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Are the FAANG Stocks on Sale During the Coronavirus Crisis?

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  • (0:25) - Breaking Down FANG: Are They Still A Sure Thing?
  • (3:30) - Facebook and Alphabets Advertising Takes A Hit
  • (9:15) - Has Apple Become The Perfect Value Stock?
  • (12:00) - The Current Coronavirus Impact On Amazon
  • (15:15) - Will Netflix Benefit From The Stay At Home Environment?
  • (20:25) - Episode Roundup: FB, GOOGL, AAPL, AMZN, NFLX

Welcome to Episode #219 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey is going solo from her dining room in Chicago while she shelters-in-place during the coronavirus outbreak.

Facebook, Amazon, Apple, Netflix and Alphabet, aka the FAANG stocks, had been investor darlings for the past 10-years.

They were the “sure things.”

Several had been hitting new all-time highs as recently as February 2020.

But then the coronavirus spread to the United States and Europe, which resulted in a swift stock market sell-off.

Is now the time to either buy, or add more to a current position, in your favorite big cap growth stock?

Warning About Advertising

The FAANG stocks aren’t necessarily bullet proof when it comes to recessions.

For those who have never been investing during a recession before, the first thing that many companies cut to contain costs is advertising.

This recession is going to hit not only the large company advertising budgets, but also the small and medium sized businesses, many of whom have been forced to shut down their businesses completely. They’re just trying to survive, so the last thing they’ll be doing is running digital ads.

Facebook gets a big chunk of its advertising revenue from the local, smaller businesses.

Analysts expect both Facebook and Alphabet’s revenues to decline by the double digits during the worst of the recession.

How Cheap Are They?

1.       Facebook (FB - Free Report) is trading with a forward P/E of just 17.8. That’s where it was trading at its 2018 lows when shares sold off due to the privacy and regulatory issues. It’s P/S ratio of 6.7 is also equivalent to the 2018 lows. When Facebook went IPO in 2012, its forward P/E of 72. If you missed the 2018 buying opportunity, 2020 might be another chance.

2.       Alphabet (GOOGL - Free Report) has a forward P/E of 21.1. This is the cheapest the search engine giant has been since 2012, when it traded at 15.4x. It’s P/S ratio of 4.9 is also the lowest since 2012. Is Alphabet a buy?

3.       Apple (AAPL - Free Report) was trading at its highest valuation of the last decade just as the coronavirus hit, with a forward P/E of 22.5. Shares have fallen over 13% year-to-date and it now trades with a forward P/E of 18.9. It’s got the cash to survive any global economic shock, but are its shares still too expensive even with the pullback?

4.       Amazon (AMZN - Free Report) is one of the few FAANG stocks that is actually UP for the year, gaining about 7% year-to-date. With its Whole Foods grocery business and excellent delivery logistics, Wall Street is betting on it to be a big winner during and after the pandemic. But with a forward P/E of 71, is it still too expensive?

5.       Netflix (NFLX - Free Report) used to have the highest P/E ratio of the FAANGs. In 2019, it traded between 82 and 111x earnings. But even with the shares UP year-to-date, the forward P/E ratio has dropped to just 60.5. That’s its lowest P/E since 2011, when it traded at 15x. Is this a buying opportunity as everyone is stuck inside with nothing to do except watch the streaming services?

What else should you know about buying the FAANG stocks in 2020?

Listen to this week’s podcast to find out.

[In full disclosure, the author of this article owns shares of AMZN, FB and GOOGL in her personal portfolio.]

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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