When you are on a stock’s price greatness but deliver only one Very good Earnings reports…sometimes investors will be in trouble.
Such is the case with early earnings from tech giants Microsoft (MSFT), Advanced Micro Devices (AMD) and Alphabet (GOOG, GOOGL). The three stocks (with a combined market capitalization of $5.2 trillion) played a key role in driving the broader market to records over the past year, but they are lagging after reporting earnings late Tuesday.
The moves “signal some overextension of the recent strong rally,” Deutsche Bank strategist Jim Reed said in a client note seen by Yahoo Finance.
At first glance, negative movements in stock prices would appear counterintuitive to the average investor who has made massive paper gains on these tech giants.
But here’s the compromise, as President Biden would put it.
The average investor probably read the earnings releases of these giants last night. I’d say a good percentage of them listened to earnings calls (which you should!).
As of 7:00 pm last night, even with a full page of notes, many investors still can’t figure out why these stocks are being put in the downdraft.
All three companies showed impressive growth numbers (AMD in particular, data center sales grew 38% year over year and 2024 AI chip sales forecast increased by 75%), hyped the AI train again (stock gains last year A fixed ticket for), and did not raise serious alarm bells on the economy.
So what does it give?
The reality is that there was no quarter Excellent, Contrary to investors’ expectations perfection, And trust me, investors have priced these stocks right: According to Yahoo Finance data, these three stocks trade at an average Forward P/E multiple of 35x. The S&P 500 trades at 22 times…