FANG Stocks

What Are FANG Stocks?

In finance, the acronym "FANG" refers to the stocks of four prominent American technology companies: Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG). FANG stocks are famous for the impressive growth they have shown in recent years, with each member more than doubling over the past five years.

In 2017, the company Apple (AAPL) was also added by some analysts, resulting in the new acronym "FAANG."

Understanding FANG Stocks

The term FANG Stocks was coined by CNBC's "Mad Money" host Jim Cramer in 2013. It is now widely used by market commentators and analysts. The stocks referred to by the acronym are all well-known and richly-valued technology companies that trade on the NASDAQ exchange, a collection of approximately 3,300 American technology companies. Many other companies included in the NASDAQ exchange are also viewed as growth investments, although very few have matched the impressive growth of the FANG stocks in recent years.

Despite their common reputation as successful growth companies, the business models of the FANG stocks are distinct. Facebook, for example, is the world’s preeminent social networking platform. With a monthly user-base of more than 2.85 billion people as of April. 2021, the company can claim over 35% of the world's population as its customers. To monetize this extraordinary user base, Facebook sells ads that are targeted based on users’ personal preferences and usage patterns.

Amazon, meanwhile, is a leading business-to-consumer (B2C) e-commerce platform that uses leading-edge cloud computing and data analytics technologies to sell a retail catalog. Although Amazon initially pioneered the sale of books online, books now represent only about one-third of their overall product catalog. In 2020, the company had sold products to over 300 million active customers in the U.S. alone, with half of those customers opting to subscribe to its paid membership service, Amazon Prime.

Netflix is also known for its impressive customer growth. An online entertainment streaming service specializing in movies and television shows, the company's subscriber base has grown exponentially in recent years, from 22 million in 2011 to more than 209 million in 2020. To compete with new entrants to the streaming market, Netflix has also begun aggressively producing its own exclusive content, moving beyond its traditional role as a content aggregator to a major content producer in its own right.

Alphabet has leveraged its core expertise as the world’s foremost search engine, developing a highly profitable online advertising business while driving user retention through popular web applications such as YouTube, Google Docs, and Google Maps. The company receives an average of over 60,000 search requests every second of every day, and its mobile operating system, Android, has gained an estimated 75% share of the global smartphone market.

Example of FANG Stocks

With these impressive facts in mind, it is no wonder why investors have been enthusiastic about the FANG Stocks' business prospects. In recent years, this enthusiasm has been supported by the companies' financial performance, which has caused substantial increases in their respective stock prices.

In the trailing twelve months (TTM) as of August 2021, for example, Facebook has reported revenues of over $104 billion, and net income of over $39 billion. Amazon, meanwhile, showed revenue of an astounding $443 billion, producing a net income of $29 billion. Over the past five years, these two companies’ stock prices increased by roughly 191% and 335%, respectively.

Netflix and Google have also shown strong TTM performance, with Netflix posting revenues of over $27 billion and net income of over $4.3 billion. Google, for its part, generated $220 billion in revenues along with nearly $62 billion in net income. Buoyed by these earnings, Netflix’s stock rose by 480% in the past five years, while Google's rose by about 276% over the same timeframe.

What Does the Acronym FANG Stand for?

The acronym FANG Stocks was coined by CNBC's "Mad Money" host Jim Cramer in 2013. This acronym refers to the stocks of four prominent American technology companies — Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG). By adding Apple (AAPL) in 2017, "FANG" became "FAANG."

Why Are FANG Stocks Popular?

FANG stocks are famous for the impressive growth they have shown in recent years, with each member more than doubling over the past five years. However, despite exhibiting growth stock behavior, FANG stocks are not too volatile. It's this stability, along with delivering superior rates of return, that has made these quite attractive to investors.

What Businesses Are FANGs in?

Although they each share the use of advanced technologies to acquire and retain users, FANGs have distinct business models. Facebook is the world’s preeminent social networking platform. Amazon is a leading business-to-consumer (B2C) e-commerce platform. Netflix is an online entertainment streaming service that has also begun aggressively producing its own exclusive content. Alphabet (Google) has leveraged its core expertise as the world’s foremost search engine to develop a highly profitable online advertising business.