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Tech Stocks' Jan 21 Earnings Roster: INTC, STX & IBM

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Radhika Pujara
·6 min read
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Technology stocks’ fourth-quarter 2020 earnings season is likely to reflect gains from consistent demand for remote working and web-based learning technology amid coronavirus scare.

Particularly, coronavirus-induced work-from-home wave might have bolstered sales of processors utilized in enterprise laptops and data center servers, which in turn is expected to have benefited the technology sector in the to-be-reported quarter.

Also, encouraging trend in PC shipments in the fourth quarter, driven by increased demand and improvement in the supply chain, may have favored fourth-quarter performance of technology stocks.

In fact, per IDC data, PC shipments in fourth-quarter of calendar 2020 improved 26.1% year over year to 91.6 million units. This is expected to have favored performance of Intel INTC and Seagate STX, which depend on PC market trends, and is likely to get reflected in upcoming earnings releases on Jan 21.

Moreover, work-from-home trend may have benefited the companies offering video conferencing tools and workspace management offerings.

Further, stay-at-home wave is likely to have driven adoption of cloud computing solutions, including contactless payment, online education portals, cloud-gaming, social media platforms, and other leisure tools, which is expected to have acted as a tailwind.

Strong adoption of digital transformative techniques and increasing deployment of 5G are expected to have aided the technology companies in the quarter to be reported.

For instance, Logitech’s LOGI December quarter benefited from increased demand for its Video Collaboration tools, primarily driven by the rising work-from-home and learn-from-home trends. Additionally, robust demand for gaming products on growing popularity of online video games and eSports amid the pandemic-led stay-at-home environment, aided performance.

Moreover, Citrix Systems' CTXS fourth-quarter results gained from solid adoption of unified workspace solutions courtesy of coronavirus crisis-induced demand for secure work-from-home solutions.

Coronavirus Crisis Led Macro Weakness to Hinder Growth

Fourth-quarter performance of tech stocks is likely to provide a glimpse into deep and lasting business impacts of coronavirus outbreak as the pace of recovery doesn’t match up to expectations for some companies.

Impacts from coronavirus-led sluggishness in IT spending, weakness across small and medium sized businesses are likely to have weighed on the tech companies’ performance in the fourth quarter.

The after-effects are already apparent and can be ascertained from preliminary fourth-quarter results from SAP SE SAP. Management noted that Cloud revenues were impacted by lower pay-as-you-go transactional revenues, primarily related to Concur business travel, due to coronavirus crisis led shelter-in-place norms.

Forthcoming Tech Stock Earnings Releases

Considering this mixed backdrop, investors interested in the technology sector are eagerly awaiting earnings releases from players like Intel, Seagate and International Business Machines Corporation IBM on Jan 21.

Intel’s fourth-quarter 2020 performance might have benefited from strength in its client computing business, courtesy of growing PC demand amid the coronavirus crisis-induced work-from-home wave.

The chipmaker’s fourth-quarter results are likely to reflect gains from solid momentum of its latest high-performance Xeon processors.

Intel Corporation Price and EPS Surprise

Intel Corporation Price and EPS Surprise
Intel Corporation Price and EPS Surprise

Intel Corporation price-eps-surprise | Intel Corporation Quote

However, increasing investments on accelerated ramp up of 10 nm products and improvement in 7 nm production, in a bid to counter stiff competition from Advanced Micro Devices AMD, primarily post Xilinx acquisition, is likely to have put pricing pressure and weighed on fourth-quarter profitability.

Our proven model does not conclusively predict an earnings beat for Intel in fourth-quarter 2020. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

While, Intel has an Earnings ESP of 0.00% and a Zacks Rank #3, which makes surprise prediction difficult.

The Zacks Consensus Estimate for fourth-quarter earnings has been steady at $1.10 in the past 60 days. (Read More: Intel to Report Q4 Earnings: CCG & DCG in Spotlight)

Seagate’s fiscal second-quarter 2021 performance is anticipated to have gained from continued traction witnessed for the mass capacity product portfolio in the cloud and edge computing verticals.

Seagate is also ramping up its portfolio of 18 terabyte (TB) drives, which is a positive. The company’s fiscal second-quarter results are expected to reflect gains from solid demand for 16 TB products.

However, coronavirus crisis-induced sluggish spending across small and medium-sized enterprises might have negatively impacted the top line in the fiscal second quarter. Moreover, management expects to witness higher costs due to the COVID-19 crisis.

Seagate Technology PLC Price and EPS Surprise

Seagate Technology PLC Price and EPS Surprise
Seagate Technology PLC Price and EPS Surprise

Seagate Technology PLC price-eps-surprise | Seagate Technology PLC Quote

Our proven model does not conclusively predict an earnings beat for Seagate this time around as it has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for fiscal second-quarter earnings has been steady at $1.10 in the past 30 days. (Read More: Seagate to Report Q2 Earnings: What's in the Cards?)

IBM's fourth-quarter 2020 results are likely to reflect gains from Red Hat acquisition synergies and solid uptick in its hybrid cloud computing capabilities, mobile, analytics, cognitive technologies and AI related solutions.

Moreover, digital transformation wave has bolstered adoption of cloud-based QRadar, and Identity and Trust services, and CloudPak for Security offerings. Additionally, gains from rapid uptake of IBM z15 are anticipated to have acted as a tailwind.

However, the coronavirus induced crisis may have hindered business prospects in the fourth quarter, due to restricted economic activity and decline in IT spending globally.

International Business Machines Corporation Price and EPS Surprise

International Business Machines Corporation Price and EPS Surprise
International Business Machines Corporation Price and EPS Surprise

International Business Machines Corporation price-eps-surprise | International Business Machines Corporation Quote

Our proven model does not conclusively predict an earnings beat for IBM this time around. IBM has a Zacks Rank #3 and an Earnings ESP of -1.31%.

Notably, the Zacks Consensus Estimate for earnings has been steady at $1.77 in the past 30 days. (Read More: Ahead of IBM’s Q4 Earnings: Cloud, GBS & Systems in Spotlight)

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International Business Machines Corporation (IBM) : Free Stock Analysis Report
 
Citrix Systems, Inc. (CTXS) : Free Stock Analysis Report
 
Seagate Technology PLC (STX) : Free Stock Analysis Report
 
Intel Corporation (INTC) : Free Stock Analysis Report
 
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
 
Logitech International S.A. (LOGI) : Free Stock Analysis Report
 
SAP SE (SAP) : Free Stock Analysis Report
 
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