FAANG stocks had a mixed first quarter. Here’s what Wall Street sees ahead for the tech titans

Published Sun, May 1 20228:05 PM EDTUpdated Thu, May 5 20223:48 AM EDT

The first-quarter report cards for FAANG stocks are in — and it's a mixed bag. CNBC Pro asks analysts and investors what's next for the tech giants. Netflix stole the headlines this earnings season, after the company's shares plunged more than 35% in a single day . The company revealed it lost 200,000 subscribers during the first quarter and said it expects more to come. Google parent Alphabet also had a rare miss as it reported weaker-than-expected earnings and revenue for the first quarter , while Amazon also fell short of consensus earnings estimates. Facebook parent Meta and Apple were the only two FAANG stocks which beat estimates, with Meta reporting better-than-expected profit , while Apple delivered on both earnings and revenue . All five companies warned of further headwinds ahead, including supply chain issues, inflation, rising competition and the war in Ukraine. Trouble in tech Investors have been waiting for the first-quarter earnings with baited breath. The titans are seen as a barometer of the current state of the wider tech sector, which is facing one of the most challenging macro backdrops in recent times. Tech stocks have been slammed this year amid a sharp spike in market volatility, with the sector bearing the brunt of a market rotation out of growth names. FAANG stocks have not been spared from the market rout. Meta is down nearly 50% from its 52-week high, while Amazon and Alphabet are trading around 30% and 20% lower than their 52-week high, respectively. Meanwhile, Netflix is down nearly 70% this year and is now the worst-performing stock of 2022 in the S & P. Buy the dip? Wedbush's Dan Ives believes tech stocks are "as oversold as we have seen since 2014" on Fed rate hike fears, with valuations relative to growth in tech "way disconnected," he told CNBC. Mark Hawtin, investment director at GAM Investments, concurs. He told CNBC on Apr. 29 that he believes some of the FAANG stocks have started to look "quite cheap" amid what had been a "sharp and fast" selloff. Fundstrat Global Advisors' Tom Lee believes the latest tech sell-off has provided "pretty great entry points" for long-term investors seeking to buy FAANG names. He believes the companies are still poised to "grow double digits" despite macro worries. Meanwhile, Mark Mahaney, head of internet research at Evercore ISI , believes the current sell down is what investors " live for," as he urged them to seize the chance to buy the "best and the leading global defining franchises" as well as "high quality assets" while they are on sale. But King Lip, chief strategist at BakerAvenue Wealth Management, which owns stakes in Apple, Alphabet and Amazon, believes investors will have to be patient given the structural issues surrounding some of the FAANG stocks. While the bad news around FAANG stocks has been "largely priced in," it would usually take two or three quarters for companies to work through their issues before share prices recover, particularly for Amazon, Meta and Netflix, Lip said. Read more Fundstrat's Tom Lee says FAANG stocks are value buys amid tech sell-off Analysts are mostly confident Amazon can work through inflation pressures, JPMorgan says buy the dip Wall Street analysts say investors should buy the Apple dip despite supply chain worries End of the FAANG era? There are also others who are questioning the continued relevance of the FAANG club. Hawtin, for instance, believes weakness in advertising and the ultra-competitive video streaming landscape justify the removal of Alphabet, Meta and Netflix. In their places, Microsoft , chip maker Nvidia and electric vehicle manufacturer Tesla , could be the next tech stars, he said. Along with incumbents Apple and Amazon, this would then form the acronym MANTA. David Sekera, chief U.S strategist at financial services firm Morningstar , told CNBC that FAANG stocks continue to be relevant given the size of their market capitalization and ability to skew broad market trading and returns. However, he added that he would also include Microsoft and Tesla as the other large-cap bellwether stocks that have the ability to shape daily trading sentiment. BakerAvenue's Lip believes the FAANG stocks are still "category leaders" in their respective industries, but warned that the period of hypergrowth is now behind them. He believes Nvidia should be added to that list as a possible replacement for Netflix. "Nvidia's future in artificial intelligence, the metaverse, and data centers have a long runway, and we see significant growth ahead," Lip said. Scott Kessler, global technology media and telecom practice lead at consulting firm Third Bridge, believes that while the FAANG group still seems relevant, the divergence in performance between the different stocks have led many to question if they continue to represent the market power and growth they once did. "I think what we've learned over the past couple of weeks is that no matter how big or successful these 'big tech' companies have been in the past, there are no guarantees for their sustained future performance and prowess," Kessler added. "Undoubtedly the FAANG companies' recent challenges aren't unique, and perhaps at best augurs for a period of substantial uncertainty."

Jason Alden | Bloomberg | Getty Images

The first-quarter report cards for FAANG stocks are in — and it's a mixed bag. CNBC Pro asks analysts and investors what's next for the tech giants.