FAANG Stocks Underperformed in 2021 Despite Bright Prospects

FAANG stocks have outperformed the broader market index in 2020 by a wide margin but the group underperformed since the beginning of 2021 due to lofty valuations.

The lack of enthusiasm for internet and tech stocks have added to the underperformance of the FAANG group in the last two weeks. The discovery of the coronavirus vaccine is likely to ease the staying at home policies in 2021, which was the main driver of user growth and demand in the last year.

FAANG stocks in 2021 source: Ycharts.com

Alphabet (NASDAQ: GOOG) and Facebook (NASDAQ: FB) stock rallied in the range of 30% in the last year while Apple (NASDAQ: AAPL) jumped 81%. Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN) stock price soared more than 60%.

Do FAANG Stocks Repeat 2020 Performance?

It’s highly unlikely that FAANG stocks could produce similar gains in 2021 because share price driving factors are not as strong as they were in the last year.

For instance, Netflix stock has been falling over the last two months amid virus vaccine discovery. Its subscriber’s growth rate is also likely to decline significantly from last year. Its net subscribers came in at 2.2 million at the end of the September quarter compared to 6.8 million a year ago.

In addition, the survey indicates that a lot of people plan to cancel their subscriptions in 2021 amid easing social distancing and staying at home policies.

Apple Likely to Top the FAANG Group

Apple stock has beaten the rest of FAANG stocks in 2020 and it is set to generate significant gains in 2020. This is because of its robust revenue base and growth prospects.

The company has aggressively been expanding its non-iPhone revenue base over the past two years. Moreover, iPhone revenue is expected to stabilize in 2021 due to the introduction of 5G supported phones.