Silicon Valley has certainly lost its groove this year. Many of the growth companies have suffered massive drops in their stock prices. The sector has also experienced an increase in layoffs.
By lowering stock prices, splits like Google’s on Monday may generate more interest from retail investors.
Photo illustration by Barron’s Advisor; Dreamtime (2)
But maybe things have become too negative? Over the past few weeks, the tech has managed a decent rally. Even the harassed
ARK Innovation ETF
(ARKK) has posted a 13% gain since the beginning of July.
Whether this will last is impossible to say. Second quarter earnings, which include
IBM
(IBM) Monday after the close, I could tell the story. There will certainly be a lot of action in the technology sector. Here’s some news that financial advisors can focus on this week.
An alphabetical division:
alphabet
,
which is Google’s parent company, enacted a 20-for-1 split Monday. It’s the first stock split since 2014.
The tech industry has seen other big company splits, including Amazon and Nvidia.
Tesla
plans to have one too.
By lowering stock prices, this can encourage more retail interest. This is especially important because the markets have been generally bearish.
However, the Alphabet division hasn’t done much for its own stock today. The price has not changed.
Again, investors are likely most interested in the company’s second-quarter earnings report, due next week.
Technical gains: After the close on Monday, IBM ( IBM ) reports quarterly earnings, kicking off tech earnings season. Tuesday,
netflix
(NFLX) will report its results. Before that, Wall Street has been cutting estimates. There are lingering concerns about competition, password sharing, slow user growth and the costs of original content.
Then on Wednesday, Tesla will announce its earnings. The company has faced headwinds from severe Covid-19 lockdowns in China, higher inflation and increased production in Germany and Texas. Elon Musk has also expressed concern about the economy. Last month, he said he had a “super bad feeling” about it.
Still, Deutsche Bank analyst Emmanuel Rosner thinks Tesla stock is a good buy right now. He made it a “catalyst call,” which is when a big short-term upside move is expected.
Return of cryptography: The headlines of the past few weeks have been awful. A court in the British Virgin Islands ordered the liquidation of the crypto hedge fund Three Arrows Capital. Then there were the bankruptcies of crypto lenders Celsius Network and Voyager Digital.
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But somehow, the crypto market has been able to adapt. And perhaps fears of contagion have been exaggerated.
Over the past week, Bitcoin went from $19,000 to $22,400. The bullishness also extended to crypto companies like Coinbase, whose shares are up 17% in Monday trading.
Twitter Drama: Yes, the Musk v.
Twitter
the litigation will be unlike any other case to hit the venerable Delaware courts. After all, Judge Kathaleen McCormick will have to rule on some unusual evidence, including Musk’s poop emoji.
On Friday, Musk’s lawyers responded to Twitter’s lawsuit to enforce the $44 billion merger agreement. He asked that there be no speedy trial.
But for Musk, this week may be a quiet one indeed. He is vacationing on a luxury yacht in Mykonos, Greece, according to reports People.com. Musk’s photos show little concern for his legal troubles.
Tom Taulli is a writer, author and former freelance broker. He is also the author of the book, Personal finance guide for technology professionals.
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