Covid Misfortunes - 19 Benefits for Wall Street Technology Companies

Technology companies made gains even before the Covid-19 outbreak, but behavioral shifts during the outbreak of the epidemic raised the sector’s stock level to higher limits, leaving the broader stock market panting behind.

The technology-dominated Nasdaq Composite Index hit record highs at close in six of its last seven sessions, reflecting investor confidence that technology companies are taking advantage of "home commitment" rules that have been a hit for airlines, hotels and stores.

"There are clear winners and losers in the market now," said Dan Eves, a senior analyst at Widbusch Securities, who believes that major technology companies can still achieve an additional 30 percent gain this year.

"From the winners' point of view, there is a clear spotlight on names in the technology sector," he added.

Quincy Crosby, chief expert on market strategy at Quincy Crosby, said that technology companies are "the side of certainty" in the period of economic weakness.

The recent rise means that only five companies in what has become known as the "Fang" group - a shortcut to Facebook, Apple, Amazon, Netflix and Google - constitute more than 20 percent of the value of the S&P 500 index.

While the rise in the number of new HIV infections in the United States appears to have been a driver of the recent rise, policy is probably the industry's biggest concern, according to analysts.

Apple, Google, Facebook and Amazon chief executives are due to appear on Capitol Hill on July 27 in a hearing on antitrust issues, potentially raising concerns that governments' interests could bypass only make political noise.

"July 27 is an important day to see whether it will be a political occasion to call attention or just the start of a much broader move to dismantle these companies," Ives said.

Crosby agrees that politics remains an unpredictable factor. And if Democratic nominee Joe Biden wins the US presidential election in November, this could increase the chances of Washington taking more drastic steps.

It is expected that the major technology companies will be in good shape in the next revenue announcement period, which begins this week.

While airline and marine tourism revenue fell 90 percent or more during periods of the second quarter of the year, technology giants like Amazon and Netflix were expected to post gains of more than 20 percent, according to Wall Street analysts.

Cumberland Advisors co-founder David Kotok notes that the rise in Nasdaq indices also reflects the gains made by biotechnology companies developing vaccines and treatments for Covid-19.

He said the sector has become a "win-win deal today. Healthcare companies are spending today and the revenue will come tomorrow."

"I don't think it's just a bubble," Kotoc added.

While the Nasdaq success is the clearest indication of improvement in the technology sector, the diversified S&P 500 index also reflects the increasing importance of the sector.

With the spread of Covid-19, the index removed Harley Davidson, a motorcycle manufacturer, and Nordstrom and Macy's, replacing it with lesser-known names such as "Tyler Technology" and "Bio-Rad Labs".

Howard Silverplatt, senior analyst at S&P Dow Jones Indexes, said the pace of change could accelerate if the repercussions of the emerging Corona Virus crisis worsen.

"The index must at some point react to the market and the economy," Silverblatt said.

Fang IT group currently controls about 28 percent of S&P 500, compared to 16 percent in 2010.

Silverblatt declined to comment on speculation that "Tesla" would soon be included in the "S&P". Conditions for adding companies to the index include the publication of their profits over four consecutive quarters, which Tesla meets when it announces its results on July 22.

The shares of the electric car maker have skyrocketed recently, outpacing other tech companies, as their shares are trading four times higher than mid-March.

Although Tesla initially experienced difficulties in making profits, the improvement it has made has made it the world's largest auto company in terms of market value, significantly outperforming Toyota, GM and other gigantic traditional car manufacturers that exceed their auto sales Significantly, "Tesla" sales.

However, some believe that Tesla's improvement has gone out of control, including JPMorgan Chase analysts, who point to "high value estimates accompanied by high investor expectations and high implementation risks."

 

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