We’re about the enter the busiest part of earnings season for the most important technology stocks.
Three of the four members of the elite “FANG” group report this week: Amazon.com (AMZN), Alphabet (GOOGL) and Facebook (FB). The trio also rank as the second, fourth and fifth most valuable members of the S&P 500.
FB will probably draw the most attention tomorrow because it has so many important initiatives underway. From a core-business perspective, the social media giant is adding a direct-buying function to Instagram (known as “checkout”) with the potential to keep users on its pages longer and control more revenue. It’s also rolling out a new Stories format and pushing more eyeballs to Messenger and WhatsApp.
Simple traffic is likely to be the main catalyst to move the stock. FB cratered last year when usage slowed, only to rebound along with those numbers the last two quarters. A recent report by Audience Insights, by the way, showed people are sticking with the company as last year’s privacy scandals move into the rear-view mirror.
Project Libra, FB’s much-discussed cryptocurrency, is a wildcard in the quarterly report. There’s no reason to expect much new information because it won’t launch until 2020. But it’s still fresh in people’s minds after last week’s congressional hearings.
Amazon.com and Alphabet
AMZN and GOOGL follow on Thursday afternoon. AMZN has made smaller moves around its quarterly numbers as it’s grown larger. However some analysts see the potential for an upside surprise as the strong economy lifts consumer spending in general.
For years, AMZN has been a secular-growth company, benefiting from the shift to online commerce and taking customers from other merchants. Will it now become more of a cyclical-growth story, riding the ups and downs of American shopping trends?
GOOGL is a very different story as its core search business continues to slow. Meanwhile it’s struggled to monetize YouTube and faces increased competition in cloud computing. On top of that, costs are rising across the board. That toxic brew produced GOOGL’s biggest drop since 2012 last time it reported in April.
Tesla and Intel
Some other heavily traded technology stocks are also due this week. Tesla (TSLA), routinely one of the most active symbols at TradeStation, reports tomorrow night. It’s likely to be a complicated quarter as investors try to balance record sales with vehicle price cuts.
Intel (INTC) could be interesting because it’s the world’s biggest chip maker, and the sector has been on fire lately. The last week featured strong results by Taiwan Semiconductor (TSM) and ASML (ASML). This week brought some bullish analyst calls from Goldman Sachs on companies like Micron Technologies (MU) and Applied Materials (AMAT).
The story has focused on higher prices for memory chips and the potential for 5G networking to drive orders in the second half of 2019. INTC’s not hugely exposed to either — it’s more focused on PCs and data centers. Still it’s important to realize that sentiment has been improving toward semiconductors in general.
Snap and Twitter
Two other social media stocks also report this week: Snap (SNAP) tonight and Twitter (TWTR) on Friday morning.
SNAP is up more than 150 percent so far this year, making it one of the best-performing major tech names in 2019. The stock’s roared to life thanks to an overhauled Android app and new gaming platform. Those helped drive surprise gains in usage after nearly two years of steady declines.
The stock also ripped higher two weeks ago after Bank of America Merrill Lynch noticed strong app downloads. Goldman Sachs also cited positive user trends. The main question now facing investors is how much of that good news is already priced in.
After these results, next week features a few more major names — especially Apple (AAPL) and Advanced Micro Devices (AMD) on Tuesday, July 30.
In conclusion, we’re in the thick of earnings for major technology stocks. The big stories are likely to be:
- FB spreading into new business areas.
- GOOGL struggling to evolve as search slows.
- AMZN’s potential to break out on consumer spending.
- The possibility of INTC delivering more good news for chips.