Another round of major tech companies including Apple Inc are reporting earnings today. Alibaba deliver another earnings beat.
Today will be another big earnings day on the Wall Street with big names like iPhone maker Apple Inc (NASDAQ:AAPL), eCommerce giant Alibaba Group Holding Ltd (NYSE:BABA) and Starbucks (NASDAQ:SBUX) will be coming out with their September quarter earnings report. Yesterday, the social media giant Facebook and electric car manufacturer Tesla had reported their third-quarter earnings. While Facebook continued to deliver strong performance, Tesla stock tanked around 10% after the company delayed 5000/week Model 3 production target by three months.
Apple Inc Will Need To Deliver On All Fronts.
Coming to today's earnings, all eyes will be on the Cupertino based iPhone Maker Apple Inc which will report its fiscal fourth quarter earnings after the closing bell. While Apple stock traded lower yesterday, the stock has rallied to its new all-time high in the last few trading sessions with analysts raising their price target on Apple stock in anticipation of strong demand for the flagship iPhone model, iPhone X. The recent stock rally has sent Apple's market cap soaring to around $870 billion. In the last one year, Apple stock has rallied over 50% on the hopes of an iPhone Supercycle. Now, the day has come when Apple must justify the rally in the stock price.
Apple needs to deliver not only strong earnings but also a strong guidance for the next quarter. Analysts expect Apple Inc to report a non-GAAP EPS of $1.87, a YoY growth of 24.67% over the last year same quarter earnings. This is also higher than last quarter EPS of $1.67. On the top line front, Wall Street expects Apple to report revenues of $50.7 billion, representing over 8% YoY growth. The fourth quarter results will contain two weeks of iPhone 8 sales, which the company had launched in mid-September. The initial response to this latest iPhone has not been great, both in U.S and the rest of the world as many consumers do not see any major changes from the previous iPhone versions. In fact, latest report suggests that many consumers are preferring iPhone 7 over iPhone 8.
However, it's not only iPhone 7 sales which is getting a boost but also the flagship iPhone X which is reportedly enjoying strong demand. While many were skeptical about the prospects of $1000 phone, the recent commentary by the management suggests otherwise. Within minutes of Apple opening pre-orders for iPhone X, delivery times had pushed out to as long as six weeks. In a statement, Apple said that "We can see from the initial response, customer demand is off the charts." Also, according to a survey conducted by RBC Capital Markets, a majority of the likely iPhone X buyers will choose the higher end version of iPhone X which is priced at $1,149, meaning higher ASP.
However, while iPhone will dominate Apple's earnings, it's not all about iPhone X. Investors will also be watching out for the services segment which not only has faster growth but also fatter margins. It has grown at a CAGR of around 23% per year over the last five years. iPad and Apple Watch Series III will also figure prominently in Appel's Q4 earnings. Apple will need to deliver strong performance on all fronts to sustain the stock rally. You can read our detailed earnings preview for Apple here.
Alibaba Group Holding Ltd (NYSE:BABA) Delivers Another Earnings Beat. Alibaba Stock Is Headed Higher.
[Update: Alibaba delivered another quarter of strong results, beating both the top and the bottom line estimates. The company reported non-GAAP EPS of $1.29, beating analysts estimates by 26 cents. On the top line front Alibaba reported revenues of $8.29B, a massive 60.77% YoY growth, and $440 million higher than what analysts were expecting. The company generated approximately US$3.4 billion in non-GAAP free cash flow during the quarter. Core-commerce continued to be the main growth driver. Core commerce revenue increased by 63% year-over-year to RMB46,462 million (US$6,983 million). As expected, the cloud business continued to deliver strong growth. Cloud computing revenue nearly doubled from last year to RMB2,975 million (US$447 million).
"We are seeing the early results from our efforts to integrate online and offline with our New Retail strategy, and consumers have benefited from access to high quality products, improved customer experience and the tremendous convenience of shopping anytime, anywhere." Alibaba CEO Daniel Zhang said in the earnings report.]
Another major tech company which will be reporting their earnings today will be Chinese eCommerce giant Alibaba. Alibaba has had a good year so far, delivering strong performance and guiding for significantly higher than expected growth in the coming years. The market has rewarded this strong performance by driving Alibaba shares much higher. In the year-to-day period, Alibaba stock has more than doubled, returning over 110%. And investors expect Alibaba stock to continue its rally in the coming months.
Analysts expect the company to report revenues of $7.85 billion, 52.1% higher than what the company had reported in the year-ago same quarter. On the bottom line, Wall Street expects Alibaba Group to report $1.03 in non-GAAP EPS, translating to more than 30% YoY growth. This though is lower than earnings of $1.17 per share, a 58% YoY growth, the Chinese eCommerce company had posted in the previous quarter. There were some concerns about the impact of consolidation of Cainiao Smart Logistics Network Ltd financials on Alibaba's bottom line as Cainiao is a loss-making business. However, Cainiao is very small compared to Alibaba and is unlikely to have a major impact. Alibaba has a decent record of trumping analysts estimates and going by the so-called whisper numbers, it is likely to deliver a beat again this quarter. Read our full coverage on Alibaba here.
Things To Watch out For During Starbucks Corporation Earnings.
The Coffee chain Starbucks will also be reporting its third-quarter earnings today, after the markets close. Like most of other retail chains, Starbucks stock has been under pressure for over two years now. SBUX stock is down more than 10% in the last two years and is almost flat for the year. Company's last quarter earnings were weak and the stock had corrected by around 5% after the company had guided lower for the year. For the fourth quarter, the company and the Wall Street expect non-GAAP EPS of $0.55, lower by a cent from the last year comparable quarters earnings. Analysts expect revenue of $5.81 billion, up 1.6% from $5.71 billion it had reported last year same quarter.
The key things to watch during the earnings will be same-store sales growth, mobile-order-and-pay usage and continued expansion in China. Analysts are expecting Starbucks to post a 3.3% increase in global same-store sales for the quarter, with a 3.4% increase in the Americas. China has been a bright spot for the company, posting strong same-store sales growth. The company will continue to drive expansion in China. It expects China to one day overtake the U.S. as its largest market. Investors should also watch out for an update on its future guidance. Starbucks has been reporting earnings on the lower end of its 15% to 20% annual earnings-per-share growth target.
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