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How the Coronavirus Is Impacting FAANG Stocks

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FAANG stocks, which are largely unexposed to the negative economic impact of the coronavirus, are selling off harder than the broader U.S. stock market is. There’s a common chain of events that tends to cause the group of large-cap tech stocks to plummet, even when they shouldn’t based on their fundamentals.

Big tech was also richly valued and vulnerable to a de-risking, wrote RealMoney's Bret Jensen earlier on in 2020. 

The coronavirus is spreading throughout the globe, the market’s biggest fear when it comes to the pandemic. Reported cases in Italy and Asian countries outside China have emerged. This threatens consumer spend in any effected country, as well as production activity, which threaten imports’ ability around the globe to meet demand.

The S&P 500 fell 3.17% Monday.

Here’s how the FAANG stocks fared:

Facebook FB: -5.35% to $198 a share

Apple AAPL: -4.27% to $299 a share

Amazon AMZN: -4.78% to $1,995 a share

Netflix NFLX: -3.93% to $365 a share

Google GOOGL: -4.7% to $1,413 a share

These stocks largely aren’t economically sensitive, but more importantly, they don’t have manufacturing or large customers bases in China, with the exception of Apple, which has both.

When the broader U.S. market sells off, FAANG stocks tend to sell off harder because they comprise a large portion of mutual funds and ETFs that are indexed to the broader market. If investors leave those funds, the FAANG stocks must be sold.

Facebook, Netflix and Google aren’t directly exposed to the economic impact, although longer-term, companies that have reduced sales outlooks could reduce advertising spend. Amazon could conceivably see lower sales volumes if it can’t deliver items to customers.

Apple has already preannounced it won’t meet quarterly revenue guidance, as Chinese consumers stay home from Apple stores and the company has delayed manufacturing of devices. Many Apple analysts say customers will buy the devices they aren’t buying now in the next few quarters, indicating the Apple will recover its hit to revenues for the March quarter. 

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