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The FANGs: 3 to Buy, 1 to Sell

The FANGs have taken a beating amid the market’s tech sell-off, but the dip offers investors some excellent opportunities

By Laura Hoy, InvestorPlace Contributor

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Over the past few years, FANGs have become investor favorites because the collection of powerhouse tech stocks are known for delivering double-digit gains to their shareholders.

The FANGs: 3 to Buy, 1 to Sell
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However, this week Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) have all tumbled amid a tech sell-off.

The steep losses faced by the coveted FANGs has caused many to question whether the four are still buy-and-hold investments.

With prices on the decline, now is a great time to scoop up tech stocks that you can hold on to in the long-term. That’s certainly the case for FB, AMZN and NFLX. However, GOOGL is looking a little bit shakier because the firm’s bread-and-butter, advertising revenue, could take a hit in the months to come.

Right now is a great time for investors to pick up highly regarded stocks for bargain prices, but I’d join in with the masses and get rid of GOOGL. With that in mind, here’s what you need to know about these FANG stocks.

FANGs to Buy or Sell: Alphabet Inc (GOOGL)

FANGs to Buy or Sell: Alphabet Inc (GOOGL)
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Don’t get me wrong, Alphabet is an exciting company with a lot of promise. However, I’d argue that the firm’s near 5% drop last week is not without reason, and investors may want to think twice before scooping it up for what appears to be a bargain price.

The trouble for GOOGL is that the company’s impressive growth track record may not be sustainable in the long-term. Alphabet’s main business is advertising, but the company is running out of space to sell.

Over the last two years, GOOGL has been able to grow its revenue tremendously in large part due to advertising on YouTube and mobile search. However, those two are reaching a saturation point and Alphabet is unlikely to continue rising at the same rate as a result.

Even with the drop, GOOGL stock looks expensive, and the company will need to find a compelling new way to eek out growth in the future before the stock makes its way back into my good books.

FANGs to Buy or Sell: Facebook Inc (FB)

FANGs to Buy or Sell: Facebook Inc (FB)
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Social media pioneer Facebook is facing a similar struggle to that of GOOGL; however, the firm appears to have a bit more wiggle room than Alphabet when it comes to revenue growth options, which makes FB a good stock to hold for the future.

While Facebook has admitted that its News Feeds have reached saturation when it comes to selling additional advertising space, the company has several other options with which to grow its ad revenue. One big area for growth is video content. Facebook has been working to build out its video offerings, which will give the firm another platform with which to sell advertising space.

Another big growth prospect for FB is messaging. The firm owns the two most popular messaging services on the planet and so far it has done very little to monetize them. That could mean there are huge revenue growth opportunities on the horizon for Facebook as its messaging potential is largely untapped.

FANGs to Buy or Sell: Netflix, Inc. (NFLX)

FANGs to Buy or Sell: Netflix, Inc. (NFLX)
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Over the past week, NFLX has fallen more than 8% in the tech selloff. That dip makes for a great opportunity to scoop up  this stock, which has the largest growth opportunity among the FANGs.

While FANGs like FB and AMZN have their mega-growth days largely behind them, NFLX is still growing its presence around the world and probably has much higher to climb.

Unlike the rest of the stocks in this group, NFLX has only just begun to dip its toe in international waters. The firm may be nearing saturation in the U.S., but its subscriber numbers are still ticking up because of international roll-outs.

Many have questioned NFLX’s lack of profitability in international markets, but some of that can be explained by the firm’s decision to use its excess cash to reinvest in the future. Netflix wants to be No.1 in the streaming space and that means it needs to invest in its content and service. Profitability isn’t everything, especially for a company like Netflix that is still in a high-growth phase.

Streaming is still a relatively new concept, especially outside the U.S., so that makes NFLX a great growth play.

FANGs to Buy or Sell: Amazon.com, Inc. (AMZN)

FANGs to Buy or Sell: Amazon.com, Inc. (AMZN)
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When it comes to Amazon stock, the answer is almost always buy.

The e-commerce giant has made a name for itself as an industry disruptor and marketing genius. AMZN has weaseled its way in to nearly every aspect of its customers lives — from groceries to flower deliveries — you can literally get almost anything you want from Amazon.

Not only that, but the firm’s ecosystem is growing. Its personal assistant Alexa has been a hit among Prime members and it helped AMZN ingrain itself even deeper into consumers’ lives. Prime membership benefits have expanded significantly since the service was introduced, and the membership benefits mean people are still willing to buy from AMZN even when there’s a lower price out there.

Finally, Amazon further demonstrated its muscle this month by buying out Whole Foods for $13.7 billion, which adds yet another layer to its arsenal.

At the end of May, AMZN stock made its way above $1,000; the recent pullback in FANGs put shares at just $964. Although shares have risen significantly from the Whole Foods purchase (now trading at $990), it is still a buy at this price. It could be one of the last times we see the stock below $1,000.

As of this writing, Laura Hoy was long AMZN, FB and NFLX.


Article printed from InvestorPlace Media, https://investorplace.com/2017/06/fangs-3-buy-1-sell/.

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