For Immediate Release
Chicago, IL – Feb 13, 2018 – Zacks Equity Research highlights Twitter TWTR as the Bull of the Day, GoPro Inc. GPRO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cisco Systems CSCO.
Here is a synopsis of all three stocks:
Bull of the Day:
As one of the most ingrained social media platforms in the public sphere, as well as a favorite method of communication for President Donald Trump, Twitter has been an important networking tool since its launch in 2006.
The app and website has become a preferred way for many people to find out what’s happening in the world, and discover what people are talking about at any moment. It utilizes hashtags, especially trending hashtags, to create a sense of community and connection.
However, it’s no secret that Twitter has faced serious headwinds over the years, in addition to Russians using the platform to disrupt the 2016 election, the rise of buying fake followers, and users deciding to sign off for good.
Its last quarter was impressive, and while one good quarter is not much to bank on, Jack Dorsey’s flagship company seems to be finally figuring out its business.
Twitter Posts First Ever GAAP Profit
Last week, Twitter, a Zacks Rank #1 (Strong Buy) stock, posted incredibly strong fourth quarter results, and its stock skyrocketed as a result.
Most importantly, the company reported, for the first time ever, GAAP profit of $91 million. Adjusted net income of $141 million, or 19 cents per share, which beat the Zacks Consensus of 14 cents per share; this represented a 72.7% year-over-year jump.
Revenues of $732 million grew just 2% from the year ago period and beat the Zacks Consensus as well.
Adjusted monthly average users (MAUs) totaled 330 million, which was flat sequentially but up 4% on a year-over-year basis. This increase was driven by 2% growth in U.S. MAUs and 4% growth in international MAUs.
Daily average users (DAUs) increased 12% year-over-year, marking Twitter’s fifth consecutive quarter of double-digit, year-over-year growth for this metric. In particular, DAUs were helped out by growth in five out of the top 10 global markets.
Bear of the Day:
Founded in 2002, GoPro Inc. is a wearable camera maker that is known for its HERO line of action cameras and related accessories; it also unveiled its new Fusion camera, a 360 camera aimed at “prosumers.” The company had also developed the Karma drone, though news recently broke that the division is now permanently shuttered.
The company has sold over 26 million GoPro cameras in more than 100 countries, and is headquartered in San Mateo, California.
Sitting at Zacks Rank #5 (Strong Sell), GoPro was hit hard by dismal fourth-quarter results, but could a restructuring help the stock rebound?
Weak Q4 Performance
A couple of weeks ago, GoPro reported weaker-than-expected fourth quarter results.
Adjusted net loss of 30 cents missed the Zacks Consensus of a loss of 10 cents per share, and is in stark contrast to earnings of 29 cents posted in the year-ago quarter. Investors should note that GoPro has lost money in seven of the last 10 quarters.
Revenues fell over 38% year-over-year to $334.8 million, missing both our consensus estimate of $384 million and its preliminary estimate of $340 million. The top line took a big hit because of discounting to its Karma drones and Hero cameras.
Breaking it down by region, the company saw a 35.9% decline in the Americas to $175.7 million, while Europe plummeted 46.7% to $89.6 million. Sales in the Asia-Pacific region contracted 29.5% to $69.5 million.
However, there was a bright spot: GoPro noted that it holds over 80% of the action-camera market in the U.S., by unit volume. The camera manufacturer also saw its unit sales rise 28% and 96% year-over-year in China and Japan, respectively.
Earnings Estimates Lowered
As a result, GoPro’s earnings growth trajectory has taken a hit lately, with analysts becoming more bullish on the media company.
For the current quarter, two analysts have cut their outlook in the last 30 days, and the consensus has fallen from $-0.27 to $-0.36.
Seven analysts have revised their estimates downward for the current fiscal year, though earnings are expected to grow over 46% in that time frame.
Looking at the next fiscal year, earnings could grow over 90%, analysts have been slashing their outlook for this time period as well. And, the current consensus has dipped from $0.35 to $-0.04 in the last 30 days.
Why Cisco Systems Is Gaining Ahead of Earnings
Stocks opened higher on Monday morning as global investors looked to quickly rebound from the market’s worst week in two years. One of the morning’s notable gainers was Cisco Systems, which surged more than 3% in early trading hours, just two days before the tech conglomerate is set to release its latest quarterly earnings results.
Cisco is a global leader in information technology. The company is best known for its networking hardware and telecommunications equipment. Cisco also works to empower budding tech markets such as Internet of Things, security, and energy management. With a market cap of over $180 billion, Cisco is one of the largest IT firms in the world—meaning that its earnings report could be a major market mover.
Shares of the technology powerhouse gained on Monday morning thanks to a brand-new analyst report that suggested Cisco is poised for a major surge on the back of an upcoming hardware upgrade cycle.
“We believe Cisco's webscale switching wins are durable and its window for a campus switching refresh will extend through 2019,” wrote Nomura Instinet’s Jeffrey Kvaal in a note to clients. “Now is the time for networking juggernaut Cisco.”
Nomura upgraded Cisco shares to a “buy” rating from “neutral” and raised its price target for the stock to $46 from $33. That call would represent a 16% upside to Friday’s closing price.
Cisco is scheduled to release its fiscal second quarter earnings report on Wednesday. Based on our current consensus estimates, we expect the company to post adjusted profits of $0.59 per share and total revenues of $11.82 billion. These results would represent year-over-year growth rates of 3.51% and 2.05%, respectively.
But Nomura thinks that the real opportunity for Cisco lies further ahead. The firm estimates that Cisco will generate full-year earnings of $2.58 per share in fiscal 2018, which is noticeably higher than our consensus estimate of $2.47 per share.
“Cisco appears well-positioned to gain share from Extreme, Juniper, and Avaya which have generally been weak in campus,” Kvaal continued.
The analyst said that Cisco increased its share of the ethernet switch market to 53% from 49% in the third quarter of fiscal 2017. Kvaal thinks those gains will continue into fiscal 2019. Investors looking to spot any hints of this trend should make sure to pay close attention to Cisco’s latest results on Wednesday.
Want more analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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