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Apple Earnings Quality Better Due To GAAP-Only Reporting, Says UBS

Apple ( AAPL ), IBM, and Cisco Systems ( CSCO ) have higher earnings quality than some 3D printer makers, based on their GAAP vs. non-GAAP accounting, says UBS. Tech companies, and some others, typically report both non-GAAP  earnings — which exclude stock options grants to employees and often other items — and earnings under GAAP (generally accepted accounted principles), which include everything. Financial analysts typically provide non-GAAP estimates for quarterly results, and those numbers frequently get more play in quarterly earnings stories in the business press. “Non-tech investors sometimes recoil at the liberal non-GAAP reporting by tech companies and its acceptance by investors,” noted UBS analyst Steven Milunovich in the research report. Milunovich says a large difference between GAAP and non-GAAP earnings should be taken into account in assessing a stock’s price-to-earnings, or P/E, ratios. “Apple’s financial statements embody the same user-friendly nature as its products in only reporting GAAP numbers,” he wrote. Milunovich also said the GAAP to non-GAAP EPS difference for  IBM ( IBM ) is just “modest,” and is a “relatively conservative” 12% for Cisco. IBM is slated to report its Q1 earnings on April 18, and Apple on April 25. IBM stock fell 0.3% to 152.07 on the stock market today. Apple rose 1% to 111.12, closing just below Apple’s 200-day line after the stock topped that key level intraday for the first time in 2016. Milunovich is the second tech analyst in a week to take a close look at GAAP vs. non-GAAP earnings. Citigroup analyst Mark May last week slashed his price target on LinkedIn ( LNKD )  and also lowered its targets on shares of  Amazon.com ( AMZN ),  Alphabet ( GOOGL ),  Facebook ( FB ) and  Netflix ( NFLX ) in a report that examined the earnings dilution from stock compensation grants . Milunovich says restructuring charges also impact GAAP vs. non-GAAP accounting. The UBS analysts flagged the leading makers of 3D printers. He said that in 2015 “both Stratasys ( SSYS ) and 3D Systems ( DDD ) had large impairments, especially Stratasys’ write-off of MakerBot, creating the biggest gaps (in GAAP vs. non-GAAP accounting)” among the companies he looked at. Storage vendors including Nimble ( NMBL ), NetApp ( NTAP ) and EMC ( EMC ) also had relatively large differences in GAAP vs. non-GAAP earnings, he wrote.

Why You Should Closely Watch Apple’s Stock Chart Today

Loading the player… Apple ( AAPL ) shares are trying to make a pivotal move in the stock market today with the recapturing of a key technical level. Credit Suisse raised its price target on Apple from 140 to 150, saying that gross profit from Apple services — including Apple Pay, Apple Music and iCloud — has big growth potential. Meanwhile, Brean Capital cut its price target from 170 to 155. The analyst said that the Street’s iPhone unit shipment expectations for the March and June quarters may be too optimistic. Shares jumped as much as 1.9% in heavy volume Monday morning, breaking past resistance at the 110 price level and retaking the critical 200-day moving average in intraday trade. Apple hasn’t traded above the 200-day since five months ago, and even then it stayed above the line only briefly. Shares pared their gains to a 1.4% rise as the market hit turbulence. If the stock can close above the 200-day line, it would be bullish. The stock has suffered severe technical damage over the last year, but it’s up more than 20% from its January low. Apple is now 16% below its all-time high of 134.54, reached at the end of last April. Among other widely held tech stocks, Microsoft ( MSFT ) is trading about 2% below its late December high and a consolidation base buy point of 56.95. Microsoft shares were down 0.5% in intraday trade. Facebook ( FB ) is down 3.3% in big volume on a cautious report from Deutsche Bank. Facebook is now trading about 4% below its February high and a buy point at 117.69. Google owner Alphabet ( GOOGL ) is trading 6% below a cup-base buy point of 810.45. Alphabet was off 0.7% intraday. And Netflix ( NFLX ) is hitting resistance at its 200-day line for a second session. The stock is 21% below its December peak. Netflix shares lost 1.3% Monday.

Apple Stock Rises On Upbeat Analyst Reports, Video Services Upside

Apple ( AAPL ) stock rose to a 2016 high Monday after the company got a pair of positive reports from Wall Street analysts. Credit Suisse analyst Kulbinder Garcha said Apple’s services business is “an underappreciated driver” for the company. He reiterated his outperform rating on Apple stock and raised his price target to 150 from 140. Brean Capital analyst Ananda Baruah maintained his buy rating on Apple stock but lowered his price target to 155 from 170. Apple stock was up 1.5% in midday trading in the stock market today , near 112. Garcha estimates that Apple’s services businesses could account for 29% of Apple’s gross profit by 2020, up from 15% today. Apple’s services include its App Store, Apple Pay, Apple Music and iCloud. Apple’s services growth will be driven by its growing installed base of devices, rising services spending per user, and new service opportunities in the TV and video market, Garcha said. A big question remains how Apple will expand in the video services market. It currently offers rentals and purchases of video through its app store, but has no subscription service like Netflix ( NFLX ) or Hulu. Apple has four options in the video services market, Garcha said. First, it could stick with its electronic sell-through model, but that has a small total addressable market. Second, it could become a “virtual MSO” (multiple-system operator) by aggregating broadcast and cable networks. Third, it could invest directly in creating its own original content. Fourth, it could acquire a subscription streaming service, but that seems unlikely, Garcha said. Brean’s Baruah remains bullish on Apple because of its iPhone business. He said early reports of iPhone SE sales point to calendar 2016 shipments at the higher end of his forecast for 20 million to 25 million units. RELATED: Low-Cost iPhone SE Could Dent Apple’s Profit Margins Middle-Aged Apple Might Get A Sports Car, New Girlfriend