FANG Gets Disrupted as the Dow Strikes Back

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FANG Gets Disrupted as the Dow Strikes Back

Two major “FANG” stocks are getting disrupted as members of the Dow Jones Industrial Average take business back into their own hands.

First, Nike (NKE) announced it will stop selling merchandise on Amazon.com (AMZN). Second, Walt Disney’s (DIS) new Disney+ service got more than 10 million subscribers within two days of being launched. Netflix (NFLX) fell almost tick-for-tick as DIS rallied.

NKE and DIS are both in the Dow Jones Industrial Average ($INDU). NKE is 55 years old and DIS has existed for almost a century. AMZN and NFLX, on the other hand, are members of the tech-focused “FANG” group that led the market higher between 2015 and 2017. Neither are even 30 years old.

Amazon.com (AMZN) chart with select moving averages and potential double top pattern.
Amazon.com (AMZN) chart with select moving averages and potential double top pattern.

In both cases, older branded companies are striking back against Internet-based middlemen. By reaching their millions of customers directly, both DIS and NKE stand to increase their profitability and grow sales of newer products.

Amazon.com Margins

The news might come at a bad time for AMZN, whose profit margins lagged estimates the last two quarters. Now investors taking a longer-term look at its chart may start to notice a potential double-top based on peaks above $2,000 in 2018 and 2019. Its 50-day moving average also recently fell under its 200-day moving average — a potential “death cross.”

Speaking of charts, the NYSE FANG+ index ($NYFANG) hasn’t closed at a 52-week high in over a year. Meanwhile, $INDU broke out to new record levels a week ago.

NFLX has also struggled and led the FANG selloff about 16 months ago. Unlike AMZN, its problem is weaker volume growth after saturating its core North American market. What happens now that they have to compete with DIS’s $6.99 package featuring 30 years of The Simpsons, Iron Man, The Lion King and Toy Story — along with countless other titles?

FANG+ Index versus Dow Jones Industrial Average.
FANG+ Index versus Dow Jones Industrial Average.

In conclusion, Market Insights was early to notice a rotation away from giant technology stocks like AMZN and NFLX. Today’s news suggests that trend is only continuing as older companies monetize their strong brand identities.

It’s not great for some flashy members of the Nasdaq-100, but investors seem to be finding new opportunities in other areas.

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