As earnings season starts up, the world is getting a glimpse into how the global pandemic and subsequent economic meltdown is impacting firms of all kinds. Of particular interest to market watchers are the FAANGs – Facebook, Amazon, Apple, Netflix and Alphabet/Google – and how the pandemic has affected those tech giants’ performance thus far. Experts also want to know what role the FAANGs will play individually and collectively in the U.S. economic recovery.
Let’s look at each company’s prospects:
“Netflix and chill” went from being a euphemism about modern dating to a dedicated lifestyle for a quickly growing swath of Americans left couch-bound by stay-at-home orders. The company reported a staggering 10 million new users, 25 percent revenue growth from the same quarter a year ago and quarterly operating income that exceeded $1 billion. Operating margins also expanded by an unheard-of 770 basis points year over year to 22.1 percent.
However, uncertainty about the future remains, and Netflix’s stock price fell 6.5 percent the day after the earnings release.
“To have a planning model, you have to have a model of COVID,” Netflix CEO Reed Hastings said in the company’s earnings conference call. “You have to know whether certain treatments are coming online, how broadly are they distributed, when vaccines are coming online and how quickly they [can] be manufactured. And we don’t know any more than anybody else on those big elements.”
“We’re in the same uncertainty [as] everyone else, but the thing we’re certain of is that the Internet is growing – it’s a bigger part of people’s lives,” he said. “Thankfully, people want entertainment. They want to be able to escape and connect, whether times are difficult or joyous.”
Hardware giant Apple plans to release earnings on July 30, and analysts expect the report to show some headwinds from the fact that Apple closed its stores nationwide for most of the quarter.
However, the company could also enjoy some tailwinds from work-from-home consumers buying more Apple products – AirPods, MacBooks and iPhone SEs in particular.
"I have seen a strong customer response to iPhone SE, which is our most affordable iPhone,” CEO Tim Cook said recently on a call with analysts, according to Apple Insider. "[It] appears that those customers are primarily coming from wanting a smaller form factor with the latest technology or coming over for it from Android."
Online shopping giant Amazon also plans to report earnings on July 30, but what the company will say remains something of a mystery to stock watchers. Analysts forecast that quarterly revenues will continue to hit record highs, but earnings will take a hit given the firm’s stated plan to spend all second-quarter profits on combatting COVID-19’s impact on company operations.
“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” CEO Jeff Bezos said in releasing the eCommerce giant’s earnings last quarter. He said the company will spend all of its roughly $4 billion in expected quarterly profits on such things as higher wages, enhanced facilities cleaning and personal protection equipment for Amazon warehouse workers.
“The service we provide has never been more critical, and the people doing the front-line work — our employees and all the contractors throughout our supply chain — are counting on us to keep them safe as they do that work,” Bezos said. “We’re not going to let them down.”
Chief Financial Officer Brian Olsavsky also estimated that Amazon will spend roughly $1 billion developing COVID-19 testing capabilities in-house.
Still, Amazon watchers will be looking for a massive expansion in the company’s digital grocery business. The unit saw sales spike 8 percent in the first quarter as it enjoyed a rapid influx of customers (perhaps too rapid).
And while Amazon’s eCommerce results are always of keen interest to market watchers, the consensus is that the company will report massive quarterly gains there. In fact, the main debate among experts is exactly how massive the quarter will be for Amazon-based digital commerce.
While Amazon will remain the FAANGs’ dominant eCommerce force, both Facebook and Google have recently made big pushes into online shopping, hoping to get their boats in the water as the tide rises for all players.
Google last week officially launched Shoploop, a video shopping platform designed to introduce consumers to new products in less than 90 seconds. The initiative aims to offer a synthesis of social media and eCommerce experiences.
Shoploop will offer quick demo-tutorials to give viewers a feel for how products function in real life. When consumers find something they want, the app can allow them to “save” the item for later or move immediately to a merchant’s website to buy.
The app also allows users to follow their favorite Shoploop creators and share videos with friends and family.
Alphabet will report its second-quarter earnings on July 30.
Meanwhile, Facebook – which will report its earnings on July 29 – recently released Instagram Shop and a whole host of new commerce features for its photo-focused social media channel.
Facebook said Instagram Shop aims to serve as an “in-app shopping destination where people can discover products and brands they love from across Instagram.” The company plans to support the initiative with Facebook Pay functionality to “provide a seamless, secure way to shop and make donations across our apps,” the company said in a recent blog post.
Facebook has been trying for some time to create a full social commerce experience. The company is hoping to achieve this by pairing its photo-sharing app with merchants who will create collections in their in-app shops that are easily paid for in a single transaction.
To further sweeten the experience, Instagram Shop will make “personalized recommendations based on the brands you follow,” in addition to collections “curated by the @shop team,” according to Facebook.