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The Zacks Analyst Blog Highlights: Apple, Tesla, Facebook and Amazon.com

Zacks Equity Research

For Immediate Release

Chicago, IL – January 28, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Apple Inc. AAPL,Tesla, Inc. TSLA, Facebook, Inc. FB and Amazon.com, Inc. AMZN.

Here are highlights from Monday’s Analyst Blog:

These Tech Bigwigs Are Set to Beat Earnings This Week

With Tech stealing the show in the last earnings season, all eyes are on the sector this time around. With threats of a U.S.-China trade war on the back burner, investors’ sentiments on the tech sector have bolstered as many U.S. tech companies have considerable exposure to China.

Needless to say, tech hardware segment currently leads the sector. And the most prominent name is Apple Inc., slated to report first-quarter fiscal 2020 earnings on Jan 28, after market close. Despite the global economic slowdown, iPhone sales rose in December 2019 and iPhone 11 is widely expected to have seen strong demand in the last three months of 2019. All these have likely boosted the company’s top line. The company is, thus, projected to report revenue growth of more than 4% on a year-over-year basis.

Its services and wearables segment, which includes products such as Apple Watch, Air Pods, and Beats earphones, has been doing pretty well. In the fiscal first quarter, the company’s wearables segment is expected to have become Apple’s biggest earnings growth driver. Apple forecasts earnings growth of more than 8% year over year. Wearables segment revenues jumped more than 50% on a year-over-year basis in the fourth-quarter fiscal 2019. And Apple Watch’s market share surged to 48% in the quarter from 45% in the preceding quarter.

Needless to say, the company did so well in the final three months of 2019 that its goal of $51 billion in services revenues seems much within reach. Additionally, Apple currently has an Earnings ESP of +4.08%. This is Zacks’ proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

Electric car maker Tesla, Inc. is scheduled to report fourth-quarter earnings on Jan 29, after market close. The company’s Model 3 vehicle, designed for electric-powered performance, has been a game changer. And with the company delivering 112,000 vehicles (mostly Model 3) in the fourth quarter, the company is expected to report healthy earnings results.

Tesla’s orders, in the meantime, have been increasing steadily. Throughout last year, Tesla’s orders grew at an impressive rate. And since the federal credit for U.S.-based buyers of Tesla vehicles has been trimmed, orders will continue to rise this year as well. Additionally, demand for Model X and S increased sequentially, particularly in the fourth quarter. Tesla CFO Zach Kirkhorn confirmed that the company is “increasing production on S and X lines in response to increasing demand.”

These bode well for the company’s performance in the fourth quarter. But it’s also true that the company’s initiative to improve operational efficient and vehicle quality has bumped up costs, which might impact profit margins when Tesla reports earnings. Nonetheless, the company has an Earnings ESP of +3.34%.

And what about Facebook, Inc.? The social media giant shrugged off regulatory concerns, surging more than 56% last year. Recently, the company’s shares scaled new all-time highs. Facebook added more than 100 million daily active users over the last 12 months, which eventually boosted its stock. And with daily active user count increasing at a steady pace, Facebook expects fourth-quarter earnings growth of more than 5% year over year. Analysts’ widely expect monthly active users (MAUs) to improve 7% year over year to 2.49 billion in the fourth quarter. Facebook possesses an Earnings ESP of +2.62%.

But there are some concerns. The company’s management has set a low bar for revenue growth. CFO Dave Wehner said that “we continue to expect a more pronounced deceleration of our revenue growth rate in Q4. We expect our Q4 reported revenue growth rate will decelerate by a mid-to-high single-digit percentage compared to our Q3 rate.”

By the way, for the fourth quarter, Amazon.com, Inc. expects operating income between $1.2 billion and $2.9 billion, suggesting a decline of 24% to 68% from the year-ago period. Its operating income is going to take a hit as the company continues to spend on improving Amazon Prime’s core free delivery benefit from two days to one.

But mostly due to the holiday shopping season in the fourth quarter, Amazon will see an improvement in revenue growth. Management expects revenues between $80 billion and $86.5 billion, suggesting 11% to 20% growth compared to the same period last year. Moreover, the biggest contributor toward Amazon’s success is growth in cloud computing business, Amazon Web Services (AWS).

AWS offers cloud services to corporations and individuals for operating websites, databases and other programs. Revenues from the AWS segment increased 35% on a year-over-year basis to almost $9 billion.

And with the constant digital transformation drive, AWS is poised to be an industry leader. Thus, AWS is expected to contribute to the company’s revenue growth in the fourth quarter as well. Investors could thus expect more than 30% growth in AWS in the fourth quarter. Amazon has an Earnings ESP of +10.23%. The company is slated to report earnings on Jan 30, after market close.

While Apple and Tesla flaunt a Zacks Rank #2 (Buy), Facebook and Amazon have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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