Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Facebook, Alphabet keep rising; Apple, Netflix fade

Facebook, Alphabet keep rising; Apple, Netflix fade

After a synchronized surge last year, so-called FAANG stocks peel away as investors look beyond pandemic

Big tech stocks are going their own ways in 2021.

It is a far cry from last year, when the so-called FAANG stocks took a commanding role in a market-driven by the coronavirus pandemic.

After the swift downturn of early 2020, shares of Facebook Inc., FB -2.04% Apple Inc., AAPL -1.01% Amazon.com Inc., AMZN -0.07% Netflix Inc. NFLX 0.49% and Google parent Alphabet Inc. GOOG -0.64% recovered more quickly than the broad stock market. Then they pushed higher, ultimately powering the S&P 500 to a 16% gain for 2020.

This year, as the economy strengthens and vaccinations diminish the pandemic in the U.S., that synchronized march has broken down. Investors have broadened their sights beyond the familiar names whose technology businesses thrived as many Americans switched to working, shopping and socializing at home. With a re-energized economy creating opportunity across industries, money managers have options, as well as renewed scrutiny for stocks whose lofty valuations and widespread popularity could limit further upside.

While Alphabet Class A and Facebook shares are up 37% and 21%, respectively, other members of the group have weighed on the market. Amazon shares are up 7.1% in 2021, lagging behind the 11% rise in the benchmark S&P 500. Apple and Netflix have fared even worse, down 1.7% and 7.4% for the year.

Among the hundreds of S&P 500 stocks outpacing Apple—the U.S. benchmark’s largest company by market value—are many that were hit hard by the pandemic. Cruise company Carnival Corp. CCL -0.84% is up 30% for the year, and American Airlines Group Inc. has risen 41%. Other big gainers include almost every member of the energy sector.

Technology stocks that lagged in 2020 are also on the move this year. Cisco Systems Inc. CSCO -2.00% is up 16% so far, and Intel Corp. INTC -2.64% has posted a 12% gain.

"A rising tide is lifting all boats right now," said Jim Golan, co-manager of the William Blair Large Cap Growth Fund. "Just investing in the top four or five big-cap companies probably won’t do it this year."

Investors this week will scrutinize earnings from delivery giant FedEx Corp. , sneaker titan Nike Inc. and Olive Garden operator Darden Restaurants Inc. DRI -1.37% for insights into consumer behavior.

With a healthier economy improving prospects for many stocks, investors have less reason to snap up ones that look expensive. That is particularly the case as a spurt of inflation focuses investors on the question of when the Federal Reserve will begin lifting interest rates from current, rock-bottom levels.

Fed officials last Wednesday indicated they anticipate raising rates by late 2023, sooner than previously expected. When rates rise, commonly used models show the far-off cash flows factored into many technology stocks’ price tags are less valuable.

In recent months, investors haven’t been willing to pay as much for the profits of some of the megacap tech names with the richest valuations. Analyst estimates for Amazon’s per-share profit over the ensuing 12 months rose more than 40% from the end of December through last week, according to FactSet. But since Amazon’s share price rose only 7.1%, the stock’s forward price/earnings multiple contracted from nearly 73 times to about 55 times.

In the case of Netflix, expectations for forward earnings have risen while its share price has fallen. That has compressed the stock’s price/earnings ratio from almost 60 at the end of 2020 to about 43 last week.

Apple has seen its valuation fall since the start of the year, as projected earnings increased while its share price is nearly unchanged. It traded last week at about 25 times expected earnings—down from more than 32 times on Dec. 31.

After owning Apple shares for years, David Bahnsen, chief investment officer of wealth-management firm The Bahnsen Group, said he sold them late last year because he thought they were too rich.

For much of 2020, a badly constricted economy pushed investors toward stocks—like the FAANG names—whose businesses were less affected and whose future growth became even more alluring with the drop in interest rates. The Russell 1000 Growth Index advanced 37% for the year, while the Russell 1000 Value Index eked out a 0.1% gain—the largest annual performance gap between the two style benchmarks in FactSet data going back to 1979.

Big tech stocks were among the leaders of that rally. Apple shares climbed 81% in 2020—last August becoming the first U.S. public company to surpass $2 trillion in market value—while Amazon rose 76% and Netflix gained 67%. Facebook added 33% for the year, and Alphabet 31%.

"Philosophically if you’re buying those very large-cap stocks—let’s say a trillion dollars and above—you’re doing so not because you think you’ve found some undiscovered gem," said Kevin Landis, who manages the Firsthand Technology Opportunities Fund. "You’re doing it more as an expression of a tech thesis, that people are going to be rotating to tech."

That rotation began to unwind in November with news that a Covid-19 vaccine was emerging. Value stocks, which trade at low multiples of book value and tend to be more sensitive to the health of the economy, began a monthslong rally. In March, value stocks were beating growth stocks by the widest margin in two decades, although the gains have eroded recently.

Among big tech stocks, Alphabet and Facebook have served as a kind of reopening play, reporting a surge in advertising. Facebook’s profit in its latest quarter nearly doubled from a year earlier, while Alphabet’s earnings more than doubled.

"They’ve had this huge resurgence in online advertising and that’s really been driving the stocks," said Daniel Morgan, senior portfolio manager at Synovus Trust Co. "All these businesses are reopening, coming back on, the economy’s accelerating. Where do they go to promote themselves? A lot of them go to Facebook."

Netflix, by contrast, disappointed investors when it reported that its subscriber growth had slowed as the economy reopened. The streaming giant got a boost from the pandemic as many consumers were forced or chose to stay home, and it ended 2020 with more than 200 million subscribers.

Those fundamentals matter more now for investors, who seem less inclined to view the market in the same broad terms as they did last year.
"These just are different companies that for a long time were highly correlated because they were popular, they were performing well," Mr. Bahnsen said. "There really was never an investment logic to a streaming company that was first to market trading in tandem with a social media company."

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
House Republicans Move to Defund OECD Over Global Tax Dispute
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
Trump Steamrolls EU in Landmark Trade Win: US–EU Trade Deal Imposes 15% Tariff on European Imports
ChatGPT CEO Sam Altman says people share personal info with ChatGPT but don’t know chats can be used as court evidence in legal cases.
Intel Reports Revenue Beats but Sees 81% Rise in Losses
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
President Trump Diagnosed with Chronic Venous Insufficiency After Leg Swelling
CEO Resigns Amid Controversy Over Relationship with HR Executive
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
Tulsi Gabbard Unveils Evidence Alleging Political Manipulation of Intelligence During Trump Administration
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Trump Announces Coca-Cola to Shift to Cane Sugar in U.S. Production
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
Zelensky Reshuffles Cabinet to Win Support at Home and in Washington
"Can You Hit Moscow?" Trump Asked Zelensky To Make Putin "Feel The Pain"
Church of England Removes 1991 Sexuality Guidelines from Clergy Selection
Superman Franchise Achieves Success with Latest Release
Hungary's Viktor Orban Rejects Agreements on Illegal Migration
Air India Pilot’s Mental Health Records Under Scrutiny
Jamie Dimon Warns Europe Is Losing Global Competitiveness and Flags Market Complacency
Moonshot AI Unveils Kimi K2: A New Open-Source AI Model
Martha Wells Says Humanity Still Far from True Artificial Intelligence
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
EU Delays Retaliatory Tariffs Amid New U.S. Threats on Imports
Trump Proposes Supplying Arms to Ukraine Through NATO Allies
US Opens First Rare Earth Mine in Over 70 Years in Wyoming
Bitcoin Reaches New Milestone of $116,000
Severe Heatwave Claims 2,300 Lives Across Europe
Declining Beer Consumption Signals Cultural Shift in Germany
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
Western Europe Records Hottest June on Record
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
×