FAANG stocks are having a hell of a trading run at the moment with all the drama that has engulfed several top tier stock exchanges such as the NASDAQ where they are listed. FAANG refers to the ETF made up of Facebook, Apple, Amazon, Netflix, and Google (Alphabet) shares. These shares are what has been collectively referred to as the ‘blue-chip’ (a financial term used to refer to consistent high-profit margin companies).
What is an ETF?
The abbreviation ETF stands for an exchange-traded fund, this involves a collection of securities (like stocks) which tend to track an underlying index (or industry). The method was developed in the early 1990s in order to make the traditional passive and high cost ‘mutual funds’ more accessible to the general public. The first ETF, the S&P 500 SPDR is not worth $260 billion in assets and trades at $280 a share.
What went down with the FAANGs
In this weeks update, we will go through the companies last week in trading and summarize the key events to do with each company.
1. Amazon
Jeff Bezo’s, the worlds richest man, on Thursday saw a $26 billion increase in his net worth. This comes as a reflection of his significant equity in his flagship company Amazon which has seen a significant increase in demand following the stay at home orders. This follows the record holiday revenue announced in their first quarter of earnings.
Despite the great news a glaring PR disaster is gaining traction and starting to damage the company reputation. Jeffery Smalls, a former employee on their New York office, was fired for staging a walk-out and “violating the social distancing guidelines”. It later emerged that in the response meetings with Bezos present, the group executives agreed to target the “illiterate” Smalls as the voice of the anti-union campaign. Recently the Amazon has had their first employee to die of COVID with more than 20 cases throughout their factories in the US. The French government has ordered the effective shutdown of their remaining warehouses in the country, could this become more common?
2. Google
Google and Apple have partnered to develop a COVID 19 tracking software, this will be able to trace whether or not you have been in contact with an infected person. The app received widespread notoriety as many have pre-maturely accused the tech giants of invasions of privacy. By using Bluetooth tracking, the companies have assured the public that governments will not receive any information they do not permit and will not map each person’s movements. According to the 2019 figures, IOS and Android devices make up 90% of global mobile phone demand ensuring the accuracy of the testing. Trading on Alphabet stock has remained steady at $1,274 per share.
3. Apple
According to its earnings report of 2019, Apple depends heavily on its revenue for iPhones (75% revenue). In their financial report for the first quarter of 2020 (as ending in December 2020) they reported a quarterly revenue growth of 9% with $91 billion in total revenue (all-time record). International sales accounted for 61% of their earnings and this is anticipated to take a heavy hit due to lockdowns. Apple has also had a lack of consistent supply from its part manufacturers like LG Innotek (the camera component maker) who shut down on March 1st due to a positive COVID case. The significant closures to some of the flagship stores from London to Johannesburg have increased the pressure on sales, in China Apple and Huawei had to look to fast online deliveries to make up for the lost profits.
Whilst this might be distressing for shareholders, the company is far from finished following the loss of its $1 trillion dollar valuation. The company is rumored to have $207 billion in cash deposits in overseas account which it using for strategic AI and VR acquisitions buying Next VR for $100 million, AI startup Voysis to improve Siri and the popular weather app Dark Sky. This also follows the steady growth of the streaming service Apple + which received nearly 33 million subscribers by January is failing to gain traction. The company is relying on improved sales from the recently-debuted iPhone SE, a cheaper alternative to the highly inflated iPhone 12 at $400 per phone.
4. Netflix
It has been a busy week for the video streaming giant. Following 20% in trading yesterday, Netflix to a $193 billion valuation becoming larger than Disney. This is the first the tech firm has out valued the entertainment giant and analysts are attributing the rise to COVID-19 and the market dependency on ‘Stay at Home Stocks’. Goldman Sachs adjusted their price targets for the company from $430 per share to $490 following a 21 million increase in downloads and 10 million net increase in subscriptions.
There are still positives for Disney as 50 million sign up to the Q1 launch of Disney+ globally. This is a growth curve sharper than Netflix’s past 20 years (time taken to reach 50 m consumers), this expected to increase rapidly with the re-introduction of sport (ESPN is part of the Disney+ package). In November, Netflix CEO Reed Hastings declared that his company was “not worried” on the threat of Disney+ stating they have “a lot of competitors”. Near rival Roku has seen a 9.6 million increase in download and it been predicted that household spending on streaming services will continue to increase as the lockdown persists. As to who will be king of the streaming wars we are yet to find out.
5. Facebook
Facebook has ‘declared war’ against the spread of misinformation during the COVID-19 fight. This comes a week after it announced measures to halt the mass sharing of information on WhatsApp, one of the main sources of false information. The platform has also agreed to rally behind the Swiss franc as singular currency backing Libra, its much-anticipated crypto-currency.