Posted July 27, 2021
By Sean Ring
Loving Tech Stocks
Happy Hump Day!
Its midweek, and I thought Id go a bit conventional today.
Youre probably a big customer of each of these companies, and thats reason enough to buy the stocks. The thing is, nearly everyone in business is a more significant customer than they otherwise would have been because of the pandemic.
If you believe theres nothing more permanent than a temporary government program, then these stocks have a way to go.
Old newsApples iPhone sales have stabilized at around the 50% of revenue mark. Though that number used to be in the 60s, this shows just how strong Apples other businesses are.
(Not So) New newsApples silicon, the M1 chip, has altered the balance in Silicon Valley. Intel simply couldnt keep up with AAPLs tech, so Apple went ahead and made their own chips.The results are nothing short of astonishing.In essence, Apple has obviated its higher-end lines. If youre an audio/video creator, you only need the M1 Mac mini nowadays.Its nearly as fast as the old Mac Pros (the huge and hugely expensive tower Apple introduced a few years ago). Its not abandoning the Mac Pro, but for solopreneurs, theres simply no need to spend $6,000-$6,500 anymore.M1 Mac Mini with 8-Core CPU and 8-Core GPU with 256GB Storage costs only $699.00. The model with 512GB Storage costs only $899.00.I dont think enough people know about these models. That, or many people still prefer a laptop so they can type away in Starbucks, showing off for the other hipsters.I will be purchasing the 512GB model once my 8-year-old Macbook Pro conks out.Incidentally, I owned an old Intel Mac Mini when I was living in Singapore. I had my apartment macked out, and it was a treat.By hooking up the Mini to a 90-inch HD projector screen, I could watch movies, complete spreadsheets, or do PowerPoint proposals for business guests.Heck, just having the screensaver on turned my living room into a little art gallery.But the real oyster for solopreneurs is the ability to render videos on Final Cut Pro quickly. Anyone can create professional videos at lower costs these days, thanks to these machines.Whether this line cannibalizes an existing product is no longer a question of if... but which? and when?AAPLs chart is close to its all-time high (ATH) of $149.15. Not a bearish sign.
Google owns YouTube, which, for all its faults, owns the video space. For now.
YouTubes ad revenue hit a record $7.0 billion in Q2 2021. Advertising revenue nearly doubled, up from $3.81 billion from last years Q2, when COVID crushed marketing expenditure.
But the big story was Googles search revenue. It rocketed to $35.6 billion. While a jump was expected, this kind of jump was not.
Google isnt just a company anymore. Its a verb for crying out loud.
Its infiltrated, again, for better or worse, everything we do, see, and search for. And thats what makes it such an attractive stock.
Its more than a tech company. Its a media company with the algorithms to tell us what we will like before we actually like it.
Retailers accounted for the most significant gain in Googles search revenue.
Again, this shouldve been expected. Because when youre driven into your houses, advertisers will find a way to reach you there.
From the WSJ:
Alphabet Googles parent company Chief Business Officer Philipp Schindler said that the company's decision last year to list brands that weren't paid advertisers in its Shopping tab increased listings and lifted sales. He said that merchants that used both free listings and shopping ads netted a 50% increase in clicks.
I think Jon Erlichman listed it best:
Heres GOOGs chart. Not at all bearish. Also, at an all-time high.
Microsoft is a misnomer. If Bill had any confidence, he wouldve called the company MacroHard. Because thats what this companys financials look like.
Microsoft Office (or Orifice, if you have more than a passing acquaintance with it) is vital for MSFTs productivity and business unit.
Wall Street runs on Microsoft Excel. Its a must.
But Outlook, PowerPoint, and Notes are also critical. I know I cant say what day it was without Outlook.
That lines revenue should come in at roughly $14.5 billion. An enormous number, but roughly in line with expectations.
Not So New News
Microsoft has a thriving gaming division led by Xbox. Im no longer a gamer. (An 8-hour marathon with Sid Meiers Civilization taught me to avoid that addiction in college.)
But its another big winner for Microsoft, as video gaming revenue was up 11% for the quarter and Xbox hardware revenue up a whopping 172%.
New News (to me, at least)
What is Microsoft Teams, you ask?
Its MSFTs answer to Zoom. Its better than Skype, in my opinion, and one of my training companies uses it for all our meetings.
I didnt think much of it, but now its got nearly 250 million active users.
Of course, this is a significant growth area, as many employers are letting their employees work from home at least once a week.
So this isnt a nice to have piece of software. Its indeed the new normal in business communications.
And thanks to its seamless integration with Office, its going to be Zooms biggest competitor. For the record, I prefer Zooms interface for teaching.
For those old enough: remember when Microsoft packaged Internet Explorer (RIP - Rot In Perpetuity) with Windows 95? And that blew Netscape Navigator out of the water?
Get ready for the Teams vs. Zoom battle along the same lines.
Heres the MSFT chart. Also, at an ATH. Also not at all bearish.
This is not a buy call. I dont own these stocks other than as a part of index funds. But I wish I bought them ten years ago, thats for sure.
I wrote this column to demonstrate with good, hard numbers that these big guys are here to stay. And despite their respective ages, theyre thriving in this environment.
Unless theres a material change in fiscal, monetary, or regulatory policy, I dont see a change in this dynamic on the horizon.
Sure, we can pontificate all day about how things should be. But as analysts, traders, and investors, first, we must take things how they are right now. Only then may we attempt to predict with any substantiation.
All the best,