This is the era of technology. Open the ranking list of global company market value. Eight of the top 10 are technology companies. In the list of the top 50, there are 10 more.
After a round of economic dividend stimulation from the epidemic, the expected superimposed profits have been cashed, and the technology stocks have ushered in a new era. Recently, the technology stocks such as apple, Microsoft and Google have reached a new high. However, after a continuous rise, can technology stocks continue to be brilliant?
China concept Internet, which has withdrawn from the previous 10 lists, some investors have smelled the prelude to a change that may open on a global scale. Whether in terms of endogenous growth space or changes in the external regulatory environment, the rapidly growing technology stocks in recent years are facing unprecedented changes.
performance differentiation under high growth
increased stall
Statistics show that the median growth rates of revenue and net profit of the eight technology companies with the world’s top 10 market capitalization in the first three quarters were 39.87% and 63.97% respectively, and 18.81% and 58.40% respectively last year. But this year, unlike last year, the growth rate of global technology companies has begun to polarize:
The pioneer of performance growth is represented by Tesla. Both revenue and economic growth have increased significantly, which should be a special case of breaking through the critical point of growth in the new energy vehicle industry under the background of global carbon neutrality. However, compared with last year’s already good performance, a large area of Internet companies have achieved a double increase in revenue and net profit, which surprised many bears. Google’s revenue growth in the first three quarters of this year increased to 45% from 9% in the same period last year, and its net profit growth also increased from 8% to 121%. This growth mainly comes from the growth of advertising business brought about by the economic recovery of the United States.
But the breakdown is not all highlight: it should be said that technology companies are the least disturbed when the global epidemic breaks out in 2020, and even generally benefit from the home economy, but this dividend will gradually disappear. One typical example is Amazon: during the epidemic period, most homes rely on e-commerce distribution. The growth rates of revenue and net profit in the first three quarters of last year were 35% and 70% respectively; Since the global economy gradually resumed opening up this year, the advantages of e-commerce channels have disappeared, and the growth rate of Amazon’s revenue and net profit has also fallen to 28% and 35% respectively.
Surprisingly, the growth of chip manufacturing TSMC also slowed down, and the revenue growth rate in the first three quarters fell to 18% from 30% last year; Net profit growth also fell from 64% last year to 15% this year. Compared with Internet companies, chip production is more affected by global supply chain problems.
If we expand the scope of technology companies to the top 50 of global company market value, we will find that the phenomenon of growth stall will be more obvious: take Tencent as an example, the net profit in the third quarter of this year fell for the first time in a decade, while the net profit growth of Tencent in the past three years was as high as 19%, 22% and 30% respectively. Although the net profit in the third quarter decreased by only 2% year-on-year, with the advent of the era of strict supervision, investors began to adjust their performance expectations in the future.
In terms of revenue structure, value-added services, online advertising, financial technology and enterprise services are Tencent’s three main sources of revenue. However, affected by the regulatory environment and the overall economic situation, the two main types of revenue only achieved single digit growth in the third quarter, including value-added services revenue of 75.2 billion yuan, a year-on-year increase of 8%; The revenue of online advertising business increased by only 5% year-on-year.
Alibaba, which has made major adjustments to its high-level organizational structure, also shows signs of slowing growth. In the third quarter of this year, excluding the impact of the merger of Gaoxin retail, Alibaba’s revenue growth was only 16%, the lowest since its listing in 2014, and the adjusted net profit fell 39% year-on-year.
Recently, the rapid reduction of organizational structure through layoffs is also facing the Kwai Tung slowdown. Kwai’s third quarter revenue grew 33.45% to 20 billion 493 million yuan over the same period, but the tiktok business, which is the main source of income, has become the only sector in the current period of revenue decline. Revenue has shrunk by 2.97% over the same period, while the electricity supplier business continues to face fierce competition from Taobao and jitter.
Meituan’s third quarterly report shows that antitrust fines, combined with factors such as a significant reduction in investment income and new business losses, led to an adjusted net loss of 5.5 billion yuan during the meituan period, the largest quarterly loss since its listing.
Morgan Stanley believes that the weak gross profit margin of live broadcasting, advertising and game business makes the performance guidelines of most Chinese Internet enterprises in the fourth quarter lower than the market expectations. It is expected that the profitability of most Internet enterprises next year will still be below the market expectations.
After the rapid growth of performance in recent years, can these once favored children maintain a considerable growth rate to maintain market confidence, investors will not help but draw a question mark?
the end of the age of barbaric growth
global regulation kicks off
Analysts assert that the “end” of loose Internet regulation, which has lasted for 20 years, is coming.
Internet companies trying to rely on traffic advantages to dominate the world by monopolizing data and information resources is no longer feasible. In April 2021, the State Administration of market supervision (“the Municipal Bureau”) imposed a fine of 18.228 billion yuan on Alibaba group after completing the investigation into its suspected monopoly behavior such as “one out of two”. Subsequently, more Internet companies received fines and the era of strict supervision opened.
In July, the Municipal Bureau of supervision launched an investigation into 22 concentration cases in the Internet field, involving Didi, Alibaba, Tencent, meituan and other companies. A single case was fined 500000 yuan. In October, the Municipal Bureau of supervision made an administrative punishment decision on meituan, ordered meituan to stop the illegal act of “one of two choices”, returned the exclusive cooperation deposit of 1.289 billion yuan in full, and imposed a fine of 3.442 billion yuan.
In November, another 43 cases of concentration of business operators not declared in accordance with the law in the Internet field received administrative punishment decisions. Among them, Alibaba and Tencent accounted for half of the cases. Baidu, JD, meituan, didi and byte beat were also listed on the list. A single case was fined 500000 yuan.
As a “major investor” in the Internet, in addition to the fine itself, the adjustment of the Internet sector caused by the change of the regulatory environment also had an unexpected impact on the profits of some companies in the third quarter. Because of the holding of many Internet companies’ shares including Tencent, Jingdong, spelt, beep, drip, Kwai hung, and so on, the third quarter joint venture and joint venture lost 5 billion 668 million yuan, compared with 2 billion 600 million yuan in the same period last year.
Another variable in the loose growth environment of the Internet is the change of tax policy. Before, in order to encourage the growth of e-commerce and promote consumption, the tax environment of e-commerce enterprises was quite loose, but now it has begun to tighten. Alibaba said in August that some businesses no longer enjoy the 10% tax preference. Recently, a number of head e-commerce live broadcasters began to pay back taxes, which also shows the normalization of e-commerce live broadcasting close to corporate taxes.
The strong supervision of Internet enterprises from China has begun to become one of the learning cases of countries all over the world. Morgan Stanley strategist Michael zesas warned in a research report that the risk of countries introducing substantive new regulations for the technology sector is rising.
Zessas pointed out that in the past 20 years, science and technology platforms have been excluded from traditional media and communication regulations to encourage investment and innovation, and a safe harbor protection mechanism has been established to promote the rapid development of science and technology enterprises. But that is changing. Considering the scale of leading technology companies, the political and public momentum of regulation is increasing, including the major developed market regions related to investors – Europe and the United States will launch the new deal in the near future.
In Europe and the UK, regulations applicable to media and communications regulations are coming. Later this month, the European Parliament will vote on a measure called the “digital market act” (DMA), which aims to “control the impact of major technology platforms on competition and customers”. In the UK, the upcoming “Network Security Act” will provide a legal “duty of care” for social media and technology platforms, which will be supervised by the UK media and communication regulatory authority.
Similarly, the United States may be in line with Europe in technology regulation. In this case, once the government promotes more active content management responsibilities, personal data transferability and antitrust. In this case, the Federal Communications Commission and other agencies may be granted the power to supervise more departments of the technology business, which may force a fundamental change in the social media business model.
consumer electronics are becoming saturated
it will take time to cultivate new business
With the recent disappearance of covid-19 variants’ concerns about market disturbance, some large market capitalization technology stocks seem to regain vitality, and the stock price rises to a new high. Apple is one of them. However, after removing the Internet, where regulatory policies have a greater impact, there are many growth worries even for top performers in consumer electronics such as apple.
As the company with the highest market value in the world, on December 9, apple hit another record high in intraday trading, with a market value of nearly $2.9 trillion. The company only needs to rise 6% to become the world’s first company with a market value of more than $3 trillion, which is less than four years since it exceeded $1 trillion for the first time. Apple’s share price has risen more than 30% this year.
The recent rise comes from regulators suspending the application store ban against apple in Epic Games antitrust lawsuit. In addition, the factors supporting the rise of Apple’s share price this year come from the strategy of “increasing the volume without increasing the price” adopted by the new iphone13 series. Especially after the vacancy in Huawei’s high-end market, the new mobile phone has a good response in China’s market. In the latest fiscal quarter, Greater China increased by more than 80% year-on-year, In addition, the recent news that AR / MR equipment may be launched in 2024 fits the concept of the metauniverse of the current fire and stimulates the nerves of the market again.
On the other hand, the global mobile phone market has already passed the period of high growth in previous years. At present, the technology giant still relies heavily on the sales of a single variety of mobile phones. Apple has now begun to enter the stage of “mass consumer goods” when Buffett held his position.
From the data of the latest fiscal quarter, iPhone is still Apple’s largest sales and fastest-growing business; The second ranked service business also depends on its hardware sales; Wearable devices, which were thought to be the next driving point in the previous two years, are still far from the sales performance of the main mobile phones. Although most analysts still rated the stock as “overweight”, Apple’s share price is $4 higher than the median target price on Wall Street.
In the highly competitive field of technology, apple, as the No. 1 market value, has also begun to be challenged. In recent years, Microsoft, an old technology company with cloud services, reappeared in the second spring. In November, the market value of the company once surpassed apple. The company’s stock got out of the downturn after Indian CEO NADELLA took over. NADELLA decisively cut Nokia, invested heavily in global data centers, acquired Lingying, and shifted the company’s business focus to cloud services. The latest financial report shows that the revenue growth rate of cloud service azure is as high as 50%.
At this time point, it is not difficult to understand how Facebook began to change from “soft” to “hard”, and how to force the “meta universe” through VR devices. Facebook has been fully distributed in the field of mobile social networking and sharing, and has fallen behind in the trend of short video. This global social Internet giant needs a better story. Although the market has bought the concept of meta universe, it has a long way to go to turn the assumption into a practical business and bring performance growth.
People’s Daily’s recent comments hit the nail on the head: the yuan universe industry is far from reaching the ideal state of full industry coverage, ecological openness, economic self consistency and virtual reality exchange. There is still a long way to go at the technical level, legal level and moral and ethical level.
valuation severely differentiated
seawater flame coexistence
After a round of ups and downs, the valuation of global technology stocks has experienced serious polarization.
The excellent performance for two consecutive years has led to the share prices of peers such as Microsoft, Amazon, Google and Tesla rising by 10% to 70% this year. From the current point of view, companies with a valuation of more than 30 times include apple, Amazon, Microsoft, TSMC, Tesla and NVIDIA. Among them, the valuations of NVIDIA and Tesla are 309 times and 97 times respectively.
On the other hand, the Hang Seng technology index, which reflects the overall trend of science and technology stocks, has just rebounded slightly in October and fell again by 5.45% in November after a sharp decline of 25.18% in the dark time of the third quarter. In the first few trading days of December, Hong Kong technology stocks were heavily sold off. On December 6, they fell to 5710.19 points, a new low this year and the lowest since the launch of the index.
The shares of Alibaba and BiliBili once fell to HK $109.5 and HK $422.2 respectively, both hitting record lows since their listing; Baidu’s share price also fell to HK $133.6, the lowest since September. After more than half a year of shock adjustment, the valuation of many China concept interconnection has fallen to a historical low. For example, Tencent’s dynamic P / E ratio is only 20 times, only about half of its previous high; Alibaba’s Hong Kong stock dynamic P / E ratio is only 17.93 times, while Baidu’s dynamic P / E ratio is 25.62 times. At present, the dynamic P / E ratio of technology stocks in the Hong Kong stock market is about 20 times.
In addition to China taking the lead in implementing strong supervision, there is also a problem of the choice of market investment tools. In the U.S. market, the number and scale of passive management investment tools are growing, which has become a key factor for the continuous rise and growth of these technology stocks.
Cameron Brandt, research director of EPFR, said: as long as the valuation of large technology stocks remains high, passive funds will continue to strengthen position allocation, which forms a self reinforcing cycle. The harm of this approach is that if the weight of technology stocks has reached a critical point, as long as one of them falls sharply, it will almost certainly produce a systematic chain decline response.
In terms of global index funds, the total assets under management of faang shares (Facebook, Amazon, apple, Netflix and Google) in 2018 was about 1.5%, which is close to 5%.
In comparison, local funds, including those in nanshaui and Hong Kong stock markets, are still more active, and passive funds are not as popular as those in the U.S. market.
fund position adjustment preference
undervalued technology stocks favored by funds
In this context, there is also an obvious increase or decrease preference in the position adjustment of institutions. Fidelity China fund has achieved an annual return on investment of more than 15% in recent three years. The latest position adjustment data as of October this year shows that TSMC and Alibaba, which have heavy positions, have reduced their holdings. The fund fell by more than 10% this year due to the heavy blow to zhonggai Internet.
Some investment leaders believe that it is difficult for science and technology stocks to make another big breakthrough in the near future. Duan Yongping, a well-known investor, believes that Apple’s share price can’t rise in the short term. Recently, he wrote on social media that he sold 9999 Apple call options. The exercise price of the option is $205 and the expiration date is the end of this year. It is estimated that the amount of the transaction is $270000. He also holds positive shares of apple and superimposes the put call option to form the covered call strategy, which shows that he believes that Apple’s share price will not rise to $205 before the end of the year.
On the other hand, after the substantial reduction of holdings of large international funds in the third quarter, nanshaui has identified the opportunity to invest in China concept interconnection. Since late November, mainland funds have flowed into the Hong Kong stock market for 12 consecutive days, among which Internet technology stocks are still heavy positions. The fast hand and the US group became the largest stocks in the Kwai Tung capital market, and received a net purchase for 10 consecutive trading days, and the total net buying scale was HK $5 billion 119 million and HK $3 billion 945 million respectively. Tencent shares experienced a substantial sell-off at the end of November and also received a net purchase of HK $949 million for five consecutive trading days from December 2 to 8.
Open source Securities believes that at a time when the regulatory impact has been fully expected by the market and the sector valuation has been significantly corrected, it is a good time to configure high-quality Internet companies for a long time. It is recommended that investors pay attention to vertical Internet head platforms with content or technical barriers and outstanding operation efficiency, as well as comprehensive head platforms with high valuation and cost performance.
Li Yiming, vice president and senior analyst of highlights capital, also believes that the decline of some Internet technology stocks has exceeded the fundamental factors. With the return of sector valuation to a reasonable range, the sharp fluctuations in the short-term market have brought investors the opportunity to bargain hunting and layout high-quality growth stocks.
CICC pointed out that due to the comparative advantage of market valuation level and China’s loose liquidity, the allocation value of overseas Chinese stock market gradually appears and gradually enters the layout period. Liu Qindong, chief executive of Esoterica Capital, believes that investors should follow the “common prosperity” policy to lay out investment, and companies that are Kwai Fu, quick hands and the US group can go deep into the sinking market are the subject of concern under this theme.
(China Fund News)
