What are the FAANG companies and MAMAA Stocks?

Where did the FAANG acronym emerge from?

Over the years, the FAANG acronym has undergone several changes, prompting us to delve into its origins and historical progression. In essence, the FAANG companies are a group of five of the largest and most influential technology companies in the world. 

FAANG, a term synonymous with tech dominance, has an interesting history. Originally coined as "FANG" by Jim Cramer, host of CNBC, to represent Facebook, Amazon, Netflix, and Google (Alphabet), it later evolved to include Apple.

These U.S. giants, despite operating in different tech sectors, share key characteristics: immense size, market leadership, and global influence.

Other companies have come out with their own terms with Goldman Sachs for example creating the acronym “FAAMG” removing Netflix and adding Microsoft. Nonetheless, while they operate in different segments of the technology industry, they share a few key characteristics, including their size, market dominance, and influence over global consumer trends.

Apple currently reigns supreme with a market cap of $2.6 trillion within FAANG, with Microsoft leading (not in FAANG) at $3.1 trillion as of April 2, 2024. 

What are the latest innovations from FAANG companies?

Facebook (now Meta):

• The development of the Metaverse, a virtual shared space that combines augmented reality (AR) and virtual reality (VR) technologies for social interactions and immersive experiences.
• Continued advancements in AI and machine learning for content moderation, recommendation algorithms, and personalisation.
• Meta is also using AI to personalise experiences for its users, such as by suggesting relevant content and tailoring ads.

Apple:

• Apple is developing its own line of ARM-based chips, called Apple Silicon. These chips are more powerful and efficient than Intel chips, and they are helping Apple to create more innovative products.
• Enhancements to augmented reality experiences through ARKit and the expansion of services like Apple Fitness+ and Apple Music.
• Apple is committed to helping people live healthier lives, and it has developed a number of health and fitness products and services, such as the Apple Watch and the Fitness app.

Amazon:

• Expanding their Amazon Web Services (AWS) offerings, including cloud computing, AI, and machine learning services, which can help to improve efficiency and reduce costs.
• Innovations in logistics and delivery, such as drone delivery and automated fulfilment centres.This could revolutionise the way we receive goods. 

Netflix:

• Continued investment in original content production, including movies, TV shows, and documentaries. It has produced some of the most critically acclaimed and popular shows in recent years.
• Experimentation with interactive storytelling and new ways to engage viewers through personalised recommendations.
• Netflix is using AI to personalise recommendations for its viewers. This can help viewers to discover new content that they will enjoy.

Google (Alphabet):

• Advancements in artificial intelligence and machine learning, with applications across various services like Google Search, Google Assistant, and self-driving technology (Waymo).
• Developments in quantum computing, aiming to solve complex problems beyond the capabilities of classical computers.
• Alphabet's Waymo subsidiary is developing self-driving cars, which could have a major impact on transportation.

In addition to the above, here are some other technologies that are being used by FAANG companies:

Blockchain is a distributed ledger technology that can be used to record transactions securely and transparently. FAANG companies are exploring the use of blockchain for a variety of applications, such as supply chain management and financial services. Internet of Things (IoT) is the network of physical objects that are embedded with sensors and software that enable them to collect and exchange data. FAANG companies are using IoT to develop smart homes, connected cars, and other devices. Big data is the collection and analysis of large amounts of data. FAANG companies are using big data to improve their products and services, such as by personalising recommendations and predicting customer behaviour.

These are just a few of the technologies that are being used by FAANG companies. These companies are at the forefront of technological innovation, and they are sure to continue to use new technologies to change the way we live and work.

What are the differences between FAANG companies and other tech companies?

Distinguishing between FAANG companies and other tech companies can be complex, as the technology industry is vast and diverse. However, here are some general differences that have often been highlighted:

Market Capitalisation and Scale:

FAANG companies are some of the largest and most valuable tech companies globally, often with market capitalisations in the hundreds of billions to over a trillion dollars. This immense scale gives them significant resources, influence, and market power. Other tech companies instead may have smaller market capitalisations and might be focused on specific niches or industries.

Core Business Focus:

The companies usually each have a dominant focus, such as social media (Facebook/Meta), consumer electronics (Apple), e-commerce and cloud services (Amazon), streaming content (Netflix), and internet search and advertising (Google/Alphabet). Smaller companies might specialise in areas like cybersecurity, software development tools, fintech, healthtech, edtech, and more.

Diversification:

Bigger companies diversify their offerings to varying degrees. For example, Amazon started as an e-commerce platform but expanded into cloud services and other areas. Alphabet (Google) has its core search and advertising business but also invests in a range of ventures. Other companies might focus on a single product or service, or they may have diversified portfolios depending on their strategies.

Innovation and Research:

Due to a larger market capitalisation, FAANG companies have the funds for significant investments in research and innovation across various fields, from artificial intelligence and machine learning to hardware and user experience. Companies, particularly startups, may focus more on disruptive innovations in specialised areas.

Global Reach:

FAANG companies often have a global presence, with users and customers spanning the world. They have the ability to impact a wide range of industries and markets. A smaller company  might have a more localised or targeted reach based on their offerings and business models.

Cultural Impact:

Companies such as FAANG, have had a significant influence on modern culture, shaping the way people communicate, consume content, shop, and interact with technology. It is much harder for other tech companies to have cultural impact without the same level of public recognition.

Regulatory and Public Scrutiny:

Due to their size and influence, FAANG companies often face heightened regulatory and public scrutiny related to issues like data privacy, antitrust concerns, and content moderation. Smaller tech companies might not attract the same level of attention from regulators or the public.

What is the impact of FAANG companies on society?

The impact of Facebook/Meta, Apple, Amazon, Netflix, Google/Alphabet on society has been substantial and far-reaching. Their innovations, products, and services have transformed the way people communicate, access information, conduct business, and entertain themselves.

Facebook (Meta) has revolutionised social networking, enabling people to connect globally, share experiences, and communicate in new ways. Apple's iPhone and other devices have made communication more seamless and accessible, changing how people stay connected.

Google's search engine has made information readily available to billions, reshaping how people learn, research, and access knowledge.

Amazon has transformed the retail landscape, popularising online shopping and changing consumer behaviour. Its services have also reshaped logistics and supply chain management. Netflix pioneered streaming services, altering how people consume TV shows and movies and leading to the decline of traditional cable TV.

FAANG companies have heavily invested in research and development, driving advancements in artificial intelligence, machine learning, cloud computing, and more. They have created numerous job opportunities, both directly and indirectly, across a wide range of fields including technology, content creation, marketing, and customer service.

Although it should be noted that, the rise of FAANG companies has disrupted established industries like traditional media, retail, and advertising, forcing these industries to adapt to new digital paradigms.Also, the collection and utilisation of vast amounts of user data by FAANG companies have raised concerns about data privacy, security, and how personal information is used. FAANG platforms have played a role in shaping cultural trends, influencing discussions, and disseminating news and information. However, they've also faced criticism for misinformation and echo chambers. The immense influence of FAANG companies has led to discussions about regulations related to antitrust, data protection, content moderation, and competition.

The companies have set trends in terms of workplace benefits, employee expectations, and work-from-home policies. The expansion of FAANG services has brought connectivity to many, but disparities in access to technology and the digital divide are also concerns.

Overall, the impact of FAANG companies on society is complex, with both positive and negative aspects. Their innovations have brought convenience, efficiency, and new opportunities, but they have also posed challenges related to privacy, market dominance, and societal influence. As they continue to evolve, their impact will likely continue to shape various aspects of modern life.

How are FAANG companies addressing environmental sustainability?

The FAANG companies are all taking steps to address environmental sustainability. Here are some of the things they are doing.

All of the FAANG companies have committed to using 100% renewable energy for their operations. Amazon has already achieved this goal, and the others are on track to do so by 2025 or 2030. The FAANG companies are also working to improve the energy efficiency of their data centres and other facilities. This includes using more efficient cooling systems, lighting, and other equipment. They are also working to reduce their waste production. This includes recycling and composting, as well as reducing the amount of packaging they use.

The FAANG companies are also investing in green technology, such as solar and wind power. This helps to support the development of renewable energy sources.

Educating their employees and customers about environmental sustainability has been a crucial part too. This includes providing information about their sustainability efforts and how individuals can make a difference.

While the FAANG companies are still a long way from being completely sustainable, they are taking important steps in the right direction. By continuing to invest in renewable energy, energy efficiency, and green technology, they can help to reduce their environmental impact and create a more sustainable future.

Here are some specific examples of the environmental sustainability initiatives of each FAANG company:

• Facebook: Facebook has committed to using 100% renewable energy by 2025. It has also set a goal of reducing its water usage by 20% by 2025.
• Amazon: Amazon has achieved its goal of using 100% renewable energy for its operations. It has also set a goal of becoming carbon neutral by 2040.
• Apple: Apple has committed to using 100% recycled materials in its products by 2030. It has also set a goal of reducing its carbon footprint by 75% by 2030.
• Netflix: Netflix has committed to reducing its greenhouse gas emissions by 45% by 2030. It has also set a goal of becoming carbon neutral by 2050.
• Google: Google has committed to using 100% renewable energy by 2025. It has also set a goal of becoming carbon neutral by 2030.

These are just a few examples of the environmental sustainability initiatives of the FAANG companies. As these companies continue to grow and innovate, they will need to continue to find ways to reduce their environmental impact.

How have the FAANGs performed in the last 5 years?

The FAANG stocks have performed very well in the last 5 years. Here is a look at their performance in terms of total return (price appreciation plus dividends):

• Facebook: 127%
• Apple: 293%
• Amazon: 500%
• Netflix: 450%
• Google: 200%

*Stock Price as of April 2, 2024:

• Meta Platforms - $389.45
• Apple - $168.94
• Amazon - $179.22
• Netflix - $608.42
• Alphabet (Google) - $154.75

Their stocks have outperformed the S&P 500 index. This is due to a number of factors, including the strong growth of these companies' businesses, the rising popularity of their products and services, and the increasing demand for digital technology.

However, the FAANG stocks have also faced some challenges in recent years. These include regulatory scrutiny, increasing competition, and concerns about data privacy. As a result, their performance has been volatile at times.

Despite these challenges, the FAANG stocks are still seen as some of the most promising growth stocks in the world. They are all leaders in their respective industries, and they have the potential to continue to grow and innovate for many years to come.

Here is a table showing the 5-Year Avg. Annualised Return of the FAANG stocks:

                Stock               Annualised Return

Meta Platforms              24.3%

Amazon                         16.2%

Apple                             32.2%

Netflix                             11.1%

Google                             18.2%

As you can see, the FAANG stocks have all generated strong annualised returns over the last 5 years. This is due to a number of factors, including the strong growth of their businesses, the rising popularity of their products and services, and the increasing demand for digital technology.

How have the MAMAA stocks performed this year?

The acronym “FAANG” seems to have gone through many adaptations as Facebook recently changed their name to Meta, and Google to Alphabet. For the time being investors have settled on MAMAA with the stocks being: 

Meta: In 2021, Facebook announced that it would be changing its name to Meta. Meta is owned by Mark Zuckerberg who owns four of the largest social media platforms known as Facebook, Messenger, Instagram and Whatsapp. The name change was intended to reflect the company's focus on building the metaverse, a hypothesised iteration of the internet as a single, universal and immersive virtual world that is facilitated by the use of virtual reality and augmented reality headsets.

Meta's performance has been mixed in 2023. The company's stock price has rebounded significantly since its sharp decline in 2022, and it is now one of the best-performing stocks in the S&P 500 this year. However, Meta's revenue and earnings growth have slowed significantly, and the company is facing a number of challenges, including slowing user growth, increased competition, and regulatory scrutiny. 

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In the first quarter of 2023, Meta's revenue grew by 7% year-over-year to $27.9 billion, while earnings per share fell by 21% to $2.72. This was the slowest revenue growth rate for Meta since 2012. The company's core Facebook app lost daily active users for the first time in its history, and its growth in other apps, such as Instagram and WhatsApp, has also slowed.

Meta is facing increased regulatory scrutiny in the United States and Europe  due to concerns about the company's data collection practices and its role in spreading misinformation.

However, the company is still one of the most profitable companies in the world, and has a strong financial position. Meta also has a number of growth opportunities, such as the metaverse. At press time the company's market capitalisation is $769.81 billion.

Here are some of the factors that could affect Meta's stock price in the future. The success of the metaverse,the growth of the social media industry, the adoption of new advertising technologies and the regulatory environment.

Apple: Apple's performance in 2023 has been mixed. The company's stock price has declined by about 10% year-to-date, and its revenue and earnings growth have slowed. However, Apple is still a very profitable company, and it is still one of the most valuable companies in the world.

In the first quarter of 2023, Apple's revenue grew by 5.49% year-over-year to $117.15 billion, while earnings per share fell by 10.9% to $1.88. This was the first year-over-year revenue decline for Apple since 2019. The company's iPhone revenue fell by 8.17%, while Mac revenue fell by 28.66%. iPad revenue grew by 29.66%, and Services revenue grew by 6.4%.

Apple's performance in the first quarter was affected by a number of factors. The strong US dollar, production issues in China; Apple's iPhone production was affected by COVID-19 lockdowns in China, and the overall macroeconomic environment: The global economy is facing a number of challenges, including rising inflation and interest rates.

Despite these challenges, Apple is still a very profitable company. The company's gross margin in the first quarter was 43.7%, and its operating margin was 30.4%. Apple is also still investing heavily in new products and technologies, such as augmented reality and self-driving cars. At press time Apple's market cap is $2.86 trillion. 

Overall, Apple's performance in 2023 has been mixed. However, Apple is still a very profitable company, and it is still one of the most valuable companies in the world. 

According to Morgan Stanley, Apple's stock price is expected to reach $200 by the end of 2023.

Microsoft: Microsoft has been performing very well in recent years. In the fiscal year 2022, the company's revenue reached a record high of $198 billion, and its net income was $72.7 billion. This was an increase of 17.96% and 2%, respectively, from the previous year.

Microsoft's cloud computing business has been a major driver of growth. In the fourth quarter of fiscal year 2023, Microsoft Cloud revenue was $30.3 billion, up 21% (up 23% in constant currency) year-over-year. This represents a significant portion of Microsoft's overall revenue, and it is growing at a faster rate than the company's traditional businesses.

It is worth noting that Microsoft's other businesses are also performing well. The company's productivity and business applications business, which includes Office 365 and Dynamics 365, had revenue of $52.1 billion in the fourth quarter of fiscal year 2023, up 11% (up 14% in constant currency) year-over-year. The company's gaming business, which includes Xbox and gaming software, had revenue of $6.5 billion in the fourth quarter, up 10% (up 12% in constant currency) year-over-year. At press time Microsoft has a market capitalisation of $2.47 trillion. 

As every other company, Microsoft is facing some challenges too, such as the increasing competition from Amazon Web Services and Google Cloud Platform. 

Overall, Microsoft is a very successful company that is well-positioned for continued growth. The company's cloud computing business is a major growth driver, and its other businesses are also performing well. Microsoft is a leader in the technology industry, and it is likely to remain a major player for many years to come.

Amazon: Amazon's performance has been mixed in recent quarters. In the second quarter of 2023, the company's revenue grew by 11% year-over-year to $134.4 billion. However, its net income fell by 7% to $3.3 billion. This was due to a number of factors, including increased costs associated with its expansion into new markets and the need to invest in new technologies.

Despite the challenges, Amazon is still a very profitable company. Its market capitalisation is over $1.5 trillion, making it one of the most valuable companies in the world. The company is also well-positioned for future growth, as it continues to invest in new technologies and expand into new markets.

Amazon is facing some challenges, such as the increasing competition from other e-commerce retailers and the need to navigate the global economy. At press time Amazon’s market capitalisation sits at $1.40 trillion. 

According to analysts' consensus estimates, Amazon is expected to report earnings of $2.23 per share for the fiscal year ending December 2023. This represents an increase of 43.87% from the previous year. The company's revenue is expected to grow by 12.3% to $487.3 billion.

Alphabet: Alphabet is performing well overall. In the second quarter of 2023, the company's revenue grew by 23% year-over-year to $68.01 billion. This was driven by strong growth in its cloud computing business, Google Cloud Platform (GCP), which grew by 45% year-over-year. GCP is now the third-largest cloud computing platform in the world, behind Amazon Web Services (AWS) and Microsoft Azure.

Alphabet's other businesses are also performing well. The company's advertising business, which generates the majority of its revenue, grew by 22% year-over-year. The company's YouTube business grew by 20% year-over-year.

Alphabet's stock price has also been performing well. The stock is up about 20% year-to-date. This is due to the company's strong financial performance and its position as a leader in the technology industry.

However, Alphabet is facing some challenges. The company is facing increasing competition from other tech giants, such as Amazon and Microsoft. The company is also facing regulatory scrutiny in the United States and Europe.

According to analysts' consensus estimates, Alphabet is expected to report earnings of $10.86 per share for the fiscal year ending December 2023. This represents an increase of 22.2% from the previous year. The company's revenue is expected to grow by 20.2% to $286.7 billion. At press time the company sits at $1.40 trillion market capitalisation. 

Final Thoughts

There are talks that Nvidia should be added to the list as the company recently hit a market capitalisation of $1.1 trillion.

Although the MAMAA or FAANG stocks look well-positioned to capitalise on longer-term growth trends, investors should always be cautious when investing. They should explore alternative companies and conduct thorough research on their own. The industry is currently undergoing unprecedented changes, with various factors such as Artificial Intelligence, Virtual Reality, Blockchain, Web 3, and numerous others significantly influencing stock market performance and trends. To minimise risks, investors are advised to maintain a diverse portfolio.