FAANG image

As we venture well into the New Year, the season for US tech companies to release reports on Q4 revenue and earnings is upon us. As Netflix saw last week with their price dropping 5%, heavy market volatility often follows report releases as traders react to the positive/negative data.

With these reports often released after markets have closed, our award-winning TraderPro platform constantly offers a range of markets, including all FAANG companies, which can be traded outside of regular hours. This means you’ll never miss a trading opportunity and can react to corporate earnings in real time as soon as the numbers hit the wires.

What are FAANG stocks?

For those who are unsure of what a FAANG stock is, FAANG is an acronym for the market's five most popular and best-performing tech stocks, namely Facebook, Apple, Amazon, Netflix and Alphabet's Google.  Collectively, share price fluctuations in these equities can have a huge impact on indices such as Wall Street and investor confidence in general, which can spill over into global markets.

FAANG stocks in 2018

At the start of 2018, the FAANG stocks were top picks amongst analysts. Four of the five tech stocks had gained roughly 50% the year before, excluding only Alphabet, which rose more than 30% in 2017. Facebook was on the heels of its best year since 2013, and Apple was having its best year since 2010. However, the tech sector stumbled massively in 2018, particularly in the final quarter, amid widespread calls for regulation alongside industry privacy scandals. Turbulent trade negotiations between the United States and China dragged the overall market lower and opened up profit-taking opportunities among the highest-flying, high-valued tech stocks.

The story so far in 2019

Netflix is the only one of the popular tech stocks to have reported earnings this year. Prior to their earnings release, Netflix shares had risen as much as 50% since their December lows. It appeared as though investors had already factored in the record 8.8 million new paid streaming customers acquired in Q4, and the announced price hike for US subscribers. The company’s EPS came in lower than the same time last year due to increased spending, but was still higher than expectations. Revenue came in at $4.19 billion, slightly below Wall Street estimates of $4.21 billion, prompting moderate profit taking following the impressive rally since the turn of the year. Forecast Q1 revenue and net income also came in below Wall Street’s analyst estimates that have contributed to the decline in share price, hence the importance of forward guidance figures.

So when do the other FAANGs report and what do you need to look out for?

Apple Report Q4 Earnings On 29/01/2019 - After market close (All sessions trading available)

Apple closed almost 7% down for 2018, making for the stock’s worst year of trading since the 2008 financial crisis. The decline in the tech sector in the final quarter of 2018 affected Apple’s stock dramatically, falling from record highs of circa $233 to find support at 18 month lows of $142. The almost-40% decline saw approximately $350 billion wiped off the company’s value. Apple’s results will likely be among the most hotly monitored of all corporate earnings released throughout the earnings season. This is following on from their shock announcement that the current quarter’s revenue will be lower than its original forecast, citing fewer iPhone upgrades and weakness in emerging markets. The focus of Apple's earnings this time round is likely to rest squarely on its forward guidance after the company lowered its outlook, and whether weakness in sales is likely to continue- and if so, for how long?

Bloomberg Analyst Consensus Ratings:

23 Buys /23 Holds / 0 Sells / Average 12 month TP $180.22 +14.9%*

*Correct as of time of writing/subject to price movements and reiterations

Facebook Report Q4 Earnings On 30/01/2019 - After market close (All sessions trading available)

Facebook ended the year well into bear market territory trading 25% down for 2018. The plunge makes for Facebook’s worst year of trading, and its only down year since going public in 2012. The company was plagued by scandals which weighed on user metrics and the platform’s ad-based business model. This caused shares to plummet from dizzy July heights of $218 to lows of $123, a massive decline of over 40%. Investors will likely be focusing on how the world’s largest social network plans to win back public trust after facing the scandals for violating its users’ privacy. Restructuring costs will be important and seeing the impact this has had on advertising revenue.

Bloomberg Analyst Consensus Ratings:

41 Buys /8 Holds / 4 Sells / Average 12 month TP $185.83 +23.9%*

*Correct as of time of writing/subject to price movements and reiterations

Amazon report Q4 earnings on 31/01/2019 - After market close (All sessions trading available)

Amazon ended 2018 up more than 28%, making it one of the better performing FAANG stocks for the year. The e-commerce giant continued to expand its reach into other industries, delving further into health care and media. Amazon stock took a beating in the fourth quarter of 2018, weighed down by market turmoil and weaker-than-expected guidance for the holiday season. The stock has shed almost 20% since September. Amazon, like Facebook, has been at the centre of calls for regulation. Experts and lawmakers, including President Donald Trump, have called for antitrust reviews of the company. Any significant action on that front in 2019 could hit the stock. Amazon's Q4 revenue could likely benefit from holiday sales amid slowing international growth and currency headwinds. Forward guidance on trade and macroeconomic concerns was previously downbeat, potentially leaving room to beat expectations. Short-term factors to be mindful of will be the impact of near-term spending pressure on profit, which may be reflected in Q1 guidance on the stronger dollar, higher wages and hiring plans, which could offset advertising and cloud profit growth.

Bloomberg Analyst Consensus Ratings:

48 Buys /2 Holds / 1 Sell / Average 12 month TP $2149.09 +26.7%*

*Correct as of time of writing/subject to price movements and reiterations

Alphabet (Google) Report Q4 Earnings On 04/02/2019 - After market close (All sessions trading available)

Alphabet ended the year practically flat, down just under 1% in 2018. Throughout the year the company suffered its own privacy and content moderation reckoning, though arguably to a lesser degree than Facebook’s, and defended its business practices before the US Congress. Google also faced backlash from its own employees around the company’s handling of misconduct and discrimination, leading them to answer to EU antitrust regulators to the tune of several billion dollars in fines. In the up and coming results, focus will be on whether growth in paid clicks on Google sites continues to increase on mobile ad demand. Focus will also be on whether ‘Google Other Revenue’ growth has held up and continues to aid long-term market share hopes, and also whether demand remains strong for advertising across all regions, bolstering the growth outlook. Alphabet remains a favourite among analysts with the consensus on Bloomberg showing 40 Buy ratings, 2 Hold ratings and not a single Sell rating on the stock. Could cautious forward guidance and a miss of estimates turn the tide in opinions? Or will a solid set of results confirm they know what they’re talking about?

Bloomberg Analyst Consensus Ratings:

40 Buys / 2 Holds / 0 Sells / Average 12 month TP $1348.68 +21.8%*

*Correct as of time of writing/subject to price movements and reiterations

Trading tech stocks

An important thing to remember when it comes to these tech stocks is they’re very susceptible to changes in market sentiment. Having made such large gains in the past few years, a lot of investors, regardless of the recent decline in Q4 of 2018, will still be sitting on handsome profits. Positions in shares are built up over time based on continuing confidence in the company and its future, whereas profit taking happens far more abruptly as people look to cash-in their gains before the shares head south too quickly. This ‘heard’ mentality can cause exaggerated declines in share prices so forward guidance will be the main focus for investors during this round of results. Along with specific company factors such as privacy scandals and volume of units sold, the global economic situation will also be likely to play a large factor in the future performance of these popular equities.