Tag: Reflects

29
Sep
2020
Posted in technology

The Current Tech Stock “Bubble” Reflects Pessimism, Not Optimism

Since the U.S. stock market started its rebound in early April of this year, technology has been the leading sector. Driven initially by mega-cap tech behemoths Amazon
AMZN
, Apple
AAPL
, Facebook, Google
GOOGL
, and Microsoft
MSFT
, the tech rally has spread into some fast growing mid- and small-cap stocks as well as high-profile IPOs like Snowflake. 

Many investors and pundits are concerned that tech stocks are experiencing a bubble, as in 1999‒2000. However, instead of excessive optimism about the future, rising tech valuations may reflect pessimism about future economic growth and profit weakness in other sectors. Given the current high unemployment rate of 8.4% and the large number of small business closures, Consumer Cyclical, Basic Material, and Energy stocks could have muted profits for an extended period. Technology’s secular growth, fueled by the Internet, cloud computing, ecommerce, and the ongoing digital transformation of business, is simply more attractive to investors than most other parts of the market.

S&P 500 overall earnings are expected to decline 3% in 2020 when companies with losses are excluded (see table above). However, Wall Street is optimistic for 2021, expecting a 13% bounce in profits. Many of 2020’s worst sectors are expected to have the highest earnings growth next year. Cyclical groups are expected to have the fastest profit growth, led by Energy (+20%), Transportation (+19%), Consumer Cyclical (+19%), and Basic Material (+18%). In contrast, Technology is only expected to grow roughly in line with the overall market at +14%. Given Technology earnings’ modest expectations and comparatively secular nature, the sector is more likely to meet earnings expectations than cyclical sectors with higher expectations. 

I believe investors are still cautious or negative on the U.S. economy, so they will pay a premium for Technology stocks

29
Sep
2020
Posted in gadget

New Amazon Echo Reflects a Spaghetti-at-the-Wall Product Strategy

Hey y’all, it’s Austin. Last week, in typical Amazon.com Inc. fashion, the Everything Store unveiled a new Everything Product for each category of buzzy gadget on the market today. At a news conference Thursday, the company showed off new smart speakers, streaming TV devices, Wi-Fi routers, a video game system, a car alarm and even a new drone security camera.

Amazon, in its relentless quest to own the home of the future, traditionally takes a spaghetti-at-the-wall approach to hardware development. Compared with rivals such as Apple Inc. or even Microsoft Corp., which generally limit their offerings to a refined set of electronics, Amazon’s ever-eclectic product line is refreshingly fun, surprising and, well, increasingly confusing. They don’t do “one more thing,” in Jobsian speak, but usually “a dozen more things.” And at this rate, people are likely to lose track of which Amazon products are actually Amazon’s.

Tech companies are forever fighting to attract more customers to their ecosystems of products. The premise is that the more people adopt one proprietary platform, the more they’ll be inclined to buy into that company’s family of products and services. That is, the Apple loyalist would own not just an iPhone and iPad but also spend money on iTunes and iCloud. You get the idea.

Amazon’s array of products tends to lack the cohesion other companies so meticulously design. Among its hardware, there’s Basics, Blink, Echo, Eero, Fire, Halo, Kindle, Luna and Ring, each with its own distinctive design and subsets of seemingly never-ending variations: Echo, Echo Auto, Echo Buds, Echo Dot, Echo Dot with a clock, Echo Dot kids edition, Echo Flex, Echo Frames, Echo Glow, Echo Link, Echo Loop, Echo Show, Echo Spot, Echo Studio. Am I missing any?

Making matters more complicated, these devices are usually linked to one of Amazon’s