The fabled group of five large-cap tech businesses, so-called FAANG — Facebook (currently Meta Platforms), Amazon, Apple, Netflix, and Google (currently Alphabet) — dominated the stock market through late 2021.
However, a challenging macroeconomic environment in 2022, characterized by stubborn inflation and removal of Covid restrictions, saw big tech struggling to meet and exceed the high expectations of growth in subscribers/users and advertisement revenues set at the height of the pandemic.
The slump in the performance of these tech businesses was soon reflected in the price action of their stocks. Their dismal year can be summarized by the below snapshot at the end of October 2022.
Source: Forbes
However, the drawdown brought the valuations of these compounders to a more comfortable buying point while they did the needful to recapture lost demand and improve the efficiency of their businesses.
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Hence, it could be wise to load up on
Meta Platforms, Inc. (META) and
Netflix, Inc. (NFLX) to capitalize on trends that indicate a potential comeback.
Meta Platforms, Inc. (META)
The company operates through two segments: Family of Apps (FoA) and Reality Labs (RL).
META’s revenue has exhibited a 21.1% CAGR over the past three years. During the same time horizon, the company’s EBITDA and net income have also grown at 9.5% and 17% CAGRs, respectively.
During the third quarter of the fiscal year 2022 ended September 30, 2022, META’s revenue came in at $27.71 billion, while its income from operations came in at $5.66 billion. As a result, the company reported a quarterly net income of $4.40 billion, or $1.64 per share.
META’s total assets stood at $178.89 billion as of September 30, 2022, compared to $165.99 billion as of December 31, 2021. Daily Active People (DAP) and Monthly Active People (MAP) across its family increased 4% year-over-year to 2.93 billion on average for September 2022 and 3.71 billion as of September 30, 2022.
Analysts expect META’s revenue and EPS for the fourth quarter of fiscal 2022, which ended December 31, 2022, to come in at $31.69 billion and $2.23, representing sequential increases of 14.4% and 36%, respectively. Moreover, the company’s revenue for the current fiscal is expected to increase by 4.9% year-over-year to $121.97 billion.
Despite its steady growth prospects, META is currently trading at a discount compared to its peers. In terms of forward P/E, META is currently trading at 16.78x compared to the industry average of 17.12x. Also, its forward EV/EBITDA multiple of 7.49 is lower than the industry average of 8.90.
The stock is currently trading above its 50-day and below its 200-day moving averages of $153.23 and $153.03, respectively. It has gained 24.2% over the past month to close the last trading session at $147.06.
MarketClub’s Trade Triangles show that META has been trending UP for all three-time horizons. Its long-term trend has been UP since January 23, 2023, while its intermediate-term and short-term trends have been UP since December 1, 2022, and January 20, 2023, respectively.
Source: MarketClub
The Trade Triangles are our proprietary indicators, comprised of weighted factors that include (but are not necessarily limited to) price change, percentage change, moving averages, and new highs/lows. The Trade Triangles point in the direction of short-term, intermediate, and long-term trends, looking for periods of alignment and, therefore, strong swings in price.
In terms of the Chart Analysis Score, another MarketClub proprietary tool, META scored +90 on a scale from -100 (strong downtrend) to +100 (strong uptrend), indicating that the uptrend will likely continue. While META is showing intraday weakness, it remains in the confines of a bullish trend. Traders should use caution and utilize a stop order.
The Chart Analysis Score measures trend strength and direction based on five different timing thresholds. This tool takes into account intraday price action, new daily, weekly, and monthly highs and lows, and moving averages.
Click here to see the latest Score and Signals for META.
Netflix, Inc. (NFLX)
NFLX operates as a global entertainment services company. Through its streaming services, its members can access television (TV) series, films, and games across a variety of genres and languages, which they can play, pause and resume to watch as much as they want, anytime, anywhere, and can change their plans at any time.
NFLX’s revenue has exhibited a 16.2% CAGR over the past three years. During the same time horizon, the company’s EBITDA and net income have also grown at 10.7% and 34% CAGRs, respectively.
Due to a 4% increase in average paid memberships, NFLX’s revenue for the fourth quarter of fiscal 2022 increased 1.9% year-over-year to $7.85 billion. During the same period, the company’s operating income and adjusted EBITDA came in at $550 million and $797.08 million, respectively. As a result, it reported a quarterly net income of $55 million, or $0.12 per share.
Analysts expect NFLX’s revenue and EPS for fiscal 2023 to increase 8.6% and 14.7% year-over-year to $34.33 billion and $11.41, respectively. Revenue and EPS are expected to increase by 11.7% and 26.2% during the next fiscal to $38.36 billion and $14.40, respectively. Moreover, the company has surpassed consensus EPS estimates in three of the trailing four quarters.
Given its stellar growth prospects, NFLX is trading at a premium compared to its peers. In terms of forward P/E, NFLX is currently trading at 31.58x, compared to the industry average of 17.12x. The company’s forward EV/Sales multiple is 5, compared to the industry average of 2.05. Also, its forward EV/EBITDA multiple of 22.60 is significantly higher than the industry average of 8.90.
NFLX’s stock is currently trading above its 50-day and 200-day moving averages of $310.94 and $245.21, respectively, indicating a bullish trend. It has surged 23.1% over the past month and 56.1% over the past six months to close the last trading session at $353.11.
MarketClub’s Trade Triangles show that NFLX has been trending UP for two of the three-time horizons. The long-term trend for NFLX has been UP since August 4, 2022, while its intermediate-term trend has been UP since January 9, 2023.
Source: MarketClub
In terms of the Chart Analysis Score, NFLX scored +75 on a scale from -100 (strong downtrend) to +100 (strong uptrend), indicating signs of short-term weakness, but it still remains in the confines of a long-term uptrend.
Click here to see the latest Score and Signals for NFLX.
What's Next for These FAANG Stocks?
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