NASDAQ Composite in Jeopardy—Earnings Growth Disappearing


NASDAQ Composite in JeopardyDaily stock market trading action is without conviction, and there have been countless days when the trading session starts out positive, only to end in negative territory. In corporate earnings, we continue to see the lack of consistency in business conditions among industries. Revenue growth is low and, in a lot of cases, it’s not due to organic demand.

Cisco Systems, Inc. (NASDAQ/CSCO) reported solid revenue growth of 5.5%, bringing revenues to $11.9 billion in the stock’s latest quarter; but this growth was mostly spurred by discounting prices. The company’s adjusted earnings grew to $0.48 a share, beating consensus of $0.46 a share, due to increased sales and job cuts. The company has cut almost 8,000 jobs over the last year, according to Bloomberg, and revenues and earnings in the current quarter are expected to come in flat. Cisco’s stock chart is below:

Cisco Systems Chart

Chart courtesy of

While the stock market was pleased with Cisco’s latest numbers, they really weren’t that great, all things considered. (See “More Dividend Increases Coming Soon—Is This Good or Bad?”) Competition, as the company refers to it, is fierce, and weakness in the eurozone, which represents about a quarter of the stock’s total business, is hampering the company’s growth. It’s a very similar story to a lot of large-cap technology companies. Growth in revenues and earnings is disappearing.

The breakdown in large-cap technology stocks is now pronounced, and I don’t see the broader stock market being able to advance without this group. Countless blue chip names within the sector are deteriorating significantly in this market; many of which were the stock market’s leaders at the beginning of this year. Microsoft Corporation (NASDAQ/MSFT) is the perfect example, as you can see in the chart below.

Microsoft Corp Chart

Chart courtesy of

I think technology stocks are slightly oversold at this time, but their earnings outlooks don’t offer much hope. It’s going to be another quarter or two before we see any potential for earnings growth from the big names in this group, and the main stock market averages will suffer for it.

The NASDAQ Composite is in a clear downtrend and has been since the beginning of October. Technology stocks within the index are not expensively priced on the stock market, but that’s appropriate—the earnings growth just isn’t there.

Retire on one hot stock

Presenting Our Top Stock Pick for 2015!

It is one of the leading companies in its industry. With quarterly revenue of $800 million and growing this company is generating over $300 million every three months in free cash flow!

"A Golden Opportunity for Stock Market Investors" is yours FREE when you opt-in to get our daily e-letter Profit Confidential. With Profit Confidential you are receiving the opinions and commentaries of seasoned financial analysts and economists. We analyze the actions of the stock market, precious metals, interest rates, real estate, and other investments so we can tell you what we believe today's financial news will mean for you tomorrow!

Combined, we have over 100 years' experience in analyzing various investment markets. Our analysts include MBAs, BAs, B.Comms, P.Engs, MAs, LLBs...and most importantly, years of experience investing and managing our own money successfully!

To opt-in to our FREE e-letter Profit Confidential and to get your FREE report, "A Golden Opportunity for Stock Market Investors," enter your e-mail address in the box below. You can unsubscribe at any time.

We hate spam as much as you do. Check out our Privacy Policy.

About the Author | Browse Mitchell Clark's Articles

Mitchell Clark is a senior editor at Lombardi Financial, specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, including Micro-Cap Reporter, Income for Life, Biotech Breakthrough Stock Report, and 100% Letter. Mitchell has been with Lombardi Financial for 17 years. He won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was a stockbroker for a large investment bank. In the... Read Full Bio »

Related Articles

Investors: This Could Send Gold Prices Soaring in 2015
By Michael Lombardi


For the rest of 2015, what's your take on oil?

View Results

Loading ... Loading ...
Profit Confidential
From: Michael Lombardi, MBA
Subject: Gold: The Stock Contrarian Investors’ Best Play of the Decade

Read this message