The faangtastic five — Facebook, Amazon, Apple, Netflix and Google — are more than some of the world’s most successful tech and internet services companies. All have a presence in users’ daily lives that goes beyond a mere product-consumer relationship.
There is an argument to be made that these companies represent global powers almost matching those of sovereign states, and in some cases are likely to inspire more devotion than citizens might feel towards their respective nations. Not to mention, the impact some of these companies have had in shaping lives beyond the original purpose of their product, has raised questions regarding a company’s role in society. So, with increasing clout and influence, what does the new decade hold in store for these mega-caps?
TipRanks’ Stock Comparison tool lined up 3 of the FAANG stocks alongside each other to get an idea of what the analysts think is in store for the tech giants in the year ahead. Let’s dive in.
Facebook has weathered so many issues and scandals over the past year. Just a short list of “the 2019 trials and tribulations of Facebook”: congressional hearings, users’ data privacy worries, allowing false claims in political ads, regulatory issues concerning its proposed digital currency Libra… we could go on. Yet, still Facebook marches ahead, its share price seeing out the year almost 60% up from where it started.
Apart from making excellent strategic acquisitions (WhatsApp, Instagram, Oculus), one of the ways Facebook keeps moving forward is by updating its product and adding new features. The rewiring hasn’t gone unnoticed by Deutsche Bank’s Lloyd Walmsley, who thinks Facebook is “improving the overall user experience across the multiple vectors.” The 5-star analyst believes the company’s “work around Groups and Stories is underappreciated by investors and can drive continued strength.”
Walmsley added, “We are bullish on Facebook and see the renewed strength in the core Facebook app becoming a critical leg of the story around FB shares in 2020. This was not a coincidence, but the result of extensive product work – reworking the core newsfeed algorithm promoting meaningful content, rolling out Stories, scaling Marketplace (800M MAUs), building its Groups product, adding more video content and continuing to improve relevancy algorithms across content and ads.”
To this end, Walmsley reiterated a Buy rating on Facebook alongside a price target of $270. This indicates room for growth of a further 30%. (To watch Walmsley’s track record, click here)
Facebook, naturally, has a large following on the Street. A Strong Buy consensus rating breaks down into 29 Buys, 2 Holds and 2 Sells. The average price target comes in at $237.70 and implies gains of 16% could be in place over the next year. (See Facebook stock analysis on TipRanks)
After a relatively quiet second half to the year, Amazon did what it does best and used the holiday season to end the year with a bang. The online commerce behemoth jumped a nice 4% the day after Christmas as the initial reports from holiday sales were released.
In step with online sales increasingly taking a greater share of the overall market, Amazon announced it had record breaking sales in the US over the holiday season (though the fine details have yet to be released). The e-commerce machine is extremely well oiled for this period of the year, with Prime 1-day shipping perfectly suited for late gift buying, and Amazon’s own custom-made logistics operations doing away with outsourcing delivery of products to unreliable third parties.
Cowen’s John Blackledge expects “continued revenue growth in 2020 coupled with margin expansion.” The 5-star analyst believes Amazon’s path for further Prime household penetration is underappreciated and estimates Amazon’s advertising revenue will reach $17.6 billion in 2020, representing growth of 36% year-over-year. According to the analyst, this figure will rise to $46 billion by 2025.
Blackledge further noted, “Amazon has several drivers that should yield robust global revenue growth with rising margins the next several years, namely (i) further B2C eCommerce market share gains in large retail verticals; (ii) emerging eCommerce verticals like B2B; (iii) significant opportunity in existing and newer Int’l markets like India, Mexico, and Australia; (iv) AWS should enjoy years of secular tailwinds, driving revenue CAGR of ~27% ’20-‘25E as workloads migrate to the Cloud; and (v) AMZN Advertising, while still nascent, will drive both revenue growth and margin opportunity.”
Unsurprisingly, then, Blackledge reiterated his Outperform rating on Amazon, alongside a price target of $2400. Should the target be met, investors stand to take home a 29% gain. (To watch Blackledge’s track record, click here)
Does the Street agree with the Cowen analyst? It certainly does, almost unanimously so. Amazon currently has 38 Buy ratings and a single Hold amongst all the analysts tracked over the last 3 months, and therefore qualifies as a Strong Buy. The average price target of $2147 indicates upside potential of 15%. (See Amazon stock analysis on TipRanks)
If you’re looking for one success story of the 2010’s, look no further than Netflix. The streaming giant is the decade’s best performing stock, rising over 4000% in the last 10 years.
The major concern for Netflix this year has been the entry into the streaming market of two fellow giants, Disney and Apple. The recent Disney+ launch had on watchers wondering whether the entertainment colossus was going to grab Netflix’s crown, but the early data reveals 80% of Disney+ subscribers also subscribe to Netflix, soothing fears of a mass exodus to the new service. As for AppleTV+, the service is currently seriously lagging behind the other two, in terms of both market share and content and it will probably take years for it to get close to Netflix’s dominance in the field.
Netflix’s first mover advantage and “content spend levels” are indicators for Pivotal’s Jeffrey Wlodarczak to back the streaming giant. The 5-star analyst said, “We remain bullish on the Netflix story as the OTT opportunity globally still appears materially underpenetrated and the entrance of Disney+/Peacock is likely to accelerate the trend away from traditional PayTV. NFLX has an unappreciated massive head start on potential competitors, the company has created substantial barriers to entry, and ultimately we think they win the global OTT race and generate material profitability.”
Therefore, Wlodarczak reiterated a Buy rating on Netflix and bumped up his price target from $400 to $425, indicating the 5-star analyst expects NFLX to add another 30% to its share price over the next 12 months. (To watch Wlodarczak’s track record, click here)
The Street is behind the Pivotal analyst, though not quite to the same extent. A Moderate Buy consensus rating breaks down into 21 Buys, 8 holds and 4 Sells. Put together, the average price target is $371.87 and implies upside of 15%. (See Netflix stock analysis on TipRanks)