Earnings: Big Tech shrugs off the techlash
Did someone say techlash? asked Spencer Soper and Dina Bass in Bloomberg.com. Big Tech stocks have taken “a beating” on Wall Street in recent weeks over increasing fears “that the industry’s growth surge was under threat.” Facebook was taking heat on data and privacy issues, Alphabet was battling accusations of anti-competitive behavior, Intel was licking its wounds after a massive security scare, and Amazon was being targeted in a Twitter tirade by President Trump. But an extraordinary round of profit results across the industry last week “went a long way toward proving the naysayers wrong.” Facebook posted record profits, Twitter grew both its revenue and user base, and Alphabet revealed it’s selling more ads than ever. Microsoft’s stock hit a record high, and Intel’s jumped to its highest level in more than 17 years.
“If political risk is a new factor complicating the outlook for the world’s most valuable companies, it certainly has not hit their businesses,” said Richard Waters in the Financial Times. Last week’s earnings statements “provided a stunning demonstration” of the tech industry’s “platform power,” and a timely reminder for politicians as to just how difficult it might be “to restrain tech companies’ headlong growth, even if they wished to do so.” The numbers proved that from a financial perspective at least, Big Tech has so far “been untouched by a growing political backlash.” But perhaps Wall Street should take another look, said Felix Salmon in Slate.com. Amazon’s stock, for instance, soared by $78 billion in just two days last week, fueled by a now familiar narrative “about how world-beating and unstoppable it is.” But a closer examination of its numbers reveals that its $814 billion market capitalization and $3.9 billion in net income trades at a price-earnings ratio “somewhere north of 200.” That stands in stark contrast to a P/E ratio of about 24 for the stock market as a whole. In other words, “if Amazon traded on the same multiple of earnings as everybody else, its stock would fall by roughly 90 percent.”
Facebook also seems to operate on a business plane all its own, said Nitasha Tiku in Wired.com. Judging by the social network’s first-quarter results, in which its revenue grew by 49 percent, to $12 billion, and its net profit jumped 65 percent, to a record $4.9 billion, “you’d never know it has been in the center of a global maelstrom” regarding privacy, consumer safety, and election meddling. Lawmakers will still make noises about trying to rein in the industry, said Jamie Condliffe in TechnologyReview.com. But users remain largely “undeterred” by allegations that tech companies have betrayed our trust. There may yet be a techlash brewing. But so far, “Silicon Valley is doing A-OK.”