FAANGs Defining Resilience Amid Market Downtrends

Summary

• Tech players, particularly the FAANG companies have played a major role fighting novel coronavirus, leveraging the opportunity to shine in the crisis hour.
• Amid the recent market downtrend, FAANG stocks not only survived the market blow, but also put up a “great show”, as per NASDAQ.
• Each member of the FAANG group seems to be an investing powerhouse and has been known to move markets, while transforming their industries and the way we live.

Almost every investor aspires to take a bite out of the very best companies in the market. The ones eying technology sphere are particularly attracted to the leading American technology stocks on the market that have been ruling social media, e-commerce, phone and computer hardware, streaming media, and internet search.

As you would have gauged, we are discussing the market darlings FAANG stocks- Facebook, Amazon, Apple, Netflix, and Google (Alphabet).

Giant players are anticipated to be strong and resilient enough to endure and survive through dynamic environments, especially volatile aftermaths. Many such huge companies genuinely shone this year amidst unprecedented challenges.

For instance, FAANG stocks deserve closer attention in the COVID-19 crisis with their innovative and unique offerings and well recognised brand power. And why not? The FAANG group is the heart of modern technology sector, if one may say.

Why Investors Like FAANG Stocks?

Totally dominant in their respective markets in the technology sector, FAANG companies are some of the largest in the entire world. As on 12 June 2020, the total market capitalisation of these stocks was over USD 4.5 trillion- a good percentage of the entire US stock market.

The biggest reason why investors seem to like FAANG stocks is the fact that they are associated with some of the most innovative technologies in the market. For instance, Google is now adept with AI and self-driving cars, whereas Apple is pioneering the IoT (Internet of Things) space along with its fellow FAANG member, Amazon. Not to forget, Netflix’s streaming media.

Moreover, FAANG stocks are often synonymous with cloud and smart home technology- tech trends that do not seem to fade away for a long period of time.

Another likeable fact about FAANG stocks is their incredible financial performances (that seem to justify the stock prices too), as evident from below facts-

• Facebook’s cash and cash equivalents and marketable securities stood at USD 60.29 billion as of 31 March 2020. The Company experienced daily active users to be 1.73 billion on average for March 2020, up by 11 % on a YoY basis.
• The e-commerce juggernaut Amazon is typically expecting to make USD 4 billion in operating profits in the second quarter of 2020.
• In the second quarter, Apple posted quarterly revenue of USD 58.3 billion, while the services revenue reached a new all-time high of USD 13.3 billion.
• Netflix added close to 16 million subscribers over the first quarter, beating its guidance of about 7 million new subscribers. Its net profits have been growing threefold, from ~ USD 0.6 billion in 2017 to USD 1.9 billion in 2019.
• Google Alphabet’s business, led by Search, YouTube, and Cloud, drove revenues to USD 41.2 billion, up by 13 % relative to last year in first quarter of 2020.

FAANG Group’s Resilience Amid COVID 19

Currently, the global economy is experiencing severe downturn as countries seek to contain the novel coronavirus. There have been dire ramifications on businesses and trade, besides health and social crisis. Consequently, stock exchanges across the world faced bearish sentiments and sell offs at record levels recapping the Great Financial Crisis (GFC) of 2008.

Besides, Global Virus Crisis (GVC) has been associated with challenging economic data, plummeting oil prices and bleak corporate results.

Speaking of the stock market, in mid-March of 2020, the S&P 500 had declined by 29.5% over two months, leading investors to plan for a phase more serious than a recession. However, some recovery was noted thereafter with spending and liquidity trends gaining traction, along with low interest rates and valuation, stimulus packages and vaccine trials. S&P 500 top 50 holdings were down just 4% in the beginning of May 2020.

Amid the market turmoil, FAANG stocks have depicted good resistance. For instance, Netflix emerged as a star performer, rising by ~25% on a YTD basis with people consuming more content while being confined to their homes.

Shares of Apple and Google gained 15.3 % and 11.7 % respectively between 22 April 2020 and 22 May 2020, while Facebook’s shares gained 29 % in the same period. Netflix’s share prices increased 2.3 % and Amazon too gained 4.4 %.

Resilience seemed to have come naturally, as key operators of digital platforms and clouds - FAANG stocks were particularly well-positioned for the new normal. Their already gigantic market capitalisations were further bolstered by measures like growing platform and cost mitigation strategies through remote work.

The overall performance of FAANG stocks remains optimistic with majority of market experts considering these as instrumental for the global economic recovery.

GOOD READ- Is FAANG Family the Ideal Stay-At-Home Stocks Amid COVID 19 Market Mayhem?

FAANG Stock Performance

Below is the glimpse at stock performance of the FAANG Group post market close on 12 June 2020:

(Note: All currency in USD, unless otherwise specified).