A host of tech companies will be showing Wall Street their quarterly results over the next few days, and if anything is like last week … well, they might be a little skittish.
Netflix (ticker: NFLX) got last week started with a thud, dropping 13 percent thanks to its Monday night report, which included weak current-quarter subscriber growth estimates that sent investors packing. Microsoft Corp. (MSFT) and Alphabet (GOOG, GOOGL) bookended things with earnings misses Thursday night, leading to substantial losses in the final trading day of the week.
That’s a rough backdrop for this week’s lineup of big tech earnings — several of which could go without more bad news in the young year.
[Read: 13 Tips for Saving and Investing When Owning a Business.]
Apple (AAPL). Prepare for the quarterly force-feeding of Apple financials this Tuesday evening, when the iPhone maker unleashes its fiscal Q2 results.
Unless Apple engaged in some of the world’s greatest sandbagging when it announced second-quarter guidance in January, prepare for a sad trombone of historic proportions. Namely, Apple said that it expected revenues to come in between $50 billion and $53 billion for the quarter — which would mark the company’s first sales decline in 13 years.
The company placed the blame on unfavorable comparisons from last year, as well as a strong dollar. But the accounting takes a clear backseat to the real problem — iPhone sales. Revenue growth for the iPhone in the first quarter came in at an all-time slow 0.4 percent, and despite the launch of the iPhone SE, the company predicted its first-ever sales decline for the iPhone, which will come amid waning interest in the iPhone 6s.
The iPhone represents 68 percent of Apple’s revenue, and no other product generates more than 10 percent. So it’s difficult to imagine news on any other product front that will get Wall Street jazzed — especially considering iPad revenue has been in long-term decline and Apple Watch sales is expected by at least one reliable researcher to decline 25 percent this year.
For the record, analysts expect earnings to slide to $2 per share on revenues of nearly $52 billion.
[Read: Dollar Stores Defy Retail Headwinds.]
Twitter (TWTR). Twitter is yet again expected to report a massive surge in revenues, as well as an uptick in profits. But we will find out on Tuesday afternoon if investors — yet again — care more about Twitter’s anemic user growth.
Analysts expect Twitter to report a 39.4 percent improvement in sales to almost $608 million in its first quarter, as well as a move in adjusted earnings from 7 cents per share in the year-ago quarter to 10 cents. But the stat that has dogged Twitter of late is monthly active user growth — of which Twitter had none in the fourth quarter of 2015.
Twitter isn’t exactly in dire straits, with $3.5 billion in cash and equivalents versus about $1.6 billion in debt. But the company still hasn’t ever posted a quarterly profit, as far as generally accepted accounting principles are concerned, and Twitter sports woeful user metrics compared to Facebook (FB). This combination has led to numerous earnings-day disappointments and a general concern of overvaluation that has sent TWTR shares down some 75 percent since they peaked in early 2014.
The product front isn’t encouraging, either, with current users griping about pending changes including a new formula for its timeline and larger character counts.
The upside? Sentiment for Twitter couldn’t get much worse, so an upside surprise might be easier to come by.
[See: 11 Stocks that Donald Trump Loves.]
Facebook. Mark Zuckerberg’s company can’t seem to do much wrong. Facebook is again flirting with all-time highs after resetting them in March, it’s coming off a fourth quarter in which it announced record quarterly and annual earnings, and it’s sporting an 11-quarter streak of Street-beating earnings.
And on top of all that, Facebook is expected to grow revenues and earnings by roughly 48 percent when it reports after the bell Wednesday.
All of that optimism almost seems to doom FB stock to a dip on anything but a stirring report, but there are a lot of positives that could keep that from happening. For instance, Facebook continues to be an online advertising powerhouse, with mobile ad growth “stronger … than we were expecting” in Q4, Evercore ISI analyst Ken Sena told Reuters.
Another thing to look for, according to Goldman Sachs analyst Heather Bellini, is information on Facebook’s “small test of sponsored messages” on Facebook Messenger — the massive messaging service that now boasts 900 million users, and that investors are excited to see become monetized.
Just don’t expect the Oculus Rift to have any meaningful impact on Facebook’s numbers. It’s an exciting product, but it’s way too early for it to hit the top and bottom lines.
Sirius XM Holdings (SIRI). Sirius XM must have performance anxiety when it comes to earnings, as the company has only beat Wall Street’s mark twice in 16 quarterly earnings reports since 2012.
But don’t take too much stake in that. For one, Sirius’ enormous share count results in earnings estimates that have ranged from just 2 to 3 cents per share in all but one of those quarters, meaning it takes a lot of wiggle room to generate a beat or a miss, making matches (there have been eight) much more likely. Earnings are expected to come in at 3 cents per share this quarter, on revenues estimated to grow 9 percent to $1.18 billion.
Expect Sirius to have difficulty generating upside surprise on the earnings front, as CEO Jim Meyer told investors at the end of last year that “margin expansion in 2016 is certainly tougher” — that’s because the company is making “substantial investments across many of our business.” But the company’s own expectations for subscriber and revenue growth for the year are fairly muted, at 5 percent and 6.5 percent, respectively.
As a note, earnings won’t just affect SIRI shares — Liberty Media Corp. (LMCA, LMCK), which has a 62 percent stake in Sirius XM, recently unleashed three classes of Sirius XM tracking stock, LSXMA, LSXMB and LSXMK.
Sirius XM reports earnings Thursday before the bell.
Amazon.com (AMZN). The roughly 120 percent surge in AMZN stock in 2015 was always going to be difficult to improve upon, but many investors probably didn’t expect the 30 percent letdown they got within the first six weeks of the year.
However, after February’s crash, AMZN has been on the upswing. The question is whether Amazon’s first-quarter earnings report Thursday afternoon will help keep momentum going — or stand in the way.
Amazon Prime is one of the most familiar faces of the business, and naturally investors will want to see that growth there remains strong — namely because Prime helps push consumers to buy from Amazon.com, stream Amazon Video and otherwise stay and pay within the Amazon ecosystem. Also, expect to hear news about Amazon’s new stand-alone video service, priced to compete with Netflix, although the launch won’t hit first-quarter numbers.
The real make-or-break area, though, could be Amazon Web Services, the company’s expansive cloud offering. The web services unit was arguably the biggest driver of Amazon stock in 2015, as the huge margins stand in stark contrast to the rest of Amazon’s businesses, helping power surprise profits in the second and third quarters last year. However, expansion costs and a strong dollar could both weigh on margins, which could cause AMZN to miss expectations for 58 cents per share in profits — one of the highest quarterly earnings estimates in the company’s history.
More from U.S. News
10 Best ETFs for Large-Cap Stock Growth
9 Hot Dividend Stocks for 2016
8 Tech Funds to Buy to Invest in the Future
5 Tech Earnings to Watch This Week (AAPL, AMZN, FB, SIRI, TWTR) originally appeared on usnews.com
