Category Archives: oud

Facebook, LinkedIn, Twitter Earnings Put Light On Social Networks

Social networking, a top tech trend the past decade, will get the spotlight with earnings reports next week, starting with Twitter ( TWTR ) on Tuesday and followed by Facebook ( FB ) on Wednesday and LinkedIn ( LNKD ) on Thursday, all after the market close. Twitter reports during a tumultuous period for the company. Revenue growth has decelerated for the past six quarters as user growth has slowed for four consecutive quarters . The slowdown continues despite a series of new features Twitter has rolled out in the past year, including video tool Periscope and Moments. The company has overhauled management, starting with the return of co-founder Jack Dorsey as CEO in October. Dorsey is also the founder and CEO of payment processing firm Square ( SQ ), thus is juggling two heavy clubs. Since Twitter reported Q1 2015 earnings that revealed trouble ahead, the stock has plunged to 17 from 51. Twitter stock fell 1.6% in the stock market today , closing at 17.23. The consensus estimate of analysts polled by Thomson Reuters is for Twitter to report Q1 revenue of $607.8 million, up 39% year over year, with earnings per share minus items rising 43%, to 10 cents. Facebook Hopes To Keep Q4 Momentum Facebook Q1 earnings will come after the close Wednesday. The company soundly beat Q4 earnings expectations on booming mobile ad revenue, with the stock up 16% since then, though shares fell 2.5% Friday, to 110.56. Facebook CEO Mark Zuckerberg announced a 10-year strategy for Facebook at its annual F8 Developer Conference last week. He emphasized pushing its Messenger chat platform deeper into the business world with chatbots, enhancing Live video with virtual reality and expanding the social network to remote regions of the world. Analysts say the monetization strategy of Messenger will closely follow that of Instagram, with both platforms seen becoming multibillion-dollar businesses . The consensus on Facebook revenue is $5.25 billion, up 48%. Analysts expect EPS ex items of 62 cents, also up 48%. In what could be a long-term nightmare scenario for Facebook, users are feeling weary about posting personal reflections and updates on their daily lives. LinkedIn, the business networking site for professionals, saw its stock bomb 44% to a three-year low after the company posted Q4 earnings on Feb. 5, as its Q1 guidance widely missed estimates. LinkedIn acknowledged that a reshuffling of product strategy will impact short-term revenue growth in favor of the long term. LinkedIn stock has recovered about 10% since that 44% drop. It fell a fraction Friday, to 119.45. The consensus on revenue is $829.5 million, up 39%. EPS is figured at 60 cents, up 5%.

Xerox Stock Rebuilds; Q1 EPS Rise Expected, But Not Better Revenue

Take your eye off iconic copier maker Xerox ( XRX ) for too long — heck, Xerox stock had done little more than fall since December 2014 — and you would have missed its run-up to Tuesday’s eight-month high at 11.39, up 34% since touching a nearly three-year low in January at 8.48. Xerox stock closed Friday at 11.16, flat for the session. Credit Suisse analyst Kulbinder Garcha doesn’t see much upside potential, giving Xerox a 12-month price target of 11 and a neutral rating in a research note issued Friday. He does see more first-quarter earnings in Xerox, modeling 1 cent more adjusted EPS than Wall Street’s 23-cent consensus, which would be up 10% from the year-earlier quarter. Xerox is scheduled to release Q1 earnings before Monday’s open. But Garcha sees slightly smaller sales than the $4.24 billion consensus of analysts polled by Thomson Reuters. That Q1 consensus would be a 5.1% decline from 2015’s Q1 sales and Xerox’s 17th consecutive quarter of shrinking year-on-year revenue, albeit slower shrinkage than the 8% decline in Q4 and 10% contraction in Q3. The rise in Xerox stock may be tied to anticipation over its imminent split into two companies: the legacy copier/printer/office machine business and the business-process outsourcing (BPO) spinoff. Based on $18 billion in 2015 sales, down 8% from 2014, the business-machine side would wind up with about $11 billion a year in sales, and the outsourcing spinoff about $7 billion, Xerox CEO Ursula Burns said when she announced the split on Jan. 29, concurrent with the Q4 earnings release. Inspired by activist investor Carl Icahn, Burns said the breakup would unlock value in both companies. Icahn would get three seats on the new BPO board, while Xerox would get six. BPO sales, grouped currently as services under Xerox, is a “show me story,” Credit Suisse’s Garcha said. “Management is trying to transition the business away from low-margin to more value-added business,” he wrote in a research note. “However, we think management has to show consistent improvement and deliver on results to regain investor confidence.” Garcha anticipates a Q1 decline of 5.4% to $2.4 billion in services revenue. As for the so-called “document technology” core hardware, software and document management businesses, Garcha estimates that about $1.6 billion of Xerox’s annual cost of goods sold are “yen-denominated,” coming from the Fuji Xerox joint venture (75% owned by Fujifilm ( FUJIY )). With the yen up about 9% year to date, foreign exchange “will impact margins,” but less than was earlier expected, Garcha said. For Q1, Garcha forecasts document tech segment revenue fell 12% to $1.6 billion. Not all of Xerox outsourcing will be part of the BPO spinoff. Document outsourcing, which fell 2% to $852 million in Q4 revenue, will stay with the larger portion of the split, a Xerox spokesman told IBD. Effective April 1, Xerox borrowed $1 billion unsecured from a consortium of seven banks to be repaid within a year or upon execution of the spinoff, whichever comes first. Xerox says the spinoff should be complete before year-end. With a market cap of $11.3 billion, Xerox is the fourth-largest member of IBD’s Computer-Hardware/Peripherals industry group, following Canon ( CAJ ), the newly reorganized HP Inc. ( HPQ ), and Fujifilm. Xerox carries a middling 66 IBD Compositing Rating. Its formidable BPO rivals, Cognizant Technology Solutions ( CTSH ) and Infosys ( INFY ) rate better, with CRs of 75 and 80, respectively.