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This week in tech: Salesforce slowdown; Amazon denies plans to disrupt telecom

Published Jun 04, 2023 12:10
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By Louis Juricic and Sarina Isaacs

Investing.com -- Here is your weekly Pro Recap on the biggest headlines out of a big earnings week for tech: Investors are disappointed by Salesforce and HP; Broadcom and Dell hearten the market; Amazon denies report of its plans to enter the wireless-services game.

InvestingPro subscribers get tech headlines like these in real time. Never miss another market-moving alert.

Soft guidance at Salesforce

Salesforce (NYSE:CRM) shares slumped 4.7% on Thursday even after the company reported better-than-expected earnings.

Analysts say the stock sold off because Salesforce revenue outperformance was below historical trends, and it also missed on under-contract sales expected in the next 12 months (that is, cRPO, or current revenue performance obligation). Moreover, its revenue growth for the quarter came in at its slowest pace since 2010, per Reuters.

For the quarter, adjusted earnings per share totaled $1.69, $0.08 better than the average analyst estimate, and $8.25 billion in sales was ahead of the $8.18B consensus. Next quarter Salesforce expects sales of $8.51B to $8.53B, higher than the $8.49B estimates.

Despite the market's reaction, Goldman Sachs reiterated its Buy rating on CRM shares, saying the results were "strong in light of the challenging macro backdrop."

Bank of America reaffirmed a Top Pick status on CRM, noting it is "impressed" by the 1% guidance beat for cRPO growth "given the tough macro and disruption from restructuring actions."

Shares closed the week at $213.03.

Broadcom's better-than-expected print

On Thursday, Broadcom (NASDAQ:AVGO) said it recorded earnings of $10.32 per share, easily beating the $10.12 consensus, on slightly better-than-expected revenue of $8.73B. It expects $8.85B in sales for the third quarter, comfortably above estimates for $8.72B.

Goldman Sachs said the company delivered "another solid quarter," citing its expectations for that generative artificial intelligence "has the potential to support a 'soft-landing' in the near term and drive above-model growth in the medium- to long-term."

Similarly, BofA argues that Broadcom's AI portfolio is "underappreciated," and assigned the stock a new Street-high price target of $950.

Shares dipped in the premarket on Friday, but ultimately closed the regular session up 2.5%. Shares ended the week at $812 even.

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HP sees weakness in PC demand

HP (NYSE:HPQ) shares slid some 6% Wednesday after the PC maker posted its lowest revenue for a quarter since early 2020, noting ongoing weakness in demand for personal computers.

For the fiscal second quarter ended in April, HP reported a 21.7% drop in overall revenue to $12.9B - below expectations for $13.1B - encompassing a 29% slide in PC business sales and a 5% dip in printing revenue.

Adjusted earnings per share of $0.80 beat expectations for $0.76. Third-quarter (ending July) guidance calls for adjusted earnings of $0.81 to $0.91 a share vs. the $0.85 consensus, and it expects $3.30 to $3.50 for the full year, up from a prior analysts' estimate of $3.34.

BofA reiterated its Underperform rating on the company, saying it remains cautious on HPQ shares even though guidance implies a second-half sales recovery: "We expect margins to normalize lower, and estimates to be revised lower over the next couple of qtrs."

Barclays said the guidance may prove to be "aggressive," adding, "We continue to see downside for shares with near term top-line, margin and cash flow pressures, though cost cuts help offset some of the underlying weaknesses."

HP shares staged a partial recovery to end the week, rising 3.8% to $30.55.

Dell throttles estimates amid challenging macro environment

On Thursday Dell Technologies (NYSE:DELL) said adjusted EPS totaled $1.31, smashing the $0.86 average Street estimate, on better-than-expected revenue of $20.9B.

The beat on the bottom line comes even as margins and revenue fell amid a weaker backdrop for PC demand, and Dell guided for Q2 revenue of $20.7B at the midpoint of the range - worse than the Street at $21.1B.

Dell's client solutions group and infrastructure solutions group business saw revenue fall 23% and 18% respectively amid "challenging economic backdrop," the company said.

The stock saw a premarket slump before climbing 4% in Friday's regular session.

Goldman Sachs and Deutsche Bank each kept their buy ratings on the stock, although the former highlighted a weak recovery in Dell's core PC business.

Deutsche said it believes "the risk-reward is attractive" for the stock, noting, "Considering a tough macro environment suggested by other IT hardware peers, we are not too surprised by DELL's cautious comments in the near term, and we view a delayed recovery as reasonable."

Amazon denies report it is setting its sights on telecom space

An Amazon (NASDAQ:AMZN) spokesperson said the company doesn't have plans to add wireless services at this time, Reuters reported, following a Bloomberg story that said Amazon is in talks to offer low-cost or free nationwide mobile phone service to Prime subscribers - news that shook the shares of telecom companies.

"We are always exploring adding even more benefits for Prime members, but don't have plans to add wireless at this time," the spokesperson said, according to Reuters, while AT&T, Verizon and T-Mobile "denied any talks."

Amazon stock had gotten a lift on the initial report, while telecom companies like T-Mobile (NASDAQ:TMUS), AT&T Inc (NYSE:T), and Verizon (NYSE:VZ) took sharp slides.

On the other hand, shares in DISH Network (NASDAQ:DISH) gained as much as 8.3% on the report. The satellite services provider is already working with Amazon and is expected to start selling its wireless services on Amazon in July.

Senad Karaahmetovic, Liz Moyer, Yasin Ebrahim, and Davit Kirakosyan contributed to this report.

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This week in tech: Salesforce slowdown; Amazon denies plans to disrupt telecom
 

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