Displaying items by tag: tech

(San Francisco)

Tech stocks are going to hold up to the next recession in very different ways. Some will prove quite defensible, while others will be wounded badly. On the defensible side, analysts contend that Google, Facebook, Twitter, and Expedia should do well. The core tenet of this argument is that digital ad spend will likely remain robust, keeping their revenues from dropping off too much. However, smaller companies like Cardlytics, Revolve Group, and Quotient Technology seem as though they may be wounded badly. Netflix might be the biggest overall risk, however.

FINSUM: Netflix is the most interesting name to discuss here. So is that ~$12 per month for Netflix a discretionary spend that consumers will cut back on in a recession, or is it now a staple? The answer to that question will decide its performance in the next downturn.

(San Francisco)

A few weeks ago there was a great deal of press, and some investor anxiety, about simultaneous anti-trust probes being launched from the FTC and DOJ into America’s biggest tech companies. Before those efforts seem to have even gotten off the ground, the investigation seems to be backtracking. The head of the FTC said this week that the integration of Facebook and Instagram and WhatsApp will likely stymie any effort to break up the social media giant. The TFC chief also acknowledged it would be hard to get the courts to reverse a merger that the FTC itself had already approved, which is the case with Facebook and its acquisitions of Instagram and WhatsApp.

FINSUM: This seems like a pretty notable surrender after only a few weeks of work. We wonder why the FTC is changing its tone so strongly?

(New York)

Anyone who has even glanced at WeWork’s disclosures prior to its forthcoming IPO should be worried. The company’s obfuscation and highly suspect share and governance structure look worrying. But here is an even more tangible reason to stay away—the company is overvalued by about 20x. Unlike other big tech IPOs recently, WeWork has existing publicly traded competitors, so there are comparables. Check out IWG (formerly known as Regus which is likely a more familiar name). It has $1.6 bn of revenue and $64m of profit. Its market cap is $4.45 bn. The company went public in 2000 and was called a disruptor back then. The company struggled during the recession and its US unit filed for bankruptcy.

FINSUM: There is not much new about WeWork other than branding and hype. The prospects for this IPO and WeWork’s future returns are dimming.

(New York)

The inverted yield curve has investors feeling down on their luck at the moment. What is the best way to play the turmoil and volatility? The answer may be in two seemingly unlikely places. The first is in energy ETFs, especially oil. Energy stocks have traditionally done very well during inverted yield curves, so an ETF like XLE seems like a good bet right now. Additionally, tech ETFs such as Vanguard’s VGT could be a good play, according to Bloomberg. Tech has often done well during inversions in the past.

FINSUM: Recommending a tech ETF right now is the height of contrarianism. Tech is basically caught in the middle of the trade war, and frankly, seems like a bad buy.

(San Francisco)

Bad news for tech investors and Silicon Valley executives—it looks like Big Tech is going to bear the brunt of the trade war. The group of stocks surged yesterday on the announcement of the delay of tariffs on China. This is because a major part of the tariffs relates to hardware that is core to technology companies’ products. Most specifically, the Treasury said it would delay tariffs until December 15th on “cellphones, laptop computers, videogame consoles, certain toys, computer monitors, and certain items of footwear and clothing”.

FINSUM: While this development offers some relief, it will likely be fleeting. The trade war with China is looking increasingly intractable and tech is right in the middle of it.