In a statement, analysts from research firm Lonsec warned investors against “bucket mentality” whereby investors group stocks together “often for superficial reasons”.
Although all five FAANG stocks (Facebook, Amazon, Apple, Netflix and Google/Alphabet) were hitting or exceeding earnings estimates, there were major divergences in share price reactions, the statement said.
“While the FAANG shares have largely risen together in recent months, Facebook’s violent decoupling from the FAANG growth trajectory shows it is a mistake to think of these shares as behaving as a group.
“While Facebook met the market’s EPS target, it undershot the consensus revenue estimate and suffered the consequences,” the statement said.
“In contrast, Amazon reported strong EPS growth and slightly down-beat revenue versus consensus, leading to only a moderate fall in price.
“Netflix reported lower than expected revenue and subscriber growth and saw a small bump in its price.”
The statement pointed out that while all the FAANG shares were all technology-related and among the highest value (bar Netflix), they were “fundamentally different businesses”.
“When they move in the same direction they can move the market with them, but when they diverge it can leave investors wondering how meaningful the FAANG label is.”
