Netflix, Yahoo!, Under Armour, Alphabet , Starbucks – Stocks To Watch This Week by Estimize
Monday, April 18
Since the financial crisis, Warren Buffett's Berkshire Hathaway has had significant exposure to financial stocks in its portfolio. Q1 2021 hedge fund letters, conferences and more At the end of March this year, Bank of America accounted for nearly 15% of the conglomerate's vast equity portfolio. Until very recently, Wells Fargo was also a prominent Read More
Tuesday, April 19
Thursday, April 21
Consumer Discretionary – Internet Retail | Reports April 18, after the close.
The Estimize community is looking for EPS of $0.04 on revenue expectations of $1.97 billion, 1 cent higher than Wall Street on the bottom line and $8 million greater on the top. Since Netflix last reported, EPS estimates have soared 21%, reflecting a strong possibility of an earnings beat. Still, compared to the year prior, profitability is expected to decline 54% on a 26% increase in sales.
What to watch: Despite estimates that suggest a large decline on the bottom-line, Netflix has been optimistic coming into fiscal 2016, guiding for revenue gains in both its international and domestic markets. Ahead of its earnings results, Netflix plans to raise its subscription price by $2 per month for 17 million users grandfathered into the company’s $7.99 plan two years ago. Given its inelasticity, a marginal rate hike is expected to improve revenue and margins more than it will hurt. This quarter management expects to add 6 million new users and it very well can, after launching in every country besides China earlier this year. Meanwhile, Netflix plans to unveil 600 hours of original programing this year, up from about 450 hours in 2015. Original programming such as House of Cards and Marvel’s Daredevil will cost the video streaming company $6 billion in 2016. As Amazon, Hulu and over the top content become more abundant, it will come at the expense of Netflix to maintain its market position. One concern is that Netflix reported negative free cash flow in Q4 2015 and continues to invest heavily in content and international expansion.
Information Technology – Internet Software & Services | Reports April 19, after the close.
The Estimize consensus is calling for EPS of $0.07 on $851.84 million in revenue, right in line with Wall Street on the bottom line and around $6 million higher on top. Since the start of the quarter, estimates have fallen 27% for EPS and 5% for revenue. Additionally, the consensus reflects a YoY decline on the bottom line by 51% and a 17% drop in sales.
What to watch: What was once the dominant search engine in the early 2000’s is now an afterthought to Google. Sure enough, earnings have tracked downward, steadily declining in each quarter of fiscal 2015. The stock has also suffered and is now down nearly 17% in the past 12 months. Yahoo continues to see a significant slowdown in its core search platform and what CEO Marissa Mayer’s has called the Mavens business. Its search troubles are nothing new and are unlikely to get better as many users are too accustomed to using Google. Mavens (mobile, video, native, social), on the other hand, had grown 44.1% in 2015, but early indications suggest this number will fall to 8.7% in fiscal 2016. Financials have been just as bad. Last quarter Yahoo posted a huge net loss of $4.44 billion on a declining cash position and rising operating expenses. Yahoo released its best news this past month after indicating they would explore bids for a potential takeover. Since its Q4 report, the stock has risen 26% on hopes of a buyout.
Under Armour (UA)
Consumer Discretionary – Textiles, Apparel & Luxury Goods | Reports April 21, before the open.
Before Thursday’s opening bell we get results from Under Armour. The consensus data is calling for earnings per share of $0.03 on $1.052 billion in revenue, 1 cent higher than Wall Street on the bottom line and $10M greater on the top. Earnings per share estimates have been falling lately, cut by 62% in the past three months, while revenue expectations have actually increased by 4%. Year-over-year, profits are estimated to stay flat, with sales growth of 31%.
What to watch: Last Monday, shares of Under Armour took a plunge after Morgan Stanley reiterated its “sell” rating and halved its price target to $32 from $64. The call was made due to slowing growth and loss of market share to competitors such as Nike. Despite Jordan Spieth’s collapse at the Master’s, other UA endorsers such as Steph Curry have been having a great run, leading the Golden State Warriors to a tie with the Chicago Bulls for the most wins in a single season. This should support further growth in the footwear segment, which currently only accounts for approximately 17% of overall revenue, but grew an impressive 95% last quarter. Apparel sales have also been strong, increasing 22% in Q4, the 25th consecutive quarter of over 20% growth in that segment.
Alphabet Inc. (GOOGL)
Information Technology – Internet Software & Services | Reports April 21, after the close.
The Estimize consensus calls for EPS of $8.03 as compared to the Street’s expectation for $7.92. Revenues are estimated to come in at $16.612 billion vs. the sell-side’s $16.499 billion. Estimates have only increased incrementally since the company last reported, 2% on the bottom-line and 1% on the top. Compared to the same period last year this represents a projected 22% for EPS and 19% for revenues.
What to Watch: Alphabet (Google) will be the second of the FANG stocks to report results next week. The internet behemoth put up incredible results last quarter, with EPS increasing 26% and sales up 19%, an incredible feat for a company with a market cap of $530 billion! The fourth quarter release was the first to break out Alphabet’s “Other Bets” division, made up of self-driving cars, health care, Google-X and smart homes, among other things, which grew 37% YoY. Mobile and YouTube will also be key drivers of strength in Q1 through search and programmatic advertising. Aggregate paid clicks should maintain the high growth (31%) seen in Q4, while continued weakness in CPCs are expected be offset by click volume. Investor’s will also be looking for updates on the cloud as Alphabet battles it out with Amazon Web Services for the top spot in that space.
Consumer Discretionary – Hotels, Restaurants & Leisure | Reports April 21, after the close
For Starbucks, the Estimize community is expecting per share earnings of $0.40, one cent higher than Wall Street and corporate guidance. Revenues are expected to come in at $5.04 billion vs. $5.01 billion from the Street. Estimates for Q1 have stayed relatively flat since the Q4 report. Overall, SBUX is projected to continue its streak of double digit growth on the top and bottom line, of 10% and 21%, respectively.
What to watch: As with most retailers, the most important number to watch is same store sales, which Starbucks grew by a whopping 8% last quarter. Impressive comps were driven by a 4% increase in customer traffic over the period. CEO Howard Schultz only expects traffic to improve thanks to increased lunch offerings, a popular loyalty program and digital ordering capabilities. Add to that an aggressive international expansion plan which aims to open up 500 new locations in China alone this year. The company is also bullish on India in the long term, although growth there has been relatively slow. Recent success in the consumer packaged goods (CPG) segment, which sells single-serve beverages and packaged coffees in grocery stores and other retail outlets, should also drive growth. This division was up 16% last quarter, officially making it the second largest retailer of packaged coffee behind Kraft.
What are you expecting for these names? Get your estimates in here!