Bet On These 5 Technology Stocks Crushing FAANG In 2019
Zacks Investment Research | Mar 27, 2019 08:28AM ET
After a disappointing 2018, the stock markets have been on an upswing this year, primarily due to positive development on the trade-war front, financial stimulus by the Chinese authorities and dovish stance of the central banks globally.
FAANG stocks have also put up an impressive performance in the year so far. These represent the most well-liked and high performing stocks that generate impressive returns for investors. This term was popularized by CNBC's Mad Money host Jim Cramer.
The word FAANG is an acronym where "F" stands for Facebook (NASDAQ:FB) , "A" for Amazon (NASDAQ:AMZN) , the next “A” stands for Apple (NASDAQ:AAPL) , "N" for Netflix (NASDAQ:NFLX) , and finally "G", which represents Alphabet (NASDAQ:GOOGL) , commonly referred to as Google.
On a year-to-date (YTD) basis, Facebook, Amazon and Apple have posted gain of 27.9%, 18.8% and 18.4%, respectively. Netflix and Alphabet have gained 34.5% and 13.9%, respectively, during the same period. The tech-heavy Nasdaq 100 and the S&P 500 posted rally of 15.6% and 12.3%, respectively, in the YTD period.
FAANG – Digging Into the Details
Alphabet and Facebook currently dominate the U.S digital ad market. Alphabet's stellar advertising revenues and improving paid click growth are the key catalysts. The company’s focus on innovation, AI, cloud, home-automation space, strategic acquisitions and Android OS will likely keep generating strong cash flows. Alphabet has shown impressive execution over the years, more or less maintaining dominant share in a competitive, fast-growing search market. Furthermore, Google’s robust mobile search is a major positive.
Facebook is benefiting from its huge user base. The company estimates that more than 2.7 billion people use its “Family” of services, which includes Facebook, WhatsApp, Instagram and Messenger, on a monthly basis.
Amazon continues to ride on its e-commerce dominance. The company’s aggressive retail strategies, distribution and delivery strength, and expanding Prime subscriber base are key catalysts. Additionally, Amazon’s continued momentum in cloud computing courtesy Amazon Web Services (“AWS”) is a major positive. Also, improving Alexa features andcompany’s growing prowess in smart and connected home solutions market space through acquisitions like Ring is a major growth driver.
Despite weak demand for iPhone, Apple is expected to benefit from expanding Services segment, driven by solid App Store sales, and increasing adoption of Apple Music and Apple Pay. Apple's endeavors to open up its ecosystem, through partnerships with the likes of Samsung (KS:005930) and Amazon, are likely to support this segment. The latest announcement of subscription-based video streaming, news and gaming service is a catalyst. The new credit card, supported by Goldman Sachs (NYSE:GS) and Mastercard (NYSE:MA), will benefit from Apple Pay’s growing adoption.
Netflix is dominating the video streaming market, driven by content portfolio strength that is helping it to expand subscriber base. The company remains confident of adding more subscribers as the trend of binge viewing is catching up fast. Netflix now has more than 139.26 million paid subscribers globally.
Tech Sector at Large Holds Promise
The technology sector, which bore the brunt of market volatility in 2018, has been recovering impressively so far this year. Currently, the Technology Select Sector SPDR Zacks Investment Research
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