Just over a month ago, the stock markets were hammered. In just 22 days, beginning in late February, it fell by 30%, the fastest drop in market history.
But the shares are rising again. And like previous rallies of recent years, mega tech stocks seem to be at the forefront.
Stocks on the so-called "FANG" index, which includes tech giants like Facebook (NASDAQ :), Amazon (NASDAQ 🙂 and Netflix (NASDAQ :), are doing much better this year than the broader S&P 500- benchmark.
NYSE FANG + TM weekly chart
The (NYFANG) increased by more than 15% in 2020, while the SPX fell by approximately 9% in the same period. These technical shares have delivered a return of 30% in the past 12 months.
Some of the most recent earnings reports show that the world's largest technology companies are well positioned to deal with the recession caused by COVID-19. Even more encouraging, they will become much stronger when things return to normal. Below, we focus on three major tech companies whose recent earnings are fueling additional gains in their stocks as investors take refuge in their safety.
1. Microsoft
Software and device giant Microsoft (NASDAQ 🙂 is thriving despite the extreme economic problems caused by the corona virus in many sectors of the economy. Currently, the world's most valuable publicly traded company, the Redmond, WA-based behemoth on Wednesday is experiencing strong growth in quarterly sales and earnings. The company is benefiting from the shift to more online activities as the coronavirus pandemic forces millions of people worldwide to take shelter at home.
Sales rose 15% to $ 35 billion in the first three months of the year. Microsoft posted a net profit of $ 10.75 billion, surpassing analyst estimates.
"Since Covid-19 affects every aspect of our work and life, we have seen two years of digital transformation within two months," said Microsoft CEO Satya Nadella during the post-release call.
The health crisis has resulted in more employees using Microsoft's work collaboration software suite, called Teams, which includes video conferencing and messaging features. It now has 75 million daily active users – more than double in early March.
Cloud computing, the main growth engine for Microsoft, has become increasingly important to customers, partly because more and more employees are working from home. According to Microsoft, this resulted in a turnover increase of 59% in the Azure cloud business in the past period.
Trading at $ 179.21 per share, the Microsoft stock is up about 14% this year and 38% in the past 12 months.
2. Facebook
Social media giant Facebook (NASDAQ: FB) also surprised analysts when it released its earnings report on Wednesday. The company's sales remained stable in the first few weeks of April, after dropping sharply in March.
Facebook relies heavily on advertising revenues from travel and entertainment companies, which have been decimated by the still-in-force global lockout measures. But that home environment also increases user engagement and stimulates the future prospects of the company.
Daily users of all Facebook apps, including Instagram and WhatsApp, averaged 2.36 billion in March, compared to 2.26 billion in December, the company said. Facebook's main social network now has 1.73 billion daily users, compared to 1.66 billion in the last month of 2019.
That proliferation of the company's messaging products could pay off in the near future, mitigating the drop in ad sales if the slump in the economy continues.
After the better-than-feared gains were announced, investors sent Facebook shares 5% higher on Wednesday. On Thursday the stock closed at $ 204.71; it is up about 5% in the past 12 months.
3. Alphabet
Alphabet (NASDAQ 🙂 also reported first quarter results this week that exceeded analysts' forecasts. The Google mother of the company's cloud and YouTube companies continued to grow during the COVID-19 pandemic.
Revenue was up 14% to $ 33.71 billion from a year ago, thanks to YouTube revenue rising 33.5% and Alphabet's cloud computing segment where sales were up 52%.
"The results were better than the market expected, with strong statistics in Google Cloud and YouTube," Jason Bazinet, an analyst at Citigroup, wrote in a note to customers.
Google's diversified business model is better positioned to weather the economic downturn, even as potential advertisers continue to cut their marketing budgets.
Chief Executive Officer Sundar Pichai said the cloud business was still going strong even if it took longer to complete some deals. "We are seeing general momentum," he told analysts during a conference call.
Google stock has been almost unchanged for the year, closing at $ 1,346.70 last night, up 3.5% over the past year.
Bottom Line
While these companies are not fully immune to the impact of the pandemic, their latest earnings reports show that they are still relatively isolated, making them the safest bets for investors if so much uncertainty remains.
