Nasdaq Nasdaq Nasdaq

Nasdaq 100 earnings show strength in Q4

PG
Peter Garnry

Head of Equity Strategy

Summary:  The Nasdaq 100 has seen EPS grow 5% q/q in Q4 and revenue increase by 16.7% compared to a year ago highlighting that US technology companies still offer a rare pocket of high growth. Equity valuations on Nasdaq 100 companies are still elevated and the overall downside risks persist in US equities due to tightening financial conditions, but the earnings season is showing why the US technology sector still has a place in the portfolio during inflation. We also highlight this week's earnings releases with US heavyweights such as Alphabet, Meta Platforms, and Amazon reporting earnings.


Earnings grow 5% q/q in Nasdaq 100

The Q4 earnings season is firing on all cylinders with this week being the most important one, which we cover further down, and around  33% of the companies in the S&P 500 Index has now reported earnings. After this week we will have enough data to make conclusions on the Q4 earnings season but already now a preliminary picture is emerging.

The Nasdaq 100 has seen its EPS grow 5.2% q/q while the MSCI World has seen EPS grow only by 0.3% q/q highlighting the underlying trend for more than a decade, that the US technology sector is where the growth is, even during inflation. While the S&P 500 and MSCI World have seen net profit margin decline 0.1%-point and 0.2%-point q/q in Q4, Nasdaq 100 has seen its net profit margin expand 0.4%-point suggesting less impact from inflation on technology companies. This should drum up some demand from investors.

31_PG_1

The recent selloff in Nasdaq 100 has pushed the equity valuation to 3.2% free cash flow yield which is still on the expensive side in a historical context, but with revenue up 16% the past year and revenue having grown 11.5% annualized since 2004, investors will likely continue to maintain their exposure to the highest quality technology companies. However, the tier 2 and tier 3 (bubble stocks) technology companies will likely continue to feel the pain from tighter financial conditions and portfolio flows into commodity companies and other related inflation hedges.

Despite solid fundamentals from high quality Nasdaq 100 companies our stance is still that equities have downside risks due to an elevated VIX Index, inverted VIX forward curve, and tightening of financial conditions. Our view is still that investors should balance growth components with inflation components with pricing power such as commodity sector, travel, defence, mega caps, logistics and semiconductors.

31_PG_2
31_PG_3

A monster earnings week ahead

The earnings season really kicks into gear this week with releases from US heavyweights such as PayPal, Exxon Mobil, UPS, Starbucks, Alphabet, Meta Platforms, AbbVie, Qualcomm, Honeywell, and Amazon. In Europe many large companies will also report such as UBS, Novo Nordisk, Orsted, Banco Santander, Novartis, Nokia, Infineon Technologies, ABB, Roche and UniCredit. Unless US long-term interest rates move higher we expect earnings this week to bolster sentiment and support the view that companies for now are able to pass on inflationary pressures.

Monday: Ryanair, Komatsu, NXP Semiconductors

Tuesday: Novozymes, Keyence, UBS Group, Exxon Mobil, PayPal, UPS, AMD, Starbucks, Gilead Sciences, GM, Electronic Arts

Wednesday: Novo Nordisk, Orsted, Kone, Sony, Mitsubishi UFJ Financial, Denso, Prudential, Telenor, Banco Santander, Hexagon, Swedbank, Novartis, Alphabet, Meta Platforms (Facebook), Alibaba, AbbVie, Qualcomm, Thermo Fisher Scientific, Ferrari, Spotify Technology, DR Horton

Thursday: Suncor Energy, Danske Bank, Nokia, Dassault Systemes, Siemens Healthineers, Infineon Technologies, Merck KGaA, Enel, Nintendo, SoftBank, Mitsubishi, Takeda, Shell, ING Groep, BBVA, Siemens Gamesa Renewable Energy, Nordea, Roche, ABB, Amazon, Eli Lilly, Merck & Co, Honeywell, ConocoPhillips, Estee Lauder, Ford Motor, Fortinet,

Friday: Carlsberg, Sanofi, Vinci, UniCredit, Intesa Sanpaolo, Assa Abloy, Bristol-Myers, Regeneron Pharmaceuticals

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.