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If Wall Street is right, FAANG stocks are about to get boring.

Over the next 12 months, the group – comprising Facebook Inc., Amazon.com Inc., Apple Inc., Netflix Inc. and Alphabet Inc.’s Google – will post an average return of 5.4 per cent, according to consensus price targets from analysts who cover the companies.

That would mark a dramatic turn for a group that has posted blistering growth – last year, the FAANGs romped to an average return of nearly 50 per cent – and at times, does a lot of heavy lifting for the S&P 500. A broader chill on Big Tech would have an outsized effect on the market.

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There is, however, at least one argument against this subdued outlook: Based on past experience, the Street has absolutely no idea where the FAANGs are heading.

Case in point: the recent Alphabet earnings. On Friday, the consensus 12-month price target for GOOGL-Q was US$1,267.70, according to Bloomberg. On Monday, Alphabet reported earnings that blew past expectations and shares shot above Friday’s target in early trading Tuesday. Analysts reacted accordingly, and the consensus target is now about US$80 higher.

To be fair, analysts are expected to change their target prices as new information becomes available. But the situation does highlight how the Street frequently fails to capture the FAANGs' upside.

As part of our analysis, we looked at price calls for the FAANGs and compared them with actual returns. To do so, we grabbed the forward 12-month consensus price target on the final trading day of the calendar year for each stock, which approximates an estimate for the following year.

In doing so, we found that over the past four calendar years, estimated returns have been off by an average of 28 percentage points. More often than not, the Street underestimated returns. And when they do underestimate, it’s by a greater margin (36 percentage points) than for overestimates (14 percentage points).

The most egregious example was for Netflix in 2015. Analysts expected the streaming service to climb 21 per cent, as implied by the price target and closing price on the final trading day of 2014. Instead, Netflix shares surged 134 per cent in 2015.

Admittedly, our comparison is imperfect: For its consensus figure, Bloomberg counts all analysts who changed their target price within the past three months. Thus, a consensus target on Dec. 31 could include an analyst who changed his or her target on Oct. 1.

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So, we also compared the consensus call with each stock’s average closing price for the final three months of the year. On that front, the Street fared better – but only slightly. The average difference was 26 percentage points, and again, analysts typically underestimated returns.

No doubt, analysts have a spotty record in calling the market at large. Year-end S&P 500 estimates are often way off the mark. But they’re significantly worse at calling the FAANGs. That’s worth keeping in mind as analysts react to the latest Big Tech earnings.

Note: For this analysis, we used absolute values (ie. no negatives) to better reflect the difference. For instance, if an analyst underestimated a company’s return by 20 percentage points one year, then overestimated by 20 percentage points the next, a simple average of both values would be zero, suggesting the analyst had a great record. Instead, we want to show that, regardless of direction, the analyst was inaccurate by an average of 20 percentage points.

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