As earnings season approaches once more, the Nasdaq is up about 30% from where it traded three months ago.
Against such a backdrop, many investors won't just be looking for signs that demand has stabilized for companies that saw large March/April sales hits, but that it's meaningfully improving -- and with further improvement to come over the next few months.
Here's a run-down of some important things to keep an eye on for companies within various parts of tech, as they report over the next few weeks.
Chip Suppliers
The Backdrop: Business is good for many chip companies right now, as recent disclosures from the likes of Micron (MU) , Xilinx (XLNX) and Microchip Technology (MCHP) drive home. Softness within end-markets such as smartphones, cars and desktop PCs is being offset by strength in end-markets such as notebooks, cloud servers, telecom infrastructure and gaming hardware, and some of the weaker end-markets (such as smartphones) are showing signs of improvement.
What to Watch: What kind of second-half visibility chip suppliers report seeing for end-markets where demand is currently strong, such as notebooks and cloud servers. Also -- with companies such as Micron and Xilinx indicating that some customers are stockpiling inventories, and companies such Broadcom and Taiwan Semiconductor seeing stretched lead times for some orders -- it's worth watching what companies share about customer inventories and end-market demand.
Software Firms
The Backdrop: COVID-19 had a major impact on new deal activity for many enterprise software firms. But the recurring, subscription-based nature of a lot of present-day software revenue has helped buffer the blow, and markets such as collaboration and security software have seen growth accelerate thanks to purchases made to support newly-remote workers. Also, as SAP's (SAP) Thursday pre-announcement shows, deal activity does seem to be improving a little.
What to Watch: How companies see deal activity trending during the back half of the year, particularly among clients within industries that are struggling right now. Also, for markets that have seen growth accelerate lately, how much companies see this acceleration as a pull-forward of future demand, as opposed to the creation of demand that otherwise wouldn't have existed.
Online Ads
The Backdrop: Online ad spend (and with it, ad prices) fell sharply in March, thanks to major ad spending cuts within verticals such as travel, hospitality and automotive as well as broader weakness in brand ad spend. But companies such as Facebook (FB) and Alphabet (GOOGL) did note that growth rates didn't worsen in April, and that they were seeing strength within verticals such as e-commerce and gaming. And more recently, there have been signs of improved spending within some (though not all) of the verticals that saw spending weaken in March/April.
What to Watch: How much ad spending and prices have been improving, particularly for brand ad spend. And in Facebook's case, how much recent advertiser boycotts/spending pauses are impacting its top line.
Streaming and E-Commerce
The Backdrop: For obvious reasons, these are two fields that saw spending/activity rise sharply as lockdowns took effect in March and April. And from the looks of things, demand is still at elevated levels right now.
What to Watch: How companies such as Netflix (NFLX) , Amazon.com (AMZN) and PayPal (PYPL) see streaming and/or e-commerce activity trending in Q3, with lockdowns easing in some major countries and regions. Also, the degree to which they feel the current environment has driven structural demand changes, as opposed to pulling forward expected future demand.
Smartphones
The Backdrop: Smartphone demand fell sharply in recent months, thanks in part to the shuttering of carrier stores and other physical retail sales outlets. Qualcomm (QCOM) forecast global phone shipments would be down 30% annually in Q2, and the FactSet consensus for Apple's (AAPL) June quarter iPhone sales implies a 15% annual drop. However, Qualcomm and others have expressed optimism that demand will be relatively healthy in the second half of the year, as new high-volume phones launch.
What to Watch: How Q3 demand is trending, now that many (though not all) retail stores have reopened. And with multiple reports indicating that this year's fall iPhone launches will take place a few weeks later than usual, any hints from Apple about when this year's iPhones will land will get attention.Tesla
The Backdrop: With Tesla (TSLA) sporting a $286 billion market cap as of Friday's close and Elon Musk's net worth having for the moment topped Warren Buffett's, the company deserves a category unto itself. Tesla reopened its giant Fremont, CA plant in mid-May, and (with the help of both Fremont deliveries and Chinese Model 3 sales fulfilled through its Shanghai plant) posted a better-than-expected Q2 deliveries report a little over a week ago.
What to Watch: How Tesla sees second-half demand trending in the U.S. and Europe, at a time when many other automakers are struggling and the consensus is for Tesla's deliveries to be up over 20% annually in both Q3 and Q4. Also, any commentary about how Model Y deliveries are trending as a percentage of Tesla's sales mix.
