It has been a love affair between investors and US technology stocks for around a decade, and in recent years an intensive one turbocharged this year by their resilience to the ongoing corona pandemic. Yesterday’s earnings from Apple, Amazon, Google, and Facebook were broadly strong but the market decided that good was not good enough except for the case of Google. The disappointment begs the question whether the love affair will end in a breakup and other segments of the equity market will now swing into focus.
Our verdict of the US tech quartet
Apple, Amazon, and Facebook shares were all down in extended trading post their earnings releases with Apple taking the biggest headlines as iPhone sales missed estimates, China revenue was down 29% y/y, and management refraining from providing any guidance for the current quarter. As a result, Apple shares were down 4.5% in extended trading. Long-term investors should overall be positive on Apple’s business as the Services segment continued to grow fast reaching revenue of $54bn in last 12 months and will be the profit engine in the years to come.
Amazon really delivered strong earnings and revenue figures for the previous quarter and revenue guidance was significantly above estimates. But nevertheless, investors sent Amazon shares down 2% in extended trading. Investors might have been spooked by the relative growth differential between Amazon Web Services (the cloud business) and Google Cloud causing investors to wonder whether Amazon is losing ground in the cloud infrastructure industry despite 26% growth y/y.
Facebook benefitted as predicted by Pinterest and Snap earnings from exceptionally strong Q3 online advertising trends- Despite heated political discussions over Facebook and a global campaign against running advertisements on Facebook’s networks the duopoly in online advertising showed resilience. Despite these strong numbers, shares were 2% lower in extended trading as investors likely drew negative conclusions from the Q4 guidance on DAU (daily active users) and MAU (monthly active users) which was flat to negative for US and Canada. Whether the Netflix documentary The Social Dilemma has had impact is difficult to say but lower number of users are potentially less advertising on the platform going forward and thus bad for Facebook.