Thinking of buying a FAANG name or two before the earnings come out? 

Be really careful. 

Earnings expectations aren't incredibly high for the FAANG companies for the first quarter of 2019 (same deal with most S&P 500 companies), but their stocks have roared. Apple (AAPL - Get Report) analysts, for example, are looking for adjusted earnings per share to fall 13%. There may not be huge upside for the group, even if we see earnings beats. Snap (SNAP - Get Report) , which reported earnings Tuesday, was a prime example. 

Let's talk FAANGs first. 

FAANGs

Facebook (FB - Get Report) is up 35% year-to-date, and now trades at a trailing price-to-earnings ratio of 24, exactly in line with its trailing earnings multiple in August of 2018, less than a quarter before the FAANGs, and subsequently the broader market, tanked for the year. Apple AAPL is up 32% on the year and has a trailing earnings multiple of 17, in line with its trailing PE ratio in August. Amazon (AMZN - Get Report) is up 24% this year, with a trailing PE ratio of 96, still well below the 165 it was at it August. Netflix (NFLX - Get Report) already reported earnings, but investors considering it now should be careful, as it's up 20% this year, with an earnings multiple of 133, almost bumping up against the 143 it was at in August. Alphabet (GOOGL - Get Report) is up 20% for the year, trading at 28 times its last twelve months of earnings, moving closer to the 33 it traded at in August. 

Snap

Snap may have taught us something. The stock was up more than 100% for the year just before its Tuesday earnings report, in which it beat earnings and revenue estimates. Most importantly, Snap showed signs its user growth was abating, and it posted average revenue per user of $1.68, beating expectations of $1.62, because it's using more sophisticated advertising technology, driving demand for advertising brands. And what happened? 

The stock fell 6% Wednesday to $11.24 a share. It's still up roughly 100% year-to-date. 

Investing lesson: when a stock is red hot into earnings, that usually indicates investors won't start buying up the stock post-earnings unless the results are absolutely incredible.

Related. Are the Good Old FAANG-Led Days Back or Is This a Warning Sign?

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