Could the FAANG tech giants continue the rocketing ascent

They are only five companies, but they are worth much more than huge international companies such as the FTSE 100 or FTSE 100 which hold shares of the 40 largest British companies on the London Stock Exchange. It is more than the companies that include the Hang Seng index in Hong Kong, and more than the German companies Dax and Cac XNUMX of France. But more than all of those companies combined! Rather, they overtake entire continents. So is the FAANG group of companies continuing their steady rise or not? Follow us

The five companies that we mean are called the abbreviation FAANG, which are the first letters of the words of the companies Facebook, Amazon, Apple, Netflix and Google. These five are the American technology giants. Despite some of the obstacles and problems that some of these companies faced.

Those companies were exposed to trade battles by the US President, especially the idea of ​​restricting Chinese investment in American companies and limiting American technology exports to China. There were difficulties that these companies had to face in the past periods, but the price of their shares continues to rise. The total value of these five companies is about 3.25 trillion dollars (a trillion equals a thousand billion or a million million).

Facebook

Facebook witnessed a decline in its shares in March, when a massive hack was revealed by Cambridge Analytica, a political consultancy, for the account of more than 80 million users, until the share price fell this month from $ 183 to $ 152, and then rose again to reach $ 202 Last May, it settles now at $ 192 per share. Thus, the market value rose again by 11% since January, bringing the company's market value estimate to $ 549 billion.

Facebook has a big problem in the future as growth needs to enter new areas such as internet services, providing devices and acquiring more companies. But these steps require government approval and the privacy scandal may cause governments to add obstacles to Facebook. Can he continue to climb?

Google

As for Google, it retreated from the five companies, due to concerns about privacy issues and potentially growing legislation, but the parent company Alphabet is still announcing an 84% increase in seasonal profits last April. The company's market value is estimated at 762 billion.

Google suffers from a problem which is that it has reached the limit in the areas in which it operates. Search engines have been controlled, and the Android system began years ago to face steady market share with Apple. The advertising industry is on the way to decisive control from Google as well. Google faces a major obstacle in opening a new field for years, and it has failed to provide a chat application that competes with the Facebook family (WhatsApp and Messenger), after a previous failure in the application of a social site "Google Plus". What is the new field that Google intends to enter in to continue launching?

Note: We are merging here between Google and Alphabet Inc., as Alphabet is primarily based on Google.

Apple

Apple has faced concerns about slowing sales of the iPhone, especially the iPhone X, despite the latest results that promise to dispel those concerns. With the increase in the investment of "Warren Buffett", the most famous American investor in the New York Stock Exchange, shares of Apple rose about 10%, bringing the market value of Apple to $ 894 billion. The company thus becomes the number one company in the world, close to $ 1 trillion strongly.

Apple faces a major obstacle, which is stability, as iPhone and Mac sales stabilize, and we do not see spikes in sales. IPad sales have declined dramatically; And the company failed to launch the smart speaker. Apple is betting on two areas, the first is the entertainment sector, videos, movies and programs, "the world of television", and the second sector is not officially announced, which is the automotive sector. Will Apple succeed in these areas?

Amazon

Amazon is on its way to taking over the world. The fourth quarter of this year showed that profits had doubled to $ 1.6 billion, buoyed by strong sales in its core business and its purchase of the Whole Food Markets. And it continues to move to new territories, including big challenges facing Sky and PT to cover the Premier League, until it actually secured that deal for three seasons and the value of that deal was not revealed.

The company also announced a new march in the pharmacy business by acquiring Pillpack, a "startup that distributes drugs via the Internet," hitting the share prices of large companies such as CVS and Walgreens Boots Alliance. Despite the series of harassment by Trump, Amazon shares have jumped 45% in the past six months, bringing the market value of Amazon to $ 815 billion.

Amazon is the only company in this field that is a candidate for an unlimited increase, as it has not yet reached the limit as it has not dominated the field of online stores, servers, and developer products. It has developed the concept of physical stores "Amazon Go" and increases its presence in entertainment devices "TV" and is currently adopting shipping companies Of its own. In every area in which Amazon operates, it has not yet reached its limits, nor the stability that Apple, Google and Facebook have begun to suffer from. Do obstacles appear to stop the march of the Ghoul Amazon?

Netflix

Among the FAANG group, the notable success this year was for Netflix, as its market value more than doubled to $ 167 billion and thus surpassed Disney, which was valued at $ 154 billion. The company has found success with the likes of Stranger Things and Queer Eye. It is perhaps the only company out of the five that can be described as not stable, rather than as a fully established and stable company.

Net Flex is now facing a major obstacle, which is the emergence of many competitors, as well as their purchase of exclusive rights to some content in countries before the arrival of Net Flex, but the latter seeks to compensate for this matter through the original content, which is the movies, series and programs produced by Net Flex. Also, a lot of advice is provided to Netflix to find a buyer for it, and it will often be either Amazon or Apple.

Can these companies continue to thrive?

Regardless of the commercial problems that the US President raises from time to time, there are concerns about the current high valuations of the reputation of technology companies, which bring to mind memories of the Internet bubble or the dotcom bubble that spanned between 1995 and 2000 when many startups, including Amazon, dominated the market. Stocks before their complete collapse and declaration of bankruptcy for many of them at the time.

But there is a major difference from the years of the Internet bubble: These companies are profiting a lot, and for that, many strategists denied the occurrence of another technology bubble, saying: “Contrary to the technology obsession in the XNUMXs, this success can be explained to these companies in view of the strong foundations on which they are based in addition to revenues. This makes it completely different from what happened in the Internet bubble of the XNUMXs. ”

Trump's tax reforms earlier this year also allow companies to return cash from abroad, allowing them to pay more dividends to investors and provide other equity support. For example, Apple plans to repatriate nearly $ 252 billion from abroad, and recently announced a 16% increase in its seasonal earnings and an increase of $ 100 billion in its share repurchase program.

Russ Mold, director of investment at AJ Bell Asset Management, said the five companies excluding Netflix are leaders in their fields and are making impressive profits at a time of modest economic growth, as they provide products and services that people are willing to pay for.

He added: “These companies generally have low debts, have a lot of liquidity, and therefore are seen as safer than many other companies and use that money to pay big dividends and buy back to shareholders in the case of Apple.

But he cautioned, “The risk to buyers is that these valuations leave little to no margin for error in the event that anything goes wrong. While these companies are viewed as nearly safe havens, due to their perceived immunity from broader economic, commercial, or geopolitical concerns, this perception and attributed assessments may mean that they are insecure.

Source:

The Guardian