The fourth-quarter earnings season has been a bit of a dud so far.
We expected energy stocks to be under pressure given the collapse in crude oil prices. But the real surprise has been the underperformance of a number of notable technology companies hit by slowdowns in PC demand, currency volatility depressing foreign earnings and weak forward guidance.
As a result, we’ve seen a number of tech stocks take it on the chin.
Here’s a look at five tech giants that are under pressure and present interesting put option or short side plays.
Tech Stocks to Sell: Qualcomm, Inc. (QCOM)
Click to Enlarge Qualcomm, Inc. (NASDAQ:QCOM) reported better-than-expected results on Wednesday but then disappointed on its forward earnings and revenue guidance. The company also noted that its 810 Snapdragon processor will not be featured in an upcoming redesign of a large customer’s flagship device — which was widely interpreted as Samsung.
Shares cratered 10.3% on Thursday as a result.
Tech Stocks to Sell: Microsoft Corporation (MSFT)
Click to Enlarge Microsoft Corporation (NASDAQ:MSFT) is suffering its first significant pullback since 2012 this week after releasing a disappointing forward outlook, which resulted in a batch of analyst downgrade notes.
The Windows/Office outlook was disappointing as the Windows XP upgrade cycle fades and folks prepare for the Windows 10 release. There also are nagging concerns that the company’s cloud initiatives are cannibalizing sales of its traditional software-as-a-product offerings.
MSFT stock doubled from late 2012 to its November high. A 50% retracement would put early 2014 levels near $37 in play — a 12% decline from here.
Tech Stocks to Sell: Hewlett-Packard Company (HPQ)
Click to Enlarge Hewlett-Packard Company (NYSE:HPQ) shares are down more than 7% from their highs earlier in the month as it’s caught in the whirlwind of MSFT’s descent. It also didn’t help that the company was removed from Deutsche Bank’s short-term buy list on January 15.
The February $38 puts recommended to Edge Pro clients earlier in the month are up more than 20% so far.
Tech Stocks to Sell: Yahoo! Inc. (YHOO)
Click to Enlarge Disappointing results from Alibaba (NYSE:BABA) on Thursday, which dropped 8.8% on weak earnings, pulled down Yahoo! Inc (NASDAQ:YHOO) given its minority interest in the company. YHOO lost 5.8% as a result despite short-lived excitement over its plans to spin off its BABA holdings.
BABA was the bright spot holding up YHOO; and with that now gone shares have a long way to fall after rising some 250% from 2012. A test of the 200-week moving average would be worth a 41% decline from here.
On Wednesday, I recommended the Feb $46 YHOO puts to Edge Pro subscribers.
Tech Stocks to Sell: Cisco Systems, Inc. (CSCO)
Click to Enlarge Cisco Systems, Inc. (NASDAQ:CSCO) shares are threatening to drop out of a three-month topping pattern after CEO Larry Ellison’s comments that the company’s new generation of engineered network systems would be 50% cheaper than current offerings. MSFT’s dour outlook has also played a role.
The company will report earnings on Feb. 11.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.
