FAANG, the acronym assigned to the basket of high-growth technology names Facebook, Amazon, Apple, Netflix and Google’s Alphabet, has remained a global market buzzword since CNBC’s Jim Cramer coined it in 2013.
But with increasing scrutiny on personal data laws and antitrust regulations, it begs the question whether the FAANG stocks are seriously under threat.
The House Judiciary Committee, a committee within the United States House of Representatives, has launched an antitrust investigation into large technology giants. David Cicilline, who will lead the investigation, claims that the investigation isn’t about targeting specific companies, and is instead focused on returning competition to the space.
The committee commenced their investigation on 11 June and have already criticised Google and Facebook for generating an “economic catastrophe” for news outlets, levying the charge at the dissolution of the free press.
Incidentally, the investigation’s timing could not be worse for Apple, Google, Amazon and Facebook, with the four companies already subject to further coordinated antitrust investigations by the Justice Department and the Federal Trade Commission.
Meanwhile, a new bill in the Senate is trying to assign monetary value to consumer data held by companies like Facebook and Google, as well as ensuring there is a way for people to delete their information from company databases.
The Designing Accounting Safeguards to Help Broaden Oversight and Regulations on Data (DASHBOARD) Act was introduced on 24 June. The act, if passed, will require the Securities and Exchange Commission to develop a way of calculating the value of data on social media platforms that have more than 100 million monthly active users.
As well as facing pressure from government agencies, technology firms have also found themselves as a talking point on the US presidential campaign trail.
It is worth mentioning that Netflix has not been subject to any investigations from governmental bodies, for the data it collects is seen to be less personal. However, it will be interesting to see if there are any future ramifications from legislation such as the DASHBOARD Act that might impact Netflix.
In the age of data privacy, or more appropriately the increasing demand for data privacy, do individuals want to extend their privacy to protect their Netflix browsing history?
However, institutional concern on big business is hardly something new, and the markets are adapting to the newfound agenda of regulating big tech excessively. So, how has the FAANG performance been fairing up?
Facebook shares started the year recovering from the latter end of 2018, caused in part by lower-than-expected revenue in the wake of the Cambridge Analytica scandal, and rallied until the end of April. Upon reports in early May that the Justice Department would be launching an antitrust investigation, shares in Facebook fell 7% in one day on 3 June. Since then, however, Facebook has recovered from this crash, and is trading near its 2019 high.
The Amazon stock price trend had a good first week of the year, then traded relatively statically until early-March when the market started a bull run. This was abruptly forced to an end when the Federal Trade Commission announced its antitrust investigation amongst the technology giants. A month on, the share price has almost recovered from this move.
Apple stock performance has also taken a knock from the speculation and confirmation of these antitrust investigations. After a solid bull run from the start of the year, the share price started to dip in May. It has since started a recovery but is only around 60% of the value it was before. This is, in part, due to the fact that the expected iPhone sales have been modest this year.
Bizarrely enough, despite not being subject to any antitrust investigation announcements, the Netflix share price has largely followed the same pattern as its FAANG counterparts; starting the year rallying, then dipping in May, with a recovery beginning in June. The Netflix share price did diverge somewhat from this pattern. The dip in May was modest in comparison to the other FAANG stocks, and some would even argue that it has been trading within support and resistance since February. What is clear, however, is that when the other FAANG stocks started a bear market due to antitrust investigations, Netflix shares – albeit meekly – were hit as well, leading people to ask what is going on with Netflix stock. What is clear is that this convergence highlights the market sentiment on the interconnectedness of the FAANG group.
Google’s Alphabet Class A shares were enjoying an incredible bull run, up around 26% from the year’s open to May. After speculation on antitrust investigations began to loom and a revenue announcement that fell below estimates for its first quarter (announced at the end of April), the Alphabet stock performance saw a decline of almost all of the yearly gains made throughout the month. Since then, it has started to make a recovery but has a long way to go to get back to 2019 highs, where it would be trading around the $1,290 mark.
In short, despite a bad May for FAANG stocks that led to commentators proclaiming that the FAANG group lost its prominence as market leaders, it would seem as if a recovery could be on its way.
But it is crucial to remember that the on-going investigations in the US will render some turbulence for these markets, and it seems that Netflix is now more intertwined than ever with the rest of the pack.