The so-called FAANG stocks flopped in 2022. It wasn’t pretty.
Meta Platforms (META 4.10%) stock (the “F” in FAANG because it was previously named Facebook) plunged 64%. Netflix (NFLX -0.84%) didn’t fare much better, with its shares sinking 51%. Alphabet (GOOG 2.51%) (GOOGL 2.42%) (the “G” in FAANG due to its Google business) and Amazon (AMZN 2.10%) fell 39% and 50%, respectively. Apple (AAPL 1.48%) ranked as the best performer in the group but still saw its shares tumble 27%.
But all of that is water under the bridge now. The future could be better than the past. Here are four FAANG stocks that Wall Street thinks will be big winners in 2023 — and one that analysts aren’t so bullish about.
Wall Street’s projected winners
Wall Street is most enthusiastic about Amazon’s prospects. The consensus 12-month price target reflects an upside potential of over 40%. That would mark a huge comeback for the beaten-down stock.
There are three main reasons why I think analysts are so optimistic about Amazon right now. The company’s cost-cutting initiatives should boost earnings. Inflation has been one of the biggest challenges curtailing Amazon’s growth but appears to be waning somewhat. Also, the threat of a severe recession seems to be relatively low.
Analysts also believe that Alphabet has plenty of room to run. The average price target for the tech giant is 27% higher than its current share price. Wall Street clearly doesn’t expect OpenAI’s ChatGPT to be the “Google killer” that some have predicted — at least not this year.
Apple should be able to largely make up for its 2022 decline based on Wall Street’s projections. The consensus price target for the stock reflects a 20% upside potential. Analysts appear to be counting on a solid performance from Apple’s iPhone ecosystem over the coming quarters.
Last year’s worst FAANG stock won’t pick up the dubious distinction in 2023 if analysts are right. The average price target for Meta Platforms is more than 8% above the current share price.
The lone loser
That leaves Netflix as the only FAANG stock that analysts aren’t as bullish about this year. The consensus price target indicates that Wall Street expects the streaming service stock to fall nearly 5% over the next 12 months.
To be sure, not all analysts are negative about Netflix. Twenty-five of the 41 analysts surveyed by Refinitiv in January rate the stock as a buy or strong buy. One of those analysts even thinks that Netflix’s share price could jump more than 20%.
However, I’m not sure how many of those recommendations and price targets were set after Netflix announced outstanding Q4 earnings results. It’s possible that some analysts could downgrade the stock to a hold after its big post-earnings gain. On the other hand, Netflix’s results could cause some on Wall Street to rethink their negative opinions about its prospects.
Is Wall Street right?
There’s an old Danish proverb once referenced by physicist Niels Bohr: “Prediction is very difficult, especially about the future.” I think this sentiment is true, even when the future being predicted is only 12 months out.
However, I fully agree with Wall Street analysts’ bullish views about Amazon, Alphabet, and Apple. I expect all three stocks to rebound strongly this year, as long as there isn’t a severe recession.
Meta’s near-term fortunes are anyone’s guess. But I do find the stock’s valuation attractive despite the company’s numerous challenges. I also believe that Meta just might be the biggest winner of all the FAANG stocks over the next decade if CEO Mark Zuckerberg’s vision of the metaverse is fulfilled.
As for Netflix, the company’s latest quarterly update showed that its business is more resilient than naysayers might think. My main concern about the stock, though, is its valuation. Even after the steep sell-off last year, Netflix shares still trade at more than 30 times expected earnings. And I expect the company’s earnings growth over the next several years will be much lower than they were in recent years.
Overall, Wall Street’s take on the FAANG stocks seems to be about right, in my opinion. But whether Meta, Amazon, Alphabet, and Apple jump in 2023 or not, they could all be big winners over the long term.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet, Amazon.com, Apple, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Apple, Meta Platforms, and Netflix. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.