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The Zacks Analyst Blog Highlights: Alphabet, Amazon, Alibaba, Apple and JD.com

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For Immediate Release

Chicago, IL –August 29, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Alphabet (GOOGL - Free Report) , Amazon (AMZN - Free Report) , Alibaba (BABA - Free Report) , Apple (AAPL - Free Report) and JD.com (JD - Free Report) .

Here are highlights from Tuesday’s Analyst Blog:

Alphabet Roundup: Hardware, Privacy, App Store & More

Of the ton of Alphabet news in the last few weeks, the following appear to be the most significant-

Hardware News

Alphabet has toyed with the idea of making hardware for quite a while now although it hasn’t really made a play for market share or made a big deal about share it picked up. But the fact remains that the company acquired Motorola Mobility only to swallow most of its patents and discard the rest of the company. Then earlier this year, it picked up HTC’s mobile business, again spurring rumors that it may be venturing into hardware, but we don’t really know.

What we do know, however, is that its flagship Pixel line of hardware, including the Pixelbook (high-end Chromebook), Pixel smartphones and Pixel Watch, as well as Google Home smart home speakers are picking up mindshare.

Google doesn’t yet need a hardware line of its own (licensing its technology to other hardware makers is a far more profitable proposition and regulatory pressure hasn’t materially harmed it). But it continues to pick up all the pieces it needs to create leading edge devices and continues to improve upon device quality. Hardware makers can use the devices as prototypes.

But the market is changing quickly with the advent of IoT devices where connectivity is more closely tied to the hardware itself, with the services the devices enable being the biggest selling point. In such an environment, involving more players in the device making itself can increase chances of regulatory scrutiny while making it more difficult to generate profits.

The Google Home device for example, allows the user to shop, listen to music, catch up on news, make calls, connect with other devices to facilitate household operations and so forth. Google or market leader Amazon gets to collect user data about habits, preferences, etc. to advertise and sell more effectively. So now, capturing the hardware share that can sell the services is more important. Which is why the smart speaker numbers from Strategy Analytics are so significant.

Amazon’s market share dropped from 76% in 2Q17 to 41% in 2Q18 despite growing units from 2.9 million to 4.8 million as the market grew 200% from 3.9 million units to 11.7 million units. Alphabet was the biggest gainer, growing from 16% to 28% (3.2 million units) followed by Alibaba and Apple, which went from 0 to a respective 7% and 6%. Even JD.com took a 2% share.

Standalone Retail Store

The Chicago Tribune reports that Google is planning a two-level store in Chicago’s Fulton Market district, close to its Midwest headquarters. While company spokespersons maintain that they don’t comment on rumors and speculation, it’s an interesting development that seems to point at its hardware ambitions.

Privacy Pains

San Diego resident Napoleon Patacsil has sued Google for collecting user location data even when they have location history turned off and is seeking unspecified damages. In his words, Google's "principal goal was to surreptitiously monitor [the claimant] and to allow third-parties to do the same."

The legal challenge was issued under California's Consumer Privacy Act, which was framed in line with the stringent GDPR that Europe adopted in May this year and is seeking class action status. If granted, millions of Android and iPhone users may join the case.

The complaints have been ongoing for quite some time now although this suit is the most formal approach. Even last week, privacy-focused Big Brother Watch accused Google of harvesting data "secretly, against people’s will."

Google’s wrongdoing appears clear from its actions-

Earlier its support policy read: "With Location History off, the places you go are no longer stored."

A Google spokesperson also clarified earlier: "There are a number of different ways that Google may use location to improve people's experience, including: Location, History, Web and App Activity, and through device-level Location Services…We provide clear descriptions of these tools, and robust controls so people can turn them on or off, and delete their histories at any time.”

But on Friday, the support policy was changed to: "This setting does not affect other location services on your device... some location data may be saved as part of your activity on other services, like Search and Maps.” Moreover, the company now says that "We have been updating the explanatory language about Location History to make it more consistent and clear across our platforms and help centers."

On that very day, privacy group Electronic Privacy Information Center complained to the FTC that the company’s recording of time-stamped location data even after users have turned off Location History was in clear violation of its 2011 settlement.

ACLU legislative counsel Neema Singh Guliani also told Bloomberg that this kind of data collection is a concern, particularly if there’s deception involved, she strongly advocated a GDPR-like legislation for the U.S. and also said that Congress was debating the issue.

Separately, Professor Douglas Schmidt of Vanderbilt University (Nashville, Tennessee) found in a study that people browsing with Chrome in Incognito mode could have their activity linked retrospectively to account information in Google-owned services like Gmail and YouTube. Also, "While such data is collected with user-anonymous identifiers, Google has the ability to connect this collected information with a user's personal credentials stored in their Google Account."

Incognito mode is worded carefully. It reads: "Now you can browse privately, and other people who use this device won't see your activity."

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.



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