By Alessandro Albano
Investing.com -- April is certainly not a good month for equities. Despite Thursday's rally, the S&P 500 lost over 7% (-11% since the start of the year) and the Nasdaq fell 12% (-18% YTD), with inflation, rising interest rates, geopolitical tensions and challenges to global growth from the latest lockdown in China weighing heavily on market sentiment.
Investors had been betting heavily on big tech's quarterly reports as the stock markets turned. This year, however, expectations for the accounts of the big companies that led the market in the two-year pandemic have been largely disappointed, raising fears of a prolonged bear market. The FANG+ Index, a basket that replicates the performance of the so-called FAANG stocks, is down 28% since the beginning of January.
"Markets are affected by wars, inflation, slowdowns, overheating economies, supply chain disruptions, energy shortages, and monetary policy moves. Much of the rotation is due to the fact that investors are realising that after more than a decade, the central banks' QE is not unlimited," OANDA senior analyst Jeffrey Halley writes.
Amazon's disappointment
The Andy Jassy-led company posted its first quarterly loss since 2015, amounting to a total of $3.8 billion and an EPS of -$7.56, due to the negative effects of its investment in Rivian (NASDAQ:RIVN); the electric vehicle manufacturer previously described as the new Tesla, but which has lost 69% market cap since the start of the year.
Revenues for Amazon (NASDAQ:AMZN) rose 7% to $116.4 billion, a marked slowdown from the +44% in Q1 2021, as the pandemic and war in Ukraine "brought unusual growth and challenges", the CEO said. Estimates for the current quarter were sharply down, with revenues expected to slow to between €116 billion and €121 billion. Estimates were behind Thursday's post-market slump, with the stock down 15% in April.
Problems in China for Apple
The Cupertino-based company's revenues rose 9% to $97.3 billion, about $4 billion more than expected, but the company estimated negative effects from supply churn of $4 billion/8 billion in the second quarter in terms of sales, mainly due to lockdowns in China, a forecast that caused the stock to fall in the after-market (-9% in April).
"This past quarter is a testament to our relentless focus on innovation and the ability to create the world's best products and services," said CEO Tim Cook, pointing out that Apple (NASDAQ:AAPL) "is not immune to supply chain issues."
Netflix worst of all
After reporting its first decline in subscribers in over 10 years and forecasting a decrease of 2 million new users in the current quarter, Netflix (NASDAQ:NFLX) stock effectively eroded all the progress made during the pandemic and returned to September 2019 valuations (-35% to $226.19), 'burning' about $53 billion in capitalisation (the worst session since 2004 according to Bloomberg data). The stock has lost 50% of its value in the last 30 days.
Google holds out?
With Meta (NASDAQ:FB) largely surprising analysts' expectations after a terrible fourth quarter that had provoked a sharp sell-off in the stock, several analysts say the safest FAANG stock at the moment is Alphabet (NASDAQ:GOOGL).
Google's parent company posted revenues and earnings of $68.01 billion and $24.62 per share respectively, beating Wall Street estimates of +5% and +13% respectively, with strong numbers also coming from the company's advertising business and Google Cloud segment, which grew 36% and 45% y/y respectively. The cash front also looked good, with cash flow up 56% in the 12 months to 2021 ($67 billion).
According to an analysis published on the Nasdaq website by Luke Meindl, Alphabet offers investors "the perfect mix of stability and growth", and is trading "at 22 times earnings, well below its five-year P/E multiple of 32". And despite higher growth than FAANG peers, Google offers "a higher discount price".
Before the Netflix crash, the average P/E among the FAANGs was 29, meaning that Alphabet was trading "at a 25% discount to its peers. Now, the FAANG group's price-earnings ratio is 26, still over 15% higher than Alphabet's." Typically, the analysis continues, 'the market dictates that we pay a higher price for higher growth companies. But in the case of Alphabet, we are being offered the best growth at one of the lowest prices, making this an easy decision for investors."