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The FANG stocks — Facebook , Amazon (AMZN - Free Report) , Netflix (NFLX - Free Report) and Alphabet (GOOGL - Free Report) — have been the hottest cluster this year. The craze for these stocks has increased on earnings optimism with FANGs hitting new highs lately. Netflix, the first in the group to report its Q2 earnings, after the closing bell on Monday, however disappointed investors with weaker-than-expected subscriber growth., This raised concerns about its long-term growth prospects (read: Tech ETFs Scaling New Highs on Surging FANG Stocks).
Quick Insights Into Netflix’s Result
The video streaming giant missed its own subscriber forecast for the first time in five years by more than a million, signaling a slowdown in momentum of the streaming-video services. It also lagged the Zacks Consensus Estimate on the revenue front but managed to beat it on earnings. Additionally, it guided weakness in subscriber base and revenues for the third quarter.
Following the sluggish result, Netflix shares plunged as much as 15% in after-market trading, eroding more than $24 billion from its market capitalization. Investors should note that Netflix is second best performer on the S&P 500 this year before the earnings, having gained 109% compared with 4.7% gain for index. Current, the stock carries a Zacks Rank #3 (Hold) and belongs to a top-ranked Zacks industry (top 30%). It nevertheless has an inflated P/E ratio of 137.03 compared with the industry average of 11.36 and a disappointing VGM Score of F.
Will Other FANGs Feel the Pain?
Other FANG stocks also felt the pinch of Netflix’s slide in after-market hours with Facebook, Amazon, and Alphabet declining nearly 1% each. Will this trend continue heading into these companies’ Q2 earnings? Right before their earnings, one analyst John Blackledge from Cowen raised its price target on these three FANG stocks. Let’s have a look at their earnings preview picture in detail below:
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while Zacks Rank #4 or 5 (Sell rated) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Facebook has a Zacks Rank #2 and an Earnings ESP of +0.85%. The social media giant witnessed positive earnings estimate revision of a penny in the past month for the to-be-reported quarter and delivered a positive earnings surprise in the last four quarters, with an average beat of 18.89%. Revenues are also expected to grow 43.78% for the quarter. The stock has a top Growth and Momentum Score of A each and belongs to a Zacks industry ranked in the top 38%. Facebook is expected to release its earnings report on Jul 25 after market close (read: 5 Hot Tech ETFs & Stocks Leading the Market Rally).
Amazon, slated to report on Jul 26 after market close, carries a Zacks Rank #3 and an Earnings ESP of +7.36%. It delivered an average positive surprise of 1,303.34% in the last four quarters and flaunts a solid Growth Score of B. The Zacks Consensus Estimate for the yet-to-be reported quarter projects earnings growth of 522.5% and revenue growth of 40.85%. However, the company has witnessed negative earnings estimate revision of a penny over the past seven days for the to-be-reported quarter. Analysts decreasing estimates right before earnings — with the most up-to-date information possible — does not bode well for the company. Additionally, the e-commerce giant is part of a bottom-ranked Zacks industry (bottom 24%).
Alphabet has a Zacks Rank #4 and an Earnings ESP of +0.11%. The stock saw negative earnings estimate revision of a penny over the past month for the to-be-reported quarter but the earnings surprise track over the past four quarters is good with an average beat of 7.83%. Earnings and revenues are expected to grow 89.82% and 22.60%, respectively, in the to-be reported quarter. The online advertisement giant has a top Growth Score of A and belongs to a top-ranked Zacks industry (top 38%). The company will report after the closing bell on Jul 23.
How to Play?
Given the moderate outlook for other FANGs, investors shouldn’t completely write off these stocks from their holdings. Instead, they should tap them in a basket form via ETFs having the largest exposure to FANGs. This is because the funds have spread out exposure to a number of firms in various types of industries, suggesting that the space can easily counter shocks from some of the industry’s biggest components. Below, we have highlighted some of them:
PowerShares NASDAQ Internet Portfolio (PNQI - Free Report) : This fund accounts for 33% share in FANG stocks and has a Zacks ETF Rank #1 (Strong Buy).
First Trust Dow Jones Internet Index Fund (FDN - Free Report) : This ETF allocates a combined 30.3% share in FANG stocks and has a Zacks ETF Rank #1.
ERSHARES Entrepreneur 30 ETF (ENTR - Free Report) : This ETF has 25% allocation in FANGs.
Image: Bigstock
A Spread of ETFs to Tap the Dip in FANGs
The FANG stocks — Facebook , Amazon (AMZN - Free Report) , Netflix (NFLX - Free Report) and Alphabet (GOOGL - Free Report) — have been the hottest cluster this year. The craze for these stocks has increased on earnings optimism with FANGs hitting new highs lately. Netflix, the first in the group to report its Q2 earnings, after the closing bell on Monday, however disappointed investors with weaker-than-expected subscriber growth., This raised concerns about its long-term growth prospects (read: Tech ETFs Scaling New Highs on Surging FANG Stocks).
Quick Insights Into Netflix’s Result
The video streaming giant missed its own subscriber forecast for the first time in five years by more than a million, signaling a slowdown in momentum of the streaming-video services. It also lagged the Zacks Consensus Estimate on the revenue front but managed to beat it on earnings. Additionally, it guided weakness in subscriber base and revenues for the third quarter.
Following the sluggish result, Netflix shares plunged as much as 15% in after-market trading, eroding more than $24 billion from its market capitalization. Investors should note that Netflix is second best performer on the S&P 500 this year before the earnings, having gained 109% compared with 4.7% gain for index. Current, the stock carries a Zacks Rank #3 (Hold) and belongs to a top-ranked Zacks industry (top 30%). It nevertheless has an inflated P/E ratio of 137.03 compared with the industry average of 11.36 and a disappointing VGM Score of F.
Will Other FANGs Feel the Pain?
Other FANG stocks also felt the pinch of Netflix’s slide in after-market hours with Facebook, Amazon, and Alphabet declining nearly 1% each. Will this trend continue heading into these companies’ Q2 earnings? Right before their earnings, one analyst John Blackledge from Cowen raised its price target on these three FANG stocks. Let’s have a look at their earnings preview picture in detail below:
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while Zacks Rank #4 or 5 (Sell rated) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Facebook has a Zacks Rank #2 and an Earnings ESP of +0.85%. The social media giant witnessed positive earnings estimate revision of a penny in the past month for the to-be-reported quarter and delivered a positive earnings surprise in the last four quarters, with an average beat of 18.89%. Revenues are also expected to grow 43.78% for the quarter. The stock has a top Growth and Momentum Score of A each and belongs to a Zacks industry ranked in the top 38%. Facebook is expected to release its earnings report on Jul 25 after market close (read: 5 Hot Tech ETFs & Stocks Leading the Market Rally).
Amazon, slated to report on Jul 26 after market close, carries a Zacks Rank #3 and an Earnings ESP of +7.36%. It delivered an average positive surprise of 1,303.34% in the last four quarters and flaunts a solid Growth Score of B. The Zacks Consensus Estimate for the yet-to-be reported quarter projects earnings growth of 522.5% and revenue growth of 40.85%. However, the company has witnessed negative earnings estimate revision of a penny over the past seven days for the to-be-reported quarter. Analysts decreasing estimates right before earnings — with the most up-to-date information possible — does not bode well for the company. Additionally, the e-commerce giant is part of a bottom-ranked Zacks industry (bottom 24%).
Alphabet has a Zacks Rank #4 and an Earnings ESP of +0.11%. The stock saw negative earnings estimate revision of a penny over the past month for the to-be-reported quarter but the earnings surprise track over the past four quarters is good with an average beat of 7.83%. Earnings and revenues are expected to grow 89.82% and 22.60%, respectively, in the to-be reported quarter. The online advertisement giant has a top Growth Score of A and belongs to a top-ranked Zacks industry (top 38%). The company will report after the closing bell on Jul 23.
How to Play?
Given the moderate outlook for other FANGs, investors shouldn’t completely write off these stocks from their holdings. Instead, they should tap them in a basket form via ETFs having the largest exposure to FANGs. This is because the funds have spread out exposure to a number of firms in various types of industries, suggesting that the space can easily counter shocks from some of the industry’s biggest components. Below, we have highlighted some of them:
PowerShares NASDAQ Internet Portfolio (PNQI - Free Report) : This fund accounts for 33% share in FANG stocks and has a Zacks ETF Rank #1 (Strong Buy).
First Trust Dow Jones Internet Index Fund (FDN - Free Report) : This ETF allocates a combined 30.3% share in FANG stocks and has a Zacks ETF Rank #1.
ERSHARES Entrepreneur 30 ETF (ENTR - Free Report) : This ETF has 25% allocation in FANGs.
O’Shares Global Internet Giants ETF (OGIG - Free Report) : This fund makes up for 23.1% share in FANGs (read: 5 Successful New ETFs of Q2).
Invesco QQQ (QQQ - Free Report) : This fund makes up for 23% share in FANGs and has a Zacks ETF Rank #1.
Motley Fool 100 Index ETF TMFC: This ETF allocates a combined 22.5% share in FANG stocks.
iShares North American Tech ETF (IGM - Free Report) : This product accounts for about 22% in FANG group and has a Zacks ETF Rank #1.
Vanguard Mega Cap Growth ETF (MGK - Free Report) : This ETF has 21% allocation in FANGs and has a Zacks ETF Rank #3 (Hold) (read: Trade Fear Oversold? Large-Cap Growth ETFs at 52-Week High).
iShares Evolved U.S. Technology ETF (IETC - Free Report) : This fund accounts for 21% share in FANG stocks.
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