After the close on Wednesday, there were a lot of earnings that impact the tech stock market. Let’s review a few of the higher profile reports.
Facebook (FB - Free Report) is a Zacks Rank #2 (Buy) and crushed it with their earnings report. The company posted revenue of $9.32B, up 44.8% from the prior year and well ahead of the $9.19B consensus. On the bottom line FB reported $1.32 which was $0.20 better than the consensus estimate.
The numbers that stood out to me were Monthly Active Users (MAU) were over 2B and growing at 17% on an annual basis. Mobile advertising represented 87% of ad revenue, up from 84% last year.
Ad prices were higher in the quarter, as the price per ad was up 24% while the number of ad’s delivered increased 19%.
On the call, management said that they were tightening expense guidance a little, moving the range from 40-50% to 40-45% and at the same time they are looking to expand headcount in the second half of the year.
After initially dropping 4.5%, buyers stepped in and bid the stock up into new record territory. I saw trades in the 173 range in after-hours so look for a new all-time high in the stock today.
This was a huge quarter which FB topping all expectations. Most investors know that the ad load was going to come down as FB wants the user experience to remain as strong as possible. Now we are seeing that pricing power is a reality and down the road monetization in Messenger and WhatsApp will only help things. I am looking for price targets from the big brokerages to top $200.
Netgear (NTGR - Free Report) is a Zacks Rank #3 (Hold) but the company topped estimates on top and on bottom. The company reported revenue of $330M when $324M was expected. Growth on top was just a bit above 6% on an annual basis. On the bottom line, the company reported $0.60 when the consensus estimate was calling for $0.54.
This was the eight straight beat on the bottom line for NTGR and we all know that 8 quarters equals $2. The stock was up 7% in after-hours, but that was below the 10% that was expected by options traders that used a straddle to estimate the size of the move.
I see this as the second straight quarter of revenue growth acceleration. Aggressive growth investors love to see that and will probably take another look at this name due to that fact. The options market was looking for a 10% move, so with the stock only being up 7% in after hours there is still a lot of meat on this bone. This stock is a long way from a new 52 week high, and trades at a paltry 19x trailing earnings. This stock should be rather active today.
PayPal (PYPL - Free Report) is a Zacks Rank #2 (Buy) and has just what I like to see, divergence in the value and growth style scores. I am a believer in the idea of value investors looking for something completely different than growth investors, so a D for value and a B for growth is something I like to see as I am all about growth.
PYPL had an earnings ESP of 3.13%, which is the Zacks Investment Research metric that helps us predict positive earnings surprises. PYPL did just that and topped estimates on top and on bottom. $0.46 was $0.03 better than expected while revenue grew 18% on an annual basis and topped estimates and previously stated guidance.
Importantly, the company guided higher as they now see FY17 coming in at $1.80-$1.84 when the Zacks Consensus Estimate was looking for $1.78. Revenues were also guided ahead of previous expectations.
The beat and raise quarter is just what investors love to see and the payment processing market is still very hot. Usually, I see beat and raise stocks moving up to a Zacks Rank #1 (Strong Buy) and I see no reason why PYPL will not do the same. 44% of payments were made on mobile devices and we can expect that number to increase going forward. The stock was up a little more than 2% in after hours and touched $61. That means a new 52 week high is coming today and investors should expect heavy volume. I am expecting some price targets of $70-$80.
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