FB / QCOM results – More big hitting.

Semis looks better than Internet at the moment.

Facebook Q2 2021 – Better lucky than good.

• Facebook reported excellent results but the adpocalypse is going to hurt in Q3 leaving Facebook as a game of two halves.
• The first half is a punchy valuation against slowing growth but the second is the opportunity that lies ahead of Facebook in virtual and augmented reality where what began as Oculus could become much more.
• Oculus looked like a fanciful acquisition at the time, but it may turn out to be the most important acquisition that Facebook ever makes.
• Was Zuckerberg that good or just lucky?
• I suspect that later but critically, the outcome will be the same.
• Q2 2021 revenues / EPS were $29.1bn / $3.61 easily beating consensus at $27.9bn / $3.00 as the jump in pricing and volume that has benefitted the sector broadly also boosted Facebook.
• However, all of this optimism took a back seat to the outlook where YoY and is expected to slow markedly due to the adpocalyspe and the law of large numbers which makes high levels of growth increasingly difficult to sustain over time.
• However, Facebook does have Sheryl Sandberg, who I think of as the queen of the cash register, and who I consider to be one of the best people to have around to find alternative methods of monetisation.
• With its 2021 PER of 23.9x, Facebook is not on the high end of the FAANG valuation range, but I think that the immediate term could see some shocks as growth slows down.
• There may be a better time to own this one.

Qualcomm FQ3 2021 – Off with a bang.

• Cristiano Amon has started his tenure as CEO with a bang reporting excellent results and good guidance as Qualcomm, like Apple, is benefitting from the US telecom operator 5G giveaway.
• FQ3 2021 revenues / EPS were $8.1bn / $1.77 compared to consensus at $7.6bn / $1.38 largely driven by the faster than expected uptake of 5G.
• Operators are very keen to get customers onto 5G networks as they think that cost of subsidising the upgrade is expected to be more than returned through the lower cost per bit that the 5G spectrum provides.
• Like everyone else, Qualcomm is currently able to sell every chip that it makes, and so in addition to seeing good volume, pricing is obviously remaining strong.
• Consequently, guidance for FQ4 2021 was strong with revenues / EPS of $8.4bn – $9.2bn ($8.8bn) / $2.15 – $2.35 ($2.25) compared to consensus at $8.5bn / $2.07.
• Qualcomm is up significantly in the last 12 months but so are its fundamentals, meaning that as a big technology stock, its relative valuation is not very challenging.
• The shares are trading at FY 2022 PER of 16.6x and its earnings are expected to average 33% over the next three years.
• This is much more attractive than other large names in the sector and so if I was going to go into large-cap US technology, this is certainly one that I would look at.