Decelerating earnings momentum and improvements in the wider market could mean the end of a rally by big technology stocks is coming into view, UBS analysts have warned.
Though Apple Inc, Amazon.com Inc, Alphabet Inc’s Google, Meta Platforms Inc, Microsoft Corp and NVIDIA Corp have enjoyed strong earnings momentum in recent months, such growth will likely slow this year, the bank said in a note.
This was after such firms enjoyed boosted demand during the pandemic, followed by a slump as lockdowns ended, which then preceded a return to strong growth on “easy comparables”.
Indeed, the big six tech firms enjoyed a collective 68% jump in per-share earnings over the final quarter of 2023.
Their earnings per share are forecast to rise by 26.3% over the coming year, meanwhile, against wider market growth of 6.1%.
“With earnings momentum rapidly decelerating for the big six, and the broader market trend improving, continued outperformance of these stocks becomes increasingly difficult,” analysts said.
“While upward revisions are currently supporting these companies, the deceleration in future profits cannot be ignored.”
Highlighting 2022’s correction in earnings, as post-pandemic demand looked to return to normalised levels, UBS added a slowdown in earnings was a case of “not if, but when”.