CNBC’s Jim Cramer said on Wednesday that some of the world’s biggest tech companies need to adapt to a changing market.
Referring to his acronym for Facebook-parent, it’s time to acknowledge that “FAANG names are getting too big. Can they turn things around? Sure, but they really need to change the way they work,” he said. Meta, Amazon, Apple, Netflix and Google parent Alphabet.
Cramer had previously said that financial stocks could surpass tech stocks as new market leaders in the current high-interest rate environment. Banks benefit from higher interest rates as they can earn more from loans.
Meanwhile, high-growth tech companies like FAANG names suffer from higher interest rates as their stocks are trading with the promise of higher returns – a risk investors are often not willing to take in a turbulent economic environment.
Cramer’s comment comes right after several disappointing earnings results from Big Tech companies. Alphabet missed third-quarter revenue and profit expectations on Tuesday, while Microsoft issued weak quarterly guidance that dragged its shares down.
Meta Platforms reported a massive loss in third-quarter earnings after Wednesday’s close, which caused stocks to drop more than 18% in after-hours trading.
Netflix has outperformed its tech peers, reporting a third-quarter top and bottom hit in October. Along with 18 significant subscriber growth. The company also provided updates on its plans to reduce password sharing and introduce a new ad-supported tier.
Cramer said the streaming giant’s plans for the second venture exemplify the type of innovation FAANG companies need to halt their downward trajectory.
“Forget being a leader – Big [Tech] “Stocks are now followers in a post-Covid era where we learn that their earnings have been inflated much more than we knew by the pandemic.”
Amazon will report third-quarter earnings on Thursday.
Disclaimer: Cramer’s Charitable Trust owns shares of Alphabet, Apple, Amazon, Meta and Netflix.