Momentum traders were the big gainers of the previous week, as Apple, Facebook and Google stocks reignited on April 23-24, 2014. Stocks of these tech leviathans rallied, with the Standard & Poor’s 500 Index trading on record-highs, as Apple and Facebook shocked Wall Street with upbeat first quarter reports and announcements that delighted investors and walloped tech-stock doubters.
Before Wednesday’s 23 rally, the technology stocks were not trading so well, with most traders being alarmed by the abrupt reversal in their performance. These tech stocks have been super-hot for more than a year, constantly reaching new highs, a situation that led to a sudden pullback in their performance. Apple, for instance, had dropped to $524 a share from its 52-week high of $575.14 and well below its all-time high of $705.07 hit in 2012. Facebook was down $59 from the year’s high of $72.59, while Google had fallen to $534 from its 52-week high of $604.83.
But quickly, the negative outlook changed. The three hotshots made a massive comeback that encouraged many traders, including a number of sceptics, to give the tech stocks a second thought. One thing is for sure, Apple, Facebook and Google have retaken their position as the tech leaders to follow and own.
Apple’s unexpected upbeat quarterly results and positive announcements released on April, 23, gave its shares a strong boost. The earnings reported for the second fiscal quarter that ended on March 29, were $10.22 billion, up 7% from 1 year ago, while the earnings per-share gained 15%, to $11.62. Data on revenue revealed a rise of 4.7% to $45.6 billion from $43.6 the same period a year ago. The electronics giant reported increase in sales of iPhones, with 43.7 million purchased in the second quarter, after the handset became available through China Mobile Ltd. The figures reported exceeded economists’ forecasts who called for a $9.1 billion net income and $43.5 billion revenue. Gross margin, a measure that gauges company profitability, was 39.3% up from 37.5% a year ago.
The major surprise, however, was the organisation’s announcement of splitting its stock 7-for-1, coupled with an 8% dividend rise and a large boost to its stock buyback programme of $30 billion. Apple’s first split in nine years would cut the stock price to approximately $75 a share, thus becoming available to a wider pool of investors and paving the way to potentially joining the Dow Jones Industrial Average. Following the positive data, Apple Inc. (AAPL) stocks surged 8.2% to $567.77, the highest since April 12.
Analysts argued that Apple’s shares were weakened since January, mainly because of the not-so-high iPhone orders during the winter quarter. Nevertheless, they are optimistic about the company’s standing as a long-term player, as it appears to return to growth course this fiscal year, with the possible launch of the bigger-screen iPhone 6 this summer. Additional products are likely to be introduced, like the Car-Play, which allows Apple’s mobile devices to work in built-in-the-car systems, a smart iWatch and an Apple TV set-top box to stream online videos.
Facebook released first-quarter profit and revenue data on April, 24, that blew away analysts’ estimations. The world’s largest social networking site revenue soared 72% to $2.5 billion from $1.46 billion in 2013, exceeding the average estimations of $2.36 billion. The average revenue per user grew 33% to $2. Net income almost tripled to $642 million or 25 cents a share, from $219 million or 9 cents a share in 2013. Profit was 34 cents a share, exceeding the forecasts of 24 cents. Facebook ended the first quarter with $12.6 billion in cash and marketable securities. Following the announcement of the strong figures, Facebook Inc. (FB) stock jumped to 4.3% to $64.
The data also showed that currently Facebook has 1.28 billion monthly users, up from 1.23 billion on the first quarter, which is almost half the world’s Internet users, spending 17 minutes per day, the longest online. Moreover, the company has more than 1 billion monthly users on mobile, which is more than half of daily users only connecting to mobile.
Mobile accounts for 59% of the social networking site’s advertising revenue, up from almost nothing at the time of Facebook’s IPO back in May 2012. Analysts predict Facebook to occupy 22% of the $31.5 billion mobile ad market this year, up from 18% in 2013. Facebook which poured more than $20 billion to acquire the messaging start-up WhatsApp and virtual reality enterprise Oculus VR - a virtual-reality headset maker - is most certainly another player that tech traders should own. The company also announced on April, 25, that it acquired fitness-tracking application Moves for an unrevealed amount, in an endeavour to enter the progressively popular fitness-tracking market.
One of the most closely monitored shares by tech traders are Google’s, the largest online organisation in the world that specializes in web search with the aim of organising global information to make it universally accessible. The company decided to do a two-for-one split in April, 2, issuing Class C shares as a dividend to their stockholders. The new shares trade under the GOOG symbol and have no voting rights.
Google Inc. , also, reported first quarter results, with average paid clicks rising 26%, while average cost-per-click falling 9%. Revenue, however, impressed the tech investors, as it jumped 19% to $15.42 billion, well above $13 billion last year. Data reported that first quarter earnings were $6.27 a share against $6 in 2013. Moreover, TAC (traffic acquisition costs) totaled $3.23 billion or 23% of advertising revenue in the first quarter of 2014. Google stock was up 1.17%, consolidating at $534.44 on April, 24.
Analysts argue that Google currently trades at an attractive valuation to its growth profile against its large-cap peer group and they expect its stock to rise up to $650 a share in 12 months and the company’s revenue to climb to 11% in 2014 and by 15% in 2015.
Invest in tech stocks
Summing up, traders looking to capitalise on the groundbreaking innovations from Silicon Valley and the technology world in order to enhance their investment portfolios’ momentum, should closely look at the fast growing potential of Apple, Facebook and Google.