The Brief

Four of the largest companies in the world Amazon, Apple, Facebook and Google (Alphabet) reported their quarterly earnings last week. The common theme, the big gets bigger… Except for Google.

The Winners: Not Google

Use of e-commerce and online services during COVID accelerated Amazon’s profits which doubled to $5.2b while quarterly sales grew 40% to $88.9b.

Apple saw an increase in all of its divisions which sent its profits up 12% to $11.25b and quarterly sales up by 11% to $59.7b. New product upgrades and increased purchases from at-home workers grew Mac and iPad sales by 21% and 31%.

Not even a boycott by advertisers could slow Facebook down who generates 98% of its revenue from ad sales. The company’s profits nearly doubled to $5.18b and quarterly sales grew 11% to $18.7b.

The Loser: Google

Under normal circumstances, when a company beats revenue and profit expectations, its stock price would typically increase. Unfortunately, that wasn’t the case for Google. Even after beating expectations, Google’s stock declined as investors focused on its first-ever sales decline (2% decrease to $37b) in its 22-year history. If that’s not enough, US prosecutors are expected to file charges against the company for its anti-competitive and harmful business practices. Google’s stock has performed the worst amongst the four tech giants in 2020.

You can invest but you can’t hide

These four firms combined are worth over $5t and represent more than a fifth of the S&P 500, an index that measures 500 of the largest companies in the US. Even if you haven’t invested in them directly, there’s a high chance that they’re a part of your portfolio through mutual funds or ETFs.

How the Joe ranks these four companies? (highest potential to lowest potential)

1️⃣ Amazon… COVID benefited Amazon the most and accelerated each of its business divisions (e-commerce sales, cloud services, subscription, and advertising). Tread carefully ⚠️ Lawmakers are finding ways to take regulatory actions over Amazon’s anti-competitive business practices and unfair treatment to third-party sellers on its platform.

2️⃣ Apple… Investors should be worried about competition from cheaper alternatives (notably in fast-growing markets like China and India) and slowing sales growth in their largest revenue segment, the iPhone. Although iPhone sales are slowing, Apple is seeing strong growth in its services (App Store) and wearables, home and accessories division.

3️⃣ Facebook… Growth has been peaking with advertising contributing to 98% of Facebook’s revenue. Facebook will have to find alternative revenue sources to accelerate its growth.

4️⃣ Google… Plagued by antitrust lawsuits and slowing revenue growth, we place Google at the bottom.