It’s a big week for technology earnings as Apple Inc. (NASDAQ:AAPL), Twitter Inc (NYSE:TWTR), and LinkedIn Corp (NYSE:LNKD) are all poised to release reports this week. Analysts from FBR Capital and Brean Capital weigh in on these tech giants ahead of earnings and highlight which factors will be at play.
Today after the closing bell, Apple will report its results for Q415. Ahead of the announcement, Daniel Ives from FBR Capital weighed in on the stock, maintaining an Outperform rating without indicating a price target.
For Q4, Ives expects revenues of $50.9 billion, EPS of $1.89 and iPhone unit sales of 49 million. These estimates are relatively in-line with the analyst consensus of $51.1 billion in revenue and $1.88 EPS. Ives mentions some concerns, noting, “Apple has become a battleground stock given the confluence of China headwinds, worries about 6s growth prospects, and uninspiring June results.”
The analyst says the Street will be focusing on iPhone guidance for the December quarter. In his opinion, approximately 75 million unit sales is reasonable. Such a guidance will help Tim Cook in proving the iPhone 6s skeptics wrong, because anything below 70 million will be considered bearish. Ives will also be looking at the general outlook for iPhone sales in China. Two factors to look for in China are the macroeconomic situtation and the growing competition from key players like Xiaomi and Huawei.
Going into FY16, Ives believes Apple’s 6s phones are on firm footing. Ives is optimistic for several reasons, including the fact that to-date, less than 30% of iPhone owners have upgraded their iPhones. Furthermore, the innovative features in the 6s model like ForceTouch are driving sales.
Ives says the company also has a “massive greenfield opportunity” in the high-end smartphone market and strong growth opportunities in streaming TV, wearables, software/services and App ecosystem. Apart from iPhones, Ives says the Street will also be looking at iPad sales, details of unit sales of the Apple Watch, and the growth trajectory for Apple Music.
Ives has a 55% overall success rate recommending stocks with an average return of +5% per recommendation. According to TipRanks, out of 36 analysts who have recently rated TipRanks’ stock, 27 have rated it as a Buy, 8 have rated it as Hold, and 1 has rated it as Sell. The average 12-month price target for the stock is $146.41, an upside of 26% over current levels.
This evening, Twitter will release its 3Q15 earnings. Two weeks ago, Twitter preannounced that its revenue and adjusted profit for 3Q15 would be “at or above” previous forecasts. Brean Capital’s Sarah Hindlian weighed in on the stock., reiterating a Buy rating with a $47 price target.
The analyst explains, “We are maintaining modest expectations for MAU’s (monthly active users) and continue to be patient with the stock due to the current transitionary period.” Twitter did not comment on MAU trends in its preannouncement. However, Hindlian estimates 318 million MAUs, or 2 million sequential net adds. She adds, “We expect new CEO Jack Dorsey to offer a conservative outlook that is beatable for Q4’15 in order to establish his early track record. However, we ultimately expect a strong Q4’15…”
Hindlian expects Twitter to report quarterly revenues of $560.9 million, which is slightly above consensus estimates of $559.4 million and Twitter’s guidance of $545 to $560 million. She anticipates EPS of $0.10, much higher the consensus estimate of $0.05. In her report, the analyst touches on the recent lay-off of approximately 8% of workforce and about “Moments,” which is Twitter’s new multimedia effort centered on real-world events. The company expects the restructuring will impact its Q4’15 earnings by $5-15 million ($0.01-0.02 per share) and impact cash expenses by $10-20 million.
Ultimately, Hindlian is bullish on the social media company due to its efforts to ramp new products such as Moments; efforts to improve user experience; and potential monetization of substantial unregistered user base to help improve ARPUs.
Sarah Hindlian has an 84% overall success rate recommending stocks with a +7.9% average return per rating. According to the 32 analysts polled by TipRanks, 17 analysts have given a Buy rating on Twitter, 13 have given a Hold rating, and only 2 analysts have given a Sell on the stock. The average 12-month price target for the stock is $40.54, marking a nearly 30% potential upside from last closing price.
LinkedIn will report its third quarter earnings on Thursday after market close. Ahead of the earnings announcement, Sarah Hindlian from Brean Capital weighed in on the stock, reiterating a Hold rating without a specific price target.
For Q315, Hindlian expects LinkedIn to “put up avg. historical upside to cons. figures” of approximately 3.5% as it has over the past 14 quarters and 4.7% over the last quarter. This means revenues of $782 million as opposed to consensus of $756 million. However, Hindlian cautions that a lot of this upside could be from the acquisition of Lynda.com.
Looking at the results of the core talent solutions segment, which makes up 63% of LinkedIn’s revenues, Hindlian expects a slight reacceleration (after taking Lynda.com into account) when compared to the Q215 report of $478 million in revenues. However, excluding Lynda.com, talent solutions will see a deceleration with year-over-year growth of 28% as opposed to 32% year-over-year growth in the prior quarter and 52% year-over-year growth in FY14.
Hindlian also notes that LinkedIn no longer exists in a competition-free environment as new competitors such as Glassdoor and AngelList are looking increasingly attractive to millennials. Hindlian highlights, “Our analysis of the Forbes 2000 shows a whopping 74% penetration” which means any growth will now have to occur in the mid-market, which is price sensitive.
According to Hindlian, premium subscription revenues are expected at $140 million, a year-over-year increase of 22%. Marketing solutions revenues are expected at $146 million, a year-over-year increase of 34% as opposed to a year-over-year increase of 32% in the prior quarter.
Hindlian has only given bearish and neutral ratings for LinkedIn, earning a 100% success rate recommending the stock with a +12.7% average return per LNKD rating. Out of 19 analysts polled by TipRanks who have recently rated LinkedIn’s stock, 14 have rated it as Buy and 5 have rated it as Hold; none of the analysts are bearish on the stock. The average consensus price target for the stock is $259.19, an upside of 23% over current levels.