FAANG De-Fanged?
Look, mummy, there’s an earnings plane up in the sky…
Great Ones, did you see the frightened ones? D-D-D-Did you see the earnings bombs?
Did you ever wonder why we had to run for safe investments when the promise of a brave, new market unfurled beneath a clear, blue sky?
Umm … Mr. Great Stuff, you OK man?
I’m super, Great Ones! Thanks for asking. Just a little too much musing about corporate earnings season while listening to Pink Floyd this weekend is all. The Wall is such a good soundtrack for current market conditions, don’t you think?
I think you need a new hobby.
The brewing storm highlighted by a very impactful earnings season. The underlying turmoil and doubt winding through the market. That sense of … well, you get the idea.
I’ll save you the college-level literature discussion on the matter … but, suffice it to say, we’re not actually looking at “Goodbye Blue Sky” for Wall Street. Though, you might wanna go ahead and build that wall around your portfolio.
The thing about Pink Floyd is that while their music is melancholy and introspective, there is a thread of hope running through Roger Waters’ lyrics. And there are threads of hope still running strong on Wall Street.
Didn’t we already establish that you suck at optimism? Get on with it, man!
You’re right. You’re right. I know you’re right.
So, late Friday I read this article over on Barron’s about how Apple (Nasdaq: AAPL) was the “Last FAANG Standing.”
The premise of the article was that Apple alone could save not only FAANG stocks, but the market as a whole. Kind of a whole “Here I come to save the day!” moment with Apple riding in on a white earnings horse to save Wall Street.
After all, FAANG stocks make up about 20% of the S&P 500 Index. When they go down, the market goes down.
“For years, a select group of megacap stocks propped up the market at large with huge outperformance and rising weightings,” Bespoke Investment Group’s George Pearkes told Barron’s. “In 2022, though, those same stocks are now a major index drag.”
And we’re going to pin all our hopes for a rebound on Apple?
Y’all Great Ones who have been around for a while can probably guess my reaction: “Well, I guess we’re all screwed then…”
But the more I thought about it, the more I realized that Barron’s had a point … and that point happens to be one of the reasons I don’t like Apple.
But, before we get there, let’s break it all down, shall we?
Take … These Broken FAANGs…
First, Facebook, aka Meta Platforms (Nasdaq: FB), is all but dead. User growth has stalled, revenue growth is slowing, and CEO Mark Zuckerberg won’t take off his metaverse blinders to see the truth of the situation.
The truth is that FB stock is down more than 45% so far this year, and I don’t see anything arriving in the company’s quarterly report this week that could change that.
Next, Amazon (Nasdaq: AMZN) is far from dead, but with the pandemic lockdowns ending around the world — except China, of course — the at-home shopping boom is gonna deflate considerably. Investors know this and have given AMZN stock a 13.5% haircut this year.
Again, don’t look to Amazon’s quarterly report this week to change this situation all that much.
Alphabet’s (Nasdaq: GOOGL) Google is in the same situation as Amazon — i.e., its revenue drops when people stop searching online and go outside to touch grass. Combine that with slowing ad revenue growth, and Alphabet isn’t the same safe bet it once was.
GOOGL stock is down 17.5% this year — a trend that will continue unless Alphabet has some positive news on the ad revenue front. Don’t hold your breath.
Then we have Netflix (Nasdaq: NFLX), which is so scared of growing competition and people going outside that it’s taking drastic measures to ensure revenue growth, including killing off password sharing, content spending and is now looking at adding commercials.
It might be just me, but that’s not how you get more revenue … that’s how you lose more subscribers. Investors feel the same, and NFLX stock is down more than 65% this year.
Barron’s Broken-Hearted Savior
That leaves us with Apple…
AAPL stock might be down 9% in 2022, but that’s good enough to outperform all of its FAANG brethren.
It’s also good enough to beat the S&P 500. That’s right: A 9% year-to-date loss is enough to be an outperformer at this point. Yeah, 2022! Right?
Well, not only is Apple a market leader right now, but the analyst community has high hopes for this week’s quarterly report. Expectations currently target earnings of $1.43 per share on revenue of $94.1 billion — up 2.1% and 5%, respectively.
EarningsWhispers.com, meanwhile, says that expectations might be even higher. Apple’s “whisper number” sits at earnings of $1.57 per share, falling at the high end of the consensus’ range: $1.34 per share to $1.59 per share.
Remember, those expectations completely factor in supply chain issues and production issues stemming from Chinese manufacturing shutdowns due to COVID-19.
So why is Wall Street this hyped on Apple? Why does Barron’s believe that the Cupertino, CA iProduct-maker can save the market?
Because of Apple’s cult of personality. Apple customers are loyal to a fault. They absolutely love Apple products and are likely to buy pretty much any iThing Apple puts out. We like to make fun of this “sheep” mentality… Heck, it’s where the “iProduct” term came from in the first place.
But if Apple manages to beat earnings expectations this week and provides positive guidance in some form — we all know Apple doesn’t do iPhone guidance anymore — then I guess I’ll have to eat some crow concerning Apple as an investment.
Now, I’m not saying I believe the “Apple will save the market!” narrative.
What I am saying, however, is that if Apple’s customers still have the spending power to push earnings and revenue higher, then maybe things aren’t as bad in the economy as Wall Street … and myself, for that matter … think.
What do y’all think, Great Ones? Can Apple save the market? Is the company a good indication of economic stability or growth? Let me know what you think: GreatStuffToday@BanyanHill.com.
Could This New Tech Be 12X Bigger Than 5G?
One of the world’s largest research firms recently commissioned a team of Ph.D.s and scientists to discover what was going to be the biggest tech trend of the next decade and beyond.
They analyzed everything from 5G to virtual reality and blockchain … all the things you’ve probably already heard will be the next game-changers. Yet they found this one mega trend was expected to come out on top
Eight times bigger than blockchain. Ten times bigger than virtual reality. And 12 times bigger than 5G.
The Good: Yer A Wizard, Chris
CEO Chris Cocks hasn’t been head honcho over at Hasbro (Nasdaq: HAS) for very long — eight weeks, to be exact — but he certainly made magic happen in his former role as President and COO of Hasbro’s Wizards of the Coast division, which houses the ever-popular Dungeons & Dragons franchise.
According to Hasbro and co., Cocks managed to double the size of the company’s Wizards business from 2018 to 2021, making it a key growth driver throughout the pandemic.
Not that you would know this from the way activist investor Alta Fox is trying to spin off Hasbro’s D&D segment to bring more “value” to shareholders.
Call me crazy, but if I’d just spent five years sinking $1 billion into one of my biggest business segments, I’d keep it close at hand to see if any of those investment seeds bore fruit.
So it’s no surprise that Hasbro clapped back with: “Are you sure about that?” following Alta Fox’s latest spinoff sentiment. Now I’m no D&D mastermind, but even I know when the Dungeon Master gives you a chance to reconsider your move … it’s usually best to heed that warning.
If only Alta Fox had rolled “Perception” instead…
The Bad: Can’t Ignore The Call Of Duty
You ever spend weeks of your life barreling through a video game just to get to the final boss fight and realize you don’t have the stats to see it through yet?
**crickets**
No? Well, gamemaker Activision Blizzard (Nasdaq: ATVI) knows this feeling of devastation all too well. After three long years spent developing its latest Call of Duty cash cow, Blizzard got caught in a storm of its own making.
It seems gamers aren’t flocking to Blizzard’s cornerstone war franchise any longer, with Call of Duty: Vanguard and Call of Duty: Warzone receiving dismal engagement from longtime loyal customers.
With sales in the toilet, the company missed its first-quarter earnings by a full $0.05 per share on lower year-over-year revenue.
Blizzard tried to blame its results on “cycle timing” — a fancy way of saying fewer people are home playing video games on office time post-pandemic — but I’m of the mind that two decades of copy-pasting from one title to the next has finally caught up with the gaming giant (don’t @ me, game developers).
Fortunately for Blizzard, Wall Street still has the upcoming Microsoft (Nasdaq: MSFT) merger fully in its crosshairs — and this was enough of a distraction to keep ATVI stock afloat today.
Even so, the Big Tech marriage still needs final approval from regulators before each company can say “I do.” And should the deal fall victim to the FTC, Blizzard stock is gonna have far greater problems than a couple crappy Call of Duty games.
The Ugly: Deal Or No Deal?
Did any of you social media fiends feel a chill crawl down your spine this morning?
That’d be because Twitter’s (NYSE: TWTR) supposedly close to inking a deal with megalomaniac Elon Musk to take the company private for $46.5 billion … funding the Musk Man “secured” late last week.
Even though Twitter swore up and down that it would do what’s in the best interest for shareholders following Musk’s proposal … which arguably means turning down his takeover bid … it seems that dollar signs have already gotten the best of Twitter’s board.
If I’m being honest — and y’all know that’s kinda my MO around here — I see this as a no-win situation for everyone involved.
If Elon “wins,” he’ll alienate a huge group of Twitter uses who don’t want to see the social media giant fall to Musk’s “free speech at any cost” wielding ways.
Meanwhile, Musk has yet to reveal his plans to unlock Twitter’s “extraordinary potential” should he take the company private, making me think that there’s really no plan at all behind this social media madness.
Am I missing something here, Great Ones? Or is Twitter about to become a big blue albatross around Elon’s neck? I guess we’ll know soon enough … as the deal went through in the time it took to get this out!
While You’re Here…
Elon Musk recently made another investment that isn’t making headlines — and experts say it will soon disrupt the $100 trillion global financial industry.
In fact, Cathie Wood sees this investment soaring 7,200% in the next decade. And former hedge fund manager Ian King says: “This could be the greatest investment opportunity in history.”
To see how you can follow Musk into the investment no one is talking about, click here.
Welcome, Great Ones, to the height of earnings season!
Whether you’re tuning in to see the continual de-fanging of FAANG or not, I’m sure there’s something going on in the earnings arena to catch your eye. Especially if you’re one of those “I neeeed to trade every single report” kinda folks (no judgment here).
Make sure you’re sitting down before you see what’s in store this week, courtesy of Earnings Whispers over on Twitter:
While the market braces for impact amid the earnings report deluge … I’m getting the popcorn ready for some peak earnings entertainment. Just look at that stacked slate, son!
Got Great Stuff Picks? ‘Course you do! Check out Boeing (NYSE: BA) and Roku (Nasdaq: ROKU) reporting later this week.
If this is your first time tuning in to Boeing earnings, it goes kinda like this: Good news? That’s a paddling. Bad news? That’s also a paddling. Sad, but true … yet, Boeing’s still the one to take you (and your portfolio) there.
With Roku, it’s all about the ad revenue … and NFLX’s earnings should show you why it pays to stick with Roku’s platform-agnostic streaming.
Outside of that? Pick your pleasure … or poison, if you’re holding out for Twitter.
You can bet we’re watching Robinhood’s (Nasdaq: HOOD) report with an eager eye … mostly for the possibility of some sweet, sweet schadenfreude from the brokerage trying to live up to Wall Street’s expectations. “Trying” is the key word there.
Let’s see how this past quarter’s trading revenue shaped up for Robinhood — crypto revenue in particular.
Then we have Ford (NYSE: F), which has been riding the “We’re electric now, boogie woogie woogie” hype train all quarter long. But I want to see if Ford is as hyped up when it comes to, you know, hard sales figures of its current offerings.
Last but not least, it might be time to check in on ol’ Spotify (NYSE: SPOT) and see how it’s recovering from its Joe Rogan experience.
My prediction? We’re gonna hear a whole lot about the company’s relentless push into podcasting, profitable or otherwise. I just want to know why Spotify’s hellbent on ruining the app’s basic functionality on a daily basis, but that’s another story.
What reports are you excited for most, Great Ones? Do you think Apple can save the rest of the FAANGs? Or is it bad news bears for Big Tech this week?
Send me your thoughts at GreatStuffToday@BanyanHill.com. Otherwise, here’s where else you can find us:
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Until next time, stay Great!
Regards,
Joseph Hargett
Editor, Great Stuff