The acronym FANG represents what has seemingly become the most popular investment strategy of the last few months. FANG constitutes 4 stocks: Facebook, Amazon, Netflix and Google. These companies are the markets darlings for good reason; since June they are up on average 40%, whereas the S&P 500 is flat over the same period.
Before you rush to buy these gems we thought it would be helpful to review some basic fundamental data in order to clarify exactly what investors are assuming when they purchase these stocks. The analysis in the table below reflects the change in revenue, profit margin or income required for these companies to have the same price to earnings (P/E) as the S&P 500. The data highlighted in blue represents the revenue, margin or net income required to bring each P/E to the market average of 18.6. The data in yellow highlights the percentage change required to bring each P/E to the market average.
Company Comments
Facebook: Revenues were up 25% year-over-year in the most recent 12 month period but growth is slowing as garnering additional market share becomes increasingly difficult. While deeper market share penetration can certainly be aided with mergers and acquisitions, revenue expectations are tremendous. One has to seriously question the ability of how, what is essentially, an advertising company can generate such growth in what is an extremely competitive and trendy industry.
This post was published at Zero Hedge on 12/08/2015.
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