FB’s Record $120B Stock Fall Portends Future Trouble

It’s time for a new Wall Street acronym for the strongest tech earners, according to London’s Financial Times, which coined FAANGs to talk about the dominance of Facebook, Amazon, Apple, Netflix and Google.

The “F” in the Faangs, Facebook, took the largest hit of any stock in history with a $120 billion loss of value in a day on warnings of slowing advertising sales and user growth and an increase in expenditures to correct many of its weaknesses, such as political ads by bots and fake accounts.

Most of the companies’ market values have surpassed $500 billion and Amazon, Apple and Alphabet, Google’s parent company, are approaching the $1 trillion market cap. Netflix, however, has lower earnings and its subscriber growth is slowing. Its shares fell, as well as those of Twitter, last week after second quarter earnings reports.

The Financial Times’ graphic depicting Faangs.

The FT story points out that the Faangs acronym has lived up to the hype so far with $20 billion of investment flowing in this year alone.

“The NYSE Fang+ index, which includes the Faangs and other companies that have enjoyed explosive growth to become household-name brands since the turn of the millennium, has handily beat the broader U.S. stock market in recent years. It also includes Tesla, chipmaker Nvidia, and China’s Baidu and Alibaba. The index has risen about 200 per cent since the start of 2015 versus close to 40 per cent for the S&P 500.”

The Wall Street Journal questioned whether the nine-year run up of the S&P stock index could be sustained, based on the recent news of companies like Facebook, Twitter and Intel reporting earnings losses.

Tesla, another stock vulnerable to market forces and its CEO’s foibles, elicited an attack in a Fast Company story in which a columnist points out that Elon Musk’s erratic behavior could have a negative impact on the company in the future.

In addition, in spite of higher earnings, Twitter stock fell when it reported a decline of 1 million users and ongoing efforts to eliminate fake accounts, according to The New York Times.

Even though Amazon’s facial recognition software freaked out 25 Congressional reps by identifying them as criminals in the FBI database—most often those of color—the company will likely weather criticism as it continues refining the AI-based software.

For the coming year, signs point to Amazon and Alphabet leading the pack, though their valuations are already quite high. The two companies remain steady, top earners that seem capable of innovating at high speed. Instead of stocks with Faangs, Wall Street may just say AAh.