Tech Explodes to New Highs, Led by FAAM

For a while at least on Wednesday, the fabled FAANG group of tech stocks was sliced and diced and all talk was about the leaner, cleaner FAAM group. They were just the shiniest of the bunch in a week that saw investors continuing to flood back into equities as hopes of a fast recovery continued.

The multi-industry based S&P 500 and the Dow Jones indices have both been putting on good shows but the headlines have been all about tech’s performance in what was one of the most aggressive market crashes and hardest bounces of all time.

By the close of Tuesday’s session, the benchmark tech index, the NASDAQ 100 had hit a fresh all-time high, this coming after an astonishing 12-week rally from the lows of March when the grip of the coronavirus pandemic on the economies of the world was at its tightest. It’s now up a full 50% in less than three months and it’s been these four stocks who have done the bulk of the recent work, all hitting all-time highs themselves this week in the process.

Facebook NASDAQ: FB

The social media giant is up more than 70% from the lows of last quarter with much less damage done than previously feared. Investors got an insight into the workings of the internal engine at the end of April when the company released their Q1 earnings.

It seems that everyone was caught on the hop when they came out with a 78% jump in operating income, an 18% jump in revenues, and a 12% jump in daily active users. Turns out being stuck at home and out of a job gets people checking their feed more than usual.

These figures more than made up for the expected and realized drop in advertising demand. Shares had already been bouncing but after the earnings report, Facebook’s recovery really took off and shares added 30% in four weeks. 

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Amazon NASDAQ: AMZN

Looking back at the COVID-19 pandemic now, Amazon seems like the most obvious buy in the world. Non-essential stores are shut, millions are out of work and sheltering-in-place, and governments around the world are handing out free money to citizens. Where else would they be going for essential and non-essential supplies but to the world’s biggest e-commerce site?

The first hint we got that the 25% drop in Amazon’s share price might be unrealistic was when the company announced they were hiring an additional 100,000 workers to keep up with the new coronavirus has driven demand. When they came out a few weeks later with plans to hire another 75,000, investors didn’t think twice.

Shares had already cleared their pre-coronavirus levels by mid-April and it’s been nothing but all-time highs since. Their earnings report at the end of April showed a 27% jump in revenues year on year and few are likely to be taking profits off the table anytime soon.

Apple NASDAQ: AAPL

Back when COVID-19 was still centered in China and fears of a global pandemic were still in their infancy, Apple was in some ways the canary in the coal mine; we saw weakness in the iPhone maker’s stock before the real panic based selling started. Both demand from one of its core markets dropped as authorities aggressively locked down entire cities and supply dropped too, as factories were shut and workers ordered to stay at home.

For that reason, Apple was a little late to the bounce as well. Amazon for example put in their low on March 16th, while Apple didn’t hit their low until March 23rd. Since then, however, Apple can boast of a 62% rally with multiple fresh all-time highs hit since last week.

Plans for 5G’s launch appear to be broadly uninterrupted and investors are clearly optimistic about the smartphone giant’s ability to capture large market share.

Microsoft NASDAQ: MSFT

Microsoft investors will surely be happy to get their moment in the sun, having long been left out of the original FAANG group. The tech legend had notched a 600% rally in the seven years through this past February so was clearly doing something right and as coronavirus fears have abated, Wall Street has been only too happy to get them back to winning ways.

Wells Fargo was out last week with a note saying they see Microsoft’s market cap hitting $2 trillion in two years. This would be a 42% jump from today’s $1.2 trillion and equates to a price target of $250. They’re impressed with the company’s ability to control costs while driving double-digit revenue growth and running consistent buyback programs.

Indeed, Microsoft’s tech stack was perfectly positioned to capture the coronavirus driven shift in corporate demand to work-from-home tools and it looks likely to continue expanding its market share.