There have been plenty of tech stocks that have reported their earnings during the past few weeks. The results have been kind of a mixed bag: Even when a company has reported standout results, such as Facebook Inc (NASDAQ:FB), Wall Street’s response has generally been muted. But it is important to keep in mind that much of the good news has already been baked into the valuations, as the tech stocks have been in the rally mode.
Yet there were still some notable examples of companies that have had substantial moves, especially for small- and mid-cap tech stocks.
Just look at Advanced Micro Devices, Inc. (NASDAQ:AMD), which hit the wall as the turnaround faced some turbulence. On the other, Twitter Inc (NYSE:TWTR) spiked on news of its earnings report, as the company finally showed traction with its user base.
But of course, earnings can turnout to be mostly short-term noise. So for the current quarter, what are the companies that have issued reports that show more lasting trends? Well, here’s a look at three companies.
Tech Stocks With Earnings That Changed Everything: Twilio Inc (TWLO)
When Twilio Inc (NYSE:TWLO) was started back in early 2008, the timing couldn’t have been better. The company was in the prime position to benefit from the megatrends of mobile and cloud computing. The result has been sizzling growth.
Yet lately there have been some nagging issues.
There is growing competition from companies like Cisco Systems, Inc. (NASDAQ:CSCO), Vonage Holdings Corp. (NYSE:VG), CallFire, Nexmo, Bandwidth.com and Amazon.com, Inc. (NASDAQ:AMZN). There is also considerable customer concentration. Last year about 30% of revenues came from only 10 customers.
TWLO’s latest earnings report showed the dangers of this as the company disclosed that its biggest customer — Uber — has been pulling back on its purchases. On the news, Twilio stock plunged 26%, as the company reduced its current quarter and full-year guidance.
But this may not be the end of the problems. After all, might other large customers look at alternative offerings? Or could there be tougher negotiations to reduce the pricing? Well, such concerns will likely weigh on TWLO stock for some time. It also does not help that the shares still sport a lofty valuation, which is at 6.3 times revenues.
Tech Stocks With Earnings That Changed Everything: Apple Inc. (AAPL)
The earnings report for Apple Inc. (NASDAQ:AAPL) was a bit of let down. Why? Interestingly enough, CEO Tim Cook provided a succinct answer: “We’re seeing what we believe to be a pause in purchases on iPhone, which we believe are due to the earlier and much more frequent reports about future iPhones.”
Consider that AAPL management rarely talks about future product releases. So Cook’s statement should be taken with lots of seriousness.
At a minimum, the iPhone 8 will not hit the markets until September. Although, this may prove to be too optimistic. Analysts at Cowen and Company predict that the launch date will be four to six weeks late.
Then there is commentary from Deutsche Bank, which points out that the iPhone 8 may not be launched until next year! For the most part, it appears that APPL is having challenges with component shortages as well as technical issues.
In other words, there will probably not be any major catalysts for the next few quarters, which means that Apple stock will likely languish. In the meantime, AAPL could also feel competitive pressures, especially from Samsung (OTCMKTS:SSNLF). The company’s new phone, the Galaxy S8, appears to have gotten off to a strong start.
Tech Stocks With Earnings That Changed Everything: Facebook Inc (FB)
Again, the most recent earnings report for FB was another winner, with a clear beat on the top and bottom lines. Advertising revenues soared by 51% to $7.9 billion and profits jumped by 76% to $3.06 billion on a year-over-year basis.
Now the concern is that growth will slow down. In fact, Facebook management has been not shy about this.
But this does not necessarily mean that FB is a bad investment. Even with a slowdown, the growth rate will likely still be solid for some time. A key, of course, is the user base. In the latest quarter, the company announced that there were over 1.9 billion monthly active users (MAUs), up by 80 million on a quarter-over-quarter basis.
If you dig into the earnings report, you see that FB is boosting capital expenditures by over 50% this year. That is, the company is building an infrastructure for a long-term growth path. Then again, the company has a portfolio of assets, like WhatsApp and Messenger, that have had little monetization so far.
It is also encouraging that Facebook is finding ways to deal with the competitive pressures from Snap Inc (NYSE:SNAP). For example, Instagram’s Stories feature, which is similar to Snap, has gained 200 million daily active users during the past year, whereas Snap’s base is at 162 million.
Tom Taulli runs the InvestorPlace blog IPO Playbook as well as OptionExercise.com, which provides interactive tools & services for employee stock options of pre/post IPO companies. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
