Analysts Cut FAANG Stock Price Targets

Amazon and Netflix are fresh off dismal fourth-quarter performances

by Karee Venema

Published on Jan 2, 2019 at 2:03 PM
Updated on Jan 2, 2019 at 2:16 PM

Tech stocks took a hit in 2018, with the technical weakness underscored by the price action in the First Trust Dow Jones Internet ETF (FDN) -- a fund that includes several FAANG members as its top holdings -- which tagged an annual low of $107.06 on Dec. 24, and closed out the fourth quarter down 17.6%. This has left a number of analysts scrambling to adjust their FAANG stock ratings, with Amazon.com, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX) getting slapped with bear notes today.

Options Traders Buy Calls on Amazon Stock

Evercore ISI cut its Amazon price target to $1,800 from $1,990 -- still a 20% premium to the stock's 2018 close at $1,501.97 -- and lowered its 2019 e-commerce and ad revenue estimates. The brokerage firm maintained its "outperform" rating, echoing the majority of the analysts covering AMZN.

While the security initially traded lower this morning, it was last seen up 2.8% at $1,544.00. More broadly speaking, Amazon stock closed out 2018 with a 28.4% gain -- even as the shares surrendered 25% in the fourth quarter, their worst quarterly performance since late 2008. However, AMZN is now trading back below its 320-day moving average, which previously served as support in late November.

amzn stock daily chart jan 2

Nevertheless, options traders have stayed hopeful. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 1.23 calls for every put in the last two weeks. The ratio ranks in the 70th annual percentile, meaning the rate of call buying relative to put buying has been quicker than usual.

Netflix 4Q Subscriber Growth to Slow, Says SunTrust

SunTrust Robinson slashed its Netflix price target to $355 from $410, saying the streaming name's fourth-quarter subscriber additions may be "slightly below consensus/guidance." However, the brokerage firm maintained its "buy" rating, and noted the company's new chief financial officer -- poached from Activision Blizzard (ATVI) -- is "fairly well-known and liked by investors."

After surrendering 28.5% in the fourth quarter -- its biggest quarterly loss since 2012 -- NFLX stock kicking 2019 off down 0.6% to trade at $265.94. However, the shares are still up 31% year-over-year, with recent support emerging from their 100-week moving average. Plus, Netflix has been one of the best stocks to own in January over the last decade.

nflx stock weekly chart jan 2

Options traders have been growing increasingly skeptical in recent weeks. At the ISE, CBOE, and PHLX, NFLX's 10-day put/call volume ratio of 0.83 ranks in the 83rd annual percentile. What's more, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.14 ranks in the 93rd percentile of its 12-month range, meaning short-term speculators are more put-heavy than usual.


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