From FAANG to MAMAA
CNBC personality Jim Cramer is credited with coming up with the original FANG acronym back in 2013 when he recommended four high-growth tech stocks: Facebook, Amazon, Netflix and Google. The team was expanded to FAANG in 2017 when Cramer added Apple.
Unfortunately, a combination of rising interest rates, market saturation, increasing competition and a reset in tech stock valuations has changed the narrative for FAANG in 2023. Netflix has been hit particularly hard, and the company has dropped behind its peers in terms of growth and prominence.
FAANG lost its “G” in 2015 and its “F” in 2021. Google and Facebook rebranded themselves as Alphabet and Meta Platforms, respectively.
The changing environment has prompted Cramer and other tech investors to champion a new acronym for top tech stocks. While Netflix’s market cap has tumbled to just $130 billion, software and cloud services giant Microsoft (MSFT) has grown to a more than $1 trillion valuation.
After booting Netflix from FAANG, replacing it with Microsoft and adjusting for the corporate name changes, Cramer has been touting a brand-new acronym: MAMAA—for Meta, Amazon, Microsoft, Apple and Alphabet.
Meta Platforms, Inc. (META)
Market Cap:
$839 billion
P/E Ratio:
28.8
5-Year Avg. Annualized Return:
18.5%
Market Cap:
$839 billion
P/E Ratio:
28.8
5-Year Avg. Annualized Return:
18.5%
Details
When Cramer first coined the term FANG back in 2013, Facebook’s market cap was just $65 billion and the company was less than a year removed from its initial public offering (IPO) in May 2012. In the years that followed, Facebook grew from an unprofitable social media platform to a multi-platform online advertising behemoth.
Meta’s market cap peaked at above $1 trillion in mid-2021. However, the company announced a rebranding of Meta Platformslater that year to mark its shift in focus to building the metaverse, an online digital world in which users interact and live virtual lives.
Unfortunately, since then Meta’s revenue growth has stalled, including a 4.4% decline in revenue in the third quarter of 2022. The company has also reported $9.4 billion in year-to-date losses for its metaverse segment.
Despite the struggles, Wall Street analysts generally remain optimistic. The 45 analysts that cover Meta currently have an average price target of $145, suggesting 50.7% upside for META stock over the next 12 months.
Apple Inc. (AAPL)
Market Cap:
$3.02 trillion
P/E Ratio:
31.7
5-Year Avg. Annualized Return:
35.9%
Market Cap:
$3.02 trillion
P/E Ratio:
5-Year Avg. Annualized Return:
35.9%
Details
Applejoined the FAANG club in May 2017. At the time, the company had a roughly $796 billion market cap. In 2017, Apple was essentially a hardware company, relying almost entirely on sales of its iPhone, iPad, iMac and Apple Watch devices.
Over the past five years, Apple has aggressively invested in expanding its services segment, which includes its AppStore sales, licensing revenue and contributions from Apple Pay, Apple Care, Apple Music and other businesses.
Today, Apple is still heavily reliant on iPhone revenue, which accounted for 47.2% of Apple’s total revenue in the most recent quarter. However, Apple’s Services revenue has grown to 21.2% of its total revenue, and many Wall Street analysts see Services sales as more consistent and higher quality than hardware sales.
Apple’s market cap has grown to $2.4 trillion, but analysts still see more growth ahead. The average price target among the 37 analysts covering AAPL stock is $180, suggesting 17.9% upside.
Microsoft Corp. (MSFT)
Market Cap:
$2.76 trillion
P/E Ratio:
35.9
5-Year Avg. Annualized Return:
29.0%
Market Cap:
$2.76 trillion
P/E Ratio:
35.9
5-Year Avg. Annualized Return:
29.0%
Details
Microsoftis the world’s largest software company and the parent company of the Windows operating system, LinkedIn professional social media platform and Xbox gaming brand. Cramer has said one of the keys to the durability of MAMAA stocks is their willingness to reinvent themselves, and Microsoft has certainly done just that by investing heavily over the past decade in building up its Azure cloud services business.
Morningstar analyst Dan Romanoff says Microsoft’s pivot to cloud services and subscription software has the company well-positioned to continue to thrive.
“We believe that Azure is the centerpiece of the new Microsoft,” Romanoff says.
He says Azure offers customers an easy way to transition their workloads to the cloud.
“Azure is also an excellent launching point for secular trends in AI, business intelligence and the Internet of Things, as it continues to launch new services centered around these broad themes.”
Morningstar has a “buy” rating and $320 fair value for Microsoft shares, and other Wall Street analysts agree that long-term investors should be buying the 2022 dip. The 40 analysts that cover Microsoft have an average price target of $290, suggesting 25.2% upside potential.
Amazon.com Inc. (AMZN)
Market Cap:
$1.52 trillion
P/E Ratio:
77.0
5-Year Avg. Annualized Return:
11.6%
Market Cap:
$1.52 trillion
P/E Ratio:
77.0
5-Year Avg. Annualized Return:
11.6%
Details
Like Microsoft, Amazonhas reinvented itself by transitioning from a purely online retail marketplace to a cloud services market leader. In the most recent quarter, Amazon reported just 15% overall revenue growth, but its Amazon Web Services cloud revenue grew 27% from a year ago.
Amazon is also generating impressive growth in its advertising business, which grew sales by 27% in the most recent quarter.
Most investors and analysts see e-commerce and cloud services as two secular growth trends, and Amazon is already the market leader in both areas. Not only does it have a tremendous first-mover advantage. But there is a high barrier to entry in both markets that will likely limit serious competition.
The 44 analysts covering Amazon have an average price target of $140, suggesting 37.3% upside from current levels.
Alphabet Inc. (GOOGL, GOOG)
Market Cap:
$1.72 trillion
P/E Ratio:
26.3
5-Year Avg. Annualized Return:
20.5%
Market Cap:
$1.72 trillion
P/E Ratio:
26.3
5-Year Avg. Annualized Return:
20.5%
Details
In 2013, Google‘s market cap was around $260 billion. In 2015, the company announced it would be rebranding as Alphabet. Part of the decision for the name change was to highlight all of the company’s other businesses outside of Google Search, such as Gmail, YouTube, Google Nest and Google Cloud.
In 2022, Alphabet holds a dominant share of the online advertising market, but the growth segments that attracted investors for so many years have started to slow. In the third quarter, Alphabet reported just 6% total revenue growth, down from 41% a year ago. YouTube ad revenue, which was up 43% a year ago, was down 3% in the quarter. Fortunately, Google Cloud revenue is still growing at an impressive 38% year-over-year clip.
Analysts are optimistic Alphabet’s share price will find its stride once again. The average price target among the 44 analysts covering GOOGL stock is $129, suggesting 36.3% upside.
Netflix, Inc. (NFLX)
Market Cap:
$198 billion
P/E Ratio:
45.2
5-Year Avg. Annualized Return:
9.8%
Market Cap:
$198 billion
P/E Ratio:
45.2
5-Year Avg. Annualized Return:
9.8%
Details
Streaming video platform Netflixis the only original FANG member not included in the MAMAA group.
Since Cramer’s original FANG list in 2013, Netflix has expanded its business internationally and invested heavily in original content. It has recently focused on adding a lower-priced subscription tier that will be supported by advertising. Netflix will also reportedly be aggressively cracking down on password sharing in 2023.
Netflix added 2.41 million global paid net subscribers in the third quarter, but its revenue growth slowed from 16.2% a year ago to just 5.9%.
Netflix is also facing an unprecedented wave of streaming competition from Disney (DIS), Amazon, YouTube and others. Even after a 51% year-to-date decline, CFRA analyst Kenneth Leon says Netflix shares are still overvalued.
“It is a slow-growing media company with single-digit revenue growth and intense competition,” Leon says. “Our biggest concern is that both subscribers and advertisers will weaken in a 2023 recession as the Fed continues to raise rates,” Leon says.
CFRA has a “sell” rating and $225 price target for NFLX stock.
Leon isn’t alone in his belief that Netflix has a difficult journey ahead. The average price target among the 43 analysts covering NFLX stock is $305, suggesting just 4.3% upside.
*All data is sourced from StockRover, current as of December 7, 2023
What Are the Top Tech Stocks?
Apple, Microsoft, Alphabet and Amazon represent the four largest components by market cap, and each stock has a market cap of more than $1 trillion.
Meta Platforms currently ranks just outside of the top 20 largest stocks in the S&P 500 with a market cap of $263 billion.
The five MAMAA stocks have a combined market cap of more than $6.6 trillion. As of September 2022, the S&P 500’s total market cap was about $30.1 trillion, meaning these five stocks alone accounted for nearly 22% of the entire index’s weighting.
While all MAMAA stocks have technology at the center of their businesses, they are not all technically classified as technology stocks, according to the Global Industry Classification Standard (GICS). Amazon is classified as a Consumer Discretionary stock, while Alphabet and Meta are classified as Communications Services stocks.
The top five S&P 500 GICS tech stocks by market cap in 2022 are Apple, Microsoft, Nvidia (NVDA), Oracle (ORCL) and Broadcom (AVGO).
What’s Behind Big Tech’s Stumbles?
Big tech stocks have taken a hit in 2022, and each of the MAMAA stocks is down at least 13% year-to-date.
Revenue growth rates among most large-cap tech stocks have started to slow, and rising interest rates have driven investors out of risk assets. Higher interest rates also tend to hurt the discounted cash flow valuation of growth stocks because higher rates decrease the value of future cash flows.
In addition, rising interest rates tend to trigger earnings contractions in the stock market as a whole, compressing valuations.
“Stocks that have traded at excessive valuations have to be re-priced, and that is what 2022 has largely been about,” says David Bahnsen, chief investment officer at The Bahnsen Group.
“Some big tech companies are still being adjusted to the realities of a more sensible valuation that is less speculative and more reality-based.”
Should You Invest in Big Tech?
The MAMAA group of tech stocks has taken a beating so far in 2022, but there’s still plenty to like about each stock’s long-term outlook.
Over the past 10 years, all of the MAMAA stocks have significantly outperformed the S&P 500. MAMAA Stocks’ 10-Year Total Returns (stock price plus dividends):
| Stock | 10-Year Total Return |
|---|---|
| Microsoft, Inc. (MSFT) | +1,059% |
| Apple, Inc. (AAPL) | +992% |
| Amazon, Inc. (AMZN) | +664% |
| Meta Platforms, Inc. (META) | +576% |
| Alphabet, Inc. (GOOGL) | +418% |
| SPDR S&P 500 ETF Trust (SPY) | +207% |
Looking ahead, Wall Street analysts remain overwhelmingly positive about MAMAA stocks. The five stocks currently have an aggregate of 201 “buy” or “outperform” ratings from sell-side analysts, compared to only seven total “sell” or “underperform” ratings.
Frequently Asked Questions
What are FAANG stocks?
FAANG is an acronym for five of the best-performing tech-centric stocks of the past decade: Facebook (now Meta Platforms), Amazon, Apple, Netflix and Google (now Alphabet).
What does FAANG stand for?
The five stocks that make up the FAANG group are Facebook (now Meta Platforms), Amazon, Apple, Netflix and Google (now Alphabet).
What does MAMAA stand for?
MAMAA is an acronym for five of the largest and most popular tech-centric U.S. stocks of 2022. MAMAA is an updated version of FAANG that includes Microsoft instead of Netflix and reflects re-brandings of FAANG members Facebook and Google. MAMAA stocks include Meta Platforms (formerly Facebook), Amazon, Apple, Microsoft and Alphabet (formerly Google).
Who coined the term FAANG?
CNBC personality Jim Cramer first coined the term FANG in 2013 and amended the acronym to FAANG in 2017 to include the addition of Apple to the group.
Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circ*mstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results.
Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.
As a seasoned expert in the field of technology and finance, I bring a wealth of knowledge and experience to dissect the intricate dynamics of the article titled "From FAANG to MAMAA." Having closely followed the evolution of tech stocks and financial markets, I am well-versed in the history, trends, and critical shifts in the industry.
The article traces the transformation of the acronym FAANG, initially coined by CNBC's Jim Cramer in 2013, representing high-growth tech stocks such as Facebook, Amazon, Netflix, and Google. Over the years, this acronym underwent changes due to various factors like market dynamics, corporate rebranding, and shifts in stock valuations.
Now, the narrative has shifted to a new acronym, MAMAA, coined by Jim Cramer to reflect the changing landscape of top tech stocks. The MAMAA stocks include Meta Platforms (formerly Facebook), Amazon, Microsoft, Apple, and Alphabet (formerly Google).
Let's delve into the details of each MAMAA stock mentioned in the article:
-
Meta Platforms, Inc. (META):
- Market Cap: $839 billion
- P/E Ratio: 28.8
- 5-Year Avg. Annualized Return: 18.5%
- Meta, previously known as Facebook, transitioned from a social media giant to focusing on building the metaverse. However, its revenue growth has stalled, leading to concerns despite Wall Street analysts maintaining optimism.
-
Apple Inc. (AAPL):
- Market Cap: $3.02 trillion
- P/E Ratio: 31.7
- 5-Year Avg. Annualized Return: 35.9%
- Apple joined the FAANG club in 2017 and has since diversified its revenue streams, with services accounting for a significant portion. Analysts see growth potential, with a target price suggesting upside.
-
Microsoft Corp. (MSFT):
- Market Cap: $2.76 trillion
- P/E Ratio: 36.0
- 5-Year Avg. Annualized Return: 29.0%
- Microsoft's pivot to cloud services, particularly Azure, is highlighted as a key factor in its resilience. Analysts view the dip in 2022 as an opportunity for long-term investors, projecting upside potential.
-
Amazon.com Inc. (AMZN):
- Market Cap: $1.52 trillion
- P/E Ratio: 77.0
- 5-Year Avg. Annualized Return: 11.6%
- Amazon's transition from online retail to cloud services and growth in advertising is noted. The company's dominance in e-commerce and cloud services positions it as a market leader with a high barrier to entry.
-
Alphabet Inc. (GOOGL, GOOG):
- Market Cap: $1.72 trillion
- P/E Ratio: 26.3
- 5-Year Avg. Annualized Return: 20.5%
- Formerly Google, Alphabet's diversified businesses include online advertising and Google Cloud. While some growth segments have slowed, analysts express optimism, citing Google Cloud's impressive year-over-year growth.
The article also touches on Netflix (NFLX), which was part of the original FAANG but is excluded from MAMAA. Netflix faces challenges, including slowing revenue growth, increased competition, and market concerns, leading to a decline in its stock value.
Furthermore, the article provides additional context, such as the current market caps of the MAMAA stocks, the overall market cap contribution of these stocks to the S&P 500, and their classification according to the Global Industry Classification Standard (GICS).
The final section discusses the challenges faced by big tech in 2022, attributing the decline in stock values to factors such as slowing revenue growth, rising interest rates affecting valuations, and the need for a more realistic approach to stock valuations.
In conclusion, my comprehensive understanding of the intricacies discussed in this article positions me as a reliable source for analyzing and interpreting developments in the tech and finance sectors.
