There is now a big target on Big Tech.
The Department of Justice announced a broad antitrust review of big-cap technology companies on Tuesday separate from its previously reported probe of Google parent Alphabet.
The announcement weighed on shares of tech giants Facebook, Apple, Amazon and Alphabet in after-hours trading on Tuesday, and while they erased some of their losses Wednesday, experts remained cautious on these names.
Here’s what five experts are watching in Big Tech:
Wamsi Mohan, senior equity research analyst at Bank of America-Merrill Lynch, was focused squarely on Apple’s upcoming earnings report on Tuesday:
“We’ve been on both sides of the Apple trade. We’ve had a downgrade last year when the stock was at [$]222. We upgraded the stock back at [$]170, when we saw improving trends back in China. Now, as we look at the services numbers, we do see that although the optics of it suggest that there was an acceleration in the quarter, there is an underlying dynamic within China that the trends got a little worse intra-quarter. So, we’re a little cautious about that overall deceleration within services, particularly in China. … When you look at privacy, this is one thing we all have to give [Apple CEO] Tim Cook a lot of kudos for. He’s been on the right side of the privacy debate. Right from the start, whether it’s designing stuff, keeping it on the iPhone, you’ve got the secure login, all the things that they’ve done with Safari. … This has been, really, a tremendous difference between Apple and other large cap[s and] mega caps. Now, on the App Store specifically, although it looks like there could be a monopoly and there’s some risk around take rates, I would actually argue that the App Store provides a lot of value to its developer community, which is in terms of micro payments, whether it’s in terms of the security, whether it’s in keeping the iOS updated, and the developer tools. So, you really have a great plethora of things that developers are gaining. “
Loup Ventures founder and managing partner Gene Munster said that Facebook — which was also slapped with a record $5 billion fine by the Federal Trade Commission on Wednesday — would need some time to resolve its issues:
“[Facebook CEO Mark] Zuckerberg now has some personal potential liability around the privacy, but that is insignificant. So, I think that the movement in Facebook shares today is all about what the Federal Trade Commission is going to do around better governance around some of these companies. And I want to take a quick step back and just kind of anchor the conversation to areas that they govern by. One is are our practices ultimately anti-competitive? And the second: is the consumer better off? And … what that means for typical investors is that it’s going to take a long time for this to sort out. And I just kind of want to caution people that the resolution is many months away.”
Kevin Rippey, technology analyst at Evercore ISI, figured the damage could be worse — and his theory appeared to play out later Wednesday as tech stocks drove the S&P 500 and Nasdaq to new highs:
“Since the breaking of the Cambridge Analytica scandal a year and a half ago, investors have had a long period of time to think through and discount a wide range of scenarios as it relates to antitrust [and] different global regulatory investigations. And I think we’re seeing that today, actually, in, you know, fairly limited downside after the announcement of these new investigations, right? The worst, I think, is Facebook down 1.5%, Google down 1[%], Amazon down 1[%]. These aren’t meaningful downside moves in light of what could be otherwise fairly ominous headlines.”
However, regular “Fast Money” trader Guy Adami — who is also director of advisor advocacy at Private Advisor Group — was a bit more bearish on how long these issues could take to play out:
“It’s scary, No. 1. … It makes sense that [Facebook, Amazon and Alphabet are] all down, and it probably makes sense that Apple’s [stock], I would imagine, [is] down small if not unchanged. But Amazon into earnings on [Jul.] 26, now with this headline, you go back and look where it topped out, look where it traded down to, look where it just re-tested, and you say to yourself, ‘Am I playing in the deep end of the pool?’ So, I don’t know if earnings will necessarily matter now for Amazon, Facebook and Google. [I] still think Facebook sets up well, but, I mean, these headlines — and I’m going to try to read through the press release — I mean, that’s got to be a little bit frightening, I would think, right? … Absolutely, the three companies that are clearly in the crosshairs for a number of different reasons … are Facebook, Amazon and Alphabet, and those are the ones you have to be concerned about. You know, if there’s ancillary damage to a Twitter, that’s, to me, an opportunity. But … this is [a] pretty draconian headline. You’ve got to read through some of this stuff. [And] this doesn’t end in a day. This lasts for quite some time. “
Mark Tepper, president and CEO of Strategic Wealth Partners, wasn’t ready to ditch these names quite yet:
“I think this is just a lot of headline noise. I mean, typically, in the past, these have been great opportunities to buy on the pullback. There’s no company-specific target right now. Quite frankly, I don’t think there’s really much to do with regards to a breakup of Amazon, and when I look at Amazon, the long-term thesis is still intact, right? I mean, this is a great company. You look at their high-margin businesses like cloud and advertising that are just growing like crazy. I still love Amazon.”
