: Tech earnings are about to dive, and there’s no life preserver in sight

by | Oct 19, 2022 | Stock Market

What a difference a year makes. Last October, the tech sector was still in full upswing, though this column warned even then that the pandemic boom was fizzling out.

Now, a slow release of air from a balloon would be a welcome relief from the sonic boom of tech stocks tanking and earnings warnings piling up. Tech companies are expected to show large earnings declines after more than two years of gains during the COVID-19 pandemic, as inflation and fears of an impending recession lead consumers and companies to cut back. After a boom in personal-computer sales went bust, the overall IT sector is projected to see earnings fall nearly 5%, thanks to the semiconductor industry. After swinging from a shortage to a glut, chip makers are expected to see earnings plunge more than 15%. With companies looking to cut advertising spending, the online-ad powerhouses are projected to see profit fall more than 20%, and the e-commerce companies that consumers depended on during lockdowns are forecast to show an earnings decline of more than 25%. In-depth: The pandemic PC boom is over, but its legacy will live on Even areas expected to show growth are likely to see anemic advances compared with past performance, as software growth is modeled for an earnings increase of less than 2%. Brendan Connaughton, founder and managing partner of Catalyst Private Wealth, believes tech executives are going to use this quarter and the next as “kitchen sink” quarters, where they can throw in every possible write-down or excuse, and then try to beat their own lowered expectations. Forecasts for the holiday season aren’t expected to be much better — tech investors are girding for several weeks of cautionary statements, missed numbers and downright pessimism, as tech executives try to get rid of all the company baggage before next year. “Leadership is going to be very, very conservative,” said Connaughton. “I think forward guidance is going to be very ugly.” Ugly comparisons with a year ago That will lead to some ugly numbers in the weeks ahead, and with good reason. Compared with a year ago, when the third quarter was the third highest earnings growth quarter of the pan …

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