Next week's US earnings season, which includes updates from Tesla, Netflix, IBM and Intel is likely to be a crucial pivot point, say analysts at Wedbush.
With tech bears romping happily in recent months and the Nasdaq index down over 20% since the start of April, the Wall Street boutique said the coming couple of weeks "will be key for the tech sector to kick off earnings".
Wall Street is "highly anticipating" this earnings season "to better gauge the health of consumer/enterprise demand" amid the softening macroeconomic backdrop, said analyst Daniel Ives in a note to clients.
He noted that dollar headwinds are well known and will "clearly lead to lower top-line guidance" and "management teams across tech will naturally set a more caution tone".
In a worst-case scenario modelled by Wedbush, Street numbers for 2023 are seen coming down by less than 10% from today's expectations, while in a base case scenario they are down around 5% from today's numbers, though this is outside of forex impact.
The Wedbush view is that "much of this is already baked into tech stocks at current levels".
"Our view is that while multiple compression and the risk-off has been brutal this year, we believe enterprise demand in areas such as cloud and cyber security are holding up much better than feared and will be shining stars during June earnings season," said Ives.
As in the first quarter, where a strong Microsoft update momentarily put the brakes on the tech slide, a bifurcated tech season lies ahead, he believes, with the Street bracing for bad news.
"Painting every tech sector with the same negative brush is the wrong approach in our opinion and we believe cloud and cyber security remain the best subsectors of tech to play in this bifurcated tech tape," Ives said.
"Based on our recent checks we believe closure rates/overall deal activity in cyber security land are holding up firm sequentially and not seeing any significant push outs and weak spots."
Ives and co's favourite overall tech name is Apple Inc (NASDAQ:AAPL), while in enterprise cloud its top stock picks are Microsoft Corporation (NASDAQ:MSFT), salesforce.com, inc. (NYSE:CRM), while cyber security favourites are Palo Alto, Fortinet, Checkpoint, CyberArk, Tenable and Zscaler.