A moment of truth is coming for the world’s biggest technology companies.
They are starting to report first quarter results as the coronavirus shutdowns slam into the markets.
But tech analyst Gene Munster expects a couple of widely held names to weather the storm and emerge as big winners: Apple and Tesla.
“Investors will have this flight to quality,” the Loup Ventures founder and managing partner told CNBC’s “Trading Nation” on Tuesday.
According to Munster, Apple’s longer-term investors will benefit from advancements in 5G, content, software services, wellness and augmented reality. However, he warns they’ll first have to cope with next Thursday’s challenged quarterly results.
“The company has more exposure than any tech company in China,” he added.
In Tesla’s case, Munster sees the electric auto maker, which reports next Wednesday, maintaining its attractiveness among consumers.
“What investors will largely leave the Tesla earnings call with is this understanding about the significance of the market share gained,” he said. “To put it in perspective, in the March quarter, Tesla grew their deliveries by 40%, and the overall auto industry was down by 30%, at least in the U.S..”
So far this year, Apple stock performance is tracking the tech-heavy Nasdaq, down about 8%. However, Tesla is outperforming the index. It’s soaring 67% in 2020.
‘It’s going to be ugly’
Overall, Munster believes earnings season will be worse than investors think particularly for two of the FAANG names.
He warns Facebook and Google parent Alphabet are super vulnerable due to the coronavirus’ impact on advertising sales.
“It’s going to be ugly,” he said.
Munster suggests the biggest wildcard will be how companies plan to return to growth.
“It’s going to be less about the reported numbers and more about the commentary,” Munster said. “Apple’s earnings loss is going to be negative relative to expectations for the margin and the guidance for June. But the companies that are making those investments, the companies that are talking about retaining their product expectations… are the ones who ultimately are going to do better.”