In a new report, 720 Global discusses the FANG trade and why now is a good time to become de-FANGed. FANG is an acronym used to describe four of the largest high-growth tech stocks in the world: Facebook Inc FB 1.75%, Amazon.com, Inc. AMZN 2.02%, Netflix, Inc. NFLX 2.06% and Alphabet Inc GOOGL 1.95%‘s Google.
Absurd Valuations
The performance of the FANG stocks says a lot about the mentality of the current market. The S&P 500 has been essentially flat since June, but the FANG stocks are up on average about 40 percent during that time.
One of the most basic valuation metrics used to identify the fundamental value of a stock if the P/E ratio. The S&P 500’s overall P/E ratio currently sits at 18.6. 720 Global took a look at exactly how much of an earnings change each of these four names would need to drop their respective P/E’s down only to the market average. All four companies would need an earnings boost of at least 81 percent to be valued similarly to the rest of the market.
Netflix would need to increase its income by 1,752 percent, while Amazon would need to see income more than six times its current level.
Amazon And Netflix
While Amazon is likely in position to boost margins in the future, it still has…
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