The second quarter earnings reporting season is well underway, and this week will feature something of a ‘main event,’ when most of the FAANG stocks (that’s Facebook, Amazon, Apple, Netflix, and Google) will report their quarterly results. We have heard from Netflix already – and the streaming giant admitted to a rough Q2.
The rest of the FAANGs, however, are likely to play a different tune. Amazon, Facebook, and Alphabet all have proven records of high revenue and earnings performance, and all three boast trillion-dollar-plus valuations. All three trade on the NASDAQ, where along with their peer Apple, they exercise – through sheer size – enormous influence on the index’s movements. So, it’s valid to note here that the NASDAQ, after a volatile start to the year, is at a record high level of 14,840, and that it is up over 15% year-to-date.
We’ve used the TipRanks platform to pull up some details on these three FAANG stocks, and we’ll flesh it out with commentary from JPMorgan’s 5-star analyst Doug Anmuth. Anmuth is a tech sector expert, rated in the top 100 of all Wall Street analysts, and he has recently updated his views on a number of major names, in light of the upcoming earnings.
Amazon (AMZN)
We’ll start with Amazon, the world leader in e-commerce. In just the last two decades, Amazon has become one of the world’s most recognizable brand names, accomplishing in just 20 years what took other brands the better part of a century. It’s an impressive achievement; Amazon is famous, among other things, for bringing in high earnings, never paying a dividend, and reaching a market cap of $1.84 trillion, behind only Apple (AAPL) and Microsoft (MSFT).
Looking at Q2, the company has guided toward $110 billion to $116 billion in revenue; the Street is estimating $115.1 billion – a 29% year-over-year uptick.
On the subject of growth rates, it’s important to remember that, in Q1 of this year, Amazon reported a massive 44% yoy revenue gain. The company has been consistently overperforming, and the numbers show it.
Return-minded investors will do well to watch the company’s EPS. Earnings are expected to hit $12.28 per common share, which would mark a yoy gain of 19%. In the past few sessions, Amazon’s shares have been climbing, at least in part due to anticipation of another blow-out quarter. But we will have to wait until Thursday to know for certain.
JPM’s Anmuth agrees with the general consensus on Amazon’s likely e-commerce numbers, writing, “We believe strong e-commerce gains persisted in 2Q driven by strength in CPG, grocery, apparel, and higher overall adoption rates as highlighted in our Retail vs. AMZN report on 6/11. We estimate 2Q revenue of $114.6B (+27% FXN Y/Y) & we believe investor expectations are toward the high end of the $110B-$116B guide.”
The analyst does go on, however, to note additional strength in the Amazon Web Services segment, the company’s cloud server: “We project AWS revenue growth of 32% in 2Q, but it likely needs to accelerate a point or two to 33-34% as more workloads shift toward the cloud (~15% of workloads currently migrated) & companies alter their spending habits. AWS also entered 2Q w/record backlog at nearly $53B (+55% Y/Y).”
Anmuth rates AMZN shares as Overweight (i.e., a Buy), and his $4,600 price target implies an upside growth of 24% in the year ahead. (To watch Anmuth’s track record, click here.)
Overall, it’s clear that Wall Street is highly bullish on Amazon. The stock has garnered no fewer than 32 recent reviews – and they are all of them positive, making a Strong Buy consensus. Shares are priced sky-high, at $3,699, and their $4,332 average price target suggests room for a 17% appreciation this year. (See Amazon’s stock analysis at TipRanks.)
Facebook (FB)
Facebook founder Mark Zuckerberg showed a positive genius in developing the modern social media. His company has become an internet behemoth, and has dominated the online social landscape for over 10 years now. Along the way, it’s become a company that we all seem to love to hate. Facebook has been called on the carpet before Congress to answer regarding online censorship, and Zuckerberg has become the butt of the internet meme culture he helped to create.
Does that mean that the company will see earnings decline? Probably not. In Q1, the company did not venture a detailed Q2 forecast, but said only that the second quarter would likely show stable growth. Taking that at face value, we can crunch some numbers and get an idea of what to expect.
First, FB showed a 48% revenue gain last quarter, getting a boost from a 30% yoy increase in the price per ad, matched with a 12% increase in the total number of ads delivered. For Q2, analysts expect $27.8 billion in total revenue – a 53% year-over-year increase – and $3.02 in earnings per share, a 68% gain on the same period last year. The company is widely expected to continue gaining on the momentum that online activity developed in 2020, and that has continued since.
Anmuth describes Facebook as one of his ‘Top Ideas,’ and he sets out a clearly bullish case for the company’s continued revenue and earnings growth: “We believe the online ad market is strong in support of a growing digital economy, & we expect FB revenue growth to accelerate in 2Q…. we remain confident in FB’s ability to adapt. As we’ve seen in the past, FB’s large base of 10M+ advertisers creates high auction density, and even if select marketers reduce their spending on the platform, others will likely step into the auction. We model 2Q reported revenue growth +50% Y/Y…”
For the shares, Anmuth has a $390 price target, indicating a modest upside of just 5% – but like Amazon, FB shares have spiked in recent days. Anmuth rates the stock as Overweight (a Buy).
While Wall Street is highly bullish on Facebook, the breakdown of analyst reviews shows that there are some outlier opinions on the stock. There are 33 recent reviews backing the Strong Buy consensus – and that number includes 28 to Buy, 4 to Hold, and 1 to Sell. FB is trading for $372.46 and its $396.13 average target implies an upside of 6% from that level. (See Facebook’s stock analysis at TipRanks.)
Alphabet, Inc. (GOOGL)
Last up, we’ll look at Alphabet, the parent company of Google. Google, of course, counts for the lion’s share of Alphabet’s performance; its search engine, PPC ads, web analytics, maps – they all add up to one of the internet’s most valuable properties. That value can be seen in the company’s market cap – Google, like Amazon and Facebook, has broken the trillion-dollar ceiling in total valuation, and boasts a cap of $1.85 trillion.
Also like its peers above, GOOGL stock has seen its share price spike as we get nearer to the earnings date. In fact, among FAANG stocks, it is 2021’s best performer, with year-to-date gains of 53%.
Wall Street’s analysts expect that growth to continue, and are predicting $56 billion in revenue and an EPS of $19.21 for Q2. These figures, if matched, would be a 46% yoy revenue gain – and a hefty 90% gain in earnings.
Turning to Anmuth’s view, the JPM analyst lays out a series of solid reasons to take a bullish stance on Google, writing, “GOOGL shares have been extremely strong YTD… we believe: 1) re-opening will remain a tailwind for Search & YouTube ads, esp. as overall spend continues to shift online & travel continues to recover; 2) overall margins will remain meaningfully above pre-pandemic levels (JPMe 28.5% for ’21, up from 22.6% in ’20 & 21.1% in ’19); 3) Cloud growth will remain solid at 40%+ while profit losses continue to improve; and 4) greater capital returns are likely on the heels of the $50B incremental buyback authorization last quarter.”
In line with these comments, Anmuth rates GOOGL as Overweight (Buy), and his $2,875 price target implies a one-year upside potential of 7%. (To watch Anmuth’s track record, click here.)
The Strong Buy consensus on GOOGL shares is based on 28 reviews. These include 26 Buys and just 2 Holds. This stock is selling for $2,680.7, and like many stocks that see sudden spikes in value, it is crowding its price target. The average target of $2,834 suggests room for just 6% appreciation this year. (See Google’s stock analysis at TipRanks.)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
