Market paradox: Despite profits, investors turn on tech
Anti-trust concerns, a congressional tongue-lashing, and not even the coronavirus pandemic can slow down Big Tech’s earnings bonanza, said Therese Poletti in MarketWatch.com. The country’s four biggest companies—Apple, Amazon, Google, and Facebook—took in $220 billion last quarter, “with double-digit revenue growth at all companies except Apple, which was only able to produce the best Septemberquarter sales in its history.” The rest had their best quarters ever, period. Collective profits rose to $38 billion, another sign of “how important their services have been during the pandemic.” The intense scrutiny of the tech giants in Congress has not had any effect on their profits. Even the Facebook boycott by many large advertisers in July barely left a mark, with the company’s sales rising 22 percent to blow past estimates.
“Digital advertising came roaring back,” said Megan Graham in CNBC.com. Businesses cut back on spending while dealing with the pandemic’s economic fallout in the second quarter, but the recovery was swift this summer. Consumers are also “getting comfortable buying online,” and “advertisers are following them” there. Google, in particular, has benefited from more shoppers searching for online shopping and deliveries. After suffering a decline in ad revenue for the first time last quarter, Google beat its revenue from the year-ago quarter by a whopping $5.7 billion. Amazon’s numbers are also stratospheric, said Jennifer Saba in BreakingViews.com. “More people are shopping online than ever before,” and not surprisingly Amazon is a beneficiary. There’s little standing in the way of Amazon’s dominance, except perhaps Washington.
Yes, Big Tech’s numbers were “predictably huge,” said Dan Gallagher in The Wall Street Journal, but that didn’t prevent their stocks from getting routed last week. Alphabet, Google’s parent, was the only company to see its shares rise after earnings, mainly because it was already lagging behind its Big Tech peers, whose collective size and success may now be working against them. Their blowout earnings “in the midst of a worsening pandemic won’t help them convince critics” not to break them up. Investors also have concerns that “the rally in tech shares has gone too far, too fast,” said Vildana Hajric and Lu Wang in Bloomberg.com. The tech sector has benefited from “optimism that their ability to cater for stay-at-home demand would help insulate the industry.” That has led tech stocks to rocket upward even as the rest of the economy staggered. They’d outrun the rest of the market by so much that at this point, “nothing is good enough” to send them any higher, and sentiment could finally be “turning against ultra-expensive digital megacaps.”