Today: While Wall Street bounces back from a rough stretch, Silicon Valley tech companies like Google struggle after releasing earnings, which could be a concern for Apple and others scheduled to divulge results next week.
The Lead: Google falls after earnings report, Apple up next
Silicon Valley tech stocks broke a losing streak of more than a week Friday, experiencing strong gains that were still held back by negative reactions to earnings reports — a concern for the majority of tech companies still in line to release financial results, starting with Apple.
The SV150 rose 1.3 percent Friday, its first gain after six straight losing sessions that brought the index of Silicon Valley’s largest tech companies down 6.8 percent overall, part of a volatile stretch on Wall Street. However, some of the region’s most prominent companies were left out of Friday’s rebound as investors and analysts picked apart their quarterly results.
Google sank 2.6 percent to $522.97 a day after the Mountain View Web giant’s report showed revenues grew 20 percent to $16.5 billion but profits sank as the company spent big on new employees. Google’s 20 percent growth rate and many other metrics were healthy, but down from previous quarters, leaving analysts with a quandary: To be concerned about Google’s growth, or not to be.
While many analysts brought down their price targets for Google stock after changing their estimates based on the new numbers, most seemed generally unconcerned abut the company’s ability to deliver strong numbers in the future.
“We continue to believe Google shares should outperform the market, as the company is positioned to capture a disproportionate amount of transitioning mobile advertising dollars,” William Blair analyst Ralph Schackart wrote in a note.
Google, the third-largest tech company in Silicon Valley and likely to ascend to No. 2 once Hewlett-Packard splits its business, was not alone in post-earnings doldrums.
Intel on Tuesday was the first major area tech firm to show off financial results for the third quarter, and the world’s largest chipmaker sank 4 percent during the next two sessions, before clawing back some of those losses on Friday. Intel’s biggest local rival, Advanced Micro Devices, released a less impressive report, but managed a 3 percent gain Friday thanks to cost-cutting maneuvers that include layoffs and the sale of real estate.
Netflix suffered the most drastic and surprising descent during the week, plunging more than 20 percent in the past two sessions after signing up fewer new subscribers than expected. Netflix fell for a second consecutive day Friday despite support from analysts and a public stock purchase by Dallas Mavericks owner Mark Cuban, who said he believes the Los Gatos company will eventually be acquired. eBay fell after announcing earnings the same day as Netflix, with a slight gain Friday still leaving it down 4 percent, and SanDisk sank 2.9 percent to $82.20 Friday after its earnings report hit.
The pattern could be a cause for concern next week, when 30 of the SV150 companies are scheduled to release earnings, starting Monday with Silicon Valley’s largest tech firm — and the world’s most valuable company — Apple. The Cupertino tech giant has warmed up investors with two hyped product releases in the past month, introducing refreshed iPhones and a new smartwatch in September and renewed iPads and Macs on Thursday.
While fresh products to fuel sales may be making Apple investors salivate, very little of that cash will appear when Apple shows off third-quarter earnings, as iPhones went on sale less than two weeks before the end of the quarter and only in select countries. Still, analysts expect Apple to produce strong income and revenue growth from the same period a year ago, with an average estimate of $1.31 a share in profits and $39.84 billion in sales, according to Thomson Reuters; last year in the third quarter, Apple brought in $1.18 a share on sales of $37.47 billion.
“All (the product launches) allow Apple to sustain a competitive advantage across the entire compute market — smartphones, tablets and PCs,” Credit Suisse analyst Kulbinder Garcha wrote Friday.
Apple stock gained 1.5 percent to $97.67 Friday, and has now increased 21.8 percent so far this year, after adjusting for a 7-for-1 stock split the company exercised in June. Among the companies joining Apple in next week’s earnings parade are Yahoo, VMware, Yelp, Pandora and beleaguered networking companies Juniper and Riverbed.
Up: EA, Facebook, Gilead, Salesforce, Intuit, AMD, Workday, GoPro, Adobe, Pandora
Down: SanDisk, Google, Netflix, LinkedIn, Zynga, Nvidia
The SV150 index of Silicon Valley’s largest tech companies:Up 19.98 or 1.34 percent, to 1,509.96
The tech-heavy Nasdaq composite index: Up 41.05, or 0.97 percent, to 4,258.44
The blue chip Dow Jones industrial average: Up 263.17, or 1.63 percent, to 16,380.41
And the widely watched Standard & Poor’s 500 index: Up 24, or 1.29 percent, to 1,886.76
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