Several software companies have been beaten on the stock exchange this year as a result of interest rate rises, sky-high inflation and monetary policy tightening.
Now the companies have suffered another setback after the giant Microsoft earlier this week issued a profit warning and warned of even more headwinds ahead, writes Bloomberg.
The more expensive US dollar is blamed for Microsoft having to cut the forecast for the current quarter from a result per. share of “at least $ 2.28” to “at least $ 2.24”.
“A strong dollar will be a recurring theme across many major software companies, as most generate more than a third of sales outside the United States,” said senior analyst Anurag Rana of Bloomberg Intelligence.
Threatens margins
The US dollar index reached its highest level in more than two decades last month. An increasingly expensive dollar is expected to further threaten companies’ margins – which are already under pressure from increased costs.
Microsoft and other major technology giants – such as Oracle and Adobe – operate complex global operations and have a higher exposure to foreign exchange, according to Bloomberg.
Salesforce issued optimistic outlook for the year earlier this week, but noted that the results were marked by the dollar. At the same time, the company warned that the problem would be extended into the second quarter.
According to Wells Fargo strategist Brendan McKenna, companies such as Salesforce, which has a greater exposure to foreign exchange, need to look at hedging strategies – so-called hedging.
He believes the dollar will continue to strengthen against most industrialized countries, as well as developing countries, with few exceptions.
– Cheap can get cheaper
Analysts are currently not very worried about the strong dollar, Bloomberg writes, and instead focus on the resilience of the companies’ underlying operations in an environment of declining economic growth.
But for some investors, it’s still too early to start stockpiling software stocks:
– They are more attractive than they were, but we do not want to chase them because we think they are a bargain yet. Cheap can quickly become cheaper in an environment with rising interest rates, says top manager Stephen Hoedt in the analysis house Key Private Bank to Bloomberg.
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