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In One Chart - May 1, 2019

In One Chart: The FAANG Shuffle

Earnings are a funny thing.

Apple (AAPL) announced earnings yesterday and relayed that quarterly revenue dropped to $58 billion from $61 billion a year ago, then shares popped 4.5% after hours.

Just earlier this week, Google’s parent company Alphabet (GOOG) reported quarterly revenue of $36 billion, compared to last year’s $31 billion, and then promptly lost $60 billion in market cap.

The nuanced effects of earnings announcements are due to how stocks are valued (shares are priced at the present value of future cash flows, at least in a perfect world) but it makes for some head-scratching price action. It also leads investors to question which FAANG stock is the best investment at the moment.

Each of the FAANG stocks (Facebook (FB), Amazon (AMZN), Apple, Netflix (NFLX), and Alphabet (née Google)) has experienced a volatile earnings announcement in the last year, and it’s caused several lead-changes in the omnipresent FAANG race. The chart below shows a 3-month look-back showing percent-change in total return price for each FAANG company.

 

Apple’s recent jump and Google’s recent fall are both stirring up chatter that it might be a good time to make moves.

Apple’s year-over-year revenue decline wasn’t as bad as analysts expected, and management guidance projects revenue of $52.5 — $54.5 billion next quarter, straddling last year’s $53.3 billion for the same figure. While share prices are up, will Apple’s year-over-year growth continue to stay flat?

On the other hand, analysts expect Alphabet to post just over $38 billion next quarter, an increase compared to the $32 billion reported in last year’s second quarter. Separately, Alphabet owns about 5% of each Uber and Lyft (LYFT), positions from which it stands to profit billions.

While Apple is the better performer as of late, is Alphabet the smarter bet moving forward?

Elsewhere in FAANG…

Amazon reported quarterly revenue of $59.7 billion, topping estimates of $59.65 billion and improving upon last year’s figure by 17%. Most notably, Amazon stated a new goal to launch 1-day shipping for its retail business, and the company’s cloud computing arm Amazon Web Services (AWS) saw 41% year-over-year growth.

Netflix reported $4.5 billion in revenue for Q1 ’19, a more than 22% increase over the $3.7 billion one year earlier, and added 1.74 million US subscribers compared to the expected 1.61 million; however, Netflix issued light guidance for the quarter ahead.

Facebook climbed on its own earnings announcement last week, rising 9% after hours despite sharing it could face a one-time charge of up to $5 billion from the FTC. CEO Mark Zuckerberg addressed privacy concerns and announced consumer-centric changes that could potentially limit future ad revenue, but Zuckerberg sees promise in other aspects of Facebook’s business, such as Facebook Marketplace and Instagram’s new e-commerce features.

All of this aside, it’s pretty remarkable that later today, most of us will be watching Netflix while checking Facebook on our Apple iPhones and Googling reviews for something we “need” from Amazon.

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