FAMNG share prices are down more than 20% year to date. In terms of business outlook, they can be divided in three groups.

The Good

Microsoft, Google, Apple are down 20-25%. They reported strong earnings and maintained a reasonably positive outlook for the coming quarters. There are supported by their strong global brands, steady business models and good execution. Google is proving resilient in terms of share price and business performance. Dow the road, Google remains a very strong brand, but advertising revenues are cyclical and tougher regulation expected in the US may dent profitability on search and rankings. 

The Bad (but not that bad)

Amazon has disappointed on the retail side. This is an execution issue in the post-Bezos period. Amazon has overbuilt its inventory and needs to get rid of it. This will weigh for another two quarters. This short-term negative is partly offset by on-going strength and leadership in their cloud business. Amazon prime video is another high margin growth engine along with advertising. Cyclical headwinds are not over. What is an inventory short-term issue may morph into something more structural and Amazon is only down 34% year to date, so one can wait before buying into this long-term winner.

The Ugly

Facebook (sorry Meta) is off 53% year to date and Netflix down 70%. They were hit by significant profit warning and investors questioning the sustainability of their long-term business model. Facebook is plagued by two systemic threats: 1 -they are using and selling their user data 2- The Facebook platform is ageing and becoming less and less relevant for younger users. The third negative side can be addressed as it relates to management. Mark Zuckerberg’s visionary style is being challenged with the departure of Sheryl Sandberg, the prime architect of the advertising money machine. The company needs a new narrative and the Metaverse is too vague, and the change of name does not do the trick. Netflix is just victim of its own success that is now being replicated by Apple TV and Amazon Prime Video with deep pockets and huge existing audiences.

Few take-aways

Strong leadership matters: Satya Nadella at Microsoft and Tim Cook at Apple are just amazing leaders. To some extent, it could become a risk factor as it will be difficult to replace them. Amazon and Facebook are twoexamples  of declining management level: Andy Jassy is not Jeff Bezos and Sheryl Sandberg will be difficult to replace. In difficult times, recurring high margins revenues are key to provide stability and visibility as seen with cloud revenues for Amazon, Microsoft and Google.  Don’t forget the 3C check for platforms on clients, community, and content. Platforms with an ability to strongly network their users like Microsoft with Teams, LinkedIn and Game Box are showing more resilience.  The digital transformation and productivity revolution is not showing any sign of slowdown. Microsoft, Google, Apple are positively impacted. Amazon as well through its cloud business.  Tougher regulation is a stumbling block down the road.

(*) Deshima Smart Data has a position in Microsoft