FAANG stocks were wildly popular with investors for over a decade. This cohort of five NASDAQ-disruptors saw incredible share price gains, resulting in four of them entering the trillion-dollar market cap club. However, fortunes have changed dramatically for most of these stocks over the last 18 months or so.
When I say ‘FAANG’, I’m speaking of the acronym of the following shares:
- Facebook, which is now part of Meta Platforms
- Apple (NASDAQ:AAPL)
- Amazon
- Netflix
- Google, which is now part of Alphabet
Since mid-November 2021, most of these stocks have fallen substantially. What’s going on here?
| Company | Market capitalisation | Share price since mid-November 2021 |
| Apple | $2.28trn | -10% |
| Alphabet | $1.15trn | -39% |
| Amazon | $935bn | -50% |
| Meta Platforms | $448bn | -49% |
| Netflix | $138bn | -54% |
Why has Apple fared better?
Both Amazon and Meta have lost their trillion-dollar market-cap status in the last couple of years. Alphabet’s downwards trajectory — triggered by increasing competition and declining advertising revenue — could also take it out of this exclusive list sooner rather than later.
However, with a mighty market cap of $2.28trn, Apple is unlikely to fall beneath the 10-digit threshold anytime soon. Indeed, as things stand, it’s worth more than Amazon, Netflix, and Meta combined! Why has this happened?
Well, most of these companies are encountering unique problems that haven’t significantly impacted Apple. Firstly, advertising accounts for the vast majority of both Alphabet and Meta’s revenue. And advertising is one of the first things companies pare back on when an economic downturn is looming.
Both companies are already seeing slowdowns in ad spending on their platforms. There’s a risk this could continue for some time. However, Apple’s ad business currently generates a little over 1% of its annual revenue. So it’s much less affected.
Plus, Meta has lunged headfirst into the metaverse — an alternate, digital universe that does not even exist yet. The risks and costs associated with this are obvious, and are reflected in the share price decline. Meanwhile, Apple is patiently waiting to see how the metaverse unfolds before officially launching products.
Finally, founders Jeff Bezos and Reed Hastings have both stepped down as CEOs at Amazon and Netflix, respectively. There’s a risk these successions don’t work out. However, long-term Apple CEO Tim Cook remains at the helm, with no plans to leave anytime soon.
I’ve been buying
I think this shows the pointlessness of lumping distinct businesses together under one term and treating them almost as a single entity. Having said that, I did recently invest in the end (the -NG bit) of FAANG. Netflix and Google-parent Alphabet, that is.
Netflix is attempting to reaccelerate growth by introducing ad-supported subscription plans. I think this ‘Act 2’, as it were, is a logical move on the part of the streaming giant. The profit margins on advertising can help fund its capital-intensive content creation, improving its bottom line.
For Alphabet, the concern is that its high-growth days are over. But that’s reflected in the fact that the stock is now the cheapest it has ever been. It currently has a forward price-to-earnings ratio under 15. But I fully expect its digital-ad empire to generate billions in profits for a good few more years yet.
