The technology sector had a difficult third quarter of 2022 due to difficult global macroeconomic conditions, semiconductor chip shortages, supply chain constraints, raging inflation, unfavorable FX due to a strong US dollar and an increasingly dovish stance from the US Federal Reserve.
Tech giants like Microsoft and Alphabet reported unenthusiastic earnings results, while Meta Platforms disappointed.
Apple was exceptional, reporting strong fourth-quarter results with record revenue and profits, driven by steady iPhone sales and a rise in Mac sales (25.4% YoY) despite slumping PC shipments worldwide.
According to Gartner’s latest report, 68 million PCs shipped in the third quarter (ended September), down 19.5% from the same period last year. Lenovo, HP and Dell Technologies posted declines of 15.3%, 27.9% and 21.1%, respectively. Apple experienced a 15.6% drop, much better than HP and Dell.
The decline in PC shipments along with the slowing cloud business negatively impacted Microsoft’s results in the first quarter of fiscal 2023.
Alphabet also warned of slowing cloud growth. Google’s parent company experienced sluggishness in YouTube ads and the Google network due to a slowdown in digital advertising, which also heavily impacted its competitors’ meta-platforms.
Meta’s ad revenue in Q3 2022 (down 3.7% YoY) suffered from weak ad demand. Healthcare and travel were the top positive contributors to ad revenue growth for the quarter, which was fully offset by weakness in online retail, gaming and financial services.
Watch upcoming earnings
A number of technology companies are set to announce their earnings results over the next few weeks. While expected to face the issues plaguing the technology sector this earnings season, we believe some are well positioned to beat earnings estimates. Stay up to date on upcoming earnings announcements with the Zacks Earnings Calendar.
Still, finding technology stocks that have the potential to beat earnings estimates can be daunting. However, our proprietary methodology makes it pretty easy.
You can narrow the shortlist by looking at stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) and a positive Earnings ESP. Our Earnings ESP Filter allows you to discover the best stocks to buy or sell before they are reported.
Earnings ESP is our proprietary method of identifying stocks that have the best chance of surprising with their next earnings call. It is the percentage difference between the most accurate estimate and Zacks’ consensus estimate.
Our research shows that stocks with this combination of ingredients have up to a 70% chance of a positive earnings surprise.
The five tech stocks below have the right combination of elements to outperform gains this reporting cycle:
Based in San Francisco, CA Airbnb (ABNB – Free Report) has an earnings ESP of +0.81% and is currently showing a Zacks rank of 1. You can see the full list of today’s Zacks ranked 1 stocks here.
The company is expected to report third quarter 2022 results on November 1. The Zacks consensus estimate for its earnings over the past 30 days is up 2.1% to $1.46 per share.
Sunnyvale, CA based Fortinet (FTNT – Free Report) is scheduled to release third-quarter 2022 results on November 2.
The company has a Zacks rank of #2 and an earnings ESP of +2.44%.
The Zacks Consensus estimate for its earnings last month was unchanged at 27 cents a share.
Located in San Ramon, CA five9 (FIVN – Free Report) has a Zacks Rank of 2 and an Earnings ESP of +7.04%. The company is expected to report third-quarter 2022 results on November 7.
Zacks’ consensus estimate for its earnings over the past 30 days has been revised down 12.5% to 36 cents a share.
Ventura, CA based The trade desk (TTD – Free Report) currently has a Zacks rank of #2 and an Earnings ESP of +2.13%.
The company is expected to report third quarter 2022 results on November 9. The consensus level for earnings is up a cent over the past 30 days to 24 cents a share.
Based in Vancouver, WA zoom info (ZI – Free Report) is expected to report third quarter 2022 results on November 1. The company has an earnings ESP of +1.27% and a Zacks rank of 2.
The consensus estimate for earnings has remained unchanged at 20 cents a share for the past 30 days.