Big Cap Tech & Social Earnings: Still Chugging Along
Earnings season is well under way and I wanted to highlight the mega-cap brands that drive market cap weighted indices given they have such large weightings. Bottom line, there’s still room in the tank for these great brands, they have huge global opportunities, are serving large and growing end markets, and generate significant amounts of cash for smart reinvestment. Twitter is an outlier that seems to be getting its mojo-on! Here’s a round up:
Solid as it gets across all business metrics and at 25x 2020 earnings, there’s room to expand and the recurring nature of revenues should command sustained high valuations & price stability until growth finally terminates. Buy the dips on MSFT, it’s a cash generating machine with more recurring revenue and clarity than they ever have had.
Solid quarter, strong profitability but Amazon is going into its “spending cycle” which is a short term drag on performance but has historically allowed for the next wave of growth to show up on future top line reports. This one could have some more choppy and down volatility but I’ll be buying these dips when they come. Amazon isn’t done innovating and the stock shouldn’t be done appreciating.
I don’t love ad-focused revenue models but it’s hard to deny Facebook doesn’t have enormous revenue generating opportunities to monetize the 2.2billion users they have captive. They are reinventing themselves with security at the core. The fines will likely continue on occasion but eventually regulators and politicians will move onto to other punching bags. I think the stock will see new highs and is a buy right here on today’s pullback to the low 190’s.
This one I’ve avoided because user growth has stalled and I saw no clear evidence that it would accelerate or their monetization of the user base would improve but this quarter highlighted they are making progress and trying new things to try and stimulate user growth and lengthen user engagement. 20% of the market cap is in cash so the stock is now on my buy list and there seems to be a margin of safety given the high cash balance.
Talk to you next week and I’ll have more comments on earnings reports!