With the COVID-19 outbreak, the world's financial markets began taking a beat. The stock performance graphs reflected as if they had been hit hard with a hammer. This alarming situation has questioned the fact across various sectors that should they react to cope or should they respond to thrive. Without a doubt, the leader will outshine the others in race, through the ability to grow when the global economy revives, as sooner or later it will.
Tech titans are boosting the mood with the reopening announcements from a few FAANG stocks like Apple (AAPL) and Alphabet (GOOGL) along with their strong business outlook that have made investors optimistic that the worse smash might be in the rear view.
The investor’s positive outlook is bolstered by the fact that NASDAQ mounted 1.58% (or around 141.66 points) to close at 9,121.32 points on 8th May 2020 leaving its fellow traded indices worldwide behind.
In the wake of the prevailing crisis, technology stocks are still managing to deliver surprises. Let’s have a look at a few Tech titans who are the key winners of this burgeoning trend.
Apple Inc. (NASDAQ:AAPL)
Though the COVID-19 pandemic has shaken up the tech industry, but it looks like Apple isn’t disappearing rather it is ready with all its arms and ammunition to sustain its strong financial position.
Apple’s next significant pieces of pie – services, wearables
By the end of April 2020, Apple unveiled its second quarter report for the period ending 28 March this year. Apple’s services segment recorded net sales of USD13.34 billion y-o-y and it's wearables, home and accessories net sales were noted at USD6.28 billion.
Shopping made easy with New Online Hub
Due to closure of Apple's stores across the global, Apple has launched a new online shopping hub to remain in the market. The website acts as a sole hub to its consumers to shop, chat with Apple specialists, app of financing, offering contactless delivery and tracking services.
Amidst global crisis- launch of iPhone SE, new iPad pro models
Recently in mid-April, Apple unveiled iPhone SE (smartphone) at an affordable price which in turn, gave a positive signal to Apple by not putting a pause on its usual product launches pace.
Apple’s results beat with no Guidance
Apple’s second quarter results suggested strong performance as they earned USD 2.55 a share on the net sales of USD 58.31 billion. iPhone net sales stood at USD 28.96 billion in comparison to second quarter of 2019’s recorded USD 31.05 billion, primarily to the impact of the COVID-19 pandemic. The Company repurchased USD 18.5 billion of its common stock and paid dividends and dividend equivalents of USD 3.4 billion during the second quarter of 2020. Also, the Company produced operating cash flow of USD 13.3 billion.
In the wake of the prevailing crisis, Apple opted not to issue earnings guidance for the third quarter.
Apple’s stock on upswing
On 8th May 2020, Apple closed the trading session at USD 310.13, up 2.38% from its previous close. Market cap of the Company was approximately USD1.34 trillion.
Alphabet Inc. (NASDAQ:GOOG,GOOGL)
The parent company of Google is engaged in the business of acquisition and operation of various companies. California based company operates through subsidiary companies like Google, Calico, Access, GV, Nest, Verily, Waymo, CapitalG and X.
Alphabet earnings suggest positive business outlook
Alphabet announced its first financial quarter results on 28th April 2020 for the quarter ended 31st March 2020. The Company delivered a strong performance during the quarter, with revenues of USD 41,159 million with 13% increase against the 1st quarter of 2019.
The Company encountering COVID-19 pandemic like rest of the world since March 2020 has experienced a decrease in its advertising revenues. However, users’ search activity rose during these times, their interests seemed to have shifted to less commercial topics. This in turn made advertising revenues to be negatively affected by declined spending of their advertisers.
Additionally, income from operations went up from USD 6,608 million in Q1 2019 to USD 7,977 million in Q1 2020. Net income increased from US$6,657 million in Q1 2019 to USD 6,836 in Q1 2020, with diluted net income per share of USD 9.87.
Stock performance of Alphabet
Alphabet Inc Class A stock last traded on NASDAQ at USD 1,384.34, increased by 1.1% percent from its previous close (as on 8th May 2020).
Microsoft Corporation (NASDAQ:MSFT)
MSFT provides various cloud-based services and software through its tools and platforms. It also designs, manufactures and sell devices, as well as delivers significant online advertising to its users worldwide.
Digital transformation acceleration in Aotearoa and Italy
MSFT seeks to invest in New Zealand with the establishment of its first data center to deliver enterprise-grade cloud services. Additionally, it seeks to invest USD 1.5 billion to speed up the digital transformation in Italy through a 5-year investment plan which would include offering local cloud services, launching digital skilling, re-skilling and smart-working programs, speeding up the business’ restart process.
Software giant beats positive outlook on border lines from top and bottom
MSFT reported Q3 2020 report for the three months closed 31 March this year, wherein it mentioned the revenue of USD 35.0 billion, an increase of ~15.6% y-o-y. The Company’s diluted earnings per share was at USD 1.40, 23% up from USD 1.14 noted in the pcp (previous corresponding period).
In Q4’20 period, the Company expects to generate revenue in the range of USD 35.85 billion–USD 36.80 billion and the cost of revenue to be in the range of USD 11.55 billion and USD 11.75 billion.
On 8th May 2020, the shares of MSFT closed at USD184.68, up 0.59% from its previous close. Market cap of MSFT was approximately USD1.40 trillion. The P/E ratio was noted at 30.75x.
Interesting read; Lens Through Zoom’s Growth Story Amidst Growing Digitisation Trend
The Company offers products that allow users to connect and share with family and friends through mobile devices, personal computers, virtual reality headsets and in-home devices.
It allows over 3 billion users worldwide to learn and discover about the world and share their opinions, ideas, photos and videos, as well as other activities through a portfolio of products including WhatsApp, Facebook, Instagram, Messenger and Oculus. FB manages its global operations through offices in over 70 cities and 15 data centres, serving through 48,268 employees worldwide.
Discover, but with limits
On 5 May 2020, FB unveiled Discover, a new connectivity app that support users who do not have enough funds to get access information over the web. The services are available through mobile data and Android app, which enables users to visit any website in text format, without any video, images, audio and other elements that consume large amounts of data. Discover, under its initial testing phase, is currently launched in Peru where it is offering 10MB of free data to its users daily.
Source: Company’s report
Uncertainty in business outlook amid COVID-19 pandemic
The tech giant anticipates the performance of its business to be impacted by the length and effectiveness of shelter-in-place orders; the efficacy of economic stimuli worldwide and the variability of currencies in comparison to the US dollar.
FB’s DAUs and MAUs and Family MAP and DAP, mirrors increased engagement due to the people sheltered in place and utilising FB’s products to connect with the others. The Company anticipates reduction in engagements post restrictions in future. The Company experiences reduction in the pricing of ads and the advertising demand.
Beats estimates, aligned with stable ad spends
FB reported Q1’20 for the three months ending 31 March 2020 on 29 April wherein it mentioned total revenue of USD 17.7 billion, an increase of 18% y-o-y. The Company’s diluted earnings per share of USD 1.71 compared to USD 0.85 in Q1’19.
Stock price performance
On 8th May 2020, FB closed at USD 212.35, up 0.52% from its previous close. Market cap of FB was approximately USD 605.01 billion. The P/E ratio was noted at 30.56x.