Earnings Season Ends Strong, Thanks to Technology Stocks Like Zoom Video

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Earnings Season Ends Strong, Thanks to Technology Stocks Like Zoom Video

Technology stocks continue to shine as earnings season winds down.

Companies including JD.com (JD), Zoom Video Communications (ZM) and Marvell Technology (MRVL) rallied on better-than-expected results in the last week. Meanwhile, prominent retailers like Target (TGT) and Kohl’s (KSS) met with shrugs despite decent numbers.

JD rode its momentum from previous quarters, profiting from earlier investments in logistics. That could now let the Chinese e-commerce company benefit from coronavirus as customers increase home delivery of groceries.

It was at least the third straight quarter that JD beat estimates, lifting its shares to their highest price in 2-1/2 years. It’s one more example of how investors have stuck with the Chinese technology industry despite the Covid-19 outbreak.

JD.com (JD) chart with 50- and 200-day moving averages.
JD.com (JD) chart with 50- and 200-day moving averages.

Marvell Moves Higher

MRVL also rallied after earnings, revenue and guidance surprised to the upside. The semiconductor company seems to be gaining traction in storage products. Analysts also see growth potential in 5G networking.

ZM climbed more than 6 percent to a new all-time high after coronavirus fueled demand for its teleconferencing software. The company, which went public last April, beat across the board.

Analysts also saw the potential for profitability to keep improving because of “operating leverage.” That means costs rise only slightly for each new customer added, resulting in quicker profit growth.

Ciena (CIEN) is a provider of traditional fiber optics that’s also benefiting as telecom firms invest on faster networks. Today it’s up about 1 percent after beating on the top and bottom lines.

Zoom Video Communications (ZM) chart with 50- and 200-day moving averages.
Zoom Video Communications (ZM) chart with 50- and 200-day moving averages.

Target Holds its Ground

Some traditional retailers reported earnings in the last week. TGT mostly beat estimates but continued to struggle with slow demand for toys and electronics. The retailer was the fifth-biggest gainer in the S&P 500 last year after digital upgrades kept shoppers in its stores.

But TGT fell in early January on a poor holiday-shopping season and is now trying to hold support at its 200-day moving average.

KSS continued its slide to new long-term lows despite earnings and sales beating consensus. The traditional retailer’s main problem has been a price collapse in women’s apparel thanks to bargain-hungry millennials.

Nordstrom (JWN) and Urban Outfitters (URBN) also fell to their lowest levels since last summer on weak profits.

In conclusion, established trends have continued as earnings season winds down. Many technology companies are still showing growth and 5G networking remains a catalyst for coming quarters. But traditional retailers keep struggling.

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