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Summary
- Technology, along with healthcare, has been among the best performing sectors led by new opportunities created by the pandemic.
- FAANG stocks are the primary drivers of the NASDAQ composite, with a substantial contribution of over 10% from Apple Inc.
- Facebook noted a 10% growth in revenue. The primary source of revenue was through advertisements.
- Apple Inc reported 18% growth in EPS on pcp. Total sales during the quarter were US$59,685 million.
- Amazon reported an increase in the operating cash flow by 42% to US$51.2 billion for the trailing 12 months.
- Google experienced a drop in revenue, driven by COVID-19. However, its non-ads revenue from Cloud, Google Play and YouTube grew strongly.
FAANG stocks play an important role in influencing the NASDAQ Composite index. These stocks fall under the category of the top 10 securities by weight in NASDAQ composite index, with apple contributing 10.42% by weight. If we see the industry breakdown of this index, we can see that the considerable contribution is from the technology sector at approximately 50%.
By the end of the day’s trade on 03 August 2020, NASDAQ composite settled at 10902.80, ~1.47% above its previous close. The improvement in the index was driven by the strong earnings from some of the largest US-based companies.
NASDAQ-100 Index surged up by 1.368% and settled at 11055.08 by the market closure on 3 August 2020.
COVID-19 pandemic has created multiple opportunities for the tech sector, which led to a boom for the industry. Technology companies are riding the wave of opportunity, and FAANG players have not stayed behind either.
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In this article, we would concentrate on FAANG stocks and see their Q2 FY2020 performance.
Facebook Inc. (NASDAQ:FB)
Facebook, on 30 July 2020 released its Q2 FY2020 results for the quarter ended 30 June 2020. Through advertising, the Company generated a revenue of US$18,321 million, up 10% as compared to the previous corresponding period. Apart from advertisement, the revenue from other sources grew up by 40% to US$366 million.
The total cost and expenses during the period improved by 4%. Impressive growth of 29% was seen in income from the operations to US$5,963 million. Operating margins also improved from 27% in Q2 FY2019 to 32% in Q2FY2020. Net income during the quarter, improved 98% to US$5,178 million.
Cash and cash equivalent along with the market securities by the end of 30 June 2020 stood at US$58.24 billion.
Operational Highlights:
- Facebook daily active users increased by 12% year-over-year. The number of daily users reached 1.79 billion on an average.
- Facebook monthly active users were 2.70 billion as of June 2020, up 12% YoY.
- Family daily active people increased by 15% to 2.47 billion YoY.
DO READ: NASDAQ surged up above 10,000 – Tech stocks setting a new benchmark
Apple Inc. (NASDAQ:AAPL)
Apple Inc, on 30 July 2020, released its Q3 FY2020 result for the quarter ended 27 June 2020. The revenue during the quarter was US$59.7 billion, a growth of 11% as compared to the previous corresponding period. International sales contributed 60% of the quarter’s revenue.
June quarter results were driven by double-digit growth in both Products and Services along with the growth in all geographic segments.
Apple’s CFO, Luca Maestri, said that the June quarter performance of the Company shows its ability to innovate and execute during tough times.
The Company noted a growth of 18% in its EPS. It generated operating cash flows of US$16.3 billion during the June quarter. Also, the board declared a dividend of US$0.82 per share. The dividend would be paid on 13 August 2020.
The board of directors also approved the four-for-one stock split so that the stock can be accessed by the wider range of investors.
Financial Highlights at a Glance:
Amazon.com, Inc (NASDAQ:AMZN)
Like other FAANG stocks, Amazon has also declared its Q2 FY2020 results for the quarter ended 30 June 2020. Below are the key takeaways:
- Operating cash flow increased by 42% to US$51.2 billion for the trailing 12 months as compared to 12 months trailing cash flow of US$36 billion for the period ended 30 June 2019.
- Free cash flow reached US$31.9 billion, which stood at US$25 billion by the end of 30 June 2019.
- Free cash flow less principal repayments of finance leases and financing obligations which was US$16.1 billion by the end of 30 June 2019 has reached US$21.3 billion by the end of 30 June 2020.
- Net sales soared 40% to US$88.9 billion on pcp.
- Operating income grew to US$5.8 billion on pcp.
- Net income was up at US$5.2 billion in Q2.
Q3 FY2020 Guidance:
- Net sales are projected to be between US$87 billion and US$93 billion. The number represents growth in the range of 24% and 33%.
- Operating income is expected in the range US$2 billion-US$5 billion. This value was US$3.2 billion in Q3 FY2020.
Netflix Inc. (NASDAQ:NFLX)
Streaming entertainment service, Netflix announced an impressive Q2 FY20 revenue growth of 24.9% to reach US$6,148 million. However, the Companies anticipates lower growth in H2 2020 compared to the H2 2019.
Highlights from Q2 FY20
- Operating revenue income crossed the US$1 billion mark in the quarter.
- Impressive growth of 25% in average streaming paid membership; streaming ARPU was up 0.4% YoY (up 5% excluding FX impact).
- Better-than-expected revenue growth and membership led to margin expansion of 770 basis points YoY.
- The Company added 10.1 million paid memberships during the quarter, substantially higher compared to 2.7 million in Q2 FY19. The performance was led by better-than-anticipated member acquisition and retention.
Guidance:
Netflix believes that the notable H1 performance will have an impact on the second half as it pulled forward demand from H2 in H1. The Company expects 2.5 million paid net adds in the coming quarter compared to 6.8 million in Q3 FY19.
NFLX is aiming for an operating margin of 16% for the full-year and highlights it is on track to achieve the target.
Alphabet Inc. (NASDAQ:GOOGL)
Google’s parent company Alphabet Inc. was able to beat the Q2 earnings expectations. However, it experienced its first quarterly YoY revenue decline in history. The result was influenced by the ongoing pandemic, which slowed economic growth. Many advertisers during this period pulled their expenses in the June 2020 quarter.
The non-ads revenue from Cloud, Google Play and YouTube grew strongly.
CEO Sundar Pichai highlighted four key areas where the Company is creating the most helpful product for everyone, offering the most trustworthy experiences for its users, executing at scale, and creating sustainable value.
- Creation of the most effective product for each individual. In the present time, the Company focuses on providing locally relevant, helpful, and authoritative details related to COVID-19 in more than 70 languages and 200 countries.
- Provide trusted experience to its users. It is making efforts to focus on areas such as user privacy, keeping information safe and provide high-quality information.
- Improvement in user and merchant experience. During this quarter, the Company was successful in this front in shopping as compared to the previous year.
- Building sustainable value for its partners and making a smart investment in new fields. In the advertisement business, the focus is on assisting businesses to find customers. Search advertisers were provided with the ability to add high-quality images to their advertisements. Thus, helping shoppers to see products to consider and act faster.
Other Developments:
Google announced that it is set to acquire a 6.6% stake in ADT Inc in a deal worth US$450 million. Through this deal, the Company would provide service to customers of its Nest home security devices. ADT Inc is a home security firm and would work with Google to incorporate Nest products such as cameras, thermostat, doorbells, and alarm systems.
Further ADT would offer a few Google devices to its clients at the beginning of this year and would expand the integration in 2021.
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Stock Information (as on 3 August 2020):
