Apple Inc. (NASDAQ:AAPL) and International Business Machines Corp (NYSE:IBM) have seen a decline in the number of sales of their shares by technology investors during the last three months.
The US stock markets came roaring back after some steep losses at the beginning of the year. The stocks have been up by 13 percent and 14 percent during this period which is almost double the gain of Nasdaq Composite Index.
For the first quarter of the year ending in March, stock analysts expect Apple Inc. (NASDAQ:AAPL) to post earnings of $2 a share. This is down from the last quarter earnings report of $2.27 a share income they posted.
The same goes with IBM with reports due on the April 18th showing that they expect a $2.09 per share earnings for the first quarter which is down from the once expected $2.90 per share earnings three months ago.
Among the illustrious list of the thirty most valuable companies the only other company which shows such a steep drop is Amazon.
Amazon is expected to share earnings reports from the first quarter of 58 cents a share down from the 88 cents a share it had in mid-January. However, unlike IBM and Apple, Amazon shares were trailing the broader market for tech stocks but they are up 5 percent from their previous value 90 days ago.
The disconnect between expectations and reality is still too high for the three companies.
The news shows that tech investors have been diving in the giant tech companies with microscopic discrimination since mid-February. Earnings-estimation reports are a more timely indicator of the Wall Street sentiment on any business rather than the standard stock ratings of buy, sell and hold, most of the times. This is because analysts are slow to adapt to changes even in the face of deteriorating fundamentals.
No Apple, IBM or Amazon analyst has cut their recommendations on the companies stocks since the companies started to lower quietly the earnings expectations. That is a telling sign since the three firms have also seen their full-year profit estimates cut though not so significantly.
IBM and Apple pay dividends that are mostly appealing to investors, while Amazon has one of the best year-over-year top line growth, at 20 percent. It is one of the highest in the tech sector.
Apple, which has reports due on the 25th April, has consistently beat earnings expectations over the years. But it is also facing tougher year-over-year comparisons this year, as it saw its revenue fall 10% for the first quarter and 3% for the fiscal year which ended in September. The same goes for IBM, with sales seen dropping almost 7% in the first three months and 4.6% for all of 2016.
Given their falling estimates, it is going to hurt their bottom lines more than Wall Street predicted back in January. So any investors buying Apple, IBM, and Amazon as part of the current bull run in tech stocks should be aware that their recent share-price gains are not supported by the trajectory of earnings expectations.
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