Stock Analysis & Ideas

AAPL vs. GOOG vs. AMZN: 3 Top FAANG Stocks Turning a Corner

Story Highlights

Apple, Alphabet, and Amazon are three top FAANG stocks that could turn quickly once market sentiment shifts and the Fed looks to pause rate hikes. As growth rates slow and expectations drop, each firm may be in a spot to shock and awe in a downbeat 2023.

FAANG stocks haven’t been able to keep this stock market afloat amid the 2022 bear market. Though big tech may have been the last domino to fall, they’re more than likely to land on their feet, unlike the many speculative and unprofitable innovative tech companies that have crashed hard. Indeed, it’s quick to conclude that FAANG’s glory days are over. Some of the names within the basket have lost more than 70% of their value. Indeed, that’s a decline that’s tough to recover from. Last week, the FAANG stocks took off as the CPI numbers caused many growth-savvy investors to go from bears to bulls. Though FAANG has fallen, they’ll likely lead the inevitable rebound.

This year has exposed the weakest links of the group. Moving forward, Wall Street is standing firm on the strongest links, most notably Apple (NASDAQ: AAPL), Google-owner Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), and Amazon (NASDAQ:AMZN). Analysts may have reduced their price targets by modest amounts, but their consensus rating remains unchanged. They’re still “Strong Buys,” with price targets that seem likely to be hit (even surpassed) in 2023 if the Federal Reserve ends up hitting the pause button.

Let’s compare the three FAANG stocks to see which holds the most upside potential.

Apple (AAPL)

Apple’s latest quarter set it apart from the pack, with in-line earnings ($1.29 EPS vs. $1.27 consensus) despite the impact of the strong U.S. dollar and other macro headwinds. Though services weren’t as robust as they could have been, recent price increases on the broad batch of services should help the firm better overcome inflationary pressures.

Indeed, Apple services are some of the best deals in town, especially for bundlers. Many Apple users won’t think twice about paying an extra dollar for their favorite service.

Looking ahead, management held back on giving revenue guidance. Downbeat guidance has been a major sore spot for Apple’s FAANG peers. Amid macro uncertainties, I’d say a lack of guidance is only wise. Whether or not Apple can continue bucking the trend with a looming recession remains to be seen.

Regardless, I view Apple as one of the strongest of the batch. Though some analysts have muted expectations for product demand going into 2023, I think many are discounting the potential impact of a mixed-reality headset, which could begin production as soon as March 2023, according to DigiTimes.

It’s unclear how a new device will influence top-line growth. Regardless, Apple stock seems too good to pass up at 24.6x trailing earnings.

What is the Price Target for AAPL Stock?

Wall Street strongly favors Apple based on 23 Buys and four Holds assigned in the past three months, with the average AAPL stock price target of $179.70 implying 20.8% upside from here.

Alphabet (GOOG)(GOOGL)

Alphabet stock has been a heck of a lot more volatile than it has been historically over the past few months. The latest Q3 quarterly results were not just disappointing; they represented the third straight quarter of missing bottom-line estimates.

Indeed, Alphabet’s growth seems to have come to a bit of a slowdown, with ads taking a hit from the rough macro climate. Total revenue climbed just 6% (11% on a constant-currency basis). Not at all indicative of a FAANG play. Despite the horrid growth, I view Alphabet as a top bounce-back play once the recession ends.

The streak of quarterly flops is discouraging. However, the 19.3x trailing earnings multiple is just too low for a company with some of the most prized tech assets out there.

Search, YouTube, and Google Cloud still has plenty of growth left in the tank. While other bets have failed to stick, Alphabet is still more than capable of regaining its growth multiple once the worst of the recession fears are baked in. After its recent bounce, it’s arguable that GOOG stock already has the worst factored in.

What is the Price Target for GOOGL Stock?

Wall Street analysts are still pounding the table on Alphabet. The average GOOGL stock price target of $129.54 suggests 31.1% upside potential based on 29 unanimous Buy ratings.

Amazon (AMZN)

Amazon stock has now lost more than 51% of its value from peak to trough. It’s been a painful drop for investors who bought in at any time over the past two and a half years. The new CEO, Andy Jassy, hasn’t really impressed investors. Though it’s mostly the macro to blame, investment in overcapacity in a rising rate environment has many concerned about the e-commerce darling.

With various disruptive technologies in the mix, Amazon is still one of the highest-growth FAANG stocks. Its massive decline is the result of the stretched multiple. After enduring a painful drop, the stock trades at 2x sales. That’s a bargain for any growth stock, especially one with a track record (and network) like Amazon.

Disruptive innovation has never come cheaper, with Amazon looking to continue innovating in a period of economic contraction. Management guided cautiously in the most recent quarter. The stock was punished accordingly. With modest expectations and many growth levers, Amazon could have the greatest upside if next year’s recession is mild or non-existent. Once the tides turn, it won’t take long for AWS and retail to power the stock toward its prior highs.

What is the Price Target for AMZN Stock?

Wall Street still loves Amazon, with 33 of 34 analysts praising it as a Buy. The average AMZN stock price target of $140.36 suggests a whopping 44.5% upside potential over the year ahead.

Conclusion: Wall Street Expects the Most Upside from Amazon

It’s hard to go wrong with the top FAANG stocks on weakness. Wall Street expects the most significant gains from Amazon stock of the three in this piece.

Disclosure

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