Next week holds a lot of critical information
This next week will give us a great look into how well or how poorly the US tech sector is doing. Apple, Microsoft and Yahoo are set to release earnings. Microsoft’s success might give new hope to a Yahoo buyout, while the earnings report for Yahoo is of much interest to the Microsoft board.
Yahoo’s stock is still at the post-Microsoft offer price of $28 per share even as the possibility of a merger seems entirely out of the question. For this reason alone, Yahoo has much more to lose from a earnings release than it has to gain. Google posted a 42% increase in revenue, Yahoo is expected to follow. A very good earnings report from Yahoo is unlikely to change the price of the stock, which has been left at the $28-30 level since the Microsoft offer.
A disappointing earnings report could mean that talks between Microsoft and Yahoo would end, however it is likely that Microsoft will stay strong in the buyout attempt. If earnings come out lower, Yahoo might be more inclined to take the buyout even after partnering with Google as a hope of evading the Microsoft offer.
Stocks are benefiting from a comparative analysis between the Quarter 4 earnings of 2007 and better earnings in 2008. The dollar has lost much of its value through 2008, helping companies market their products to foreign buyers. Now that the “doom and gloom” seems over, many companies are still feeling the hurt of losing quarters.
Bank of America reports this week on its 1st quarter earnings which are likely to miss the 20% growth the bank was looking for. Bad loans and defaults have sent earnings in a downward spiral but BOA is still in a much better situation than many of its competitors.
Very few of these individual stocks have much to gain. Bank of America has plenty of exposure to subprime markets, Yahoo is already trading at a premium and Microsoft is stuck submitting offers to Yahoo for a buyout. At this point, the overall market has much more to gain from these earnings reports than the stocks that are reporting. Any half-way decent news should be expected to be met with a tidy gain.
