Apple, Google and other technology stocks plummeted: cooling down the trillion-dollar market value may not be a bad thing
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Recently, high-tech stocks represented by Apple, Facebook, Amazon, Microsoft, and Alphabet (FAAMG) have plummeted. Among them, Apple fell 3.88%, the largest single-day drop of the year, closing at $148.98; Facebook also fell more than 3%, closing at $149.60, down 3.30%. Google's parent company Alphabet fell 3.40%, and its stock price fell below the $1,000 mark, closing at $970.12. Like Alphabet, Amazon also fell below $1,000, with its stock price falling 3.16% to $978.31. Microsoft's decline was the smallest, but it also reached 2.27%, closing at $70.32. In this regard, some analysts believe that the culprit behind the sharp drop in US technology stocks is Goldman Sachs' report that is bearish on FAAMG. Goldman Sachs analysts led by Robert Boroujerdi warned that the recent performance of FAAMG stock prices may have been overheated. The low volatility of FAAMG has led investors to underestimate the risks of these stocks, which may worsen downward volatility when the situation changes. In fact, just before the plunge in technology stocks, the industry has been hotly discussing which of the above five giants is likely to achieve the goal of a market value of $1 trillion first, although Amazon's market value was only $477.5 billion at the time; Alphabet's market value was about $682.4 billion; Microsoft's market value was about $540 billion; Facebook's market value was about $403.2 billion; Apple's market value was close to $800 billion. Except for Apple, the other four giants are basically halfway to a trillion-dollar market value, at least about 1/3 of the gap. However, after this plunge, I believe that there will be no more debates about the trillion-dollar market value in the near future. After all, from a business perspective, the above five giants all have weaknesses that cannot be ignored, and these may become the cause of their stock price mutations in the future. Therefore, we believe that the plunge in technology stocks this time is just right for the industry, including the five giants, to calm down and re-examine themselves. Facebook: Single revenue, doubts about measuring advertising effectiveness, and rampant fake news Let's first look at Facebook. According to its first quarter 2017 financial report, its revenue was $8.03 billion, of which 98% came from advertising, exceeding 97% in the same period last year and 84% in 2012. Corresponding to this is the downturn in non-advertising business, whose revenue dropped from $181 million a year ago to $175 million, and Oculus VR helmets and Workplace office software even had no revenue. It should be noted that some companies have diversified their revenue structure through acquisitions, but most of Facebook's acquisitions (such as Instagram and WhatsApp) are in adjacent markets. Take Instagram as an example. Instagram's ads are sold on the same interface as Facebook's ads, which has almost no effect on promoting the diversification of revenue structure. Speaking of advertising, the low efficiency of targeting ads for big brand customers is still a problem that Facebook has to face at present. For example, Procter & Gamble, the world's largest advertising company, said last year that it would cut its advertising investment on Facebook because it believed that Facebook advertising was not efficient. Marc Pritchard, chief marketing officer of Procter & Gamble, told the media: "We have invested in many directions, but the results are not satisfactory. We are considering finding the best way to invest in advertising in order to achieve accurate coverage of the target consumer group." In addition, the frequent occurrence of erroneous data on measuring advertising effectiveness is also a variable. Will it affect advertisers' confidence? Last September, the media first exposed that Facebook has been exaggerating a key video viewing indicator for many years. This error angered advertisers and media companies that have invested heavily in Facebook's video platform in recent years. Facebook subsequently apologized and later admitted that it had exaggerated four advertising indicators, although it did not affect the amount of money paid by advertisers. Among them, the standard for evaluating the number of users reached by the advertisement was exaggerated by 55%. In this regard, some industry insiders said that repeated errors in advertising evaluation standards will inevitably affect advertisers' confidence in the Facebook platform. According to the latest survey results of Pew Research, most Americans like to read news on their mobile phones, and among Facebook users, more than two-thirds of them use the service mainly for reading news, of course, the news here is real news. However, after the US presidential election, the news about fake news on Facebook has been a hot topic, and it has triggered a debate on the impact on Facebook's revenue if the source of fake news is completely cut off. Among them, BuzzFeed analysts believe that given the gap in traffic between true and false news before the election, if Facebook takes ruthless measures against fake news, it may lose $15 billion in revenue this year, more than half of its advertising revenue. Although this prediction is somewhat alarmist, fake news is indeed one of the sources of Facebook's revenue, and sometimes it even brings more forwarding and comments than real news. Take the third quarter of last year as an example. With the help of a user base of 1.6 billion, Facebook attracted 2 million advertisers and its revenue reached $7 billion. But in terms of traffic, fake news accounted for 54.2%. In this regard, Buzzfeed pointed out that at the most tense moment of the election, the number of reposts, interactions and comments on the top 20 false news on Facebook was 8.711 million, while the number of reposts, interactions and comments on the top 20 real news was 7.367 million. It seems that Facebook is facing an irreconcilable contradiction between user demand for news authenticity and revenue. Amazon: setbacks in expanding core e-commerce business, AWS faces slowing growth and declining profit margins Looking at Amazon again, in fact, today's Amazon has been divided into two companies, one is a retail e-commerce company, which is building a global market; the other is a cloud storage and service company (mainly AWS), which accounts for the largest share of its revenue in the first quarter of 2017, with profits exceeding retail services. In terms of retail, competitor Walmart has become the main potential obstacle to Amazon's continued development and growth. Supported by a huge network of physical stores, Walmart decided to enter the e-commerce field and become more and more active. Apple, Google and other technology stocks plummeted: cooling down the trillion-dollar market value may not be a bad thing . To this end, Amazon is also chasing those less wealthy low-income shoppers, but Wall Street is skeptical of Amazon's strategy, believing that Amazon's bet will be difficult to get the due return. For example, Amazon recently announced that it will offer discounts to shoppers who receive government relief based on their monthly Prime membership rate. This move is believed to be aimed at low-income shoppers who have been shopping at discount chains such as Walmart, Dollar Store and Dollar Tree. However, a recent research report by market analysis agency Gordon Haskett showed that about 80% of respondents "are unwilling to pay the current monthly membership fee of $10.99" or even the lower fee of $5.99. Another survey of 369 current non-Prime members by Gordon Haskett showed that only 78 users were willing to pay $10.99 per month to become Prime members; 291 respondents were unwilling to join; and only 21% of users, about 61 people, said they were willing to consider becoming Prime members at the discounted price of $5.99. As for AWS, which is generally favored by the industry, its revenue growth rate has actually slowed down for seven consecutive quarters. For example, last quarter, AWS's annual revenue growth fell from 64% in the previous year to 43%, and Pacific Crown Securities on Wall Street predicted last month that AWS's growth would fall below 30% for the first time by the end of 2018. Although some analysts believe that it is difficult to maintain the same high growth as before, given that AWS is heading for $14 billion in annual revenue. However, some analysts believe that the reason for the slowdown is that AWS is offering bigger discounts to long-term customers, offering immediate payment discounts of up to 75%, and the condition of the discount is to sign a one-year or three-year purchase contract with the company. Prepayment is not required, but if customers do so, the discount may be even greater. Then the question is, with the increase in such customers (and the corresponding increase in discounts), will AWS's profit margins be affected? From the perspective of market competition in which AWS is located, according to the 2017 Cloud State Report released by cloud management company Right Scale, Microsoft's Azure is constantly eroding Amazon AWS's market share, and AWS's leading advantage has further narrowed. It should be noted that this report surveyed 1,002 IT professionals from multiple industries on cloud computing. From the overall results, the adoption rate of Azure increased from 20% last year to 34%, while AWS remained at 57%, and the adoption rate of Google Cloud increased from 10% last year to 15%. Google: Search advertising prices are falling, traffic acquisition costs are increasing, and forward-looking innovations are still "burning money" in the short term . It is undeniable that as the leader in the search market, Google still has a market share of about 63% in the PC market, which has stopped growing. On mobile phones and tablet devices with smaller screens, Google has almost 84% of the search share. From a proportional point of view, Google seems to have an absolute advantage. But in fact, the price of search ads on the PC side has been falling in the past three years, and the advertising revenue per thousand clicks on the mobile phone side has also begun to decline since last year. The global mobile phone market has also entered a slow growth phase since last year, and Google's hope of increasing advertising revenue year after year through search services is becoming increasingly difficult to achieve. Although Google seems to be using AI to further explore the commercial value of its core search function on mobile phones. However, Pixel and Google Assistant need more time to prove whether this strategy is really feasible. But judging from the sales of only 1 million units of the previous generation of Pixel, this strategy has considerable variables. Microsoft: Behind the growth of "cloud-first", there are hidden concerns about profit margins, the failure of mobile-first, and the slowdown of Windows 10. As we all know, the entire PC industry is still shrinking, and Microsoft does not have a reliable smartphone platform, which means that it will completely miss the feast of the mobile market. At the same time, Apple's Mac computers and Google's Chromebooks are also constantly eroding the PC market share. The current situation is a battle for Microsoft and Windows. In Office, Microsoft's biggest challenge is actually itself. The sales revenue of boxed Office software has been declining, because people have turned to Microsoft's Office 365 service. At the same time, from 2010 to 2015, Microsoft's gross profit margin dropped from 80% to 64%, mainly because Microsoft has continued to increase its data center investment to support the global development of Azure (including the aforementioned Office 365 service). In fact, what we have seen here is that although Microsoft CEO Nadella's "cloud-first" strategy has achieved substantial growth (which is also the main reason for Microsoft's stock price to continue to rise), the industry seems to have overlooked the relative negative impact of this strategy. When it comes to "cloud-first", I believe the industry will soon think of Nadella's other strategy, which is "mobile-first". However, today, as a "mobile-first" Windows phone business, after experiencing a cliff-like decline in recent years, market analysis agency IDC recently released a forecast report stating that in 2021, the proportion of Windows phones in the global market will drop to 0%. According to IDC's forecast, Microsoft's mobile phone sales in 2017 may be only 1.1 million units, a decrease of 80.9% compared with the same period last year. And this situation still shows no signs of improvement, and the highly anticipated Surface Phone will be postponed until the end of this year or the beginning of next year, but before that, due to the lack of new hardware partners and developer support, Windows Phone shipments will continue to decline, and the entire platform has no signs of recovery. In addition to the above, there is another risk that has been overlooked by the industry. Microsoft once vowed to promote Windows 10 to 1 billion devices. After the release of the new system, it quickly became popular with the temptation of free upgrades. However, after the free benefits ended, Windows 10 soon became weak and the growth rate of installed base quickly declined. At the end of October 2016, the number of Windows 10 installed base (monthly active users) reached 400 million, and just exceeded 500 million at the beginning of this month, but Microsoft had actually given up on the goal of achieving 1 billion in 2018. According to NetMarketShare, the growth of Windows 10 usage share has stagnated recently. It lost some share in February and only gained a small amount in March, which seems to indicate that the growth of Windows 10 usage share seems to have disappeared. Apple: There are variables in the new iPhone, independent research and development has no substantial impact in the short term, and the AR and AI markets are yet to be tested. In the past year, Apple's stock price has risen sharply, but the rise in Apple's stock price is not supported by the fundamentals of the company's business. From last year to the first quarter of this year, Apple's mobile phone sales fell for the first time in history. In addition, almost all electronic products have declined or stagnated, and tablets continue to plummet at a rate of 20%. Apple's revenue has also fallen for the first time in more than a decade. As for the new iPhone to be released, due to the unsuccessful patent lawsuit with Qualcomm, it is likely to use more basebands from Qualcomm's rival Intel, which will not allow it to have an advantage over its rivals (for example, Samsung's Galaxy S8 has already adopted Qualcomm's latest baseband) in mobile phone download speed. According to foreign media reviews, Galaxy S8 may be the "best Samsung smartphone" ever, and it is even likely to become the best smartphone in 2017. In addition to Samsung, given that Apple's iPhone business revenue in Greater China has declined for five consecutive quarters, whether the new iPhone can save the decline is also uncertain, especially when Huawei, Oppo and vivo have become powerful smartphone manufacturers in China. It is worth mentioning that Huawei's retail stores were reportedly close to 50,000 last year, and OPPO had 200,000 retail stores. In contrast, Apple has only 40 stores in China, and currently 40% of smartphones in China are sold through physical stores. Therefore, for the new iPhone, in addition to the high price, Apple's weak channels in the Chinese smartphone market may restrict the sales of the new iPhone. That is, although the industry is optimistic about the new iPhone, the above factors may still lead to variables. In addition, the negative impact on Apple's supply chain manufacturers caused by the industry's possible independent development of GPUs at the beginning of this year, while proving Apple's strength, also indirectly improved the performance of Apple's stock price. But if you look closely, even if it is finally confirmed that Apple will independently develop GPUs, it will be next year at the earliest. As for the independent development of other components, it is more like a means of creating momentum to improve stock price performance. In fact, it will not have a substantial impact on Apple's business in the short term. Finally, Apple recently announced that it has entered the AI and AR fields, which have been criticized by the industry for its slowness, with smart speakers and mobile phone AR, which has also boosted Apple's stock price to some extent. However, given that Apple is the latest manufacturer (compared with Google, Amazon, and Microsoft) to enter the above two fields, and has no obvious advantages in technology (such as Siri in smart speakers), this has also buried uncertainty about its true performance in the market in the future. Through the above analysis of the core or future business shortcomings of the five giants and the resulting uncertainty in future development, we believe that the plunge in technology stocks has come at a very timely moment. It reminds the industry not to ignore the potential concerns behind seemingly positive performance and rising stock prices. After all, the final bubble starts here. As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity. |
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