FANG Stocks in Race to a Trillion

The FANG group of stocks (Facebook, Amazon, Netflix, and Google) has been receiving a tonne of attention recently, with all four of the online giants in the midst of a massive rally that started back at the beginning of the year. In a financial setting where many are predicting that a large portion of the S&P 500 is going to be replaced in the coming decade, these tech stocks demonstrate how infinitely scalable companies can experience massive growth on a consistent basis – and they’ve shown it again in their Q2 earnings reports.
All four of the companies released their Q2 earnings in the last week of July. Facebook’s report beat market expectations on all fronts, with their second-quarter EPS of $1.32 beating expectations of $1.13. The company also reported revenues of $9.32 billion, compared to predictions of $9.2 billion. Growth for the social media kingpin has been largely driven by its advertising revenue, which grew at twice the rate of its rival Google.
Speaking of Google, the internet giant reported a Q2 profit that was significantly lower than their Q2 report for last year, thanks to a huge antitrust fine in Europe. Nonetheless, the company’s reported EPS of $5.01 was still enough to beat expectations of $4.49, and revenue grew to $26.01 billion, up from $21.5 billion at this time last year. Google also reported a 23% drop in cost per click from a year ago, as increased user migration to mobile devices pushed up the rate of mobile search traffic.
Netflix, on other hand, beat revenue predictions but fell slightly short of EPS expectations. The company reported an EPS of 15 cents vs. 16 cents expected, while revenue grew to $2.79 billion – more than the market forecast of $2.76 billion. Netflix also reported a significant growth in users, with the number of subscribers reaching 5.2 million and easily eclipsing the 3.23 million expected.
The last company to release its Q2 earnings was Amazon. Just like Netflix, the online retailer beat on revenue, but fell short of earnings expectations. The company’s reported EPS of 40 cents was way below street estimates of $1.42, largely due to the company’s continued international expansion and investment in new online services. Revenues, however, kept on growing and reached $38.00 billion vs. $37.18 billion expected.
As of June, all of the FANG stocks were up significantly year-to-date. Facebook showed a 33% appreciation, while Amazon had 34%, Netflix had 33%, and Alphabet had 26%. These are massive increases and not the sort of numbers we would usually expect from companies that are already well-known. It’s actually quite amazing that these companies have been able to deliver “start-up” numbers despite having been around for almost 10 years.
It has long been rumoured that Amazon will become the first company to hit $1 trillion, but when analysing the space for growth that each company has left, it seems that Amazon may have the most potential. The term retail giant sounds so innocuous, but it’s a perfect description of what Amazon is turning into. The Seattle-based business has been able to deliver consistent growth by delving into new markets and making bold moves; their recent purchase of Whole Foods being just one of these. Despite their huge miss on earnings in the Q2 report, the company’s expansion into many new markets is creating real value for their customers.
There is no question that at least one of these companies will eventually reach $1 trillion in market capitalisation, but predicting which one it will be requires deep analysis into the remaining potential of each industry. Will social media end up being more important than retail? Or will the idea of an “Amazon tax” come to fruition and result in the full domination of the company?

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