Back to top

Analyst Blog

Last week, big tech traded more or less in line with the market, some exceptions being Facebook (FB - Analyst Report) pulling well ahead and Microsoft (MSFT - Analyst Report) trailing.

Facebook: What’s Not to “Like”?

A Facebook “like” attained the status of free speech as protected by the First Amendment to the Constitution when an appeals court overturned a decision of a lower court, which had ruled that a “like” did not constitute speech in the first place. The case was initiated by employees in a Virginia sheriff’s department who lost their jobs as a result of “liking” the sheriff’s opponent’s campaign page. They filed a suit asking to be reinstated.

On the face of it, the ruling makes sense, but exposes the vulnerability of people who connect on social media platforms.

On the heels of the judgment, a Cowen analyst upgraded the shares based on lofty revenue growth expectations, sending FB to its all-time high. The company has been exceptionally successful generating advertising dollars on the mobile platform, not only because of the high usage but also the high ROI for advertisers.  

Microsoft: How Deep the Surface?

Last week, Microsoft hosted its analyst day, but did not provide much granularity on its future growth and prospects. Management said that new segment details would be available this week and guidance would be available when it reported results in October. The new Surface will launch later today.

One thing is clear though: Microsoft is going all out to become a “devices and services” company. What this basically means is huge investments, such as the Nokia (NOK - Analyst Report) handset business, hardware development efforts to provide initial business mass in the mobile computing segment, and additional data centers and servers to support its cloud services business.

Microsoft will also continue to invest in the desktop in the hopes that it will return to growth at some point in the future. As a result, Microsoft has increased its capex target to $6.5 billion.

One encouraging sign was Microsoft’s willingness to take Office to iOS and Android platforms and the company said it was working on a better touch experience. Office 365 adoption rates are high and some Google defectors have returned to it. Microsoft is also expected to earn higher profits from the subscription model.

In the near term, revenues will be sluggish, with margins and cash flow under pressure. In the long run, the company hopes to make the cloud, mobility, big data and social technology its pillars of success.

Yahoo Gains Android Executive

The Android open source project tech lead, Jean-Baptiste Queru is joining Yahoo (YHOO - Analyst Report) as a senior principal engineer on its mobile team. Queru has made public his dissatisfaction with Google’s hardware partners and had earlier announced his intention to leave the company. Early this year, Android developer Andy Rubin stepped down as the head of Android, making way for Sundar Pichai, who had headed Chrome until then.

Although the Android OS has helped get Google on the majority of mobile devices, it has resulted in multiple lawsuits from companies like Microsoft and Oracle (ORCL - Analyst Report), wasting a lot of time and money. The company has also had problems working with hardware partners, some of which (like Samsung), ignored Google’s advice on design issues and also started demanding a higher share of its revenue.

The Chrome browser has been growing in popularity on both Android and iOS devices. Additionally, the Chrome OS, which runs chromebooks, have started creeping up on the low end of the market. Even chromecast, which has been stripped of Android code, became a sold-out item at retailers. It’s possible that Google is gradually distancing itself from Android.

 

Company

Last Week

Last  6 Months

AAPL

+1.82%

+3.24%

FB

+6.87%

+84.57%

YHOO

+3.67%

+32.98%

GOOG

+0.98%

+11.45%

MSFT

-2.15%

+16.07%

INTC

+0.55%

+11.44%

CSCO

+0.45%

+18.12%

 

Other stories you may have missed:

Massive Job Cuts at Blackberry (BBRY - Analyst Report): The company has announced that it will reduce its headcount by 4,500 or 40% after efforts to turn around the company failed. As a result, it now expects to report losses of $950-$995 million as it continues to look for a buyer of the company.

Will Apple (AAPL - Analyst Report)) Destroy Pandora? Internet radio service Pandora (P - Snapshot Report) could be in for a shock. The company has been doing very well this year and just increased its secondary offering by 30%. However, with iTunes Radio launching last week and available for free with iOS7, there is likely to be a drain of its 72 million users.

Google acquires Bump

iPhone Subsidy Cut: This year, China Telecom reduced its subsidy on iPhones, but die-hard fans can get the iPhones free for significantly longer data plans. iPhone sales were strong in China, indicating that many die-hard fans still exist.

iPhone Has Great Launch Weekend:  Apple said it sold 9 million iPhone 5s and and 5c phones in the launch weekend, with sales of the 5s (the higher-end model) exceeding expectations. This compares with 5 million pieces sold last year in the launch weekend. The 9 million figure includes China (unlike last year).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%