In an earnings preview of Facebook Inc (NASDAQ:FB) and quarterly reviews of Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOGL), analysts from Wedbush and Cantor are chiming in with confident forecasts of these popular internet leaders. How does Facebook’s momentum measure up in the “rest of the world?” Why does Wedbush remain bullish on Amazon amid weak earnings and guidance that failed to impress? What is one of Wall Street’s top analysts saying about Alphabet “in the wake of another strong quarter?” Let’s dive in:
Ahead of Facebook’s forthcoming third-quarter earnings, to be delivered November 2nd, Michael Pachter at Wedbush is looking for another solid beat on back of sustained mobile ad momentum. As such, the analyst reiterates an Outperform rating on shares of FB with a $162 price target, which represents a 24% increase from where the stock is currently trading.
Pachter projects revenue to reach $7,190 million and EPS to hit $1.02, ahead of the Street’s estimates of $6,918 million in revenue and $0.97 in EPS. Moreover, the analyst anticipates a 14% quarter-over-quarter surge forward in mobile ad revenue, modeling $733 million, which is quite a jump from this quarter last year’s $445 million. The analyst believes monthly active users (MAUs) will see 14% year-over-year and 3% quarter-over-quarter rises, with expectations for a 17% year-over-year and 3% quarter-over-quarter global mobile MAUs expansion.
Pachter asserts, “Facebook has a virtually insurmountable competitive advantage with over 1.7 billion monthly active users and over 1.1 billion daily active users, and has succeeded in convincing 3 million advertisers that its captive audience will yield returns on advertising investment. We expect Facebook to continue its rapid growth overseas, and expect it to expand monetization of under-penetrated Instagram, WhatsApp and Messenger assets over the coming years.”
Ultimately, “Investments in new initiatives position the company for long term growth, and we believe that these initiatives will drive growth over the next decade. In summary, we believe Facebook is a great company, period,” Pachter surmises.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Pachter is ranked #3,800 out of 4,188 analysts. Pachter has a 47% success rate and faces a loss of 3.5% in his annual returns. However, when recommending FB, Pachter earns 40.8% in average profits on the stock.
TipRanks analytics exhibit FB as a Strong Buy. Based on 36 analysts polled in the last 3 months 31 rate a Buy on FB, while 5 maintain a Hold. The 12-month average price target stands at $156.60, marking a nearly 21% upside from where the shares last closed.
Amazon shares are falling nearly 6% after the online auction and e-commerce leader released earnings and guidance that underwhelmed investors. Nonetheless, Pachter remains positive, affirming the company continues to deliver palpable results when it comes to “substantial earnings growth,” and as such, he remains undeterred by “disappointing” earnings and guidance.
Therefore, even while reducing his outlook, the analyst maintains that “Amazon clearly has the scale to deliver whatever profits it chooses” and reiterates an Outperform rating on AMZN with a price target of $900, which represents a 16% increase from current levels.
AMZN posted revenue of $32.71 billion, just under Pachter’s projection of $33.1 billion, even slightly above the Street’s estimate of $32.69 billion, and within the guidance range of $31.0 to $33.5 billion. The real miss lies in the company’s EPS, a result of GAAP EPS of $0.52 significantly under Pachter’s forecast of $1.15 and the Street’s $0.78. Operating income was $575 million, compared to Pachter’s $891 million estimate and within guidance of $50 to $650 million, on back of $330 million in video content spending.
In reaction to earnings and considering investments moving forward, Pachter has reduced his EPS estimate for the financial year of 2016 from $6.00 to $5.06, and operating income from $1.45 billion to $1.26 billion. AMZN indicates fourth-quarter guidance for operating income of $0 to $1.25 billion. Additionaly, Pachter reduces his EPS projection for the financial year of 2017 from $9.00 to $7.42, but bolsters his 2017 revenue estimate from $164 billion to $170 billion.
The analyst believes, “While the outlook for FY:16 has been tempered, the company’s outsized earnings beats in 1H:16 and still meaningful y-o-y EPS growth in Q3 are a signal that Amazon remains focused on growing profits despite the quarterly variability. Amazon Web Services’ (‘AWS’) gross and operating margins have grown as revenues continue to ramp, the mix of Fulfillment by Amazon (‘FBA’) and AWS is likely to drive further gross margin expansion, and Prime membership growth has continued unabated.”
Overall, “We expect the monthly Prime subscription offering to bolster the number of Prime customers seasonally, particularly around the holidays, and although gross margin expansion is being offset by its increased video content spending, the trajectory is clear and investment strategy purposeful,” Pachter contends.
When recommending AMZN, Pachter yields 33.7% in average profits on the stock.
TipRanks analytics demonstrate AMZN as a Strong Buy. Based on 35 analysts polled in the last 3 months, 34 rate a Buy on AMZN, while 1 maintains a Hold. The consensus price target stands at $949.21, marking a nearly 16% upside from where the stock is currently trading.
After Alphabet delivered another stellar quarter yesterday evening, top analyst Youssef Squali at Cantor takes notice and remains bullish on the Google-parent company. On back of strong financial results and noting that fundamental engagement metrics are “very healthy,” the analyst reiterates a Buy rating on shares of GOOGL while raising the price target from $1,000 to $1,040, which represents just under a 26% increase from where the stock is currently trading.
Alphabet delivered revenue 1.6% and NEPS 5.1% above consensus. Gross renue of $22,451 million, net revenue of $18,269 million, adjusted EBITDA of $9,223 million, and NEPS of $9.06 each went on to outclass the Street’s respective expectations of $22,030 million, $17,990 million, $8,957 million, and $8.62. EBITDA this third quarter saw a 24.8% year-over-year increase. Aggregate paid clicks rose to a “robust” 33% year-over-year surge, compared to the Street’s estimate of 26.5%, although CPCs fell 11% year-over-year, compared to consensus expectations of -7.9%.
The analyst adds, “Notably, gross revenue growth of +23% Y/Y (ex F/X) is consistent with +25%/+23% seen in 1Q16/2Q16, and op. expense efficiency drove an impressive bottom line.”
“As highlighted in our preview, Mobile search, Youtube and programmatic were called out as key drivers for this above-industry performance. With mobile search and display still having a long runway ahead, a level of product innovation not seen in years and a cash-rich balance sheet, we believe Alphabet remains one of the key beneficiaries of growth in the digital economy. Disciplined cost allocation across core Google and Other Bets, sound capital allocation and compelling valuation keep us positive,” Squali concludes.
Youssef Squali has a very good TipRanks score with a 71% success rate and he stands at #4 out of 4,188 on the analyst leaderboard. Squali realizes 13.2% in his annual returns. When rating GOOGL, Squali gains 12.9% in average profits on the stock.
TipRanks analytics indicate GOOGL as a Strong Buy. Based on 33 analysts polled in the last 3 months, 32 rate a Buy on GOOGL, while 1 issues a Sell. The 12-month price target stands at $952.86, marking a nearly 17% upside from where the shares last closed.