Big Tech Stocks: Is MATANA the New FAANG?
Meta, formerly known as Facebook, Amazon, Netflix, Apple, and Alphabet are considered some of the most renowned and popularly traded companies in the world. Aside from being American and belonging to the tech sector, these companies have other commonalities and even share a mutual acronym- FAANG. However, while FAANG was a highly popular term in the past couple of years, more recently, some analysts and market watchers seem to have replaced it with MATANA stocks. So what are FAANG and MATANA stocks exactly, who coined these terms, and how have they fared in the past year? Here’s what you need to know:
What Does FAANG Mean?
FAANG stocks refer to 5 of the most popular tech shares in the world; Meta, formerly known as Facebook, Amazon, Apple, Netflix, and Alphabet, also known as Google. While the term is most commonly known as FAANG, before 2017, it actually did not include Apple and was called FANG until investors popularized Apple and incorporated it into the term, hence turning it into FAANG. These stocks were chosen because they created hype in the market at the time and were considered hot stocks. (Source:Investopedia)
A Short Rundown of All the FAANG Companies:
Founded in 2004, Meta (META), famously known as Facebook, is an online social media and social networking service company. Instagram, WhatsApp, and Oculus VR are among Meta's subsidiaries, and online advertising is its chief source of revenue. In October 2021, the company changed its name from Facebook to Meta to reflect its interest in the nascent Metaverse technology. However, while in 2021, Meta was among the US’ top 5 companies by market capitalization and had an astonishing market capitalization of $1 trillion, as of relatively recently, it seemed to be losing its luster following underwhelming earnings reports, and revenue loss reported on the 26th of October, among other factors. Its current market cap dropped to about $295 Billion as of November 2022.
Known as an e-commerce giant, Amazon (AMZN) was founded in 1994 by Jeff Bezos. Whereby the company currently sells retail goods and electronics among other things, in 1994, it started as an online bookshop and has grown exponentially throughout the years to become one of the largest e-commerce retailers in the world (by revenue). On October 27th, the e-commerce behemoth reported its Q3 earnings and a weak Q4 guidance which sent its stock tumbling. As of November 2022, the company has a market capitalization of about $952 Billion.
Famously known for its iPhones, Apple (AAPL) is a big tech company which was founded in 1976 by Steve Jobs, Ronald Wayne, and Steve Wozniak. In 2022, as global inflation, fears of a recession, and high interest rates took a toll on the tech industry, Apple among its tech peers paused its hiring process to tackle the aforementioned hurdles. Nonetheless, the California-based company is considered one of the world’s largest tech companies by market capitalization and as of November 2022, it’s valued at above $2 trillion. (Source:Bloomberg)
Netflix (NFLX) is a renowned online streaming service that provides subscribers with access to movies and television shows by subscription. The California-based streaming giant has been through a tumultous year of ups and downs triggered by the increase in market competition like Disney+, Hulu, and HBO, along with inflation and ailing economic circumstances. However, following its last earnings release on October 18th, the company reported positive figures which were attributed to its subscription growth from key Netflix hit shows like ‘Stranger Things,’ ‘Monster: The Jeffery Dahmer Story,’ and ‘The Crown.' As of November 2022, Netflix’s market capitalization stands at about $127 billion.
One of the world’s most famous tech companies with the most used search engine, Google, otherwise known as Alphabet (GOOG), was founded in 1998 by Sergey Bring and Larry Page and has grown exponentially throughout the years. While the company is most famous for its search engine, its services are multifaceted as it also offers online advertising, computer software, e-commerce, and quantum computing among other things. In July 2022, the company split its stock by 20-for-one, and on the 25th of October, it reported beneath predicted Q3 earnings that caused its stock to drop. As of November 2022, Alphabet’s market value is $1.26 Trillion.
Who Came Up with the Term FANG Stocks?
While the term was undoubtedly popularized by Jim Cramer, a host on the CNBC TV show, ‘Mad Money,’ which covers interviews with companies’ executives to help people understand the market, Cramer credits this term’s coining to someone else. According to sources, it was Bob Lang, a trader, author, and co-portfolio manager of TheStreet's Action Alerts PLUS and Trifecta Stocks who coined this term in 2013.
Why Are FAANG Stocks Important?
There is no question that FAANG stocks dominate both the US as well as the global markets since they provide products and services that are used worldwide. These companies are also famous for their remarkable growth in recent years and as of 2022, their market capitalization combined is above $4000 Billion which exceeds Germany’s GDP and surpasses Russia’s and Australia’s GDP combined. Thus, it might not be surprising to know that these companies' shares can have a huge impact on the market as a whole and are hence quite important.
Why Microsoft Is Not a FAANG Company?
With Microsoft being one of the world’s biggest tech companies with an impressive market capitalization of over $1.6 Trillion, it might be surprising to know that Microsoft isn't included in the FAANG companies. Nonetheless, its exclusion from the FAANG may be attributed to the fact that when the term FAANG emerged, it was used mainly to refer to relatively newer or more hyped companies in the field, and Microsoft was not among any of the former back then. Nonetheless, this company is included in a newer term called MATANA stocks, which many analysts believe might be the new FAANG.
What Does MATANA Stand For?
Essentially, MATANA and FAANG share similar companies with the extraction of Meta and Netflix, and the addition of Microsoft, Tesla, and NVIDIA. Accordingly, the acronym MATANA refers to Microsoft, Apple, Tesla, Alphabet, NVIDIA, and Amazon which are considered prominent American tech companies. This term was highly popularized in the past year and analysts are even suggesting that it should replace FAANG. The term MATANA was introduced by Constellation Research Principal Analyst & Founder Ray Wang in 2022 in an interview.
A Short Rundown of All the Matana Companies
As mentioned above, MATANA and FAANG do share similar companies such as Apple, Alphabet, and Amazon. However, whereas FAANG includes Netflix and Meta, MATANA replaced those with Microsoft, Tesla, and NVIDIA. The replacement came about in light of the fact that Meta, according to Wang, needed to delve into something besides being ad-reliant, and the obscurity surrounding where the company is heading next, stand behind his decision to replace it. As for Netflix, Wang believes that since the streaming giant’s business model relies on subscriptions, it might not grow substantially in the future, which is why he excluded it.
Furthermore, the choice to replace the aforementioned companies with Microsoft, NVIDIA, and Tesla, is due to many reasons including Microsoft’s (MSFT) involvement in the Metaverse, gaming, and cloud computing according to Wang. In addition, chip-giant NVIDIA (NVDA) was added due to its contribution to the AI sphere and also the Metaverse. Whereas Tesla’s (TSLA) addition can be traced back to its ostensible dominance in the EV sector.
Both Microsoft and NVIDIA were deemed some of COVID-19’s biggest winners due to increased at-home usage and while these two companies were indefinitely harmed by the higher interest rates and inflation throughout 2022. This, in turn, caused the two tech giants to freeze their hiring process or lay off workers. Tesla too has suffered throughout the year due to renewed COVID restrictions which halted production in its Shanghai facilities and affected its growth. Nonetheless, all of these companies may still be considered some of the biggest names in the market with a possibly prosperous future ahead of them.
The Future of FAANG Stocks vs. MATANA Stocks
There is one thing we can be sure of when it comes to the market and the economy: they can be volatile and many factors can affect their growth. Therefore, while some of the companies mentioned above may have been suffering with the overall economy lately, whether or not this downtrend continues or for how long is yet to be unclear. Moreover, since past performance is no guarantee of future growth and since there are many factors like the war in Ukraine, rate hikes, recession, and inflation that can come into play, the future of both FAANG and MATANA may be obscure. Nonetheless, while figures show that in the past year MATANA stocks have outperformed FAANG companies, many analysts seem to predict a bright future for most of these companies, and whether or not MATANA will indeed replace FAANG is yet to be seen.