Technology
5 Red-Hot Large-Cap Tech Stocks That Should Beat Earnings Estimates
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While the market has surely cooled off over the past six weeks from the blistering pace set in January and February, stocks are still trading close to all-time highs, and that means one thing for companies posting first-quarter results. Meet or beat expectations, and provide at least decent guidance, or sellers may show up in droves.
A new research report from the internet and e-commerce team at Merrill Lynch offers their earnings estimates for 25 top large and small cap companies in the firm’s research universe. They are above Wall Street estimates on 16 of the 25. We screened for the big liquid stocks, and found five that look solid for aggressive growth accounts. All are rated Buy at Merrill Lynch.
Alphabet
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused around key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
The Google segment also sells hardware products: Chromecast, Chromebooks and Nexus. The Other Bets segment includes businesses such as Access/Google Fiber, Calico, Nest, Verily, GV, Google Capital, X and other initiatives.
The analysts point to Google Cloud, which is the largest cloud infrastructure and engages in more technology, infrastructure research and development in headcount and dollars than any other company. That gives it the strength and wherewithal to compete with and differentiate itself from Amazon’s AWS and Microsoft’s Azure.
The Merrill Lynch price target for the stock is $1,025, and the Wall Street consensus price objective is $965.81. The shares closed Thursday at $845.09.
Expedia
This online travel leader is poised for a potential big first quarter. Expedia Inc. (NASDAQ: EXPE) is the leading internet travel pure-play with exposure to online travel in the United States, Europe and Asia. The company’s portfolio of brands includes Expedia, Orbitz, HomeAway, Travelocity, Hotels.com, Trivago, Egencia, Hotwire, Wotif, Venere and Classic Vacations.
Top analysts see it as a story of improving execution, and they also think that the company is starting to finally match Priceline’s growth metrics. The company has raised its dividend and is buying back stock, both shareholder friendly actions.
Expedia investors receive a 0.9% dividend. Merrill Lynch has a $146 target price. The consensus target is $142.72, and shares closed Thursday at $125.67.
The huge social media leader has continued to post gigantic numbers and is on the Merrill Lynch US 1 list. Facebook Inc. (NASDAQ: FB) operates as a mobile application and website that enables people to connect, share, discover and communicate each other on mobile devices and personal computers worldwide.
Its solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile and web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.
Merrill Lynch analysts feel that Facebook’s long-term forecasts are more easily attainable, especially as the company continues to grow and employ new platforms for online advertising. They also think the company exceeds first-quarter consensus estimates. It should be noted that Facebook had grown to an astounding $410 billion market cap in less than five years.
The towering $165 Merrill Lynch price target compares with the consensus target of $160.17. The shares closed Thursday at $141.17.
Netflix
This Wall Street darling and FANG constituent could offer solid upside. Netflix Inc. (NASDAQ: NFLX) is the world’s leading internet television network, with more than 70 million members in over 190 countries enjoying more than 125 million hours of TV shows and movies per day, including original series, documentaries and feature films. Members can watch as much as they want, anytime, anywhere, on nearly any internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments.
Netflix is available on virtually any device with an internet connection, including personal computers, tablets, smartphones, smart TVs and game consoles, and it automatically provides the best possible streaming quality based on available bandwidth. Many titles, including Netflix original series and films, are available in high-definition with Dolby Digital Plus 5.1 surround sound and some in Ultra HD 4K. Advanced recommendation technologies with up to five user profiles help members discover entertainment they’ll love.
Merrill Lynch has set its price target at $154, and the consensus target is $151.60. Shares closed Thursday at $143.74.
Priceline
This internet travel leader took off late last summer and hasn’t really looked back. Priceline Group Inc. (NASDAQ: PCLN) is an online travel business offering price disclosed and opaque airline tickets, hotel rooms, rental cars, vacation packages and cruises. The company generates over 85% of gross profit from its international brands. Priceline operates Priceline.com, Booking.com, Kayak.com, Agoda.com, Rentalcars.com and OpenTable.
China is a key growth market for the company over the next 10 years, and Priceline has a multipart strategy to capture growing travel demand. The Merrill Lynch analysts see stock as attractive at 20 times 2018 earnings per share versus 15% two-year earnings growth. They also think the company will exceed Wall Street estimates for the first quarter.
The Merrill Lynch price target is posted at $1,920. The consensus target is $1,894.14. Shares closed most recently at $1,773.52.
Given the big gains theses top companies have put in over the past year, they are going to need solid first-quarter results to continue the price momentum. The positive for investors is they are all dominant players in their specific tech categories.
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