Troubled Trio? Why These Megacaps Are Faltering in 2024

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The stock market is off to a roaring start in 2024, but three former leaders might be left behind.

Apple (AAPL), Tesla (TSLA) and Alphabet (GOOGL) have dropped in recent weeks as the S&P 500 and Nasdaq-100 rallied to new highs. They’re now below chart levels that could make investors worry about further downside risk.

Combined, these three companies account for 12 percent of the S&P 500 and 16 percent of the Nasdaq-100. Contrasted with gains in the bigger indexes, their weakness could mean investors are broadly reducing positions. Does the market see better growth prospects in other names?

Apple (AAPL), daily chart, with technical patterns and indicators.

Apple Breaks Support

Apple (AAPL), once the world’s most valuable company, bounced at $180 in January and February. But it closed under that level on Friday (the first day of March) and continued lower on Monday. Chart watchers may also notice other potentially bearish patterns:

  • On December 14, AAPL had a failed breakout above its previous record high from July.
  • On January 24, it made a slightly lower high.
  • In late February, it slid under its 200-day moving average and has stayed there since.

AAPL’s first problem has been slowing demand for iPhones. It’s also failed to make significant Artificial Intelligence (AI) announcements, depriving it of the most recent growth area. The stock declined further yesterday after getting a $2 billion fine in Europe.

Tesla (TSLA), daily chart, with technical patterns and indicators.

Tesla Skids Lower

Tesla (TSLA) had a significant rally between late 2019 and late 2021, but it’s been skidding lower since. Unlike the S&P 500, its peak in late December was below its earlier highs in July and September. That could have made chart watchers suspect sellers had gained control over the longer term.

It next slid under its 200-day moving average and its low from late October. TSLA’s 50-day moving average then proceeded to cross below its 200-day moving average. That kind of “death cross” may reflect longer-term selling pressures.

Slowing EV sales have weighed on TSLA. It’s also struggled as competition increases from legacy car makers like Toyota Motor (TM) and Ford Motor (F).

Perceived overvaluation could be another issue:

  • TSLA trades for about 47 times earnings and 7 times revenue, according to TradeStation data.
  • TM trades for 21 times earnings and 1 times revenue.
  • F trades for 5 times earnings and 0.3 times revenue.
Alphabet (GOOGL), daily chart, with technical patterns and indicators.

Alphabet’s Failed Breakout

Alphabet (GOOGL) also flirted with new highs and couldn’t hold. The Internet-search giant inched past $153 in late January, slightly above its previous record from two years prior. But it gapped lower on January 31 after advertising revenue missed estimates. It dropped further last month after Reuters reported on problems with its Gemini AI tool. The slide continued on Monday after a judge ruled it should face a class-action lawsuit by advertisers.

Aside from the failed breakout in January, GOOGL made lower weekly highs in February. It slid below its 50-day moving average and is now back to its 200-day moving average for the first time in 11 months.

In conclusion, the market may have entered a new period. Recent growth areas like e-commerce, mobility and EVs have shown signs of maturation and slowing. TSLA has struggled with weaker demand, increased competition and high valuations. AAPL and GOOGL– once on the cutting edge of growth — have failed to capitalize on the AI boom.

They used to be members of the “Magnificent Seven.” Have they now become a new “troubled trio” of the Nasdaq?

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