The technology sector is thriving while the rest of the global economy is struggling to recover. Quarterly earnings for Apple, Microsoft, and Alphabet were released in late July.
Apple’s revenue surpassed expected figures for iPad, iPhone, Mac, and Services divisions. iPhone brought in $34.57 Billion in revenue, even better than the expected $34.5 Billion. Earnings per share doubled in the last year to $1.30 per share.
Alphabet also reported a 69% increase in advertising revenue of $27.76 per share, well above the expected $19.89. Their revenue was also impressive at $61.88 billion vs the $46.07 billion estimate. Alphabet’s operating income surpassed expectations as well, growing by 19.3%.
Microsoft posted a 21% increase in revenue, attributed to businesses like cloud computing, LinkedIn advertising and business applications.
The software company surpassed Wall Street’s expectations in sales and earnings. The Azure Cloud platform is one of the leading drivers for Microsoft’s recent growth.
The Azure growth accelerated in the three months prior to June by 51% – the fastest growth expansion in five quarters.
Shares rallied by almost 20% to a new high. However, it pulled back slightly by 2% and presented an excellent opportunity to look at online trading brands such as Trustpac.
Is Tech stock overvalued?
According to research, investors are still actively buying tech stocks, with more than 2 out of 5 professional investors planning to increase their tech stock holdings in the next year.
GraniteShares conducted a study of hedge funds, wealth, and fund managers and what it found is that 24% of investors are planning to reduce their tech holdings, while 23% are opting to maintain their investments. Furthermore, 47% of institutional investors are of the opinion that retail investors should increase their weighting.
The last decade was the era for tech stocks, achieving extraordinary growth. The Nasdaq composite, which tracks the performance of the leading 100 tech companies, has a performance of 733% vs the S&P500 and FTSE100 in the last decade. The main drivers behind the Nasdaq 100 are, naturally, Apple, Alphabet, Microsoft, Facebook, and Netflix. They are all mega-cap stocks.
Is now the right time to buy?
The question remains uncertain, as multiple factors impact the stock markets. The Covid-19 Delta variant is a heavy weight on economists and investors’ minds. Economic recovery has rapidly increased; however, there are signs of slowing down as infection rates in the US and China are surging.
In addition, the Fed’s decision to start tapering bond purchases, plus the rising inflation, could mean that now might not be the ideal time to add more weight on your tech stock holdings.
Despite these concerns, the GraniteShares survey revealed that 74% of professional investors believe that now is an excellent time to buy technology stocks; in addition, Trustpac and other reliable brokers offer CFDs on over 2000 shares, including the leading technology stocks. The survey further revealed that investors advise them to hold for a medium-term of one to three years.
In conclusion, it could go both ways here. As Trustpac’s expert analysts put it, “perhaps the best advice would be cautious investment in tech. People should keep looking to Alphabet, Facebook and the others for potential, but shouldn’t be putting all of their eggs in this basket.”