FAANGM Monthly: November 23 – Lower treasury yields pushing FAANGM higher December 11, 2023 161

  • FAANGM had its 3rd best month of the year (+10.2%), driven by falling treasury yields (-60bps MoM) and market expectations of quicker rate cuts. The Nasdaq was +10.7%, while the S&P 500 was +8.9%.
  • NFLX (+15.1%) was the biggest gainer of the month due to positive earnings momentum and healthy ad-supported user trends. GOOGL (+6.8%) was the main laggard as price began to consolidate following poor Cloud growth.
  • FAAANGM valuations still remain attractive even after a rebound in November. Digital advertising continues to recover over the festive period, with e-commerce spending still resilient. The biggest near-term headwind remains soft demand for tech hardware. We maintain an OVERWEIGHT recommendation on FAANGM.

 

 

Summary

FAANGM had its 3rd best month of the year in Nov 23, gaining +10.2%, as falling treasury yields (-60bps MoM), market expectations of quicker rate cuts, and continued positive earnings momentum drove equity markets higher. The Nasdaq was up +10.7%, while the S&P 500 was up +8.9%.

 

Gainers: NFLX (+15.1%) was the biggest gainer in the month, due to positive earnings momentum, and healthy user trends for its ad-supported subscription tier.

 

Laggards: GOOGL (+6.8%) was again the laggard as its price action looks to be consolidating after weak Cloud growth.

 

Review

Meta Platforms Inc (META US, BUY, TP US$375)

Comment: No major news for META this month. However, digital ad spend trends for November look to have rebounded after a soft couple of months as advertisers look to cash in on Black Friday and Cyber Monday sales. This could point to better-than-expected 4Q23 results if this level of spending can sustain into December. META also looks to regain some lost market share vs competitors like TikTok and GOOGL.

 

 

 

Apple Inc (AAPL US, ACCUMULATE, TP US$194)

  • Uncertainty over iPhone sales. Several data points are showing that demand for AAPL’s new iPhone 15s have begun to slow meaningfully. Current inventory levels are above last year’s iPhone 14 levels, with AAPL even boosting its trade-in prices for old devices (including Android phones) to get consumers to upgrade to its new range. In addition, a lack of new product launches also seems to be affecting sales.
  • Apple to be largest customer of new US$2bn Amkor semiconductor plant. Apple will be Amkor Technology’s first and largest customer for its new US$2bn semiconductor manufacturing and packaging facility in Arizona. Amkor will also package Apple’s silicon produced from a nearby TSMC fabcrication plant.

 

Comment: The softness in tech hardware remains AAPL’s largest near-term headwind, with sales of iPhones the only real positive among a sea of negatives. In the long-run, we do still expect earnings growth to be driven by higher-margin services revenue as AAPL increases monetisation of its user base.

 

 

 

Amazon.com Inc (AMZN US, BUY, TP US$190)

  • Amazon overtakes UPS and FedEx to become biggest delivery giant in the U.S. Amazon is set to take hold of the annual delivery crown for the first time, shipping a total of 4.8bn packages in the U.S. before Black Friday and Cyber Monday, and predicting it will deliver about 5.9bn by the end of 2023. Its closest rival UPS only handled around 3.4bn parcels domestically in the first nine months of the year, and said its volume in 2023 is unlikely to exceed last year’s 5.3bn. FedEx’s domestic parcel volume is even further behind.
  • Auto retail disruption: Amazon partners with Hyundai to sell cars online. The Seattle tech giant plans to launch online vehicle sales in the U.S. in 2024 with the South Korean automaker. Auto buyers will have the option to buy their Hyundai vehicle on Amazon’s website and then pick it up from their local dealer. Hyundai will be the first brand available for customers to purchase. Amazon (AMZN) did not disclose when other automakers might be added to the program.

 

Comment: AMZN’s dedication to establish its independent delivery network appear to be yielding positive results, granting the company a substantial degree of control and competitiveness. Expanding into new domains like the online automotive business is also expected to bolster future margin growth, presenting a significant opportunity for AMZN.

 

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