As with most companies, the stock prices for Big Tech firms tumbled as the coronavirus pandemic spread across the world. Is now the time to invest?
In recent years, Big Tech companies have been some of the most popular stocks to invest in. People are familiar with these companies and their various offerings. But with many of these stocks now falling from all-time highs, is it time to invest?
Millions of people globally are without work, countless businesses have closed and supply chains have been struggling with the ongoing uncertainty.
Some analysts say that this will be a worse economic crisis than the Great Depression. Others see this as a great buying opportunity, particularly for some Big Tech stocks that may have been overvalued.
While these companies will naturally be affected by strains on supply chains and cuts in advertising budgets, they are still robust businesses.
With nearly all of its $70 billion revenue coming from advertisers, naturally Facebook (NASDAQ: FB) will be hit as businesses slash advertising budgets during this crisis. Times of economic uncertainty mean that these ad budgets may be depressed for some time.
However, the company has a strong balance sheet and is still well-positioned for growth into the future. It holds about 19% of the online advertising market and it is great at picking out promising companies for acquisition. The likes of Instagram is set to grow its advertising revenue significantly in the coming years for example.
Its share price has already been recovering steadily in recent weeks after dropping by 33%, with still value to be had.
Amazon
Amazon (NASDAQ: AMZN) looks like it will benefit the most out of all the Big Tech companies as a result of this crisis. It has seen unprecedented demand in its online marketplace as people scramble to get supplies due to the ongoing global lockdown.
The company was performing strongly before the pandemic hit, reporting $87 billion in revenue for Q4 2019, an increase of 21%. This momentum undoubtedly will continue as the world emerges from the pandemic.
However, Amazon’s share price is now about 7% higher than what it was pre-crisis after initially dropping by 22%, so you will have to decide if there is enough value to be had at current prices.
Apple
Apple (NASDAQ: AAPL) does have a lot of exposure to production in China, which ground to a halt at the height of the crisis in the country. iPhone shipment forecasts have been cut by 10% as a result, with iPhone sales making up about 52% of Apple’s revenues. However, as China emerges from this crisis, production is already starting to ramp up again.
People will likely cut down on their spending on luxury electronics as incomes are squeezed. However, this will subside as consumer confidence comes back as matters normalize. Share price recovery has been strong in recent weeks since dropping by 31%, with still a lot of upside potential for investors.
Like Facebook, Google (NASDAQ: GOOG) advertising revenue will be hit as a result of the crisis, making up 68% of revenues. However, the business is robust and has been growing significantly year-on-year despite its size. For example, its total revenue grew by 18% in 2019. One of its big areas of focus will be on its cloud business. While it only made up 5.5% of total sales in 2019, its revenue grew by 53% in 2019.
The company’s share price has been a bit slower than other Big Tech companies to recover since dropping by 25% and there is still a lot of value to be had by investors at current prices. It could be the only chance you get to invest in this company at such a relatively low price for many years.
Microsoft
Microsoft (NASDAQ: MSFT) is another big winner so far from the ongoing crisis. It has a sticky customer base and does not have much exposure in terms of production in China.
The company has seen its share price compound steadily since Satya Nadella took over as CEO in February 2014. It is continually innovating and collaborating in a wide number of areas. Its cloud computing service is now starting to rival AWS in what is a lucrative market, now having an 18% share of the market.
Microsoft’s share price is nearly back to pre-crisis heights after briefly dropping by 27%. However, it still looks to be a good buy amid the ongoing uncertainty.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.