Cantor Fitzgerald analysts Youssef Squali, Naved Khan and Kip Paulson rate Twitter Inc (NYSE:TWTR) as Sell as the micro-blogging company is set to announce strong results but current valuation is excessive. They also believe that strong results from other internet titans sets things up nicely for Twitter.
Last week saw generally strong results out of Facebook Inc (NASDAQ:FB), Google Inc (NASDAQ:GOOG), Yahoo! Inc. (NASDAQ:YHOO), Amazon.com, Inc. (NASDAQ:AMZN), and VistaPrint Limited (NASDAQ:VPRT), setting us up nicely for Twitter Inc (NYSE:TWTR), this week, which will report its first quarterly results as a public company amidst high expectations! We will also hear from Yelp Inc (NYSE:YELP), Shutterfly, Inc. (NASDAQ:SFLY), LinkedIn Corp (NYSE:LNKD), Expedia Inc (NASDAQ:EXPE), AOL, Inc. (NYSE:AOL), and Dice Holdings, Inc. (NYSE:DHX). Despite the recent pullback, Internet valuations remain near their 5-year high, but we remain bullish on the group longer-term given the improving macro picture and uninterrupted secular growth.We continue to favor strong franchises at attractive valuations, including Facebook Inc (NASDAQ:FB), Google Inc (NASDAQ:GOOG), and eBay Inc (NASDAQ:EBAY).
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The Cantor Internet Index (CII) underperformed the broader market for the week ended 1/30. The CII decreased 2.2% between Jan. 23-30 vs. the S&P 500’s 1.9% decline in that time period. By sub-segment, Marketing decreased 2.1%, Commerce decreased 1.2%, Subscriptions increased 0.1%, and Infrastructure decreased 1.6%.
Previews for third week of earnings
Twitter earnings preview
We expect Twitter Inc (NYSE:TWTR) to report very strong results with upside potential to our ~100% total revenue growth, and ~115% ad revenue growth. That said, we find Twitter’s current valuation to be excessive (at 32.4x ’14E Revenue) and continue to see more downside than upside short-term, given outsized (whisper) Street expectations and fast approaching lock-up expirations. We continue to favor Facebook Inc (NASDAQ:FB) as a play on social.
Yelp earnings preview
We expect strong 4Q:13 results from Yelp Inc (NYSE:YELP), with local ad revenue powering ahead at an anticipated rate of 70% Y/Y, decelerating slightly from 80% Y/Y growth in 3Q.
Shutterfly earnings preview
We expect Shutterfly, Inc. (NASDAQ:SFLY) to report in-line 4Q results, driven by healthy order growth amid a relatively stable promotional environment (Y/Y). Our checks point to continued strength in paid click spending as well as overall search popularity in 4Q, which should help drive strong quarterly performance.
Expedia earnings preview
We expect Expedia Inc (NASDAQ:EXPE) to report 4Q results in-line with Street expectations. Our checks point to relative strength in US paid search on Expedia.com and Hotels.com in 4Q and signs of further progress on the TripAdvisor channel.
LinkedIn earnings preview
We expect LinkedIn Corp (NYSE:LNKD) to post strong 4Q results, driven by a differentiated offering for professionals and what we view as a superior value proposition for recruiters and agencies. While we would expect to see upside to consensus estimates for 4Q, we also note that the magnitude of quarterly out-performance has diminished over the past few quarters, reflecting heightened Street’s expectations for this management team.
AOL earnings preview
We expect AOL, Inc. (NYSE:AOL) to report roughly in-line 4Q results. Top-line growth was +2.3% Y/Y in 3Q:13 (ex Adap.tv), and while this is at least in positive territory, there is a long way to go before closing in on industry-level growth rates. We’d like to see further acceleration in O&O and Ad Network growth before getting more positive on the name.
Dice Holdings earnings preview
We expect an in-line quarter out of Dice Holdings, Inc. (NYSE:DHX). Headwinds from macro uncertainty and increased pressure from LinkedIn likely persisted in the quarter, keeping us on the sidelines.