As Facebook, Boeing, Apple & Tesla all report their performance over the last three months on Wednesday, how do you think they performed and would you buy them, sell them, or trade them?
The context of my blogs is to give opinions and ideas, formulated by research and facts but they do not give the reader advice, @insiderkk we want new traders or investors to formulate their own decisions and speculate the markets by either investing or trading, these are two quite different things.
There will be an array of commentators and analysts giving an overview about the markets and particular stocks and it can be confusing to a newcomer and can require a lot of research to make informed decisions, so I will try to make simple generalizations.
The consensus in looking at the markets, is sentiment, technical analysis, and fundamentals.
Fundamental analysis tells traders/investors about core market values, technical analysis relies on past performance of an asset. The third is sentiment analysis, used to determine the general attitude of traders, which shapes the overall market mood, within a specific timeframe. This is key to long term investing or short term trading, timeframe.
So, during the height of this earnings season what about Apple and Facebook? How are they doing?
Things to consider are how have they benefited or lost out during the peak of the pandemic. Is the recent announcement of stimulus in the US going to keep supporting the bull markets and are there longer-term concerns regarding these companies?
I have written numerous times about Tesla and its meteoric rise recently.
There is no doubt that with the lockdowns and changes in working conditions consumers are becoming more reliant on these tech firms.
A headline today by Oxfam caught my eye.
Billionaires thriving as poor suffer in widening COVID-19 divide: Oxfam.
“Billionaires including Amazon’s Jeff Bezos and Tesla founder Elon Musk have seen their wealth soar during the COVID-19 pandemic while the world’s poor face years of hardship, charity Oxfam said on Monday as it demanded steps to tackle inequality”.
The 10 richest men — a list led by Jeff Bezos and Elon Musk, Microsoft’s Bill Gates and Facebook CEO Mark Zuckerberg — saw their net worth increase by $540 billion since the pandemic, Oxfam said.
Ok, I don’t want to get political and debate the social context of this, I want to see how the companies have performed and the fact that their CEO's personal wealth has increased significantly can only prove the stocks have thrived as well, or have they?
Facebook, we all know the success but briefly.
Facebook is a social networking service that was created by Harvard student Mark Zuckerberg in 2004. Initially designed as a networking tool for Harvard students, it quickly spread to other schools and was finally opened to the public in 2006. Facebook is now, by a very wide margin, the biggest social network worldwide. As of the fourth quarter of 2019, Facebook had more than 2.5 billion global monthly active users with a cumulative total of 2.89 billion users accessing any of the company's core products Facebook, WhatsApp, Instagram, and Messenger monthly.
So, stuck indoors, too much time on our hands, did we use it?
Just as importantly, how many new start-ups have been created by people laid off work and looking to start afresh. I must admit, I have used FB advertising to market my blog and having done my research, the results are worth the advertising cost. They and Google are monopolising the market for social media advertising, no doubt. Has this increased during the pandemic?
Facts. In 2020, rooted in advertising from more than 10 million advertisers and a flourishing digital economy FB stock gained 33%.
The markets have again been buoyed by the new Presidents attempts to stimulate the economy by injecting further trillions. Will this benefit FB? Has the pandemic slowed down, or do we still have months left of lockdown, will this macabre situation continue to back the company's fortunes?
There are concerns. Antitrust and political intervention are increasing, especially considering the siege on the U.S. Capitol and the consensus that it was the social media’s role, helping stimulate the riot. The efforts of Facebook and other social-media giants like Twitter to clamp down on misinformation and hate speech over their digital platforms lingers and we recently have cases in Europe and Australia questioning the risk of monopolisation of these giants.
Apple has also inadvertently benefited by the change in our world due to the pandemic.
People like former CEO Steve Jobs has made Apple one of the most valuable brands in the world. The company’s success translates into strong brand loyalty, as well as unparalleled revenue growth, from eight billion U.S. dollars in 2004 to more than 260 billion in 2019.
The continued demand for Macs and iPads for remote work and school needs is expected to see sales soar over the last three months.
Apple’s first 5G-enabled phones has arguably been the company’s most successful product launch in five years, in the view of Morgan Stanley analyst Katy Huberty.
Also, to consider is that the company launces new products before the festive season and this usually increase sales growth, even prior to the pandemic, thus, it is expected to boast the first $100 billion quarter in history.
As with most tech giants, as the pandemic lingers and we are expecting further lockdowns and remote working and schools requiring their products, it seems the growth will continue. As stated previously, a Biden led stimulus package is hoped to maintain the economy and kick start recovery and Apple will remain the dominant leader in their sector. Trade wars and concerns about Chinese and other overseas tech companies’ potential security risks will also benefit Apple’s monopoly.
President Biden and Vice President-elect Kamala Harris have been open critics of the tech sector, and have called for more regulations, especially for social media giants like Facebook.
Attempts to curb allegedly anticompetitive behaviour by large technology companies got serious in 2020, when federal and state agencies filed five separate antitrust lawsuits against Alphabet Inc.’s Google and Facebook Inc.
Apple Inc. has yet to face legal action, and with officials dedicating significant resources to existing litigation, it’s possible to imagine them avoiding imminent lawsuits.
Trading or investing, it seems likely that both companies will report positively but they will also give caution as to economic and geopolitical uncertainty. If, the market reacts, such as the 10% jump in Netflix the other day, traders may find great opportunities. Remember, trading with leverage is a two sided sword, so quick gains can disappear just as quickly without a strategy.
TRADING EARNINGS SEASON?
Trading earnings reports can be difficult and risky for inexperienced newcomers, that’s why I always suggest to use your demo account at the start. That said, volatility can create big opportunities.
When trading earning season and there will always be interesting stocks to speculate, there may well be a period of uncertainty and extreme volatility ahead of the data release. This makes picking the right stock, background research and sensible risk management key to trading success. With these things in place, traders can maximize their chance of success and hopefully carry some key knowledge over to the next earning season.
Got a comment for me? Send it along!
Kyri Kyriacou, over 25 years working for leading banks and brokerages. Focused on providing top-notch trading & investing ideas to our clients @ Insiderkk.com