The company’s third-quarter operating results certainly demonstrated these struggles, with year-over-year revenue up just 6%, or 11% if you exclude currency movements. The NASDAQ is comprised of over 5,000 companies, many in the coveted tech sector. FAANG stocks also make up approximately 1 percent of the S&P 500 Index – a broad representation of the stock market. However, as any savvy investor who lost a significant chunk of their portfolio in the tech crash of the early 2000s will tell you, outperformance only tells you the “what”. In the case of the FAANG stocks, they have the attention of Wall Street because of the way they have captured the minds, hearts, and wallets of consumers. There’s a good chance you are reading this article on your phone, tablet, or other mobile device.
Looking elsewhere for their next investments, plenty of others might see this as a temporary blip that’s creating a great chance to buy the dip in a sector that has been red hot of late. The InvestorPlace Research Staff member primarily responsible for this article did not hold any positions in the securities mentioned in this article. This calls into question whether now is the time to bottom fish in Alphabet stock. Over the past year, GOOG stock has tumbled to the tune of around 41.7%, in line with price declines among other major Nasdaq components. Although already undervalued, I believe shares of Google are going to retest their recent lows.
About The Motley Fool
Each of the FAANG stocks trades on the Nasdaq exchange and is included in the S&P 500 Index. Since the S&P 500 is a broad representation of the market, the movement of the market mirrors the index’s movement. As of August 2021, the FAANGs make up about 19% of the S&P 500—a staggering figure considering the S&P 500 is generally viewed as a proxy for the United States economy as a whole. After all, the #1 stock is the cream of the crop, even when markets crash. Netflix has two advantages that other streaming services have been unable to duplicate. Netflix is credited with single-handedly creating the streaming video market after it started offering the service alongside its wildly popular DVDs-by-mail in 2007.
- These concerns started gaining prominence in 2018, when technology stocks, which had been driving consistent gains in the stock market, began losing their former strength.
- In addition to being widely known among consumers, the five FAANG stocks are among the largest companies in the world.
- That makes Netflix the priciest FAANG stock, relative to operating cash flow, by a considerable amount.
As you likely know, the Federal Reserve’s raising of interest rates, in response to the big inflation spike, has put considerable pressure on tech and growth stock valuations. With this large drop, shares in the tech giant, which is the parent company of Google and YouTube, have fallen to what appears to be a “cheap” valuation. It currently trades at a low price-to-earnings ratio, relative to its average multiple over the past decade. Although Google’s revenue growth in Search is slowing down, Google is set to remain the dominant player in the search-based digital advertising market.
Search revenues in the first nine months of FY 2022 were $119.8B, showing an increase of only 13% while most of this growth occurred mostly in the first half of FY 2022. Google is clearly seeing a serious slowdown in the advertising business, and the slowdown in ad-spending in FY 2022 was also the key reason behind Meta Platforms having to reduce its headcount. Part of the decision for the name change was to highlight all of the company’s mt4 trailing stop ea other businesses outside of Google Search, such as Gmail, YouTube, Google Nest and Google Cloud. In a clear a sign of the challenges the company faces, yesterday it laid off 11,000 employees, or 13% of its workforce. Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports.
Apple vs. Google: Which FAANG Stock is a Better Buy?
Both Apple and Alphabet skyrocketed last year due to the suitability of their offerings. In this article, you’ll learn what the FAANG Stocks are, why they are newsworthy, and the outlook for each stock. We’ll also look at whether FAANG stocks are good investments and how to invest in them (particularly for investors of modest means who don’t want to or can’t afford to buy individual shares). Whilst the past and present have made Alphabet the company it is today, and helped to build out a fairly impenetrable moat, the exact same can be said for many other FAANG stocks. The question now is whether or not any of these FAANG businesses can continue their history of impressive growth, because this is what will be needed to keep shareholders happy. If we also take a look at free cash flow in absolute terms, Google is also the second best of the FAANGs – this time second to Apple.
In addition, rising interest rates tend to trigger earnings contractions in the stock market as a whole, compressing valuations. Analysts are optimistic Alphabet’s share price will find its stride once again. The average price target among the 44 analysts covering GOOGL stock is $129, suggesting 36.3% upside. In 2022, Alphabet holds a dominant share of the online advertising market, but the growth segments that attracted investors for so many years have started to slow. In the third quarter, Alphabet reported just 6% total revenue growth, down from 41% a year ago.
The company faced pressure from regulators, criticism of its inability to quash misinformation and hate speech on the platform, and declining revenue growth per user. However, macro and company-specific challenges could continue to put pressure on the Google and YouTube parent’s shares. Big tech stocks have taken a hit in 2022, and each of the MAMAA stocks is down at least 13% year-to-date. Today, Apple is still heavily reliant on iPhone revenue, which accounted for 47.2% of Apple’s total revenue in the most recent quarter.
FAANG is an acronym referring to the stocks of the five most popular and best-performing American technology companies. The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype. All in all, Alphabet/Google is likely to continue growing and expanding its business, though many analysts believe it won’t see the dramatic increase in share prices that marked its early years.
When it comes to Search, Google has clear competitive advantages from its brand name as well as a technological advantage; its machine learning has outperformed all other “competitors” over the last decade. While Apple’s overall performance was impressive, the company cautioned that revenue rate of change forex growth in the December quarter would be lower than the Q4 growth rate. Apple stock isn’t unreasonably expensive as compared to other technology companies. That fact, coupled with Apple’s unique genius for industry-leading products, has most analysts convinced that Apple stock is a buy.
When Cramer first coined the term FANG back in 2013, Facebook’s market cap was just $65 billion and the company was less than a year removed from its initial public offering in May 2012. In the years that followed, Facebook grew from an unprofitable social media platform to a multi-platform online advertising tradeallcrypto behemoth. Unfortunately, a combination of rising interest rates, market saturation, increasing competition and a reset in tech stock valuations has changed the narrative for FAANG in 2022. Netflix has been hit particularly hard, and the company has dropped behind its peers in terms of growth and prominence.
With that said, a majority of those who monitor and analyze Apple’s every move are convinced that the company has more growth in its future. In fact, since the company held its IPO in December 1980, share prices have increased by an astonishing 363,325 percent. Certainly, the company has had its ups and downs, but its growth under founder and CEO Steve Jobs was nothing short of extraordinary. If Alphabet’s performance has taken this big of a hit in a mere economic slowdown, how it fares in a recession could be far worse than presently expected. Instead of EPS getting back near the high-water mark set in 2021 ($5.61), GOOG’s profitability could decline again in 2023, and only start to bounce back in 2024.
I have no business relationship with any company whose stock is mentioned in this article. Any investors in these businesses since 2012 have been very well rewarded, with each company comfortably outperforming the benchmark S&P 500. The 5 FAANG stocks have absolutely crushed the market over the past decade.
What does MAMAA stand for?
While Netflix’s market cap has tumbled to just $130 billion, software and cloud services giant Microsoft has grown to a more than $1 trillion valuation. Apple’s market cap has grown to $2.4 trillion, but analysts still see more growth ahead. The average price target among the 37 analysts covering AAPL stock is $180, suggesting 17.9% upside. They have upgraded and expanded their offerings to meet changing consumer demand amid the pandemic and to facilitate the “new normal” way of living and working. Their proponents will argue that their valuations are justified based on their fundamental strength as businesses. But critics argue that, even with impressive business performance, the FAANG stocks’ prices have become so expensive that it may be difficult to realize attractive long-term profits from investing in them.
On the whole, Alphabet is an older, more established company — funny to say out loud, but true in this case — that offers a better value on its revenue. Facebook’s growth, however, remains more impressive, and it does offer the stronger P/E ratio even if some of that might be due to Google’s huge tax bill. Weighing these factors with your investing preferences can help you decide which investment could be a better fit for your portfolio. Providing investment advice to tens of thousands of investors for more than three decades, he has earned a reputation as a savvy stock picker and unrivaled portfolio manager.
In its 2021 annual report, Meta posted revenues of $118 billion and net income of $39.4 billion. In addition to being widely known among consumers, the five FAANG stocks are among the largest companies in the world. In short, Alphabet/Google stock is a buy, if for no other reason than it is very likely to produce reliable returns year after year. Alphabet is still the world leader in online search, and its ability to generate ad revenue is second-to-none. It quickly mastered the nuances of streaming technology to offer the best user experience and the most advanced features – a combination that put it in an industry leadership position.
Eventually, growth in these types of products will offset declines in iPhone sales. Looking ahead, Wall Street analysts remain overwhelmingly positive about MAMAA stocks. The five stocks currently have an aggregate of 201 “buy” or “outperform” ratings from sell-side analysts, compared to only seven total “sell” or “underperform” ratings. Meta Platforms currently ranks just outside of the top 20 largest stocks in the S&P 500 with a market cap of $263 billion. In 2017, Apple was essentially a hardware company, relying almost entirely on sales of its iPhone, iPad, iMac and Apple Watch devices. Unfortunately, since then Meta’s revenue growth has stalled, including a 4.4% decline in revenue in the third quarter of 2022.
Mass layoffs in the tech sector are set to create new negative sentiment overhang for Google. “Stocks that have traded at excessive valuations have to be re-priced, and that is what 2022 has largely been about,” says David Bahnsen, chief investment officer at The Bahnsen Group. Since Cramer’s original FANG list in 2013, Netflix has expanded its business internationally and invested heavily in original content. It has recently focused on adding a lower-priced subscription tier that will be supported by advertising. Netflix will also reportedly be aggressively cracking down on password sharing in 2023. Netflix also has $14 billion in debt, some of which it’s likely to roll over in the coming years, so lower interest rates are to its advantage there.
Apple stock has gone up more than 25 percent in the past 12 months alone due to the excitement surrounding the latest and greatest versions of the iPhone. The newest models have 5G capability, which promises to open the door to all sorts of new features for users. Those gains pushed Facebook’s share price up by more than 30 percent year-to-date. Check out which stocks you should watch as Google partners with major brands.
YouTube ad revenue, which was up 43% a year ago, was down 3% in the quarter. Fortunately, Google Cloud revenue is still growing at an impressive 38% year-over-year clip. Advertising is a cyclical business, and it’s generally one of the first expenses that businesses pull back on when they sense that demand is slowing or they need to cut costs. Notably, GOOGL is the best performing FAANG component so far this year.
While Jim Cramer certainly popularized the term, he himself credits Bob Lang, a Real Money and The Street colleague of Cramer’s, with identifying these four stocks and inventing the acronym. On the other hand, those who believe in the fundamental strength of the FAANG stocks have abundant evidence for this claim. For example, Facebook is the world’s largest social network with approximately 2.8 billion users.