Market Overview

4 Possible Reasons Why The FANG Stocks Are Near All Time Highs

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It’s been the summer of FANG.

The FANG stocks (Facebook Inc (NASDAQ: FB), Amazon.com Inc (NASDAQ: AMZN), Netflix Inc (NASDAQ: NFLX), and Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) all made dramatic turnarounds in April and May, and all four made new all-time highs in July.

These tech companies have seen their share prices surge during the midst of a global pandemic, where many companies have seen their revenues decline and their values contract. The FANG stocks have been able to prosper during this time for a variety of different reasons.

Their Core Businesses Are Digital

At a time where businesses have had to transition, these four companies were already well-positioned.

The FANG companies are digitally oriented, meaning the main way they generate their revenues transact with their customers is through digital mediums. This is incredibly valuable during this time, as person-to-person transactions and in-person oriented businesses have had to shut their doors and shift the way they do business.

Companies have also had to shift the way they generated awareness or exposure for their goods and services. With in-person advertising and marketing changing, many have needed to shift to digital mediums to gain awareness or get exposure as well. Whether it’s to get the message out that they’re doing curbside or delivery, companies and businesses have needed to figure out ways to spread their messages. Online advertising directly benefits two companies in particular: Facebook and Google. Together, they control roughly 70% of the U.S. digital advertising market.

People Are Home

The pandemic forced everyone to stay home, which in turn led to more hours spent on social media, streaming, and online shopping.

Companies like Amazon have been incredibly well-positioned to capture more of people’s spending due to their digital platforms and their infrastructure. The way Netflix operates, allowing its customers to access an array of different entertainment and content through their platform, hasn’t changed or been affected in any way by the shift to remote work.

Their Connection To Consumers

Another possible reason why the FANG stocks may have experienced tremendous rallies over the past few months is the way they facilitate connection at a time when many people were isolated.

Facebook allows us to connect with friends and family. Google allows us to connect with information. Netflix allows us to connect with entertainment. And Amazon, through their warehouse and delivery services, connects businesses with consumers at a time where both need it most.

Their Ability To Produce

The FANG companies have also been able to continue operating during this time, possibly circumventing the financial hardship and difficulties that many businesses are facing. They’ve been able to continue to generate the level of income they’re accustomed to, and in some cases increase earnings. It’s an incredible sign of strength, to be able to navigate these difficult times, and continue operating and producing at similar, if not better levels than they were used to. The sense of security and strength it must signal to investors, that even during a global pandemic, these companies were able to continue operating, and continue generating revenue, has probably helped their share prices and encouraged investors to buy into their businesses.

Company % Revenue Growth YOY % Income Growth YOY
Facebook 17.64% 16.48%
Amazon 26.38% 21.02%
Netflix 25% 30.2%
Alphabet 13.56% 9.6%

The ability for these companies to grow their revenues and incomes by that percentage in the current climate that we are in is truly remarkable. The numbers that they are generating and were able to generate in their most recently reported quarterly earnings, were all affected by the global pandemic, and still managed to maintain this type of growth. The ability to do that has most likely increased the confidence investors have in their underlying businesses, and in their management teams as well. This strong performance likely also increased confidence in the eyes of financial analysts.

To be able to weather a global pandemic and economic shutdown is pretty remarkable. Based on how the FANG companies have managed to maintain operations, its no wonder their stocks are near their all-time highs.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

 

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