Big Tech, meet bear market.
With Apple Inc.'s drop on Tuesday, all FAANG stocks – Facebook Inc., Amazon.com Inc., Apple, Netflix Inc. and Alphabet Inc.'s Google – have fallen into a bear market, meaning they have dropped at least 20 per cent from recent highs. It marks a rare downturn for a group that reliably produced outsized returns for years.
Apple stumbled after a Goldman Sachs analyst cut his price target to US$182 a share from US$209, a forecast that implies the iPhone maker will decline over the next year, based on Monday’s closing price of nearly US$186. The analyst, Rod Hall, was the latest to raise concerns over the iPhone’s outlook.
“In addition to weakness in demand for Apple’s products in China and other emerging markets it also looks like the balance of price and features in the iPhone XR may not have been well-received,” Mr. Hall said in a note Tuesday.
Still, most analysts expect the FAANG stocks – even Apple – to regain their momentum and post stellar returns over the next year. The majority of analysts who actively cover the FAANGs have “buy” ratings on them, paced by 94 per cent who have a “buy” on Amazon, according to Bloomberg data. (Apple is lowest of the group, with 56 per cent of analysts recommending a “buy.")
Based on analysts' 12-month price targets, the FAANGs are expected to post the type of market-beating returns that investors have grown used to. Here is each company’s return potential, calculated as the difference between the consensus target price and the current price, as of Tuesday morning.
Time will tell whether analysts were caught sleeping on Big Tech’s tumble, or whether the growth story still has room to run.