There are various reasons why to avoid specific stocks over others out of the thousands of listed companies. However, I will be focusing on FAANG stocks. More specifically, Facebook, Apple, Amazon, Netflix, and Google.
Out of the bunch, two names, in particular, are worth sounding the alarm on. Facebook and Apple are both companies that are facing some worry either on valuation, fundamentals, or competition.
Facebook (NASDAQ: FB)
Facebook, the social media giant that influences a massive portion of the population, has had its stock decline on an abundance of problems. Everything from competition to whistleblowers, Facebook is getting targeted. Their $1 trillion market capitalization has now been wiped, down near $910 billion.
Despite Facebook being a growth stock, growing over 20% in the past year alone, the stock has plummeted for a variety of reasons. These reasons aren’t invalid, they can affect Facebook’s long-term success.
One of the main reasons for worry is the competition with TikTok. Facebook over the past few years has become the ‘everything’ app. It all started with Stories, then IGTV, and Reels. These products were released to compete against Snapchat, Youtube, and TikTok. However, in doing so it has made their service very cluttered. These other corporations are eating away at Facebook’s long-term potential as they have mastered their genre in the social media industry, while Facebook struggles to find its purpose.
Another reason for potentially steering clear from Facebook is the shady business model in which it operates. Just recently, a whistleblower who was a formal product manager at Facebook had admitted they were behind multiple leaks involving a toxic online environment for teenagers that Facebook has built over the years of operating.
While the balance sheet looks great right now, these interruptions can affect user interactions over the long term which may lead to lower profits.
Apple (NASDAQ: APPL)
Apple, the software and hardware technology company, has been struggling to impress investors after a somewhat lacking iPhone 13 launch. It later sent the stock tumbling, making investors wonder if Apple’s ability to create a new revolutionary iPhone is currently possible.
There is a fairly big concern with Apple currently. Unfortunately, market dominance comes at a cost over many years. In Apple’s instance, it’s growth.
When viewing year over year performance of Apple’s revenue, it doesn’t look any better since revenues only grew by 5.5% in the full year of 2020. This slow growth is most likely caused by Apple already being so large. They don’t have a competition problem, but a size problem.
Apple’s market capitalisation is already over $2.3 trillion, making it a challenge for further growth, which investors have now come to realise. This has and will most likely continue to affect the confidence of shareholders.
The balance sheet isn’t forward-looking, so an added step is necessary to evaluate your long-term returns. This is why investors should consider if Apple is a viable investment over the long term. There could very well be much better investment options out there for higher growth, even in FAANG.
Overall, it may be best to avoid these stocks in the meantime as situations, valuations, and competition fears are sorted out. This will lower the potential risk an investor could face by purchasing these stocks currently as the stock market is extremely volatile and unpredictable in the short term.