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Tech Stocks' May 6 Earnings Roster: SYNA, MCHP, DBX & More

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·8 min read
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The technology stocks’ first-quarter 2021 results are likely to reflect an uptick in demand for digital transformation solutions, courtesy of the ongoing momentum in work-from-home and learn-from-home trends induced by the pandemic.

Increasing utilization of cloud-computing solutions and Internet services, increasing demand for high-compute capabilities’ processors, and growing proliferation of advanced technologies are expected to have benefited the tech companies.

This is evident from the scintillating performance of companies in the cloud computing domain. Amazon’s AMZN Amazon Web Services’ revenues surged 32% year over year to $13.5 billion. Meanwhile, Microsoft Azure revenues improved 46% at constant currency, driven by robust growth in consumption-based business.

Further, a rebound in the automotive space, accelerated deployment of 5G and strong PC market worldwide might have favored the technology sector in the quarter under review.

Moreover, encouraging PC shipments highlight the need for advanced processors in sleek enterprise laptops, which is expected to have contributed to the performance of semiconductor companies in the first quarter.

It must be noted that according to data from the Semiconductor Industry Association (SIA), worldwide sales of semiconductors hit $123.1 billion during first-quarter 2021, up 3.6% sequentially and 17.8% on a year-over-year basis.

In the words of John Neuffer, SIA president and CEO, as stated on Mar 1, “Global semiconductor production is on the rise to meet increasing demand and ease the ongoing chip shortage affecting the auto sector and others, and annual sales are projected to increase in 2021.”

Also, the rapid adoption of AI, Machine Learning (“ML”), cloud products and service, analytics, IoT, AR/VR, which are bolstering the adoption of cutting-edge semiconductors, might have significantly benefited the tech companies in the quarter to be reported.

Other Key Factors to Note

Solid uptick in video conferencing as a result of the current work-from-home trend is expected to have acted as a tailwind. Likewise, strengthening user penetration for online payment services is anticipated to have been encouraging for tech companies offering digital payment solutions.

Incidentally, rise in use of Internet-based services has resulted in strong demand for cloud security solutions, which favored Akamai’s first-quarter performance to a great extent.

Besides, growing clout of streaming services for entertainment, rising user penetration on social media platforms and online gaming craze are expected to have been other positives. Markedly, Facebook’s first-quarter 2021 top-line growth gained from increasing Average Revenue per User (ARPU), and growth in Monthly active users (MAUs) and Daily Active Users (DAUs).

Nevertheless, a slowdown in IT spending, and weakness across small and medium-sized businesses, due to disruptions caused by COVID-19, are likely to have weighed on the tech companies’ performance in the first quarter.

Also, a few companies aren’t witnessing as much growth due to normalizing demand for digital solutions.

This can be ascertained from ServiceNow’s first-quarter 2021 results. Although ServiceNow has been benefiting from rising adoption of its workflows by enterprises undergoing digital transformation, slowing down of growth in new customer acquisition remains a concern. The company concluded first-quarter with 1,146 total customers having more than $1 million in ACV, up 23% year over year and up 53 sequentially. However, in December quarter, the customers increased by 82 on a sequential basis to 1,093.

Sneak Peek on Upcoming Releases

Given this interesting mix of factors, let’s see how the following technology stocks are poised ahead of their quarterly results slated to be reported on May 6.

Our quantitative model predicts an earnings beat for the company with a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) as this combination increases the odds of a positive surprise.

Synaptics Incorporated SYNA third-quarter fiscal 2021 performance is likely to have benefited from a healthy backlog of $341 million, as noted by management in its last earnings call. Apart from solid bookings, a growing customer base and healthy product sell-in and sell-through patterns are expected to have acted as key growth drivers.

Notably, Synaptics is a display component supplier of Apple AAPL, which witnessed solid growth in iPhone sales in the March quarter. This is likely to have benefited Synaptics as well. Further, robust uptick in the new 5G-supported iPhone 12 family might have acted as a tailwind.

Also, the company’s market-leading position for both touchpads and secure fingerprint sensors in the PC market makes us optimistic regarding the impending quarterly release. The new design momentum with its OLED touch sensors is also likely to have contributed to the top line during the to-be-reported quarter.

Our proven model predicts an earnings beat for Synaptics this time around. The company has an Earnings ESP of +1.60% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Synaptics Incorporated Price and EPS Surprise

Synaptics Incorporated Price and EPS Surprise
Synaptics Incorporated Price and EPS Surprise

Synaptics Incorporated price-eps-surprise | Synaptics Incorporated Quote

The Zacks Consensus Estimate for fiscal third-quarter earnings has been revised upwards by a penny over the past seven days to $1.88 per share, suggesting growth of 26.2% on a year-over-year basis.

Microchip Technology Incorporated MCHP fourth-quarter fiscal 2021 results are likely to reflect gains from demand recovery across global business environment, particularly in automotive, industrial and consumer end-markets on easing of lockdowns and relaxation in shelter-in-place guidelines.

Nonetheless, broad-based coronavirus crisis-induced macroeconomic weakness and headwinds pertaining to Huawei ban are likely to have weighed on the to-be-reported quarter’s performance.

Although Microchip carries a Zacks Rank #2, an Earnings ESP of 0.00% makes surprise prediction difficult.

Microchip Technology Incorporated Price and EPS Surprise

Microchip Technology Incorporated Price and EPS Surprise
Microchip Technology Incorporated Price and EPS Surprise

Microchip Technology Incorporated price-eps-surprise | Microchip Technology Incorporated Quote

In the past 30 days, the Zacks Consensus Estimate for fiscal fourth-quarter earnings has been steady over the past 30 days at $1.74 per share, indicating an improvement of 19.2% from the prior-year reported figure. (Read More: Portfolio Strength to Drive Microchip's Q4 Earnings)

Dropbox, Inc. DBX first-quarter 2021 performance might have benefited from incremental uptake of its offerings and gains from growth in paying users amid continued momentum in work-from-home trend.

Moreover, the company has been witnessing growth in user base of Plus subscription plan for individuals, due to strength in Dropbox Transfer, Smart Sync and Dropbox Rewind functionalities.

Dropbox has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Dropbox, Inc. Price and EPS Surprise

Dropbox, Inc. Price and EPS Surprise
Dropbox, Inc. Price and EPS Surprise

Dropbox, Inc. price-eps-surprise | Dropbox, Inc. Quote

Notably, the consensus mark for first-quarter earnings has remained unchanged at 30 cents per share in the past 30 days. This suggests a surge of 76.5% from the prior-year quarter’s levels. (Read More: Growth in Paying Users to Drive Dropbox's Q1 Earnings)

Himax Technologies, Inc. HIMX first-quarter 2021 performance is likely to have gained from a rebounding smartphone market, which is expected to have led to an uptick in demand for its smartphone TDDI solutions, AMOLED driver ICs and PMIC utilized in 5G smartphones.

Continued momentum in demand for automotive driver ICs owing to recovery in the automotive sector, and increasing usage of WLO in technologies across nanoimprinting manufacturing and diffraction optics might have acted as tailwinds.

Himax has an Earnings ESP of 0.00% and a Zacks Rank #3.

Himax Technologies, Inc. Price and EPS Surprise

Himax Technologies, Inc. Price and EPS Surprise
Himax Technologies, Inc. Price and EPS Surprise

Himax Technologies, Inc. price-eps-surprise | Himax Technologies, Inc. Quote

The Zacks Consensus Estimate for earnings per share has been steady at 38 cents in the past seven days. Meanwhile, Himax reported earnings of 2 cents per share in the year-ago quarter. (Read More: Himax to Report Q1 Earnings: What's in the Cards?)

Datadog, Inc. DDOG first-quarter 2021 results are likely to reflect increased adoption of its cloud-based monitoring and analytics platform, courtesy of customer wins.

Further, the company added new monitoring capabilities to troubleshoot DNS issues and strengthened Datadog APM with new Deployment Tracking feature. These are likely to have acted as tailwinds and contributed to top-line growth in the to-be-reported quarter.

Datadog has an Earnings ESP of -31.03% and a Zacks Rank #3.

Datadog, Inc. Price and EPS Surprise

Datadog, Inc. Price and EPS Surprise
Datadog, Inc. Price and EPS Surprise

Datadog, Inc. price-eps-surprise | Datadog, Inc. Quote

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 3 cents per share, steady over the past 30 days. (Read More: Datadog to Report Q1 Earnings: What's in the Cards?)

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