Market Digest: Great Expectations

The FAANG stocks are made up of Meta (previously Facebook), Amazon, Apple, Netflix and Alphabet (previously Google). Taken as a group, these giants have a market capitalisation of some $6 trillion. Apple is now worth more than $2.6 trillion, larger than all the FTSE 100 companies combined. So, when these market heavyweights report, the market listens, and all of them have updated recently.

Meta (Facebook) dropped five percent after hours, giving back the six percent gains it had made on the day when it reported Q2 earnings just under the consensus. Revenue was down one percent to $29 billion, the first year-on-year quarterly revenue drop in the company’s history. Analyst consensus remains strong however up at $255, well above the current depressed levels, suggesting confidence that its long-term plans on the Metaverse should eventually bear fruit.

Amazon rallied five percent after it reported its quarterly earnings, which came in well ahead of expectations. It managed to trade strongly despite the wider retail headwinds and posted quarterly revenues of $121 billion (up seven percent).

Apple also managed to gain around five percent as it reported quarterly numbers ahead of expectations in recent days. Its strong brand continues to find solid demand amongst consumers despite the tough economic environment, posting revenues of $83 billion, up two percent. The analyst’s consensus maintains a moderate buy on the stock with an average price target of $179.50.

Netflix remains rather a relative minor in this group with a market cap of “only” $100 billion, but it is still an extremely useful bellwether on US consumer sentiment. The analyst consensus on the stock is around $229, close to the current share price. So, while the recent update was slightly disappointing  - with one million lost subscribers - the stock still rallied seven percent on the news as it was better than the worst of the forecasts. The major focus for 2023 is plans to introduce a lower priced ad-supported service.

Alphabet (Google) followed the trend by also gaining around five percent after it reported quarterly earnings of $70 billion, up 13 percent, just marginally under the forecasts. It remains confident on its full year outlook. Analyst consensus remains up at $144, still quite a bit above the current share price, suggesting the street maintains a strong outlook on the tech giant.

In summary then the highly watched FAANG stocks broadly beat the expectations. Even when they missed (Meta), the analyst consensus remains extremely strong for the longer term. This means these “stay at home” darlings of the pandemic can continue to support the wider market and buck fears held just a few weeks ago that the US consumer was increasingly feeling the pinch.

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