Displaying items by tag: facebook

(New York)

Markets have been falling in aggregate, but the real damage has been to the tech sector (and utilities to a lesser extent). Facebook, for instance, fell a whopping 6.8% yesterday on fears of fallout over its data breach. But Amazon, Netflix, and Google, all tumbled as well. Tech stocks have been such a leader for markets, and now amount to such a major percentage of indexes ($2.2 tn), that some are worried tech losses could rattle the whole market. Mounting fears over regulations seem to be weighing on the sector.

FINSUM: The odd thing is that it is not fears over tech businesses that are causing losses, but rather fears of regulation. We do absolutely believe big losses in tech could shake the confidence of the market as a whole.

(San Francisco)

While most publications have been running stories arguing that it may be time to get out of the FAANGs, Barron’s has a run a piece to the contrary, saying that they have more room to run. While the piece admits that the group of stocks is under a lot of pressure and is highly priced, it contends that it is not time to pull out yet. The argument is that despite accusations of misbehavior and threats from Trump, the sector will remain the centerpiece for growth investors. If the economy continues to chug (meaning stay under 3% growth), then tech’s steady growth will remain attractive.

FINSUM: We tend to like this view. Despite how richly these companies are valued, we think there is still room for medium-term value growth as regulation is still a way off and their fundamental businesses are solid.

(San Francisco)

There is no doubt about it, the FAANG stocks—Facebook, Apple, Amazon, Netflix, and Google—were a huge force is delivering 2017’s great return. But it might be time to remove them from your portfolio, at least as Barron’s argues it. And if not removing them, then at least reducing exposure. The stocks count for a huge portion of many funds, so investors may have more exposure than they realize. The stocks have seen a massive run-up in valuation, but that makes them look increasingly vulnerable. Barron’s also cites the increasing risk of regulation of the sector, which could prove a weight on values.

FINSUM: The tech industry has grown very large and dominant, and seems to have its own cycle versus the rest of the economy, all of which makes it very hard to call a top. There are some dark clouds gathering on the horizon, but nothing looks like it is imminently going to bring the FAANGs down.

(San Francisco)

While they are far from young or immature businesses, so-called FNAG stocks have all stuck to the current entrepreneurial mantra of not paying a dividend. That may be about to change as Facebook may soon be compelled to start issuing one. The company has 2 bn users and is reaching the limits of its growth potential. If headline growth starts to slow, which it almost inevitably will, expect investors to start demanding dividends and buybacks. Non FANG, but closely related stocks, such as Apple, Microsoft, and Intel, are all paying or raising dividends.

FINSUM: Dividends and buybacks would be a very positive driver for Facebook’s stock price, especially if they started before growth began to wane.