For years after the financial crisis meltdown of 2008 and 2009, the so-called FANG stocks had the market leadership as they all roared higher during the following years. Over the past few years, the luster seemed to have worn off as the momentum crowd moved to electric vehicle stocks (especially Tesla), solar and green energy stocks, marijuana stocks and others. However, for long-term aggressive growth investors, the FANG stocks are very likely one of the best places to be now.
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We screened the curated stock lists at BofA Securities and were intrigued to find that all four of the original FANG stocks were in the firm’s Growth 10 list, which contains their 10 top growth stock picks. All are rated Buy and all make good sense for investors looking to shift from momentum plays that are way overvalued to more sensible mega-cap technology ideas. While they all dominate their respective technology silos, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Alphabet
The search giant continues to expand, and it was the G in the FANG stocks before changing its name in 2015. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas such as search, advertising, operating systems and platforms, and enterprise and hardware products. The company generates revenue primarily by delivering online advertising and by selling apps and content on Google Play, as well as hardware products. Alphabet provides its products and services in more than 100 languages and in 190 countries, regions and territories.
The company offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as search, ads, commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
Analysts point to Google Cloud, which is the largest cloud infrastructure play and engages in more technology, infrastructure research and development in headcount and dollars than any other company. That gives it the strength and wherewithal to compete with and differentiate itself from Amazon’s AWS and Microsoft’s Azure.
The BofA Securities price target for the stock is $2,440, and the Wall Street consensus target is $2,319.03. Alphabet stock closed Tuesday at $2,046.47 a share.
Amazon
This is the absolute leader in online shopping, and it remains a technology anchor for many portfolio managers and also is a member of the BofA Securities US 1 list. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers.
The company serves developers and enterprises through Amazon Web Services, which provides computing, storage, database, analytics, applications and deployment services that enable virtually various businesses. AWS is also the undisputed leader in the cloud now, and many top analysts see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market.
Like every year, online sales continued to grow in 2020, especially during the busy Christmas shopping period, and as a result of the COVID-19 shutdowns, and Amazon remains the go-to portal for many shoppers.
BofA Securities has a huge $4,150 price objective for the technology giant, while the consensus figure is $3,899.36. The last Amazon.com trade for Tuesday came in at $3,055.29.
The huge social media leader has been on a roll, and the analysts remain very positive. Facebook Inc. (NASDAQ: FB) is the largest social network, with over 2.3 billion monthly active users and over 1.6 billion daily active users. The company generates revenue from advertising and from payments, with over 95% of revenue from advertising. It generates close to 50% of revenues in the United States and Canada and is expanding rapidly in international markets.
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The company’s solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends. Messenger, a messaging application for mobile and web on various platforms and devices, enables people to reach others instantly, as well as enable businesses to engage with customers. WhatsApp Messenger is a mobile messaging application.
The company has been under intense scrutiny lately, along with other big-tech giants. Some people allege there has been unreasonable censorship, and it is yet another that may be targeted by either Congress or the Department of Justice, or perhaps both. With that noted, it remains one of the largest and most powerful social media platforms in the world.
BofA Securities has set a $358 target. The consensus target is $338.72, and Facebook stock closed at $288 on Tuesday.
24/7 Wall St.Netflix
This Wall Street darling offers a great entry point after selling off from all-time highs back in January. Netflix Inc. (NASDAQ: NFLX) is the world’s leading internet television network, with more than 120 million members in over 190 countries enjoying more than 125 million hours of TV shows and movies per day, including original series, documentaries and feature films.
Members can watch as much as they want, anytime, anywhere, on nearly any internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments. Netflix is available on virtually any device with an internet connection, including personal computers, tablets, smartphones, smart TVs and game consoles, and it automatically provides the best possible streaming quality based on the available bandwidth.
Many titles, including Netflix original series and films, are available in high-definition with Dolby Digital Plus 5.1 surround sound and some in Ultra HD 4K. It appears Netflix may be cracking down on password sharing. Many on Wall Street view such crackdowns as a tailwind, and Netflix is in a strong position to continue price increases in 2021.
The $680 BofA Securities price target compares with the $619.43 consensus estimate. Netflix stock ended Tuesday’s trading at $513.39.
It is somewhat ironic that after being the talk-of-the-town on Wall Street for years, these hugely successful (and most importantly profitable) companies took a back seat to momentum names, many of which make no or very little money. With the market very pricey, and perhaps vulnerable to tail risks like massively overleveraged hedge funds, it makes sense to continue to bet on these mega-cap leaders.
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