FAANG stocks are overbought and at the top of a 6 year trend channel. +/- 3 deviations to the mean highlighted by yellow trend lines. I've previously said that, of all the stocks, tech makes the most sense to have remained bullish through this period because of the additional user count that those platforms have seen over recent months...
But to be at the top of a range that is this well established? That is insanity. There is no way on this planet, that you will ever justify to me why any of these stocks (let alone all of them...) are 30% better than they were pre-covid...
Facebook makes money from advertisers. Marketing budgets get slashed during a recession...
Apple makes luxury, discretionary products in a world that is seeing modern countries with 10% - 30% real unemployment...
Amazon is the company everyone loves to hate, but at least they have a business model built for this particular event...
Netflix, as above with apple, is going to struggle when people need to make decisions on which bills to cut...
Google, as above with facebook, is reliant on money that should be drying up...
So Amazon will come out on top while the others will have a much bigger correction, if sanity is back on the table... but the market is never about logic
Moon_Rocket_Capital
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@AryaxS, Even just taking AMZN on it's own - this is still completely irrational. Take this chart for example. Economists are pretty upfront right now above the economic impact of covid, and the timeframe that it will take to return to 'normal'. How did Amazon trading react to that news? It's circled in yellow.
The October - December '18 decline in price was more substantial and lasted longer...and that was during an economic boom period.
AryaxS
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@Moon_Rocket_Capital, I take it as that more people are unwilling to shop in person and turn into Amazon for even grocery deliveries. In fact, Amazon is the only company among FANG to announce an increased need for workers blog.aboutamazon.com/operations/amazon-opening-100000-new-roles that't the news reaction trading at that time. Totally justifies in my eyes.
Moon_Rocket_Capital
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@AryaxS, Long term lens - absolutely. I've previously done demand models for retailers and have long been of the belief that traditional brick and mortar sales would fall apart once people understood how online shopping could provide convenience as a trade off to immediacy. The last few months have certainly provided that circumstance; and I don't think retail will ever be the same again (see: JC Penny walking away).
That being said though, I still think the uncertainty here in the short to medium term is far greater than that of '08 or '18. Could an argument be made that the price was undervalued from '18 and that's why there was limited downside? Perhaps.
seawolf88
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@Moon_Rocket_Capital, That's your problem the markets are not rational. This is a different machine where technical analysis alone is not enough. If you look deeper you will understand why facebook is undervalued and worth much more just off their recent investments
Moon_Rocket_Capital
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@seawolf88, Fundamentally FB is an advertising based company. They make their income from the aggregating user data and either selling it to advertisers; or offering targeted advertising on platform. Regardless of what they are going to be able to do in the future - to keep the lights on today, they need advertisers.
In recent surveys of marketers; almost 2/3 of respondents acknowledged their upcoming 12 month budgets are going to be slashed, and focusing on proven high return marketing streams (i.e. not FB ads). In another survey; roughly 50% of respondents said that they were either drastically or completely changing their marketing strategies; with a further 30% saying their changes were "moderate".
If Walmart was suddenly unable to sell fresh produce, we wouldn't be talking about how they are upgrading their car parks.