For July, FAANGM was up 2.9%, lagging the S&P 500 (3.1%) for a 2nd consecutive month. The Nasdaq was up 3.8% for the month. We suspect the FAANGM underperformance could be due to FAANGM stocks being negatively affected by the Nasdaq special rebalancing conducted on 17th July 2023.
Gainers: META and GOOGL were the biggest gainers in July, up 12% and 10% respectively after better-than-expected 2Q23 results and positive forward guidance, with a slight indication that we could expect a recovery in digital advertising sooner rather than later.
Laggards: The rest of the FAANGM (NFLX, AMZN, AAPL, MSFT) had relatively flat performance, ranging from -1% to 3% for July. Note: AAPL and AMZN had yet to announce earnings as of 31st July 2023.
Results for Quarter ending June 2023
Revenue for FAANGM grew 7% YoY in the quarter, led by META and AMZN. AAPL was the only company that saw contractions in its revenue due to weaker iPhone, Mac, and iPad sales. Other than NFLX, all other companies beat their own company guidance for revenue. Adj. earnings for the FAANGM was very positive, growing 17% YoY on better cost efficiencies and an acceleration in top line growth. Adj. earnings improved 20% YoY sequentially compared with 1Q23. The standout here was AMZN’s 90% YoY spike in adj. earnings due to lower logistics costs.
Meta Platforms Inc (META US, ACCUMULATE, TP US$360)
Comment: Although still in its early days, the launch of Threads provides an additional avenue for monetization for Meta if it can continue growing its active user base. The downside is fairly limited given its small team size and initial budget for the project. With respect to 2Q23 earnings, most of the growth was led by outbound e-commerce spending from Chinese advertisers. Meta’s short-form product, Reels, also saw improvements, with >200bn daily plays, >75% advertisers using Reels, and a US$10bn annual revenue run-rate. Guidance moving into the back half of FY23e was extremely positive, indicating some early signs of a recovery in digital advertising could be underway.
Apple Inc (AAPL US, NEUTRAL, TP US$183)
Comment: Apple does not talk about AI as much because it remains committed to only reveal new features and products as they come to market. However, the company did note that it has been doing research on various AI tools, including generative AI, for years. With regards to earnings, the results were within our expectations. Apple continues to leverage on its ecosystem strength and its installed base of 2bn devices. Services remain the key growth driver as customer engagement continues to grow, with the number of subscriptions passing the 1bn mark, up from 975mn disclosed in 2Q23, and we believe this will continue to drive margin expansion for the company.