FANG Stocks – Powering through the economic downturn

The exquisite FANG group – Facebook, Amazon, Netflix, and Google – powered through the economic downturn, posting strong gains in 2020. The FANG companies have historically outperformed the S&P 500 Index in 2020, aided by strong earnings results and the ability to diversify beyond their core businesses.

Amazon, Facebook and Netflix have been growing exceptionally as digital trends accelerate, bolstered by the pandemic. However, when comparing to the other three big techies’ stock performance, Alphabet’s growth lagged but recovered at the end of 2020.

In 2020, AMZN rose more than 70% – outperforming the S&P 500 and other FANG stocks. NFLX is currently trading above $500 and touched an all-time high of $575.37 on July 13, 2020. The stock is up more than 60% in 2020. Facebook performed well despite facing several challenges, up almost 30% in 2020. GOOGL has been very volatile over the past year but maintained an uptrend. In 2020, GOOGL rose 27.5%, outperforming S&P 500 performance of 12%.

Amazon, the lead share gainer in 2020, massively benefitted from the pandemic. The e-commerce behemoth’s strong dominance in e-commerce fueled by offering low prices and fast delivery, and its rapidly growing cloud business, makes the stock a great compelling opportunity.

Facebook has proven to be resilient in the face of many controversies. Despite posting strong growth rates and profitability, it remains undervalued. Facebook is diversifying its business, which currently relies heavily on advertising. The social media giant is pushing into e-commerce through Facebook Shops, enabling small businesses to directly sell products from Facebook and Instagram. All these developments could potentially benefit Facebook and widen its moat.

Netflix has built a strong brand, and has many growth catalysts through its original content and international expansion. The company’s diverse portfolio of original shows and movies will further boost subscriber growth, retain its existing customers and enhance its pricing poor.

Google faced a slight downfall as its advertisement business was impacted by the pandemic. However, Google’s cloud business continued to perform well. The company has been growing rapidly in this fast-growing highly-competitive cloud market. The Google search engine remains the dominant player in both laptop and mobile platforms. Alphabet is also strongly positioned with YouTube.

While the FANG companies have several competitive advantages, they are also exposed to significant risks. Facebook and Google have been condemned for lack of data privacy and security. Facebook’s Whatsapp was hit by a global backlash over privacy, after it issued a new privacy policy.  Netflix faces new competitors in streaming video as well as a mounting debt load while Amazon has come under regulatory scrutiny for anti-competitive business practices.

– Merlyn Sushmitha
Sr.Research Analyst

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