Holiday earnings forecasts are disappointing investors so far, and the biggest boxes under Wall Street’s tree are coming this week.
The market can withstand those kinds of moves from a certain number of companies. After all, the Dow Jones Industrial Average DJIA, +0.21% still rose to a record on Friday despite the woeful performance from Intel, one of its 30 components. But poor forecasts in the week ahead could do much more damage, as nearly half of the S&P 500’s market cap will be at stake as Big Tech jumps into the fray.
Big Tech’s strength through the pandemic has been a backstop for the overall market, but there are reasons to be concerned. Apple and Amazon are facing some of the same supply-chain problems that have roiled other industries, with expectations that Apple will struggle to supply enough new iPhones to meet holiday demand and Amazon’s signature logistics network will require a lot more cash to keep running near peak performance.
Amazon’s forecast last quarter raised eyebrows and lowered the stock price, and analysts now expect that the dominant online retailer’s earnings will decline year-over-year in both the third and fourth quarters, which has only happened in two quarters of the past 16 for Amazon. Apple has stopped giving forecasts during the COVID-19 pandemic, but investors will expect some kind of forward-looking color after reports of trimmed production estimates.
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