Company / Analytics

Analytics, 30 October 2020

Big Tech earning report: Alphabet, Facebook, Apple

Big tech companies have proven again that they have herd immunity against the pandemic. This week’s earnings reports from Google-parent Alphabet, Amazon, Apple, Facebook, Microsoft and Twitter showed that the companies are thriving despite economic woes from the pandemic. The earnings came just a day after the CEOs of Facebook, Google and Twitter defended themselves and their companies before the Senate Commerce Committee over claims they have too much power and stifle conservative opinion. Read our summary on the stocks and analyst recommendations.

Alphabet

Google parent company Alphabet returned to robust financial growth during the reporting period, after its first-ever quarterly decline during the three months between April and June, when advertisers pulled back amid the economic slowdown stemming from the COVID-19 pandemic.

Revenue and earnings.

The online search and advertising company’s revenue for the July-September period rose 14% from the same time last year to $46.2 billion. Profits soared 59% to $11.2 billion, or $16.40 per share.

How did the stock move?

Both revenue and profits surpassed analysts’ estimates, lifting Alphabet’s class C shares more than 7% in Thursday extended trading, following a 3.3% rise in the regular session to close at $1,567.24 after the earnings call. Alphabet shares are up 18% for the year, compared with a 3% gain on the S&P 500 index and a 25% surge in the tech-heavy Nasdaq Composite Index.

Alphabet’s rebound, as usual, was propelled by the ad spending that has established Google as one of the world’s most proficient moneymaking machines. The U.S. Justice Department is now coming after that financial might, filing a lawsuit that accuses the company of abusing its dominance of search to boost its profits and stifle competition.

What analysts are saying?

The current consensus among 43 polled investment analysts is to Buy stock in Alphabet Inc. This rating has held steady since October, when it was unchanged from a Buy rating, according to CNN Money. The 40 analysts offering 12-month price forecasts for Alphabet Inc have a median target of 1,837.50, with a high estimate of 2,250.00 and a low estimate of 1,237.00. The median estimate represents a +17.65% increase from the last price of 1,561.78.

Amazon

Amazon continued to benefit from shopping trends during the pandemic, reporting record profit and revenue during the third quarter.

Revenue and earnings.

The company reported a $6.3 billion profit in the three months ending September 30, nearly triple that of the previous-year period. Earnings per share came to $12.37, about $5 more than analysts’ estimates. Revenue also beat expectations, soaring 37% to $96.1 billion.

The online shopping giant is also expecting a big end to the year as the holiday shopping season picks up. Amazon said Thursday that it expects fourth-quarter sales to rise between 28% and 38% from a year ago to between $112 billion and $121 billion.

The last three months of the year are always Amazon’s biggest, due to the holidays. But this year, Amazon also held its Prime Day sale event during the quarter for the first time after postponing it from July to October due to the pandemic. Prime Day has become one of the company’s busiest shopping events of the year, leading many of Amazon’s retail competitors to create their concurrent shopping holidays.

“We’re seeing more customers than ever shopping early for their holiday gifts,” said Amazon CEO and founder Jeff Bezos in a written statement. “Which is just one of the signs that this is going to be an unprecedented holiday season.”

How did the stock move?

Shares of Amazon fell more than 1% in extended trading, closing at $3, 211.01. Amazon shares are up 74% this year, the best performance among the five most valuable U.S. tech companies.

What analysts are saying?

The current consensus among 48 polled investment analysts is to Buy stock in Amazon.com Inc. This rating has held steady since September, when it was unchanged from a Buy rating, according to CNN Money. The 46 analysts offering 12-month price forecasts for Amazon.com Inc have a median target of 3,726.69, with a high estimate of 4,500.00 and a low estimate of 2,646.00. The median estimate represents a +16.03% increase from the last price of 3,211.88.

Apple

Apple was the sole tech company to post middling results on Thursday, with the company’s profits dipping, largely due to a scheduling change for the newest iPhone model.

Revenue and earnings.

Apple’s revenue rose to $64.7 billion, slightly beating analyst expectations, but profits dropped 7% from the year-ago quarter to $12.7 billion. iPhone sales plunged, dropping 21% from the year-before period to $26.4 billion. Apple offset that erosion with strong sales of its services, including its music and streaming services, as well as its wireless earbuds and internet-connected watch.

The company typically gets a sales surge in late September, when it releases its new iPhone, but production problems leftover from factory shutdowns during the pandemic led to the release being delayed until October.

Analysts expect sales to bounce back with a huge quarter during the October-December period, which includes the holiday shopping season.

How did the stock move?

Shares of Apple declined by more than 5% ($109.87) after the market closed on Thursday, from its closing price of $115.32, following the tech titan’s fourth-quarter earnings release. The 5% drop wiped off nearly $100 billion in Apple’s market value. The stock was still down at 3.9% down, at $110.85 in pre-market trading on Friday.

What analysts are saying?

The current consensus among 39 polled investment analysts is to Buy stock in Apple Inc. This rating has held steady since October, when it was unchanged from a Buy rating, according to CNN Money. The 35 analysts offering 12-month price forecasts for Apple Inc have a median target of 133.00, with a high estimate of 150.00 and a low estimate of 80.00. The median estimate represents a +16.11% increase from the last price of 114.55.

Facebook

Facebook’s third-quarter profit and revenue continued to grow along with its worldwide user base, the company said, but it predicted a “significant amount of uncertainty” looking ahead to 2021.

Revenue and earnings.

Facebook earned $7.85 billion, or $2.71 per share, in the July-September period. That’s up 29% from $6.09 billion, or $2.12 per share, a year earlier. Revenue grew 22% to $21.22 billion from $17.38 billion.

The social media giant’s average monthly user base was 2.74 billion as of September 30, up 12% from a year earlier. However, Facebook lost users in the U.S. and Canada, its most lucrative ad market. Monthly users in the region dropped to 255 million, while daily users dropped to 196 million.

How did the stock move?

Facebook Inc. shares initially rose 2% but then dipped 1.5% in extended trading Thursday after the earnings call. Shares closed trading Thursday at $280.83 and traded at $278.00 in pre-market trading on Friday. Facebook shares are up 37% in 2020, while the broader S&P 500 index has inched up 2.5% this year.

Though the earnings offered strong evidence of smooth sailing despite a torrent of criticism that included a monthlong ad boycott in July. Facebook warned of “significant” uncertainty next year, as the accelerated shift to online shopping and digital-advertising boom during the pandemic might not last, and platform changes and new regulations could spell trouble for its business.

What analysts are saying?

The current consensus among 49 polled investment analysts is to Buy stock in Facebook Inc. This rating has held steady since September, when it was unchanged from a Buy rating, according to CNN Money. The 44 analysts offering 12-month price forecasts for Facebook Inc have a median target of 310.00, with a high estimate of 340.00 and a low estimate of 195.00. The median estimate represents a +10.54% increase from the last price of 280.43.

Twitter

Twitter posted much stronger than expected third-quarter results thanks to surging advertiser demand. But while its user base continued to grow, shares plunged in after-hours trading on Thursday.

Revenue and earnings.

Twitter earned $28.66 million in the July-September period. That’s down 22% from $36.5 million a year earlier, due to higher expenses in part related to COVID-19. Revenue grew 14% to $936.2 million. Twitter had 187 million daily users, on average, in the third quarter.

That’s up 29% from a year earlier, thanks to people signing up to follow U.S. politics and current events worldwide, but below analysts’ expectations of 195.6 million. The company no longer discloses monthly user figures. Going forward, Twitter predicted uncertainty, due in part to the upcoming U.S elections, noting that it’s “hard to predict how advertiser behavior could change.”

Twitter has been aggressive in policing content that violates its policies, including posts it considers misinformation, which has earned it criticism from conservatives and free-speech advocates.

How did the stock move?

Twitter’s stock fell $6.06, or 11.6%, to $46.37 in after-hours trading.

What analysts are saying?

The current consensus among 41 polled investment analysts is to Hold stock in Twitter Inc. This rating has held steady since October, when it was unchanged from a Hold rating, according to CNN Money. The 34 analysts offering 12-month price forecasts for Twitter Inc have a median target of 41.50, with a high estimate of 65.00 and a low estimate of 19.00. The median estimate represents a -20.88% decrease from the last price of 52.45.

Microsoft

Microsoft Corp. easily topped earnings and sales expectations in a Tuesday report, as all three of its core segments grew strongly amid demand for cloud services and videogames during the COVID-19 pandemic, but its forecast did not live up to estimates.

Revenue and earnings.

Microsoft reported fiscal first-quarter earnings Tuesday of $13.9 billion, or $1.82 a share, up from $1.38 a share a year ago. Revenue reached $37.2 billion, up from $33.06 billion a year ago. Analysts on average expected earnings of $1.54 a share on sales of $35.76 billion.

How did the stock move?

Microsoft stock rose about 1% in after-hours trading immediately following the release of the results, but then fell to a slight decline ahead of the conference call. After the forecast was shared, shares fell to a decline of more than 1% in the extended session, after closing with a 1.5% gain at $213.25. In premarket trading on Wednesday, the stock slumped 2.6%. The stock closed at $204.72 on Thursday, October 29.

Microsoft shares have gained 35.2% so far this year through Tuesday while the Dow Jones Industrial Average, which counts Microsoft as a component, has declined 3.8%.

What analysts are saying?

The current consensus among 30 polled investment analysts is to Buy stock in Microsoft Corp. This rating has held steady since October, when it was unchanged from a Buy rating, according to CNN Money. The 26 analysts offering 12-month price forecasts for Microsoft Corp have a median target of 245.00, with a high estimate of 260.00 and a low estimate of 220.00. The median estimate represents a +19.89% increase from the last price of 204.35.

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