Roughly four weeks ago, all of Wall Street’s major stock indexes rocketed to record highs. While the rise of artificial intelligence (AI) and initial public offering (IPO) euphoria have been the premier catalysts, it’s the FAANG stocks that have done the bulk of the lifting for years. The FAANG acronym stands for:
- Facebook, now Meta Platforms (META +2.52%)
- Apple (AAPL +0.43%)
- Amazon (AMZN +2.35%)
- Netflix (NFLX +6.04%)
- Google, now Alphabet (GOOGL +0.55%)(GOOG +0.37%)
These stock market pillars are leaders within their respective industries. However, they don’t share the same outlook. If there’s one fundamental metric that truly separates the bargains from the pretenders within the FAANG stocks, it’s cash flow.
Image source: Getty Images.
Ranking the FAANG stocks by their future cash flow
Although the time-tested price-to-earnings (P/E) ratio is the go-to for most investors when quickly evaluating a public company, it can be easily tripped up by recessions and high-growth stocks, such as the FAANG components.
Since all five FAANG stocks are aggressively reinvesting their cash flow into high-growth initiatives, it’s the perfect metric to gauge which companies are or aren’t bargains.
Based on Wall Street’s consensus cash-flow-per-share estimates for 2027, here’s how the FAANG stocks rank from cheapest (i.e., most attractive) to most expensive (as of June 25):
- Meta Platforms: 8.46 times estimated forward-year cash flow
- Amazon: 10.06
- Alphabet: 16.78
- Netflix: 18.61
- Apple: 25.34
On the one hand, Meta Platforms and Amazon look to be genuine bargains amid a historically pricey stock market. By comparison, Apple is a long way from being fundamentally attractive.
Image source: Amazon.
Meta and Amazon are historically attractive
Despite Meta and Amazon spending a small fortune on their respective AI build-outs, the foundational operating segments for both companies continue to deliver.
Meta is still a social media maven. Its top-tier social media destinations, such as Facebook, WhatsApp, Instagram, and Threads, helped lure an average of 3.56 billion people per day to its family of apps in March. A figure this large has made Meta an advertising magnet and afforded it exceptional pricing power.
Today’s Change
(2.52%) $13.70
Current Price
$556.57
Key Data Points
Market Cap
$1.4T
Day’s Range
$540.50 – $556.71
52wk Range
$520.26 – $796.25
Volume
397.2K
Avg Vol
17.6M
Gross Margin
81.94%
Dividend Yield
0.39%
Furthermore, Meta has been deploying generative AI solutions within its ad network, enabling businesses to tailor static or video messages for individual users.
Like Meta, Amazon has utilized AI as a growth tool. The integration of generative AI and large language model solutions into Amazon Web Services, the No. 1 cloud infrastructure service platform in the world, has reaccelerated sales growth in this high-margin segment.
Whereas investors paid 23 to 37 times year-end cash flow to own shares of Amazon throughout the 2010s, shares now trade at a historically low 10 times forward-year cash flow.
Apple is a pretender
At the other end of the spectrum, Apple is historically expensive.
Though iPhone 17 sales have picked up, the company’s previous three years were marked by stagnant or shrinking hardware sales. Apple will have to prove to Wall Street and investors that its physical devices are once again resonating with consumers.
Today’s Change
(0.43%) $1.17
Current Price
$276.32
Key Data Points
Market Cap
$4.0T
Day’s Range
$274.24 – $280.46
52wk Range
$199.26 – $317.40
Volume
2.8M
Avg Vol
48.8M
Gross Margin
47.86%
Dividend Yield
0.38%
Apple also offers the largest share repurchase program on Wall Street. More than $853 billion has been spent since the start of 2013 to retire over 44% of Apple’s outstanding shares. While buybacks have been beneficial to Apple’s shareholders and the company’s earnings per share, they’ve also helped mask mediocre growth in net income.
Sean Williams has positions in Alphabet, Amazon, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, and Netflix. The Motley Fool has a disclosure policy.
