Loup Ventures’ Gene Munster and Quantum Trading Strategies CIO Sean Udall recently joined Joel Elconin on PreMarket Prep for a new segment called “Gene Munster Vs. Mystery Guest.” Munster and Udall discussed several megacap tech stocks that have uncharacteristically underperformed as of late.
Apple App Store Ruling
One stock that has lagged the S&P 500 in 2021 has been tech giant Apple, Inc. (NASDAQ: AAPL), which was hit by a court decision in September in which a judge ruled the company will no longer be allowed to prevent developers from providing links or information directing users away from Apple in-app purchasing. Munster said the ruling will have a negative 1% to 4% impact on Apple earnings over the next four to six quarters.
“This happened to Amazon.com, Inc. (NASDAQ: AMZN) when they started to collect sales tax across the board. Growth dipped for the first year, year and a half then it started to build from there,” Munster said.
He said the ruling will have no major impact on Apple’s market position or pricing power in the long-term.
Udall said he doesn’t currently own Apple, but he likes the stock.
“I don’t think the App Store thing is a huge negative impact. There is a price level where I could get pretty interested in Apple again. It wouldn’t have to drop a ton from here,” he said.
Instead, he mentioned several companies that could potentially benefit from the changes in Apple’s policies, including Zynga Inc (NASDAQ: ZNGA), TAKE-TWO INTERACTIVE SOFTWARE, INC (NASDAQ: TTWO), Activision Blizzard, Inc. (NASDAQ:ATVI) and Playtika Holding Corp (NASDAQ: PLTK).
Munster also mentioned Unity Software Inc (NYSE: U) as his top play on the App Store changes.
Facebook Headwinds
Another big tech stock that has taken a hit in the past month has been social media giant Facebook, Inc. (NASDAQ: FB). Munster said he’s not a fan of Facebook because of social media’s negative impact on mental health, but he believes the stock will likely continue to be a good long-term investment.
Udall agreed that there are plenty of things to dislike about Facebook as a company, but that doesn’t make it a bad investment.
“It’s just such a juggernaut of an earnings and revenue producer,” he said.
However, he prefers other social media stocks instead, including Pinterest Inc (NYSE: PINS) and Twitter Inc (NYSE: TWTR).
Amazon’s Brick-And-Mortar Push
Udall said Amazon’s recent push to expand its brick-and-mortar presence is a positive for investors because it’s one of the few ways Amazon can expand its retail presence. Udall said he’s not currently an Amazon shareholder, but it’s difficult to make a bear case at this point.
“I think there would be a lot of value created in breaking it up and spinning out separate divisions as separate, standalone companies,” Udall said.
Munster said brick-and-mortar will eventually account for only about 40% of total retail sales, but Amazon still has a lot of work to do to ensure that it secures a large portion of that 40% share.
