Displaying items by tag: tech

(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)

The market seems to be ignoring it, but Facebook is facing a major challenge to its business model. One so big in fact, that it is an esoteric threat to its whole way of making money (not to mention the rest of social media). That challenge is the collective ditching of third party cookies, which are little tools used to track users across sites. Third party cookies are used to assemble profiles of user behavior that then allow Facebook to deliver targeted ads. Since third party cookies are now being phased out by major browsers, Facebook (and other social media companies) are going to have a much tougher time assembling behavioral profiles, and this could ultimately have a cataclysmic effect on revenue and profitability. According to a research analyst, and explained by Barron’s, the big worry is that the decline of cookies—which is being called the “cookiepocalypse—will “will lead to ‘signal loss’ for advertisers, leading to reduced returns on advertising, and then an ‘implosion’ in ad spend by direct-to-consumer advertisers”.

FINSUM: As a publication, we understand this better than most. If Facebook ads are no longer as targeted, then their click-through rates will be worse. When that happens, advertisers will get worse overall results. This will mean they spend less dollars and pricing power will plummet. Facebook is definitely working on a work around, but until there is a concrete solution, this is a big threat.

(San Francisco)

Morgan Stanley has just made two interesting picks in the tech world. While these are not specifically tech companies, these chipmakers are so closely related that it is fair to lump them in. In particular, Morgan Stanley is bullish on rising memory demand in chips and therefore likes two names to do well. The first is Micron (ticker: MU), and the second is Western Digital (WDC), both of which specialize in DRAM and NAND. The former is used in mobile phones and servers, while the latter is used in smartphones and solid state hard drives. According to Morgan Stanley, “channel checks make it clearer that customers are building real conviction that memory will tighten [more demand versus supply] over the course of 2020, which is leading them to put more inventory into place”.

FINSUM: This matches exactly what we see on the consumer demand front, so we do not have any argument with these picks.

(San Francisco)

Barron’s has featured a very eye-opening call. The argument comes from the CIO of Ariel Investments. She argues that it is time to short Apple. Referring to the company as the “blue chip of yesterday”, she contends that Apple is not a tech company, but a consumer electronics one, and that whether its new products are a hit has a huge impact on revenue. It is trying to pivot to services, but it has no first mover’s or any other natural advantage in doing so and is competing with big names like Netflix and Disney. It is even behind competitors in its core iPhone business and trying to catch up. She argues that a blue chip of yesterday is the worst kind of stock because all the good news is priced in, but none of the bad news is.

FINSUM: This is quite a stark portrayal of Apple. While we do not completely agree, there is some significant truth to this argument and it warrants concern.

(New York)

The market is at all time highs, multiples are huge, and earnings are trending the wrong way. If you are looking to buy into some downside protection, take a look at these 4 tech names. These stocks have big dividends which should offer some significant downside protection as tech shares with lower multiples and good dividend yields provide insulation. Here are the names: IBM (4.7% yield), Broadcom (4.2%), Hewlett Packard (3.2%), and Cisco Systems (2.9%).

FINSUM: IBM trailed the tech market last year but still had a respectable 16% gain. Seems like a good choice given the big dividend yield.