Quarterly reports are underway, and investors are watching closely for the lowdown on some of the market’s biggest players. It’s not unusual to find rapid shifts in a stock’s share price after earnings are reported, especially if the company says something unexpected – an earnings beat, or a revenue miss, or a revision to forward guidance will all have an impact on investors’ perceptions.
So, we’ve opened up TipRanks’ Earnings Calendar, a nifty tool for sorting through the earnings schedule, to find three popular stocks, all with Strong Buy consensus ratings, that are reporting earnings today. We’ll report on their current status; it will be up to you to watch for the earnings releases after markets close.
Up first is Twilio, one of Silicon Valley’s cloud server companies. Specifically, Twilio offers a cloud communications platform on the popular software-as-a-service model. Twilio’s cloud software allows customers telecommunications access through the computer server. Customers can use Twilio to send or receive telephone calls, text messages, video, or chat, and the platform has security systems – user verification and authentication – built in.
Twilio brings in upwards of $650 million in annual revenue, but like many cutting-edge tech companies it frequently operates with an earnings loss. However, in Q2, reported at the end of July, the company showed a non-GAAP earning of 3 cents per share after revenues jumped 86% year-over-year. Looking ahead to Q3, the forecast is for positive EPS of 1 cent and a 70% annual revenue gain to $287.9 million.
Twilio’s earnings curve has been on an upward trajectory in recent years. In the last 8 quarters, TWLO has beaten the revenue forecast every time, and the EPS forecast six times. Both earnings and revenues have been revised upwards in multiple times in the last three months.
Wall Street’s analysts are impressed with TWLO. Writing from Piper Jaffray, Brent Bracelin, ranked number 9 overall in TipRanks’ analyst database, gives the stock a solid Buy rating with a $141 price target, suggesting over 30% upside. (To watch Bracelin’s track record, click here)
Bracelin noted, “After declining 29% from the 52-week highs, the stock’s risk/reward appears favorable for a profitable share gainer with a $1B-plus run-rate in a secularly growing category within a $66B total addressable market.” In other words, this is a stock that is primed for explosive growth.
Monness analyst Brian White highlights some different numbers in his note on Twilio. He says, “We believe Twilio will at least meet our 3Q:19 revenue estimate of $288.5 million (up 71%) and our EPS forecast of $0.02… We are projecting 3Q:19 base revenue of $278 million (up 80% YoY) and variable revenue of $10.4 million… We expect Twilio to add 7,500-8,000 customers in 3Q:19, reaching a total of well over 169,000 customer accounts (vs. 161,869 in 2Q:19).” White’s price target is highly bullish, at $175, indicating confidence in a 66% upside potential.
Wall Street’s confidence backing this cloud communications app maker is strong, with TipRanks analytics showcasing TWLO as a Strong Buy. Based on 9 analysts polled in the last three months, eight are bullish on Twilio, while only one remains sidelined. The 12-month average price target stands at $149.33, marking a 40% upside from where the stock is currently trading. (See Twilio stock analysis on TipRanks)
Etsy Inc (ETSY)
Etsy is the popular e-commerce website catering to the “craft” market. The company’s registered merchants lean heavily toward purveyors of craft supplies, handmade items, and vintage goods. The merchandise is varied, including jewelry, handbags, clothing, art, and toys. In a sense, Etsy brings the world of craft fairs online
It’s a successful online craft fair, with more than 60 million individual items listed by more than 2 million merchants and visited by over 39 million buyers. The company brought in more than $600 million in revenue last year, derived from listing and transaction fees charged to sellers, services provided to sellers, and miscellaneous fees from third parties.
Looking forward, analysts are predicting 12 cents EPS from Etsy, which would be a slight decline from last year’s Q3 EPS of 15 cents. Among possible headwinds for Etsy is a recent trend among several states to collect sales taxes on out-of-state merchants selling to in-state residents. Nine states added such regulations in 2019, including California which alone counts for 12% of the US population.
While a shift toward an unfavorable tax regime may slow down Etsy, the Street doesn’t not expect it to cause serious harm. Needham analyst Rick Patel writes, “We expect benefits from Etsy Ads, but believe it’ll take time to ramp. Despite our view for a bumpy 3Q, we remain bullish on Etsy’s LT opportunity to drive GMS growth (better search results, helped by Google Cloud), improve its take rate (conversion for seller services), and expand margins.” Patel gives ETSY a $75 price target, suggesting an upside of 38%. (To watch Patel’s track record, click here)
Also bullish is 5-star analyst Darren Aftahi of Roth Capital. He believes that the headwinds are baked into ETSY shares now, and writes, “We look for 3Q results slightly below consensus… While growth is likely to decelerate at a greater rate amid tougher comps, we believe ETSY can remain a ~20%+ topline growth story through FY20, as marketing initiatives and platform updates continue to filter through as growth catalysts.” His $76 price target implies a 39% upside potential.
This ‘Strong Buy’ stock is no Wall Street secret. After all, in just three months, the stock has attracted 9 “buy” ratings from best-performing analysts. With a return potential of nearly 40%, the stock’s consensus price target stands at $74. In other words, optimism backs this e-commerce story. (See Etsy stock analysis on TipRanks)
Does Facebook really need an introduction? Mark Zuckerberg’s giant tech company has become the 800-pound gorilla in the world of social media, dominating its industry, setting trends, and generally changing the way people interact, with each other and with the interwebs.
The company derives its income from advertising sales, which has led to its voracious appetite for data collection. Targeted ads and selective reach are the lifeblood of the company, and their success has led directly to its $55 billion-plus in annual revenues. When the company reports earnings later today, the analysts are expecting an EPS of $1.91, or an 8.5% increase from the year-ago quarter.
Facebook needs to meet that forecast. The company missed expectations on the last two quarters, badly, due in part to reputational problems and in part to a record-breaking $5 billion fine from the Federal Trade Commission for violations consumer privacy rights. It was a testament to the company’s strength that it had the cash available to simply pay up, albeit at a serious cost to reported EPS.
Writing from Credit Suisse, Stephen Ju raised his price target on FB by $10, to $260, and said in his extended comments, “…our primary focus is a return to FCF growth in 2020… We maintain our Outperform rating based on the following: potential better-than-expected ad revenue growth on product innovation (Instagram Checkout, Search in Marketplaces, etc.), Street models are too conservative and underestimate the long-term monetization potential of other billion-user properties like Messenger and WhatsApp, accelerating free cash flow growth in 2020.” Ju’s new price target suggests an upside of 37%.
Michael Pachter, of Wedbush, sees a 39% upside to FB, setting a $265 price target. As the bottom line, he says simply, “We expect Facebook to continue its rapid growth overseas and to increase monetization of under-penetrated Instagram, WhatsApp, and Messenger.”
Facebook’s Strong Buy consensus rating is supported by 14 Buy ratings and 4 Holds. The stock sells for $189, and the average price target of $235 suggests room for a 24% upside. (See Facebook stock analysis on TipRanks)