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  • Writer's pictureGVA Research

BNN Interview: Facebook Results & Tech Sector Investment Prospects

Updated: Apr 26, 2021

FB results & Tech Sector Investment Prospects – Today, we tear down FB results and caution investors that tech stocks vulnerable to pullback after 4Q14 results.

1) Apple, Yahoo, Facebook, Google, Amazon — It’s a BIG week for tech earnings (Linkedin, Twitter next week). Would love your thoughts on all of the mega-cap tech stocks. Which ones are the best buys? Which ones are disappointing? Why?

Here’s a quick rundown on each of the above names:

AAPL: Core holding as the company is still in the early stages of the iPhone6 upgrade cycle with a potentially big CY15Q1 in front of it as it’s now the #1 smartphone in PRC ahead of Lunar New Year.

YHOO: With BABA spin-off plans done, what’s to support the stock of a company with deteriorating fundamentals and less of a war chest ($8bn cash vs GOOG’s $60bn+)? Takeover fodder at best.

FB: Decelerating revenue growth coupled with rising expenses serve to crush profit margins, so after blistering 2014 rise (+44% vs SP500 +11%) the shares may take a breather.

GOOG: With 4Q the ad sales seasonal peak, look for concerns on negative implications of the shift to mobile ads (lower price than desktop) to limit upside in what looks to be a broken growth stock.

AMZN: CEO Bezos indifferent to Wall St concerns so slowing revenue growth in 4Q14 results coupled with no guidance as to margin improvement should drive shares below $300, so, don’t walk, run away.

2) Special attention will be on Facebook Thursday — what are your views on this stock?

FB is well positioned fundamentally as it expands its ad business beyond the Facebook platform and, given that 4Q14 revs & EPS beat consensus, the stock’s valuation relative to its expected growth rate is not demanding. So, while as indicated above the stock may take a short-term breather (i.e. trade sideways) due to expense growth crushing profit margins, the stock should be bought on any pullback.

3) What are some of the top trends that have the potential to move tech stocks looking ahead?

The big question is the extent businesses & households will take the discretionary spending benefit from the collapse in energy prices to upgrade their existing technology equipment and services. The key consideration is that technology is a primary driver of productivity and as deflationary trends still appear to plague the global economy, productivity improvements are key to maintaining standard of living, albeit in a “running faster just to remain in place” sense.

Away from the macro “energy to tech” spending reallocation, the “cellphone to smartphone” shift remains intact as a tech spending driver along with “give me security no matter the costs because we don’t want to follow Sony down in hacker-induced flames” needs. One new area that will take time to play out, but is unfolding as disruptive and thus revolutionary is mobile money (e.g. Apple Pay).

#aapl #facebook #yahoo #yhoo #goog

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