We discuss which FAANG stocks are the best post-earnings buys.

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This story originally appeared on MarketBeat

Every time earnings season rolls around, it’s always a good idea to pay attention to the FAANG stocks and how they perform both before and after their quarterly numbers are released. Not only are these some of the most innovative and fundamentally sound companies in the world, but they also make up such a massive portion of the overall indices that each stock can really influence the overall direction of the market.

If you aren’t familiar with the acronym FAANG, it refers to some of the strongest stocks in the United States including Facebook, Amazon, Apple, Netflix, and Alphabet. Each of these companies has delivered some truly astounding returns to early investors over the years and it’s easy to find reasons why each one belongs in a long-term portfolio. With that said, certain FAANG stocks stand out as strong post-earnings buys at this time.

We are going to highlight three of them below to help you plan out your investment strategies for the coming quarter. Let’s take a further look below.

Microsoft (NASDAQ:MSFT)

Microsoft is a company that seems to deliver quarter after quarter of impressive numbers, and the company’s Q4 results were no exception. With so many good things working in the company’s favor at this time, it’s certainly one of the most attractive FAANG stocks to add post-earnings. The price action reflects that, as the stock is nearing new all-time highs and could be heading for $300 a share sooner rather than later. Consider some of the trends that benefit Microsoft’s business at this time, including the ongoing digital transformation of enterprises around the world, the remote work revolution, and the growing popularity of video games.

When you stop to take a look at the company’s recently announced Q4 numbers, it’s quite evident that the company’s cloud business is firing on all cylinders, which is another solid reason to consider adding shares at this time. Microsoft reported commercial cloud revenue growth of 36% year-over-year to $19.5 billion along with 51% year-over-year growth for the company’s Azure cloud platform. Finally, the company’s reliable revenue from software businesses like Microsoft Office should allow the company to invest heavily in higher-growth areas such as Azure, which in turn could like Microsoft to becoming the premier enterprise computing company in the world at some point. 

Apple’s latest earnings release was nothing short of a blowout, yet the post-earnings reaction has been somewhat lackluster. With that said, investors need to recognize that the stock rallied considerably up into the report and is simply consolidating that big move. It’s still a great FAANG stock to think about adding at this time, especially since the company is expected to provide details on a variety of new products this fall including the iPhone 13. Additionally, investors should be impressed with how the mega-cap tech company was able to deliver such strong results amidst a global chip shortage that likely caused supply constraints. Although the company’s management warned that chip supply issues might impact sales next quarter, the new product launches and strong services revenue should help to ease those concerns.

The consumer computing device company beat the consensus Q3 revenue estimate by over $8 billion and saw its services revenue reach a new all-time high. With the way 5G networks are going to grow over the next few years, Apple should see steady demand for its smartphones and has a fantastic opportunity to grow in emerging markets like China. In fact, the company reported $14.76 billion in sales for the Greater China region, up 58% year-over-year and confirmation that Apple is gaining more ground internationally. The stock could be ready to rally again if it can break out above the previous all-time high of $150 a share and is the type of company that nearly any investor should be comfortable adding to their portfolio.

Finally, Facebook is another great FAANG stock to consider adding following its recent earnings report. Although some investors might be hesitant to add exposure to the social media giant after the company warned that growth will likely decelerate during the second half of 2021, it’s worth noting that Facebook’s management tends to under promise and over deliver on its guidance. The stock sold off following the company’s Q2 results, but it wouldn’t be surprising to see the stock trading back at all-time highs very shortly.

If you are a believer in the global economic recovery, this is a great stock to own since it will benefit from more advertising spending in a strong economy. It’s also one of the more undervalued big tech stocks to add at this time with a P/E ratio of 26.61, which is lower than stocks like Apple, Amazon, and Microsoft. Sure, the company underwhelmed investors with its daily active user growth in Q2, but with an EPS increase of 101% year-over-year in the quarter and some of the most actively used social media applications in the world, Facebook is still a great post-earnings buy to consider.

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Roland Millaner