Digital Media Rights and Sports League Financing
Technology all over the world has been advancing at a breakneck speed. Just a few decades earlier, radio was the dominant medium of transmission when it came to sports leagues. Then slowly, the transition from radio to television began. In the past few years, television has turned out to be the predominant medium of transmission […]
Accounting for Player Contracts – Advanced Scenarios
In the previous article, we have already seen that accounting for sporting franchises involves certain scenarios that are specific only to the sporting industry. We saw how the accounting for player contracts was unique and why it was important to understand the accounting implications. In this article, we will continue to have a look at […]
Accounting for Stadium Leases
In the previous article, we have already established that there are many sporting franchises across the world that prefer to rent out stadiums instead of building them outright. We also know that a significant number of sports franchises are indeed using the leasing route. Hence, there are a lot of leasing transactions present in the […]
Why is Short Selling a Dangerous Financial Strategy?
The term short selling is often seen in the news. This tactic is regularly used by well-known investors. They are also very public about the shares they have shorted. This prompts many retail investors to follow suit. While, it may be true that many funds and high net worth investors make a lot of money […]
Procedure of Job Order Costing
Before the Job The first four stages are done before the job is being performed. The final purpose of this is to give a quotation to the clients. The calculation is done based on very little information. However, it needs to be precise. Here is the procedure: Stage 1: List the Cost Objects At the […]
Facebook, Amazon, Apple, Netflix, and Google are together known as the FAANG stocks in the stock market. These stocks have been the darling of the market for the past decade or so. Almost every investor has some of these stocks in their portfolio. However, it seems like the bull run for these stocks is over.
In the latest crash which happened in Oct and Nov 2018, the FAANG stocks have been the worst hit. In fact, these stocks have a lost a combined net worth of over $1 trillion during this downfall.
Since the value of these shares has fallen more than 20% from their peak valuation, it would now be safe to say that these companies are in a bear phase. The panic has started seeping to the other sectors of the market, and it doesn’t seem like the suffering is about to end anytime soon. After the fallout of the tech sector, the energy sector has also taken a beating.
In this article, we will have a closer look at what led to this tragic reversal of fortunes. Why are investors suddenly bearish about the FAANG stocks and want to get rid of them as soon as possible?
Concerns Facing Each of the FAANG Companies:
Lastly, Facebook has now found itself in a scandal over how it handles other scandals! Some investors are demanding the resignation of Mark Zuckerberg on the charges that he has hired an external PR agency to dig up dirt on competitors.
Instead of streamlining Facebook’s operations and getting to the root cause, Zuckerberg is wasting time and money finding faults with competitors. This has not gone down well with investors who started selling off the stock in large quantities.
For the past many years, Apple has been milking its iPhone model to increase its revenues. Investors are worried that consumers might soon get bored with the same old products.
It is likely that Apple will not be able to maintain the same kind of revenue that it has been able to do in the past. This is making the investors jittery, and hence they are willing to sell off their Apple stocks instead of holding on to them.
Also, Amazon’s sales are likely to take a huge hit in the European markets if a digital tax is introduced. Hence, it would be fair to say that the sentiment is negative for Amazon as well. This is the reason why its stock has been losing value.
Netflix needs more and more subscribers in order to stay competitive in the market. This is why any fall in the subscriber numbers has a direct effect on the stock price of Netflix.
Also, it has come to light that Google is building a separate search engine for the market in China. This search engine will work as per the censor norms decided by the Chinese government. As a result, it will not show the results of human rights violations and religious abuse in China. Events like these are spoiling the image of Google as well. The stock price of Google is very sensitive towards the perception of its brand image. This is the reason why the stock has been on a downward trajectory in the recent past.
The events mentioned above are catalysts which are causing the FAANG stocks to decline in value. However, these are not the events that are truly causing the fall. It seems like the market has suddenly realized that too much money is stuck in FAANG stocks. Most of these stocks have market value is which is 150x their current revenue. This obviously means that they are overpriced in the first place which is why the market is correcting the prices as and when it gets a chance.
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