The Dow Jones just wrapped its fourth positive week in a row, but don’t let that fool you.
Big Tech leaders like Amazon and Meta underperformed in their third-quarter earnings reports this week in a trend that Wedbush’s tech analyst Dan Ives called a Big Tech “horror show.”
Ives argued in a Thursday note that poor earnings from Meta and Amazon are evidence a new era is here for Big Tech, with investors becoming increasingly picky.
“In this softer macro, and with a recession likely on the doorstep, Big Tech management teams need to quickly adjust to a much different backdrop or risk losing their luster for investors that have bet on these tech thoroughbreds for the past decade,” he wrote.
Amazon
Amazon missed both earnings and revenue estimates from Wall Street on Thursday, and the company’s fourth-quarter outlook was so bad that Bank of America analysts argued it was evidence that a “consumer recession” is already here.
The e-commerce leader’s stock dropped 6.8% on Friday as a result, leading to a roughly $80 billion hit to the company’s market cap in a single day. And since July 8 of last year, when Amazon was at its peak market cap of nearly $1.9 trillion, the company has lost nearly $800 billion in value.
For reference, only five companies even have a market cap of $800 billion or more globally.
Morgan Stanley tech analyst Brian Nowak slashed his price target for Amazon to $140 per share from $175 after the earnings release, noting that the firm’s e-commerce and cloud businesses both slowed “faster than expected” in the third quarter.
But Nowak still believes Amazon will gain market share from the competition whether a recession comes or not, and maintained an “overweight” rating—akin to a “buy” rating.
Meta
Meanwhile, Meta reported a 4% decline in revenue and a 52% plunge in profit in the third quarter. And the firm’s namesake virtual reality business has now lost over $9 billion this year alone.
The earnings were so bad it caused the stock to drop roughly 25% on Thursday, slashing some $85 billion in value from the firm. And since Meta’s peak market cap of $1.07 trillion in August 2021, the firm has lost some $800 billion in value.
Bank of America analysts, led by Justin Post, maintained their neutral rating on Meta stock after earnings, but slashed their price target to $136 from $150.
Post and his team wrote in tongue-in-cheek language that Meta’s virtual reality business is costing “real” money, but the returns are still “virtual.” They also fear that with advertising spending slowing as recession fears mount, Meta will face further pressure in coming quarters.
