FAANG No More? Facebook, Netflix 'Fracturing' Away From Elite Tech Group, Says Gene Munster

Mark Zuckerberg-owned Meta Platforms Inc FB and online video streaming platform Netflix Inc NFLX are fracturing away from the elite FAANG group, Loup Funds co-founder Gene Munster said in a discussion with managing partner Doug Clinton.

What Happened: The analysts were discussing Meta Platforms’ disappointing earnings and a weak forecast that led to shares plummeting 23% in after-hours trading Wednesday. 

“If you miss in this environment, you’ll likely be punished more than usual. That trend is not going to change for the balance of this reporting season,” Munster said. 

Loup Ventures, a tech venture capital firm, owned shares in Facebook ahead of the earnings. 

“We took out insurance on this and have a minimal loss on it. [That] doesn't change the fact it was a loss; it's not how we wanted the position to go,” Munster said, adding the loss could have been worse if Loup had not taken a call early in the day.

The two said the consensus looked good ahead of the earnings but knew shares could “get smashed” if it missed expectations.

“Basically I’ve just been reading what the market's been telling us,” Clinton said, adding that tech companies such as Apple Inc AAPL and Microsoft Corp MSFT reported “kind of great results” but shares were up only modestly,” Doug said. 

See Also: Meta Platforms (Facebook) Q4 Earnings Takeaways: Big EPS Miss, Revenue Beat, New Ticker

“Anybody who's missed — Paypal Holdings Inc PYPL and Netflix, the two big ones, were both down over 20%. I was concerned that if anything was wrong with Facebook — and it was probably more wrong than we would have guessed for sure — then the stock would be down big, and that's unfortunately where we're at.”

Why It's Important: Clinton singled out Facebook and Netflix from the FAANG stocks to point out how the two were attention-focused, which can be profitable, but are challenging and competitive businesses to run, unlike the rest of the companies in the bunch.

Munster said: “We always talked about this fracturing of FAANG and you can kind of see it now more clearly than ever when you put in that context of attention businesses with Facebook and Netflix on one side and then the foundational businesses on Google, Apple and Microsoft there too makes a ton of sense.” 

Meta Platforms reported fourth-quarter earnings of $3.67 per share, missing estimates of $3.84. Meta is guiding for fiscal 2022 revenue to come in a range of $27 billion to $29 billion.

What's Next: Munster said the key takeaway from Facebook’s earnings was the impact of Tik Tok and how it is taking engagement away.

“That means that Facebook is going to be pushing on their reels stories. That is a competitor to Tik Tok and they're going to try to transfer some of the engagement from stories over to the Tik Tok competitor.”

See Also: Cathie Wood Sells $21M In PayPal Amid Stock Crash — Loads Up Heavily In This Fintech Rival

Paypal shares plummeted on Wednesday after the company said it no longer expects to achieve 750 million active accounts by 2025, abandoning a goal that contributed to a jump in spending last year on sales campaigns.

Popular stock picker Cathie Wood cut most of her exposure in Paypal on Wednesday and is completely out of Netflix as well.

FB Price Action: Facebook shares closed 1.25% higher at $323 a share and were down 24.51% at $243.84 midday Thursday.