FAANGs Disappoint As Volatile Q3 Earnings Season Enters Home Stretch

earnings season

It is hard to keep track of all of the things that are happening in the world these days. However, most of us know that we are about to bid goodbye to one of the most volatile U.S. third quarter earnings seasons in recent years.

The momentum of the so-called FAANGs (Facebook, Apple, Amazon, Netflix, and Google) has drastically gone down.

Amazon and Apple became the first companies in the U.S. to hit a market cap of $1 trillion earlier this year, but both have since lost more than $200 billion and $100 billion, respectively. Google parent Alphabet Inc., Facebook Inc., and Netflix Inc. are also on the verge of sliding into the bear territory.

On Monday, tech stocks continued leading the way south, with Facebook hitting a 12-month low after going down 5%, while Microsoft and Apple lost over 3%. During the third quarter, Facebook, Amazon and Alphabet Inc. reported mixed earnings.

Amazon announced third-quarter sales up 29% to $56.6 billion, but missed analyst expectations for a second consecutive quarter. Analysts said e-commerce competition was rising and overseas results were disheartening. Amazon warned that it was being conservative with its forecast while blaming changes in its accounting method.

The online retail giant made things worse after announcing downbeat third-quarter sales outlook for the holiday season, sending its shares down 8% in the extending trading session on Oct. 25, 2018.

Amazon forecasts that fourth quarter sales will grow by between 10 and 20 percent, or up to $72.5 billion. That is below sales of $73.9 billion that analysts are expecting the company to report, according to figures compiled by Refinitiv.

George Salmon, an analyst at Hargreaves Lansdown said, “Weak revenue growth stuck out like a sore thumb. And when you´re trading on 70 times expected earnings, it doesn’t take much to jolt the share price.”

Third quarter sales of Alphabet Inc. also fell short of analyst estimates amid lower revenue growth from its main Google sites, including YouTube and Search. The company has consistently posted strong sales growth in recent years, aided by its core search advertisement unit.

Smartphone maker Apple Inc. also announced higher than anticipated fiscal fourth-quarter results, but reports of shrinking iPhone demand saw shares of the company move to the bear market territory on Monday.

Facebook is among the hardest hit tech stocks on the Nasdaq as the company continues to face an intense backlash from U.S. lawmakers on both sides of the aisle, after a negative report detailed how its top brass executives used dirty methods to avoid criticism.

Despite posting solid earnings last month, Netflix is also taking a bite with its shares giving up 5.5% to change hands at $270.608 on Monday. The streaming giant beat its own forecast, and every key consensus metric. However, analysts believe the stock will soon produce its first “death cross” pattern since January 2016 because of pressure from the other FAANGs.

Tech companies account for more than 20% of the market value of the Standard & Poor’s 500. But, FAANGs have lost close to $1 trillion in value this year through Monday, since reaching their respective 52-week highs.