Second quarter earnings are up and away with banking stocks performing
“better than feared”. So there is plenty of optimism on Wall Street as technology stocks get ready to report.
While things don’t look all that exciting for technology, with total earnings expected to be down 6.2% on 2.7% higher revenues, there are sure to be some bright spots. More so since since Q2 earnings excluding Apple should not decline more than 0.6%, mainly the result of global growth concerns, a strengthening dollar and volatility. Brexit is unlikely to do any damage right now, but related concerns do impact share prices.
Of course, all sectors aren’t the same, and ecommerce, which depends on the proliferation of online business, is definitely poised to grow. As computing becomes more mobile, affordable and more broadly adopted across the world, as consumers gain confidence in transacting online and technology companies rise to the occasion with constantly evolving and increasingly secure solutions, the sector looks poised for long-term growth.
However, trading stocks going into earnings is risky business at any time because even a small miss is a negative surprise and share prices can react strongly. But Zacks proprietary methodology in the form of its
Earnings Expected Surprise Prediction (ESP) model together with the Zacks Rank helps reduce risk. So here’s what Zacks says about a few stocks from the ecommerce sector that will report results over the next few weeks.
Keep in mind the golden rule: Zacks Buy-ranked (#1 and #2) and Hold-ranked (#3) stocks when combined with a positive ESP greatly increases chances of a positive surprise, while in other cases, surprise prediction becomes difficult. Sell-rated stocks are of course to be avoided. With that, let’s jump to the stocks-
eBay Inc. ( EBAY - Free Report)
The company has a Zacks Rank #2 and earnings ESP of -2.78, meaning surprise prediction is difficult. It does have a good track record however (positive surprises in each of the last four quarters at an average rate of 6.70%). The Zacks Consensus Estimate has edged down a penny since the company last reported. For further details see
What's in Store for eBay Inc. ( EBAY - Free Report) This Earnings Season?
Amazon Inc. ( AMZN - Free Report)
In Amazon’s case, the company’s Zacks Rank #2 and earnings ESP 37.72 are in combination a good indicator of a positive surprise this quarter. While Amazon beat estimates in three of the last four quarters, its average surprise is a whopping 133.55%. Amazon is fueled by not only the ecommerce business, in which it is the reigning champion, but also the infrastructure-as-a-service (IaaS) business, another fast-growing area where it has a first mover advantage. This is another reason for optimism.
Expedia Inc ( EXPE - Free Report)
Online travel agent (OTA) Expedia has a good chance of beating estimates this quarter on the basis of its Zacks Rank #3 and Earnings ESP of 17.07%. The company doesn’t have a very good history however, having missed estimates in three of the last four quarters. The encouraging thing is that it beat estimates in the last quarter by 46.87% so the trend could be reversing. Moreover, estimates for the current quarter have dropped significantly since the company last reported, so topping them should be easier.
A much smaller and lesser known peer is online automotive commerce company Autobytel, which has a Zacks Rank #3 and Earnings ESP of 0.00%. So according to Zacks, surprise prediction for Autobytel is difficult. The company had a massive earnings miss in the last quarter, but positive surprises in each of the three quarters preceding that.
Blue Nile Inc
The online diamond and fine jewelry seller Blue Nile is similar to Autobytel in that its Zacks Rank is #3 and Earnings ESP 0.00%. It’s also topped estimates in only three of the last four quarters.
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