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Falling big-cap tech and tech-related stocks are a big reason the S&P 500 is struggling this year. But analysts have their favorite if you’re looking to play a rebound.
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Analysts who follow fundamentals closely think fallen FANG stock Netflix (NFLX) is the “tech” stock you’re likely to make the most on, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Analysts, on average, think this communication services company’s stock will rise nearly 60% in the next 12 months.
That’s more price appreciation they expect from any of the FANG stocks or any of the top seven most valuable stocks on the S&P 500. Of course, savvy investors know to pay attention to S&P 500 stock charts for the right buy point.
“This is not a dot-com bubble 2.0 in our opinion,” said Dan Ives, analyst at Wedbush Securities. “It’s a massive over correction in a higher rate environment that will cause a bifurcated tech tape with clear haves and have nots of tech.”
Sizing Up The Tech Implosion On The S&P 500
If you’re not feeling the tech crash, you’re not paying attention. It’s epic.
Year-to-date drops by just seven technology stocks in the S&P 500 account for more than 40% of the S&P 500’s total percentage drop, says DataTrek Research. All seven of the former do-no-wrong stocks are down on the year by an average of nearly 30%.
And that’s a big issue for all investors, even if you just own S&P 500 index funds. Just seven big tech names, Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Tesla (TSLA), Meta Platforms (FB) and Nvidia (NVDA), account for roughly a quarter of the S&P 500.
So their underperformance weighs more on the S&P 500 than arguably any other segment of the market. Apple alone accounts for 6.6% of the S&P 500.
Additionally, the crash in these stocks haven’t deflated their valuations by much. Amazon, for instance, is still trading for nearly 80 times its expected profit in the next 12 months, says DataTrek. Meanwhile, analysts are viciously slashing how much profit they think these high-profile companies will make. Analysts cut their current year profit target on Amazon by nearly 70%, says DataTrek.
“Analysts and investors thought the world had changed permanently, toward a tech-enabled online future. That lifted earnings and valuations, but now we’re seeing those were unsustainable,” said DataTrek’s Jessica Rabe.
So which ones do analysts like most?
Netflix: Analysts’ Favorite Big Tech Bet
No other stock personifies the “de-FANG”ing of the S&P 500 than Netflix. Shares of the video streamer dropped nearly 70% this year to 197.14. Layoffs are kicking off at the company due to disappointing subscriber numbers.
But analysts still think this battered FANG holds the best odds for a turnaround story. Analysts think this will be a 315.07 a share stock in 12-months’ time. If that’s right, it would mark an implied rally of 60% — or more than any other major tech-related stock.
Next up: Mark Zuckerberg’s pummeled Meta. The company, trying to pivot into virtual reality, has seen its shares drop 42% in real life to 194.25. Analysts, though, insist shares will be worth 285.37 a share in 12 months, or nearly 50% more than they are now.
To be fair, though, S&P 500 analysts see something to love in all these fallen stocks. They think all the FANG stocks, plus the seven largest tech-related firms, will be worth more in 12 months than they are now.
But analysts don’t think all the fallen darlings will recover at the same speed.
Big Tech, Big Hopes
How analysts’ price targets on FANGs and largest tech-related stocks compare
| Company | Ticker | YTD % ch. | Implied upside* | Sector |
|---|---|---|---|---|
| Netflix | (NFLX) | -67.3% | 59.8% | Communication Services |
| Meta Platforms | (FB) | -42.2 | 46.9 | Communication Services |
| Amazon.com | (AMZN) | -25.1 | 44.1 | Consumer Discretionary |
| Alphabet | (GOOGL) | -19.4 | 39.0 | Communication Services |
| Nvidia | (NVDA) | -36.1 | 35.8 | Information Technology |
| Microsoft | (MSFT) | -20.1 | 34.2 | Information Technology |
| Tesla | (TSLA) | -32.4 | 31.4 | Consumer Discretionary |
| Apple | (AAPL) | -17.7 | 28.7 | Information Technology |
Sources: IBD, S&P Global Market Intelligence, *- to analysts’ 12 month price targets
Follow Matt Krantz on Twitter @mattkrantz
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