What on earth’s going on with FAANG stocks?

FAANG stocks have been very popular with investors for over a decade. This is a group of five NASDAQ-disruptors saw extraordinary stock price gains, resulting in four people entering the trillion-dollar market cap club. However, fortunes have changed dramatically for most of these stocks over the past 18 months.

When I say ‘FAANG’, I’m talking about the acronym of the following stocks:

• Facebook, which is now part of Meta platform
• Apple (NASDAQ:AAPL)
• Amazon
• Netflix
• Google, which is now part of Alphabet

Since mid-November 2021, most of these stocks have fallen sharply. What is going on here?

Why is Apple better?

Amazon and Meta have lost their trillion dollar market cap status over the past few years. Alphabet’s downward trajectory — fueled by increasing competition and declining ad revenue — may leave this exclusive list sooner rather than later.

However, with a market cap of $2.28trn, Apple is unlikely to dip below the 10-digit threshold anytime soon. Indeed, as it stands now, it costs more than Amazon, Netflix, and Meta combined! Why is this happening?

Well, most of these companies face unique problems that Apple doesn’t have to deal with. First, advertising accounts for the majority of Alphabet and Meta’s revenue. And advertising is one of the first things companies do when there is an economic crisis.

Both companies have seen a slowdown in ad spending on their platforms. There is a risk that this may continue for some time. However, Apple’s advertising business currently generates more than 1% of its annual revenue. So less affected.

Additionally, Meta has lunged headfirst into the metaverse – an alternative, digital universe that doesn’t exist yet. The risks and costs associated with this are clear, and are reflected in the drop in share prices. Meanwhile, Apple is patiently waiting to see how the metaverse unfolds before officially launching a product.

Finally, founders Jeff Bezos and Reed Hastings both stepped down as CEOs at Amazon and Netflix. There is a risk of this succession not being possible. However, long-term Apple CEO Tim Cook remains at the helm, with no plans to leave anytime soon.

I have bought it

I think it shows the pointlessness of grouping different businesses together in one term and treating them almost as a single entity. Having said that, I recently invested in the end (bit -NG) of FAANG. Netflix and Google-parent Alphabet, that is.

Netflix is ​​trying to accelerate growth by introducing ad-supported subscription plans. I think this ‘Act 2’ is, as it were, a logical step from the streaming giant. Profit margins on advertising can help finance capital-intensive content creation, improving the bottom line.

For Alphabet, the concern is that its growth days are over. But that is reflected in the fact that the stock is now the lowest it has ever been. It currently has a price-to-earnings ratio below 15. But I expect the digital advertising empire to generate billions in revenue in a few more years.