Where Are FANG Companies Headed in 2017?
Unless you’ve been living under a rock, you must know of the FANG stocks: the omnipresent Facebook Inc (NASDAQ:FB), the mighty Amazon.com, Inc. (NASDAQ:AMZN), the fast-growing Netflix, Inc. (NASDAQ:NFLX), and the invincible Google (otherwise known as Alphabet Inc) (NASDAQ:GOOG, GOOGL).
Through 2016, all four of the FANG companies remained Wall Street’s hottest picks. The question now is: Can we draw a promising FANG stocks forecast for 2017?
Let me answer that for you.
You will often find traditional analysts telling you that tech stocks are not for value investors. “Value investors” like to hold their stocks for longer terms of 10 years or more. This is why fund managers sometimes suggest FANG stock ETFs as proxy investments to value investors. Tech stocks are often deemed more appropriate for “growth investors”—investors who are seeking to make quick buck off of a fast-growing company, but whose future is uncertain.
Yes, this was once true until Silicon Valley revolutionized the economic landscape for businesses.
Today, technology, and particularly the Internet, is reshaping traditional industries. This is why we are seeing more and more tech companies dethroning established brick-and-mortar corporations from their long-established monarchies.
The result is obvious. The tech sector is starting to attract value investors like Warren Buffett, who had previously held off from buying tech stocks.
So how are FANG stocks building their long-term durability? Allow me to explain.
As mentioned above, the acronym “FANG” comes from the names of four heavyweights of the present-day tech industry: Facebook, Amazon, Netflix, and Google. All four have dug their “fangs” deep into our flesh, becoming quasi-necessities in our lives.
Facebook is replacing traditional print and electronic media advertising businesses. Amazon is altering the retail industry via e-commerce. Netflix is posing a threat to the traditional television entertainment industry. And finally, Google is…well, pretty much doing a bit of everything while controlling how we search, connect, and review all of these old and new businesses.
So what’s next for FANG stocks in 2017?
1. Facebook Stock Forecast
Facebook Inc (NASDAQ:FB) stock begs no introduction. If you think Facebook is just a social media company, you couldn’t be more wrong. With initiatives in artificial intelligence (AI) and half a dozen new technology gadgets in the pipeline, Facebook is now a full-blown technology conglomerate.
Aiming to hit two billion active users this year, Facebook’s biggest strength has been the brain running the company. CEO Mark Zuckerberg’s mantra has been to adapt before competition creeps in. He believes that if Facebook won’t do it, somebody else will. This is the very lesson taught in the little red book given to every new employee at Facebook. So now we know why Facebook either buys out imminent competition (Instagram, WhatsApp), or replicates it (SnapChat, which is owned by Snap Inc (NYSE:SNAP)).
Facebook’s true “economic moat” lies in its advertising business, one that is recession-proof. This is because, no matter how well the economy is doing, businesses will always have the need to advertise to sell their product. And what better way to reach the masses than using the most ubiquitous platforms? Yes, the top three most-used social platforms—”Instagram,” “WhatsApp,” and “FB Messenger”—are all owned by Facebook.
So where is FB stock headed in 2017? Just take a peek at the Facebook stock price chart below. A general rule of thumb is that, if there are more buyers than sellers in the market for a stock, the price of that stock will be trending upward. If there are more sellers than buyers in the market, the prices will be trending lower.
It is evident that Facebook stock is more popular with buyers right now, since the Facebook stock price keeps advancing northward.
Chart courtesy of StockCharts.com
The reason is obvious. The company’s fundamentals are excellent. Earnings growing at an exponential rate, above-average return on equity, and a solid cash position have naturally piqued the interest of buyers. This is why making a Facebook stock price prediction for 2017 couldn’t get any easier.
Here are three interesting things happening at Facebook right now which bear glad tidings for Facebook stock investors in 2017:
• New hardware products are slated to be released this year, which will further deepen Facebook’s pockets. Count on new augmented reality (AR) and virtual reality (VR) gadgets and drone technology.
• Facebook is betting big on live streaming with Snapchat-like features, and has also started streaming live sports on its platform. The live video streaming feature is expected to scoop up more ad dollars.
• Facebook is building an artificially intelligent ecosystem for all of its apps, employing Deep Learning. It will put Facebook in a better position to dissect all the textual, pictorial and video data being put out on its platforms, and derive better analytical insights for its advertisers. Expect Facebook to grow into an even stronger and more meaningful advertising platform than it already is.
2. Amazon Stock Forecast
Like Facebook, Amazon.com, Inc. (NASDAQ:AMZN) is also wrongfully identified by its core business as an e-commerce company. Again, like Facebook, Amazon is also neck-deep in massive technology ventures like AI, drones, and tech gadgets. Yet again, let’s properly call it a tech conglomerate.
Amazon’s success story began 20 years ago. That’s when Wal-Mart Stores Inc (NYSE:WMT) first sued Amazon for allegedly stealing its trade secrets by poaching top Wal-Mart executives. It was then that the foresighted investors first saw where Amazon was headed and jumped on board. Even after two decades, that growth story has continued. But don’t assume that the Amazon ship has already sailed. You still have a chance.
Amazon’s economic moat is no different than Facebook’s. You’re not just investing in Amazon stock; you’re investing in the brain behind it, Jeff Bezos, the man whose business acumen is valued and applauded in the upper echelons of the investment community.
Bezos’s business mantra contrasts Zuckerberg’s. His focus is not on competitors, but on “customers.” By selling at razor-thin profit margins, and sometimes even at losses, Bezos has managed to build a loyal customer base for Amazon. Today, Amazon is the largest e-commerce retailer, threatening to elbow out traditional brick-and-mortar retailers like Wal-Mart from the industry.
How is Amazon pulling this off? It’s simple. Amazon is trying to beat the brick-and-mortar model by establishing a swift delivery service of its own. The company’s drone delivery initiative, trucking service, and now ocean freight service are all calculated moves to expand the company’s foothold. In the last two years, Amazon’s bottom line numbers have turned from red to green. Amazon’s fattening balance sheet and growing earnings are now proof of its success.
Much like Facebook, Amazon’s stock price chart paints a similar picture. Bulls are raging in on AMZN stock.
Chart courtesy of StockCharts.com
To make a sound Amazon stock prediction for 2017, take note of these three developments.
• Amazon is further expanding in international markets. Its first stop this year is Mexico, but expect more countries to be added to the itinerary. Emerging markets like India are already proving to be lucrative. Of course, a growing member base means more subscription dollars.
• “Prime Video” is garnering significant consumer appeal. This year began with Prime Video streaming in 200 countries worldwide, followed by accolades at the Oscars. Rumor has it that Amazon might even invest in a premium TV channel of its own. True or not, the entertainment industry will continue to add more dollars to its revenue numbers.
3. Netflix Stock Forecast
Next up in FANG stocks forecast is Netflix, Inc. (NASDAQ:NFLX)—a success story fit to make a classic B-school case study. From a small DVD rental company to a full-blown entertainment powerhouse, Netflix is reshaping the television industry. With numerous Oscar nominations and now wins under its belt, nobody can challenge its growing strength in the industry. A quick look at the Netflix stock price chart confirms my thesis.
Chart courtesy of StockCharts.com
But here’s a word of caution. Netflix’s income numbers don’t look good on paper. We know that the average value investor looks for green figures. As long as this faction of prospective buyers stays out of the market, the sellers may team up to tip the scale against Netflix’s favor.
Nonetheless, watch out for these developments to arrive at a reasonable Netflix stock price prediction in 2017.
• Netflix is planning a new business division for selling toys of its famous characters. Yes, it sounds a lot like Walt Disney Co (NYSE:DIS)! This could help Netflix in building long-term franchises that are profitable, like Star Wars has been for Disney. The keyword here is “profitable.”
• With rapid international expansion, Netflix is adding new subscribers at an increasing rate. For only 10 bucks a month, it’s a cheap entertainment source that few would want to pass on. This is exactly how Netflix is keeping competition from Amazon Prime Video at bay. As long as the good news about subscriber growth keeps pouring in, NFLX stock will keep seeing more upside.
4. Google Stock Forecast
Alphabet Inc (NASDAQ:GOOG) is by far the most lucrative of the FANG stocks. See it through the lens of a traditional investor like Warren Buffett, and this company checks on nearly everything that the “Oracle of Omaha” deems necessary for an investment to be valuable. It has a durable economic moat, has a monopolistic hold over its industry, and has a fattening balance sheet, ever-rising income, great returns on equity and assets, very low debt, and an excellent cash position.
Consider this yourself: Google is not just a search engine. It’s an ecosystem, to the point that some even find its ubiquity cryptic. Google is everywhere. Everything with the word “smart” in its name must necessarily have Alphabet’s footprints in there, from smartphones to smart homes, to smart cars. Google is building (or powering) virtually everything.
On top of it are the company’s services that are making our lives easier, including its payment solutions, advertising solutions, and Internet distribution initiatives in remote areas. You name a product or service, and Google has it.
With fundamentals like these, one would be a fool to miss out on Google stock. The very jumpy “Mr. Market” is also in on this one. The Google price chart below confirms that the shorts are taking a beating at the hands of the longs. The Google stock price has gone up and up in perpetuum.
Chart courtesy of StockCharts.com
Projects like the commercialization of Google’s self-driving cars, solar-powered drones, and live streaming entertainment initiatives via “YouTube” are some promising developments to build your Google stock predictions for 2017.
Final Word on FANG Stocks Forecast
Long story short: the success story of FANG stocks is not over in 2017. Ask yourself, are you on the right side of the trade on FANG in 2017?