It’s been a while since the so-called FAANG stocks were all must-have names. Other companies like Nvidia and Microsoft have since stolen their thunder. The advent of artificial intelligence (AI) helped this happen, of course.
With the AI euphoria finally starting to fade, though — and with the economy easing its way back to normal — investors should soon start seeing how all the things that made FAANG stocks so great then still apply now. That’s why you may want to step into some of them sooner or later, particularly given that a few of these stocks are trading at a discount right now.
Here’s a closer look at three FAANG stocks that are best bets for September.
1. Amazon
Amazon (NASDAQ: AMZN) has been very un-Amazon-like since early July. Share prices are currently down more than 10% from that month’s record high and are still sinking, headed into what’s historically a tough month for the stock market.
At least some of the weakness stems from the company’s second-quarter revenue miss. Although sales of $148 billion were up 10% year over year, analysts were calling for a top line of $148.7 billion. Investors flinched, and understandably so.
You might want to take a step back and look at the bigger picture, though.
The fact is, Amazon is still a growth steamroller no other e-commerce player wants to compete with. It controls around 40% of the United States’ online shopping market (according to data from eMarketer), trouncing next-nearest Walmart‘s reach. And, being a name that’s nearly synonymous with the e-commerce industry, it’s arguably better positioned than any rival to capture more than its share of the industry’s continued growth. It’s doing pretty well outside of the U.S. as well; last quarter’s international e-commerce revenue was up nearly 7%.
Perhaps Amazon’s most underestimated growth engine, however, is its cloud computing arm. Amazon Web Services sales improved by nearly 19% year over year during the three-month stretch ending in June, leading to a 74% increase in its cloud business’s operating income. Both numbers extend well-established trends that should carry on into the distant future, too. Market research outfit Mordor Intelligence believes the global cloud computing industry will grow at an annualized pace of more than 16% through 2029.
So, why are Amazon shares retreating? It’s got much to do with the wobbly market environment itself and even more to do with the stock’s big run-up from its late-2022 low to June’s high. There’s a lot of opportunistic profit-taking going on here. However, that’s actually a long-term opportunity for you.
2. Alphabet
Ditto for Google’s parent, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). That is, the stock is down since early July thanks to a combination of marketwide weakness and a second-quarter earnings stumble. Although its overall bottom line of $1.89 per share was better than expected, YouTube’s revenue came up short.
Oh, there’s also the possibility that the Department of Justice will soon be recommending a breakup of the company.
In early August, a federal court determined that “Google is a monopolist, and it has acted as one to maintain its monopoly.” While the company is preparing an appeal of the decision, the court is proceeding. The next stage of the process is the DOJ’s proposal for a remedy, scheduled for submission no later than Sept. 4, with a meeting of all involved parties slated for Sept. 6. It’s widely expected that, at the very least, the Department of Justice will ask Alphabet to divest its Chrome browser, or its Android mobile operating system, or both. The company could also be required to share more of its collected data with third parties.
It’s certainly a troubling prospect on the surface. Alphabet’s success largely hinges on dominating multiple facets of how people navigate the internet. Even if just one of them goes away, Google’s reach is seemingly disproportionally weakened.
However, maybe it isn’t.
Sure, Android steers people toward the Google Play app store. Chrome and Google’s online services, like Gmail and Google Docs, work very well together. Google is the default search engine on many manufacturers’ connectable devices because Alphabet can afford to outbid other search engine operators for this placement.
To believe consumers won’t seek out these services and tools without a nudge from Google, however, may be wishful thinking on the DOJ’s part. The world loves Google’s search engine because it’s simple and effective. Owners of Android devices — the world’s most-used mobile operating system — are going to find Google Play anyway. Folks like Chrome just because Chrome works well.
That doesn’t mean the Department of Justice and the U.S. court system can’t rattle investors more than they already have. Together or in pieces, though, Alphabet’s breadwinning ad business is going to be OK.
3. Apple
Last but certainly not least, add Apple (NASDAQ: AAPL) to your list of FAANG stocks to buy in September.
Apple shares have performed quite differently than Alphabet or Amazon have of late. While both Amazon and Apple stocks are down following sizable run-ups, Apple shares are now trading near record highs following significant stagnation between early 2022 and April of this year.
What changed? Artificial intelligence. Although it was a bit late to the AI party, Apple is making up for lost time. In June, the company introduced what it calls “Apple Intelligence,” which turns Apple’s newest iPhones and iPads into full-blown generative AI devices capable of handling this heavy-duty work without punting the effort to the cloud (where most consumer-friendly artificial intelligence work is currently done). This evolution is expected to reignite long-stagnant iPhone sales in terms of revenue as well as individual units.
The thing is, the launch of Apple Intelligence will likely do just that, but perhaps even more than expected. Technology market research firm IDC predicts generative-AI smartphone deliveries will swell from 234 million units this year to more than 900 million such devices in 2028, at which point AI-capable smartphones will account for nearly 80% of the global mobile phone market.
Already the world’s single-most-popular smartphone, Apple’s iPhone is well positioned to capture more than its fair share of this growth.
The kicker: While Apple will certainly enjoy any revenue growth stemming from the impending improvement in iPhone sales, getting the company’s popular mobile phone in more consumers’ hands does something else that’s arguably even more fruitful. That is, it sets the stage for even more services revenue. Services is now not only Apple’s second-biggest business but is also (by far) its highest-margin business.
Should you invest $1,000 in Amazon right now?
Before you buy stock in Amazon, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $720,542!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of August 26, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, Nvidia, and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
3 Incredible FAANG Stocks You’ll Want to Consider Adding to Your Portfolio in September was originally published by The Motley Fool
