Big Tech posts best week in three months

After lagging behind the broader market for months, the world’s largest technology stocks suddenly perked up this week ahead of earnings. All it took was a reminder from Netflix that there’s still plenty of opportunity for growth.

The five biggest technology companies posted their best week in nearly three months in a rally sparked on Tuesday by Netflix, which added 2 million more subscribers than Wall Street was expecting. The megacap gains were led by Google parent Alphabet, Apple and Facebook, whose 9.2 percent advance was more than it had gained in six months before this week.

After big tech stocks led the market higher for most of 2020, investors recently shunned the group in favor of stocks like cyclicals and small caps that tend to outperform in an economic rebound. Now the megacaps suddenly look more desirable if they can deliver on revenue and profit targets, as many analysts are predicting. The technology exchange traded fund Invesco QQQ Trust is on pace for $1.4 billion in inflows this week, the most in two months, according to data compiled by Bloomberg.

“FANG names are attractive, particularly given the level of appreciation in other parts of the market,” said JPMorgan Chase analyst Douglas Anmuth. “In the early days of 2021, our conversations with investors suggest real FANG fatigue.”

Analysts expect the big five — Facebook, Amazon, Apple, Microsoft and Alphabet — to beat other companies in the S&P 500 on profit growth for a 12th straight quarter. Their combined earnings are projected to expand 11 percent during the quarter that ended in December, compared with a decline of a similar size for the rest of the market, analyst estimates compiled by Bloomberg Intelligence show.

While their profits are poised for another record, the stocks have been stuck in a prolonged trading range. Since peaking in early September, their total market value has failed to make a new high for 97 straight sessions, the longest drought in almost two years. Apple and Alphabet are the only ones whose shares have hit new highs, while Facebook is trading about 10 percent from its peak.

Microsoft will be the first major tech company to report on Tuesday, followed by Apple and Facebook the next day. The software giant is in good position to gain market share and expand profit margins in an improving operating environment, according to Morgan Stanley.