The so-called FAANGs – a collection of the world’s largest tech companies – have suffered sharp falls following a recent round of results amid a recalibration of investor expectations for these titans.
Despite better than expected profitability from a number of the stocks, they have all suffered significant share price losses since peaking in October. Apple, the world’s largest company and at one point a $1trn company, has seen its shares plummet by 13% recently.
Alphabet, the listed company representing Google, has experienced the same sell-off of 13%, while Amazon is down 19% from its October peak.
Meanwhile, Facebook and Netflix have been similarly afflicted, down 9% and 17% respectively, with Facebook having already derated significantly in the summer.
So is the story of the FAANGs over for investors? Certainly there are headwinds facing many of the stocks, not least the tech-tax proposed in the UK last week during the Budget, one that could be mimicked across Europe.
Below, three investment experts give their views about what’s next for the famous five, and how investors should be positioning.
Adrian Lowcock, head of personal investing, Willis Owen:
The results highlight the risks of stretched valuations and lofty expectations. To meet these expectations and support the share prices the tech giants didn’t need to meet the expectations, they needed to beat them, as that’s what investors came to expect. So any numbers that don’t meet targets – be that below expectation revenues at Amazon, or falling iPhone sales at Apple – are going to result in big falls in the share prices of those companies.
This doesn’t mean this is the end – a company’s performance and profits are not linear and there are always bumps in the road. But it could mean that investors begin to price future growth more cautiously and wait for it to come before pricing it into the shares so far in advance.
Christopher Rossbach, CIO, J Stern & Co:
While the results were slightly below market expectations, companies like Amazon and Alphabet have strong competitive positions in their markets and strong fundamentals. Taking those as examples, both show good profitability, with Alphabet the leader in search and advertising, and Amazon the leader in e-commerce and cloud computing, and increasingly benefiting from advertising too. The fundamentals of both companies are intact and we believe that any significant weakness is a buying opportunity for long-term investors.
Hyun Ho Sohn, portfolio manager, FF Global Technology fund:
Though sentiment has become slightly more negative towards the technology sector this year, it is maintaining market-leading performance. And while some investors are concerned about high valuations in technology, on a relative and historic basis the sector still looks attractive compared with others – benefiting from long-term growth themes and robust company fundamentals. All of this augers well from a long-term perspective.