U.S. equities are drifting lower on Thursday in the wake of a party-line vote by the FCC to repeal net neutrality rules imposed in 2015. The 3-2 decision removes the additional regulatory constraints imposed by the Obama Administration and shifts the balance of power from internet companies — mainly over-the-top streaming providers as well as hoarders of personal data — to telecoms delivering the data into homes.
The decision, which has generated a lot of emotional blowback, merely returns the system to the pre-2015 status quo. Which wasn’t so bad.
But the thinking is that as the telecom industry consolidates and the technology needed to throttle bandwidth improves, the owners of the “pipes” will stand to squeeze some profitability from pure internet companies. Either by collecting and selling user data or by charging for “carrier” services not unlike how cable and satellite TV providers operate.
All of this threatens to prick the speculative bubble many of these internet companies have enjoyed, potentially sending their stock prices reeling. Here are five to sell:
Net Neutrality Stocks: Facebook (FB)
Facebook Inc (NASDAQ:FB) shares remain stalled near the $180-a-share level — continuing a three-month consolidation range — capping an unbroken rise out of the lows seen in 2013. Watch for a possible reversal to lows last seen in July, which would be worth a near-20% decline from current levels.
The company will next report results on Jan. 31, after the close. Analysts are looking for earnings of $1.94-per-share on revenues of $12.5 billion. When the company last reported on Nov. 1, earnings of $1.59 beat estimates by 31 cents on a 47.3% rise in revenues.
Net Neutrality Stocks: Netflix (NFLX)
In the wake of the FCC vote, a company spokesperson for Netflix, Inc. (NASDAQ:NFLX) said the vote was disappointment, but it is only the beginning of a longer legal battle. Not only does the company face this threat, but the purchase by Walt Disney Co (NYSE:DIS) of Twenty-First Century Fox Inc (NASDAQ:FOXA) will make Disney’s over-the-top service more competitive.
NFLX will next report results on Jan. 17, after the close. Analysts are looking for earnings of 42-cents-per-share on revenues of $3.3 billion. When the company last reported on Oct. 16, earnings of 29-cents-per-share missed estimates by 3 cents on a 30.3% rise in revenues as higher production costs cut into profitability.
Net Neutrality Stocks: Twitter (TWTR)
In the wake of the FCC vote, a spokesperson said Twitter Inc (NYSE:TWTR) is looking for ways to continue defending an open internet as the fight moves to the courts. Shares surged at the open, but are suffering a pump-and-dump dynamic in mid-day trading as the FCC headlines crossed … a little embarrassing for the bulls to be honest.
TWTR will next report results on Jan. 25, before the bell. Analysts are looking for earnings of 6 cents per share on revenues of $689.5 million. When the company last reported on Oct. 26, earnings of 10-cents-per-share beat estimates by 4 cents despite a 4.2% drop in revenues.
Net Neutrality Stocks: Alphabet (GOOG)
Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) shares, like TWTR, surged at the open before the FCC headlines crossed and snuffed out the enthusiasm. Double-top resistance at $1,060 is a worry for GOOGL, potentially setting up a decline back to the 200-day moving average. This would be worth an 11% decline from here.
GOOGL will next report results on Jan. 25, after the close. Analysts are looking for earnings of $10.05-per-share on revenues of $31.61 billion. When the company last reported on Oct. 26, earnings of $9.57-per-share beat estimates by $1.17 on a 23.7% rise in revenues.
Net Neutrality Stocks: Amazon (AMZN)
Amazon.com, Inc. (NASDAQ:AMZN) shares have been melting higher since reporting results in late October, but AMZN looks vulnerable to a retest of the $1,000-a-share level that proved so intractable earlier this year. That would be worth a decline of nearly 12% from here.
While recent excitement has been focused on the company’s retail prowess, its media and consumer data businesses will be impacted by the FCC’s decision.
AMZN will next report results on Jan. 25, after the close. Analysts are looking for earnings of $1.94-per-share on revenues of $59.8 billion. When the company last reported on Oct. 26, earnings of 52 cents beat estimates by 53 cents on a 33.7% rise in revenues.
Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
