As big tech shares have become somewhat of a safe haven for investor in times of high uncertainty, we take a closer look at their YTD performance to examine what drove their prices during the year.
Facebook, Amazon, Apple, Netflix, and Google. Also known as FAANG, have become this year’s star performers as interest in their products and services has risen as most people were made to stay at home and put their usual activities on hold.
YTD Performance of FAANG Shares
Facebook, Amazon, Apple, Netflix, and Google. Also known as FAANG, have become this year’s star performers as interest in their products and services has risen as most people were made to stay at home and put their usual activities on hold.
And since these companies represent four of the top five largest companies in terms of market capitalization (exclude Netflix), their movement weighs heavily on the movement of the major index as well. The other company in the top five is Microsoft, however they will not be included in our overview today.
Among the observed shares, the top performers is Amazon whose share price is up 74.7% YTD. Following closely in second place is Apple whose share rose 73.7% since the beginning of the year. The rising interest in apple might not coma as such a surprise since the company recently announced plans to manufacture up to 96m iPhones in the first half of 2021, a nearly 30% YoY increase. Clearly the demand for their products is growing. In third places comes Netflix which has become one of the stars among the stay at home stocks as they are referred to with the share price rising 61.3% since the beginning of 2020. Finally, Facebook and Google posted similar results with share of these companies rising 34.1% and 30.8%, respectively, since the beginning of the year.
However, certain dangers have started looming above the perceived safe haven. Two days ago, the European Commission proposed two bills—one focused on illegal content, the other on anticompetitive behaviour—that would empower regulators in some cases to levy fines of up 10% of annual world-wide revenue or break up big tech companies to stop certain competition abuses. To read more about this click here. Yet, despite the regulatory changes, share prices of big tech remained resilient to the potential new expenses.
In 2021, the company expects net operating profit of EUR 30.8m, representing a 12% increase compared to 2020 plan.
Telekom Slovenije published yesterday their Strategic business plan for the 2021–2025 period, together with the business plan for 2021 which can be found below.
Key objectives of the Telekom Slovenije Group for 2021
- Operating revenues – EUR 653.0m (-3.4% YoY compared to 2020 plan)
- EBITDA – EUR 210.6m (flat YoY compared to 2020 plan)
- Net operating profit – EUR 30.8m (+12% YoY compared to 2020 plan)
- Investments – EUR 203.7m (-2.9% YoY compared to 2020 plan)
Telekom Slovenije Group’s strategic goals
Leader in user experience
According to Telekom Slovenije, excellent user experience allows them to achieve short-term business objectives and strengthen our long term strategic position – to remain the users’ first choice. The key factors in this are digital excellence, providing security, contactless operations and dynamically adapting to the needs and habits of users of communication services.
Digitalization of operations
Accelerated digitalization through process optimization and automation improves efficiency of operations, and will continue to be an integral part of business activities for ensuring the competitiveness of Telekom Slovenije Group.
Growth of ICT services Growth
Growth of ICT services and solutions is based on their existing state-of-the-art LTE/4G network and the opportunities ushered in by 5G, the fifth generation of mobile networks. 5G will also support the development of smart industry and smart cities, as well as the introduction of virtual dedicated networks, which will support continued digitalization of various business verticals.
Retaining revenue levels from core activity in Slovenia
The core telecommunications activities market is stagnating in Slovenia, and Telekom Slovenije is under additional pressure from regulatory bodies. They plan to retain our revenue through accelerated digitalization and the development of digital services, continued network development and the development of services based on 5G technologies, successful cooperation with regulators, and especially by providing the best user experience.
Consolidation in individual markets
On the one hand, the European telecommunications market is seeing intense consolidation of the industry and mergers of operators, with a change in the portfolio of services, while new competition is entering the ICT services market, which will additionally affect the operators’ business models. The consolidation activities of Telekom Slovenije will be focused on obtaining new competencies, and entering new markets and areas.
Optimum employee structure
Telekom Slovenije Group has the optimal number of employees to continue addressing the needs of the work processes of individual Group companies.
Financial stability
The company is implementing activities that ensure effective management of liquidity and a high level of financial stability. They note that the company is ensuring the optimum level of debt for the long term, maximizing the company’s value.
Environmental and social responsibility
Telekom Slovenije actively identifies opportunities where we can contribute to the development of the social and economic environment in which they operate, providing their expertise, financial and other resources.
Here you can find the updated DuPont analysis of Slovenian companies.
For today we would like to present you with a DuPont model of Slovenian companies, which is a reputable technique used to deconstruct return on equity (ROE) into three separate component parts, to have a clearer understanding of the changes occurring in ROE over time. Through this analysis, we will be able to ascertain which of the three factors is dominant in relation to the company’s ROE and give us an improved image of the company’s financial health and operating efficiency. Note that for this analysis we used (trailing 12m) 9M 2020 results.
Return on Equity of Slovenian Companies (%)*
*trailing 12m
The DuPont Equation gives us the ability to effectively deduce the strengths and weaknesses of a particular company, hence allows us to examine a company more thoroughly. This allows analysts to quickly know what areas of business to look at (inventory management, debt structure, margins) for more answers. Despite the advantages of the DuPont analysis, the method is still unable to substitute a more comprehensive and detailed analysis.
DuPont shows us that ROE is affected by three things:
- Operating efficiency, which is measured by profit margin
- Asset use efficiency, which is measured by total asset turnover
- Financial leverage, which is measured by the equity multiplier
We have excluded Telekom Slovenije from this analysis as their net profits has significantly reduced in FY 2019, creating an inaccurate picture for trailing results for calculating the profit margin as well as ROE. Only one company reported a double-digit ROE, Krka, indicating relatively high profitability in relation to stockholder’s equity. As a reminder, it is important to consider that ROE varies significantly from industry to industry, and comparison with a company’s peers is the most reliable way to figure out how to company is doing relative to an industry standard. In the case of Krka, their high ROE is mostly attributed to their profit margin. An important factor to consider is that a high ROE might not necessarily be achieved through operating efficiency but it can be a result of a highly leveraged company, which is not the case with any of Slovenian blue chips. Next on list is Cinkarna Celje with a ROE of 9.7%. The company’s components of ROE are relatively stable, without any particular component standing out and taking credit for either causing a high or low ROE.
Petrol is third on the list for highest ROE, with it being 8.3%. It can be seen that its third place is not any thanks to a high profit margin, but by having higher asset turnover and equity multiplier than any of the companies on the list.