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All Contents © 2019The Kiplinger Washington Editors
By Harriet Lefton, Contributing Writer
| July 16, 2018
The stock market is rolling into an important second-quarter earnings season. The market is volatile and hasn’t gained nearly as much ground in 2018 as the optimism heading into the year would have indicated. But Q2 earnings – especially those coming from a number of highly rated tech stocks – might be able to help the market turn the tide.
Top Canaccord Genuity analyst Tony Dwyer is feeling very confident, for instance, even in the face of trade war fears. He recently told CNBC, “The market moves with the direction of earnings … as long as the economy is positive, that direction of earnings is going up.” He added that S&P 500 operating profits likely grew 24% year-over-year in the second quarter.
With this bullish analysis in mind, and technology companies’ earnings on tap soon, we decided to drill down into seven of the hottest tech stocks poised to soar this earnings season. We used TipRanks’ powerful market data to pinpoint stocks with big support from top-rated analysts.
Here’s a closer look at these seven tech stocks, including how bullish Wall Street is on them, why, where they fall on the earnings calendar and how much upside the “smart money” is projecting.
Data is as of July 13, 2018. Stocks are listed in alphabetical order. Earnings estimates provided by Yahoo Finance. Earnings dates provided by Briefing.com.
Market value: $13.2 billion
TipRanks consensus price target: $84.67 (10% upside potential)
TipRanks consensus rating: Moderate Buy (See Details)
If you’ve ever shopped online, downloaded music or watched a video online, chances are you’ve used Akamai Technologies’ (AKAM, $77.32) cloud delivery platform. Akamai describes itself as the world’s largest and most trusted cloud delivery platform, delivering 95 exabytes of data every year to billions of devices.
At the investor-day event, Akamai said the number of customers spending more than $1 million has gone from 235 in 2012 to 511 today, and that its customer base is now much more diversified.
Most notably, five-star Oppenheimer analyst Timothy Horan (view Horan’s profile & recommendations) has just reiterated his “Buy” rating with a $90 price target (16% upside potential).
“Growth is improving in each business unit; media traffic has accelerated for three straight quarters and will continue to strengthen throughout 2018 and beyond as video and gaming move OTT (over the top)” Horan writes. Meanwhile, the company’s “unique last-mile infrastructure” places it firmly on track to snatch a share of the massive $16 billion web security market.
The company will report earnings on Tuesday, July 31. Following the Akamai’s recent investor day updates, the Street is forecasting for revenues of $662.7 million, filtering down to 80 cents of per-share earnings.
Market value: $835.0 billion
TipRanks consensus price target: $1,267.73 (5% upside potential)
TipRanks consensus rating: Strong Buy (See Details)
Keep a close eye out for Alphabet’s (GOOGL, $1,204.42) results, which are set for July 23.
RBC Capital’s Mark Mahaney (view Mahaney’s profile & recommendations) is steadfast in his view that Google remains “one of the strongest, most consistent fundamental stories out there.” “GOOGL has averaged 23% growth for 33 straight quarters & shows no signs of slowing,” he cheers.
Looking forward, this top analyst is excited about the money-making potential of Google’s self-driving unit, Waymo. Industry experts have described Waymo as way ahead of competition with extremely impressive AI capabilities built on 7 million miles’ worth of autonomous driving. According to Mahaney, the unit’s commercialization by end of 2018 “could be a catalyst for GOOGL shares in the near/medium term, leading to a potential rerating in GOOGL’s multiple.”
Wall Street is predicting quarterly revenues of $32.2 billion and profits of $9.61 per share. However, Mahaney is even more optimistic about the top line, predicting revenues of $32.5 billion driven by ongoing strength in mobile search, programmatic and YouTube.
Market value: $859.35 billion
TipRanks consensus price target: $1,902.38 (5% upside potential)
Amazon (AMZN, $1,813.03) remains one of the Street’s favorite stocks ahead of its second-quarter results, due out Thursday, July 26. Indeed, TipRanks’ data shows that the stock has received no less than 36 buy ratings in the past three months, versus just two hold-equivalent ratings in the same period.
One of Amazon’s big supporters is Canaccord Genuity’s Michael Graham (view Graham’s profile & recommendations). He has just boosted his price target from $1,800 to $2,000 (10% upside potential). “We think fundamentals remain as strong as ever as e-commerce business continues to grow nearly 30% ex-Whole Foods, and AWS (cloud business) remains the market leader, accelerating growth to almost 50% last quarter,” he writes.”
Barclays bull Ross Sandler (view Sandler’s profile & recommendations) won’t be left behind, either. He calls Amazon one of his favorite consumer stocks and has just ramped up his price target from $1,700 to $1,850. “We would add to positions into the print as AMZN has traded up 4 out of the past 7 July earnings,” Sandler writes, telling investors to prepare themselves for another solid quarter of operating income.
Wall Street is looking for $1.40 in per-share earnings on $52.5 billion in revenues for Amazon’s most recent quarter.
Market value: $37.5 billion
TipRanks consensus price target: $52.59 (40% upside potential)
EBay (EBAY, $37.61) will report earnings on July 18, and the company is expected to produce 51 cents per share in profits on $2.7 billion in sales. Those expectations aren’t actually particularly robust. According to top D.A. Davidson analyst Tom Forte (view Forte’s profile & recommendations), this doesn’t do justice to eBay’s robust sales potential. He has a bullish $55 price target on the stock, translating into sizable upside potential of 46%.
Forte writes, “We think investor expectations are low going into the quarter following (the first quarter’s) rare sales miss and the subsequent 10% pull back in shares”. However, Forte is confident that the company “has multiple levers” that can be pulled to produce “sustainable double-digit revenue growth.” For example, the surprise move to Intermediate Payments via the Adyen partnership could create a material new revenue driver of 10% or more down the road.
EBay also has just launched a new subscription offering, “eBay Plus,” in Australia that provides free standard domestic delivery and returns, access to exclusive offers/deals and customer service.
Market value: $19.0 billion
TipRanks consensus price target: $140.00 (10% upside potential)
Global travel company Expedia (EXPE, $126.70) is in prime place to benefit from positive trends in online travel. The company owns multiple sites including Airbnb rival HomeAway, which offers more than 2 million vacation rentals across the world.
Five-star Wells Fargo analyst Peter Stabler (view Stabler’s profile & recommendations) has just ramped up his EXPE price target from $130 to $160. From current levels this indicates big upside potential of 26%. He cites the company’s ongoing migration to the cloud, which should slash data costs by two-thirds. At the same time, the move also sets EXPE apart from rivals. “We estimate that the rough cost to replicate technology infrastructure on the same scale as EXPE’s is likely on the order of $500MM over a three-year horizon,” Stabler writes.
As a result, Stabler now expects the company’s free cash flow margin to expand significantly, from 10% in 2019 to 14% in 2020.
Right now, the Street consensus for the quarter stands at $2.89 billion in revenues and 71 cents in per-share earnings. Investors also should pay close attention to the room-night growth rate, which came to 15% year-over-year in Q1.
Market value: $601.5 billion
TipRanks consensus price target: $232.85 (11% upside potential)
Social media giant Facebook (FB, $207.32) is gearing up for what should be another stellar earnings season, though it will be hard-pressed to beat the 9% jump shares delivered after the Q1 print.
Wall Street is expecting revenues of $13.3 billion to produce $1.71 per share in earnings. And five-star analyst Mark Mahaney (view Mahaney’s profile & recommendations) picks Facebook as his “Top Large Cap Long” heading into the report.
He explains that with 40% growth in ad revenues (ex-foreign exchange) and 30% EBITDA growth, “we still view FB as among the best growth stories in tech.” These figures don’t appear to be slowing anytime soon. According to RBC Capital’s Ad Surveys, “FB ranks as one of the highest ROI platforms & has intrinsically one of the most positive Spend Intentions skews.”
And remember: Facebook also owns the second most popular social media platform, Instagram. Mahaney points out that this rapidly growing photo sharing app revealed very high satisfaction levels among users. Facebook also is beginning to explore the monetization potential of Facebook Messenger, which Mahaney believes can be “highly material” to the stock over time. He has a $250 price target on FB (20% upside potential).
Market value: $2.9 billion
TipRanks consensus price target: $56.67 (22% upside potential)
Cloud networking giant GTT Communications (GTT, $46.40) is the “top pick” for Oppenheimer’s Timothy Horan (view Horan’s profile & recommendations) going into the print. This five-star analyst singles out GTT as his No. 1 stock as the company is set to “discuss large synergies from Interroute and as enterprise demand remains robust.”
GTT closed its $2.3 billion acquisition of Europe’s Interoute – operator of the continent’s largest cloud network – at the end of the second quarter. According to Horan, the acquisition effectively doubles the size of the company, but at the expense of some initial execution risk.
Nonetheless he expects “very positive management comments on the earnings call regardless” and is firmly bullish on the deal in general: “We believe Interoute is a strong strategic fit, and layers well into GTT’s existing strategy/network. Acquisitions are driving growth for GTT, and we expect margins to improve as synergies are realized from recent acquisitions.”
He has a bullish $62 price target on GTT, suggesting prices can spike 34% from current levels.
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