Landmines and fireworks. Those are the two things you can expect this week, as investors are treated to a cornucopia of earnings reports by some of technology’s biggest names, most of whom are in the middle of breathtaking runs, at pivotal crossroads or reeling from life’s relentless uppercuts.
[See: What Every Investor Should Know About Earnings Reports.]
Apple (ticker: AAPL). If Apple investors are usually frothing at their mouth by this point in the year, they’re almost certainly beside themselves right now. Apple went with a more shrouded approach to iPhone sales data, refusing to give up any first-weekend number for the iPhone 7, so Wednesday will be the first info we get straight from the horse’s mouth.
Not that there isn’t a bevy of third-party information already out there.
Consumer Intelligence Research Partners data says the iPhone 7 and iPhone 7 Plus is “off to a blistering start.” The pair, sold for just 17 days of Apple’s fiscal fourth quarter, made up 43 percent of all iPhone sales. But it’s not all good news — CIRP also attributed the share to “slow iPhone sales in the weeks leading up to the launch of these two new models.”
That info also was blunted by a report from UBS analyst Jinjin Wang, who reported a few struggles in China. Sales of the iPhone 7 are lagging compared to 2015’s iPhone 6s launch, and broadly speaking, Apple is losing share to low-cost Chinese brands like Huawei and Vivo. Also of worry: KGI Securities, which did bump up Apple Watch Series 2 shipment estimates by single digits, believes overall Apple Watch sales in 2016 could be down from last year.
Don’t look to history for guidance. In the nine quarters immediately following a major iPhone launch (in which any sales were recorded), AAPL’s five-day returns have gone positive five times, and negative four. But whatever way Apple stock moves, it should be significant — seven of those moves were by 4 percent or more.
Twitter (TWTR). This is not going to be a fun week for Twitter.
Back in July, when Twitter reported second-quarter earnings, the company gave out third-quarter revenue guidance of $590 million to $610 million that was woefully shy of Wall Street expectations for $681.4 million.
It seemed that would be a moot point, what with Apple, Alphabet, Walt Disney Co. ( DIS) and Salesforce.com ( CRM) all lined up as potential bidders. And in the height of merger rumor madness, Twitter told its suitors it wanted a deal done before its third-quarter earnings report, due out Thursday.
But one by one, those suitors dropped, and now one has to wonder … why the rush for that specific date?
TWTR is expected to report scant revenue growth of 6.5 percent, just three months after 20 percent revenue growth marked the company’s slowest-ever quarter for sales growth. Meanwhile, adjusted earnings are estimated to decline 10 percent to 9 cents per share. User growth is stagnant, and mixed analyses of Twitter’s NFL game livestreams isn’t providing any hope that much changed in the third quarter.
The only hope for Twitter, as it looks right now, is that the rumors of a SoftBank Group Corp. bid — which flew in late Friday to bolster TWTR shares — actually have some meat to them.
[See: The 10 Best Ways to Buy Tech Stocks.]
Tesla Motors (TSLA). Tesla’s earnings report, while still important and often able to move the stock, loses a little bit of its luster because TSLA typically announces its deliveries figures a couple weeks prior. For instance, we already know that Tesla delivered 24,500 vehicles last quarter, up 70 percent from last year and a third-quarter record for the company. Production of 25,185 was up 37 percent sequentially and also a record.
What will matter in this report is how amplified sales will trickle down to the bottom line.
Tesla has bled red ink and negative operating cash flow for years, but the hope has always been that once the EV maker reaches some sort of scale, profits will finally flow. Yes, Tesla posted positive operating cash flow in the second quarter, but that was thanks to customer deposits for the Model 3.
Analysts estimate a huge spike in revenues — 87.6 percent, to be exact — when Tesla reports third-quarter earnings Wednesday after the bell. But perhaps most important is the 7-cent-per-share non-GAAP profit expected by Wall Street. Anything in the red simply won’t be enough.
Alphabet (GOOG, GOOGL). Alphabet is running about as hot as you could want heading into its third-quarter report. Shares are up more than 20 percent out of their June trench and hit a new all-time high of $825.73 last week.
The bar set by Wall Street analysts isn’t going to make things easy, either. Earnings are expected to grow by 17 percent to $8.63 per share on revenues of $22.04 billion — that would be about 18 percent growth, well more than its five-year annual average of about 13 percent.
The onus is on Google’s parent, then, to show Wall Street something nifty. Otherwise, profit-taking might be in the cards.
For what it’s worth, Goldman Sachs is extremely bullish on Alphabet’s prospects before Thursday’s earnings. Analyst Heather Bellini reaffirmed a “conviction buy” rating on GOOGL, saying channel checks showed marketing partners’ spend “came in above their expectations.” Thus, Goldman thinks Alphabet will beat on revenue.
Amazon.com (AMZN). Amazon’s in a similar boat as Alphabet, in the midst of a 20 percent year-to-date run that’s much more impressive when you back out the February market crash. AMZN also is receiving some analyst love ahead of its Thursday after-market report.
For instance, KeyCorp raised its profit estimates for Amazon’s third-quarter report from $1.03 per share to $1.04. KeyCorp already has an “overweight” rating on AMZN shares, though a price target of $847 implies modest 3 percent-plus growth from here. SunTrust’s Bob Peck has a slightly higher price target, $850, which he raised earlier this month, in part because of a robust Prime Day.
[See: High-Tech Investing: 7 Sectors to Watch.]
Amazon is expected to grow revenues 28.9 percent to $32.69 billion, and earnings are expected to rocket from just 17 cents per share in the year-ago quarter to 80 cents for the third quarter.
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5 Huge Tech Stocks Making News This Week: AAPL, TWTR, TSLA, GOOGL, AMZN originally appeared on usnews.com
