Internet stocks are outperforming the broader market, SunTrust Robinson Humphrey said in a review of second-quarter earnings season.
Top-Line Momentum Strong
The number of companies reporting revenue beats was higher than historical levels and also well above the proportion of S&P 500 companies reporting revenue upside, analyst Youssef Squali said in a Monday note.
Squali highlighted strong and weak pockets within SunTrust's coverage universe.
Large-cap tech names such as Amazon.com, Inc. (NASDAQ: AMZN), Facebook, Inc. (NASDAQ: FB) and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) reported both earnings and revenue beats despite public scrutiny over data and privacy concerns, the analyst said.
The social media names Facebook and Snap Inc (NYSE: SNAP) also reported better-than-expected revenue and earnings, Squali said. Twitter Inc (NYSE: TWTR)'s revenue exceeded estimates, and its EBITDA was in-line.
The travel names in SunTrust's coverage universe mostly surprised to the upside on revenue and earnings, although Tripadvisor Inc (NASDAQ: TRIP) missed slightly on revenues, the analyst said.
The strength of EBITDA beats by internet companies in SunTrust's coverage universe was slightly lower than those of S&P 500 companies, he said.
Uber's London Business
Uber Technologies Inc (NYSE: UBER)'s short-term license to operate in London is expected to expire Sept. 25. It's likely to be renewed for another short term, Squali said, quoting Sky News.
Following the expected expiration of its short-term license to operate in London Sept. 25, is likely to be renewed for another short-term, SunTrust said, quoting a Sky News report.
The analyst said maintaining the license — at least through a short-term agreement — is a positive for the stock.
Amazon-FedEx Severing Ties Has Little Impact On E-Commerce Giant
FedEx Corporation (NYSE: FDX)'s decision to end the contract to deliver Amazon packages through its ground networks should have little impact on Amazon, given that FedEx makes up a very small amount of Amazon's network, Squali said.
"What has been a frienemy relationship focused on mutual short-term benefits seems to now be turning into one where long-term strategic considerations lead," the analyst said.
SunTrust expects the development to benefit United Parcel Service, Inc. (NYSE: UPS), which has a stronger relationship with Amazon.
Snap GAAP Profitable In 2022?
Snap's $1.1-billion convertible debt offering is an indication of improving prospects at the company, Squali said. The analyst noted that prior to the offering, the company had about $1.2 billion in cash.
Squali expects Snap to be GAAP profitable in 2022.
Apple Restriction Unlikely To Hurt Facebook
Apple Inc. (NASDAQ: AAPL) is reportedly looking to restrict certain app access through the PushKit VoIP API, as it is capable of collecting data in the background of apps, with WhatsApp, Messenger, Snap, WeChat among those affected, the analyst said.
The analyst does not expect the restriction, which is to go into place in April 2020, to have a major impact on Facebook's business in the short term.
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