Loving Tech Stocks

Happy Hump Day!

It’s midweek, and I thought I’d go a bit conventional today.

You’re probably a big customer of each of these companies, and that’s reason enough to buy the stocks.  The thing is, nearly everyone in business is a more significant customer than they otherwise would have been because of the pandemic.

If you believe there’s nothing more permanent than a temporary government program, then these stocks have a way to go.

Apple

Old news

Apple’s iPhone sales have stabilized at around the 50% of revenue mark.  Though that number used to be in the 60s, this shows just how strong Apple’s other businesses are.

(Not So) New news

Apple’s silicon, the M1 chip, has altered the balance in Silicon Valley.  Intel simply couldn’t keep up with AAPL’s tech, so Apple went ahead and made their own chips.

The results are nothing short of astonishing.

In essence, Apple has obviated its higher-end lines.  If you’re an audio/video creator, you only need the M1 Mac mini nowadays.

It’s nearly as fast as the old Mac Pros (the huge and hugely expensive tower Apple introduced a few years ago).  It’s not abandoning the Mac Pro, but for solopreneurs, there’s simply no need to spend $6,000-$6,500 anymore.

M1 Mac Mini with 8-Core CPU and 8-Core GPU with 256GB Storage costs only $699.00.  The model with 512GB Storage costs only $899.00.

I don’t think enough people know about these models.  That, or many people still prefer a laptop so they can type away in Starbucks, showing off for the other hipsters.

I will be purchasing the 512GB model once my 8-year-old Macbook Pro conks out.

Incidentally, I owned an old Intel Mac Mini when I was living in Singapore.  I had my apartment macked out, and it was a treat.

By hooking up the Mini to a 90-inch HD projector screen, I could watch movies, complete spreadsheets, or do PowerPoint proposals for business guests.

Heck, just having the screensaver on turned my living room into a little art gallery.

But the real oyster for solopreneurs is the ability to render videos on Final Cut Pro quickly.  Anyone can create professional videos at lower costs these days, thanks to these machines.

Whether this line cannibalizes an existing product is no longer a question of “if…” but “which?” and “when?”

AAPL’s chart is close to its all-time high (ATH) of $149.15.  Not a bearish sign.

Google

Old news

Google owns YouTube, which, for all its faults, owns the video space.  For now.

YouTube’s ad revenue hit a record $7.0 billion in Q2 2021. Advertising revenue nearly doubled, up from $3.81 billion from last year’s Q2, when COVID crushed marketing expenditure.

But the big story was Google’s search revenue.  It rocketed to $35.6 billion.  While a jump was expected, this kind of jump was not.

Google isn’t just a company anymore.  It’s a verb for crying out loud.

It’s infiltrated, again, for better or worse, everything we do, see, and search for.  And that’s what makes it such an attractive stock.

It’s more than a tech company.  It’s a media company with the algorithms to tell us what we will like before we actually like it.

New(er) News

Retailers accounted for the most significant gain in Google’s search revenue.

Again, this should’ve been expected.  Because when you’re driven into your houses, advertisers will find a way to reach you there.

From the WSJ:

Alphabet [Google’s parent company] Chief Business Officer Philipp Schindler said that the company’s decision last year to list brands that weren’t paid advertisers in its Shopping tab increased listings and lifted sales. He said that merchants that used both free listings and shopping ads netted a 50% increase in clicks.

I think Jon Erlichman listed it best:

Here’s GOOG’s chart. Not at all bearish. Also, at an all-time high.

Microsoft

Microsoft is a misnomer.  If Bill had any confidence, he would’ve called the company MacroHard.  Because that’s what this company’s financials look like.

Old News

Microsoft Office (or Orifice, if you have more than a passing acquaintance with it) is vital for MSFT’s productivity and business unit.

Wall Street runs on Microsoft Excel.  It’s a must.

But Outlook, PowerPoint, and Notes are also critical.  I know I can’t say what day it was without Outlook.

That line’s revenue should come in at roughly $14.5 billion.  An enormous number, but roughly in line with expectations.

Not So New News

Microsoft has a thriving gaming division led by Xbox.  I’m no longer a gamer.  (An 8-hour marathon with Sid Meier’s Civilization taught me to avoid that addiction in college.)

But it’s another big winner for Microsoft, as video gaming revenue was up 11% for the quarter and Xbox hardware revenue up a whopping 172%.

New News (to me, at least)

What is Microsoft Teams, you ask?

It’s MSFT’s answer to Zoom.  It’s better than Skype, in my opinion, and one of my training companies uses it for all our meetings.

I didn’t think much of it, but now it’s got nearly 250 million active users.

Of course, this is a significant growth area, as many employers are letting their employees work from home at least once a week.

So this isn’t a “nice to have” piece of software.  It’s indeed the new normal in business communications.

And thanks to its seamless integration with Office, it’s going to be Zoom’s biggest competitor.  For the record, I prefer Zoom’s interface for teaching.

For those old enough: remember when Microsoft packaged Internet Explorer (RIP – Rot In Perpetuity) with Windows 95?  And that blew Netscape Navigator out of the water?

Get ready for the Teams vs. Zoom battle along the same lines.

Here’s the MSFT chart.  Also, at an ATH.  Also not at all bearish.

Wrap Up

This is not a buy call.  I don’t own these stocks other than as a part of index funds.  But I wish I bought them ten years ago, that’s for sure.

I wrote this column to demonstrate with good, hard numbers that these big guys are here to stay.  And despite their respective ages, they’re thriving in this environment.

Unless there’s a material change in fiscal, monetary, or regulatory policy, I don’t see a change in this dynamic on the horizon.

Sure, we can pontificate all day about how things should be.  But as analysts, traders, and investors, first, we must take things how they are right now.  Only then may we attempt to predict with any substantiation.

Good hunting!

All the best,

Sean

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