Wall Street Still Loves Big Tech Stocks: Analysts See Further Upside Ahead Of Crucial Earnings Week

Despite a brutal selloff so far this year in the tech sector, Wall Street analysts remain cautiously optimistic about Big Tech stocks ahead of upcoming second-quarter earnings this week, with the majority of experts predicting that companies like Apple, Microsoft and Alphabet can continue to post strong profits in the long run.

Though tech stocks have been hard-hit this year (with the Nasdaq down 25%) amid surging inflation, rising interest rates and ongoing recession fears, a majority of Wall Street analysts still maintain buy ratings on Apple, Alphabet, Meta, Microsoft and Amazon ahead of key earnings results this week.

Three firms reiterated buy ratings on several big names Monday: Deutsche Bank predicted solid results from Apple, Bank of America expects Facebook parent Meta to see ad revenue take a smaller hit than expected and Oppenheimer predicts “robust” growth in Amazon’s AWS cloud services business.

Analysts note that while the tech sector is already slowing down, hiring across the board amid the more challenging economic environment, after a big selloff earlier this year, valuations are now looking much more attractive.

Netflix and Tesla saw their stocks rally last week after “better than feared” results, while Snap delivered “another train wreck quarter that highlights a digital ad slowdown, Apple iOS privacy headwinds and TikTok competition further heating up,” according to Wedbush analyst Dan Ives.

While there’s been some “good and bad news” in the tech sector, “there are some encouraging signs” and investors can now buy shares in some of the biggest companies at a more attractive entry point, says Lindsey Bell, chief markets and money strategist for Ally.

Among the more than 250 combined analysts covering the five Big Tech companies reporting earnings this week—Apple, Alphabet, Meta, Microsoft and Amazon—fewer than five have sell ratings—a sign of just how bullish Wall Street is on some of America’s most valuable tech companies.

Alphabet and Microsoft kick off Big Tech earnings on Tuesday. Meta reports Wednesday, Apple and Amazon on Thursday. “Investors should be selective when picking stocks within the tech sector,” says David Trainer, CEO of New Constructs. “The strongest types of stocks are the ones where cash flows are strong and valuations underestimate the company’s ability to generate cash flows in the future.”

He especially likes Google parent Alphabet, which is trading at a “much cheaper” valuation than its peers and should continue to outperform, thanks to its ability to keep innovating. Trainer is “not as confident” about Facebook parent Meta, however, questioning the company’s “ability to sustain profits,” especially as it struggles to retain users amid increased competition from the likes of TikTok. His firm also remains bullish and “big fans” of Apple, though the stock is still somewhat expensive, he adds.

All of the Big Tech stocks have seen big losses so far this year, though they have recovered somewhat in recent months. Meta has suffered the greatest losses, with its market value falling by roughly half as Facebook’s ad business continues to struggle. Amazon and Alphabet are both down roughly 25%, Microsoft more than 20% and Apple 15%.

I am a senior reporter at Forbes covering markets and business news. Previously, I worked on the wealth team at Forbes covering billionaires and their wealth.

Source: Wall Street Still Loves Big Tech Stocks: Analysts See Further Upside Ahead Of Crucial Earnings Week

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In a single two-and-a-half-hour stretch on Jan. 25, Microsoft Corp. stock erased $156 billion of its shareholders’ money, then rebounded, recovering all of its losses and adding $74 billion. In one sense this was just another lurch in the markets’ wild ride in 2022, as investors adjust to recovering economies and the prospect of rising interest rates. But it also points to a new environment in which the most valuable U.S. tech companies are going to have to work harder to justify their trillion-dollar or near-trillion-dollar valuations.

The Big Tech companies are still doing well. The day after Microsoft’s earnings, Apple reported a quarterly performance that wildly exceeded expectations. On Feb. 1, Alphabet also beat analysts’ projections. Share prices for both companies spiked—but remain below their peaks. The way Microsoft’s white-knuckle afternoon played out is particularly illustrative of the shifting environment: At 4 p.m. New York time, it released quarterly financial results.

They exceeded analysts’ expectations, except for one crucial number: Growth slowed slightly at its lucrative Azure cloud computing business. Investors panicked, sending shares down as much as 6.8% in aftermarket trading. Shortly after 6 p.m., Chief Financial Officer Amy Hood told analysts that cloud computing growth would accelerate again in the next fiscal quarter. The stock jumped, erasing the earlier losses.

Short-term stock gyrations have limited predictive power. But the activity around Microsoft’s earnings highlighted how negatively investors are now inclined to react to slowing growth at key units, even if revenue and earnings beat expectations.

A standard way to look at how excited investors are about a particular company is to compare its share price with its expected earnings. In January 2017 the stocks of the five most valuable tech companies—Apple, Amazon, Facebook, Google, and Microsoft—traded in line with the S&P 500 as a whole, at 19 times their predicted earnings. By September 2020 that multiple for the Big Tech companies was 42, while the market as a whole traded at a 27 multiple.

Investors were rewarded. Apple shareholders enjoyed an average 43% annual return over the past five years if they reinvested all their dividends back into the stock. Microsoft, Amazon, and Google generated average returns of 38%, 28%, and 26%, respectively. Even Facebook’s relatively modest 18% outperformed the S&P 500’s average of 16%.

The lockdowns helped widen the gap between tech and everyone else, according to Kasper Elmgreen, the head of equities at Amundi SA. “The economy gets turned off, so we had an historic economic contraction that hit [vehicular] traffic, leisure, industrials, construction, financial services, and so forth hardest,” he says.

That could be changing. The Covid-19 omicron wave is receding in many places, and businesses that suffered during the pandemic could benefit more than tech companies from a renewed recovery. This could send investors looking to increase their stakes in companies they’ve spurned for the past two years while they focused on the tech giants.

“The whole case for investing in these companies and inflating their premiums was the fact that growth was scarce and they had the strongest growth prospects in the S&P 500,” says Gina Martin Adams, the chief equity strategist for Bloomberg Intelligence in New York. “As economic conditions improve, that premium will naturally deflate.”

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Crypto Winter Watch: All The Big Layoffs, Record Withdrawals And Bankruptcies Sparked By The $2 Trillion Crash

Fears of global recession and the worst inflation in more than 40 years have wreaked havoc on the nascent cryptocurrency market this year—unleashing a fierce crypto winter that’s forced once high-flying firms into bankruptcy and pushed investors into panic-selling mode. The turmoil has already claimed trillions of dollars in market value, billions of dollars in frozen funds and thousands of jobs, but current casualties may only mark the beginning of the storm.

“There will be others that come forward with trouble—I don’t think it ends here,” Marcus Sotiriou, an analyst at London digital asset brokerage GlobalBlock, tells Forbes, noting that close to a dozen firms—including Peter Thiel-backed Vauld—face an uncertain fate after locking customers out of their funds or initiating restructuring proceedings over the past month. “It’s going to be a sustained period of pain,” he says.

It’s anyone’s guess whether the current crypto bear market will ultimately rival the years-long crypto winters of 2014 and 2018—the latter wiping 80% from bitcoin’s price while crushing hundreds of then buzzy new tokens. Sotiriou posits this downturn could last up to 12 months unless persistent inflation soon cools down, allowing the Federal Reserve to ease up on aggressive interest rate hikes that make risky assets less attractive to investors. Analysts aren’t so sure that will happen.

“This is necessary for any financial market to mature and evolve,” argues Matteo Dante Perruccio, a partner at crypto investment firm Wave Financial who envisions that cryptocurrency prices will take at least six months—and up to two years—before recovering, similar to cycles past. “But this time, there’s a difference,” he adds, pointing to a wave of institutional money—from the likes of Tesla, Goldman Sachs, Morgan Stanley and more—that fueled widespread adoption during the pandemic:

“When we inevitably come back into an appreciating market, it’s going to be more sustained and healthier, with less speculation and more tried and true investment philosophy.”As crypto investors wait for brighter days ahead, Forbes is tracking all the carnage from the latest crypto winter, including layoffs, price plunges and record selling—as well as the lifelines and acquisitions that may help cushion the blow. Here’s the damage, so far:

Trillions In Value Erased

Low interest rates and government stimulus measures fueled skyrocketing cryptocurrency prices during the pandemic, but the Federal Reserve’s decision to curb rising inflation by hiking interest rates has since battered investor sentiment—ushering in some of the crypto market’s biggest losses in history. After amassing a record value above $3 trillion in November 2021, the cryptocurrency market posted its worst first half ever and has plummeted to about $950 billion, a nearly 60% drop this year, according to CoinGecko.

Piling on to bearish sentiment, Terra’s luna token, a once top cryptocurrency worth more than $40 billion, lost virtually all its value within a week in May after sister token TerraUSD, a stablecoin meant to hold a price of $1, broke its dollar peg as markets collapsed. Meanwhile, top cryptocurrencies bitcoin, ether and BNB have plunged 70%, 75% and 65% from record highs, respectively. It’s taken the market years to recover from similar declines: When growing regulation sparked a fierce crypto winter beginning in 2017, it took more than 1,000 days for the world’s largest cryptocurrency to nab a new high.

Thousands Laid Off

Faced with steep market declines, cryptocurrency companies have laid off more than 2,000 workers in less than five weeks. By far the biggest blow, popular brokerage Coinbase laid off 1,180 employees, or about 18% of its workforce, on June 14—weeks after the firm’s billionaire CEO, Brian Armstrong, warned investors that a potential recession could lead to a prolonged bear market for cryptocurrencies. In a note announcing the layoffs, Armstrong said he was planning “for the worst” and acknowledged the firm “grew too quickly” during the pandemic bull market.

“It was surprising, and it was hard,” one former employee posted on LinkedIn. Others described the cuts as “abrupt” and “sudden.” Also in June, Gemini, the exchange founded by the billionaire Winklevii twins, said it would cut about 10% of its 1,000 employees, and exchanges Crypto.com and BlockFi said they would terminate 5% and 20% of their workforces, affecting some 260 and 170 employees, respectively. Since then, lending platform Celsius reportedly laid off 150 workers, and Austrian trading platform Bitpanda cut 270 jobs, calling the move “necessary . . . to navigate the storm and get out of it financially healthy.”

Record Selling

Investors piled out of cryptocurrency investment funds at a record pace as bitcoin plunged to an 18-month low last month. Outflows totaled $423 million in the week of June 17, virtually erasing all inflows this year and eclipsing the prior record of $198 million from January, according to crypto asset management firm CoinShares. The turbulence pushed the assets under management of crypto investment products to a record-low $21.6 billion last month, down 37% from May, as “looming liquidation threats” fueled “panic” among investors after Luna’s crash, CryptoCompare analysts wrote in a report.

Meanwhile, Bank of America reports the number of its customers using cryptocurrency tumbled more than 50% to fewer than 500,000 since the market’s highs in November. Even bullish crypto firms have had to reckon with the changing market. On Tuesday, top miner Core Scientific revealed it sold a majority of its bitcoin pile at an average cost of $23,000 last month, raising more than $167 million. In a statement, CEO Mike Levitt attributed the sales to “tremendous stress” driven by weak markets, higher interest rates and “historic inflation.”

Canada-based Bitfarms, which made headlines in January by joining Tesla and former billionaire Michael Saylor’s MicroStrategy in buying bitcoin for its balance sheet, also offloaded a large sum, dumping 3,000 bitcoins, or nearly half its pile, for $62 milion late last month. “It’s typical behavior for bitcoin miners to sell during the final stages of a bear market,” explains Sotiriou, noting some firms may need to shore up funds to cover expenses or stay solvent as high inflation tacks on to operating costs.

Billions In Frozen Cash

Citing “extreme market conditions,” crypto lender Celsius became the first major platform to pause withdrawals and transfers between customer accounts on June 13. Within days, others followed suit: Babel Finance, CoinFLEX and Voyager all froze withdrawals. None have re-enabled access, thus making billions of dollars in funds inaccessible to their investors.

“They’re in a really sticky situation because they’ve been irresponsible with clients’ funds, somehow lost out and are now unable to pay back their clients—and there’s no guarantee they’ll pay the money back,” explains Sotiriou. In its most recent quarterly filing, publicly traded Coinbase warned of the risk, disclosing customers would be treated as “unsecured creditors,” or lenders without collateral to fall back on, in the event the company goes bankrupt.

Bankruptcies And Liquidations

A handful of crypto firms are simply collapsing. On June 27, Voyager issued a notice of default to beleaguered Singapore-based crypto hedge fund Three Arrows Capital (3AC) for failing to make payments on $675 million in bitcoin and stablecoin loans. 3AC at one point managed some $3 billion, but Singapore financial regulators condemned the firm late last month, saying it provided false information and only had the authority to manage up to $250 million.

On top of that, 3AC’s troubles were exacerbated by the sell-off’s impact on its risky investments, which reportedly included overleveraged bets on the Grayscale Bitcoin Trust and about $200 million in now-worthless Luna. On Friday, a British Virgin Islands court reportedly ordered 3AC to liquidate its assets, deeming the firm insolvent; it filed for bankruptcy the same day.

With 3AC’s fate sealed, Voyager itself filed for bankruptcy on Wednesday—a mere five days after it suspended trading. “While I strongly believe in this future, the prolonged volatility and contagion in the crypto markets require us to take deliberate and decisive action now,” Voyager CEO Stephen Ehrlich said in a statement. In a court filing, the firm disclosed that it had more than 100,000 creditors and up to $10 billion in assets. Vauld and Celsius have also announced they’re exploring restructuring options.

Lifelines And War Chests

Some crypto companies are hoping to be rescued before being forced to shut their doors by turning to more stable counterparts. On Friday, FTX, the exchange founded by billionaire Sam Bankman-Fried, entered into an agreement to buy embattled BlockFi for as much as $240 million. “You know, we’re willing to do a somewhat bad deal here, if that’s what it takes to sort of stabilize things and protect customers,” he told Forbes last month after providing BlockFi and Voyager with $750 million in credit lines between FTX and his quantitative trading firm Alameda.

More recently, he has said FTX has a “few billion” more to help struggling companies. Meanwhile, Goldman Sachs is reportedly looking to raise $2 billion to help buy up distressed assets from Celsius, and other legacy institutions are also showing interest. “I have this knee-jerk reaction that if you believe that the fundamentals of a long-term case are really strong, when everybody else is dipping, that’s the time to double down,”

Fidelity CEO Abby Johnson, who this year shepherded the firm’s industry-first decision to allow bitcoin in 401(k) plans, said last month when asked about what could be her third crypto winter. “That’s usually the right move.” “It’s incredibly encouraging,” says Dante Perrucio. “Big institutions looking for distressed crypto assets means they believe that the industry is going to come back—and come back strong—despite this very complicated period we’re all in.”

I’m a senior reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism …

Source: Crypto Winter Watch: All The Big Layoffs, Record Withdrawals And Bankruptcies Sparked By The $2 Trillion Crash

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Credit Suisse To Tighten The Reins After String of Scandals

Credit Suisse will unveil a new centralized structure on Thursday in an attempt to bring its far-flung divisions to heel and draw a line under a string of scandals that have cost the Swiss bank billions of dollars, two sources said.

Over the past year, Credit Suisse has been fined for arranging a fraudulent loan to Mozambique, tarnished by its involvement with defunct financier Greensill, racked up $5.5 billion in losses when U.S. family office Archegos collapsed, and been rebuked by regulators for spying on executives.

Credit Suisse drafted in seasoned banker Antonio Horta-Osorio as chairman in April to stop the rot and he will lay out his charter to reform Switzerland’s second-biggest bank on Thursday when it presents third-quarter results.

One key change is expected to be the creation of a single wealth management division that caters to a global elite, centralizing oversight at the bank’s headquarters in Zurich, two people familiar with the matter told Reuters.

Under the current structure put in place six years ago, wealth management straddles three divisions: a Swiss business, an Asia-Pacific arm catering mainly to rich Chinese and an international arm based out of Switzerland.

Merging the wealth division would make Credit Suisse simpler and potentially pave the way for cost cuts.It would also rein in local bankers who have enjoyed much autonomy, making them more answerable to senior managers who have often been blindsided by the risks that triggered past scandals, the sources said.

One of the people told Reuters that managers at the bank’s headquarters had become very risk averse and they did not want to give leeway to local bankers, regardless of how much profit they were making. A spokesman for Credit Suisse declined to comment.

Credit Suisse’s financial humiliation stands in stark contrast to its cross-town rival UBS (UBSG.S). In the wake of massive losses and a bailout during the financial crisis, UBS successfully pivoted away from investment banking to wealth management and is now the world’s largest wealth manager with $3.2 trillion in invested assets.

Its shares have climbed 57% in the past 10 years while Credit Suisse has slumped 53% over the same period.Shareholders have deserted Credit Suisse this year following the slew of bad headlines. Its shares are down 12% while UBS is up 36% while Wall Street rivals are riding high on the back of a boom in equity trading and M&A.

Andreas Venditti, an analyst at Swiss private bank Vontobel, said it would take more than “minor changes and a new divisional set-up” at Credit Suisse to reverse the trend.The expected revamp at Credit Suisse has also encouraged some high-profile dealmakers to approach the bank’s senior management to suggest it merges with a rival, another person with knowledge of the matter said.

Those ideas have been rejected so far, however, the person said. Nonetheless, the prospect of a challenge by investors demanding the break-up of the bank, or that its shrinking market value makes it a target for a hostile foreign takeover, have long troubled managers, sources told Reuters earlier this year.

‘WARNING SIGNALS’

With a market value of $28 billion, Credit Suisse is worth less than half of UBS and a fraction of Wall Street giants such as JPMorgan (JPM.N) weighing in at half a trillion dollars. But an approach from the United States would not go down well in Switzerland. Relations between Swiss banks and Washington were damaged when the United States pressured them into giving up their strict secrecy code more than a decade ago.

A combination of Credit Suisse and UBS, which has been touted as an alternative alliance, would face its own problems. For one, it would dominate the Swiss market. Another source said that while Credit Suisse had examined a sale or spin-off of its asset management business, that had been shelved. The person said, however, that once further efforts were made to cut costs and boost growth, a sale, or listing of the business on the market, could be back on the cards.

The bank’s drive to centralize its operations is drawing on lessons from some of its recent failures, including Archegos. Earlier this year, Credit Suisse published a report blaming a focus on maximizing short-term profits and enabling “voracious risk-taking” by Archegos for failing to steer the bank away from catastrophe.

Despite long-running discussions about Archegos – by far the bank’s largest hedge fund client – Credit Suisse’s top management were apparently unaware of the risks it was taking.

The bank’s chief risk officer and the head of its investment bank recall hearing about it first only on the eve of the fund’s collapse. “There were numerous warning signals,” the report said. “Yet the business … failed to heed these signs.”

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Source: Credit Suisse to tighten the reins after string of scandals | Reuters

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Related Contents:

B. H. Meyer; Hans Dietler (1899). “The Regulation and Nationalization of the Swiss Railways

Hill, Kelly (1999). Cases in Corporate Acquisitions, Buyouts, Mergers, and Takeovers. Gale. ISBN 0-7876-3894-3.

Atkinson, Mark (4 August 2000). “Swiss banks agree $1.25bn Holocaust deal”. The Guardian

Grant, Linda (19 August 1996). “Will CS First Boston Ever Win?”. Fortune. pp. 30–34. Archived from the original

Strom, Stephanie (30 July 1999). “Japan Revokes Credit Suisse Unit’s Banking License”. The New York Times.

Kandell, Jonathan (March 2012). “Swiss Banks Adjusting To Radical New Regulations”. Institutional Investor. Vol. 46 no. 2. p. 33.

Crawford, David (8 November 2012). “Germany Probes UBS Staff on Tax-Evasion Allegations”. The Wall

Owen Walker (30 July 2020). “Credit Suisse launches restructuring after trading profit boost

U.S.-Listed Chinese Stocks Have Lost Another $150 Billion In Market Value This Week As Beijing Targets ‘Excessive’ Wealth

Shares of Chinese tech giants trading in the United States struggled to pare losses Friday amid intensifying concerns over China’s efforts to impose sweeping new regulations on its publicly traded companies over the next several years, yielding market value losses of more than $150 billion for the 10 largest U.S.-listed Chinese stocks this week alone.

Key Facts

As of 2:45 p.m. EDT, shares of e-commerce juggernaut Alibaba, the largest Chinese company listed in the U.S., were among the hardest hit, down more than 15% on the New York Stock Exchange over the past week to $157, deflating its market capitalization to $424 billion.

Fellow online retailers JD.com and Pinduoduo, posted similarly staggering losses, wiping out about $20 billion and $10 billion in market value this week, respectively, despite ticking up about 2% Friday.

“China remains a huge source of global concern,” market analyst Adam Crisafulli of Vital Knowledge Media wrote in a Friday email, pointing to the nation’s strengthening regulatory campaign against corporations and actions that last month included demanding online education companies end their for-profit business models.

This week, shares of Chinese stocks have crashed steadily since Tuesday, when President Xi Jinping vowed to redistribute wealth in the nation by regulating “excessively high incomes”—spurring a sell-off that crushed shares of European luxury companies that do big business in China, like LVMH and Gucci-parent Kering.

U.S.-listed shares of online-gaming company NetEase, electric carmaker NIO and Internet firm Baidu plunged 11%, 10% and 10%, respectively, this week.

All told, the 10 largest Chinese companies trading in the United States have lost about $153 billion in market value since last week—more than 15% of their combined market value of roughly $940 billion.

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Key Background

In a matter of weeks, China has introduced harsh regulations targeting wide swaths of its economy and showing investors how risky investing in its market can be, Tom Essaye, author of the Sevens Report, wrote in a recent note. “Yes, there’s a huge market and lots of growth potential, but obviously there are regulatory risks that seem to be growing larger with every passing month,” said Essaye.

Last week, officials released a sweeping five-year blueprint for the crackdown, covering virtually every sector in its market. Then on Wednesday, China’s market regulators published a long list of draft rules targeting tech companies, barring them from using data to influence consumer choices and “traffic hijacking activities,” among other things.

Crucial Quote

“This is all a stark reminder that the current regulatory crackdown from Beijing is not going to let up,” Wedbush analyst Dan Ives said in a Thursday note, forecasting U.S. tech stocks, which are outperforming the broader market Friday, should benefit from the tech-focused crackdown in China over the next year. “The fear with more regulation in China around the corner is a major worry that is hard for investors to digest, and it will ultimately cause more of a rotation from the China tech sector to U.S. tech.”

Surprising Fact

The Nasdaq Golden Dragon China index, which tracks Chinese businesses trading in the United States, is down 9% this week and has crashed 51% from a February all-time high.

Further Reading

U.S., European Investment Banks May Have Lost Some $12 Billion As Chinese Education Firms Crashed (Forbes)

China’s Internet Tycoons Suffer $13.6 Billion Wealth Drop As Regulatory Crackdown Triggers Market Sell-Off (Forbes)

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I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism

Source: U.S.-Listed Chinese Stocks Have Lost Another $150 Billion In Market Value This Week As Beijing Targets ‘Excessive’ Wealth

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Market News

1h Does the US economy need another $480 billion in stimulus? – CNN Business
2h Top Wall Street analysts say these stocks are long-term buys – CNBC
22h Gold fails at $1,800, another selloff might be on its way – Kitco
1d Fed To Taper This Year – What Are the Odds? – Benzinga
1d Half a trillion dollars erased from China markets in a week – New York Post
1d US Indexes Close Higher Friday – GuruFocus
1d Taking Stock of Small-Cap Earnings – Zacks Investment Research
1d Fed’s Jackson Hole symposium to take place virtually due to Covid risk – CNBC
1d Fed’s Jackson Hole conference to take place virtually – Reuters
1d U.S. dollar net long bets slip in latest week -CFTC, Reuters data – Reuters
1d China Evergrande’s Bailout Hopes Continue to Fade – GuruFocus
1d Fed ‘actively working’ on US digital currency, official says – New York Post
1d Fed Minutes, Retail Data Weighed on Wall Street This Week – Schaeffers Research
1d Wall Street Week Ahead: Investors stick to stocks, but gear up for bumpier ride – Reuters
1d Looking to Cash In on a Stronger U.S. Dollar? – ETF Trends
1d U.S.-Listed Chinese Stocks Have Lost Another $150 Billion In Market Value This W… – Forbes
1d Biden Freezes Student Loan Interest Rates For 47,000 Service Members – Forbes
1d Read This Before Your Next Trade – Zacks Investment Research
1d Fed officials will seek to avoid a tantrum as they keep ‘taper talk’ going at Ja… – CNBC
1d ‘Flash recession’ could hit markets by the fall – Fox Business

Zuckerberg Grows $5.1 Billion Richer After Judge Throws Out FTC’s Antitrust Case Against Facebook

Facebook CEO Mark Zuckerberg Testifies At House Hearing

A federal judge has given Mark Zuckerberg and Facebook investors a trillion or so reasons to smile.

Judge James E. Boasberg on Monday tossed aside several antitrust cases brought by the FTC and state authorities, turning away the most concerted campaign yet to police the social network. The decision sent Facebook’s stock sharply higher, allowing the company to cross the $1 trillion threshold in market value for the first time. These rising shares were a boon for common shareholder and billionaire alike: The 4.1% in stock price during after-hours trading added $5.1 billion to Zuckerberg’s fortune.

Boasberg’s decision—and the stock movement—underscore the complexities about Facebook’s future. The social network has developed a wide swath of critics from both sides of the political spectrum and received a major black eye for its handling of user data.

Led by New York Attorney General Letitia James, some of the company’s opponents had hoped antitrust legal action might deliver what they’ve long craved: A blow to Facebook to reduce its ballooning scale and importance and deliver a measure of regulation. The antitrust case revolved around Facebook’s 2012 acquisition of Instagram and its WhatsApp purchase two years later.

But bringing Facebook to heel won’t be as easy as its detractors might’ve hoped. Boasberg dismissed the states’ case over timeliness, saying it too much time had elapased since those acquisitions. Meanwhile, Boasberg tossed out the FTC’s argument and argued in a 53-page opinion that regulators hadn’t produced enough facts to support their argument. The FTC could still tak

The other thing is: Despite a steady drum beat of negative news for much of the past four years, Facebook’s stock has been a winner. Its shares have doubled since March 2018, when the full ramifications of the Cambridge Analytic become public, igniting this new era in Facebook’s history. Over that period, the S&P 500 went up less than 60%—while Zuckerberg, his position at the company bolstered by the company’s increasing share prices, has watched his fortune go from less than $60 billion to nearly $100 billion.

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I’m a senior editor at Forbes, where I cover social media, creators and internet culture. In the past, I’ve edited across Forbes magazine and Forbes.com.

Source: Zuckerberg Grows $5.1 Billion Richer After Judge Throws Out FTC’s Antitrust Case Against Facebook

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Critics:

An antitrust suit against Facebook by the FTC and several states had the wind taken out of its sails today by a federal judge, who ruled that the plaintiffs don’t provide enough evidence that the company exerts monopoly control over social media. The court was more receptive, however, to revisiting the acquisitions of Instagram and WhatsApp, and the case was left open for regulators to take another shot at it.

The court decision was in response to a Facebook motion to dismiss the suit. Judge James Boesberg of the D.C. circuit explained that the provided evidence of monopoly and antitrust violations was “too speculative and conclusory to go forward.” In a more ordinary industry, it might have sufficed, he admits, but “this case involves no ordinary or intuitive market.”

It was incumbent on the plaintiffs to back up their allegation of Facebook controlling 60 percent of the market with clear and voluminous data and a convincing delineation of what exactly that market comprises — and it failed to do so, wrote Boesberg. Therefore he dismissed the complaints in accordance with Facebook’s legal argument.

The company wrote in a statement that it is “pleased that today’s decisions recognize the defects in the government complaints.”

On the other hand, Boesberg is sensible that lack of evidence in the record does not mean that the evidence does not exist. So he his giving the FTC and states 30 days to amend their filing, after which the complaints will be reevaluated.

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