The leading companies in the technology industry will each report its third quarter earnings for the current fiscal year. Wall Street analysts have their own expectations from each of these companies. The main question is — which company can beat their expectations? Analysts from Stifel Nicolaus, a financial services firm, released their third quarter earnings estimate for the tech companies.
Analysts at Stifel Nicolaus are upbeat with the performance of e-Commerce businesses, eBay Inc (NASDAQ:EBAY) and Amazon.com, Inc. (NASDAQ:AMZN). They noted improvements from both companies during the quarter and initiated a “buy” rating for the stock of both e-commerce giants.
On the other hand, the analysts initiated a “hold” rating for the stock of Google Inc (NASDAQ:GOOG), Yahoo! Inc. (NASDAQ:YHOO), and Facebook Inc (NASDAQ:FB). Based on analysts estimate, the three companies’ earnings per share (EPS) could be lower than the consensus expectations.
Stifel Nicolaus projected that eBay Inc (NASDAQ:EBAY) will report $3.44 billion net revenue and $0.56 EPS, higher than the $3.35 billion net revenue and $0.55 EPS consensus estimate of Wall Street analysts. According to analysts, the company achieved a 13 percent growth during the third quarter, and the retail performance of its two largest European markets (U.K. and Germany) remained resilient, despite economic pressures in the region. They believe that the negative impact of foreign exchange rate is slightly lower than expected, since the dollar gained strength against the euro.
The analysts identified three significant metrics: 1) strong growth in units sold for the past six consecutive quarters to as much as 19.7 percent y/y in the previous quarter; 2) solid growth in Gross Merchandise Volume (GMV) remaining in mid-teens, and 3) positive payment margins at around 24 to 25 percent this year.
Analysts projected that eBay Inc (NASDAQ:EBAY)’s 4Q revenue and EPS guidance would be around $13.9 to $14.1 billion and $0.65 to $0.68 respectively.
For Amazon.com, Inc. (NASDAQ:AMZN), Stifel Nicolaus analysts believed that the company’s gross profit margins improved significantly during the third quarter, which alleviated shareholders concerns on its core business profitability in the long-term. Analysts expect the company to report $13.9 billion net revenue, in-line with the consensus estimate. Amazon’s estimated EPS loss was $0.04, lower than the $0.08 consensus estimate.
The analysts noted two important metrics: 1) revenue growth guidance at 28-30% FX-adj. range in the mid-point; and 2) growth margins increased y/y by more than 23.5 % in 2011.
Amazon.com, Inc. (NASDAQ:AMZN) will continue to hold its leading position as an online retailer. In the fourth quarter, the company’s revenue outlook would be around $21.5 to $23 billion, and its profit guidance will remain low, depending on the sales performance of its Kindle products.
Analysts expect Google Inc (NASDAQ:GOOG) to report $11.65 billion net revenue, slightly above the consensus net revenue estimate of $11.47 billion. Stifel Nicolaus $9.92 estimated EPS could be lower than the $10.63 consensus estimate, due to an increase in amortization expenses. According to analysts, Google’s acquisition amortization would be $725 million higher in 2013 than the approximately $100 million rate during the previous quarters. Google Inc (NASDAQ:GOOG) purchased Motorola Mobility Holdings Inc. (NYSE:MMI) for $12.4 billion earlier this year, and spent $340 million in the third quarter to restructuring the company.
According to analysts, Google’s display advertising remains strong and generates approximately $2 billion quarterly revenue worldwide. Analysts believe that the growth in mobile ads would provide a positive impact on Google, as well as the introduction of the paid product listing ads (PLA). In addition, they believe “investors have overlooked what appears to be a flat-to-declining desktop search business.” According to them Google’s explicit search declined by 1.4 percent q/q. They think investors will not pay attention to it in the long-term.
Analysts believed that Yahoo! Inc. (NASDAQ:YHOO) earnings for the third quarter remained challenging as the company is still going through transition under the leadership of its new CEO Marissa Mayer, who was hired by the company in July. Analysts expect Yahoo! Inc. (NASDAQ:YHOO) to report $998 million net revenue and $0.23 EPS, lower than the $1.08 billion net revenue and $0.26 EPS consensus estimate respectively.
The company’s “fundamentals remain challenged, and the consensus estimates are too high,” according to analysts.
Meanwhile, Stifel Nicolaus lowered its expectation on Facebook Inc (NASDAQ:FB) for the third quarter. Analysts project the company to post $1.21 billion revenue compared with the $1.22 billion consensus estimate. Facebook’s $0.10 estimated EPS is lower than the $0.12 consensus estimate. According to analysts, they remain uncertain that the growth in mobile advertising will be enough to compensate the declining revenues from desktop. They believe investor confidence on Facebook Inc (NASDAQ:FB) is negative.