Analysis: Apple results loom large for tech – and the market

(Reuters) – When Apple’s shares fall, is Wall Street’s entire performance at risk?

The outsize influence of Apple on both the technology sector and the entire stock market was thrown into sharp relief when the iPad maker’s shares fell 4.1 percent on Monday.

The alpha male of the stock market, Apple accounts for a third of the S&P tech sector’s 20 percent year-to-date return, the best performance of any of the 10 sectors in the Standard & Poor’s 500 index this year.

The problem is, Apple’s success may be masking a larger trend in the wider market toward slower profit growth.

Technology companies are expected to report earnings growth of 7.5 percent for the first quarter, according to Thomson Reuters estimates. But excluding Apple, which is due to report results next Tuesday, the technology sector is looking at an earnings decrease
of 0.3 percent, according to the data.

"It seems like every quarter, every year, everyone is predicting technology is this great group, and recently, without Apple it would never be there," said Daniel Morgan, who helps manage about $3.5 billion at Synovus Trust Company in Atlanta. Synovus Trust’s
assets include about 30,000 Apple shares.

Big tech companies that have already reported this quarter have done little to inspire Wall Street. Google reported in-line revenue last week, while International Business Machines and Intel Corp results reported late Tuesday failed to ignite buying. All
three stocks ended lower on Wednesday.

Still to come are results from Microsoft, due Thursday, and Texas Instruments, expected on Monday.

In addition to earnings, another key performance measure are company profit margins, an indication of how much control a company has over its costs. Profit margins are higher for tech companies than for any other sector in the S&P 500 sectors, but much of
that advantage is a result of Apple.

For the first quarter, the net profit margin for the tech sector is estimated at 17 percent. That falls to 15.7 percent when Apple is excluded, Thomson Reuters data showed, enough to push technology into the second spot, after the financial sector.

Short URL: https://www.newspakistan.pk/?p=19518

Posted by Awais Khan on Apr 19 2012. Filed under Sci-Tech. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry