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Facebook Inc (FB), Alibaba Group Holding Ltd (BABA) Are Among Stocks to Watch

Kyle Woodley

If you're still hungry for seconds after last week's earnings bonanza, don't worry -- Wall Street has a heaping bowlful of excitement for you that's headlined by Facebook Inc (ticker: FB) and Alibaba Group Holding Ltd (BABA).

Last week, Tesla Motors ( TSLA) delivered a shock profit, and Alphabet ( GOOGL, GOOG) pleased the analysts. Meanwhile, Apple ( AAPL) and Amazon.com ( AMZN) both took precipitous dips as recent goodwill finally ran dry. Then the whole market took a step back as the FBI offered up its own "October surprise."

But we're not out of explosive news yet. Here's a look at this week's quintet of earnings reports most investors should be watching:

Facebook. You can't ask for much more consistency out of Facebook, which has rocketed 150 percent higher in three years. It's all the returns of a momentum stock, but with far less nausea.

That's what you get when you beat lofty earnings expectations since mid-2013.

Third-quarter estimates are no cakewalk, either. Wall Street sees Facebook amping up profits by 70 percent on revenue growth of nearly 54 percent. But while that seems like a recipe for disappointment when FB reports after Wednesday's bell, doubting Facebook might be the same losing proposition it has been for years.

Leading Facebook ad company Nanigans recently posted its quarterly report, which included some eye-popping third-quarter numbers. Advertisers' budgets for Facebook spend (through Nanigans) shot up 249 percent from last year, sparked by an average 26 percent increase in return on ad spend for the quarter.

[See: 7 Notable Quotes From Warren Buffett.]

Meanwhile, RBC Capital's Mark Mahaney recently reiterated an "outperform" rating on Facebook stock ahead of its report, believing the top and adjusted bottom lines will come in ahead of the consensus. Mahaney is a long-term bull on FB, too, touting the company's upside in area such as virtual reality (via Oculus) and Instagram while also pointing out user growth for the core product is going "at a reasonably robust pace."

Alibaba Group Holding. Alibaba has been on heck of a run, too, up 25 percent for the year after a lackluster 2015. And it too faces high expectations, with analysts looking for 21 percent profit growth to 69 cents per share on 44 percent revenue growth to $5.03 billion when Alibaba reports fiscal second-quarter earnings Wednesday morning.

Just like Facebook, BABA earned a small show of confidence from analysts ahead of its earnings report. In this case, it was Citi's Alicia Yap, who ticked up her price target on shares from $112 to $113 while maintaining a "buy" rating. However, her note isn't all sunshine, as Yap expects EBIDTA margins to fall back 6.5 percentage points to 43.8 percent.

Look for Alibaba to benefit from China's stabilizing economic growth, which hit government estimates of 6.7 percent for the calendar third quarter. Retail sales were boosted between 10 and 11 percent across the past three months.

However, investors might be more interested to hear about any expectations for the current quarter, which will include the massive Chinese shopping holiday, Singles' Day. BABA demolished its previous record for Singles' Day revenues last year with $14.3 billion.

Starbucks Corp. (SBUX). Former growth darling Starbucks has been struggling for nearly a year now, with shares off 16 percent since peaking at all-time highs at $64 in late October 2015, including 11 percent declines year-to-date.

There's no secret to Starbucks' struggles: The company just hasn't been able to impress the pros. SBUX had a dreadful third-quarter report in July that included revenue and comparable-store sales misses, in-line earnings and a lowered full-year sales forecast. That followed a similar second quarter in which profits matched and revenues missed amid criticism over its reworked rewards system.

[See: 7 Stocks to Buy for the Fourth Quarter.]

Particularly worrisome is the 4 percent comps growth in the Americas, which previously had remained above the 5 percent mark for 25 consecutive quarters.

Starbucks' answer? It's doubling the number of planned openings for cafes focused on the brand's more expensive Reserve coffees, to 1,000 by 2021, and also expanding its cafe count in China from 2,300 to 5,000 over the same time period.

For now, though, Starbucks has to get through Thursday, where it faces aggressive estimates of 28 percent profit growth and nearly 16 percent revenue growth.

Square (SQ). Twitter ( TWTR) CEO Jack Dorsey has come under plenty of fire for his inability to pick the social media giant up off the ground. And he hasn't exactly done much for Square this year, either.

Square is off 15 percent in 2016 while the payment operators it's trying to disrupt -- Visa ( V) and MasterCard ( MA) -- are both up in high single digits. Shares have traded below their November 2015 initial public offering price of $9 per share a few times in the past year, and that's largely a reflection of investors' worries over the company's business model and profitability.

While Square charges businesses a higher-percent fee than the likes of First Data Corp. ( FDC) and Global Payments ( GPN), it also absorbs the 20-cent fee that goes to payment services companies like the aforementioned Visa and MasterCard, which can kill it on smaller purchases.

Square is expected to take an 11-cent-per-share loss on nearly 30 percent revenue growth, and analysts still see robust 32 percent sales improvement for the year. But that figure is decelerating, and while net losses are expected to contract from $1.06 per share to 60 cents, the lack of profitability in this 7-year-old company is becoming worrisome.

Twilio (TWLO). Twilio's honeymoon appears to be over. Following a June IPO at $15 per share, TWLO spiked more than 370 percent to just below $71 in late September. At that point, it was trading at more than 11 times current-year revenue projections.

But from there, shares have been cut in half, fueled in large part by the early October announcement of a secondary offering. Bears are still hounding TWLO, too, with more than two-thirds of the float sold short.

Twilio's Thursday report might be a chance for the cloud communications company to rebound, but that potential might be muted, as TWLO already pre-announced third-quarter earnings mid-month. Twilio did say operational losses could expand from $8.9 million in the year-ago period to a range between $11.75 million and $12.25 million.

[See: 20 Awesome Dividend Stocks for Guaranteed Income.]

But otherwise, the numbers were gaudy. The company expects 43 percent improvement in active customers, to more than 34,000, 60 percent revenue growth to between $70.25 million and $71.25 million, and a thinner adjusted loss of 4 to 5 cents per share. The latter two estimates are better than expectations for $66.8 million in revenues and an 8-cent-per-share loss.



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