The latest updates from tech giants Amazon and Apple contained enough negative material to spook investors, with shares in both stocks down in after-hours trading,” says AJ Bell investment bank Russ Mould.
They round off what’s been a testing week for investors in US stocks or global funds, given they are popular investments alongside Microsoft which also updated on its trading
Amazon’s update was worrying as it not only put the company into its first quarterly loss since 2015, but it also painted a gloomy picture for the retail market in general.
“A drop in online retail sales no doubt reflects a more cost-conscious consumer. Whereas during the pandemic people were happy to browse and click with little care about the cost, now purchases will be more considered,” said AJ Bell’s Russ Mould.
“It’s far too early to say we’ve lost our love of online shopping. It’s merely that people are more hesitant when it comes to pressing the ‘buy’ button after filling up their virtual basket.
“While Amazon’s outlook is somewhat gloomy, it is important to remember other parts of its business are firing on all cylinders, namely the advertising and cloud computing bits.
“Amazon has put up the price of its Prime delivery and streaming service in the US to try and get additional income to offset rising costs across the group including staff and delivery. That’s likely to be replicated in other parts of the world.
“We’ve also seen Amazon increase fees for merchants using its platform. Yet Amazon has never been one to worry too much about short-term profit or loss. It has an eye on the longer-term prize and would always prioritise user experience and value for money over jacking up prices big time simply to give its earnings as big a boost as possible.
“Apple appears to be surviving the cost-of-living crisis better than most. Its latest update shows strong sales and, importantly, more people hooked into its network of services such as streaming and digital storage.
“In the earnings call with investors, chief executive Tim Cook said he was more focused on supply rather than demand. Covid-related disruption in China and industry-wide chip shortages present a risk that Apple cannot create enough products to meet demand.
“That might not be such an issue if demand weakens in line with many other parts of the retail sector, particularly as big-ticket items like tablets are tough purchase decisions to make if you’re under financial pressure.”