Midday Tech Roundup: AMZN, HTC, AAPL, YHOO

NEW YORK (TheStreet) -- In Wednesday's tech roundup, Amazon (AMZN) and HTC are reportedly developing a line of smartphones, Apple (AAPL) has scaled back on iPhone 5c production, according to a published media report, and Yahoo! (YHOO) shares are digesting third-quarter earnings.

Amazon is reportedly partnering with HTC as it moves into the highly competitive smartphone market, according to The Financial Times. The paper said one device is at an advanced stage of development, though a 2013 launch or whether it will be released at all is not known.

TechCrunch reported earlier this month that Amazon is in the process of developing two smartphones, a low-end device and another more expensive model with a 3D user interface.

At the time of publication, an Amazon spokesperson has not responded to requests for comment. 

Amazon shares are 1.2% higher to $309.92 as of 12:15 p.m. EST. Amazon will release third-quarter earnings on October 24.

TheStreet Ratings team rates Amazon.com Inc as a Hold with a ratings score of C. The team has this to say about its recommendation:

"We rate Amazon.com Inc (AMZN) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team go as follows:

  • AMZN's revenue growth has slightly outpaced the industry average of 17.8%. Since the same quarter one year prior, revenues rose by 22.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 200% when compared to the same quarter one year ago, falling from $7 million to -$7 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet & Catalog Retail industry and the overall market, Amazon.com Inc's return on equity significantly trails that of both the industry average and the S&P 500.


Apple has cut fourth-quarter orders for the less-expensive 5c model, according to The Wall Street Journal. The Cupertino, Calif.-based firm reportedly told contract manufacturers Hon Hai Precision Industry and Pegatron it was cutting orders by a third and a fifth, respectively. Quarterly orders for the popular iPhone 5s, however, have increased, said the paper.

Apple shares have increased 0.58% to $501.57 as of 12:15 p.m. EST. Apple will report fourth-quarter earnings on October 28.

At the time of publication, an Apple spokesperson had not been available for comment.

TheStreet Ratings team rates Apple Inc as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about its recommendation:

"We rate Apple Inc (AAPL) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AAPL's revenue growth has slightly outpaced the industry average of 0.7%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • AAPL's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, AAPL has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 41.67% is the gross profit margin for Apple Inc which we consider to be strong. Regardless of AAPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AAPL's net profit margin of 19.53% compares favorably to the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Computers & Peripherals industry and the overall market, Apple Inc's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Apple Inc's earnings per share declined by 19.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, Apple Inc increased its bottom line by earning $44.16 a share vs. $27.67 a share in the prior year. For the next year, the market is expecting a contraction of 10.8% in earnings ($39.38 a share vs. $44.16 a share).


Yahoo! shares were trading 1% lower to $33.05 as of 12:15 p.m. EST, as investors continued to digest third-quarter earnings released a day earlier.

Yahoo! reported third-quarter revenue had decreased 1% to $1.08 billion from $1.09 billion a year earlier.

"I'm very pleased with our execution, especially as we've continued to invest in and strengthen our core business," said Yahoo! CEO Marissa Mayer in a statement.

Net income for the period was $297 million, or 28 cents a share, compared to $3.16 billion, or $2.64 a share, in the year-ago quarter. Net income was significantly higher in the third quarter of 2012 due to a one-time partial sale of its Alibaba Group stake.

TheStreet Ratings team rates Yahoo! Inc as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate Yahoo! Inc (YHOO) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, notable return on equity, reasonable valuation levels and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Written by Keris Alison Lahiff.

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