F.A.A.N.G.

Hello All,

As you may recall we introduced the “FAANG Factor” on our last video.  I wanted to give you a quick update, as all 5 components of the “Factor” have reported their 2Q earnings.  Overall a mixed bag.  Facebook came out on top, followed by Apple; the shares of both soared to all time highs.   Netflix has a good quarter too while Amazon and Google both lagged.

  • Facebook – Topped analyst expectations with 45% growth in revenue versus last year, driving the stock to all time highs.  However, growth percentages continue to slow (hard to maintain growth on larger numbers).  Users have topped 2 billion in world. Future growth dependent on figuring out how to further monetize its products (spent $2 bil on R&D in the 2Q, more ad $, Instagram, Occulus, expanding data centers to accommodate growth in video) and/or expand users throughout world.

  • Amazon – Amazon beat revenue expectations but fell short on profits.  The company’s cloud services continue to be the fastest-growing and most profitable.  They continue to expand internationally (e.g., Prime Now in Singapore) and recently announced to major acquisitions: Whole Foods and Souq.com. They are exploring opportunities in healthcare.

  • Apple – Apple beat revenue and earnings estimates on stronger iPad and Mac sales, driving the stock to new all time highs.  Apple suggested that the new iPhone 8 launch delays have been overcome.  Going forward, Wall Street is paying attention to the iPhone 8 launch as well as Trump tax reform since Apple is holding over $260 billion of cash, most of which is overseas.

  • Netflix – Topped 2Q expectations and realized strong subscriber growth.  Stock has traded higher since the report.  They now have over 100 million streaming members.  Wall Street happy with pricing/subscriber growth, investment in content, international growth.

  • Google – Beat revenue estimates and saw 15% growth in earnings (excluding a fine paid in Europe).  However, stock has fallen as the company reported worse than expected performance on “cost per click” and “traffic acquisitions costs.” Company noted that traffic acquisition costs will continue to increase as mobile traffic and programmatic advertising carry higher costs.  Future growth dependent on mobile ads, global scaling of Youtube, and cloud / hardware expansion.