Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
The earnings season for America’s world-dominating technology giants got off to a good start last week. Netflix outperformed its own guidance by adding 1.5 million new subscribers in the second quarter, while Snap – the social media firm that allows users to superimpose digital content over real-life images – blew expectations out of the water, with a 23% rise in daily active users and 116% rise in revenues compared with a year ago1.
This week, earnings from the remaining “ FAANGs” take centre stage, with Facebook, Apple, Amazon and Alphabet (Google) all scheduled to issue updates. Perhaps the most important of these will be results tonight from Apple, which will confirm how many new iPhones got sold in the April-June quarter. Look out too for results from Facebook tomorrow night – the social media industry leader in terms of average revenues per user (approximately US$9 in the first quarter)2.
Last time out, iPhone sales reached a jaw-dropping US$48 billion, while total revenues were US$90 billion, up 54% from the first three months of 20203. Despite Apple’s efforts to bolster its subscription models, iPhone easily remains the company’s flagship revenue earner.
Alphabet and, to a lesser extent Facebook, have travelled a long way to get here. Digital advertising revenues slumped in the second quarter of 2020, the first full three-month period of lockdown. So comparables should be impressive. However, both have seen their shares outperform the broader stock market significantly so far in 2021.
The reverse is true for Amazon – results out Thursday – which saw both its revenues and earnings jump during lockdown. Its shares have lagged the broader market this year. Net sales increased by 44% year-on-year in the first quarter, a performance that could prove difficult to repeat4. Sales last quarter will have been boosted by the firm’s annual Prime Day in June.
With US markets – including Nasdaq – trading close to record highs, this is a critical week for big tech. Markets will be looking for further evidence that we haven’t downscaled our reliance or liking for social media apps and e-commerce after lockdown.
For the tech sector as a whole, it’s so far, so good. Data released on Friday showed analysts expect US information technology companies to have grown their earnings by approximately 33% in the second quarter over the same three months a year ago – no mean feat if achieved, bearing in mind strong comparatives in 2020 in some cases5.
Investors looking to invest in technology companies can gain a diversified exposure to the FAANGs and other US technology businesses in a number of ways via Fidelity’s Select 50 list of favourite funds.
The Rathbone Global Opportunities Fund has large positions in Alphabet and Amazon, alongside other tech names such as PayPal, Microsoft and Nvidia, the gaming graphics specialist and a leader in artificial intelligence. The Jupiter Merian North American Equity Fund holds Facebook, Amazon, Apple, Netflix and Alphabet (Google ) – all of the FAANGs, in other words – and Microsoft too.
1 Netflix 20.07.21 and Snap 22.07.21
2 Facebook, 28.04.21
3 Apple, 28.04.21
4 Amazon, 29.04.21
5 FactSet, 23.07.21
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.
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