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Alphabet (Google), Apple, Amazon or Facebook: who will win the race?

Carla Olson | 1:59 am ET, 08 May 2018

This past weekend we asked stock investors on Twitter: which company among the tech giants (Google / Alphabet, Apple, Amazon or Facebook) will outgrowth the competition?  We got some pretty insightful responses from our Twitter audience and are sharing with you their growth predictions in this Finstead Bites post.

Our Twitter poll shows, investors feel more optimistic about Alphabet (Google) and Amazon, and less optimistic about Facebook and Apple when it comes to those companies' growth prospects. 

Here is the poll question, verbatim: 

And here are the responses:  


Buy-side stock analysts, on the other hand, do not see as much stock price upside for Amazon and envision a greater upside for Facebook.  This is somewhat understandable, given Facebook's recent snafu caused by user data leak.  

We consulted Finstead to find out  price target upside for each of those stocks (e.g., searched for "GOOGL upside")--and here is what we found out:

  • GOOGL price target upside is 21.09%.
  • FB price target upside is 25.68%.
  • AAPL price target upside is 3.73%.
  • AMZN price target upside is 3.96%.

The investors we polled on Twitter feel optimistic about Alphabet (Google) for the following reasons:

  • Alphabet's history of execution is unparalleled... it has made significant investments to diversify its revenues, and the effort is paying off.
  • Online and mobile video consumption is going through the roof and Alphabet remains strongly positioned here with YouTube. In its race to target TV ad dollars, Alphabet allowed Nielsen and comScore tagging of YouTube videos to determine the effectiveness of YouTube vs (compared to TV ads)--and YouTube is winning thus far.
  • Android’s dominant global market share of smartphones leaves Google well positioned to continue generating top-line growth as search traffic shifts from desktop to mobile.

Comparing Alphabet and Amazon, it's important to note that those two are still fundamentally different businesses.  While they compete in many areas, they focus on different things.  

The two companies are in the same range based on the market capitalization.  However, Amazon employs a lot more people (over 340,000) than Alphabet (78,000+).  Amazon generates more revenue than Alphabet ($178B vs.  $111B), is growing significantly faster (38% vs. 24%), but is also less profitable (1.7% vs.  11.42%). 

For a detailed comparison of the two companies, please visit Finstead and type AMZN vs. GOOGL.  

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Facebook (FB) earnings expectations: 5 things to watch

Carla Olson | 10:19 am ET, 25 Apr 2018

Facebook (NASDAQ: FB) stock slightly dipped in today’s trading. The social networking company is disclosing its earnings results after the close bell today.

In 2017, the stock appreciated 47%. But in 2018, it is down 12%.

Investors are wondering what to expect from Facebook earnings. 

The consensus analyst profit expectation is $1.36 per share on revenue of $11.4 billion for the quarter.

Facebook's main source of revenue is advertising. Its CEO Mark Zuckerberg said that he doesn't see any significant impact on the company's business stemming from the Cambridge Analytica issue.

But according to analysts, the top position that the social networking company has attained through so many years may be threatened. User trust is broken because of the data leakage issue, instigating uncertainty around user engagement and growth.

The legislative control of social networks is evolving fast. Legislations were introduced by 2 US senators to curb Facebook data collection, storing, usage and sharing. 

On May 25, EU's General Data Protection Regulation (GDPR) will come into effect. GDPR will let users control the way their personal information is stored and used. The firms that breach the rules will have to pay huge fines.

Ad prices are likely to surge because people spend less time on Facebook than before, leading to a reduction in ad impressions. The number of users in the US and Canada has declined in the previous quarter. 

For today’s earnings, the five key questions to watch out for are:

  • Is the number of users stable, or declining in developed markets such as the US and Canada? 
  • Are users spending less time on Facebook?
  • Are advertisers spending more or less money with Facebook?
  • Are there any indications of how the regulation may hit the bottom line?
  • Are the costs increasing?

What is the stock forecast for Facebook? Per Finstead Research, Facebook shares have an average price target of almost $224. It has an upside of about 40%.

The company has a fairly high valuation compared to its peers. Its P/E ratio is behind that of Google (GOOGL), Sina Corporation (SINA) and Twitter (TWTR).


For the latest news data on Facebook, please visit Finstead and type “FB news”, “FB stock price” or “FB price target”.  

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Microsoft (MSFT): How High Is The Sky?

Carla Olson | 6:17 pm ET, 27 Mar 2018

Microsoft (NASDAQ: MSFT) declined 5% in today’s trading, to below $90 per share.  Is this a good buying opportunity?   

The equity selloff among the top technology companies was instigated by Trumps's recent political announcement regarding tariffs on foreign goods.  The magnitude of the impact is $60 billion tariffs on Chinese imports.  The worst hit industries will be tech hardware and machinery. 

Beijing reacted by announcing its target--128 US projects which have an import value of $3 billion.  This resulted in a 6% decline for the IT Sector.

But Microsoft has a lot of things going for it.

The recent increase in the company's margins has resulted from the adoption of Azure, Microsoft’s public cloud, more profitable channel distribution, and an ever-growing customer base. The hope is that Microsoft will have a $50 Billion EBIT by mid-2019.

The firm anticipates doubling of the public cloud market to $230B by 2020.  Morgan Stanley thinks Microsoft will hit a $1 Trillion market cap in the upcoming year.

Such a rally over the course of this and next year would make MSFT go from the third largest public enterprise (only Apple and Alphabet and larger judging by market capitalization) to the largest one.

Per Finstead Research, Microsoft has an average price target of almost $104. Its price upside is almost 14%.

Microsoft’s valuation is fairly high among its peers (based on the forward P/E ratio), lagging only ADBE, RHT, and CRM.


Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Alphabet (GOOGL): Why Investors Think This Stock Is A Buy Now

Carla Olson | 4:08 pm ET, 26 Mar 2018

The similarity of Google’s and Facebook's business models, fueled by Facebook’s data leak, resulted in a dip for Alphabet’s stock price (NASDAQ: GOOGL) earlier last week. Both companies obtain the majority of their revenue from advertising. The impact is likely to continue until Facebook is completely cleared from the data leak scandal dating back three years.

Data is the driving factor behind IT companies such as Google, and cybersecurity breaches are at all-time high. The perceived lack of data integrity has affected investors’ sentiment about the advertising giants. 

However, the Facebook data breach is likely to be a temporary occurrence only.  Both Google and Facebook have a solid data governance model.  So now may be a good opportunity to buy these stocks at relatively low prices.

Google dominates mobile OS ecosystem.  More than 60% of the US and 80% of the global mobile OS market share is tied to Alphabet. 

Google’s core products are going strong.  Some core products and services that are doing well are YouTube, Gmail, Google Play, Pixel phones, and Google Cloud.

The Waymo subsidiary of Alphabet rules the autonomous vehicles sector. Waymo has also become one of the leading AI companies.

On the negative side, Google is facing tough competition from rivals like Amazon, particularly now that Amazon is gaining speed in the advertising space.  

Per Finstead Research, Google’s average price target is almost $1283.  Its price upside is 25% (just visit Finstead.com and type “Google price upside”).

Google has a fairly high valuation with respect to its peers. Its P/E ratio only lags that of YNDX and TWTR.


Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Shopify: Can The Stock Move Higher?

Carla Olson | 1:25 pm ET, 26 Mar 2018

There has been a 700% rise in Shopify’s stock (NYSE: SHOP) price since 2015.   But what is the stock price prediction?

Shopify's "Facebook problem"--its dependence on getting the data from the social networking site--had caused a dip in its stock price recently.

The Ottawa-based company enables smaller merchants to compete with huge retailers such as Amazon.com by providing them with tools and websites to run their operations.

Google inked a deal with Shopify to assist it in hosting its online e-commerce stores. The hosting will be done on Google's Infrastructure-as-a-Service.   This is a shrewd strategic move by the search engine giant in its attempt to compete with Amazon. 

A few other major retailers besides Shopify have switched from the rival’s Amazon Web Services to Google Public Cloud or Microsoft Azure.

Shopify's focus on the SMB segment, which is prone to headwinds in the retail sector makes it risky to buy the stock now.

Per Finstead Research , Shopify’s average price target is almost $145 which is comparable to its current price (visit Finstead.com and type "Shopify price target").  


Shopify’s valuation is the highest among its peers.

Our simple thought on Shopify is, hold for now.  It may be too risky to jump in at this point.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Facebook (FB): Should You Buy The Stock Now?

Carla Olson | 6:31 am ET, 20 Mar 2018

The data incongruity issue has created a pressure on Facebook’s stock performance, which is down 6.79% in yesterday’s trading.  

Facebook is under huge pressure for letting the data company Cambridge Analytica acquire 50 million user profiles in the U.S., which the firm might have used to help Donald Trump in his election campaign.

The sell-off was instigated by a stipulation that Facebook allowed Cambridge Analytica to violate its terms of service since the firm used the data acquired by user submissions for commercial purposes.

From our perspective, the market might have over-reacted, since this problem was detected early and it was well taken care of by Facebook’s management.  

Facebook knew about the violation and blocked the controversial Cambridge Analytics application in 2015. The internet giant also ensured that all data acquired illegally was permanently destroyed.  

It is questionable whether all of the data was actually erased.

So we think this may be a buying opportunity for long-term Facebook investors.Based on Finstead research, Facebook’s stock price upside is 30%.

It is clear that the Facebook leadership team is trying to do the right thing to ensure consumer confidence.  

How high can the stock price go? According to Finstead, the average price target is almost $223.


Even though Facebook’s valuation is fairly high compared to its peers (its P/E ratio lags only that of GOOGL, SINA and TWTR), we see a potential for stock price appreciation because of the company’s high revenue growth (visit Finstead and type “FB growth” to get a sense of how high it is).  

Do you think Facebook will bounce back?

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


FAANG Pullback Inevitable in 2018?

Carla Olson | 7:09 am ET, 02 Jan 2018

FAANG

As you're entering 2018, you may be wondering which stocks that you own in your portfolio are bound for a 'correction' in 2018.  

The scale of the FAANG rally in 2017  has led some investors to believe that this group has been overdone as an investing theme, especially given signs of overvaluation. 

Facebook, Amazon, and Netflix were up more than 50% over the last 12 months; Apple's gain was over 50%, and Google 'trailed behind' with 30%+ annual stock price growth.

And the FAANG stocks weren’t just market leaders this year; they accounted for a sizable portion of Wall Street’s overall move higher. 

How do the analysts feel about these stocks?  Morgan Stanley said it is still positive on the group, but macro factors could be concerning.  History indicates that returns may moderate their pace and Morgan Stanley analysts question whether growth can be sustained in the upcoming period.  

Apple investors should be especially worried about the $1,000 price tag on the iPhone X that may cut into first-quarter demand.

The group may be less well-insulated from cyclical pressures that many investors anticipate will increase over the next couple of years.  These stocks are tied to the cycle via advertising and consumer spending.

Here is a look-back on Facebook and Amazon stock performance.  Over the last year, FB returned +52.54%. This return is higher than Internet Information Providers sector (42.56%), Technology industry (26.77%), S&P 500 (18.87%) returns.

Over the last year, AMZN returned +52.98%. This return is higher than Catalog & Mail Order Houses sector (20.39%), Services industry (4.74%), S&P 500 (18.87%) returns.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Alphabet Inc. (GOOGL) Buy or Sell Stock Guide

Updated at: 6:58 am ET, 12 Jun 2019

Are you looking for the analysis of Alphabet Inc. (GOOGL) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 16 reasons to buy and 9 reasons to sell GOOGL stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about GOOGL stock:

  • Is GOOGL a buy or a sell?
  • Should I sell or hold GOOGL stock today?
  • Is GOOGL a good buy / investment?
  • What are GOOGL analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy GOOGL stock:

1. As the number of online users and usage increases, so will digital ad spending, of which Google will remain one of the main beneficiaries.

2. Android’s dominant global market share of smartphones leaves Alphabet’s Google well positioned to continue generating top-line growth as search traffic shifts from desktop to mobile.

3. The significant cash generated from the Google search business allows Alphabet to remain focused on innovation and the long-term growth opportunities that new areas present.

4. Alphabet is showing increased appetite in the Home Assistant space. The company made its foray into this market in October 2016 with the launch of Google Home. Google Home performs an array of tasks such as playing music, reading books, managing calendars, answering queries, searching places, calling over cabs, controlling smart home devices and so on.

5. Alphabet focuses on innovation, launching products and services for multiple industries. The development and enhancements of its search technology over time has created win-win situations wherein buyers, sellers and the public at large were benefited. The success of this strategy led to very strong growth since inception.

6. Google has been growing rapidly in this fast-growing highly-competitive cloud market. The company has signed many partnerships and has been opening data centers to extend its cloud footprint worldwide.

7. The company’s history of execution is unparalleled. Alphabet has made significant investments to diversify its revenues, but still managed strong double-digit growth, which is indicative of good management execution. The strength in the core search business was supported by the successful integration of major acquisitions (AdMob, DoubleClick, YouTube, ITA and Nest to name a few), which provided it with the technology for sustained growth in the highly dynamic and competitive markets in which it operates.

8. Although the desktop was the most popular computing device in the past, mobile search is now equally if not more popular. That is because there is a growing tendency among users to look for information at the exact time the need arises. The plethora of mobile Internet devices that are making their way to the market is making it easier on the device front.

9. Alphabet has a number of mobile initiatives. First, it is leveraging its Android OS not just to build search market share but also to drive sales of apps and digital products through Google Play. The company continues to bring improvements with each version of the OS, at the same time spurring app development.

10. Online and mobile video consumption is soaring and Alphabet remains strongly positioned here with the YouTube platform. In its race to target TV ad dollars, Alphabet allowed third-party (Nielsen and comScore) tagging of YouTube videos to determine the effectiveness of ads on YouTube versus ads shown on TV. The Google Preferred program pulls out the top 5% of the most engaging content on YouTube for advertisers.

11. Alphabet has increased focus on the online payments segment. The first phones incorporating Near Field Communication (“NFC”) technology were introduced quite some time back, but adoption was slow because it required retailers to invest in new terminals and because ISIS (the payments service created by wireless carriers) stood in the way. But Alphabet has since struck a deal with carriers, bought out most of the ISIS technology, and even acquired distribution rights for last-mile access in some cases.

12. Alphabet is clearly getting more serious about ecommerce opportunities in an attempt to diversify away from the increasingly competitive search market. For search advertising to be effective, Alphabet needs to track certain user activity, which it does through cookies (programs installed on user devices) or when users agree to share location with the Maps app.

13. Another area of diversification that is likely to gain traction over the next few years is Android Auto. This is a technology that projects the user’s Android phone (Lollipop version or later) onto a car’s dashboard enabling the use of Alphabet technology like Google Now and access to Maps, directions, music and other apps on the phone just by placing the phone in the allotted space. The phone also charges automatically.

14. GOOGL quarterly revenue growth was 16.70%, higher than the industry and sector average revenue growth (5.75% and 5.21%, respectively). See GOOGL revenue growth chart.

15. GOOGL average analyst rating is Strong Buy. See GOOGL analyst rating chart.

16. GOOGL average analyst price target ($1336.56) is above its current price ($1081.04). See GOOGL price target chart.

Now that you understand the bull case, let’s look at the reasons to sell GOOGL stock (i.e., the bear case):

1. There is little revenue diversification within Alphabet, as it remains heavily dependent on Google and the state of the search ad space.

2. Alphabet is allocating too much capital toward high-risk bets, which face a very low probability of generating returns.

3. Google’s dominant position in online search is not sustainable, as more companies and regulatory agencies are contesting the methods through which the company has been extending its leadership.

4. Alphabet faces significant litigation all over the world as a result of its dominant position in search. Regulatory scrutiny continues to worsen with the competition commission issuing several statements of objections (which precedes judicial proceedings unless settled).

5. There are also some other margin pressures: foreign currency impact, fast-paced international growth, and a growing volume of lower-priced YouTube clicks.

6. Google's Android Pay, an NFC-enabled payment system for transaction processing at a large number of retailers, faces significant competition at the moment from Apple Pay and rival payment systems: PayPal, Amazon, Samsung, Square, etc.

7. Alphabet has made numerous attempts to build a position in the social segment. This is because social networking through websites, such as Facebook and Twitter are places where people are sharing a lot of personal information and preferences that may be used to develop more customized results and thereby enable better targeting of advertisements. The fact that people are spending more time on social networks means that they are spending less time on the browser.

8. The company is likely to see an increased amount of competition from Facebook for digital advertising dollars. The social network has already taken the lead in display ads and has now doubled down on video.

9. GOOGL profitability is declining. The YoY profit margin change was -10.15percentage points. See GOOGL profitability chart.

Now let's look at the key statistics for GOOGL:

Metrics GOOGL
Price $1,149.44
Average Price Target / Upside $1,335.59 / 16.19%
Average Analyst Rating Strong Buy
Industry Internet Content & Information
Sector Technology
Number of Employees 98,771
Market Cap $800.37B
Forward P/E Ratio 24.9377
Price/Book Ratio 5.7036
PEG 1.8633
Revenue (TTM) $142.01B
YoY Quarterly Revenue Growth 14.290431767522495%
Profit Margin 19.70987958594465%

What are your thoughts on GOOGL?

If you liked this analysis, check out Buy or Sell Stock Guides for other stocks.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


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