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Following Microsoft's earnings beat and Netflix's miss, leading tech companies Facebook $FB, Amazon $AMZN, Alphabet $GOOGL and Twitter $MSFT report this week. Cloud computing and data privacy will determine analyst and investor ratings.


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Alphabet Inc. (NASDAQ: $GOOGL) Reports After Close Monday

Analysts consensus is $9.59 in earnings per share (EPS) and $32.19 billion in revenue* 

*After adjustment for a European Commission Fine in Q2 

 

What Analysts Will Be Watching

Google's traffic acquisition costs 

Traffic acquistion costs (TAC) have been rising, even more so after the Facebook scandal and $FB CEO hauled before congress  Alphabet management's response in the conference call on growing regulatory risk and data privacy issues will be closely analysed. The other factor will be Google and Amazon's competition in voice search and smart home appliances. How will this affect or benefit future advertising ? A moderation an improvement will improve margins.

Alphabet's "Google other" segment

This segment includes revenue from cloud, hardware, and the Android App store. This is a hot sector, not least the cloud factor. Other brought in pnly 14% of first-quarter revenue, however  its strong 36% year-over-year growth was a factor to overall growth and a key for momentum to continue. These investments are long term and will likely seef severe margin compression, how much will satisfy investors?

Self-driving unit, Waymo

Where are we with regards to revenue and delivery. The obvious comparison is Tesla, does Waymo have similar issues? 

  • Shares closed Friday at $1,201.47 with a 52-week trading range of $918.60 to $1,221.59.

 

Facebook Inc. (NASDAQ: $FB) Reports After Close Wednesday

Analysts consensus is $1.72 in earnings per share (EPS) and $13.38 billion in revenue* 

What Analysts Will Be Watching

Data Privacy

Social media data privacy and Facebook in particular has been a beacon of controversy with many hoping earnings will allow a change of focus. 

It appears that Facebook Chief Executive Mark Zuckerberg's 10 hours of congressional testimony last quarter or so ago has been forgotten in this FOMO mania we call NASDAQ investing. This will help avoid difficult questions, perhaps but doubtful. During the conference call, expect Zuckerberg to again address questions about the impact of the Cambridge Analytica data scandal, which led to the congressional hearings. 

Advertising Revenue Metrics

Advertising accounts for the bulk of Facebook's revenue, growing 39% year over year during the last quarter. Investors will also be watching  for improvements in ad impressions, which grew 8%. Facebook guided for full-year operating expenses to increase 50% to 60%, earnings-per-share growth could decelerate significantly in Q2. 

Continued growth in the user base for the Facebook flagship social media site is a key metric. $FB's monthly active users (MAUs) grew 13% year over year in its most recent quarter. Investors will be expecting growth at least at this speed.

Stifel Nicolaus’s Scott Devitt in a recent note rose his price target on Facebook to $242 from $202. 

"We are incrementally positive on our mega cap U.S. digital advertising names (FB, GOOGL) in the near term, as reasonable valuation, the potential for multiple expansion, and digital advertising growth momentum continues. As reasonable valuation, the potential for multiple expansion, and digital advertising growth momentum continues." He added that his "agency checks indicate continued momentum."

Instagram

With Instagram now Facebook's fourth platform to exceed 1 billion users while launching IGTV. There is much excitment here, Updated user growth or engagement information are expected to show that adoption of the app is accelerating,

Facebook's future growth may well depend on the success of Instagram, as its own user growth is slowing.

Messaging Apps

Facebook's messaging apps with WhatsApp and Messenger users sending a combined 100 billion messages per day, along with 3 billion minutes of video and voice calls last quarter. Investors are expecting monstrous growth as usual.

  • Shares closed Friday at $210.34 in a 52-week range of $147.80 to $211.50. 

 

Amazon.com Inc. (NASDAQ: $AMZN) Reports After Close Thursday

Analysts consensus is $2.50 in earnings per share (EPS) and $53.38 billion in revenue* 

What Analysts Will Be Watching

Prime Membership 

The release comes after CEO Jeff Bezos revealed for the first time its global Prime membership total in a letter to shareholders last quarter when it went over 100 million members.

Deutsche Bank’s Lloyd Walmsley says he likes the “momentum” in Amazon’s Prime membership service, and Amazon’s recent price increases there.  "Amazon is seen as the alternative to [Alphabet's] (GOOGL) Google and Facebook (FB),” he wrote.

e-Commerce Expansion

Investors will want to hear Amazon's  e-commerce expansion into retail markets like apparel and grocery, in particular Wholefoods.

Piper Jaffrey’s Michael Olson also ranked Amazon as his number one pick heading into earnings with his “Inaugural Faang Rank,” in which he attempts to “pick your favorite child.” Is this just getting a little silly?  Note he has an Overweight rating on all the Faang names.  He wrote of the “massive new addressable markets that Amazon is attacking,” across grocery, pharmaceuticals, gaming and others.”

By the way his Faang ranks are 1. Amazon $AMZN 2. Netflix $NFLX 3. Apple $AAPL 4, Facebook $FB 5. Alphabet $GOOGL.

Amazon Web Sevices (AWS)

The biggie is cloud behemoth Amazon Web Services (AWS) cloud. Microsoft and SAP both reported robust Cloud numbers last week. The big question is that from AWS or new customers?

Deutsche Bank’s Lloyd Walmsley, rates $AMZN his “Top Pick,” and reiterated a Buy rating heading into earnings and raised his price target to $2,200 from $1,800, writing that worries about higher spending are offset by the company’s expanding empire of initiatives.

"We recognize the concerns, however modest, regarding potential for higher near-term investment in fulfillment facilities, last-mile delivery, international markets (particularly another $2B in India), AWS. These concerns are far outweighed by the large and expanding TAM most recently with the acquisition of PillPack as well as the expansions into Brazil and Australia,” his note said.

  • Shares closed Friday at $1,817.75  with a 52-week range is $931.75 to $1,858.88

 

Twitter Inc. (NASDAQ: $TWTR) Reports Before Open Friday

Analysts consensus is $.17 in earnings per share (EPS) and $696.23 million in revenue* 

What Analysts Will Be Watching

Twitter's traffic acquisition costs 

Traffic acquistion costs (TAC) have been rising, even more so after the Facebook scandal and $FB CEO hauled before congress  Alphabet management's response in the conference call on growing regulatory risk and data privacy issues will be closely analysed. 

Revenue Growth

Twitter's first-quarter year-over-year revenue growth rate accelerated to 21%m from a lowly 2% growth in Q4. This saw Twitter swung from a net loss of $62 million in the first quarter of 2017 to a profit of $61 million in the first quarter of 2018. No mean feat in a year where many saw the end of twitter First-quarter EPS and non-GAAP EPS of $0.08 and $0.16, respectively.

Daily Active User Growth

Twitter investors will be revited to $TWTR's daily active user growth. Twitter has seens six consecutive quarters of double-digit year-over-year growth in daily active users, some call it the 'Trump affect'.  However this key metric has decelerated for the last three quarters. Twitter's daily active users increased 10% year over year in Q1, this was down from 14% growth in the third quarter of 2017. 

  • Shares closed Friday at $43.43 with a 52-week range is $15.67 to $47.79

 

 Source: Deutsche Bank, Stiffel, TradersCommunity

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