Microsoft and Alphabet earnings are signaling one thing: A lot of bad news has been priced in

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Microsoft and Alphabet earnings are signaling one thing: A lot of bad news has been priced in, BobPisani writes.

Well, that covers just about ... everything. Microsoft earnings release cited a litany of issues: unfavorable foreign exchange, extended productions shutdown in China, a deteriorating PC market in June, reductions in advertising spending and scaling down Russian operations. It left out frogs, boils, locusts, lice and hail, so the press release does not quite rise to the level of biblical disasters, but you get the point. It was a pretty long list to account for the EPS and revenue miss.

, are all underperforming the S & P 500 year to date: The S & P 500: Largest Tech Stocks Apple -15% Microsoft -25% Amazon -31% Alphabet -27% Tesla -30% Meta -52% -43% The average decline of those seven stocks has been 31% this year. Collectively, those stocks comprise more than 30% of the market cap of the S & P, and yet the S & P is only down 17%.

has been cut in half since hitting its historic high just last November. Its forward P/E ratio has gone from 68 in January to 31 today. That doesn't mean we can't go down more in the next two months. But a reasonable position would argue that if you are looking six months down the road, there is more potential upside in the highest quality names than there are downsides.

 

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