Elec­tion hys­te­ria puts FANG stocks on sale

Financial Mirror (Cyprus) - - FRONT PAGE -

One thing smart in­vestors should keep in mind is things that are said and promised dur­ing a red-hot elec­tion need to be taken with a gi­gan­tic grain of salt. With Don­ald Trump win­ning the White House, many in­vestors are im­me­di­ately scared of huge pro­tec­tion­ist trade poli­cies. Th­ese can­not be im­posed uni­lat­er­ally, and need­less to say, the rhetoric will give way to com­mon sense so­lu­tions.

One sec­tor get­ting ab­so­lutely de­stroyed is tech­nol­ogy, over fears of trade changes with China and a host of other is­sues, not the least of which was rhetoric di­rected at Trump from high-pro­file Sil­i­con Val­ley ex­ec­u­tives. Cooler heads will pre­vail, as Trump knows that tech­nol­ogy is an en­gine of growth, strength and jobs in the United States.

We screened the Mer­rill Lynch re­search data­base and found four high-pro­file mega-cap tech­nol­ogy stocks that have been ham­mered. Known in Wall Street par­lance as the FANG stocks, they rep­re­sent the big­gest and best in tech­nol­ogy. While only suit­able for more ag­gres­sive-styled ac­counts, the abil­ity for in­vestors to buy par­tial po­si­tions cheap is very en­tic­ing.

The search gi­ant con­tin­ues to ex­pand and is even work­ing on a driver­less car now. Al­pha­bet Inc. (NASDAQ: GOOGL) pro­vides on­line ad­ver­tis­ing ser­vices in the United States, the United King­dom and rest of the world. It of­fers per­for­mance and brand ad­ver­tis­ing ser­vices, and it op­er­ates through Google and Other Bets seg­ments. The Google seg­ment in­cludes prin­ci­pal in­ter­net prod­ucts, such as Search, Ads, Com­merce, Maps, YouTube, Apps, Cloud, An­droid, Chrome and Google Play, as well as tech­ni­cal in­fra­struc­ture and newer ef­forts, such as vir­tual re­al­ity.

The Google seg­ment also sells hard­ware prod­ucts, com­pris­ing Chrome­cast, Chrome­books and Nexus. The Other Bets seg­ment in­cludes busi­nesses such as Ac­cess/Google Fiber, Calico, Nest, Ver­ily, GV, Google Cap­i­tal, X and other ini­tia­tives.

The com­pany re­ported earn­ings last month against some very tough com­par­isons from this time last year. Al­pha­bet an­nounced fis­cal first quar­ter re­sults that pro­duced 20% year-on-year growth in rev­enues to $22.45 bil­lion, in line with most ex­pec­ta­tions. On a con­stant-cur­rency ba­sis, rev­enues grew 23%. Google seg­ment rev­enues for the quar­ter were up 20% over the prior year. While Google’s op­er­at­ing profit grew by 16.7%, the op­er­at­ing mar­gin de­clined by just un­der 1% ba­sis point.

The Mer­rill Lynch price ob­jec­tive for the stock is $970, while the Wall Street con­sen­sus tar­get price is $963.74. The shares closed Fri­day at $771.75, down a whop­ping 10% in the

past three weeks.

This com­pany is the ab­so­lute leader in on­line re­tail and a dom­i­nant player in cloud stor­age busi­ness. Ama­zon.com Inc. (NASDAQ: AMZN) serves con­sumers through re­tail web­sites that pri­mar­ily in­clude mer­chan­dise and con­tent pur­chased for re­sale from ven­dors and those of­fered by third-party sell­ers. In ad­di­tion, the com­pany serves de­vel­op­ers and en­ter­prises through Ama­zon Web Ser­vices (AWS), which pro­vides com­pute, stor­age, data­base, an­a­lyt­ics, ap­pli­ca­tions and de­ploy­ment ser­vices that en­able vir­tu­ally var­i­ous busi­nesses.

AWS is the undis­puted leader in the cloud now, and many top an­a­lysts team see the com­pany ex­pand­ing and mov­ing up the en­ter­prise in­for­ma­tion value chain and tar­get­ing a larger to­tal ad­dress­able mar­ket. The com­pany has had nu­mer­ous re­cent prod­uct an­nounce­ments, in­clud­ing Aurora for re­la­tional data­base en­gine, Quick Sight for busi­ness in­tel­li­gence and AWS Data­base Mi­gra­tion Sup­port Ser­vice.

Ama­zon re­ported a mixed quar­ter in Oc­to­ber, and top an­a­lysts around Wall Street noted that rev­enues were in line and mar­gins were soft. Guid­ance was be­low ex­pec­ta­tions as the com­pany con­tin­ues to in­vest, but the sales mid­point was also be­low ex­pec­ta­tions. Many sug­gest buy­ing the dip as noth­ing here changes the view that Ama­zon is best po­si­tioned to ben­e­fit from the shift of com­merce from off­line to on­line, and it is also look­ing to ex­pand to Aus­tralia.

Mer­rill Lynch has a $960 price tar­get, and the con­sen­sus tar­get is $921.63. Shares closed Fri­day at $739.01, down 12.3% in just over two weeks.

The huge so­cial me­dia leader has posted gi­gan­tic quar­terly num­bers that truly blew most of Wall Street away. Face­book Inc. (NASDAQ: FB) op­er­ates as a mo­bile ap­pli­ca­tion and web­site that en­ables peo­ple to con­nect, share, dis­cover and com­mu­ni­cate each other on mo­bile de­vices and per­sonal com­put­ers world­wide.

Its so­lu­tions also in­clude Instagram, a mo­bile ap­pli­ca­tion that en­ables peo­ple to take pho­tos or videos, cus­tom­ize them with fil­ter ef­fects, and share them with friends and fol­low­ers in a photo feed or send them di­rectly to friends; Mes­sen­ger, a mes­sag­ing ap­pli­ca­tion for mo­bile and web on var­i­ous plat­forms and de­vices, which en­able peo­ple to reach oth­ers in­stantly, as well as en­able busi­nesses to en­gage with cus­tomers; and What­sApp Mes­sen­ger, a mo­bile mes­sag­ing ap­pli­ca­tion.

Most Wall Street an­a­lysts point to the fact that Face­book re­mains the top ben­e­fi­ciary of the adop­tion of mo­bile in­ter­net trends, with to­tal U.S. in­ter­net time spent on Face­book and Mes­sen­ger. Face­book also de­vel­ops Ocu­lus VR tech­nol­ogy and con­tent plat­form, which al­lows peo­ple to en­ter an im­mer­sive and in­ter­ac­tive en­vi­ron­ment to play games, con­sume con­tent and con­nect with oth­ers.

Top Wall Street an­a­lysts feel that Face­book’s long-term fore­casts are more eas­ily at­tain­able, es­pe­cially as the com­pany con­tin­ues to grow and em­ploy new plat­forms for on­line ad­ver­tis­ing. It should be noted that Face­book had grown to an as­tound­ing $341.78 bil­lion mar­ket cap in less than five years.

The $150 Mer­rill Lynch price tar­get is less than the con­sen­sus tar­get of $156.60. The shares closed Fri­day at $119.02.

This Wall Street dar­ling has been mauled and is down over 10% from highs printed in late Oc­to­ber and could of­fer solid up­side. Net­flix Inc. (NASDAQ: NFLX) is the world’s lead­ing in­ter­net tele­vi­sion net­work, with more than 70 mil­lion mem­bers in over 190 coun­tries en­joy­ing more than 125 mil­lion hours of TV shows and movies per day, in­clud­ing orig­i­nal se­ries, doc­u­men­taries and fea­ture films. Mem­bers can watch as much as they want, any­time, any­where, on nearly any in­ter­net-con­nected screen. Mem­bers can play, pause and re­sume watch­ing, all with­out com­mer­cials or com­mit­ments.

Net­flix is avail­able on vir­tu­ally any de­vice with an in­ter­net con­nec­tion, in­clud­ing per­sonal com­put­ers, tablets, smart­phones, smart TVs and game con­soles, and it au­to­mat­i­cally pro­vides the best pos­si­ble stream­ing qual­ity based on avail­able band­width. Many ti­tles, in­clud­ing Net­flix orig­i­nal se­ries and films, are avail­able in high-def­i­ni­tion with Dolby Dig­i­tal Plus 5.1 sur­round sound and some in Ul­tra HD 4K. Ad­vanced rec­om­men­da­tion tech­nolo­gies with up to five user pro­files help mem­bers dis­cover en­ter­tain­ment they’ll love.

The Mer­rill Lynch price tar­get is $141. The con­sen­sus tar­get is $122.33. Shares closed most re­cently at $114.78.

While the un­cer­tainty is far from over, you can bet that a Pres­i­dent Trump will reach out to the Sil­i­con Val­ley ti­tans and they will reach back. While they may not like him, they need to get along to keep the tech­nol­ogy growth en­gine strong, which Trump knows is good for jobs and the na­tion as a whole.

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