Apple, Google, Facebook and Netflix: Götterdämmerung the tech giants

Sometimes it only takes a small pebble on the stock exchange to trigger a landslide. On Monday came this little stones from the "Wall Street Journal": The smartphone group Apple, reported the US business paper, have lowered production orders for the two new iPhone models XS and XS Max. There was no official confirmation for that. But the news reached many investors not only to shed massive amounts of Apple shares, but also the shares of other tech greats like Facebook, Amazon or Netflix, all of which lost more than five percent in value.

The potential weakness in Apple's iPhone sales fits the picture that many investors currently have of the tech industry. The large corporations, which have grown gigantic for years, have suffered repeated setbacks in recent weeks and months. At Apple, it may be the sluggish demand for iPhone, Facebook has been fighting for months with declining user numbers in Europe and comparatively disappointing business results. And even the streaming service Netflix could not win as many new subscribers, as many investors had hoped.

In addition, there was always bad news outside of the five major FAANG stocks (Facebook, Amazon, Apple, Netflix and Google): the papers of the graphics card specialist Nvidia, for example, have been in freefall for days because of the outlook on the fourth quarter turned out bad.

All this blends into a narrative that currently dominates the stock market world: The years of rise of the big US tech giants could come to an end. Since the beginning of September, FAANG shares have fallen sharply. For Facebook , Amazon and Netflix it was about a quarter down. For Apple and the Google parent alphabet after all, by more than 15 percent (see chart).

"The risk appetite of investors has fallen significantly since September," says Matthias Born, fund manager at Berenberg. "Risky companies are now being avoided, which has slowed down the overall tech euphoria."

Lowered risk-taking

The situation was quite different in the summer: At the beginning of August, Apple was the first company ever to achieve a market value of one trillion dollars. A month later, Amazon moved to. Within just five years, the online retailer's stock price had more than quintupled - on the way up, there seemed to be no limit.

But now the doubts about this apparent endless boom are getting louder and louder. For one thing, the general economic situation has deteriorated somewhat. This is especially true for companies that are heavily dependent on the business cycle, such as the semiconductor and consumer goods industries. On the other hand, investors are increasingly wondering if the tech giants are really worth the huge sums they are traded on the stock exchange.

If you look at the so-called price-earnings ratio (P / E ratio) - a common stock market index - it becomes clear that there are very high expectations in the high prices that companies first have to meet. At Amazon, for example, there was a KGV of 185 for the year 2017 - that means the company would need 185 times the annual profit of 2017 in order to buy itself on the stock exchange. At Netflix, this value was just under 150. For comparison: The German stock index Dax came on average of the past 30 years at a P / E of 19.

Apple loses more in one day than the Deutsche Bank is worth

To the problem, the high expectations of the tech companies have become the latest since the US Federal Reserve, the interest rates screwed up noticeably. "For companies whose value is more likely in the future, rising interest rates are particularly strong," says fund manager Born. That's because in the future it will be more expensive to generate high profits.

Because the US corporations have become so big, any setback in absolute terms is all the more powerful. For example, the four percent that Apple shares lost on Monday equates to around $ 35 billion in stock market value: nearly twice as much as the whole of Deutsche Bank currently worth it.

The example also shows that you should be very careful with the chants on Apple and Co. Because despite the recent, sometimes massive setbacks, the tech giants are still giants. And since the beginning of the year at least four of the five FAANG shares are still in the plus - the only exception is Facebook.

The tech boom does not have to be over yet. But it is likely to be more bumpy for those companies that currently do not make any money and owe their value to rosy future scenarios in particular.