What are FAANG stocks?
FAANG is the one acronym that everyone on Wall Street understands. FAANG stocks are on every trader’s watchlist – even if they do not hold positions in these companies – due to the profound effect they can have on broader markets.
But what does FAANG stand for? Facebook, Apple, Amazon, Netflix and Google. A phrase popularised by CNBC’s Mad Money speaker, Jim Cramer, FAANG stocks are high performance technology companies listed on the NASDAQ 100 index.
With Q1 earnings announcements looming by the day, it’s time to see what investors are expecting from the FAANG stocks.
Facebook Q1 earnings (expected)
Expected date: April 24 market close
2018 was a rough year for Facebook. All you have to do is think about one of the numerous bad turns the company faced, whether that be the co-founders of Instagram leaving or the Cambridge Analytica data scandal. Its stock price was the highest on record last summer, with a value of $218.61, yet the year’s close was 26% lower than what the price had opened with that year.
This year, however, Facebook seems to be making a recovery and restoring market confidence with shares back on the rise. There is a lot of pressure on Facebook’s first quarter update to solidify restored market confidence.
Facebook’s 2018 final-quarter revenue of $16.9 billion was higher than most expected. The company’s management have reported an expected revenue growth of 24 to 26% – so somewhere in this area is where expectations will lie – although sceptics suggest Facebook earnings could well be lower than this.
Last quarter, Facebook’s operating costs jumped 62% to $9.1 billion, which CFO David Wehner attributed to investment in infrastructure, safety, security and innovation. Further investment in these areas is set to continue, so it is expected that operating costs should be rising in line with management’s expectations of expense growth of 40 to 50% compared to 2018.
A key metric for investors to consider will be Facebook user growth – especially the measure of monthly active users across its family of platforms: Facebook, Instagram, Messenger and WhatsApp. If this figure can top the previous few quarters, then that will be a big indicator of current trust among users.
Sceptics are claiming Facebook will announce a declining earnings per share when compared with the first quarter of last year, which in part could be due to costs growing at a faster pace than revenue.
Apple Q2 earnings (expected)
Expected date: April 30 market close
Apple is set to report its Q2 – running from January to March – earnings for this year. You may remember from last quarter that Apple had to revise its earnings expectations due to lower than expected iPhone sales. Since its previous quarterly report, Apple has made various changes to the iPhone pricing structure across the globe.
Apple have provided their expected figures for Q2 2019. They are expecting revenue to fall between the $55 billion and $59 billion mark, with a gross margin between 37 and 38%. They are expecting operating expenses in the region between $8.5 billion and $8.6 billion. Apple will live stream the earnings call on its Investor Relations website, as it does every quarter.
Apple iPhone unit sales are expected to decline again, according to analysts, but it will be near-impossible to tell as Apple no longer reports iPhone, iPad and Mac unit sales as of last quarter. CEO Tim Cook is hoping that the launch of new services like Apple TV+ will drive long-term growth for the company in light of potential falling iPhone sales. This Apple earnings announcement could reinstate confidence in investors.
Amazon Q1 earnings (expected)
Expected date: 25 April market close
It is expected that Amazon will deliver a year-over-year increase in earnings with higher revenues when it makes its first quarter announcement. According to the Zacks Consensus Estimate, Amazon is expected to announce quarterly earnings of $4.61 per share, which equates to a 41% increase in year-over-year performance. Revenues are expected to have grown by 16.9% from Q1 2018.
While Amazon earnings exceeded expectations in the final quarter of 2018, it has since released a more modest revenue guidance of somewhere in the $56 billion to $60 billion band – equating to a 10 to 18% year-on-year change.
Netflix Q1 earnings
On April 16 Netflix announced its earnings report, defying analysts expectations. The stock price initially took a dip when markets opened, before rallying later that day. On the whole, Netflix earnings were fairly positive, but some investors are still dubious of new competition in the streaming space from Apple and Disney.
Netflix reported an earnings per share of 76 cents, up 19 cents compared to the Refinitiv consensus estimate. With revenue of $4.52 billion compared to the $4.5 billion expected, Netflix marked a 22.2% increase year-over-year.
They added 1.74 million domestic paid subscribers against a forecasted 1.61 million, and added 7.86 million international paid subscribers, compared to the 7.31 million forecast.
It was also announced that both Chief Marketing Officer Kelly Bennett and Chief Content Officer Ted Sarandos will retire this year.
The company did address what investors had been, and some remain, concerned about: the introduction of streaming-service competitors. Apple and Disney have both announced that they are launching their own streaming services, with Disney removing their movies from Netflix.
However, CEO Reed Hastings has said that the company has been expecting a decline in second window content and that everyone is much more concentrated on increasing Netflix’s own original content.
Google (Alphabet) Q1 expected earnings
Expected date: April 29 market close
Technology giant Alphabet Inc., parent company of Google, is hoping to hold onto the previous year’s momentum of exceeding expectations for all four quarters. According to Wall Street estimates, revenue is expected to be $37.34 billion, which would mark a projected change of 19.9%. Google earnings per share is expected to be $10.58 – a year-on-year projected change of 20.6%.
Historically, Google’s ad business tends to account for the bulk of Alphabet’s total revenue, which was typically around 83%. However, it is expected that this percentage will gradually decrease due to the importance of rapidly growing revenue streams such as Google Cloud and Google Play.