While the FANG stocks have been standout performers in 2017, will company performance and industry trends continue to fuel their double-digit growth heading into 2018?
X The contingent of those following the tech giants is growing. On Thursday, GBH Insights analyst Daniel Ives delivered a report on the FANG stocks to clients, giving all four companies a rating of highly attractive.
While there are lingering worries around growth and competition, Ives wrote, “We believe the underlying fundamentals, spending environment, and consumer/enterprise landscape looks very healthy heading into 2018.”
The FANG stocks — social media leader Facebook (FB), e-commerce king Amazon (AMZN) streaming media champion Netflix (NFLX) and Google-owner Alphabet (GOOGL) — are among the top-performing technology companies globally. This year, Facebook shares are up 56%, while Amazon is up 55%, Netflix 49% and Alphabet 32%.
Ives gave two of the four FANG stocks a price-target increase. Ives raised his price target on Amazon to 1,375 from 1,270, while Alphabet was raised to 1,190 from 1,100.
Ives said Amazon continues to have an “iron grip” on the e-commerce market, despite a clear bullseye on its back from retailers around the world.
Bolstering Amazon heading into 2018 is its Prime membership program, now more than 85 million strong, and the various business opportunities surrounding its Whole Foods acquisition. Another pillar of strength is Amazon Web Services.
The biggest risk and investor concern around Amazon, Ives wrote, “is emerging competition from every direction of the consumer and enterprise landscape.”
Amazon recently scored two price-target hikes on expectations of a strong holiday sales season and increased optimism about its competitive position.
Regarding Alphabet, Ives based his price-target increase on increased confidence in Google’s underlying growth drivers.
“We believe Google has a number of organic growth investments that will start to bear fruit in 2018 as ad growth, mobile impression strength, and a host of other initiatives lay out a compelling growth story for Google in 2018,” Ives wrote.
Alphabet, in late October, reported third-quarter results that smashed estimates, sending shares in the internet giant to a new high.
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On Netflix, Ives said the streaming media company has a number of initiatives which should fuel the company’s next phase of growth in the U.S. and internationally.
“While the landscape for original content has become increasingly competitive with new entrants entering the market by the day, we believe Netflix remains in a unique position of strength to grow its content and distribution tentacles over the next 12 to 18 months,” Ives wrote.
Despite growing competition in the streaming video market coming from Amazon, Hulu and others, he added: “We are not overly concerned that this dynamic will alter the company’s growth trajectory in the near-term given the Netflix competitive moat and original content.”
Ives has a price target on Netflix of 235.
As to Facebook, Ives said the company has strong momentum heading into 2018.
“Facebook will continue to grow its massive global installed base in our opinion while importantly monetizing users, especially on the Instagram side of the house,” Ives wrote.
One concern is that Facebook intends to significantly increase spending in 2018, “which could be a lingering cloud over Facebook’s shares in the near term until investors can get further comfort that these investments are fueling the next phase of the company’s growth story,” Ives wrote.
Facebook, on Nov. 1, reported third-quarter earnings that topped earnings and revenue estimates by a wide margin. He has a price target on Facebook of 210.
Facebook shares were up 1.5%, near 178.75 during afternoon trading on the stock market today. Amazon was up 0.7%, near 1,161. Netflix was up 0.5%, near 186, while Alphabet was up 1.5%, near 1,048.