(Bloomberg) -- The FAANG stocks have already seen double-digit gains so far this year, but one analyst expects the rally to continue for at least three of the five companies, with their upcoming quarterly results seen as the primary positive catalyst.
The mega-cap group of Internet and technology stocks -- comprised of Facebook Inc., Amazon.com Inc., Apple Inc., Netflix Inc., and Google-parent Alphabet Inc. -- are all scheduled to report by the end of April, and Barclays recommends adding to positions in Facebook, Amazon, and Alphabet ahead of their results.
All five companies have outperformed the broader market this year, though they remain below record levels hit in 2018, before concerns over valuation and their growth prospects spurred heavy selling. While those issues haven't disappeared, and growth stocks are at their priciest level relative to value names since the dot-com era, Barclays' analyst Ross Sandler expects the results to help investors move past them.
Barclays "would add to positions" in both Facebook and Alphabet ahead of their results, and recommended "taking advantage and adding selectively" to Amazon before the e-commerce company's print, the firm wrote to clients on Monday.
For Facebook, Sandler wrote that the results could provide a key boost to investor sentiment following a variety of controversies in 2018, affirming his overweight rating and $210 price target.
"The investment community is skeptical around core FB's user growth and engagement, so any color around stable-to-improving user trends should go a long way toward improving the narrative," he wrote. Internal checks point to "another strong quarter," although one that likely wouldn't result in as much upside as the social media company's fourth quarter.
Facebook is up nearly 37 percent in 2019, more than twice the almost 16 percent rise of the S&P 500. At current levels, it remains 18 percent below a record hit in July. Facebook reports after the market closes on April 24.
Amazon reports the day after Facebook, and while Barclays expects its quarter to be "mixed," Sandler wrote that "unlike the last two prints sentiment is already bracing for this." Barclays has an overweight rating and $1,930 price target on Amazon.
Stepping back, he added, "investors rarely get a chance to buy AMZN at 19x Ebitda," or when it is notably below recent highs.
Amazon is currently about 10 percent below records, despite having risen 37 percent off a December low.
For Alphabet, Sandler said the company could benefit from improving margins. The current margin picture, "reminds us very much of the set up in early 2015, whereby Google operating margins went from imploding to stable, which set the stage for a 40 percent+ move higher for shares."
He doesn't expect any 2019 rally to be "that dramatic," but writes, "we'd expect some upside from here." He noted that mobile advertising revenue "remains strong," and that any headwind from YouTube content issues were "not material." Sandler affirmed Barclays overweight rating and $1,350 price target on Alphabet.
Alphabet is scheduled to report results on April 29. Shares have risen 17 percent year to date.
Barclays' Monday note didn't include any commentary on Netflix or Apple, the other two FAANG stocks, though over at Buckingham, analyst Matthew Harrigan wrote that he "would be opportunistic" on any weakness in Netflix after its results. The video-streaming company reports after the market closes on April 16. Apple's results are due April 30.
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