By Jeff Reeves
There are a few different ways to define the most popular stocks on Wall Street. For some, it’s a quantitative screen of volume with cheap stocks like Ford /zigman2/quotes/208911460/composite F +3.84% and Nokia /zigman2/quotes/207421390/composite NOK +1.23% regularly at the top of the list. For others, it’s about so-called “meme stocks” like GameStop /zigman2/quotes/203755179/composite GME +3.99% and AMC Entertainment /zigman2/quotes/200235402/composite AMC +6.48% that are lighting up message boards and social media.
But for many investors, it’s simply the megacap tech stocks that collectively make up more than $9.4 trillion in market value — the FAANMG stocks that are Facebook , Amazon /zigman2/quotes/210331248/composite AMZN +7.38% , Apple /zigman2/quotes/202934861/composite AAPL +3.71% , Netflix /zigman2/quotes/202353025/composite NFLX +1.35% , Microsoft /zigman2/quotes/207732364/composite MSFT +4.69% and Google parent Alphabet /zigman2/quotes/205453964/composite GOOG +7.27% /zigman2/quotes/202490156/composite GOOGL +7.28% .
These big tech giants are often at the top of many investors’ buy lists, and all have delivered their latest earnings reports in the last week or so.
So which of these six are looking good and which ones are falling behind? Here’s the lineup, ranking them from worst to first.
No. 6: Netflix
July performance: -4% through Thursday’s close
Year-to-date performance: -4%
Netflix proved many naysayers wrong over the years, showing that it has not yet bowed to the competition as it continues to regularly top expectations on subscriber growth. But its second-quarter earnings gave the bears a bit more fodder than usual, as it posted a modest loss of about 430,000 subscribers in the U.S. and Canada. And as the smallest of the FAANMG stocks at “only” $220 billion or so, it perhaps the least margin for error of the group.
It’s that short leash that seems to be the problem for Netflix more than just its fundamentals. Shares are negative so far in 2021 compared with an otherwise roaring stock market where the broader S&P 500 /zigman2/quotes/210599714/realtime SPX +1.47% is up 15% since Jan. 1. That says a lot about the general attitude on Wall Street.
There is certainly growth ahead, with projections of nearly 20% revenue expansion this fiscal year and hopes for 3.5 million net adds to global subscribers in the third quarter. And Netflix still has a great brand with many subscribers remaining highly connected with its original programming — season two of the fantasy epic “The Witcher” is sure to be an instant smash when it drops in December after COVID-related production delays.
However, as is so often the case, it’s all about expectations. That 3.5 million subscriber target is a far cry from the roughly 5.5 million new subscribers that Wall Street had been expecting. And the hard reality is that it has missed the mark lately on subscriber expansion and Wall Street has soured on this stock’s prospects as a result. And the fact that its latest report also slightly missed on the EPS front was just further proof Wall Street’s skepticism of the stock is justified.
No. 5: Amazon
July performance: 1% through Thursday’s close
YTD performance: 11%
Amazon.com was a powerhouse during the pandemic, as Americans shopped from home instead of at bricks-and-mortar locations. But sales growth slowed down in a big way in the last quarter, partially because so much of the rest of the economy was reopening.
Specifically, revenue came in at “only” a 27% growth rate — much cooler than the 40%-ish rates investors have been used to lately. The top line came in at $113.1 billion versus roughly $115.1 billion expected by Wall Street.
Beyond that, there’s more regulatory pressure than ever before, as it faces EU antitrust charges and as both Democrats and Republicans alike are sharpening their knives at home. There are also concerns that its big Prime Day sale isn’t delivering quite as it has in years past, and there’s a little bit of a hangover as new CEO Andy Jassy has so far failed to deliver quite the star power and optimism that founder Jeff Bezos did before him.
Amazon’s stock is looking ugly on the heels of Thursday’s earnings report. But even before this revenue miss, shares were barely positive in the month of July before that, even as some other Big Tech stocks have seen a pretty significant rally.
In other words, Wall Street seemed to be having doubts about Amazon’s staying power before its recent earnings — but Thursday’s earnings report seems to have cemented the narrative that the e-commerce giant is not quite as bulletproof as in years past.
No. 4: Apple
July performance: 8% through Thursday’s close
YTD performance: 10%
It’s pretty clear why Apple is in the middle of this list when you look at the numbers. While some of the FAANMG stocks are moving decidedly higher or clearly struggling, Apple has arguments on both sides.
The glass half-full case is that it just posted its strongest fiscal third quarter ever, with profits roughly doubling to $21.7 billion from $11.3 billion a year earlier. The company trounced both profit and revenue expectations.
But the glass half-empty argument is that Apple admitted that growth won’t keep up going forward, and it acknowledged both rising freight costs and supply chain challenges that could hamper operations in the near future. Plus Tim Cook & Co. did not provide formal guidance for the sixth quarter in a row — and frankly, some investors are getting impatient with the use of the pandemic as an excuse.