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Tech Earnings Week: Who Has Reported, What to Watch For Next

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You're probably not completely caught up on tech earnings.

With several tech behemoths already with results hitting the wires and a few more to come, here's what you need to know looking back a few days and forward a few.

Tech Earnings In:

Twitter (TWTR) posted earnings per share for the quarter of 17 cents, below Wall Street's expected 20 cents. Revenue was $824 million, missing estimates of $876 million. Monetizable daily active users rose 17% year-over-year to 145 million.

But Twitter said it has an advertising bug hampering its ability to generate such revenue. This doesn't go over well with investors, some of whom may be particularly wary of bugs. (Snap (SNAP) dealt with an android app bug for an extended period, during which time user and revenue growth were severely impacted.)

Twitter management guided for fourth quarter revenue of between $940 million and $1.01 billion, missing analysts hopes of $1.06 billion.

The stock fell 21.25% to $30.57 a share.

But "We view challenges as mostly temporary," wrote RBC Capital Markets analyst Mark Mahaney in a note out Thursday morning. The challenges are more near term than structural. Everybody makes mistakes." Mahaney lowered his price target to $40 from $42 more as a result of general estimate tweaks rather than any long-term snafu. His price target now represents 30% upside from the stock's current level.

Snap reported loss per share of 4 cents, narrower than Wall Street's expected 5 cents. Revenue rose 50% year-over-year to $446 million, better than the expected $435 million. Daily active users came in at 210 million, above estimates of 207 million. In the second quarter, Snap reported having 203 million DAU's. Snap burned $84 million of cash, less than the expected $113 million.

But the stock fell a bit, and is down 4% in the past five days because guidance was not so great. The company guided for revenue of $540 million to $560 million for the fourth quarter. The $550 million midpoint lags analysts' expectation of $555 million. Guidance for earnings before interest, taxes, depreciation and amortization was between break-even and $20 million. The midpoint of $10 million is less than estimates of $14 million.

Bigger picture for Snap, the company is showing it's back to user growth and seemingly on a path towards profitability, not away from it.

Microsoft (MSFT) posted revenue of $33.1 billion, beating estimates of $32.3 billion. Earnings per share was $1.38, better than the expected $1.24. Revenue was partly boosted by a stronger-than-expected Azure result, which saw revenue grow by 59%.

The stock only rose 2.01% to $140 a share. Microsoft almost always beats estimates on explosive growth rates and strong execution, so it's not entirely shocking that the stock price reaction was muted.

Importantly, Wedbush Securities analysts Dan Ives raised his price target to $170 from $160. THe rsults speak to the "underlying strength that Redmond is seeing in the field as more enterprises move to the cloud with Nadella & Co," Ives said. "Taking a step back on the heels of these results and our recent positive cloud checks on the name, we remain bullish on MSFT into 2020 given our thesis that Azure's cloud momentum is still in its early days of playing out."

Tesla (TSLA) reported earnings per share of $1.86 on an adjusted basis, against estimates for a loss per share of 42 cents. Free cash flow was $371 million versus $32 million expected. 

Astonishingly, Tesla missed revenue expectations, posting $6.303 billion versus expectations of $6.425 billion. Tesla delivered more of its lower priced Model 3's and fewer of its higher priced Model S's and X's. Still, the copmany posted an adjusted gross margin of 22%, above the expected 18%. 

Management attributed the profitability to precise cost cutting on production and other operating expenses. 

The question now? Can Tesla sustain the new cost structure and produce as many cars this way? 

Tech Earnings Rolling In

Amazon (AMZN) is reporting earnings Thursday October 24. Whatever the results, analysts are expecting:

  • EPS adjusted: $7.38
  • Revenue: $68.833 billion

The keys? How long will the initial operating investments and costs for one-day shipping pressure e-commerce margins? Will Amazon show it's keeping pace with Microsoft's cloud business? 

Facebook (FB) will report on October 30. Expectations are for:

  • EPS adjusted: $2.11
  • Revenue: $17.365 billion

Here's the big picture for big tech:

Valuations (price-to-earnings multiples) are largely far lower for this group than they used to be as newer trends start to decelerate and competition for some businesses crops up. Now, some of these companies are investing in the next growth driver, like Facebook's Instagram or Amazon's cloud business. Some companies are stuck for the moment. 

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