Boy, this FANG is hard to kill. Here we are on a day where the market's ramping and the money's flowing right back to the once-loved growth names including good old FANG -- Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOGL), now Alphabet. (Facebook and Google are part of TheStreet's Action Alerts PLUS portfolio. Amazon is part of TheStreet's Growth Seeker portfolio.)
The F and A are the standouts. Facebook's still digesting what was one of the best quarters of 2016, a top- and bottom-line beat that was so huge you could see how it's become the ultimate growth stock. The sales are growing faster than ever and the costs are totally under control and actually going down vs. the speed of the sales growth. That's called leverage, the good leverage, not the bad indebted kind. Facebook's become a necessity for some, with the Instagram division every bit as important. The mobile platform seems made for the company and the advertisers are flocking to it like no other medium.
I know there's some chatter out there that Facebook suppressed some conservative viewpoints on its site. I find that farfetched, although I will say Facebook is a friendly place and I think that if someone was scatological or gratuitously personal, I would hope it would be blocked, from any ideology. Either way, it's a non-story when it comes to earnings, which are what matter.
Today a prominent research firm slapped a $1,000 price tag on Amazon's stock, taking it to an all-time high of $700. The reasoning behind the Bernstein report? The company's buildout is so far along that it will have a much higher profit than anyone thinks possible. The analyst admits his estimates are "massively" above Street consensus and that when others move up to his level, the stock will power much higher. Part of the reason for the aggressive price tag? Amazon Web Services, the backbone of its cloud-based business that it lets other merchants use, a division that Bob Peck over at SunTrust (STI) values at over $100 billion, a little less than one-third of the entire valuation.
I question the rationale here. I think Amazon's Jeff Bezos will always find something, some growth opportunity worth spending on. For example, just today it introduced a competitive product to Google's YouTube. Maybe there's room for both, but it shows you Amazon never rests on its laurels or its cash.
Netflix is a real quandary here. Its most recent quarter was universally panned. Sign-ups seem to have slowed. But the costs have gone higher. The stock's down 20% for the year. Has it been overly punished? I think the risk/reward is good here for this $38 billion company. If numbers pick up, the stock can take off. If the numbers stay softer, I don't know if it matters that much.
Google's the one that's most intriguing. I know the company's stock seems vulnerable, as it missed on both the top and bottom lines. I still think there's so much low-hanging fruit here, though, and a weaker dollar and a gigantic cash position could mean the company's numbers could go higher, being augmented by a buyback or a purchase of something that gives them faster growth. In the meantime, we wait for its moonshots to deliver. It's tough to value a stock with a company that failed to make estimates like Netflix, but does anyone doubt that this one could come roaring back with a dose of spending discipline and an acceleration of advertising? Both could be in store for shareholders when the next quarter's reported.
It's amazing that ever since I came up with the term FANG, not much has been able to grow faster or have a bigger moat around their businesses than these four companies. Only Google is classically cheap on near-term numbers. Netflix's stock is very expensive. Amazon? Depends on if the Bernstein analyst is right. And Facebook? The estimates may turn out to be so low that the stock ends up being much cheaper than it looks.
FANG. What an amazing phenomenon.