$GOOG - 14%, $FB - 22%, $TWTR - 14%

Macro Perspectives: Fri 30 Oct 2020

A couple days ago a few of the most powerful people in big tech were getting grilled by the Senate. Yesterday they reported earnings.

If you need more convincing that big tech is eating the world, seeing their earnings through a government-imposed "work at home world" should do it.

• Google grew revenue by 14% compared to the same period a year ago, whilst they grew operating earnings by 22%.

• Facebook grew revenue by 22%, with operating earnings up 12%.

• Twitter grew revenue by 14%, and grew operating earnings by 27%.

Keep in mind, this is a quarter where most companies, while beating dialed down estimates, are still only putting up a fraction of the revenues and earnings of a year ago.

So, these numbers hit as Congress is mulling over ways to tame these platforms, and as the DOJ is suing Google (Alphabet) for abusing its dominant position in search.

This only amplifies the scrutiny, and as we discussed earlier this week, this all sets up for higher regulatory costs coming down the line, and less "wild west" in their business models. That is a threat to the lofty multiples on these stocks - coming at a time where technology, as a sector, has recently exceeded its 1999 proportion of the S&P 500.

With all of this said, picking a top in big tech has been a fool's errand. The billionaire investor David Einhorn, has many wounds to lick from his failed attempts at shorting his "bubble basket" of tech stocks. He did write in his recent investor note that he’s convinced the bubble has finally burst – as of September 2.

As a key barometer of tech, remember we’ve looked at this Apple chart before…

Could the earning’s beat signal a low (technically speaking a higher low), and be a pre-curser to take the broader market with it?