Previewing fourth-quarter earnings, Jefferies analyst Brian Fitzgerald is setting confident expectations on the following large-cap internet stocks in his coverage: Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), and Alphabet Inc (NASDAQ:GOOGL). From Facebook’s worldwide mobile ad success to Amazon’s record Prime numbers to Alphabet’s accelerating mobile search advantage, the analyst highlights various reasons to be bullish on these giants.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Brian Fitzgerald is ranked #184 out of 4,372 analysts. Fitzgerald has a 68% success rate and earns 13.2% in his annual returns. When recommending FB, Fitzgerald gains 10.9% in average profits on the stock. When rating AMZN, Fitzgerald realizes 19.7%. When suggesting GOOGL, Fitzgerald yields 10.8%.
Let’s dive in:
Facebook: Ad Dollar Flow and the Instagram X Factor
Facebook is set to deliver fourth-quarter earnings on February 1st after market close, and Fitzgerald previews the social media giant from an increasingly bullish perspective. As such, with anticipation for robust results from mobile ad revenue and the strength of Instagram, the analyst reiterates a Buy rating on shares of FB with a $175 price target, which represents a nearly 35% increase from where the stock is currently trading.
Ahead of the print, the analyst lifts his estimates, as he points to his “expectation FB remains a primary beneficiary as ad dollars flow into mobile ad campaigns on a global basis,” and subsequently models 46% year-over-year growth in revenue with a 36% net margin. The analyst looks for revenue to hit $8.54 billion with GAAP EPS of $l.05, more bullish than the Street’s projection of $8.50 billion in revenue and $1.04 in GAAP EPS.
“FB grew its ad business by $1.6B in the past two quarters (GOOGL did $1.4B). We remain particularly optimistic around Instagram, bottom-funnel ad units like DPAs, and Live video. While expense growth is a potential concern, FB has a history of under-promising and overdelivering in this area. Investors will also focus on commentary around FB’s plans to stabilize ad-load, but we stress the driver of this business is advertisers are following users to where they are engaged and spending time (which is on FB + Insta) — stabilizing ad load doesn’t really change this demand function,” Fitzgerald surmises.
TipRanks analytics exhibit FB as a Strong Buy. Out of 39 analysts polled by TipRanks in the last 3 months, 36 are bullish on Facebook stock and 3 remain sidelined. With a return potential of nearly 20%, the stock’s consensus target price stands at $155.19.
Amazon: Expect a Beat on Back of the Holiday Season
As Amazon prepares to release fourth-quarter earnings on February 2nd after market close, Fitzgerald sees no end in sight for the online and e-commerce leader’s advancing capture of market share. Particularly after a stellar holiday season performance, the analyst reiterates a Buy rating on AMZN with a price target of $950, which represents a just under 16% increase from where the shares last closed.
For the fourth quarter, the analyst calls for net revenue to reach $45.3 billion, GAAP Op Inc to circle $1.21 billion, CSOI to hit $2.07 billion, and GAAP EPS of $1.36. In comparison, the Street’s estimates model $44.7 billion in net revenue, $1.13 billion in GAAP Op Inc, $1.96 billion in CSOI, and $1.38 in GAAP EPS.
Ultimately, “We expect a beat qtr on better-than-expected rev growth (~180bps ahead of cons) and continuing market share gains. We believe AMZN had a very strong holiday season with record number of people trying out Prime – one of the Co’s key rev growth drivers. Data suggest FBA had a strong qtr too. On margins, we don’t expect any negative surprises despite the recent step-up in investment (new fulfillment capacity and digital content),” Fitzgerald contends.
TipRanks analytics demonstrate AMZN as a Strong Buy. Based on 32 analysts polled by TipRanks in the last 3 months, 30 rate a Buy on AMZN stock while 2 maintain a Hold. The 12-month average price target stands at $951.37, marking a nearly 16% upside from where the stock is currently trading.
Alphabet: Mobile Search to Score #1 Growth Driver for 6th Consecutive Quarter
Alphabet is squaring soon to report its fourth-quarter print tomorrow, January 26th after market close. From Fitzgerald’s stance, “Alphabet remains a Franchise Pick ahead of 4Q earnings,” as he continues to expect impressive growth thanks to the tech giant’s triple threat: mobile search, YouTube, as well as programmatic advertising.
Therefore, the analyst reiterates a Buy rating on shares of GOOGL with a $1,000 price target, which represents a close to 17% increase from current levels.
Overall, “Expect mobile search to again be the #1 growth driver. Mobile search has been the #1 growth driver for five straight quarters, making it the primary reason behind the accelerating, impressive growth at Google Web Sites. PLAs continue to do well through the Holiday season. We continue to believe online video is the biggest online ad growth driver and YouTube is the premier vehicle to play that trend. We model $21.9B of net rev vs. Street $20.5B and Op. EPS of $10.67 vs. $9.64. Trading at 15x our 2017 EPS estimate (ex-cash), we believe the valuation is compelling given GOOGL’s best in breed search product, strong mobile business, and intriguing hardware potential,” Fitzgerald concludes, believing that not only is online ad growth the largest driving asset Alphabet has in its pocket, but “YouTube is the premier vehicle to play that trend.”
TipRanks analytics indicate GOOGL as a Strong Buy. Out of 27 analysts polled by TipRanks in the last 3 months, 25 are bullish on Alphabet stock and 2 remain sidelined. With a return potential of 15%, the stock’s consensus target price stands at $976.96.
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