Tech stocks aren’t like the dotcoms of old, but few will escape the pain

After years of spectacular growth and exceptional returns on investment, some of the biggest companies in the world have collapsed in recent months, at least as far as the stock market is concerned.

Wall Street’s precipitous falls in Big Tech stocks, many of which double as media stocks that require our eyeballs for revenue, are barely ringing alarm bells in Silicon Valley, Silicon Docks or anywhere else they employ a big number.

And yet the charts of their stock price trajectories hitting steep cliffs, after years of climbing higher and higher, are spectacular.

In September 2021, the company now called Meta Platforms reached a high of $384.33. On Friday, parent Facebook closed at $193.54. Half of its maximum value has been erased.

Amazon, a massive employer that rivals everyone from Walmart to Microsoft to Netflix, hit a record $3,773.08 last July. Its Friday closing price was $2,151.82, about 43% lower.

Microsoft is down nearly 28% since its November 2021 peak, Google parent Alphabet has slipped the same percentage since its February 2022 peak, and Apple has lost a quarter of its stock value since January.

These companies, with the arguable exception of Meta, are not in a particularly difficult business position. On the contrary, they remain super-rich behemoths. Their stock prices are reversing on broader investor fears that the slowing global economy could slide into recession, as are higher interest rates, introduced by central banks to contain the surge in the inflation, temporarily dampening their growth prospects.

Their pullback is part of a broader market meltdown that saw the S&P 500 briefly enter a bear market on Friday, defined as a 20% decline from peak to trough. Memories of Dotcom have surfaced lately, with the S&P 500 and tech-led Nasdaq index on their longest weekly losing streaks since that bubble burst in 2001. The Dow Jones is on its longest losing streak since 1932.

Nothing stays the same forever. Even the speed at which this group of West Coast American companies has evolved beyond the acronym once used to describe them is indicative of their rapid and rapid rise.

The 2013 FANG shares – created by CNBC’s Mad Money host Jim Cramer – survived Google’s renaming to Alphabet, although FANG became FAANG when Apple could no longer be ignored, the ” A” original being Amazon.

FAANG wasn’t perfect either, as it ruled out an obvious growth stock like Microsoft. Alternate acronyms, including the awful FANMAG, then made the rounds of more sober journalistic descriptions like mega-cap stocks, until Facebook changed its name to Meta and the smaller Netflix started to look like to a toddler who had been grouped with the big boys.

Last October, Cramer offered MAMAA stock, excluding Netflix, but the term clearly failed to take off, mostly because it sounds like it sucks.

Pandemic actions

These mega-caps are clearly in a safer position than pandemic flirts such as Zoom, Peloton and Etsy which had a hot streak during the lockdown economy but are now sweating a lot as investors throw them away like paper masks .

Between the elite and the unravelers of the pandemic, however, many other tech and media companies are feeling the itch as increasingly loud warnings of economic calamity amplify their own vulnerabilities.

Since hitting a dizzying $700.99 with the market peak in November 2021, Netflix has lost nearly three-quarters of its value, its stock plunging 35% in a single day in April after reporting its first net loss of subscribers in more than a decade. The doomsday narrative this sparked seemed overdone on some level, but there’s no denying that Netflix’s attempt to regain lost momentum is much more difficult given that consumers around the world are being hit by inflation.

In an equally tricky position is Spotify, which has plunged 72% since February 2021. Disney, another pandemic winner, is down 49% since its peak in March 2021, and while its business isn’t as Tied to stay-at-home entertainment like Netflix, it’s not exactly immune to economic malaise, either.

Elsewhere, Warner Bros. Discovery, the owner of streamers HBO Max and Discovery Plus newly formed by a $43 billion (40 billion euros) merger, has already fallen to $17.74, at Friday’s close, after having started trading at $24.08 in April.

Paramount Global’s stock, meanwhile, has fallen 36% from its peak, although it soared last week when it emerged that Warren Buffett had pumped $2.6 billion into the pillar. ‘Hollywood.

Alongside the falls of Netflix and Spotify, it is the falls of social media companies Snap and Twitter that are attracting attention, with Snap down 72% and Twitter down 48% from their highs. The two compete with the big three of Alphabet, Meta and (outside Ireland) Amazon for digital advertising revenue, while also having to deal with the lightning-fast rise of TikTok, owned private from Chinese ByteDance.

Advertiser jitters surrounding Elon Musk’s accepted but not completed takeover of Twitter didn’t help. But there is of course another risk. In times of war, inflation, food security crises, climate emergency and a possible global recession, it would not be shocking if advertisers at all levels pulled back from spending, which would lead to difficulties not only for traditional media companies, but also for ad-dependent technology companies. like Twitter, Snap and even Alphabet and Meta.

Job creators

But will any of these attention stealers downsize in response? In short, do their stock price woes matter?

Netflix laid off 150 people last week, a considerable number that must nevertheless be seen in the context of its rapid expansion to more than 11,000 employees. Twitter, which is headquartered for Europe, the Middle East and Africa in Dublin, seems a likely candidate to join him on the job cut front, given that its ownership is in flux.

Mega-caps, all recent and key job creators in Ireland, may be less exposed to a recession and more able to invest their way through a recession to consolidate their power. It’s not the dotcoms. But that doesn’t mean they won’t take sudden action to protect their profit margins if things get really bad.

Sometimes what looks like a rout and smells like a rout is hard to frame as anything other than a rout.

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Garland K. Long