While earnings have been mostly better for the quarter, some anemic guidance has increased the volatility level. With Internet growth and usage somewhat of a tailwind, the Cowen team sees a potential for a mixed bag.
One of the stocks in the Cowen report, IAC/InterActiveCorp. (NASDAQ: IACI), reported solid numbers after the close Tuesday, but the stock traded down in the premarket Wednesday. The stock is rated Outperform at Cowen, which has an $84 price target. The Thomson/First Call consensus price target is lower at $75.77. Shares closed Tuesday before the release at $64.06.
The companies stepping into the earnings spotlight Thursday are LinkedIn Corp. (NYSE: LNKD), Pandora Media Inc. (NYSE: P) and Twitter Inc. (NYSE: TWTR).
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Despite the 332 million LinkedIn members, this an Internet momentum stock has suffered from stiff volatility moves in the price over the last year. While the company continues to dominate the interconnecting of business professionals with members worldwide and is growing, uneven earnings and some corporate missteps have turned the stock into a volatility victim. But an improving economy and demand for highly skilled workers have provided the impetus for a possible earnings surprise.
The Cowen team also is looking for updates on engagement, which should have accelerated in the fourth quarter. The analysts will also be very interested the sales navigator updates and potential Total Addressable Market figures. LinkedIn reports after the close on Thursday.
The Cowen price target for the stock is posted at $260, while the consensus figure is lower at $251.80. LinkedIn closed Tuesday at $232.76.
Pandora Media
Pandora is the current streaming music leader in installation and use in the automotive world, with a penetration rate right at 70%. The Cowen team is very interested when Pandora reports in advertising revenue figures, user count and total listening hours and any provided color on the Copyright Royalty Board process. With the analysts expecting revenue of $275 million, that represents a large 37% year-over-year jump, driven by a 40% increase in advertising revenue. Cowen is above the Wall Street consensus, and if the firm is correct, the stock may be up big.
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Cowen puts a $33 price target on Pandora stock, and the consensus price objective is $28.78. The stock closed on Tuesday at $17.40.
This has become a Wall Street whipping boy for any number of reasons: high multiple valuation, issues with the current CEO’s performance and overall terrible negative market sentiment. Wall Street analysts point out that despite putting everything on the table during the company’s analyst meeting in November, the future revenue numbers are not taken seriously, and many do not think it is cheap enough to buy.
The Cowen team is watching for data on the monthly active users, which is a critical number that needs to stay at or above the firm’s projections. They will also be looking for updates on new product initiatives and potential new engagement metrics. Some analysts feel that the company is improving core products and is undermonetized and so out-of-favor that unless earnings are a disaster, the stock could have real upside potential. Twitter also comes up frequently as takeover chatter makes the rounds.
Cowen rates Twitter at Market Perform, with at $42 price target. The consensus target is much higher at $50.12. Shares closed Tuesday at $39.79.
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With all these top Internet stocks reporting Thursday, aggressive trading accounts may want to put on a partial position in front of the numbers. More traditional tech growth investors may want to wait and see the actual results.
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