28 Oct FAANG Stocks – Predictions
Are FAANG Stocks about to Collapse?
With the US economy booming as predicted, most of us are scratching our heads at market volatility and market corrections, and why the FAANG stocks (Facebook, Amazon, Apple, Netflix, Google) are having trouble making money.
The fall of the FAANGs is equal even though the situation for Amazon, Facebook, and Netflix is very different than that of Google and Apple. It looks like the Asia to US market transition is giving Apple and other major offshore manufacturing-based companies more challenges than they can handle. Investors see them as a group.
The markets and economy are good for US based businesses ready for 2019/2020, but for those exposed to International trade and offshore production (25% tariffs), the road is really uphill. That increase in costs and FAANG resistance to recentering manufacturing in the US, is making investors give the thumbs down to FAANG stocks values.
Investor’s Negative Outlook on FAANGs
The FAANG stocks were doing fine, with many analysts buy recommendation, but suddenly the fall, the scene changed. Earnings season brought everyone back to earth and either the FAANG companies didn’t want to pay out, or investors were just believing what they wanted.
As you can view in the chart below, FAANG stock Netflix is in particular trouble. It’s sunk twice in the last 3 months and it’s the most confusing situation for stock market investors. Netflix reported 34% growth in revenue including revenue of $4 billion during the 3rd quarter, compared to analyst estimates of $3.99 billion.
Equity Research managing director David Miller says Netflix can be cash flow positive by 2020 and he forecasts a 12-month target price of $503 per share.
The Internet television network paid 89 cents earnings per share (EPS) for the last quarter, 68 cents better than the 21 cents forecast by stock analysts. And they’ve just announced billion dollar content development plans. It all looks pretty good, so what could possibly be causing Netflix’ price decline?
With earnings down, investors feel Amazon won’t do well this Xmas season either and its valuations have fallen. Quarterly earnings for Amazon are consistently above $50 billion and some predictions for 2019 are very strong ($11.81 for 4th quarter of 2019 compared to 3.33 reported this last quarter). Marketbeat sees a earnings payout for 2019 of $31.66 per share.
Betting against Amazon, given the shift to online shopping and cloud computing is probably not wise. Investingdaily has a thorough look at and forecast for Amazon. It’s flush with cash and into all sorts of things.
Google – Alphabet
Google’s revenue growth is the key issue for many investors, as it’s all about future earnings. Other companies appear to be more attractive, and the competition might be the big story of 2019. If the monopoly type companies under perform, the talk about anti-monopoly action might die down. However, these companies have plenty of threats during a highly volatile, transitionary economy. Take a look at Longforecast’s Google outlook for 2019.
Apple’s fortunes have fallen quickly. Actual revenue has plummeted from 88 billion in the 1st quarter of 2018 down to $53 Billion in the 3rd quarter. Few companies can be overjoyed with a near 30% drop in revenue, along with predictions of higher costs. Apple’s cost control issues foretell vulnerability to big stock market corrections or perhaps a market crash sometime this winter 2019. Still, take a look at Moneymorning’s prediction that Apple will reach $300 by 2020.
Facebook has had a steady decline since last summer. In July earning per share was $1.74 and revenue was up 42% year-over-year. But they missed projections and the stock price plummeted 25%. Facebook has a huge customer base and they don’t share revenue with anyone almost, unlike Google who pay out revenue share with advertisers.
Some feel Facebook is massively undervalued and it may only be the limited imagination of its management that’s stopping it from big growth. It’s looking to buy an internet security company to help it avoid data breaches. Hear Paul Schatz, Heritage Capital president and chief investment officer bullish outlook of $200 per share.
Bloomberg Report on FAANG Performance and Predictions
FAANG Analysis – Ramy Inocencio reports on Bloomberg Daybreak: Asia
Just because business is moving back to the US, doesn’t mean the FAANGs can’t make mountains of money. They’ll likely adjust and become super monopolies. See more on the stock market and the factors/signals that produce corrections and crashes.
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* the above post includes opinions of the author and do not connote recommendations of any kind regarding stocks to invest in. The material is provided as information only.