Facebook and LinkedIn reports come amid a quarter of big stock moves
It's been a breakout for the technology sector so far in this second-quarter earnings reporting season. The problem is just as many stocks are breaking out with disappointments as positive surprises.
Instead of typical stock moves of one or two percent, tech companies have been lighting up the market with huge swings. Google (GOOGL) jumped 16%, equal to $65 billion in market cap, the day after its report, Amazon (AMZN) gained 10% and Netflix (NFLX) rose 18%.
Downside moves have been somewhat more modest, with Apple (AAPL) and Microsoft (MSFT) losing 4% each and IBM down 6%. Today Twitter (TWTR) is off 14% and Yelp (YELP) a staggering 29%.
With Facebook (FB) and LinkedIn (LNKD) on deck, analysts expect more fireworks.
Expectations for Facebook, which reports on Wednesday, are high but analysts have been holding steady lately. The dominant social network has been doing everything right in Wall Street's view and has the stock market performance to show for it -- up 23% so far this year, with half the gain in the past month alone.
At the same time, analysts have tempered their excitement. They expect Facebook will report a 37% jump in revenue, to $4 billion, and adjusted earnings per share of 47 cents, up 12%, according to FactSet. Those consensus numbers haven't changed much in months -- $4 billion of revenue was the average estimate back in March and adjusted EPS have increased only one penny since then.
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Analysts also expect Facebook will report 962 million daily active users, up from 936 million at the end of the first quarter, and 1.48 billion monthly actives, up from 1.44 billion. As Twitter found out the hard way, disappointing user growth can have just as harsh an impact on a company's stock price as disappointing financial results.
Shares of Facebook haven't moved much over its past four earnings reports -- less than 3% on average -- but, as noted, this has been the quarter for outsized moves.
LinkedIn is still trying to recover from its first-quarter earnings report, when the company offered a weak forecast for the rest of the year on higher-than-expected costs to integrate Lynda.com, sales force turnover, the display ad market shrinking and a few other excuses.
After disappointing on several fronts, LinkedIn will need to repair the damage with a strong showing in multiple areas. Analyst Martin Pyykkonen at Rosenblatt Securities offered a half dozen bullet point areas of concern for investors to monitor, including the Lynda.com integration, sales trends in the talent solutions business and user engagement metrics.
"We continue to think LNKD is among the best positioned Internet companies fundamentally," Pyykkonen writes in his latest update on the company on Wednesday. "But the recent changes in the corporate salesforce and account management warrant close monitoring from here."
Analysts expect LinkedIn will report sales of $680 million, up 27% from last year, and adjusted earnings per share of 30 cents, down from 51 cents, according to FactSet. As for the full-year forecast, analysts expect LinkedIn will bring in $2.9 billion in 2015 with adjusted EPS of $1.93.
Last quarter's disappointments led to a 19% plunge in the stock price. Shareholders are hoping this week's report can reverse course.
