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Updates

Amazon share price: FAANGs trading at a discount as antitrust fears mount?

Amazon [AMZN], Apple [AAPL], Facebook [FB] and Alphabet's [GOOGL] share prices all plummeted last Monday on rumours that US authorities are planning a major antitrust investigation. 

Amazon's share price itself dropped 4.6% as part of the sell-off that saw the tech-heavy Nasdaq drop 1.6% on the day. While Amazon mounted a recovery, the wider sell-off could represent a buying opportunity for investors.

FAANG stocks like Amazon and Netflix [NFLX] had already been under pressure after December's tech sell-off and fallout from the US-China trade war. 

For Kim Forrest, founder of Bokeh Capital, now is the time to ‘buy’. Forrest told CNBC:

“I look at opportunities like this, when the market sells off, to either initiate or add to my positions.” 

But just how big is the opportunity in FAANG stocks following news of the antitrust investigation?

 

Amazon share price

The danger for Amazon is that the investigation will put the brakes on the share price’s 28% recovery from a Christmas Eve low of $1307. Although since June last year, the gains aren't as impressive, up a meagre 2.71%.Amazon 1-year share price performance, CMC Markets, 11 June 2019

 

While recent Q1 results delivered fatter profit margins for the online retailer, they also revealed a slowdown in growth. Spiralling costs off the back of same-day delivery improvements could also see some short-term movement in the share price; the company has only ever twice hiked the membership fee. Yet, if higher costs do weigh on the stock, it might not be for long. According to analysts at Stifel, Prime customers will be willing to pay more in return for the convenience of faster shipping.

Still, analyst consensus for Amazon is a "Buy", with the average target price $2170.21. A 25% upside on the current share price.

 

Alphabet share price

Alphabet's share price dropped 6.6% to $1038 as Google’s parent company got caught up in the antitrust rumour-mill. This was the stock’s biggest intraday decline since 30 April and the lowest it has been since January.

It's already been a difficult 12 months for Alphabet, with the share price shrinking 7.2% since last June. A turnaround looked to be on the cards in April when the stock reached a year high of $1289. However, Q1 numbers missed expectations, sending the stock down 15% in one day.

Now could be a significant buying opportunity for traders. Shares in Alphabet are trading at their cheapest multiple for 5 years, with a trailing P/E ratio of 27.21. The stock also has a 5-year PEG ratio of 1.56, and price to book comes in at 3.99 for the most recent quarter.

 

Market cap$750.75bn
PE ratio (TTM)27.10
EPS (TTM)39.86
Operating margin (TTM)22.88%

Alphabet share price vitals, Yahoo finance, 11 June 2019

 

The consensus rating is "Buy", with an average price target of $1340. This would be a 23% upside on the current share price.

 

Apple share price

Apple's stock has fallen 15% since 3 May as it looks for new revenue channels in the wake of a 17% Q1 fall in iPhone sales. 

Over the past year the share price is down 7%, with the stock getting caught up in the wider tech sell-off in December. May delivered more bad news with HSBC cutting its price target from $180 a share to $174, and the antitrust investigation won’t have helped sentiment.Apple 1-year share price performance, CMC Markets, 11 June 2019

 

Analysts forecast a 3.6% dip in earnings in 2019 followed by an 11% gain in 2020. The stock has a forward P/E rating of 14.06 and a 5-year PEG of 1.37. Price to book comes in at 7.82 for the most recent quarter.

With the average price target from analysts at $216.72, they’re predicting a 20% gain on the current share price.

 

Facebook share price

Facebook's share price tanked 15% as the company found itself in the crosshairs of US authorities yet again. This caps a tricky 12 months that has seen shares dive 13% after a never-ending series of scandals. 

Shareholders have made their displeasure known, with 68% voting to fire Mark Zuckerberg from his role of chairman last week. Although Zuckerberg has the controlling vote so is unlikely to be stepping down anytime soon. 

68%

Percentage of shareholders voting for Zuckerberg's removal as chairman

Analysts expect earnings to dip 6.9% in 2019 before gaining 32.2% in 2020. Facebook has a P/E ratio of 17.97 and a 5-year expected PEG ratio of 1.47. Price to book is 5.55 in the most recent quarter.

Consensus expectations are for the stock to hit $221.5 a share this year, which would see a 32% upside on the current price.

 

Netflix share price

Despite the negative news surrounding other FAANG stocks, Netflix’s share price actually jumped 3.3% last Tuesday after Loop Capital Markets rated the streaming giant a "Buy". Loop cited an "unstoppable lead in subscription video streaming and the margin opportunity" as reasons for the upgrade, setting its target price at $425 a share.

 

Market cap$153.91bn
PE ratio (TTM)125.72
EPS (TTM)2.80
Return on Equity (TTM)26.02%

Netflix share price vitals, Yahoo finance, 11 June 2019

 

Over the past 12 months the stock is down 3%, remaining in recovery mode following the December tech sell-off. Analyst consensus is muted, with the average price target coming in at $387.03, a mere 9% higher than the current share price. The stock is also expensive, with a 60.7 forward P/E ratio.

Yet, expectations are for earnings to grow 28% in 2019 and a massive 71% in 2020.

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Disclaimer

Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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