May 1, 2023
“It’s tough to be impressed by companies exceeding already beaten down earnings estimates,” Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, said in an email commentary shared with Money.
1. The first quarter earnings reports of companies have shown better-than-expected results, alleviating some investor concerns. These reports indicate company performance and can majorly influence stock performance.
2. Significant tech companies like Amazon and Meta have reported revenues higher than analysts anticipated. According to data from Wells Fargo, all but two of the 21 large-cap information technology companies in the S&P 500 that have reported earnings so far beat expectations.
3. Michael Landsberg, the chief investment officer at Landsberg Bennett Private Wealth Management, has expressed a critical perspective. He finds it hard to be impressed by companies exceeding already lowered earnings estimates, indicating that the positive results might be less impressive in context.
4. Landsberg notes that analysts have been steadily reducing their expectations over the past few months due to a slowing economic climate. He believes that big tech stocks, in particular, are extremely overvalued.
5. While companies beating lowered expectations may be a good thing for market sentiment, these expectations have been revised downward about 15%. So, the fact that companies are beating these expectations might not be as impressive as it seems1.
6. Headline earnings don’t tell the whole story. Many tech giants are beating earnings estimates based on growth and cost management, and many have beat revenue expectations, which was a surprise to investors. Investors were expecting performance to improve after cost-cutting measures like layoffs, but they weren’t expecting much in the way of organic revenue growth.
7. Despite the bar being really low for tech companies, a better-than-expected earnings season could actually be beneficial for the market.
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