It’s been a bad few days for tech stocks.
The FANG stocks, a moniker used to collectively describe Facebook, Amazon, Netflix and Google (now Alphabet) have had a rough two days on Wall Street. And even though Apple isn’t included in the original FANG group (which was designed to describe a grouping of high-risk but high-reward mega-growth stocks), the company has also underperformed in the last two days.
Here’s a brief summary of the damage, between when the market opened Friday morning and closed this afternoon.
- Facebook is down ~4.5%, falling from to $155.55 to $148.44
- Amazon is down ~4.75%, falling from $1013.00 to $964.91
- Netflix is down ~8.67%, falling from $165.82 to 151.44
- Google, or Alphabet, is down ~4%, falling from $984.15 to $942.90
- Apple is down ~6.24%, falling from $154.82 to $145.42
The chart below shows their performance over the last month (with the S&P 500 in orange for comparison), which really shows how severe the two-day downturn is.
There are a few interesting things about this correction.
First, the decline started Friday morning as soon as the markets opened – all of the above five stocks slide almost immediately, timed to a Goldman Sachs market note that said the market may be over relying on this group of technology companies for growth and the “FAANG” stocks may be seeing a valuation bubble.
While certainly not dire, the report raised valid concerns and may have caused caused the investors to reconsider how much their portfolios were relying on these stocks.
Another interesting thing is that this wasn’t a market-wide correction, and essentially was limited to the tech sector. The S&P 500 Index is down about .64% in the same time-period, and even the NASDAQ, which is tech-heavy and very heavily influenced by most of the FANG stocks, was only down 2.62%.
So if anything it’s actually a good sign for the economy as a whole that this tech-focused downturn didn’t have more of an effect on the broader market.
It’s also interesting that beyond the Goldman note mentioned above, and an Apple downgrade, there hasn’t been much tangible news from any of these companies to explain the sudden drop in price.
Plus, earnings were pretty good last quarter, with Facebook, Amazon, and Alphabet beating estimates and only slight misses by Apple and Netflix.
It’s also important to remember that even though these stock have had a bad couple of days, they have all tremendously outperformed the market in the long-term, with all of them up over 20% year to date (compared to the S&P 500 which is up 8.5% since January 1st.
So while it’s unclear how much more of a correction we’ll see from these tech stocks, the fact that the downturn is being caused by investor sentiment, instead of tangible events like missed earnings or negative company news, is probably a good sign that investors will eventually return to the growth that few other stocks outside of FANG have been able to provide.