Last week I spent some time on Facebook’s beleaguered Q2 Earnings. I also covered Google’s $5B EU anti-trust problem, and Netflix’s decelerating user growth. I didn’t go as in-depth on Apple’s and Amazon’s Q2 Earnings – both held up well thanks to increased product and ad sales respectively. However the rally by the two “As” of FAANG weren’t enough to save the whole group in the eyes of Wall Street.
Believe it or not many investors on the Street trade a FAANG-based stock index called NYSE FANG+. 2018 has been very good for this sub-group with +35% growth from January-July. But as you can see in the graphic below, there’s been a material correction in the index’s price thanks to business challenges with half of FAANG. Beyond just a technical correction, there’s a growing realization within the investment community that these companies have real limitations in their business life cycles. While you could argue that Google and especially Amazon still have plenty of runway in their growth plans, Apple’s maturity, Netflix’s slowing growth, and Facebook’s data problems are making the entire basket of FAANG stocks less and less appealing.
For the record, I think the FANG+ index will recover some of last week’s losses. However, I don’t think it’ll ever be viewed with the same optimism of limitless potential as it did before.