3/13/2023 0 Comments Stocks about to skyrocketIn the longer term, Markowicz also points to a maturing tech market that may make it harder for Big Tech companies to consistently deliver outsized returns. “Equities are likely to grind higher, just because of stronger economic growth, but we'll probably see underlying shifts in which sectors are likely to do the best.” “Why would you be willing to pay 20 to 30 times a company's earnings if you can get something much cheaper, that's growing relatively quickly elsewhere,” he says. Covid-19 slowed growth in internet access when it was needed mostīut, even in the face of a continued earnings bonanza, Markowicz predicts that the performance of FAMAG and other “stay at home” stocks will weaken when restrictions loosen as other companies start to look more attractive to investors.Contactless commerce: Covid-19 and the customer experience. How digitisation will underpin the post-pandemic recovery.Cloud strategy separated IT industry winners and losers in 2020.How CIOs and CTOs responded to Covid-19 disruption.The great catalyst: How Covid-19 accelerated digital transformation.The future of work – and society – will be decided in 2021.More on the impact of Covid-19 on digital transformation in 2020: “While demand for some of the products such as videoconferencing services may adjust in the post-pandemic era, Big Techs are likely to perform well since these companies are rapidly embracing the fourth-revolution technologies such as 5G, AR/VR and artificial intelligence to launch innovative offerings for businesses and consumers,” he says. This rosy outlook is likely to outlive the pandemic, as Big Tech companies leverage the behavioural shifts from Covid-19 to expand their businesses and double down on investment in emerging tech, says Kshetri. “They trade in the software and engineering and innovation that investors are willing to pay a premium for.” is the main driving feature of what makes them so attractive to investors,” he says. It is their commitment to innovation that makes Big Tech companies so valuable to investors, says Markowicz. And, with many companies struggling to deliver returns in the face of the pandemic, it is unsurprising that investors have flocked to FAMAG stocks that have consistently performed. In the past four years, the earnings of the five tech titans as a proportion of total S&P 500 earnings has increased 42% and is projected to be more than a fifth by 2023, according to Schroders. Indeed, earnings for the FAMAGs has largely kept pace with the soaring stock market valuations. But surging stock prices does not signal a bubble if the high valuations are justified, argues Markowicz. This has led to questions about the stability of the market, with some commentators drawing comparison with the dot com bubble of the early 2000s. At the peak in August, Big Tech accounted for over a quarter of the S&P 500. “All these led to better performance of Big Techs such as Alphabet Facebook.”Ī by-product of the outsized bounceback of FAMAG stocks has been increased market concentration. “While total ad spending worldwide is predicted to decline by 4.9% this year, digital ad spending will increase 2.4% online display and online video categories are experiencing even faster growth rates,” he says. These stocks were also bolstered by a bounceback in the digital advertising market after an initial dip, adds Nir Kshetri, professor at the Bryan School of Business and Economics at The University of North Carolina-Greensboro (UNCG).
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