People visit the Apple Store in Grand Central Station in New York.
Michael M. Santiago/Getty Images
Apple and Amazon.com kicked off the second week of May looking as if the stocks would extend their six-week losing streaks, the longest since before the pandemic.
Over the last six weeks, Apple (ticker: AAPL
) and Amazon ( AMZN
) have lost more than10% and 30%, respectively, amid a widespread market selloff that has hit the tech sector particularly hard as the Federal Reserve hikes interest rates in a bid to curb inflation. Apple was down 2.7% on Monday, while Amazon fell 3%.
“The magnitude and velocity of the selloff in tech names have surprisedus this year as fears of a recession and no more easy Fed-driven money has caused multiples to fall off a cliff in tech stocks with so much pain inflicted on the bulls,” wrote Wedbush analyst Daniel Ives in a research note.
The last time Apple faced such a dogged losing streak was during the eight weeks ended Nov. 23, 2018, when it lost 22.5%. For Amazon, a six-week losing streak ended on Aug. 23, 2019, when it fell 13% over that time span.
Back in 2018, Apple was falling on concerns over lagging consumer demand for the iPhone XR , as well as weaker-than-expected guidance for the 2018 holiday season. The Federal Reserve also played a role, as Chair Jerome Powell was talking about continuing to increase rates. Today, aside from the hawkishness of Fed, the company’s in a different place. The tech giant recently delivered an impressive earnings report, beating expectations across the board, raising its dividend, and expanding its share repurchase program.
The stock is still a favorite among analysts — it’s one of Ives’ top picks — even though management warned that supply-chain challenges, including Covid-19 lockdowns in China, were making it hard to meet demand in the short-term. But those concerns were enough to sow doubt among investors.
“If what Apple is experiencing is more broad-based, inventory shortage could ultimately translate into hesitancy to spend, hindering the positive momentum we are seeing on the demand front,” wrote Deutsche Bank analyst Benjamin Black. Deutsche Bank has a Buy rating on Apple.
Amazon’s selloff, while also unwelcome, could perhaps easier to understand. The company’s first-quarter online retailing and advertising sales missed estimates, and second-quarter guidance was similarly downbeat. The conditions aren’t unlike the ones fueled the stock’s 2019 tumble, which coincided with a soft second-quarter earnings and concerns over rising tensions between the U.S. and China.
To be fair, it’s not just Apple and Amazon — the tech-heavy Nasdaq Composite is down more than 15% over the last six weeks, making it the worst six-week performance since April 2020. Shares of Google parent Alphabet ( GOOGL
), for example, have dropped 18.3% over the past six weeks for its worst performance since April 2020. Microsoft ( MSFT
) has fallen 9.5% during the same time period.
Unfortunately, there may be more pain ahead in the tech sector, said Joe Quinlan, head of CIO Market Strategy for Merrill and Bank of America Private Bank. The pandemic pulled forward a lot of the earnings growth for these companies, he said, while rising interest rates have prompted investors to shift away from growth stocks and find shelter among value stocks.
In the short term, Quinlan is Neutral on the sector, but long-term, he said, “This is the time to start considering dipping your toe into tech.”
Wedbush’s Ives agreed, saying he remains “steadfastly bullish” through the market storm, favoring companies that have bet on software, semiconductors, cyber security, and product-driven cycles, such as Apple. Amazon, Microsoft, and Google, in turn, could benefit from the shift toward cloud services, he added.
Write to Sabrina Escobar at [email protected]
