Are the “FANG” Stocks Losing Their Teeth? Here’s Where the Next Big Profits Are Hiding
Ten years ago, Jim Cramer of CNBC came up with the “FANG” acronym to describe the hottest stocks in the market at that time: Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (GOOG).
And those stocks stayed hot for an extended stretch – averaging 516% returns over the last decade.
But Facebook is now Meta Platforms (META).And Google is now Alphabet (GOOG).
The upshot: The FANG acronym doesn’t work anymore (MANA doesn’t have quite the same ring), and a couple of those stocks lack the powerful bite they once had.
All four companies report quarterly earnings results in the next two weeks, starting with Netflix on Wednesday.
To gauge their moneymaking potential going forward, let’s see how they rate in my Quantum Edge system – and look at what Big Money is doing.
Netflix – Oct. 18
Shares of the streaming king are up 23% so far this year, but they’ve taken an outsized 25% hit since their highs of July. ghs in July – which corresponded to the last earnings report.
Netflix (NFLX) slid after the company beat earnings expectations but missed on revenue and revenue guidance. On the plus side, Netflix added more paid subscribers than Wall Street expected.
One of the more interesting things to watch is the impact of the company’s crackdown on password sharing, which it began in May, so the July report was too early to get much of a read.
Quantum Edge Ranking: With a Quantum Score of 58.6,NFLX is in the middling zone and not a screaming buy.
It’s worth noting, however, that the company’s fundamentals are solid with a 70.9 rating. The 50 technicals rating is the biggest weight on the overall score.
Big Money was buying the stock earlier in the year (the green bars are buy signals), but there have been seven sell signals the last two months.
I don’t normally buy a stock within days of an earnings report anyway, but I wouldn’t rush out to buy NFLX right now. This week’s report might provide important information that changes the outlook, but for now, there are better opportunities for the coming rally.
Alphabet – Oct. 24
Alphabet (GOOGL), on the other hand, has been a stalwart, up nearly 60% in 2023 alone and already back at 52-week highs after a 7% pullback in September.
Analysts expect earnings to grow 37% on 10% revenue growth. Those estimates have been rising the last few weeks, and that often precedes a positive surprise.
Quantum Edge Ranking: GOOGL’s Quantum Score is 77.6, which is excellent and in the zone I look for when buying a stock. I also like the balance, with the fundamentals rating 75 and the technicals 79 – both strong scores.
And Big Money has stayed loyal. There have been a bunch of sell signals since the beginning of August, but GOOGL has yet to see even one in 2023. Just the opposite. We’ve detected 12 buy signals, including as recently as last week.
With earnings a little over a week away, there is always the risk of a disappointment. Otherwise, the only drawback is the company’s humungous $1.7 trillion market cap. It’s just harder for massive stocks that size to pile up the percentage gains, but GOOGL has been pretty darned good at it.
Meta Platforms – Oct. 25
Meta Platforms (META) has been one of the market’s superstars this year, gaining 167% in less than 10 months. That’s second only to Nvidia’s (NVDA) 215% surge.
Analysts look for the former Facebook to post 120% earnings growth on 21% higher revenues, which is impressive. The question is how much of that may already be priced into the stock.
Quantum Edge Ranking: META matches Alphabet’s strong Quantum Score of 77.6. The difference, though, is how we get there.
With the stock’s moonshot higher this year, the technicals rate very high at 85.3. That’s close to being overheated. The fundamentals, meanwhile, are solid but not exceptional at 66.7. I think META will need a strong earnings report to keep the momentum going.
And 2023 has been a story of momentum, with no fewer than 24 Big Money buy signals this year – and 0 sells.
META is likely to continue moving higher over time. How much and how quickly it runs from here are the questions. Some valuation measures are a little rich right now, which is not at all surprising given how well the stock has done.
Amazon.com – Oct. 26
And lastly we come to Amazon.com (AMZN). Its fresh off another round of Prime Big Deal Days last week, but it’s the lowest rated of these four stocks.
AMZN has quadrupled the S&P 500 this year with its 58% gains, and it has turned higher the last 10 days after getting knocked down from $145 to $125 in September and early October.
Quantum Edge Ranking: Amazon’s Quantum Score of 55.2 puts it slightly behind Netflix. Its 61.8 technical rating isn’t bad, but the fundamentals get a below-average ranking at 45.8.
It’s a great company that has clearly made investors money, but the current profit margin is negative, debt is high at more than twice equity, and the valuation is rich by multiple measures – including shares trading at 58.8 times expected earnings.
Big Money was on board the first eight months of the year, but we’ve seen four sell signals in the last three weeks. That may just be market volatility, but it bears watching.
I’m not saying Amazon is a bad stock to own, but I am saying it has the least certain upside potential of the four former FANGs.
You can see that a couple of those FANGs have dulled a little bit, like Amazon and Netflix. But Alphabet and Meta Platforms still have some bite.
For bigger upside, consider smaller stocks out there with equally strong – or even stronger – fundamentals, technicals, and Big Money inflows. Like semiconductor and software company Synopsys (SNPS), which has a $75 billion market cap and an outstanding Quantum Score of 82.8. (It is also up 36% since I recommended it to my Quantum Edge Trader readers.)
Upcoming earnings season should give us multiple such opportunities as we also enjoy a strong rally in stocks into 2024.
Talk soon,
Editor,
Jason Bodner’s Power Trends