Eq: Tech
(Seattle)
You may or may not have heard of Shopify, but if you haven’t, it is probably time to take a hard look. Shopify is a Canadian e-commerce company—a fact which has meant it has been somewhat overlooked by those outside the tech space—that makes offering ecommerce and in-store payment collection easier for small businesses. The idea is to offer the scale and robustness that large companies have to small businesses selling online. It makes its money from subscription fees and add-on services. After initially falling during the lockdown, it has nearly doubled in value and is now worth around $100 bn.
FINSUM: This has been a big run higher, but Shopify sits at the intersection of ecommerce and fintech and may be the long-term competitor to Amazon.
(San Francisco)
The market has seen some very healthy (or perhaps not) gains in the last few weeks, but many are still worried about a plunge to come as the full impact of the COVID lockdown reverberates through the economy. Tech stocks have been big beneficiaries of the rally, with the big companies adding $250 bn to their market caps recently. Those gains look more sustainable than elsewhere too. Fund managers have been seeking refuge in the shares, and their business models look more defensible than most.
FINSUM: We are very bullish on big tech stocks. This whole lockdown is going to shift habits more towards ecommerce (and not just online retail, but food ordering etc), which means Google and Facebook are going to be able to collect their digital advertising tax on a bigger pot than ever.
(San Francisco)
Apple just debuted a new phone model and they appear to have made a very wise decision. The company unveiled its new version of the iPhone SE, its lowest end model of the iPhone, for just $399, the same price as the original SE model in 2016. However, this phone is significantly beefed up, and Apple says its Bionic Chip is the “fastest chip in a smartphone”. The pricing, of course, comes at a time of major economic hardship for most Americans.
FINSUM: This is a wise play both from a revenue generation standpoint and a branding standpoint. It would be hard for most of the US to justify a $1,000+ upgrade right now.
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(San Francisco)
Investors have made cash the only thing that matters in markets. The Dollar is surging and investors are fleeing assets in favor of cash. Cash is a scarce and valuable asset in this downturn, and which companies have a ton of it—tech companies. While the Silicon Valley giants will take a hit from lower consumer spending, the reality is that the shutdown of normal life is pushing things ever more online—their domain. As this crisis eventually abates, giants like Apple, Microsoft, Google, and Amazon, have huge cash reserves (currently $350 bn) that will help them attract shareholder capital, and also grab market share as competition gets weeded out.
FINSUM: Tech is probably going to be in a stronger position in a year than it was six weeks ago. Their fortress balance sheets will be key.
(San Francisco)
The market is in a brutal position, everyone knows that. Peak losses hit 19% yesterday, just a hair off a bear market. The reality, though, is that some sectors are thoroughly in a bear market, including the biggest growth driver of them all—tech. The S&P info tech sector is down 20%, while Microsoft is down 20% and Apple 19%. Amazon and Facebook are both down 17%. IBM, Cisco, and older-guard tech companies are getting slaughtered down to the 25%+ range.
FINSUM: Some of these are smart to stay away from, but others could be good buying opportunities. For instance, social media companies are more exposed to consumer spending declines (and resultant advertising declines) that B2B tech companies offering cloud and other software infrastructure that is hard to cut from budgets.
(San Francisco)
Apple has been deeply wounded by the coronavirus panic. The stock fell as much as 16.5% through the weekend before good gains on Monday. The reality is that this is great time to buy Apple, as shares are offering a big discount just before the next iPhone super cycle begins. According to Wedbush, a leading Apple analyst (and referencing the coronavirus sell-off), “we believe this will be short lived as the longer term 5G super cycle thesis and services re-rating remain the crux of our bull thesis on Apple for the next 12 to 18 months.” Wedbush believes that some 350m of the nearly one billion iPhones out there are “in a window of an upgrade opportunity”.
FINSUM: Apple has a good shot at selling over 200m iPhones in the 12 months starting September 2020, likely breaking its highest sales ever. This is a good time to get ahead of that.