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FAANG Stocks: Analyzing Their Valuations

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Jun. 3 2019, Published 12:12 p.m. ET

Facebook

All of the FAANG stocks fell 7.0%–13.0% in May. Are these tech stocks an attractive investment or will market uncertainty drive the stock prices lower?

Facebook (FB) stock has a forward PE ratio of 19.0x. According to analysts, the company’s earnings are expected to fall 6.9% in 2019 and rise 32.2% in 2020. In the next five years, Facebook’s EPS might grow at a CAGR (compound annual growth rate) of 17.6%.

The stock looks undervalued based on its 2020 earnings. The company will have to resolve data privacy issues and other allegations to keep investors interested.

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Amazon

Amazon (AMZN) stock has a forward PE ratio of 46.6x. Analysts expect the company’s earnings to rise 35.4% in 2019 and 39.8% in 2020. In the next five years, Amazon’s EPS might grow at a CAGR of 94.0%.

Amazon stock isn’t too expensive considering its strong growth rates. The stock looks like a solid bet for the long term.

Apple

Apple (AAPL) stock has a forward PE ratio of 13.7x. Analysts expect the company’s to fall 3.5% in 2019 and rise 11.2% in 2020. In the next five years, Apple’s EPS might grow at a CAGR of 12.0%.

Apple stock isn’t too overvalued at the current prices. The stock has a dividend yield of 1.7%. However, Apple is the most vulnerable among the FAANG stocks due to trade war sentiments. Apple investors will likely remain cautious until the trade war issues are resolved and iPhone demand picks up with the launch of new products.

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Netflix

Netflix (NFLX) stock has a forward PE ratio of 58.6x. Analysts expect the company’s earnings to rise 27.6% in 2019 and 71.3% in 2020. In the next five years, Netflix’s EPS might grow at a CAGR of 45.6%.

Netflix stock looks expensive at the current prices. However, Netflix’s strong earnings growth going forward should keep investors interested. Netflix is a solid pick if it can grow significant international revenues.

Google

Google (GOOGL) stock has a forward PE ratio of 20.6x. Analysts expect the company’s earnings to rise 4.1% in 2019 and 17.8% in 2020. In the next five years, Google’s EPS might grow at a CAGR of 15.8%.

Google stock doesn’t seem too overvalued based on its long-term earnings growth.

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