The real reason why investors lost a lot of money on Apple, Amazon, Facebook and Netflix – 2019
Are you an FOMO? I think you are or at least have been 🙂
FOMO is the experience of worrying that other people are doing more interesting things than you, have more friends than you, and are just all around living a better and cooler life. A form of FOMO has been around for centuries, but its prevalence and intensity has greatly accelerated in our modern age. In the stockmarket a FOMO is a person who fears he will miss the bullride and sometimes buy fast without reading about the companies financial status.
BAT and FAANG shares have long been spearheading the stock market growth. This year in may, Tencent started to fall back. Tencent started backing because Chinese authorities began to control the company more and more. The Chinese government made demands on what games children can play and they also choose which games would getl the important licenses.
Without licenses, the company will not receive revenue and these games will remain free to download.
BAT has clearly affected its relatives in the USA FANNG stocks.
Many people have hooked on the technology stock trend. It is said that there is a term called FOMO – fear of missing out. Even though you may invest through ETF,thinking you are reducing risk, it is not always safe. Many ETF funds have a lot of technology stocks, and if one starts to fall the others may do the same.
Suddenly FAANG are starting to fall. From record levels to todays levels the FAANG have lost more then 1000 million in market value.
Drop in FAANG stocks are between 20-40%
Toward the end of a bull market there are a lot of people thinking I don’t want to miss out the bull ride. And they buy big time, some just buy because of the hype they don’t even read about the companies. No want wants to stand outside risking too miss the bull ride. It is unusual that the same tech shares and sector will lead the next upturn phase on the stock market, therefore we can be sure that FAANG hype could be over.
Amazon and Netflix still have high market values and this is their main concern. Amazon is valued at a P/E around 80 and Netflix to P/E around 100. They could make these high profits no one know for sure. But if they don’t, the downfall could be very big.
Because for a growth company that has nothing to stand against but just growth ( no dividends and no profits ) could fall much bigger if there is a smallest sign that something i not right or that growth has been weakened.
A general problem for growth companies is that valuation has nothing but just growth to rest. Neither current profits nor dividends. The smallest sign that the companies have cooled is going to send a scary feeling along the backs of the investors.
Netflix was the first FAANG company to fall. This could be due to that they missed second quarter expectations of more than 1 million subscriber. Even though they had a strong third quarter this was not enough to convince the market. I read about some psychologist who said. Netflix is making so much movies and series that people are starting to watch tv more and more. They are starting to finish series faster than they did before. This is negative because at some moment Netflix will not be able to produce so much material. Then you also have asian markets who probably are going to have Netflix at very cheap price making it another question weather future profits are going to be strong.
Amazon is likely to expect the strongest sales season so far. But some people can lift their eyebrows when they look at the hightstock value of Amazon.
Even though e-commerce segment is growing. In the third quarter the revenue was around 500 million dollars lower than expected. This could be the reason why the fourth quarter revenue have been lowered.
Lower growth rate in Amazon e-commerce will make is bad for Amazon because it also drives the traffic to the more profitable parts of amazon like the Amazon Web Services.
A good eye could see the small cracks coming out of Amazon but one thing is for sure. Jeff Bezos is one of the rich persons in the world. He don’t care about quarter report. He is in the long runt. He always told this that he plays long games. Amazon is also getting more and more money from advertising. Before the end of the year revenue of just advertising could exceed more than 10 billion dollars which would mean 260% increase growth. That is just impressive.
Apple is the company that has lost the most market value in absolute terms – from the $ 1 120 billion top valuation, $ 303 billion has been deleted.
The company’s subcontractors have sent signal for lower demand of electronic device and components. Other semiconductor companies have fallen before the FAANG started to fall. The last quarter Apple Iphone salve where cooler. The border management have decided that it no longer will report sales in number of ios units. This could be the what turn on the snowball effect for Apple. Then you have China tulls that Donald Trump want to impose. Trump threatens to raise tariffs on a wide range of branded good from today’s 10% to 25%. I could likely hit 25% of Apples products range. Apple have little chance to raise their already expensive products to match the tariffs. But could USA and China come to an agreement we could then see a raising of Apple share. Apple have increase its digital sales services and apps this is good news for the share. But Chinese mobile companies are getting closer to Apple. I personally think we will have more Chinese mobile devices in the future instead of Iphone. They are now as good as the Western models.
Facebook the social network also has no as big share valuation on the stock as the others. But Facebook is the FAANG share that has been performing worst during the year.
Following the Cambridge Analytica scandal in March, the stock fell sharply, but it recovered and rose to a new record level.
But the problems jumped again. In the last quarter, daily active users were slightly less than expected. And the youth’s involvement on the platform has decreased in favour for Instagram.
Margins are also under pressure. Last year, the profit margin was 39 percent and future forecast could have fallen to 30 percent in 2021.
The company has also flagged the marginal press. This includes cleaning on the platform that costs. There is an army of workers in Philippines who cleans facebook from spam and other inappropriate pictures or fake accounts.Facebook has spent huge sums of money on addressing security and privacy issues. For example facebook have been used in spreading hate in Myanmar against Rohingya people. You also have the Russian troll army who are writting their agenda and politics around Europe.
At the same time, the founders of Instagram, Kevin Systorm and Mike Krieger, have chosen to jump. Facebook bought Instagram for $ 1 billion in 2012. The founders are expected to leave then they do not agree with Facebook founder Mark Zuckerberg regarding a couple of recent product changes.
Despite a diminished activity, Facebook is the best way to reach a young audience network. The stock is now traded on p / e 18 on the year’s earnings and p / e 13 on the long-term estimate for 2021.
The Google share has fallen 20 percent from its previous highest levels. And despite two consecutive quarters with better results than expected, the stock is sour. Could be that the other stock in the FAANG are dragging Google downwards. Most analysts now believe that the stock should not be grouped together with other FAANG companies.
Google’s search engine is completely dominant outside China and Russia. About 80 percent of revenue comes from advertising sales there.
Google is one of the FAANG companies with the most constant revenue growth historically. And although the company’s revenues grows rapidly, there is more to take off. As part of the overall advertising market, Google’s share is just a few percent this is likely to increase a lot.
Google also owns Youtube, which is one of the major media platforms after Facebook. And unlike Facebook, Youtube is gaining popularity over the Facebook and Instagram.
Then Google has its cloud service, which is one of the top three in the world. The company is investing in AI. There is no revenue stream today, but Waymo, which is Google’s self-propelled vehicle, can eventually pull out the big lottery ticket.
On next year’s estimate, you can buy Google for p / e 21, which is quite cheap i would say.
You could also read about my analyst of Autoliv
Or my my general view on automobile in USA and Europe: here
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Source: Avanza, Nordnet, Factset, Netflix, Amazon, Google, Facebook, Apple, Marketscreener,