Finally, the cat is out of the bag! Putting to rest all the speculation that spread uncertainty in the world market lately, the Britons have said “Yes” to a Brexit.
As expected by the majority of analysts, this departure decision of Britain from the European Union (EU), send shockwaves across the global economy, including the U.S. stock market, which had barely reached a level of composure after the turbulence it suffered last year. Evidently, the S&P 500 and Nasdaq E-mini futures plunged as much as 5% early today, following the release of this news (according to Reuters).
No doubt, this sharp fall in the U.S. stock index future prices hints at a similar drop when the Wall Street opens this morning. As per the WashingtonPost, with the U.S. being the largest single investor in Britain, Brexit will jeopardize many U.S.-based firms’ access to the markets comprising the 28 nations of the EU, potentially lowering revenues and forcing some firms to consider relocating their European operations elsewhere.
Implications of Brexit on U.S. Investors
Given that an anticipated Brexit had triggered a bearish outlook among analysts, U.S. investors must be all the more jittery now that the vote is over and had an adverse effect on the U.S. market. After all, 30 companies in the S&P 500 generate more than 10% of their sales from the U.K. (according to FactSet Research).
So, companies with more revenue exposure to the U.K. are the most vulnerable at this moment. Considering the extent of their revenue exposure to the U.K., Information Technology (IT) will likely suffer the most.
IT Stocks to Dump on News of Brexit
For investors in the IT sector, it will be wise for now to avoid the stocks mentioned below that despite having high operational potential are expected to deliver weak performances, owing to their substantial exposure in the British market.
eBay Inc.EBAY is one of the world's largest online trading communities and has high exposure to the U.K. market as 16% of its 2015 total revenue came from this nation, only second to U.S. In the last 60 days, 14 out of 28 analysts covering this company downgraded their estimates for the current year.
PayPal Holdings, Inc. PYPL is a technology platform that offers online payment solution. In 2015, 13% of the company’s total revenue came from this nation. This implies that it came in second to the U.S. in terms of revenue exposure. In the last 60 days, five out of eight analysts covering this company downgraded their estimates for the current year.
Amazon.com, Inc. AMZN engages in the retail sale of consumer products in North America and internationally. The company generated 8.5% of its 2015 total revenue from the U.K., coming in only third to the U.S. in terms of sales exposure. The company’scompany’s Earnings ESP is currently -15.32% as the Most Accurate estimate is pegged at 94 cents while the Zacks Consensus Estimate is pegged at $1.11.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment