David Fuller and Eoin Treacy's Comment of the Day
Category - Technology

    Meta Faces Historic Stock Rout After Facebook Growth Stalled

    This article from Bloomberg may be of interest to subscribers. Here is a section:https://www.bloomberg.com/news/articles/2022-02-02/facebook-shares-plunge-as-users-stall-forecast-falls-short?sref=g4EhC0E7

    This quarter’s sales forecast also disappointed Wall Street and Chief Executive Officer Mark Zuckerberg, who saw his personal wealth potentially plummet about $24 billion, acknowledged that Meta is facing serious competition for user time and attention, particularly from viral video-sharing app TikTok.
     
    The dour outlook and stalled user momentum mark a dramatic turnaround for a company that has posted share gains in every year but one since its 2012 IPO, stoking concern that Meta Platforms flagship product and core advertising moneymaker has plateaued after years of consistent gains. 

    “These cuts run deep,” wrote Michael Nathanson, an analyst at brokerage Moffett Nathanson, who titled his note “Facebook: The Beginning of the End?” The results were “a headline grabber
    and not in a good way.”  Zuckerberg said Meta’s rival to TikTok, Reels, is growing quickly, but monetization has been slow. He asked investors for patience as the product ramps up.

    “Over time we think that there is potential for a tremendous amount of overall engagement growth” with Reels, he said on a conference call Wednesday. “We think it’s definitely the right thing to lean into this and push as hard to grow Reels as quickly as possible and not hold on the brakes at all, even though it may create some near-term slower growth than we would have wanted.”

     

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    Mega-cap Influence

    This note from a Bloomberg blog helps to put today’s price action into perspective.

    Alphabet Inc.’s brisk rally on Wall Street on Wednesday is giving a boost to the Nasdaq 100 Index, still reeling from last month’s selloff in tech stocks. Shares in the Google parent are surging after it announced a stock split and posted quarterly sales and profit that topped analysts’ projections, signaling the resilience of its advertising business. The gains in Alphabet shares -- the third biggest stock on the Nasdaq 100 with a weighting of 7.4% -- account for most of the rise on the index on the day.

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    Big Ideas 2022

    This aspirational report from ARK Invest highlights the arguments they have been making for the last couple of years about the promise of the innovation sector.

    When has investing not been about the future? Change appears to happen slowly and then all at once. Over time, innovation should displace industry incumbents, increase efficiencies, and gain majority market share. With the right understanding of disruptive innovation and a long-term time horizon, we believe investors will capture exponential growth opportunities, which deserve a strategic allocation in their portfolios. For this reason, ARK focuses on opportunities likely to scale as technologies converge, transforming entire industries.

    To enlighten investors on the impact of breakthrough technologies we began publishing Big Ideas in 2017. This annual research report seeks to highlight our most provocative research conclusions for the coming year. We hope you enjoy our Big Ideas for 2022.

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    Email of the day on the green revolution

    Thanks for the great service pulling the noise out of market trends for us. We especially enjoy what my wife affectionately calls the “Big Picture Long-Winded” Friday recordings. Regarding the possible rotation into the renewable/green economy do you have any ideas on Industries/companies that could benefit from the build out? Or would the safer play be directly in the commodities needed for the grid, vehicles, batteries, and such? Hoping to get to another Chart Seminar before too long.

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    The Sell-off

    Thanks to subscriber for this chartbook from Goldman Sachs which may be of interest. 

    Value Stocks, U.S. Dollar Among Top Trades After Hawkish Fed

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    “The Fed’s latest update is net negative for risk assets, as it seems to show that the Fed has a lower strike put than we thought - in other words Powell would be comfortable to allow further market weakness and volatility without intervening,” said Altaf Kassam, EMEA head of investment strategy and research at State Street Global Advisors.

    “Investors should continue to avoid developed markets government bonds as there is only downside there. We are rotating into defensive equities, long-dated U.S. Treasuries, commodities and VIX futures - Volatility will be here for a while.”

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    Bitcoin billionaire Mike Novogratz says plunging crypto will have a hard time rallying until stocks find a base

    This note from Bloomberg may be of interest to subscribers. Here is a section:

    Billionaire investor Mike Novogratz has said cryptocurrencies will struggle to pull out of their sell-off if stocks keep falling, as he urged investors not to buy the dip.

    Prices for bitcoin, ether and other digital currencies have fallen sharply across the board as they track Wall Street's rout in tech stocks, driven by pressure from rising bond yields.

    "Crypto will have a hard time rallying until stocks find a base," Novogratz, CEO of investment company Galaxy Digital, tweeted late Thursday.

    Novogratz pointed to the sharp fall in the Russell index, which is down almost 10% year to date, saying there are 1.2 trillion bad equity longs above the market.

    "This is now a bear market," he said, adding: "Sell rallies.  Don't buy dips."

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