With recession and inflation fears to rising interest rates, the tech industry has suffered this year – and with it, the biggest players in the industry: FAANG stocks.
The FAANG group includes Meta Platforms, Inc. (NASDAQ:META), Apple Inc. (NASDAQ:AAPL), Amazon.com Inc. (NASDAQ:AMZN), Netflix Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOG). But it seems these FAANG stocks may have lost their bite, as all but Apple (down 13%) are in a bear market this year.
FAANG stocks have been volatile since 2018, when some of the tech companies lost more than 20% of their valuation. Since then, the large influence these prominent stocks can have on the market has been a concern for investors.
And this year is no exception.
While Amazon and Netflix thrived during the pandemic, both companies suffered customer loss and business slowdowns so far in 2022. Apple has been hit by supply chain issues in China; Meta, formerly Facebook, lost more than $500 billion in market value since last summer; and Alphabet has felt the effects of paling revenue from internet advertising.
We’ll get a read on these companies following their quarterly results next week.
So, let’s use today’s Market360 to dig into the FAANG stocks’ earnings previews and see if they’re good buys ahead of their results next week.
Meta Platforms, Inc. (NASDAQ:META)
Meta will release its second-quarter earnings report on Wednesday, July 27, after the market closes. Analysts expect earnings of $2.61 per share, down 100% from earnings of $3.61 per share a year ago. Revenue is expected to increase 4.2% year-over-year to $29.05 billion. Earnings estimates have been revised 8% lower in the past three months.
Apple Inc. (NASDAQ:AAPL)
Apple is scheduled to release its earnings for its third quarter in fiscal year 2022 on Thursday, July 28. Analysts anticipate earnings to decrease 11% year-over-year to $1.16 per share, down from $1.30 per share a year ago. Estimates call for revenue of $82.47 billion, and earnings estimates have been lowered 7.2% in the past three months.
Last quarter, all of Apple’s segments (including the iPhone and Macintosh) grew from last year, except for the iPad. This decrease in sales was due to supply chain constraints and the war in Ukraine – in fact, Apple stopped sales of all its products in Russia as the conflict continues.
Amazon.com Inc. (NASDAQ:AMZN)
Amazon will report its second-quarter earnings on Thursday, July 28. Analysts expect to see earnings for the upcoming quarter of $0.16 per share, down 79% from $0.76 per share a year ago. Revenue estimates of $119.43 billion represent a 3.70% drop from sales of $115.2 billion last year. And earnings estimates have been revised a whopping 99% lower in the past three months, so an earnings surprise is not likely.
Alphabet Inc. (NASDAQ:GOOG)
Alphabet, Google’s parent company, is set to report its earnings on Tuesday, July 26. Analysts anticipate earnings to fall 3% year-over-year to $26.46 per share, down from $27.26 per share a year ago. Revenue is expected to increase 13.60% year-over-year to $70.29 billion. Earnings estimates have been lowered 4% in the past three months.
Netflix Inc. (NASDAQ:NFLX)
We heard from Netflix on Tuesday. I reviewed Netflix’s second-quarter results on Thursday. In case you missed it, here’s a quick review:
For the quarter, Netflix reported adjusted earnings of $3.20 per share on revenue of $7.97 billion, or 7.7% year-over-year earnings growth and 8.6% year-over-year revenue growth. So, Netflix topped earnings expectations but fell slightly short of revenue estimates.
For the third quarter, company management anticipates earnings will decline 34% year-over-year to $2.14 per share. Revenue is expected to increase 4.7% year-over-year to $7.84 billion. This is below analysts’ estimates for third-quarter earnings of $2.75 per share and revenue of $8.1 billion.
Netflix saw a drop of 970,000 subscribers in the second quarter – better than Netflix’s own guidance for a 2 million loss and analysts’ expectations for a 1.9 million loss.
Earnings of $3.20 per share beat analysts’ estimate of $2.94 and posted a 7.7% increase year-over-year. However, revenue decreased from $8.035 billion to $7.97 billion. At Tuesday’s close, Netflix’s shares traded just above $200, compared to $700 last year.
Netflix currently has 220.67 million subscribers, and it anticipates adding back 1 million in the third quarter.
The decrease in the company’s revenue – due in part to competition from other streaming platforms – was addressed by company management. In a letter to its shareholders, Netflix said its “key priority” will be to “re-accelerate revenue growth” through evolving its monetization, largely by cracking down on password sharing.
Where to Invest Next
FAANG stocks dominated the stock market for the last decade with their impressive growth. However, as we discussed. So, it’s really no surprise that most of the companies rate poorly in my Portfolio Grader.
As you can see in the Report Card above, the Total Grades are mixed. Apple has a B-rating, making it a “Buy.” Google has a C-rating, making it a “Hold.” And Amazon, Meta, and Netflix have D-ratings, making them “Sells.”
The overall FAANG portfolio earns a Total Grade of “C”. Although Apple is a more attractive buy, the remainder just are not holding up well right now.
The bottom line: The FAANG stocks lost their bite.
So, the question remains… which stocks still have their teeth?
The answer? The companies that are hyperscalable. These are the companies that can massively grow revenues while minimally growing the costs associated with producing.
On Thursday, I released a special recommendation that is the backbone of hyperscalability. In other words, hypergrowth isn’t possible without it.
This stock is still trading at bargain prices, but it won’t be for long. The company is scheduled to release its latest quarterly results on Thursday, August 4, and given that the analyst community has revised earnings estimates higher in the past three months, an earnings surprise is likely. A big earnings surprise could send the stock soaring, so you’ll definitely want to own this company before its earnings are out.
Before we go, I wanted to tell you to keep an eye on your email for details for a special event sent to take place next Thursday, July 28, at 4 p.m. Eastern time. I’ll explain in more detail next week, but I’ll give you a hint today: It has to do with the best way to make cash now – and I can guarantee you it’s not the way you’d think. Again, stay tuned for more details next week!
Louis Navellier, Market 360
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below: