The Journey of the Wall Street Giants

2021 was a year in which, on the one hand, many pandemic-induced consumer habits remained in place from 2020, and in which, on the other, people started to re-emerge into normal life. Many people are edging away from their homes and finally taking holidays and going to physical shops. Complicating these mixed feelings has been the emergence, in November, of a new variant of Covid-19 called Omicron, sparking yet another period of uncertainty. At the beginning of December, Reuters reported that Amazon, Apple, Tesla, Alphabet and Microsoft shares, “Which are favored in times of uncertainty, added between 0.8% and 2.5% to the provide the biggest boost to S&P 500 and the Nasdaq”. But let’s look back at the whole year and recall the journey some of these giants have had. A must read if you plan to trade shares as CFDs.

Tesla

The Austin-based automaker saw wonderful things happen to its share price in 2021. In December 2020, it was at $600, but one year later it had grown 62% to $1,014.36. Q3 earnings were very impressive, but a snag hit in November when prices sunk by over 20%. “We think some of the sell-off has been due to the market readjusting to its long-term expectations for the company amid increasing competition”, explained Seth Goldstein of Morningstar. Another thing that seemed to weigh on prices was CEO Elon Musk’s November tweet that he planned to sell more Tesla shares.

Tesla reported that their biggest recent challenges have been “Semiconductor shortages, congestion at ports and rolling blackouts”. Two more hurdles appeared in December that pressed share prices down by 4.8%: a whistle-blower accused Tesla of failing to reveal the fire risks associated with their solar panel system and an investigation by the National Highway Traffic Safety Administration into whether Tesla’s autopilot feature is responsible for several road accidents. However, Tesla has many things going for it, including the prospect of benefitting from increased fuel prices in months to come. Also, evidence indicates more and more people are switching to electric cars. Even in 2020, during the harshest economic pressure of the pandemic, there was a huge 43% increase in electric car purchases over 2019.

Amazon

2021 gave indications that people had grown comfortable shopping electronically, especially for groceries, which was good news for Amazon. After a year during which the company’s stock price nearly doubled just by the end of Q2, 2021 profits started off strongly in their own right. Amazon did face the obstacles early in 2021 of a lawsuit alleging that it prioritized profits over employee safety and an attempt at unionization in Alabama, but both failed to derail the massive economic train.

Amazon had to pay big Covid-related bills, for example in buying new cargo planes and building new warehouses to keep their products coming swiftly to their customers’ doors. They also paid out over a billion dollars in wage increases for their employees. At the end of the day, though, “Habit. Good quality grocery. Stimulus checks. They’re going to thrive”, in the words of Michael Pachter of Wedbush Securities.

Alphabet (Google)

Even when compared to big guns like Microsoft, Facebook and Amazon, Alphabet’s share performance stood out. These three saw improvements of 39%, 20% and 2% respectively, but Alphabet’s price shot up by 57%. Google’s Phillip Schindler feels that 2021 proved the fact that “The consumer shift to digital is real and will continue even as we start seeing people return to stores”. Indeed, Q3 profit clocked in at $27.99 per share and overall sales exceeded expectations at $65.1 billion.

Google is actually the biggest seller of internet ads of all, and their sales in Q3 were better than expected. As to their battles, Schindler says that supply-chain problems only affected their sales of automotive adverts. They have also had to face the attention of regulators who suspect their search practices and advertising of being anticompetitive.

Alibaba

Alibaba had a hard time of it in 2021, dealing with a pandemic-related economic slowdown that made consumers less anxious to spend, as well as some fierce regulatory action. Alibaba’s two Chinese marketplaces, Tmall and Taobao, take over a trillion dollars in orders every year, giving the company sovereignty in the e-commerce space. However, “Other platforms are growing faster than Alibaba, which means they are eating Alibaba’s lunch”, says Lu Zhenwang of Wanqing Consultancy. Its two main competitors are Douyin and Pinduoduo Inc., and the latter has begun competing strongly with its low pricing and solid relationships with local retailers. Zhenwang believes Aliaba “Can only adopt a defensive strategy” to its competition at this point. It remains to be seen what Alibaba can pull out of their hat in 2022.

The bottom line

Although consumer habits are persisting, we’ll need to keep an eye on the news to see how each of these companies deals with regulatory, supply-chain and competitive challenges. Certainly those intending to trade shares as CFDs of Tesla, Amazon or Alphabet should stay informed on new company developments and any new knowledge on the Omicron strain.