What Are FANG Stocks?
In finance, the acronym "FANG" refers to the stocks of four prominent American technology companies: Facebook (F), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG). In 2017, the company Apple (AAPL) was also added, causing the acronym to be rewritten as "FAANG."
FANG stocks are famous for the impressive growth they have shown in recent years, with each member more than doubling over the past five years.
- The term "FANG" refers to the stocks of four popular American technology companies: Facebook, Amazon, Netflix, and Alphabet.
- Each of the FANG companies has shown extraordinary growth in recent years, reflected in both their revenues and their net profits.
- Although their business models vary, they each share the use of advanced technologies to acquire and retain users.
Understanding FANG Stocks
The term FANG Stocks was coined by CNBC's "Mad Money" host Jim Cramer in 2013. It is now widely used by market commentators and analysts. The stocks referred to by the acronym are all well-known and richly-valued technology companies that trade on the NASDAQ exchange, a collection of approximately 3,500 American technology companies. Many other companies included in the NASDAQ exchange are also viewed as growth investments, although very few have matched the impressive growth of the FANG stocks in recent years.
Despite their common reputation as successful growth companies, the business models of the FANG stocks are distinct. Facebook, for example, is the world’s preeminent social networking platform. With a user-base of nearly 2.5 billion people as of Sept. 2019, the company can claim approximately 30% of the world's population as its customers. To monetize this extraordinary user base, Facebook sells ads that are targeted based on users’ personal preferences and usage patterns.
Amazon, meanwhile, is a leading business to consumer (B2C) ecommerce platform that uses leading-edge cloud computing and data analytics technologies to sell a retail catalog. As of April 2019, the platform had over 120 million items for sale. Although Amazon initially pioneered the sale of books online, books now represent only about one-third of their overall product catalog. In 2018, the company had sold products to over 150 million active customers in the U.S. alone, with more than half of those customers opting to subscribe to its paid membership service, Amazon Prime.
Netflix is also known for its impressive customer growth. An online entertainment streaming service specializing in movies and television shows, the company's subscriber base has grown exponentially in recent years, from 22 million in 2011 to 150 million in 2019. To compete with new entrants to the streaming market, Netflix has also begun aggressively producing its own exclusive content, moving beyond its traditional role as a content aggregator to a major content producer in its own right.
Alphabet has leveraged its core expertise as the world’s foremost search engine, developing a highly profitable online advertising business while driving user retention through popular web applications such as YouTube, Google Docs, and Google Maps. The company receives an average of over 60,000 search requests every second of every day, and its mobile operating system, Android, has gained an estimated 75% share of the global smartphone market.
Example of FANG Stocks
With these impressive facts in mind, it is no wonder why investors have been enthusiastic about the FANG Stocks' business prospects. In recent years, this enthusiasm has been supported by the companies' financial performance, which has caused substantial increases in their respective stock prices.
In the trailing twelve months (TTM) as of Jan. 2020, for example, Facebook has reported revenues of over $65 billion, and net income of $18 billion. Amazon, meanwhile, showed revenue of an astounding $265 billion, producing net income of $11 billion. Over the past five years, these two companies’ stock prices increased by roughly 185% and 500%, respectively.
Netflix and Google have also shown strong TTM performance, with Netflix posting revenues of just under $19 billion and net income of over $1.4 billion. Google, for its part, generated $155 billion in revenues along with nearly $33 billion in net income. Buoyed by these earnings, Netflix’s stock rose by 450% in the past five years, while Google's rose by about 175% over the same timeframe.