U.S. equities are drifting lower on Monday as the first-quarter earnings season hits its peak this week. Results have been, as expected, very strong thanks to the impact of the Trump tax cuts and steady economic growth.
Yet despite positive upside surprises, many stocks are reacting negatively to reports on concerns the good times won’t last. Moreover, there is a nagging concern that many pockets of leadership — I’m looking at your big-cap tech stocks — remain overvalued.
In this environment, respected bond manager Jeffrey Gundlach told the audience at the Ira Sohn Conference that he is short Facebook, Inc. (NASDAQ:FB) amid ongoing troubles related to to the Cambridge Analytica data privacy scandal.
Here’s why FB stock, along with two other big-cap tech stocks, are looking like good short-side plays here:
Tech Stocks to Short: Facebook (FB)
Gundlach’s comments against Facebook pushed shares down out of another upside breakout attempt as the $170 levels remain intractable. Watch for a downside move down, with a break of the 20-day moving average setting up a test of the late March/early April lows near $150.
The stock also recently suffered a “death cross” with the 50-day moving average falling below the 200-day average for the first time since early 2017.
The company will next report results on April 25 after the close. Analysts are looking for earnings of $1.32 per share on revenues of $11.4 billion. When the company last reported on Jan. 31, earnings of $2.21 beat estimates by 24 cents on a 47.3% rise in revenues.
Tech Stocks to Short: Apple (AAPL)
Apple Inc. (NASDAQ:AAPL) shares have fallen back below their 200-day moving average after a key semiconductor supplier warned of tepid demand for ultra high-end smartphones last week — casting a pall on the $999 iPhone X as we head into a mid-cycle refresh later this year.
Consumers just aren’t that excited about shelling out that kind of cash for incremental improvements. Which will make a planned “iPhone X Plus” model with a larger screen (and a larger price tag) a tough sell.
The company will next report results on May 1 after the bell. Analysts are looking for earnings of $2.69 per share on revenues of $61.1 billion.
When the company last reported on Feb. 1, earnings of $3.89 beat estimates by four cents per share on a 12.7% rise in revenues.
Tech Stocks to Short: Alphabet (GOOG)
Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) shares are rolling over after setting another pattern of lower highs and lower lows, dropping back below its 50-day moving average ahead of earnings.
Watch for a decline back to support near $1,000 and its 200-day moving average.
The company will report results after the close today. Analysts are looking for earnings of $9.28 per share on revenues of $30.3 billion. When the company last reported on Feb. 1, earnings of $9.70 missed estates by 37 cents on a 24% rise in revenues.
Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
