To The Moon

The FAANG stocks, which comprise some of the most influential and profitable tech companies in the world, have disappointed their investors in the latest quarter of 2023.

Despite their remarkable growth in previous quarters, the FAANG have:

• Failed to meet the high expectations of the market.

• Reported less than perfect earnings results.

This has wrong footed many investors who were:

• Betting on the continued dominance of these tech giants in the post-pandemic era.

• Hoping that the FAANG’s fantastic results could lift up the US market, given a depressing Sep and Oct 2023.

$Meta Platforms, Inc.(META)$, formerly known as Facebook, has “better” its earnings estimates.

The company reported:

• Earnings per share (EPS) of $4.39, well above consensus estimate of $3.63 per share.

• Revenue also above expectations, coming in at $34.15 billion, compared to the forecast of $33.56 billion.

• Meta Platforms saw its daily active users (DAU) at 2.09 billion versus analysts’ forecast of 2.07 billion.

The money burner at Meta is the Reality Labs division:

• That focuses on [a] virtual reality and [b] augmented reality technologies.

• It has racked up -$3.74 billion in operating losses for current quarter.

• To date it has lost closed to $25 billion since the start of last year.

$Apple(AAPL)$, the most valuable company in the world by market capitalization, delivered a “mixed” earnings report.

The company reported:

• Earnings per share (EPS) of $1.46, exceeding consensus estimate of $1.39 per share.

• Revenue came in marginally above expectations, at $89.5 billion versus forecast $89.28 billion.

• Apple saw its Mac and iPad sales decline by -34% and -10.18% YoY to $7.61 billion 6.44 billion respectively.

Headwinds affecting Apple includes:

• Overall sales fell for the 4th quarter in a row.

• Greater China “flat” YoY sales.

• Executives signaled Apple may not return to growth during the holiday quarter.

• Analysts were looking for $122.98 billion in revenue for 2023 December quarter; that is +37.41% above current quarter Q4 2023’s revenue.

$Amazon.com(AMZN)$, the e-commerce and cloud computing behemoth, handed in an impressive report card.

The company reported:

• Earnings per share (EPS) of $0.94 exceeded consensus estimate of $0.58 per share.

• Revenue also wins over expectations, at $143.1 billion, versus forecast of $141.1billion.

• Amazon’s core e-commerce online store sales continued to recover, expanding +7% YoY, after growing 4% in the previous quarter.

• The company also saw its cloud computing segment, AWS, grow by 13% year-over-year to $16.1 billion, but lose market share to rivals like Microsoft and Google.

• Amazon Web Services, which leads Microsoft Azure and Google Cloud, showed growth in the quarter of +12%.

• However, its growth rate paled when stacked against Azure +29% revenue jumped and Google Cloud’s +22% growth rate.

$Netflix(NFLX)$, the leading streaming service provider, delighted investors with its earnings results.

The company reported:

• Earnings per share (EPS) of $3.73 versus consensus estimate of $3.49 per share.

• Revenue matched analysts’ estimates at $8.54 billion.

• Total memberships was 247.15 million vs. 243.88 million expected.

• The results were the latest confirmation that Netflix is the undisputed leader in the streaming world, as would-be rivals are still trying to become profitable.

$Alphabet(GOOG)$, the parent company of Google and YouTube, was another FAANG stock that beat its earnings estimates in the latest quarter.

It benefited from its diversified revenue streams and strong advertising demand.

The company reported:

• Earnings per share (EPS) of $1.55, edging consensus estimate of $1.45 per share.

• Revenue surpassed expectations, at $76.69 billion, compared to the forecast of $75.97 billion.

• Google Cloud revenue was $8.41 billion vs. $8.64 billion, according to StreetAccount.

• Alphabet’s advertising revenue was $59.65 billion, up from $54.48 billion YoY.

Facing headwinds include:

• Ongoing lawsuit by US Dept of Justice on Google anti-competitive deals with Apple and other companies for prime placement of its search engine.

Were the FAANG stocks really a letdown?

Were investors really disappointed with the FAANG’s latest quarter, with their less than perfect earnings results that have wrong footed many investors who were expecting more from these tech giants.

My observations:

• 3 of 5 FAANG stocks fell after they announced their quarterly earnings.

• 2 of 5 did not.

Observations’ details (see below).

What I have done:

• Consolidate the 5 FAANG stocks into one graph.

• The price that is highlighted indicates the day on which the quarterly results were released.

• The monitoring period began with the first FAANG stock, Netflix, announcing its earnings (18 Oct).

• 3 of 5 FAANG stocks fell after their quarterly earnings were released.

• The 3 stocks were [1] Meta Platform, [2] Apple Inc and [3] Google.

• 2 of 5 FAANG stocks rose after they announced their quarterly results.

• The 2 stocks were [4] Amazon and [5] Netflix.

• At the end of October 2023, market sentiments turned positive and, in the process, helped lifted the FAANG stocks, except for Apple Inc.

Which is the best FAANG stock?

Based on technical analysis (TA), the best FAANG stock is Meta Platform. (see below)

• For a start, Meta shares have skyrocketed> +155%, with the impressive move fueled largely by strong quarterly updates. (see above)

• Based on technical analysis (TA) using valuation metrics — price/earnings-to-growth ratio (PEG) that includes projected growth, Meta has the best readings. (see below)

FAANG : Price/Earnings-to-growth Ratio

• The lower the PEG ratio, the more attractive & valued a stock is, relative to how much growth it's expected to generate.

• One advantage of the PEG ratio is that it can be used to compare stocks with different business models.

• For investors looking for growth at a reasonable price, Meta looks like the best alternative in the group by far.

• Like any TA tool, the PEG ratio has its “constraints” too.

• The “E” (earnings) in PEG ratio can be misleading. This is because companies' earnings can sometimes be distorted by unusual revenue and/or expenses.

• When applying the PEG ratio to a stock, remember to look out for earnings abnormalies (if any).

• The other more “complex & abstract” issue with PEG ratio is reliance on estimates of future growth.

• For above FAANG stocks’ PEG ratio — the growth projections used was based on five years into the future.

• Objectively, projections required a lot of guesswork, and that could turn out to be completely wrong if the hypothesis carried out is not closed to actuals.

• Do you think the best FAANG stock is Meta or Amazon or Google?

• Do you think FAANG is not fantastic any longer?

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