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Amazon To Miss Wall Street Q1 Earnings Expectations, Says Analyst

Mighty e-commerce giant Amazon.com ( AMZN ) will fall well short of Wall Street’s Q1 earnings estimates, at least one analyst predicts. Wedbush analyst Michael Pachter, however, expects sales to beat view, he said in a research note Wednesday. The company is slated to report Q1 earnings after the close Thursday. Pachter forecasts earnings per share minus items of 45 cents. That would swing from a 12-cent loss in the year-earlier quarter, but analysts polled by Thomson Reuters have modeled EPS ex items of 58 cents. IBD Take: Amazon is a Leaderboard stock. Find out why at IBD Stock Checkup. Amazon is known for de-emphasizing profit as it strives for growth. Capital expenditures on items such as new fulfillment centers , more digital content, expansion of several of its e-tail lines and expanding delivery offerings will contribute to lower-than-expected earnings, Patcher wrote. Analysts have modeled a 21% increase in revenue vs. Q1 2015, to $28 billion. That would be down a tad from 22% and 23% year-over-year growth in the two preceding quarters. The Amazon Prime loyalty program also is going to eat into profits, Pachter says, because of the company’s aggressive efforts to sign up more members. Pachter also expects Prime’s new monthly $10.99 payment option — previously it was only available for $99 for 12 months — will further boost membership, especially around the holiday shopping season . Amazon’s cloud services division, Amazon Web Services, is likely to continue to see growing gross and operating margins, Patcher says. But he expects growth to be “measured” due to the company’s investments in international data centers. Patcher says a recent letter Amazon CEO Jeff Bezos sent to shareholders suggests that the company is going to continue to “invest in growth” beyond what Wall Street is expecting. Amazon’s Q4 2015 financials fell  shy of Wall Street’s outsized expectations. Image provided by Shutterstock .

PayPal Undervalued Despite Run-Up, Analyst Says Ahead Of Earnings

PayPal ( PYPL ) is undervalued, an analyst has said ahead of the payments leader’s Q1 earnings due after the close Wednesday. Analysts polled by Thomson Reuters estimate that Q1 revenue will be $2.5 billion, up 19% from $2.1 billion in the year-earlier quarter, with earnings per share minus items rising 20%, to 35 cents. The IBD Leaderboard company, spun off from  eBay in July 2015 , has seen its shares rise 30% since late January. Still, Jefferies analyst Jason Kupferberg says PayPal is an “under-owned, yet scarce asset.” He bumped the investment bank’s price target on PayPal stock nearly 10% to 48 from 44. Shares closed Friday at 40.31, up a fraction on the day. Kupferberg, in a research note, also said that if PayPal and Visa ( V ) revise their operating agreement, it could be favorable for PayPal. Payments has evolved into a fiercely competitive sector, with some of the largest U.S. tech companies making inroads. Apple ( AAPL ) and Google, which is a unit of Alphabet ( GOOGL ), have both built digital wallet technologies. Square ( SQ ) — which makes digital cash registers and processes payments — also has created a technology that may eat into PayPal’s top line. San Jose-based PayPal continues to rally after finding support at its 50-day moving average. Volume has been lackluster during its rebound, but not much different from when shares were falling. The stock is just above a 40.03 buy point and also is in buy range from a lower 38.62 entry. Image provided by Shutterstock .

Apple Q2 Earnings To Clash With New Cash Return Plan

Apple ( AAPL ) investors will have two major reports to chew on next week: the company’s fiscal second-quarter earnings report and the annual revision to its capital return program. Both are expected to come out on Tuesday after the market close. Analysts polled by Thomson Reuters expect Apple to earn $2 a share on sales of $51.97 billion in the March quarter. On a year-over-year basis, earnings per share are forecast to fall 14% with sales down 10%. It would mark the company’s first quarterly decline in EPS in nearly three years and first drop in sales since 2003. Apple’s iPhone is expected to post its first-ever unit sales decline year-over-year in fiscal Q2. For the current quarter, Wall Street is modeling Apple to earn $1.76 a share, down 5%, on sales of $47.32 billion, also down 5%. UBS analyst Steven Milunovich on Friday reiterated his buy rating on Apple with a price target of 120. His favorable opinion of Apple stock is based on positive expectations for the company’s upcoming iPhone 7, which is expected to launch in September. Milunovich expects iPhone unit sales to rise about 10% in fiscal 2017, which starts Sept. 24. “Even without killer new features, the iPhone 7 should prompt improved upgrade demand with more than 200 million iPhone users not having moved to a large screen,” he said in a research report. Meanwhile, Apple is poised to boost its quarterly dividend and share repurchases as part of its annual capital return program . Last year, Apple increased its quarterly dividend by 11% to 52 cents a share and raised its share repurchase authorization to $140 billion from the $90 billion level announced in 2014. Image provided by Shutterstock . RELATED: Apple iPhone Keeps Samsung At Bay In U.S. Smartphone Market Apple Outlook Cut As iPhone 7 Doesn’t Seem Like Must-Have Device