Tuesday, January 18

Big Tech Add $ 2.5 Trillion in Value on Solid 2021 Profits

Big tech propelled US stocks to a third straight year with gains in 2021, as giants like Apple Inc. and Microsoft Corp. continue to see strong demand almost regardless of the economic environment.

Five of the most notable internet and tech names on the market (Apple, Microsoft, Alphabet Inc., parent of Google, Amazon.com Inc., and Meta Platforms Inc., parent of Facebook) rose last year, even as they finished in numbers. reds on the last trading day. of 2021.

While its performance in 2021 ranged from Alphabet’s 65% surge to Amazon’s 2.4% lag, the group collectively added more than $ 2.45 trillion in market valuation. Microsoft, Apple and Alphabet were among the top three contributors to the S&P 500 Index earnings in 2021.

“Investors have recognized that these companies continue to do extremely well,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott, who has about $ 125 billion in assets under management. Rapid earnings growth, competitive trenches and strong balance sheets protected them from some of last year’s risks, he added.

“While I believe in the merits of moving towards cyclical names in 2022, I would not abandon the technology,” Luschini said.

The group ended 2021 on a negative note. Apple fell 0.4% on Friday, while Microsoft lost 0.9%, Amazon fell 1.1%, Alphabet lost 0.9% and Meta sank 2.3%. The Nasdaq 100 index was down 0.7% during the session, but still rallied nearly 27% for the year.

Here’s how the group performed in 2021, starting with its biggest winner:

Alphabet Inc.
Google’s parent company soared 65% in 2021, making it the top-performing company among the biggest names on Wall Street. This was the strongest year for the stock since 2009, briefly joining Apple and Microsoft with a $ 2 trillion market valuation.

Alphabet benefited from growth in its cloud business, as well as a rebound in digital advertising spending, particularly in key categories such as travel that were affected by the pandemic in 2020. Earlier this week, the CFRA updated the stocks to a strong buy based on its “attractive valuation against large-cap tech peers,” as well as the “belief that it can sustain a mid-adolescent annual income growth rate for the next three years.”

Microsoft Corp.
The software giant surged 51% in 2021, pushing it into the $ 2 trillion market cap club. The stock has won for 10 years in a row, its longest rally in its history, and has delivered double-digit returns for nine years in a row. The shares have risen nearly 1,200% since the end of 2011.

Microsoft’s strength came from constant demand for its cloud computing and business software.

Apple Inc.
The iPhone maker was up 34% in 2021, outperforming the S&P 500 for the third year in a row. While 2021 marked its weakest performance of the three (stocks were up more than 80% in both 2019 and 2020), the rally put the company a surprising distance from a historic market capitalization of $ 3 trillion.

Despite issues such as chip shortages and the ongoing pandemic, which recently prompted Apple to close its New York City retail stores, stocks remained an investor favorite in 2021.

The company continues to benefit from the worldwide popularity of its products, the potential for new offerings to maintain consistent sales growth and a strong cash balance. And the future looks promising with investors favoring what they consider to be high-quality stocks with long growth records amid uncertainty related to Federal Reserve policy and the prospect of higher rates.

Meta Platforms Inc.
The stock was up 23% in 2021, roughly in line with the S&P 500, despite one of the most tumultuous years in company history. While Facebook’s parent company continued to benefit from high user engagement on its platforms and an ongoing shift in advertising budgets toward social media, it struggled with the impact of Apple’s revised privacy policy and intense scrutiny of its products, especially after the publication of a whistleblower documents. .

In October, the company announced a new focus on the metaverse, an immersive virtual reality technology, and a new name to reflect the change.

Meta’s gains came primarily in the first half of 2021, as the stock hasn’t traded at a record high since September. However, Wall Street is optimistic about the company’s prospects in 2022, given what is seen as an attractive valuation and a powerful engine for profit. Baird just named him one of his top large-cap internet picks for 2022.

Amazon.com Inc.
The ecommerce company underperformed notably in 2021 relative to its megacap peers and the market as a whole. The stock gained 2.4%, enough for a seventh straight positive year, its longest winning streak in history. Since the end of 2014, stocks have soared nearly 1,000%.

Amazon traded within a fairly tight range during the second half of the year, as a couple of disappointing quarterly reports, rising labor costs, and supply chain disruptions weighed on stocks. On Wednesday, Mizuho Securities managing director Jordan Klein wrote that among investors there is a “clear view that the sell side appears to be mis-modeling the first half of 22 (as too high).”

Still, several companies have named Amazon as their first choice for 2022.

© 2022 Bloomberg LP


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