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FAANG stocks have been unable to steer clear of the market hailstorm that's hit the tech sector. Though high-flying hyper-growth stocks have dragged stocks lower in the first half, the fallen FAANG stocks still appear like great long-term holds, even as rates and recession risks rise by the month.
Many may be quick to conclude that FAANG is dead. And although the acronym may be in need of an update following the epic blow-up of Meta and Netflix in the first half, I'd argue that the broader basket needs more time to demonstrate its resilience.
As America's top tech titans brace themselves for an economic slowdown, investors and analysts have been quick to temper expectations. Given their tremendous resilience, I'd argue it's likely that it's the FAANG stocks that could provide leadership as markets look to rebound.
In this piece, we used TipRanks' Comparison tool to have a closer look at two Strong Buy-rated FAANG stocks.
Alphabet (GOOGL)
Alphabet is a wonderful tech company that you can never count out. The company caused a bit of a stir when it reported a mild earnings miss in its first quarter, with $24.62 per-share earnings, missing the $25.89 estimate.
In a market that doesn't even reward earnings beats, you can bet that earnings misses will be met with tremendous selling pressure. Though Alphabet's rare quarterly flop may be viewed as the beginning of a disturbing trend, I'd argue that things weren't nearly as ugly as they seemed under the hood.
The search and cloud businesses were remarkably strong. Internet video behemoth YouTube acted as a major drag for the quarter, thanks in part to significant competition for user engagement and the reopening of the economy. Indeed, many shut-in consumers have been going out, rather than spending hours on custom-tailored videos served up by the YouTube algorithm.
Though lockdown tailwinds are unlikely to return, even as new COVID variants do, I view YouTube as a powerful platform that could recover ahead of an economic slowdown.
YouTube isn't just a magnificent entertainment platform. It's one that could be a lot more recession-resilient than skeptics think.
As the economy slows down, consumers won't be in a hurry to spend considerable sums anymore. Many may ditch their paid subscriptions, and start going out less to curb their monthly spending. As they do, people could spend more time engaging with YouTube's free, ad-based platform.
Though YouTube subscriptions could decline, I view the ad business as one that could take off as free entertainment tiers get a chance to shine.