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FAANG Results for First Quarter: Part bite, part nibble

May 01, 2019

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For the FAANGs this quarter it was a mixed bag

F

Facebook (FB) had a great first quarter and its results showed it:
Facebook reported 

  • A 26% jump in sales to $15.1 billion, above the $14.97 billion consensus estimate
  • First quarter adjusted profit of $1.89 per share (adjusted for the $3 billion set aside for potential FTC fine), well ahead of $1.66 consensus estimate
  • Facebook reported robust user data a touch above expectations:
    •     1.56 billion daily average users
    •     2.38 billion monthly average users

Facebook sees a resilient outlook for 2019 with users’ privacy concerns not seeming to limit their use, and with multiple new avenues for revenue generation, especially with Instagram and its e-commerce app Checkout
Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.       

A

Apple (AAPL) reported fiscal second quarter results that were vert well received, with increased guidance
Apple reported

  • $58 billion in fiscal second quarter revenue, above $57.5 billion expected, a drop of just over 5%
  • Net income of $2.46 per share that beat $2.37 consensus estimate
  • A $75 billion share buyback program using its stockpile of cash
  • A 16% jump in services revenue, just ahead of expectations, at $11.45 billion
  • iPhone revenue of $31 billion, a 17% drop, as expected

Apple provided fiscal third quarter revenue guidance of $52.5 billion to $54.5 billion, well ahead of $52.2 billion consensus
Apple is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.       

A

Amazon (AMZN) delivered a strong quarter and provided solid guidance
Amazon delivered 

  • First quarter EPS of $7.09 while consensus was $4.67
  • Net sales in the first quarter were $59.7 billion, matching consensus, up 17% y/y.  
  • AWS sales of $7.7 billion, posting 41% y/y growth, matching consensus of $7.67 billion.  

Amazon announced that it will be transitioning its Prime free 2-day shipping to 1-day shipping.  

  • Analysts estimate it will add $800 million in costs to transition to that service completely.  
  • Competitors are quietly screaming as most now match Amazon’s 2-day delivery and few expected the 1-day announcement.  

Amazon gave 2Q sales guidance of $59.5 billion to $63.5 billion, while consensus was of $62.4 billion

Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas

 

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N

Netflix (NFLX) reported results that spooked investors with the guidance it provided
Netflix reported:

  • Revenue of $4.50 billion while $4.52 billion consensus estimate
  • Adjusted earnings of 76 cents per share, well above 58 cents consensus estimate
  • New subscriber adds of 9.6 million, the most ever in a quarter

But Netflix guidance on news subscriber adds surprised to the downside, 5 million adds are expected while 6.09 million was the consensus estimate

  •  US adds guidance was less than half consensus, 300k vs 617k consensus
  •  International adds guidance of 4.7 million was well below 5.47 million guidance

Competition from both new and existing streaming services is intensifying and Netflix is feeling the heat

Netflix  is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas

G

Google (Alphabet-GOOGL) reported results that showed further slowdown in growth if its core business
Alphabet reported:

  • First quarter revenue ex-TAC of $29.48 billion trailed $30.04 billion consensus
  • Adjusted EPS of $11.90 beat $10.65 consensus (adjusted for the $1.7 billion EU fine)  

The trends continue in the same direction for Alphabet’s Google:growing at a somewhat slower pace with earnings per clicking dropping, 19% in the most recent quarter
Google did not clarify in its conference call the trajectory, leaving many analyst to cite frustration; growth is slowing though at what pace is not clear to many 
Alphabet is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
 

 

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