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Highlights:
- Alphabet (GOOGL) posted Q1, FY-22 advertising revenue of US$54.7 billion.
- Amazon (AMZN) Q1 FY-22 revenue was US$116.4 billion.
- YouTube for GOOGL and AWS for AMZN are key revenue drivers.
The Federal Reserve is trying to quell the fastest inflation in decades. Meanwhile, the aggressive interest rate hikes by the central bank are triggering the risk of tipping the US economy into a recession.
As a result, the equities markets have become volatile. Investor sentiments are down, and that has trigerred a sell-off. Even the FAANG stocks are not immune to the recent market mayhem. An acronym for Facebook (now Meta Platforms), Amazon.com (AMZN), Apple (AAPL), Netflix (NFLX), and Google (now part of Alphabet (GOOG) (GOOGL), FAANG stocks were considered a safe bet by investors.
But this year has not been particularly good for any stock. FAANG stocks have also suffered during the tumultuous market conditions.
Here, we look at two of the FAANG stocks, GOOGL and AMZN, and see which can be a better option to hedge a portfolio amid the recessionary winds:
Alphabet (GOOGL)
Despite reporting mild earnings in its first quarter, Alphabet (GOOGL) is still a stock of choice for investors. GOOGL posted US$24.62 per-share earnings in its Q1 results. Although it faced a slew of headwinds, including the pandemic, it has YouTube, which only thrives during such lean phases.
Alphabet's advertising revenue surged 22 per cent year over year in Q1, FY-22, to US$54.7 billion. However, it also has revenue streams other than advertising.
Google cloud is a strong contributor to its revenue. Its cloud hosting revenue in Q1 jumped nearly 44 per cent YoY to US$5.8 billion, which is a strong cue for investors to consider GOOGL.
Besides, Alphabet has a substantial cash stockpile of nearly US$134 billion, which can be used to reward investors.
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Amazon.com (Nasdaq:AMZN)
The global market leader in e-commerce, Amazon (AMZN), is also a long-standing contender among FAANG stocks. AMZN reported a net loss of US$3.8 billion in its Q1, FY-22 results versus a net income of US$8.1 billion in the year-ago quarter.
Although a drop in profits may have dampened investor sentiments, the company also has businesses that can generate huge profits, like its Amazon Web Services (AWS), which propelled the net sales by 37 per cent to US$18.4 billion in Q2, FY-22.
Amazon has other growth drivers in its electronic gadgets like Fire TV, Blink Home Security Camera, Echo Virtual Assistant, and self-driving vehicle company Zoox.
Even if there are economic headwinds, AMZN can still wade through market volatility.
Bottom line:
Inflation, Fed Reserve's rate hikes, and fears of a recession are impacting the market. The year has seen the worst tech rout, with all major US indices plunging since the start of the year. Investing isn't easy, so investors need to apply caution before buying and selling.
