Are Google, Amazon, Apple and Meta Cheap yet? JPMorgan Has the Answer – Business Insider

Big tech stocks have seen their stellar pandemic-era run abruptly end in early 2022.
With geopolitical turmoil in Ukraine, high inflation around the world, and expectations of rising interest rates, the entire market has started the year sharply lower. But shares of Meta (FB), Apple (AAPL), Amazon (AMZN), Netflix (NLFX), and Alphabet (GOOGL) are faring even worse than the rest of the market, begging the question: are these top growth stocks now cheap enough to buy?
For JPMorgan, the answer is no. Strategists Mislav Matejka, Prabhav Bhadani, Nitya Saldanha and Karishma Manpuria have examined the market in forensic detail for their latest equity strategy report.
The FAANG stocks — or Meta (né Facebook), Amazon, Apple, Netflix and Alphabet (Google) — are all lower, even relative to the wider US equities market, which is down over 9% so far in 2022.
Shares of Meta crashed after the company reported its first-ever decline in daily active users last quarter, while  Netflix took a similar dive when the company announced it believed subscriber growth will slow next quarter. As a result, shares of Meta are down over 39% year-to-date, while Netflix is down 36%. Meanwhile, Apple shares are down 7%, while shares of Amazon and Alphabet are both down over 9% this year.
But according to the team at JPMorgan the issue isn’t the price of these high-growth stocks — it’s the timeframe. When looking at the big picture the JPMorgan team is unconvinced growth stocks are a bargain right now.
“Despite recent underperformance, growth continues to trade near highs, in a multi-year context,” they wrote. “In a longer term context, the recent underperformance of growth is much less stark, as it comes on the back of years of outperformance.” 
“Similarly, the recent underperformance of FAANG relatively also appears muted, considering its large outperformance over the last decade. In fact, the price earnings differential between technology and banks is still close to the widest on record.” 
Given this, where should investors put their money? The JPMorgan team said that despite its recent rally, value investments continue to trade “outright cheap relative to growth.” 
“As growth stocks weakened of late, they derated, but are still not outright cheap,” they wrote. “On the other side, financials and commodities in particular had a strong rally, but are far from expensive, especially relative to underlying commodity prices and relative to the magnitude of potential rate changes by central banks.”
JPMorgan noted that the earnings of growth companies “might not be exceptional anymore,” while the earnings of certain value sectors are “bouncing.” They also said the forward earnings of value appear to be “bottoming out” versus growth stocks.
“The big driver remains the direction of bond yields,” the JPMorgan team explained. “Over the past 10 years, growth style benefitted from negative real rates and subdued bond yields, rerating vs value sectors. If bond yields show a more persistent upside, as central banks undergo a series of rate increases, and as the demand-supply for bonds changes, then the large valuation premium that growth sectors have over value will keep reducing.”
Inflation peaking might not be a “durable reason” to go back and buy growth stocks, they warned, but it could offer a short-term tactical bounce.
“We believe one should look through the widespread ‘slowdown’ calls that are currently in vogue, and stay bullish on banks, mining, energy, insurance, autos, travel and telecoms. The year-to-date market performance is tracking these well.”
“The question is whether one should buy back quality, especially if one sees a potential peak in inflation,” the team continued. “In our view the key is the direction of bond yields – we expect them to continue moving higher, and that was always consistent with cyclical leadership.”
The team also gave a nod to one geographic part of the equities market that looks attractive. “Regionally, we reiterate our upgrade of the UK to overweight, after six years of a cautious stance.”
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