Apple poised to record improved earnings

As the big tech companies prepare to announce their earnings, Apple is poised to exceed expectations from the figures seen previously. The companies expected to announce their results this week include tech giants Amazon, Alphabet, Microsoft, Facebook and Apple. These companies which constitute over 40 percent of the Nasdaq 100 are keenly watched as they are indicators of the state of the tech industry.

According to Craig Johnson, an analyst at Piper Jaffray, Apple is among the companies to look out for in this year’s earnings release period. He added that the tech giant has managed to survive a tough market even as the S&P 500 soared to new heights this year. Last week’s drop of4 percent in Apple’s shares was the worst since September. The slump was occasioned by reports of a slowdown in sales of the iPhone which remains the biggest sales driver for the company.

The drop has impacted the company’s price-to-earnings ratio which now hangs below 15. This has resulted in Apple trading at 14.2 times forward earnings against S&P 500’s 18.6 times forward earnings and Technology Select Sector ETF which trades at 18.9 times forward earnings.

Apple’s P/E ratio may not necessarily compare favorably with other top tech stocks like Alphabet, Amazon, Facebook and Netflix. Amazon, for example trades at 168 times forward earnings having grown 56 percent in 2017 partly due to the acquisition of Whole Foods. The tech rally did not leave behind Google which rose 33 percent bringing its parent Alphabet’s P/E to 28 times forward earnings.

The market in 2017 was largely driven by tech stocks with companies like Facebook performing exceedingly well. Netflix rose 55 percent on the back of sizable growth in subscribers. S&P 500’s 19 percent rise paled in comparison to XLK Tech ETF’s 32 percent growth.

If the tech sector wants to maintain the kind of growth that we have seen so far then innovation will have to take center stage moving forward. Companies have to focus on new inventions even as the earnings season brings out the efforts of the past year.

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