Holly's Blog: Blistering heat for Facebook as Amazon books cool profits
19 July, 2021
Holly recaps this week's market turbulence which saw Facebook take a 20% tumble and Amazon report double their estimated profits. With tech's big five constituting 11% of the US stock market, what does this mean for the average investor?
I tend not to worry too much about individual shares’ performance as I don’t believe that picking shares (https://www.boringmoney.co.uk/learn/investing-guides/product-guides/shares/) is a recipe for success for us mere retail punters. I work on the assumption that the person on the other end of the transaction knows more than I do. Which is why I stick to funds and pay a gonk to worry about this on my behalf.
But when the collective FAANGs (Facebook, Apple, Amazon, Netflix and Google) make up about 11% of the US stock market, their progress silently impacts most of our investment portfolios and pensions (https://www.boringmoney.co.uk/learn/investing-guides/product-guides/private-pension/). This week has been a big week as the tech giants report how they did over the three months to June.
Holly's top picks for stocks and shares ISAs in 2018
This is not mahogany boardroom table stuff – I’m talking about a typical starting amount of £25-£50 a month. You can get access to your money whenever you want so it’s not locked away. And if you don’t feel confident about picking shares or investments, you can still take part.
Holly's top picks for stocks and shares ISAs in 2018 (https://www.boringmoney.co.uk/learn/articles/hollys-top-picks-for-stocks-and-shares-isas-in-2018/)
Facebook gets bitten
Facebook shares took a 20% tumble on Wednesday after disappointing results. (I’ve always thought that running a listed business is like being in a permanent business episode of Love Island – the public vote which wipes $140 billion of your company value in one day is a fairly damning indictment of your progress!)
In fact over the last year, its revenues have grown by over 40%. More than respectable, but the firm missed revenue expectations for the first time since 2015 and the market doesn’t like surprises. Future margins are also expected to slide from 44% to the mid 30s, so the outlook is touch cloudier. A contributing headache is of course the new European privacy laws and GDPR – in Europe, daily active users of Facebook fell by 3 million over the quarter. Whether this share price slump is an over-reaction and a buying opportunity – or the beginning of the end – remains to be seen. But I wouldn’t be too quick to write them off.
Over in Amazon-Towers, it’s a cooler story
Profits reported this week were more than double what investors predicted and the shares went up by over 3%. Main drivers are cloud computing services and Prime subscriptions. The business is now worth a staggering $875 billion, surpassed only by Apple. Five years ago its shares were trading at $300 - as I write this they’re around the $1860 mark.
Netflix were another tech-darling disappointment last week, their shares fell on the back of lower than expected subscriber numbers. Twitter is due to report today – its shares are up over 80% over the year so far and the ‘futures’ market (where people effectively bet on future price movements of shares, and buy what I think of as a token to exchange for shares at a locked-in price in the future) suggests that the news today will be good and the shares will go up. People are predicting revenues of $700 million for the last 3 month period.
So – a mixed bag of news for the FAANGS and trendy tech stocks. I don’t feel the particular need to do anything – the good news is largely balancing out the disappointments and as usual having a broad diversified mixed bag of stuff makes a lot of sense.
Have a great weekend all – I have never been so delighted at the prospect of rain! Hooray