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Nasdaq set to open lower as Amazon, Alphabet and Apple disappoint

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Volatility in US markets looks set to continue later today with the Nasdaq 100 set to open lower after a disappointing reaction to numbers from the three A's of Amazon, Alphabet and Apple, which are all lower in the premarket.

It does need to be said that any market weakness today needs to be set against the backdrop of strong gains from all three in yesterday’s session, which meant the bar to meeting expectations was always going to be higher.

Starting with Amazon, we saw their shares finish the day over 7% higher touching the 200-day SMA in the process, in the lead up to the release of their Q4 earnings numbers last night.

In Q3 Amazon downgraded expectations around their Q4 revenues to between $140bn to $148bn, so it was welcome that they managed to beat on this, coming in at $149.2bn, while they also managed to eke out a profit of $300m or 3c a share, given that they warned they might struggle to return a profit, with another $2.3bn write-down from the stake in Rivian, weighing on the top line numbers.

AWS was slightly weaker than expected, with revenues of $21.3bn, but these were still up 20% year over year.

For the full year, Amazon posted $514bn in net sales, compared with $496.8bn in 2021, however the company posted a net annual loss of $2.7bn, with Rivian knocking $12.7bn off that profit number, compared to a $33.4bn profit in 2021.    

For its Q1 guidance Amazon said it expects to deliver between $121bn and $126bn, which was slightly on the lower side of forecasts of $125.5bn.   

Alphabet shares also finished the day over 7% higher yesterday, closing above its 200-day SMA, with attention on their Q4 numbers not only on their cloud business, but also on advertising after the big surge for Meta in the aftermath of their results on Wednesday.  

Q4 revenues came in at $76.05bn, slightly below expectations of $76.5bn, with net income falling to $13.6bn, or $10.05c a share. 

The main drag was in advertising with YouTube ad revenue coming in light at $7.96bn, down from $8.6bn a year ago, while advertising revenue came in at just over $59bn, also down from last year. The cloud business did see an improvement on last year, rising to $7.3bn.

Alphabet said it expects to incur charges of up to $2.3bn in respect of severance costs for 12,000 employees in its Q1 numbers, with the shares looking to open lower.  

Apple shares pushed above $150 yesterday, also closing above the 200-day SMA and over 3.7% up on the day, however their Q1 numbers were a little disappointing.

It was always going to be a tall order for Apple to get close to last year’s $123.95bn, although last night’s numbers were still pretty good at $117.15bn given the various supply chain disruptions that affected the business at the end of last year, nonetheless revenues still came in 5% lower. Profits also fell short at $1.88c a share.

When the numbers were broken down, there was weakness across the board, iPhone sales fell well short at $65.78bn, against an expectation of $68.3bn. Mac revenue was also disappointing at $7.74bn, $2bn below expectations, although iPad revenue beat forecasts, coming in at $9.40bn, above the $7.78bn estimate.

Wearables also fell short of expectations, despite the release of 3 new Apple watches and the new AirPods Pro, suggesting that consumer appetite for incremental upgrades is waning. For the upcoming quarter Apple said they also expected to see a similar 5% decline in their Q2 revenue numbers, the first time we’ve seen such declines since 2016.

All in all, the initial market reaction to last night’s numbers looks disappointing and could lead to some read across in some chip makers, and other related suppliers to the sector, but we should also remember all three companies have seen big gains in their share prices so far this year, so perhaps it’s time for a bit of a pause as we head into the weekend.

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