Apple and Twitter Face Low Expectations, TI Provides Good News for Chip Stocks and Pandora Surges

Here's a look at major tech stories in the news.
By Eric Jhonsa ,

Apple and Twitter's Earnings Are On Tap

Expectations for both Apple (AAPL) - Get Reportand Twitter (TWTR) - Get Report are pretty low going into the companies' June quarter reports, which are due on Tuesday afternoon. Apple guided in April for June quarter revenue to drop 13% to 17% annually due to declining iPhone sales, and the average analyst EPS estimate of $1.38 implies a 25% decline. Twitter, hurt by weak user growth and ad execution challenges, guided for revenue to be up 17% to 21%, a market slowdown from the first quarter's 36% growth and the fourth quarter's 48% growth.

With the iPhone 7 expected to launch in September, more attention will likely be given to Apple's guidance than its results. Expectations are tempered on this front as well, following a string of reports indicating the iPhone 7 will break with Apple's traditional iPhone upgrade cycle by featuring incremental improvements. The fact RF chip supplier Skyworks (SWKS) - Get Report provided subdued guidance and reported a massive inventory jump last week hasn't helped matters.

For Twitter, the company's monthly active user (MAU) count, up just 3% annually last quarter, will once more get plenty of attention. Markets will also look for signs that Twitter is faring better at winning over brand advertisers -- a group that Twitter has blamed its recent ad sales pressures on, and which has been spending heavily on Facebook.

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Texas Instruments Jumps On Strong Earnings, Takes Peers Higher

In a fresh sign the chip industry is on much better footing than it was to start the year, Texas Instruments (TXN) - Get Report beat second-quarter estimates and guided for third-quarter revenue of $3.34 billion to $3.62 billion and EPS of 81 cents to 91 cents, favorable at the midpoints to mean analyst estimates of $3.38 billion and 81 cents

TI reports seeing strong demand from the automotive market, where the chip content found in the average car has been steadily rising, and positive growth from the industrial and telecom equipment markets, which were soft not too long ago. Sales to the "personal electronics" market fell, no doubt due to weak iPhone-related demand; an iPhone 6S teardown found four different TI chips.

iPhone softness also contributed to TI's analog chip sales being roughly flat annually at $2.04 billion. But embedded processing sales, which cover microcontrollers, DSPs and other processing chips, rose 9% to $755 million. Meanwhile, TI's EPS benefited from a 300-basis-point annual increase in gross margin to 61.2%, a $10 million drop in selling, general and administrative spending to $460 million and $527 million in stock buybacks.

Shares jumped to new 52-week highs in after-hours trading and early Tuesday morning. Rivals Analog Devices (ADI) - Get Report and NXP (NXPI) - Get Report, each of which also have strong auto, industrial and telecom equipment exposure, have gone in the same direction.

Pandora surges on a fresh M&A report

Bloomberg reportsPandora (P) has hired boutique investment bank Centerview Partners to "advise on strategic options as it seeks to placate activist investor Corvex Management," which has a 9.9% stake and has urged the company to explore a sale. Pandora spiked shortly before Monday's close on the report, and finished up 5.9% to $13.

Bloomberg's report comes four days after one from The Wall Street Journal stating Pandora had rejected a $15 per share buyout offer from Sirius XM parent Liberty Media (LMCA) on a belief the company's value is closer to $20 per share. The paper cautioned the offer was more of a "a fishing expedition" by Liberty CEO Greg Maffei than a formal bid.

Pandora's second-quarter numbers, together with pressure from Corvex, might make the Web radio leader willing to settle for less. Active listeners fell by 1.3 million annually to 78.1 million, and revenue growth was just 12% after backing out the $22.8 million stemming from Pandora's $450 million 2015 purchase of online ticketing platform Ticketfly.

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