AmigoBulls Internet Weekly Jul 29, 2013

The Q2 2013 (Jun 2013) earnings season brought along a fair dose of pleasant surprises, as quite a few internet companies declared earnings surpassing analyst estimates. Though the analysts’ expectations were muted by macro concerns, the stock price of the outperforming companies like Facebook stock, Baidu stock took an upturn once the results were out.

To continue with the trend of the earnings season, many more internet companies are reporting the quarterly earnings tomorrow and the day after. A few of our favorite stocks are reporting too:

IACI Stock

We anticipate IAC Interactive Group (IACI) to beat the current analysts’ earnings consensus, which is at $0.83 for June 2013. The company had reported a spectacular March 2013 quarter with IACI top line growth of 15.8% along with an earnings increase of 61%. The mean target price for IACI stock as per consensus earnings preview is $58 (12% increase from Friday’s closing price). (See: IACI stock analysis)

IACI eps chart
Source: IACI EPS chart by Amigobulls

Shutterfly Stock

We are also positive about Shutterfly (SFLY) and expect the company to post a good earnings quarter. However, we find that there may not be any further upside to the current target price and the market price for Shutterfly stock. (See: Shutterfly stock analysis)

Ctrip Stock

Ctrip international (CTRP), the Chinese travel company will declare its June 2013 earnings on Jul 31, 2013 after market close. Analyst estimates put the quarterly EPS estimate at $0.29. We expect the company to post a strong YoY revenue growth but a key metric of the company’s performance will be the change in the profit margins, which declined during the last quarter. Overall we are positive about Ctrip stock coming out on top of estimates and maintaining its history of earnings surprise. So we will keep a close watch on this one to notify you of the surprise this one brings your way on Wednesday evening. (See: Ctrip stock rating)

We are also keeping a watch on macros, as to what is known as “the triple bill” i.e. the macro impacts on the Earnings Season’s second innings. Overall, the first innings turned out to be stronger-than-expected, thereby pushing up the earnings estimates for the second half.

Baidu Stock: Strong Earnings

Baidu (BIDU) posted a strong earnings quarter was backed by a substantial addition of new users resulting in a revenue growth of 38% YoY, with the only concern being the increased selling expenses brought about by stiff competition. Although the company barely beat the EPS estimates, the market responded with a 12.5% jump in Baidu stock price over the three days following the earnings announcement. (See: Baidu stock analysis)

Baidu revenue Q2 2013
Source: Baidu revenue chart by Amigobulls

Expedia Stock: Poor Earnings

Expedia (EXPE) posted highly disappointing results, calling out one of its worst quarters. Expedia stock price declined by more than one-fourth, closing at $47.2. Few analysts question if this is a warning sign from the online travel agency industry. Rising expenses, increased competition and its car-rental segment dragged down the EPS (Earnings Per Share). Wary of the signs, investors also reacted negatively pushing down the price of Priceline (PCLN) stock by 1.3% on Friday. (See: Expedia stock analysis, and Priceline stock analysis)

Amazon Stock: Poor Earnings Too

Expedia wasn't the only bearer of bad news, Amazon (AMZN) joined the club too. As usual, Amazon CEO, Bezos baited the investors with a risky proposition of new segment businesses like grocery delivery and tablets. eBay (EBAY) had already offered weaker guidance too due to continued sluggishness in Europe and the UK.

Of course, the companies beating analysts' estimates outnumbered the meek ones. Few of these include Shanda Games, Akamai, Facebook, Baidu, Xoom Corp., Co-star Group, etc. Overstock had witnessed an increase of 20.4% post the announcement of its earnings results. However, most of the top performing companies had a cautious future outlook.

Overall, the past week was quite interesting with unimaginable twists to the guidance vs. estimates vs. actuals. The stock market seems optimistic with an underlying fear of another bubble’s outburst. In our opinion, we do see a slow and steady increase in the market.

Upcoming Earnings Call

Nutrisystem (NTRI), Bankrate (RATE), QuinStreet (QNST), Sohu.com (SOHU), Shutterfly (SFLY), Stamps.com (STMP), Trulia (TRLA), United Online (UNTD), WebMD (WBMD), Ctrip (CTRP), Digital River (DRIV), NIC (EGOV), EarthLink (ELNK), IAC Interactive (IACI), LivePerson (LPSN), Move (MOVE), and Monster Worldwide (MWW).

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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