Whether it’s the FANG group, FAAMG, or FAANG being talked about, it’s like alphabet soup on Wall Street these days.
The long and the short of these jumbles is that investors love Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOGL) stock, while they merely like Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASAQ:NFLX) and Microsoft Corporation (NASDAQ:MSFT).
The volatility among these major tech names and others has been extreme over the last week and a half, and it shows no sign of slowing down.
FANG Group Is Still Strong
In a note to investors dated June 15, Canaccord Genuity analyst Michael Graham updated his valuation for the FANG group (Facebook, Amazon, Netflix, Alphabet/ Google).
At a time when much of the rest of Wall Street has moved on to FAAMG or FAANG, Graham remains focused on the FANG group.
He noted that the four stocks have “trounced” the S&P 500, each rising by approximately 30% over the last six months. The S&P has risen only 11% over the same timeframe.
He feels that the drivers for the FANG group are still intact, as their fundamentals remain strong. He noted that many have tried to explain why the FANG group has outperformed the rest of the market by so much and that many have suggested extreme momentum buying driven by the rise in passive investing.
He disagrees, however, as he thinks it is much simpler, in that the four stocks making up the FANG group “represent a large portion of the growth opportunities within large cap tech.” Additionally, he said that six months ago, the four stocks’ valuations were “quite reasonable,” but now, the valuations of the FANG group are “less obvious.”
This view could be why he remains focused only on those four stocks while most other analysts have shifted away from FANG in favor of FAAMG or FAANG.
Alphabet (Google) Stock Is Downgraded
Graham sees the main drivers of the FANG group as “digital advertising, digital video viewing, eCommerce, and cloud services, and he sees “ample room” for further growth in all of these drivers.
However, he did adjust his valuations for the four stocks and even downgraded Alphabet/ Google stock.