With earnings season now in full swing, investors have high hopes that Facebook Inc (Nasdaq: FB), Amazon.com, Inc. ( AMZN), Netflix Inc. ( NFLX) and Alphabet Inc ( GOOG, GOOGL) will post strong third-quarter numbers that show their growth stories are still on track.
Canaccord Genuity analyst Michael Graham recently previewed earnings season for the four FANG stocks and broke down which numbers are most important.
[See: 9 of the Market’s Best Growth Stocks.]
The first of the four FANG stocks to report is Netflix, which will release its earnings report after the market close on Monday. Graham says investors should be watching net domestic subscriber additions. Wall Street analyst consensus estimates are calling for 796,000 domestic net subscription additions, but Graham is anticipating 850,000. In addition, Canaccord will be watching for any commentary related to how the recently announced pricing increases will impact average revenue per user.
Next up are Amazon and Alphabet, which report earnings on Oct. 26 after the market close.
For Amazon, Graham is watching domestic e-commerce margins. In the second quarter, domestic e-commerce margins were down from last year. Graham says investors may forgive shrinking margins as long as Amazon continues to gain retail market share. Canaccord will also be watching for commentary on a stand-alone logistics business after several recent media reports that Amazon is leasing planes and trucks.
When Alphabet reports, Graham will be watching properties revenue growth and gross margins. He says properties revenue growth needs to top the 20 percent threshold to impress the market, and he’s confident it will. However, Graham is expecting another margin miss for Google stock. Analysts are calling for gross margin of 60.4 percent, but Canaccord is forecasting 59.8 percent.
[Read: 5 Reasons Facebook Is a Great Long-Term Buy.]
Finally, Facebook reports earnings Nov. 1. Graham will be watching for ad load growth and ad pricing. In the second quarter, ad load growth dropped from 49 percent to 19 percent, but pricing growth accelerated from 2 percent to 24 percent. Graham is also watching for commentary related to original video content. Facebook is reportedly spending $1 billion on video content in 2018.
Overall, Canaccord is bullish on three of the four FANG stocks, with “buy” ratings for Facebook, Netflix and Amazon and a “hold” rating for Alphabet.
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The Most Important Earnings Numbers for FANG Stocks originally appeared on usnews.com
