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The 2 FAANG Stocks Underperforming the S&P 500 Year to Date

Although the stock market has been able to hold on to steady gains so far this year, FAANG components Apple (AAPL) and (AMZN) have failed to perform consistent with the market trend. These stocks have underperformed the S&P 500 year-to-date owing in part to President Biden’s executive order that cracks down on anti-competitive practices by tech giants. Read on.

FAANG stocks represent some of the most well-known technology companies in the United States. These companies have risen to unparalleled market-cap heights on their excellent business strategies and market domination. They represent approximately 19% of the S&P 500 index and have a substantial influence over the movement of the benchmark index.

However, FAANG stocks Apple Inc. (AAPL) and Inc. (AMZN) have underperformed the S&P 500 since early January.

Growing investor skepticism over the Fed's policy meeting led the stock market to a turbulent start this week, further exacerbating the tech sector's pressure and causing these companies to retreat even more. Also, the Biden administration’s executive order aimed at increasing the scrutiny of big tech firms for their anti-competitive practices could put further pressure on the FAANG stocks.

Apple Inc. (AAPL)

APPL is one of the largest manufacturers and suppliers of consumer electronics. Its market dominance in the tech world is unparalleled. Furthermore,  its innovative edge and brand value have allowed it to enjoy strong growth over the years.

AAPL’s operating expenses increased 16.1% year-over-year to $11.13 billion in its third fiscal quarter ended June 26, 2021. Its cash and cash equivalents declined 10.4% from its year-ago value to $34.05 billion, while its net cash used in investing activities increased 56.6% year-over-year to $15.8 billion for the nine months ended June 30, 2021.

The stock has declined 3.2% in price over the past month. Moreover, the stock has gained 8.1% year-to-date versus the S&P 500 16% returns over the same period.

In terms of forward Price/Sales, AAPL is currently trading at 6.45x, which is 62.7% higher than the 3.97x industry average. Also, in terms of its forward EV/Sales, the stock is currently trading at 6.44x, which is 56.7% higher than the 4.11x industry average. Inc. (AMZN)

AMZN is an e-commerce juggernaut with a global market presence. The company operates through North America; International; and Amazon Web Services (AWS) segments. In addition,  it provides Amazon Prime, a membership program that offers access to streaming movies and TV episodes and free shipping of various retail goods items.

This month, AMZN announced the redemption of $1 billion in outstanding senior notes due December 5, 2021. In an ultra-low interest-rate situation, premature debt repayment may imply inefficient use of cash reserves.

For the second quarter, ended June 30, 2021, AMZN’s operating expenses increased 26.9% year-over-year to $105.38 billion. Its net cash from operating activities decreased 38.3% from its  year-ago value to $12.72 billion. In addition, the company’s cash and cash equivalents declined 4.1% from the prior-year quarter to $40.38 billion for the nine months ended June 30, 2021.

The company's EPS is expected to decline 27.2% in the current year and 9.9% in the next quarter. AMZN’s stock has declined 3.2% in price over the past three months. In addition, the stock has returned 2.7% year-to-date.

In terms of forward Price/Book, AMZN’s 11.95x is 258.5% higher than the 3.33x industry average. In addition, its 3.57x forward Price/Sales is 198.5% higher than the 1.20x industry average.

AAPL shares were trading at $145.13 per share on Wednesday afternoon, up $1.70 (+1.19%). Year-to-date, AAPL has gained 9.89%, versus a 18.23% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.


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