FAANG Stocks Seem Immune To COVID-19

Of the five component FAANG stocks — Facebook, Inc. FB, Amazon.com, Inc AMZN, Apple, Inc. AAPL, Netflix, Inc. NFLX and Google-parent Alphabet, Inc. GOOG GOOGL —three of them, Facebook, Amazon and Netflix, have each hit record during the pandemic. Of course, this doesn't mean all is bright.

Facebook's Controversies Remain

Facebook's stock is up by about 16% since early 2018 and its revenues have expanded 74% between 2017 and 2019. This is 1.6x those of Google in the same period. Facebook's higher revenue growth over recent years and its higher multiple imply higher potential earnings growth in the future. The hype is led by its big push into e-commerce with the launch of Shops. But controversies remain at Facebook, with continued concerns about how user data is stored and sold as well as the company's responsibility in spreading sometimes dangerous misinformation and content.

Alphabet's Varied Potential

It could be argued that Google's parent company Alphabet has a high-quality revenue mix, especially due to its Cloud business, which represents its fastest-growing segment. Google also has very large advertising exposure, with ads contributing 80% to Google's revenues. While many of Google's offerings don't make much money yet, they could imply that Google is being undervalued.

Amazon's Biggest Weakness Exposed

Amazon is at a crossroads as it is facing sharp criticism over its treatment of employees and the way the company responds to the objections may well determine its future. The e-commerce giant has made some concessions during the pandemic, setting aside $4 billion in COVID-19 response during the current quarter. While the use of the funds is not itemized, it could include ten days of subsidized emergency backup child or adult care.

Still, it is unclear whether this response is a sustained commitment to the wellbeing of its employees or simply a response to the recent criticism. After all, the company was known for its poor working conditions long before the pandemic. In last week's shareholder meeting, Amazon tipped its hand that it was concerned about permanently damaging its reputation.

Apple's Innovation Gap

Shares of Apple have been on a good track for a while. Investors have applauded the company's shift from a business model dependent on hardware revenue to a more services-based structure. As a result, investors have pushed the stock higher 80% over the past year.

Since surpassing a $1 trillion market cap in 2019, shares of Apple have continued to climb sharply. The company's value is now approaching $1.4 trillion. Further robust growth in Apple's services and wearables businesses and strong operational tailwinds over the next for years will help the tech company going forward. However, with sales of the iPhone hitting a saturation point and slowing revenue growth over the last three years, innovation is a must for the company.

Netflix's Record Numbers

Netflix blew away expectations by adding 15.77 million new subscribers in the first quarter. But skeptics remain critical its high cash burn, with the company spending more than $3.2 billion in cash last year. Also, it remains an open question whether Netflix can continue to raise prices to offset its rising costs, especially in light of increased competition from the likes of The Walt Disney Company DIS and AT&T, Inc. T.

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