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Formidable Tech Trio Could Launch Stocks to New Highs

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April 24, 2015

If Friday’s early stock action is any indicator, more tech-sector upside is possible on the shoulders of Amazon.com (AMZN), Microsoft (MSFT), and Google (GOOG, GOOGL) as these stocks gained despite mixed earnings reports.

The NASDAQ Composite (COMP) closed up a slim 0.4% Thursday, but that was enough to hand the index its highest ever finish at 5,056.06 (figure 1). The move squeezed the tech-studded composite past a 15-year, dot-com-era closing high reached on March 10, 2000. Analysts are well aware of the comparisons, with many saying stock valuations may be high, sure, but pale next to those seen 15 years ago.

The S&P 500 (SPX), which now has back-to-back closes above the closely watched 2100, and the Dow Jones Industrial Average (DJIA) point up, too. Clearly, Friday may be all about tech in the lead-up to Apple’s (AAPL) earnings release on Monday. Oh, and don’t forget the coffee. Starbucks (SBUX) is an early gainer after java joint reported an 18% jump in quarterly revenue and gains in worldwide traffic. 

FIGURE 1: PARTY LIKE IT’S 1999?

The NASDAQ Composite (COMP) is back in dot.com boom territory, which of course raises all sorts of questions about what’s coming next. Data source: NASDAQ. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

New Lifestage for Google? A globe-circling Google (GOOG, GOOGL) admitted that the strong dollar and lower ad prices hurt its bottom line. Its stockholders shrugged. Revenue was up 12% to $17.3 billion from $15.4 billion a year earlier through all those headwinds. And expense control kicked in, it said. As the Wall Street Journal reports: Smartphones have been a mixed blessing for Google: more clicks on its ads, marketers pay less for them. The company has tried to reverse the latter trend by tying smartphone and personal-computer ad campaigns together. Will that be enough?

Amazon: Less Fog on the Cloud. Amazon (AMZN) had no shortage of potential lead stories stacked up in its earnings report. Take your pick, I guess, depending on how you feel about this stock. First, AMZN swung to a quarterly loss—that, even as it could boast a jump in sales. But it may have been the bigger-picture stuff that really mattered.   The online retailer finally unveiled details about its cloud-computing business. AMZN said this arm, known as AWS, is slightly profitable. That fueled Street analyst speculation that the company may be considering spinning out the cloud business as a separate company, similar to what eBay (EBAY) is doing with its faster growing PayPal payments business.

Dollar Bugged Microsoft, Too. The software giant beat the Street’s fiscal Q3 profit and sales expectations. For the quarter ended March 31, earnings fell to $6.59 billion, or $0.61 a share, from $6.97 billion, or $0.68 a share, in the same period a year ago, beating the FactSet consensus of 51 cents a share. Revenue rose to $21.73 billion from $20.4 billion, with commercial revenue increasing 5% to $12.8 billion, above the FactSet consensus estimates of $21.1 billion and $12.42 billion, respectively. Extended-hours traded found relief in the figures, even as MSFT said a strong dollar shaved revenue growth by 3 percentage points.

Good trading,
JJ
@TDAJJKinahan

JJ Kinahan

JJ began his career in 1985 as a Chicago Board Options Exchange...

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