Apple Is the Last FAANG Standing. How Its Earnings Could Move the Market.

By Ben Levisohn
Updated April 24, 2022 / Original April 22, 2022

Apple’s flagship store in New York City.

GABBY JONES/BLOOMBERG

Apple is the last FAANG standing—and its earnings report this coming week could go a long way toward determining if the stock market bounces back or slides even further.

As bad as this year has been for the stock market, it’s been even worse for the original FAANGs. While the S&P 500 has fallen 10.4% in 2022, Facebook parent Meta Platforms (ticker: FB) has slumped 45.3%, Amazon.com (AMZN) has dropped 13.4%, Netflix (NFLX) has tumbled 64.2%, and Google parent Alphabet (GOOGL) has fallen 17.4%.

The expanded FAANMGs haven’t done much better, with Microsoft (MSFT) falling 18.5%, and only Apple (AAPL)—down 8.9% in 2022—outperforming the S&P 500.

To say this is bad news for the stock market is an understatement. In every year since 2014, those six stocks have added more to the S&P 500’s returns than their weight in the index would imply, according to Bespoke Investment Group data. They’ve also contributed more to the market’s gains than the rest of the stock market combined in three out of those eight years.

That’s changed in 2022, with Meta, Amazon, Netflix, Microsoft, Apple, and Alphabet accounting for 3.9%, or about half, of the S&P 500’s 7.8% decline through Thursday’s close. “For years, a select group of megacap stocks propped up the market at large with huge outperformance and rising weightings,” writes Bespoke’s George Pearkes. “In 2022, though, those same stocks are now a major index drag.”

Five of those six stocks will get a chance to prove that the market has been too pessimistic when they report earnings this coming week. Alphabet is scheduled to report after the close on Tuesday, as is Microsoft, followed by Meta on Wednesday afternoon, then Apple and Amazon after Thursday’s close. Netflix, of course, already whiffed on earnings, causing the stock to drop 37% this past week. The less said about Meta, the better.

Don’t expect great things from Microsoft, Amazon, and Alphabet. The three are trading below their 40-week moving averages, suggesting that there is more downside ahead, writes John Roque, head of technical strategy at 22V Research. “The charts continue to tell us they’re going to move sharply lower and...investors [aren’t] particularly prepared for that to happen,’’ explains Roque, who sees Alphabet and Amazon hitting $2,000, with Microsoft potentially falling to $225.

That leaves the market’s hopes resting on Apple, the largest of the tech giants. Unlike the rest of Big Tech, Apple stock is still trading above its 40-week moving average, notes Roque, while Mark Newton, head of technical strategy at Fundstrat Global Advisors, also noted Apple’s relative strength—and the impact it has on the stock market and on the Invesco QQQ exchange-traded fund (QQQ).

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Fundamental analysts, too, are generally bullish on Apple. The company is expected to report a fiscal-second-quarter profit of $1.43 a share, up 2.1% from $1.40 one year earlier, on sales of $94.1 billion, up 5% from $89.6 billion. Many analysts believe it will be able to surpass those numbers despite numerous headwinds, including supply-chain issues and shutdowns in China.

Strong growth in Apple’s very profitable services business should also help alleviate concerns, writes Deutsche Bank analyst Sidney Ho: “We believe AAPL stock is a good hiding place in this volatile market.”

Investors better hope so. Without Apple, the market’s slide will only get worse.

Write to Ben Levisohn at Ben.Levisohn@barrons.com