Market Cap Check: Winter Is Coming for Media and Tech Stocks

Illustration of a baseball cap with a pie chart on it

The third quarter has drawn to a close, and the market stats paint an ugly picture.  

All three of the major indices ended the quarter firmly in a bear market, off 20% or more from the recent highs. The S&P and tech-heavy Nasdaq logged their third consecutive quarter of declines for the first time since 2009. On top of that, analysts slashed Q3 corporate earnings estimates by the widest margin in more than two years. 

As we officially enter the final quarter of 2022, more turbulence is expected, and the media and tech sectors will likely feel the pain.

Looking back at Q3, struggling streaming giant Netflix staged a bit of a comeback and outperformed all its peers with its 37% market cap gain between June 30 and Sept. 30. Nevertheless, the company’s value was still down 60% so far in 2022.  

The real test comes when Netflix kicks off media earnings season when it reports Q3 results Tues. Oct. 18 after market close. If Netflix doesn’t meet the guidance its management predicted, of one million subscriber additions in Q3, investors will likely send the stock nosediving yet again.  

At the highs back in October 2021, Netflix’s market value exceeded $300 billion, and its stock was $700 per share. As of the end of Q3, Netflix’s value was roughly $106 billion. 

The biggest losers in Q3 included movie theater chain AMC and streaming company Roku. Roku was also the worst performing media stock thus far in 2022 with its market value sinking a whopping 74%. Only two companies remain positive on the year — WWE and Tegna.  

Despite the recent scandals involving ex-CEO Vince McMahon, WWE has held up relatively well. WWE’s market value increased a solid 39% in 2022. Much of the recent stock jump can be attributed to increased sale speculation following McMahon’s retirement. 

It’s still a bumpy road as we head into the final quarter of 2022. Looking ahead, there are a handful of market-moving events including the midterm elections on Nov. 8, two additional interest rate decisions by the central bank, Q3 earnings and a slew of economic data releases.

Meanwhile, Big Tech hasn’t had it much easier. If anything, none of the Big Tech companies are positive on the year. The biggest gainers of 2021 are being hit the hardest in 2022.  

Twitter spent this year being wrapped up in will-he-won't-he drama with Tesla CEO Elon Musk. Musk has taken Twitter’s management and investors on a roller coaster ride regarding whether he would buy the company and take it private. There is still no resolution to the messy situation, but in the third quarter, Twitter’s value increased by 17%. However, Twitter is the best performing Big Tech giant this year, with its value only contracting by 2% in 2022. 

Twitter, Amazon and Apple were the only Big Tech companies to see gains in the past quarter. It’s also worth noting Apple would’ve seen better finishing numbers if the company hadn’t revealed that it was readjusting iPhone production targets due to weaker-than-anticipated demand. Apple shares sank 8% last week on the news. 

There’s not much optimism headed into the holiday quarter. If macroeconomic conditions worsen even more and Q3 earnings reflect the damage to companies, it's likely the media and tech giants will continue to get beaten down.  

But on the bright side, consumer spending and consumer sentiment data has been strong, which means the economy is still on somewhat solid ground for the time being. At least for now there seems to be no reason to panic. As hard as it is to stomach these rough cycles in the market, it can also be viewed as an opportunity to reassess and jump in when prices are low.