chaikinpowerfeed.com Open in urlscan Pro
2606:4700:3037::ac43:94fd  Public Scan

Form analysis
1 forms found in the DOM

GET https://chaikinpowerfeed.com/

<form role="search" method="get" class="search-form" action="https://chaikinpowerfeed.com/">
  <label>
    <span class="screen-reader-text">Search for:</span>
    <input type="search" class="search-field" placeholder="Search …" value="" name="s" tabindex="-1">
    <button class="search-submit ast-search-submit" aria-label="Search Submit">
      <span hidden="">Search</span>
      <i><span class="ast-icon icon-search"><svg xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink" version="1.1" x="0px" y="0px" viewBox="-888 480 142 142" enable-background="new -888 480 142 142" xml:space="preserve">
				<path d="M-787.4,568.7h-6.3l-2.4-2.4c7.9-8.7,12.6-20.5,12.6-33.1c0-28.4-22.9-51.3-51.3-51.3  c-28.4,0-51.3,22.9-51.3,51.3c0,28.4,22.9,51.3,51.3,51.3c12.6,0,24.4-4.7,33.1-12.6l2.4,2.4v6.3l39.4,39.4l11.8-11.8L-787.4,568.7  L-787.4,568.7z M-834.7,568.7c-19.7,0-35.5-15.8-35.5-35.5c0-19.7,15.8-35.5,35.5-35.5c19.7,0,35.5,15.8,35.5,35.5  C-799.3,553-815,568.7-834.7,568.7L-834.7,568.7z"></path>
				</svg></span></i>
    </button>
  </label>
  <input type="submit" class="search-submit" value="Search">
</form>

Text Content

Skip to content
Go to ChaikinAnalytics.com »
Go to ChaikinAnalytics.com »
 * Chaikin PowerFeed
 * Archive
 * About
 * Contact
 * Sign Up for PowerFeed »



 * Chaikin PowerFeed
 * Archive
 * About
 * Contact
 * Sign Up for PowerFeed »

Go to ChaikinAnalytics.com »
Go to ChaikinAnalytics.com »
Main Menu
 * Chaikin PowerFeed
 * Archive
 * About
 * Contact
 * Sign Up for PowerFeed »


GOOGLE AND FACEBOOK HAVE A RECESSION PROBLEM

July 13, 2022 July 13, 2022 / By Marc Gerstein

Advertising companies have a dirty secret…

I first wrote about this secret during the 1990-1991 recession. I was covering
media stocks at the time…

In short, many investors believed media and advertising stocks were a great
defensive play. Not so, I warned…

Falling revenue leads to cuts in all sorts of expenses, including advertising.
That makes these types of companies vulnerable to the dirty secret –
cyclicality.

Today, that’s more true than ever. But many investors are blinded to this
painful reality…

You see, we didn’t talk about this idea too much during the past two recessions.
We had bigger fish to fry.

The 2000-2001 recession focused on the implosion of new-technology valuations.
And the recession in 2008 involved whether the global financial system would
survive.

But the recession we’re in today looks more conventional. It’s about higher
interest rates and costs pinching consumers and businesses.

So this time, advertising will have a much higher profile.

That’s a darn big deal. Think about it…

We’re not talking about newspaper ads anymore. This industry is mostly online
these days.

The mega advertisers are tech giants like Alphabet (GOOGL) and Meta Platforms
(META). They make up roughly 11% of the Invesco QQQ Trust (QQQ), a top
tech-focused exchange-traded fund.

And as we’ll discuss today, the outlook for these businesses in this recession
isn’t great…

In the past, like during the 1990-1991 recession, advertising related mostly to
traditional media stocks. But now, it involves some of the world’s most
glamorous corporate giants…

Technophiles love Alphabet. Its Google search algorithm is brilliant.

The company operates in all sorts of businesses – video, collaboration,
connectivity, and productivity. And it’s getting into digital health care.

But advertising sales make up 81% of Alphabet’s revenue. This segment
contributed $91.9 billion in operating profit last year. Meanwhile, the
company’s other segments combined for an $8.4 billion operating loss.

Meta Platforms’ fans focus on content-display algorithms, connectivity tools,
and things like that. Of course, most folks recognize it as the parent company
of social media app Facebook. And the company’s move into the “Metaverse” is
getting a lot of attention.

But advertising sales (99.3% of total revenue) are even more dominant at Meta
Platforms than at Alphabet. This segment generated $56.9 billion in operating
profit last year. In comparison, all other segments combined for a $10.2 billion
loss.

So in this recession… we’ll see how productive newfangled advertising is.

Do video ads really attract a lot of business? Or do viewers wait eagerly until
they can click on the “Skip Ad” button?

Are full-page or close-to-full-page ads effective? Or do users obsess about
finding the clickable “X” that closes them?

We can’t take anything for granted until the evidence comes in. We learned that
in the early days of the Internet…

Everyone thought “banner ads” were the way to go. But consumers ignored them.
And when advertisers eventually realized that, the prices of banner ads
collapsed.

Today’s advertisers enjoy sophisticated analytics. But how are they interpreting
what they see? Do they really know what’s good enough?

It’s easy to be happy with the data in good times. But a recession is the
ultimate test…

Tough times force everyone to get real. Will falling revenue force ad buyers to
raise their standards of acceptability?

It’s hard for typical investors to unravel such issues. But fortunately, we can
turn to the Power Gauge for guidance. Our system provides valuable insight once
again…

Just look at Alphabet and Meta Platforms. The Power Gauge ranks both companies
as “neutral” today. And the details show the full picture…

Alphabet’s category rankings for Financials and Earnings are “bullish” and “very
bullish,” respectively. The system rates Technicals as “bearish” and Earnings as
“very bearish.”

Meanwhile, Meta Platforms receives “very bullish” rankings for Financials and
Earnings. And its Technicals and Experts category rankings are both “very
bearish.”

Based only on valuation and fundamentals, these stocks would both be screaming
buys. That’s why it’s critical to see the full picture…

The Technicals and Experts rankings for Alphabet and Meta Platforms are all
poor. That’s important because both of these categories signal worries about the
future.

So for now, let’s focus our attention – and money – elsewhere.

Good investing,

Marc Gerstein


ABOUT THE AUTHOR

MARC GERSTEIN

Marc Gerstein, the director of research at Chaikin Analytics, is an
unconventional "quant." He has long specialized in rules- and factor-based
equity-investing strategies. And he authored two books on stock screening –
Screening the Market and The Value Connection. Marc met company founder Marc
Chaikin in 2010 and eventually assisted in developing our proprietary "Power
Gauge" system. He eventually joined the Chaikin Analytics team in 2018. Marc's
quant inclinations trace back to his early days as an attorney (mainly criminal
and landlord-tenant proceedings). In that world, everything Marc did had to be
supported by evidence or legal authority. He first applied this
evidence-oriented approach at Value Line, an independent investment-research
firm that he joined in 1980. There, he learned to relate human investment
stories to that company's "Timeliness" ranking system. Before coming to Chaikin,
Marc used screens to create and write The Reuters Value Review and The Reuters
Growth Review in the mid-2000s, and The Forbes Low-Priced Stock Report from 2010
to 2015. During the mid-1980s, Marc managed the Value Line Aggressive Income
Trust. That's a high-yield ("junk") bond open-end mutual fund. He steered the
fund through the Drexel Burnham scandals and the related junk-bond storms. He
came away from that experience with a non-academic but highly reality-based
understanding of risk.
Search for: Search


RECENT ARTICLES:

 * Snap’s Horrible Guidance Isn’t Its Worst Problem
 * The Recession Goalposts Moved Once Again
 * The Biggest Problem With the U.S. Dollar’s Strength
 * We’re Seeing 2012 Netflix Again… But Only Halfway
 * Don’t Let Excel Spoil Your Corn Flakes


CATEGORIES:

 * Daily Issues

 * Chaikin PowerFeed
 * Archive
 * About
 * Contact
 * Sign Up for PowerFeed »



Disclaimer: Chaikin Analytics LLC is not registered as a securities
broker-dealer or advisor either with the U.S. Securities and Exchange Commission
or with any state securities regulatory authority. Chaikin Analytics does not
recommend the purchase of any stock, ETF or advise on the suitability of any
trade. The information presented is generic in nature and is not to be construed
as an endorsement, recommendation, advice or any offer or solicitation to buy or
sell securities or any kind, but solely as information requiring further
research as to suitability, accuracy and appropriateness. Users bear sole
responsibility for their own stock research and decisions. Read the entire
disclaimer in our terms and conditions.

 * Full Disclaimer
 * Privacy Policy
 * Terms and Conditions
 * Ad Choices
 * Do Not Sell My Personal Information

Copyright © 2022 Chaikin PowerFeed

Scroll to Top

By continuing to browse Chaikin Analytics' website or by clicking “Accept All
Cookies,” you agree to allow this site to store cookies on your device to
enhance site navigation, analyze site usage, and assist in our marketing
efforts. To learn more about the cookies we use, including how to withdraw
consent to cookies, visitCookie Policy.

Reject All Accept All



PRIVACY PREFERENCE CENTER

When you visit any website, it may store or retrieve information on your
browser, mostly in the form of cookies. This information might be about you,
your preferences or your device and is mostly used to make the site work as you
expect it to. The information does not usually directly identify you, but it can
give you a more personalized web experience. Because we respect your right to
privacy, you can choose not to allow some types of cookies. Click on the
different category headings to find out more and change our default settings.
However, blocking some types of cookies may impact your experience of the site
and the services we are able to offer.
Cookie Policy
Allow All


MANAGE CONSENT PREFERENCES

STRICTLY NECESSARY COOKIES

Always Active

These cookies are necessary for the website to function and cannot be switched
off in our systems. They are usually only set in response to actions made by you
which amount to a request for services, such as setting your privacy
preferences, logging in or filling in forms. You can set your browser to block
or alert you about these cookies, but some parts of the site will not then work.
These cookies do not store any personally identifiable information.

PERFORMANCE COOKIES

Performance Cookies

These cookies allow us to count visits and traffic sources so we can measure and
improve the performance of our site. They help us to know which pages are the
most and least popular and see how visitors move around the site. All
information these cookies collect is aggregated and therefore anonymous. If you
do not allow these cookies we will not know when you have visited our site, and
will not be able to monitor its performance.

Back Button


PERFORMANCE COOKIES



Search Icon
Filter Icon

Clear
checkbox label label
Apply Cancel
Consent Leg.Interest
checkbox label label
checkbox label label
checkbox label label

Confirm My Choices