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Can Amazon and Apple share prices power FAANG returns in 2020?

The FAANG stocks – Facebook [FB], Amazon [AMZN], Apple [APPL], Netflix [NFLX] and Google’s parent company Alphabet [GOOG] – have all helped to prop up the tech-heavy Nasdaq so far this month, following their strong performance in 2019. Will their share price strength continue this year amid the push to quickly innovate and stave off the competition while facing regulatory uncertainties and political risk?

From early December 2019 through 6 January, Facebook’s share price was up by 5.2%, Amazon’s was 5.5% higher, Apple’s share price increased by an impressive 12%, Netflix’s rose by 6.8% and Alphabet’s stock gained 7.2%.

 

 FacebookAppleAmazonNetflixGoogle
Market Cap$617bn$1.3trn$956bn$149bn$954bn
PE ratio (TTM)34.3925.2384.44107.8030.21
EPS (TTM)6.2611.8922.573.1246.60
Operating Margin (TTM)34.49%24.57%5.39%12.51%21.36%

Facebook, Apple, Amazon, Netflix & Alphabet share price vitals, Yahoo Finance, 08 January 2020



Looking at these stock’s full-year performance, Facebook’s share price was up by 59%, Amazon’s was 26% higher, Apple’s share price went up a whopping 92%, Netflix’s rose by 25% and Alphabet’s stock gained by 32%. Opto takes a look at what could be in store for FAANG stocks as a whole this year, as well as some key factors unique to each company.

 

Apple, Alphabet and Facebook: share prices on the rise
 

In 2019, the S&P 500 was up by 30%, mainly down to the strong performances from the FAANG stocks, according to a CNBC. Many analysts are predicting the five companies will make strong gains again this year. But whereas Apple and Facebook were the two leading FAANG stocks last year, some analysts think Alphabet could take the lead in 2020.

Blackstone vice-chairman Byron Wien is predicting “several market corrections” to total at least 5% in 2020, with much of the negative impact hitting the FAANG stocks, “Big tech companies face growing political scrutiny and social blowback,” Wien said, according to MarketWatch.

 

Alphabet

Alphabet shares gained on 6 January after “a bullish note from Pivotal Research Group, which upgraded the company’s stock to buy from hold,” according to a report by The Wall Street Journal. The expectation from the research firm, according to the publication, was that new Alphabet CEO Sundar Pichai would provide more wealth to Alphabet’s wealth with shareholders. This would be either through increased buyback but could also potentially come in the form of a dividend “for the first time in the company’s history,”

 

 

 

 

While some analysts fear what result the 2020 US presidential election may have on regulation,  But Brian White, an analyst with Monness, Crespi, Hardt & Co, isn’t one of them. “Although we expect the anti-trust rhetoric to reach deafening levels ahead of the US presidential election this year, we are not afraid of a potential break-up of Alphabet,” he told CNBC, adding: “We continue to believe Alphabet is undervalued for its growth prospects, leadership position in digital advertising and cash-rich balance sheet.”

 

Facebook

Analysts at Deutsche Bank are bullish on Facebook, expecting the company’s core app to continue to be a “critical leg of the story” around the company’s stock this year. Other analysts think fines levied against the company should hopefully help it learn from its mistakes.

 

 

 

 

Amazon

For analysts at Argus Research, the relative underperformance in Amazon’s shares last year “has pushed valuations into more attractive ranges”. Jim Kelleher said in a note to clients that Amazon stock “warrants long-term accumulation in most equity accounts” outlining that the company’s “ecosystem displayed strength across numerous metrics,” CNBC reports.

 

 

 

 

Netflix

Despite a variety of headwinds, Netflix stock still managed to increase more than 20% last year. The major headwind, according to Rick Munarriz writing in the Motley Fool, is “the credibility of its quarterly outlooks”.  Following failures to meet guidance for net streaming account additions in two previous quarters has raised concerns while the launch of competitors Disney+ and Apple TV+ are other causes for concern. However, Munarriz notes that “at least 165.93 million streaming accounts worldwide would show the world it can thrive in a more cutthroat climate”. The consensus among 43 analysts polled by CNN is to buy the stock.

 

 

 

 

Apple

Apple appears to be the stand-out among FAANG stocks, as it could see much higher returns once 5G technology gets underway. Apple’s share price could reach $400 by the end of the year, according to Wedbush managing director Dan Ives in a report by CNBC.

 

 

 

 

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.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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