Tech Giants Benefit from Stocks Updates
Tech Companies in the U.S saw their stocks rising to an unprecedented level since 2011. Companies such as Microsoft Corp, Apple Inc., Facebook Inc., Amazon.com.inc., and Alphabet Inc. gained more than $330 billion in market value. However, analysts are cautious and recommend to jump to the conclusion too quickly. The overall picture is not as promising as someone might think based on this data.
Recent increase of the tech companies stocks happened thanks to several factors. The deal reached between the U.S. and the Mexican government is one of them. Also, the possibility of U.S. Federal Reserve lowering the interest rates. A possible resolution of the trade dispute between the U.S. and the Chinese government.
Another aspect is that tech companies, especially the ones mentioned above, are seen as strong and stable corporations. These companies make a lot of money. For example, Microsoft Corp is the world’s largest public company with a market value of more than $1 trillion. Other companies are not far behind just a glimpse at their profits is enough to believe in their success.
According to International Data Corp., global spending will increase to $1.8 trillion by 2021. Companies are trying to prepare for the digital age.
However, it is important to remember when taking into account the news that U.S tech companies stocks are profitable. The report prepared by Goldman Sachs gives the possibility to have a closer look at the tech companies. One of the significant findings that the tech sector’s earnings-per-share (EPS) growth is predicted as a positive only in one out of four quarters in 2019.
Crunching Stock Numbers
Earnings across the tech sector will most likely decrease by 3% for this year, according to the forecasts. Tech companies’ sales-per-share will be only 3% for 2019. All this brings to us to another report by another bank, Morgan Stanley. Both of the banks give a quite negative overall outlook. Corporate earnings forecast for 2019 is same as for 2020 it means zero profit growth for two years straight.
What might become a serious obstacle are possible antitrust violations by Google’s parent company Alphabet. U.S. Department of Justice is planning to investigate possible antitrust violations. It is not the first time when Google found itself in hot water. The European Commission fined Alphabet for $1.7 billion as Google was found guilty of abusing its dominant position. In overall it is the third fine for the company which has previous records of other violations. The latest fine was issued just three months ago.
Alphabet is not alone when it comes to alleged violations. Facebook is also facing fine because of privacy violations. The Federal Trade Commission is investigating possible violations, and the fine will most likely reach $3 billion.
Tech companies are becoming bigger and more sophisticated. It means that it is getting harder to understand the whole scope of their business. Investing in tech stocks as in any stocks, in general, are tricky but profitable at the same time. U.S. tech giants face many different issues ranging from antitrust violations to the privacy concerns. In general, investing in the tech sector and stocks, in particular, is a good idea after exploring all the potential risks and benefits.