Facebook, Samsung & Apple – No woes here.

Big tech is just fine.

Apple FQ4 19 – Accessories assemble

• Apple reported good FQ4 19 results as wearables and services offset a less than expected decline in iPhone shipments.
• FQ4 19 revenues / EPS were $64.0bn / $3.03 ahead of consensus forecasts of $62.9bn / $2.84.
• A 9% YoY decline in iPhone sales was offset by a 16% increase in iPad sales, 54% YoY increase in wearables and an 18% increase in services.
• This is certainly a good sign for Apple with its dependence on iPhone slowly coming down, but it was other hardware products (which depend on iPhone ownership) that made up most of the gap.
• However, Services is now a $50bn business (1/3 the size of iPhone) with 450m subscribers each spending around $9 per month.
• A large piece of this is going to be Apple care but even taking this out, the diversification strategy is working steadily
• Hence, I think that the outlook for Apple remains steady.
• This is where I run into problems as Apple is trading on around 5x 2019 EBIT and 19x 2019 PER.
• These are multiples demanded by growth stocks which is not where Apple is.
• Now is a good time to take some profit.

Samsung Q3 19 – The Huawei effect.

• Samsung reported Q3 19 results that showed a bottoming in semiconductors and market share gains from Huawei completing a pretty rosy picture for 2019.
• Q3 19 revenues / net income were KRW62.0tn / KRW6.1tn compared to estimates of KRW61.1tn / KRW5.5tn.
• Increasing market share and lower competitive pressure from Huawei helped both revenues and profits from smartphones which went together with strong signs of a bottom in semiconductors.
• Consequently, the outlook for Samsung remains good which means it should show some growth over the next 24 months.
• The net result is a pretty good outlook and unchallenging valuation which continues to support my positive stance.
• I continue to hold Samsung in my portfolio.

Facebook Q3 19 – No foot vote here.

• Facebook has once again put to bed any notion of users and advertisers leaving the platform due to its ongoing PR woes with an excellent set of Q3 19 results.
• Q3 19 revenue / EPS was $17.65bn (up 29% YoY) / $2.12 nicely ahead of consensus at $17.35bn / $1.88.
• Users are continuing to sign up with India, Indonesia and the Philippines seeing the strongest growth, but Facebook has also seen new users signing up in the USA and Canada.
• As a result, Facebook remains one of the best ways to reach the audience meaning that advertisers are using the platform to market their wares more than ever.
• This is yet another quarter that clearly demonstrates that users simply do not care that much about Facebook’s problems and poor reputation giving the company plenty of space to get its house in order.
• On that front, I think there is steady progress, but its AI efforts remain woeful.
• Facebook now has 35,000 humans that are in some way involved in security and safety which represents a staggering 81% of the workforce.
• The vast majority of these jobs are in areas where AI should be taking over highlighting the scale of the shortcoming that Facebook has in this area.
• Hence, I think that in the long-term there is scope for a big increase in profitability as Facebook fixes its AI issues.
• However, in the short-term, there is growth but it remains expensive and so I am pretty ambivalent to an investment in Facebook