1. Abstract

• Under the overall market correction, overseas technology giants have reached 18 times the forward PE valuation center

From a long-term perspective, the capital market’s long-term valuation center for technology giants remains relatively stable: For more mature platform technology companies, although with different development stages and different cycles of the company, the change in the PE multiple of the current year is relatively high. However, its long-term PE actually remains relatively stable.

Taking into account the necessary rate of return in the market, the current PE23E should be slightly higher than the average PE23E in 2018-21. In fact, it is consistent with companies such as Google, Apple, Microsoft, and domestic Tencent, JD.com, and Baidu. Companies such as Meta, Ali, and Netflix that are currently discounting may be given more discounts by the market mainly due to the sharp reduction in Bloomberg consensus expectations in the past two quarters.

The valuation centers of Internet companies at home and abroad tend to be consistent, and the market gives a premium to owning operating systems (Apple and Microsoft): From the perspective of the valuation centers of Internet companies at home and abroad, the overall value is basically at 18 times in 23 years, only Apple (24 times), Amazon (29 times) and Microsoft (25 times) have relatively stable premiums. Other tech companies are back on the 18x pivot in PE23E.

• Fundamentals: Customer structure and moats determine resilience against inflation and supply chain headwinds

Amid the headwinds of inflation, consumer demand, and supply chains this quarter, the growth resilience of tech giants continues to be tested. From a long-term perspective, the headwind test further reflects:

1) Enterprise operational efficiency and capital operation efficiency; 2) Industrial chain status and bargaining power; 3) Mental status among consumers and ability to maintain market share.

• For tech giants, the market is focused on trading:

1) Will the Fed’s rate cut lead to an earlier recession; 2) When a recession arrives, where should the tech giants be under the investment clock; 3) When the purchasing power of individuals and businesses is damaged, whose product matrix and customer structure are better? for health.

In terms of funding, under the fear of recession, tech giants still have some support with their relatively healthier cash flow and continuous buyback plans. For example, Alphabet announced a $70 billion buyback this quarter, and Amazon last quarter Announced the opening of repurchases for the first time in years, totaling no more than $10 billion.

2. Valuation: Under the overall market correction, overseas technology giants are 18 times the forward PE valuation center

• 1. From a long-term perspective, the capital market’s long-term valuation center for technology giants remains relatively stable

For more mature platform companies, although their PE multiples in the current year vary greatly with different development stages and different cycles of the company, their long-term PE actually remains relatively stable. For example, Meta (Facebook), if according to the annual PS and TTMPE of the financial report, the current relative valuation (13.7 times PE) multiple is quite different from the 18-21 year average (28 times PE).

However, if calculated according to the market value of Meta on each trading day and the 23-year profit that Bloomberg unanimously expected on that trading day, PE23E will actually be relatively stable and fluctuate around 12-14 times the pivot in 2018-22. Taking into account the necessary rate of return in the market, the current PE23E should be slightly higher than the average PE23E in 2018-21.

In fact, it is consistent with companies such as Google, Apple, Microsoft, and domestic Tencent, JD.com, and Baidu. For companies such as Meta, Ali, and Netflix that are currently discounted, we believe that the market may give more discounts mainly due to the sharp reduction in Bloomberg consensus expectations in the past two quarters.

• 2. The valuation centers of technology platform companies at home and abroad tend to be the same, and the market gives a premium for operating systems (Apple and Microsoft)

Judging from the valuation centers of domestic and foreign companies within the selected range, the overall value is basically at 18 times in 23 years, and only Apple (24 times), Amazon (29 times), and Microsoft (25 times) have relatively stable premiums. Such companies have returned to their 18x pivot in PE23E.

3. Fundamentals: Customer structure and moat determine resilience against inflation and supply chain headwinds?

Amid the headwinds of inflation, consumer demand, and supply chains this quarter, the growth resilience of tech giants continues to be tested. In the long run, the test of headwinds reflects: 1) the efficiency of enterprise operation and capital operation; 2) the status of the industry chain and bargaining power; 3) the market position in the minds of consumers and the ability to maintain market share.

Amazon’s profits are the most affected by headwinds: due to the high proportion of logistics costs (especially oil costs) in its e-commerce business costs, net profit is significantly lower than consensus expectations, and the gross profit margin of e-commerce business has turned negative. The impact of enterprise cloud computing demand has not yet been reflected. This quarter, Amazon Cloud, Google Cloud, and Microsoft Cloud continued to maintain high revenue growth rates. Apple and Microsoft as a whole continued to slightly exceed expectations. Among them, the number of large orders from Microsoft’s major customers is still increasing rapidly.

We believe that for tech giants, the market is focused on trading: 1) whether the Fed’s rate cut will lead to an earlier recession; 2) where the tech giants should be under the investment clock when a recession arrives; 3) personal versus business Whose product matrix and customer structure are healthier when purchasing power is compromised.

We believe that in terms of funding, under the fear of recession, technology giants still have some support with their relatively healthier cash flow and continuous buyback plans. For example, Alphabet announced a $70 billion buyback this quarter, and Amazon is on the list. This quarter announced the first repurchase in years, totaling no more than $10 billion.

• Comments on Apple’s quarterly report: The core competitive advantage is reflected in its stronger resilience than its counterparts in the consumer electronics industry.

Apple: We believe that Apple’s core competitive advantages are:

1) A strong ecosystem and user stickiness built by the integration of soft (iOS) and hard (from the whole machine to the chip) 2) The greatest common divisor of consumer demand can be led by a small number of models, thus greatly reducing development costs and supply The difficulty of chain management and control 3) An open corporate culture of continuous innovation.

We believe that this quarter, the strength of the ecosystem continued to be reflected in software revenue, while the supply chain management capabilities were reflected in Apple’s ability to supply products.

Revenue hit another record in the second quarter, beating consensus estimates. On April 29, 2022, Apple released the second quarterly report for fiscal year 2022:

Apple achieved operating income of 97.278 billion US dollars, a year-on-year increase of 9%. Gross profit was US$42.559 billion, a year-on-year increase of 11.77%.

Record iPhone revenue (+5%) drives strong double-digit growth in performance and EPS, with Mac (+15% y/y), wearables (12% y/y) and services (17% y/y) all growing rapidly .

Affected by severe supply constraints, iPad revenue fell by 2% year-on-year, mainly due to the high base of iPad demand since the epidemic, and the growth rate of tablet demand in 2022 has slowed down.

Overall demand is strong, and supply chain management capabilities can basically ensure hardware supply and stable sales. The Software & Services business set an all-time revenue record of $19.8 billion, with the App Store, Music, Cloud Services and AppleCare all setting records, as well as video, advertising and payment services setting March quarter records, with strong growth in paid subscriptions.

In the future, wearing AR devices may become a new growth curve. According to reports, Apple’s next-generation AR headset has been shown on the board. We think the market should focus on the following in the next quarter:

1) The marginal impact of the supply chain on production capacity; 2) The resilience of Apple products in a consumer electronics market that is generally headwinds; 3) News about next-generation headsets or further smart car plans.

• Microsoft quarterly report review: Tier 1 customer cloud computing usage is still increasing

Revenue and net profit slightly exceeded Bloomberg consensus estimates : the company achieved total revenue of $49.4 billion, an increase of 18% year-on-year. Net profit: Net profit was US$16.7 billion, a year-on-year increase of 8%, with a net profit margin of 33.89%. Diluted EPS was $2.22 in Q3.

By business: Productivity and business processes revenue was $15.8 billion, up 17% year-over-year, primarily driven by seat growth in paid Office and growth in Dynamics.

Revenue from the Intelligent Cloud business was $19.1 billion, up 26% year-over-year, beating revenue expectations. Among them, Azure revenue increased by 46% year-on-year, excluding the impact of exchange rate, it increased by 49% year-on-year, and continued to maintain rapid growth.

Personal computing revenue was $14.5 billion, up 11% year over year. The search business and the Windows business performed strongly during the quarter. The News Highlights feature of Start, which Windows added to the Start menu, is gradually opening up a new commercialization path for advertising. The company’s Xbox was the market leader in both North America and Europe during the quarter, and its Azure cloud gaming business grew 66% year over year.

The company’s guidance for the next quarter slightly exceeded expectations: the productivity business and personal computing business increased steadily, and the intelligent cloud business maintained rapid growth. Productivity and business processes revenue was between $16.65 billion and $16.9 billion. Intelligent cloud revenue was between $21.1 billion and $21.35 billion, with Azure’s revenue growth decelerating by about 2% in constant currency. The personal computing business is expected to generate between $14.65 billion and $14.95 billion in revenue.

Our view is:

1) Without fear of inflation, the cloud computing business benefited from the rapid increase in the usage load of Tier 1 in this quarter, including the continuous increase in the usage of customers such as SAP and Lufthansa. We believe that super large customers will not reduce digital cloud computing spending in an inflationary economic environment, but will continue to move to the cloud to reduce costs and increase efficiency. Microsoft has benefited from a comprehensive product line and perfect industry service capabilities, and is expected to continue to benefit from the process of major customers moving to the cloud.

2) Mergers and acquisitions continue to strengthen corporate services and industry cloud capabilities. During the quarter, the company completed the acquisition of Nuance and announced the acquisition of process mining company Minit. Nuance’s acquisition strengthens the company’s legacy in medical cloud and speech recognition, while Minit is expected to enhance the company’s CRMERP suite, Dynamics.

3) The usage of the basic software layer and software development and deployment tools continued to increase rapidly. The use of corporate data governance and database-related tools continued to increase significantly during the quarter.

4) The increase in the demand for personal PCs will continue into the next quarter, which will boost the continued performance of Office and Windows businesses: We believe that the demand for personal PCs will benefit from the return to the office after the epidemic. The force is expected to continue into the next quarter.

• Amazon quarterly report review: capital expenditure pace and e-commerce expansion may slow down

The divergence between the area of ​​Amazon’s warehouse and distribution center and revenue used to be one of the core logics to be optimistic about revenue exceeding expectations, but management announced this quarter that the utilization of investment area needs to be improved. It means that the long-term growth rate of e-commerce may be given a certain discount in the “long slope and thick snow” that the market thinks.

Both revenue and net profit fell short of Bloomberg consensus estimates. On April 29, 2022, Amazon released its first quarterly report for fiscal year 2022:

Amazon achieved net sales revenue of $116.444 billion, a year-on-year increase of 7.3%. Excluding the unfavorable impact of year-over-year changes in foreign exchange rates throughout the quarter, growth was 9% year-over-year. Operating income was $3.7 billion, down 58.4% year-over-year.

Net loss was negative $3.844 billion, down 147% year-over-year, of which $7.6 billion was a loss on the valuation of available-for-sale equity securities on Rivian’s equity investment.

Three business segments: AWS, North America, and International. Of these, only the AWS business segment was profitable in the first quarter of 2022.

The AWS business segment has become the main source of revenue, and the company has reached new cooperation with major industry customers such as telecommunications, aerospace, and sports. The AWS business segment generated an all-time revenue record of $18.441 billion in the first quarter of 2022, up 44% year over year.

The increase in revenue prompted the company to accelerate investments in AWS, including global infrastructure deployments and the rollout of next-generation databases. Net sales in the North American business segment accounted for the largest share of total sales, but earnings were far below market expectations, down 145% year-on-year. The segment’s operating expenses increased by 16.2% year-on-year, far exceeding the year-on-year increase in net sales revenue (7.5%).

Amazon has further expanded prime membership rights, innovating eco-friendly products, and using 3D technology to enhance customer shopping experience. Designed to enhance customer stickiness. Launched an industry-first punch-in for businesses that simplifies the purchasing process for businesses by creating and coordinating purchase orders.

Given the rate at which its consumer business has grown over the past two years, Amazon plans to double the size of its network in the next two years. Amazon completed its acquisition of MGM in the quarter, giving customers more options for digital media content. The acquisition has no significant impact on consolidated operating income. The profit of the international business segment was far below market expectations, down 202% year-on-year. Net sales revenue of this segment decreased by 6.6% year-on-year

• Google Quarterly Review Comments: Search demand for travel smoothes macro fluctuations, but Youtube’s growth rate is slightly worrying

The company’s revenue and net profit were basically in line with expectations: the company’s FY22Q1 consolidated revenue was $68 billion. Four main business segments: Google Services, Google Cloud, OtherBets, and other revenue. Among them, Google’s service sector still accounts for the giant’s contribution to profit.

Google’s services segment’s total revenue was $61.5 billion, up 20 percent, as demand for travel and retail advertising picked up. Google search and other advertising revenue rose 24% in the quarter. YouTube ad revenue rose 14% to $6.9 billion.

The deceleration of the year-on-year growth rate is mainly due to the high base in 1Q2021. Online advertising revenue rose 20 percent to $8.2 billion, driven by AdSense and AdMob. Other income was $6.8 billion, up 5%.

This growth rate reflects a substantial increase in YouTube’s non-advertising revenue, driven by growth in YouTube Music and Premium and YouTubeTV subscribers, largely offset by a year-over-year decline in Play revenue, primarily due to pricing adjustments. Meanwhile, second-quarter results will continue to reflect the continued impact of the suspension of operations in Russia.

The operating income of the Google Cloud segment was US$5.8 billion, an increase of 44%, and continued rapid growth, and it will take time for profits to turn positive. GCP’s revenue growth again outpaced cloud computing, reflecting significant growth in infrastructure and platform services. Driven by digital transformation, Google Cloud is in strong demand, with more and more customers choosing Google Cloud to help leverage Google’s global infrastructure offerings.

OtherBets revenue was $440 million.

• Tesla quarterly report review: delivery capacity and profitability both slightly exceed market expectations

Both delivery capacity and profitability slightly exceeded market expectations: Total revenue in the first quarter of 2022 was US$18.8 billion, an increase of 81% year-on-year, and operating profit margin reached 19.7%, setting a new single-quarter operating profit margin record among all volume OEMs, including automotive Revenue reached $16.9 billion, up 87% year over year.

From the perspective of automobile production and sales, the total automobile production in the first quarter was 305,407 units, a year-on-year increase of 69%, and the vehicle delivery volume was 310,048 units, a year-on-year increase of 68%, setting a single-quarter record for vehicle delivery . The gross profit margin of automobile revenue increased by 6.4 percentage points year-on-year to 32.9%.

Market layout:

(1) In Texas, USA, Tesla began delivering Model Y in April at its new plant in Austin, Texas, delivering the first batch of 4680 one-piece front body castings and structures at the CyberRodeo opening battery packs for vehicles.

(2) In Shanghai, China, the weekly production rate was high in the first quarter, but the surge in COVID-19 cases led to the temporary closure of factories and parts of the supply chain, and production began to resume at limited levels recently, and Tesla is working hard to resume full production as soon as possible, But that will affect total builds and deliveries in the second quarter.

(3) In Berlin-Brandenburg, Europe, Gigafactory production started in March 2022 using non-structural battery packs with 2170 cells, and it is expected that this year GigafactoryTexas will be able to use both 4680 cells for structural components as well as Non-structural components with 2170 cells Two structural packages produce Model Y.

In terms of technological progress: autonomous driving and fully autonomous driving (FSD) technology and vehicle software will continue to improve.

In battery, powertrain and manufacturing, nearly half of Tesla’s vehicles produced in the first quarter were equipped with lithium iron phosphate (LFP) batteries that do not contain nickel or cobalt, given the importance of battery chemistry diversity to long-term capacity growth. In energy technology, energy storage deployments rose 90% year-on-year to 846 MWh in the first quarter, driven by strong Powerwall deployments. Meanwhile, Tesla is developing a dedicated self-driving taxi that is highly optimized for autonomy, eliminating the need for a steering wheel and pedals in an attempt to achieve the lowest cost per kilometer.

• Meta Quarterly Review

Overall Profit: Revenue in the first quarter was $27.9 billion. Among them, the family of apps (Family ofApps) revenue was 27.2 billion US dollars, advertising revenue was 27 billion US dollars, and the Metaverse VR business (RealityLabs) revenue was 700 million US dollars, a year-on-year increase of 30%. In the first quarter, Facebook’s average DAU was 1.96 billion, a year-on-year increase of 4%. After the first quarter-on-quarter decline in the fourth quarter of last year, it resumed the growth trend.

Meta’s revenue guidance for the second quarter is US$28-30 billion, which is mainly affected by global inflation, exchange rate changes, Russian-Ukrainian conflicts, and TikTok competition. In addition, Apple’s new privacy policy last year and the IOS16 system, the European Union and the global regulation of the Internet industry have become potential risks. And revenue headwinds could slow the company’s investments, including in AI and machine learning-related infrastructure.

The core of Meta’s metaverse strategy is the social platform Horizon, but it is still in its early stages, and a web version of Horizon is expected to be launched by the end of this year; in terms of hardware, a high-end VR device codenamed Cambria will be released by the end of this year, with the goal of eventually replacing computers as office equipment.

It also features face and eye tracking, and the ability to upload expressions to Horizon in real time. Although the investment cycle of Metaverse is long in the long run, the company still has opportunities to make profits in the short term. For example, it cooperates with advertisers to open stores in the virtual world, and promotes it through advertisements such as Feeds and Reels.

The company’s long-term outlook for the Metaverse business is to use the profits from traditional businesses for the development of the Metaverse business. At the same time, the company will also measure the pace of new business capital expenditure and invest in a planned way.

This article is reprinted from: https://news.futunn.com/post/15970638?src=3&report_type=market&report_id=206833&futusource=news_headline_list
This site is for inclusion only, and the copyright belongs to the original author.