Let’s swap Netflix for Microsoft, Jim Cramer says in FAANG audit

Time to retire FAANG?

CNBC’s Jim Cramer, who enjoys putting acronyms to good use, is now on the prowl for a new play on words to redefine the group of big technology stocks.

Though he did not invent the FAANG acronym, the “Mad Money” host popularized the term that encompasses the internet stocks of Facebook, Apple, Amazon, Netflix and Google-parent Alphabet. Now he is calling for another giant in tech to displace the streaming platform from the bunch.

“I say we replace Netflix with the far less episodic Microsoft, but if we do that, well, you know we’ve got some difficult choices to make,” Cramer said. “I need a new acronym.”

He went on to ask viewers to suggest new acronyms on his Twitter page: @JimCramer.

Cramer called Netflix, whose stock cratered more than 18 points to nearly $275 a share during the session, the “elephant in the room.” Just the day before, the show host told viewers not to buy or short the stock — just sell it out of your portfolio.

He was critical of its mixed third-quarter report, which said the company beat profit expectations but barely missed revenue numbers. However, Cramer was disappointed that it missed subscriber growth for the second straight quarter as video-streaming competition is expected to heat up in the current quarter.

Netflix shares climbed as much as 43% between the start of the trading year and early May. The stock is now up just 2.85% since it opened at $267.66 on the first trading day of 2019.

“When Netflix reported two nights ago, they missed on almost every key metric,” Cramer said. “I think it’s got more downside. I think the stock has lost its mojo.”

In assessing the rest of the FAANG class, Cramer said Facebook is a “very undervalued stock” but warned that it could also get kicked out of the group if the U.S. government forces the social media giant to spin off the Instagram and WhatsApp platforms.

Apple is the “north star” of the market, Cramer added. The host said he thinks Wall Street may be “concerned” about Amazon’s spending habits. The e-commerce giant earlier this year earmarked $7 billion for video and music content in 2019.

While Amazon also faces some calls to be broken up, Cramer is convinced that Alphabet could benefit by separating its search, cloud services and self-driving car program, Waymo, into separate businesses.

As for Microsoft, it is one of two companies that have market value of more than $1 trillion, according to FactSet. Apple has nearly $1.07 trillion market value to Microsoft’s almost $1.06 trillion, as of Friday’s close.

With Microsoft, what was formerly known as FAANG would be made up of the five most valuable companies on the S&P 500. Facebook, the youngest company of the five, has the smallest market value at $530 billion.

Disclosure: Cramer’s charitable trust owns shares of Facebook, Alphabet, Apple, Microsoft and Amazon.

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