3Q Tech Earnings Premiere: What Should Investors Expect from Amazon.com, Inc. (AMZN), Twitter Inc (TWTR) and Alphabet Inc (GOOGL)?

Daniel Ives: AMZN cream of the tech crop, TWTR's short-term uncertain, GOOGL stock poised to rise.


GBH Insights Daniel Ives is setting largely high expectations on tech players ahead of the fresh new round of earnings after encouraging field checks spanning enterprise and consumer technology names alike. Which moguls of the tech-verse does Ives peg as top of the leaderboard and bound to be outperformers when it comes to Amazon.com, Inc. (NASDAQ:AMZN), Twitter Inc (NYSE:TWTR), and Alphabet Inc (NASDAQ:GOOGL)? Which one is lagging behind the rest of the giants in the short-term picture, leaving Ives to play a waiting game on forthcoming growth prospects?

Let’s take a closer look:

Amazon Remains a Tech Favorite

Recently, there has been a cloud-heavy trend evolution at play, which Ives believes has set Amazon at a towering advantage in the tech field. This should especially show in the online auction and e-commerce leader’s third quarter earnings performance due this Thursday evening, with Ives anticipating a meaningful tailwind that should help the company glide through the close of the year and well into the next.

As such, in a resounding bullish quarterly preview, the analyst reiterates a Highly Attractive rating on AMZN stock while suggesting a valuation target of $1,185, which implies a close to 23% increase from where the shares last closed. (To watch Ives’ track record, click here):

Keep in mind, this is a quarter that saw the e-commerce pacesetter take over Whole Foods, which Ives anticipates will captivate “all eyes” on the outcome with “laser focused” attention in the interim. As more details come up about the Whole Foods deal, the strength of Amazon Web Services (AWS), and what is in store for the margin guide, the analyst projects these could all “be a swing factor on the stock in the near-term.”

As Amazon rises like a phoenix from its “major consumer/enterprise transformation,” Ives recognizes an earnings powerhouse that has richly rewarding potential for a long-term growth trajectory. Ives is looking for strength “across the board” come Thursday’s print on back of a robust North America retail channel coupled with AWS.

“While near-term there is a major focus on significant investments around fulfillment, Prime, Echo/Alexa, AWS, and integrating the Whole Foods acquisition into the fold which could depress margins over the next few quarters, we believe this is ‘near term pain for long-term gain’ as Amazon has a unique window of opportunity to double down on its consumer and enterprise initiatives heading into 2018 and drive significant growth/cash flow for the coming years as Bezos & Co. further diversifies the Amazon franchise globally,” highlights the analyst.

Ives concludes with enthusiasm for this tech darling: “In a nutshell, Amazon remains one of our favorite secular tech growth stories into FY18 as our GBH Consumer surveys/analysis support the Amazon consumer growth thesis, coupled by cloud strength on the AWS segment which is still in the early innings of playing out among enterprises globally.”

How does Ives’ bullish bet measure up against the word of the Street? Quite on point, it seems, considering TipRanks analytics exhibit AMZN as a Strong Buy. Out of 31 analysts polled by TipRanks in the last 3 months, 29 are bullish on Amazon stock while 2 remain sidelined. With a return potential of 24%, the stock’s consensus target price stands at $1,201.58.

Twitter Is a “Wait and See” Stock

Twitter is the tech stock in the most trouble from Ives’ standing, as the social media platform grunts the force of continuous headwinds when it comes to advertising gain headaches and trends for monthly active users (MAUs) down the line. When it comes to the other tech players on the Street, Twitter is not one that elicits an unblinking vote of confidence these days, and Ives believes most investors need to see some sign of life in third quarter earnings.

Expecting Twitter’s comeback will not be making a fight any time in the near future, analyst for now watches and waits from the sidelines for better MAU and advertising performance, maintaining an In Line rating on TWTR stock with a $19 valuation target, which implies a 9% increase from where the shares last closed.

Ives asserts: “With Twitter still facing major headwinds around MAU metrics, declining revenue, and ad pricing erosion there is clear uncertainty around the story in the near-term. While there are a number of organic initiatives to potentially grow its mobile advertising trajectory the jury is still out on the timing/success of the potential Twitter turnaround story. Given the secular growth in the industry vs. Twitter’s advertising decline, there are clear concerns around the company with the Street looking for any signs of a turnaround this quarter. That said, we believe improvement on the MAU and ad front are still a few quarters further out and speaks to our ‘wait and see’ thesis on the name.”

Most of Wall Street is growing impatient with this tech player’s stumbles, as TipRanks analytics demonstrate TWTR as a Sell. Based on 19 analysts polled by TipRanks in the last 3 months, 12 rate a Hold on Twitter stock while 7 maintain a Sell. The 12-month average price target stands at $15.39, marking an 11% downside from where the stock is currently trading.

Alphabet Is Ready to Disprove the Bears

Alphabet has something to prove this quarter, Ives writes, after the last few months have resulted in some “mixed” enthusiasm for the tech titan. Third quarter results are set to impress investors, as Ives believes both the print and guide for the fourth quarter will hike shares on the heels of robust search trends and ad gains the analyst expects to last through the close of 2017.

Between “healthy” ad click and impressions activity coupled with marked strides in YouTube, the analyst wagers, “Alphabet looking to prove naysayers wrong in 3Q.”

Therefore, in high anticipation for this Thursday after the bell tolls for stellar third quarter results, the analyst reiterates an Attractive rating on GOOGL stock with a $1,060 valuation target, which represents a close to 8% increase from where the stock is currently trading.

Ultimately, “Our mobile search analysis/tracker this quarter continue to show strength from Google around its ‘bread and butter’ search business, which should be a catalyst for at least in line to modestly better than expected earnings in 3Q. We are also seeing accelerating ad momentum from search and YouTube again this quarter and heading into year-end. TAC trends will be a focus this quarter, as mobile advertising impression success remains a key going forward for Google in this very competitive land grab market opportunity. Overall, while shares have been range-bound over the past few months (since 2Q earnings), we believe solid 3Q earnings and guidance could be a positive catalyst for shares into year-end and holiday season,” Ives surmises.

Alphabet is a Wall Street favorite, earning one of the best analyst consensus ratings in the market. TipRanks analytics exhibit GOOGL as a Strong Buy. Out of 30 analysts polled by TipRanks in the last 3 months, 27 are bullish on Alphabet stock while 3 maintain a Hold. With a return potential of 12%, the stock’s consensus target price stands at $1,108.59.