Facebook’s stock has taken a hit lately, and with good reason. Several large businesses have announced boycotts of Facebook because of their poor record on hate speech. A recent survey found a third of top US brands are planning to suspend their social media spending soon. That spending is of course not just limited to Facebook, but Twitter, and others as well. According to the World Federation of Advertiser’s, a trade body covering 90% of the world’s ad spending, the survey of 58 WFA members who account for $90 bn of ad spend worldwide found that combined with the one-third just mentioned, an additional 41% were still undecided about whether to pause campaigns. According to the CEO of the WFA, “In all candour, it feels like a turning point … What’s striking is the number of brands who are saying they are reassessing their longer-term media allocation strategies and demanding structural changes in the way platforms address racial intolerance, hate speech and harmful content”.
FINSUM: Hard to tell if this could be a sustained movement that could really hurt Facebook and other social media companies, or this will just be a few-week flash in the pan that will make no real difference. Our view is that the social media companies will respond strongly now that it is threatening revenue, and the advertisers will quickly fall back in line because the social media platforms are the bedrock of current customer acquisition strategies.
We have been saying this for months now, but Wall Street is also coming around to the idea: the COVID lockdown was ultimately going to be very bullish for ecommerce and the social media companies with which they are inextricably linked. According to Wedbush, the COVID lockdown has permanently changed shopping habits, and ecommerce’s share of total retail sales will maintain the big jump it saw over the last few months. With that in mind, here are six stocks to consider: Wix.com, GoDaddy, Shopify, eBay, Etsy, and Pinterest.
FINSUM: Just like work habits, people’s buying habits have changed, and they are likely to stay that way. That is a big victory for retailers who were winning the ecommerce race, those who support ecommerce (e.g. Shopify), and social media companies who benefit from increased advertising.
One of the things that makes Amazon such an extraordinary company is that it is always on the look out for the next great business opportunity, and always seems to be one step ahead in executing it. AWS anyone? Now the champion of Seattle may be eyeing a new target—ride-sharing. Amazon is considering the acquisition of Zoox, a well-known autonomous vehicle company. If it were to acquire Zoox, it would immediately be in competition with Uber and Lyft in the soon-to-be autonomous ride-sharing market.
FINSUM: We assume Amazon also has some yet-to-be-understood purpose for this beyond just competing with Uber and Lyft. For instance, autonomous delivery/logistics vehicles?
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.
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.
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.