FAANG stocks have really felt the turbulence of the broader market sell-off so far this year. In fact, two members, Meta Platforms and Netflix (the “F” and “N” in FAANG), suffered massive falls from glory, shedding well over half of their value following brutal quarterly earnings results.
Indeed, the FAANG cohort seems fractured, with some beginning to question whether or not a new acronym is needed to represent the best that big tech has to offer. With volatility spreading to the highest-quality members of FAANG like Apple, questions linger as to whether the group will save this market or weigh it down further in what could be another leg lower.
Despite recent swings, FAANG stocks are still best-in-breed. They’ve become a lot cheaper in recent months, and in this piece, we’ll use Tipranks’ Comparison Tool to determine which member offers the most value.
Apple (AAPL)
Apple is the largest company on the planet, and it needs no introduction. The iPhone maker has held its ground best amid the recent volatility storm facing the FAANG group. Though AAPL stock has held relatively steady, thanks to its exceptional results and enviable balance sheet, shares are still down in line with the S&P 500.
Today, Apple stock is down around 14% from its high, and with earnings on tap today after market close, it’s time for the market’s moment of truth.
While chatter points to share-taking in smartphones, with Morgan Stanley analyst Katy Huberty pointing to blockbuster earnings for the quarter, all eyes will be on guidance moving forward. Lockdowns in China aren’t great news, but if there’s a company that can navigate supply chain problems, it’s Apple. Its CEO Tim Cook has done a magnificent job of steering Apple through the past two years of supply woes.
If investors don’t like Apple’s second quarter (and there’s a risk that they won’t), Apple stock may very well become the best value that FAANG has to offer. At writing, Apple stock trades at a modest 26 times trailing earnings multiple. That’s too low, in my opinion, given the firm’s booming services business and new innovations that could delight within five years.
Wall Street analysts remain bullish on AAPL, with the average Apple price target of $195.55 suggesting 24.9% upside potential from current levels.
Amazon (AMZN)
Amazon stock may very well be the priciest FAANG member, with its elevated 42.6 times trailing earnings multiple. However, Amazon could prove more than worthy of the premium to the peer group, given its disruptive growth prospects.
The company has been doing a stellar job on all fronts. With the “Buy with Prime” button that could prove a game-changer in payments and logistics, Amazon could be in the early innings of its next big growth segment.
It’s not just “Buy with Prime” that could unlock next-level revenue growth. The company’s video gaming and video-streaming services could act as a one-two punch that makes Prime one of the stickiest services on the planet. Further, continued innovations in robotics could pave the way for a wave of disruption in the physical realm. Indeed, the long-term growth profile couldn’t look better.
For now, the stock will wane over broader market woes. The high multiple does the stock no favors.
With earnings scheduled for today after market close, the stock could go either way. Though there were notable headwinds for the quarter, it will be interesting to see how investors react. It has been a very long time since earnings powered the stock higher.
Wall Street analysts are bullish on AMZN, with the average Amazon price target of $4,160.66 implying 50.6% upside potential from today’s levels.
Netflix (NFLX)
Finally, we have fallen streaming star Netflix, which clocked in two straight quarters of abysmal results. Shares of Netflix are now down over 72%, with a mere 16.8 times trailing earnings multiple.
Undoubtedly, such a low multiple on a FAANG mainstay like Netflix would have been unheard of last year. Yet, here we are. Netflix is now the second-cheapest stock behind Meta based on trailing earnings.
While legendary investor Bill Ackman has jumped ship following the latest brutal results that unveiled a loss of 200,000 subscribers, I do think the stock represents compelling value. The real question is if the subscriber losses are a bump in the road amid a content drought and a rise in competition or if it’s curtains for video-streaming as we know it.
Indeed, competitive pressures and tighter consumer budgets are likely factors behind Netflix’s brutal quarter. Still, investors would rather jump ship than wait around for any sort of relief.
Currently, Netflix has near-term solutions for alleviating its recent weakness. From getting freeloaders to pay modest price increases, it’s clear that the company is pursuing any effort it can to reverse the pain. Such efforts could hurt Netflix more than do it any good, in my opinion.
Netflix has real issues. It needs to create more, better content to justify its price hikes. Otherwise, consumers will jump ship, given switching costs are negligible. Show cancellations and other questionable efforts to beef up margins will do no good, in my opinion.
For now, the company’s push into mobile video gaming is a wildcard. What the company really needs is a second season of Squid Game to save it. For investors, that second season can’t come soon enough.
Wall Street analysts remain modestly bullish on NFLX in terms of price targets, with the average Netflix price target at $304.29, implying upside potential of 61.4% from current levels. Nonetheless, the stock has a Hold consensus rating.
Conclusion
Apple and Amazon are the highest-quality FAANG stocks. Both stocks have Strong Buy recommendations, with AMZN stock having the higher upside potential. While Amazon stock may be the most expensive of the group, it does seem like one of the most undervalued.
Netflix has a Hold rating but the highest upside potential, according to Wall Street analysts. Netflix seems like the cheapest FAANG company of the batch, but there are problems at the firm that will not be easy to solve.
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