For Better Market Returns, Consider Companies Nipping at the FANG Stock’s Heels

For years, the FANG stocks have become market dominators. It’s easy to see why. But in the past decade since the term was coined, many of these companies have seen new firms eat into their profit margins. That could come from a proliferation of competitors, such as in social media or streaming services.

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  • That’s why investors are seeing wild swings in these companies as earnings season unfolds. It’s also revealing another truth about the market.

    It’s the fact that nothing lasts forever. And investors who find companies that can take on the major dominant players and grab market share, a great return is possible.

    One recent example? Snap (SNAP). Shares dove over 20 percent on Thursday in sympathy with Meta’s (FB) drop. However, their earnings showed a 42 percent surge in revenue. And Snap reported a surprise profit. That led to a massive rally in shares on Friday.

    It’s one likely to continue, as the company continues to increase users as well as user time on its platform, two key metrics for the industry.

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  • Action to take: Shares have lost nearly half their value in the past year. While still unprofitable, the company has gone from trading at 500 times forward earnings to about 63 times forward earnings. That’s still a bit pricey for any stock, but looks like an attractive price to growth for the social media space. Investors might want to consider this play for a rebound in social media stocks as the market settles down.

    For traders, the June $40 calls, last going for about $3.00, offer continued upside on a further rally in shares in the coming months.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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