Are FAANG Stocks’ Earnings More Bark Than Bite?

It’s been a volatile week for the stock market, with the major indexes ending the week down about 3%. The good news is that the pandemic triggered a bigger push towards digitalization, which progressed rapidly due to the immediate need for advanced technological solutions so folks could remain in contact with friends, family and co-workers, and companies could keep their businesses running.

This shift has been great for e-commerce, as well as stocks that profit from the work-from-home trend or home entertainment. So, it should come as no surprise that the FAANG stocks –Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOGL) have performed relatively well.

Now that most of their earnings results have been released, it’s a good time for us to do a “temperature check” and see if their numbers have any teeth.

Facebook – Announced January 27, 2021

Facebook’s fourth-quarter revenue rose 33% to $28.07 billion, which beat Wall Street consensus estimates for revenue of $26.44 billion. Earnings climbed 51.6% year-over-year to $3.88 per share from the $2.56 earned in the prior year. Analysts were calling for earnings of $3.22 per share, so the company topped expectations by 20.5%.  Facebook also posted a profit of $11.2 billion, which accounted for a year-over-year increase of over 50%.

The social media giant’s userbase fell to 195 million daily active users in the U.S. and Canada, from 196 million in the previous quarter. However, across all of its apps including Instagram, Messenger and WhatsApp, monthly users ticked up 14% to 3.3 billion from 3.21 billion in the previous quarter.

Average daily and monthly active users climbed year-over-year, but the figures were only up slightly from the third quarter in the U.S, which the company said were elevated due to the pandemic. Despite the overall positive report, Facebook shares sold off more than 6% this week as investors worried about fewer users in the U.S. and Canada and potential regulation changes to Section 230, which protects the company from being sued over user content.

Facebook CEO Mark Zuckerberg also noted that Apple’s privacy changes on the iOS 14 update could impact Facebook’s ability to target ads to customers, which is a huge part of Facebook’s revenue. This could begin to affect its business as soon as the first quarter.

Apple – Announced January 27, 2021

Apple posted record fourth-quarter revenue of $111.44 billion, up 21% year-over-year and higher than analysts’ expectations of $103.28 billion.

Earnings of $1.68 per share fell from $3.03 year-over-year but still beat analysts’ expectations of $1.41 per share by 19%.

The company’s $65.6 billion in iPhone revenue almost doubled from revenue of $33.36 billion last year, thanks in large part to the release of the 5G-enabled iPhone 12. Mac sales fell slightly short of estimates for $8.69 billion, coming in at $8.68 billion. Services revenue of $15.76 billion jumped from $12.51 billion a year prior.

CEO Tim Cook noted that results could have been better without the COVID-19 pandemic, with lockdowns forcing Apple to temporarily close some Apple stores. Apple declined to provide fiscal first-quarter guidance. The lack of guidance helped fuel a sell-off this week, with Apple shares slipping down over 7%.

Netflix Announced January 20, 2021

Netflix had its best announcement season in some time this quarter. However, earnings per share of $1.19 missed analysts’ expectations for $1.39. Revenue of $6.64 billion came in slightly above estimates calling for $6.626 billion. The streaming giant added 8.5 million global paid net subscribers, which beat the expected 6.47 million. The service exceeded 200 million paid subscribers for the first time during the fourth quarter.

Netflix had some additional competition during the fourth quarter from Apple TV+, Discovery+, Disney+, HBO Max and Peacock. Despite its competition, Netflix still saw huge success with some of its limited series last year, including The Queens Gambit, which had 62 million households watching in its first 28 days – a new record for the company.

Interestingly, Netflix was also its own worst enemy this quarter following the huge influx of subscribers at the onset of the pandemic. The dramatic increase in the first few quarters of 2020 called for a decline during the past few quarters. Looking forward, Netflix expects to add six million subscribers during the first quarter of 2021, which is less than half of the 15.8 million subscribers added during the first quarter in 2020.

The stock is down 8.6% since the earnings announcement, although some of those losses were due in part to the broader market selloff on Wednesday.

Amazon Announcing February 2, 2021

Amazon is expected to achieved fourth-quarter earnings of $7.00 per share, an 8.2% increase year-over-year. Revenue is estimated come in at $120.23 billion, up 37.5% from a year ago. Last quarter, Amazon beat expectations by 69.45% with earnings of $12.37, versus the expected $7.30. The company has beat estimates the past four quarters; however, analysts revised estimates down 21.7% over the three months and earnings have decreased from last quarter.

Alphabet – Announcing February 2, 2021

Alphabet has seen a streak of earnings surprises over the past few quarters. For the upcoming fourth-quarter earnings announcement, GOOGL is expected to achieve earnings of $15.89 per share on revenue of $53.11 billion. This is down from last quarter, when the company achieved earnings of $16.40 per share while estimates called for $11.40 per share.

A Mixed Earnings Bag

Amazon’s and Google’s earnings reports next week wrap up the FAANG earnings announcements for the quarter. Overall, this quarter has been a mixed bag for the FAANG group. Most of the companies only had slight earnings surprises or completely missed expectations. With the exception of the release of new tech from Apple, the results were relatively disappointing. In fact, most of the stocks are down since the release of their earnings.

The FAANG stocks aren’t the only big-name tech companies that reported disappointing earnings this week: Tesla (TSLA) also reported weak fourth-quarter earnings results on Wednesday. Earnings of $0.80 per share missed analysts’ expectations for $0.90 by 11.1%. Revenue was slightly better, with revenue of $10.74 million topping the estimated $10.13 billion.

What I find especially worrisome about Tesla is that the company is still not making money building cars. Most of its revenue comes from electric vehicle tax credits from other automotive companies. The company received $1.58 billion last year in tax credits, but only made $721 million in earnings. This shows me they are only making money selling carbon credits, so they can meet California and European Union (EU) emission standards. Yikes!

Their cars are also being heavily discounted in China, and their average selling price fell 11% as customers shifted towards cheaper models. The stock is down about 9% since its earnings release.

While the massive FAANG stocks are falling short, there are plenty of lesser known, but still fundamentally superior stocks that are posting strong earnings results.

Thanks to my Project Mastermind, I’m able to find these stocks and help my subscribers make massive gains

Take one financial tech company I recommended based on Project Mastermind back on June 23, 2020, to my Accelerated Profits subscribers. The stock has soared 122% since December 31, 2020. The overall Accelerated Profits Buy List of 57 stocks is up an average 15% over the same timeframe, while the S&P 500 is about flat.

This past Tuesday, I released a brand-new Buy Alert for two companies thanks to Project Mastermind. One released its earnings report on Thursday, posting a 70.5% earnings beat.

I will be releasing another Buy Alert next Tuesday that has seen explosive earnings surprises in the past two quarters. You don’t want you to miss out before any of these stocks really take off, so make sure to sign up here so you can still get in early.

You can also click here to watch my Project Mastermind event, where I gave everyone a glimpse at my system and revealed my number-one stock pick, which posted a 76.9% earnings surprise in its most-recent quarter. You’re not going to want to miss out.

The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

Amazon (AMZN), Facebook (FB), Google (GOOG)

More Louis Navellier



RSS Feed

Little Book

InvestorPlace Network