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Sunday, April 22, 2018

Wall St eyes earnings stabilizer after FAANG stocks wobble

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Wall Street is hoping that first-quarter earnings growth and corporate forecasts are strong enough to bring the FAANG group of stocks back into favor and take the spotlight off worries that caused the recent sell-off in the high-flying group. With valuations below recent peaks, the group - comprised of Facebook, Amazon.com, Apple Inc, Netflix and Google parent Alphabet Inc - could get some relief if the companies beat, or at least meet, Wall Street estimates.

Shares in the group, which led the S&P 500 to record highs in January, often trade together. They were pummeled late in the quarter on worries about a data privacy scandal at Facebook and US President Donald Trump's public criticism of Amazon.com. On top of this, fears of a trade war with China escalated during the quarter.

For the group, analysts expect average first-quarter year-over-year earnings growth of 25.8 percent, up from 12.4 percent growth in the fourth quarter and a 12.8 percent increase a year ago, according to Thomson Reuters data. "All we're getting now is negative news ... once we start to see the numbers, you're going to see a bigger spotlight on the success these companies are having," said Daniel Morgan, portfolio manager at Synovus Trust in Atlanta, which holds shares in the FAANG stocks.

Morgan says he is in a wait-and-see mode until after the first report from Netflix, which is due to be issued on Monday. Analysts expect Netflix earnings growth of 59 percent and revenue growth of 39 percent, according to Thomson Reuters data.

The entire group was hurt by fears that Facebook and other internet firms including Google would face onerous regulations or slowing advertising revenue growth after Facebook said nearly 87 million of its members' personal data was improperly leaked.

Facebook fell almost 24 percent below its early February record to hit $149.02 on March 26, its lowest point since July last year, due to the scandal. Google had fallen almost 18 percent below its late January record by March 28.

-Reuters

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