Currency Wars: “Beggar Thy Neighbor” Policy
February 12, 2025
The number of pension funds, as well as the amount of money being managed by these funds, is increasing exponentially every day. This is creating advantages for the investors. However, this is also creating a lot of problems for the regulators. This is because regulators have scarce resources and they have to manage the regulation […]
Mergers and acquisitions are often used by conglomerates to create value. However, in some cases, demergers have also been effectively used. While the workings of mergers and acquisitions are well known to many people, demerger is still considered somewhat of a mystery. In this article, we will have a closer look at what a demerger […]
It is true that cryptocurrencies have been gaining more acceptances all over the world. As a result, the rise of Bitcoin should have been no surprise had the rise been minimal. However, of late the value of a single Bitcoin has grown several-fold. It is now more valuable than several currencies in the world. The […]
A sports league becomes profitable when it is successfully run over many years. This means that almost all the teams participating in the league must be competitive. Now, the amount of money that a team has deeply influences its competitive ability. For instance, a team with more funds is likely to be able to afford […]
It is a myth that financial ratios are to be used only by investors and analysts in deriving a fair valuation for the firm. In reality, financial ratios are used by a wide variety of people for a wide variety of reasons. A common usage is by the sales department. Usually sales departments in large […]
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.
Your email address will not be published. Required fields are marked *