The technology sector continues to get trounced as the S&P 500 followed the Nasdaq Composite into correction territory, falling as much as 10% from its 52-week high. Third-quarter results from the likes of Amazon and Google showed better-than-expected earnings, but missed on revenue.
The Nasdaq Composite was down over 200 points Friday as the once-heralded FANG (Facebook, Amazon, Netflix, Google) stocks have been languishing amid October’s sell-off. On Wednesday, the Nasdaq experienced its worst loss since August 2011 as companies like Texas Instruments and AT&T reported weak third-quarter results.
“You can’t just say tech is going to do great or even that FANG is going to do great. You have to be more selective,” said Daniel Morgan, senior portfolio manager with Synovus Trust Company.
Amazon reported better-than-expected earnings, but shares of the online retailer fell after hours by as much as 8% and another 8% to start Friday’s trading session as of 11:00 a.m. ET.
Amazon’s earnings per share came in at $5.75 versus forecasts of $3.14, according to Refinitiv. However, revenue generated came in at $56.6 billion as opposed to the estimated $57.10 million expected by analysts.
Adding fuel to the revenue miss flame was a weaker-than-expected fourth-quarter guidance, which came in between $2.1 billion and $3.6 billion–under the $3.8 billion estimate. Earlier this month, Amazon announced it would increase minimum wage to $15 per hour for all U.S. workers, which it factored into its fourth-quarter revenue guidance.
Amazon’s total revenue climbed 29% as opposed to last year with sales up in North America by $34.3 billion or 35% from last year. Additionally, international sales were 13% higher than last year to $15.5 billion.
“Amazon continued to demonstrate that its various investments are resonating with its very broad and fast-growing customer base, with impressive results across the board,” Charlie O’Shea, Moody’s lead retail analyst, said in a statement.
The news comes as the Commerce Department reported that gross domestic product expanded by 3.5%, beating economic forecasts of 3.4% growth. Nonetheless, the drop in U.S. equities continued to overshadow the growth of the U.S. economy as investors continued to sell off.
“What’s happened is we have a number of outside issues overshadowing what has been strong economic data and overall good earnings,” said Michael Arone, chief investment strategist at State Street Global Advisors.
Positive earnings reports from the likes of other tech giants like Microsoft (etftrends.com/quote/MSFT) couldn’t save tech. Microsoft bested analyst expectations with $1.14 per share as opposed to the $0.96 per share expected by analysts, according to Refinitiv. In addition, revenue came in at $29.08 billion versus forecasts of $27.90 billion.
Netflix’s third-quarter revenue came in exactly at the estimated $4 billion expected per a Refinitiv consensus estimate, but bested earnings per share (EPS) estimates of 68 cents with 89 cents for the third quarter. Furthermore, subscriber additions came in at 6.96 million with domestic subscriber additions reaching 1.09 million versus 673,800 estimated, and international subscriber additions reaching 5.87 million as opposed to the 4.46 million estimated.
Furthermore, Netflix also announced a gain of 370,000 net memberships in the U.S. and 3.2 million internationally, beating its initial forecast of 2.3 million new users.
In the meantime, electric carmaker Tesla reported a surprise profit at the close of yesterday’s trading session, which was the company’s largest at $312 million.
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