Google Trends search analysis from Amazon, Netflix and Tesla – ABOUT MAG 2020

(Pexels)

Google search has become an ubiquitous part of most people’s lives. Indeed, 87% of buyers begin product search with a web query (for Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) or others). As detailed in “Using Google Trends to predict Peloton’s vacation sales (and cancellations), “Google Trends search data can have a strong correlation with sales before these numbers are announced.

Obviously, Google Trends is still a relatively new tool for investors to use, but I discovered significant information recently. Most investor speculation today concerns which companies will gain from stay-at-home requests and which will lose. More important, how much they will win or lose. Google Trends can help us find before guidance is offered.

Let’s look at some of the top companies that have been the target of rumors and volatility: Amazon, Tesla (TSLA) and Netflix (NFLX)

Amazon – Sales increase likely, but limited

AMZN has been on fire since it hit a low last month, rising 43% to a new historic high. The bet appears to be that a decline in physical retail sales will result in an increase in online sales. This is logical and the data seems to confirm.

As you can see below, the relative search volume for “Amazon” in the US and worldwide has jumped from COVID-19:

(Google trends)

From a long-term point of view, we can see that the volume of searches on Amazon tends to double during the holidays and there is usually a smaller peak in the middle of summer. As you can see below, this winter spike generally correlates to a 25% increase in sales volume:

GraphicData by YCharts

Looking at the COVID-19 peak, we can see that it is about 60% of the normal holiday peak. Thus, Amazon’s peak sales may be around 15% of its expectations prior to COVID-19. Analysts currently estimate that Amazon sales will be decrease by 7.8% in 2020, with most of the losses seen in the first and second quarters of 2020. Given the increase in search volume, I believe Amazon will likely exceed these expectations.

That said, supply-side factors like ongoing dispute in France, it can offset these gains and generate bad gains. Furthermore, it does not appear that Amazon is being traded at fair value, given its recent speculative increase.

Tesla – Expected Weak Sales

To be honest, I find the TSLA’s extreme recovery quite disconcerting. First, the company’s Chinese factory was closed and then its factories in the USA. In addition, total vehicle sales in the USA were almost cut in half in March and it will probably be smaller this month (as the stoppage occurred only in mid-March).

While many believe that Tesla cars are such a popular niche that they will not be affected, the data does not confirm.

As you can see below, the global search volume for each Tesla model has dropped from 30% (Model Y) to 65% (Model X) since the end of December:

(Google trends)

The same result is also shown in the US data. This occurs when Tesla tries to have your reduced rent (despite $ 6 billion in cash reserves) and “guaranteed financing” tweet lawsuit is pushed towards. Personally, this seems like a nightmare scenario for the company, but the market does not seem to agree. Goldman Sachs recently updated the stock due to its lead product in the growing EV market.

Interestingly, the search volume for “Electric vehicles” has also dropped by more than 50% this year:

(Google trends)

Even if we exclude the slowdown in short-term sales, Tesla is not in a great position. Gas prices are at extremely low levels, making electric and hybrid vehicles an uneconomical option. Obviously, with auto loan rates as low as before, many consumers don’t have to worry about the cost of a vehicle. However, with default on auto loans, I can’t imagine that the era of low vehicle rates continues much longer.

Netflix – Expecting a Big Boost in Sales

While the market may be wrong about Tesla, it looks like it’s hitting Netflix. I certainly believe that the NFLX itself is overvalued and that its high debt backed by intangible assets is problematic. That said, Google Trends confirms that the company is winning with COVID-19’s home stay requests.

As you can see below, the global and North American search volume for “Netflix” recently reached a higher level:

(Google trends)

Looking more closely, we can see that the increase started initially in mid-March, at the beginning of the closing orders and has since decreased somewhat:

(Google trends)

In fact, it seems likely that those who didn’t already have a Netflix subscription will now have one. This is not only because more people are stuck at home, but also because sports on live television have been canceled. This is confirmed by other sources who suggest that visits to the Netflix subscription page are over 100% YoY.

Analysts currently estimate 6% QoQ revenue growth in the first quarter and 4% in the second quarter. Given the significant increase in the volume of Google search, I would not be surprised that the company exceeded revenue. Of course, the NFLX went up almost 50% last month, so it is widely quoted on the stock.

However, COVID-19 has problematically stopped production of many of Netflix’s “bread and butter” programs. This one includes Stranger Things, The Witcher and Peaky Blinders, among many others. If these delays take too long, there will be a long period when many Netflix users will not be able to watch new content. I sincerely hope that Netflix’s subscription increase will be followed by a cancellation increase.

The bottom line

Overall, it seems that market expectations and the reality of research interests usually line up. That said, the market seems to be estimating the best scenario for each of the companies mentioned. In the case of Tesla, the market appears to be wrong. In the case of Netflix, it seems to be right, but underestimating the long-term consequences.

Although I used only three major companies, Google Trends provides information about many other sectors. It shows that the search volume in hotels, travel and restaurants decreased to zero. It also shows a 33X increase in queries for “unemployment file”. Clearly, it is a useful and apparently undervalued tool.

Followers know that I use Google Trends quite often; therefore, if you want more analysis related to Google Trends, follow my account.

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Disclosure: I am / we are short AMZN, NFLX. I wrote this article myself, and it expresses my own opinions. I’m not getting compensation for this (except for Alpha Search). I have no business relationship with any company whose actions are mentioned in this article.

Paula Fonseca