Back to top

Image: Bigstock

Has Facebook's Collapse Ended the Party for FAANG Stocks?

Read MoreHide Full Article

Facebook, Inc. and Netflix, Inc. (NFLX - Free Report) are bleeding after reporting disappointing second-quarter results and it’s taking a toll on other tech stocks. FAANG stocks, which comprise Facebook, Amazon.com, Inc (AMZN - Free Report) , Apple, Inc (AAPL - Free Report) , Netflix and Google parent Alphabet, Inc. (GOOGL - Free Report) , are at the helm of carnage, with the Nasdaq falling 1.4% on Jul 30.

Investor concerns are at their peak after disappointing results from two tech giants. So much so, that despite reporting impressive quarterly figures, Alphabet and Amazon too are suffering. Investors are now waiting with bated breath as Apple is the only company left from the FAANG family to report its quarterly results on Jul 31.

Facebook, Netflix Suffer on Weaker User Growth

Netflix has been one of the best-performing tech stocks this year, having increased 66.6% year to date. However, on Jul 16, shares of Netflix tumbled 13% in after-hours trading after it reported second-quarter fiscal 2018 results. The streaming giant’s shares took a hit as it managed to add only 5.2 million new subscribers in the quarter, falling shy of its forecast of 6.2 million.

On Jul 25, shares of Facebook slid almost 20% in after-hour trading after the company missed earnings expectations for the first time in 11 quarters. The company lost $120 billion in two hours, the biggest daily fall for shares of any company in the United States’ stock market history. The social media giant also issued a weaker guidance and expects revenue growth to slow through at least the end of 2019. 

User growth definitely has been a concern for both Netflix and Facebook, on which a lot of the companies’ ad revenues depend. Netflix and Facebook since then have been suffering. On Jul 30, shares of Netflix and Facebook declined 5.7% and 2.2%, respectively.

Google, Amazon Fail to Survive the Tech Bloodbath

Google, undoubtedly, is one of the few tech giants to have emerged winner once again. Much like Facebook and Netflix, advertising is one of the major revenue generators for Alphabet. The company reported ad revenues of $28.09 billion, reflecting an increase of 24% from the year-ago quarter.

Amazon too came up with quarterly earnings of $5.07 per share, beating the Zacks Consensus Estimate of $2.49 per share and representing an earnings surprise of 103.61%.   Moreover, the company expects revenues in the range of $54.0 to $57.5 billion, which would represent growth of 23% to 31%.

Year to date, shares of Amazon and Alphabet have increased 47.1% and 14.6%, respectively. However, Facebook and Netflix have been taking a toll on other FAANG stocks. Amazon and Alphabet declined 2.1% and 1.8%, respectively, on Monday.

Can Apple Help Revive FAANG Stocks?

Apple will report fiscal third-quarter earnings on Jul 31. The company had a decent first half of 2018, with its shares climbing 12.2%. Apple’s fiscal third-quarter revenues are projected to climb just over 15% to hit $52.37 billion, going by the current Zacks Consensus Estimate (read more: Should You Buy Apple Stock Ahead of Earnings?).

The iPhone maker has a trailing four-quarter average positive earnings surprise of 5.1%. Apple has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

That said, investors, who so long believed that the high-growth FAANG stocks were on track, have finally started feeling jittery. This has eventually led to huge selloffs. Then again, it’s too early to rule out the FAANG stocks as tech players are still the best performers this year and the sector is up 10.6% compared with the S&P 500 index’s gain of 4.8%.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%. And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Amazon.com, Inc. (AMZN) - free report >>

Apple Inc. (AAPL) - free report >>

Netflix, Inc. (NFLX) - free report >>

Alphabet Inc. (GOOGL) - free report >>

Published in