The global economic shock delivered by the coronavirus outbreak has devastated the stock market, and the mitigating effects of dramatic Federal Reserve measures and a proposed $2 trillion U.S. stimulus bill remain uncertain.
But tech giants Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Google parent Alphabet (GOOGL, GOOG) — also known as the FAANG stocks — will endure the crisis and some may benefit from it, says Daniel Ives, managing director of equity research at Wedbush.
“If you look at trends whether streaming in Netflix, e-commerce for Amazon, smartphones and 5G with Apple, and obviously advertising and search with Alphabet,” he tells Yahoo Finance. “Even look at Facebook: more users engaging in streaming and social media given that they’re locked in their house all but for 10 minutes every day.”
“It’s hard to paint the apocalyptic type scenario on the other side [for these companies],” he adds. “There’s no liquidity risks — they’re companies even in the stress case, worst-case type scenarios that are still generating tens of billions in free cash flow.”
Over the past month, Facebook has fallen about 25% — a precipitous drop but one that outperforms the nearly 33% dive for the S&P500 (GSPC). The same goes for Amazon, which has fallen off 8% over that period; as well as for Netflix, Alphabet, and Apple, which have fallen nearly 6%, about 24%, and 22% respectively.
All but Netflix were up in trading on Tuesday, as the market rallied in anticipation of a stimulus bill agreement on Capitol Hill.
Daniel Newman, an analyst at Futurum Research, echoed the bullish attitude toward big tech in a conversation on Tuesday with Yahoo Finance’s Alexis Christoforous and Brian Sozzi.
“Everybody working from home, being at home more. This means more Netflix; this means more time on social media,” he says. “This has become the key way we’re communicating with one another. Look at how we’re getting our goods and services from Amazon right now.”
While the FAANG stocks will likely come out of the crisis just fine, some will continue to take a hard hit in the short term, said Ives, noting Apple’s closure earlier this month of all stores outside China.
“These companies are not teflon-like,” he says. “There’s going to be a lot of damage both from stocks and real life as we continue to see tragic trends emerge from the pandemic.”
But, he reiterated, for the FAANG stocks this is “more of a nightmarish period for everyone rather than the start of a longer term, darker game-changing trend.”