Looking Ahead to Earnings Season, China Internet Stocks Rebound, and Today's Winners and Losers
After Monday's mammoth gains, technology stocks bucked an otherwise flat market and closed the day up 0.66%. We're checking in on the top storylines driving technology's recent resurgence.
Tech News No. 1: A Look Ahead to Earnings Season
The broader earnings season kicked off today with Alcoa reporting results, but technology begins its earnings season in earnest when Google (NAS: GOOG) reports on Thursday. Estimates for the quarter look pretty modest, with analysts expecting $8.74 in adjusted earnings; that'd be exactly even with the stellar earnings Google delivered last quarter. In focus will be any additional insights into Google's buyout of Motorola Mobility, updates on Google+ and any comments on its user engagement, and -- as always with Google -- where operating expenses come in.
Looking ahead in tech earnings, next Tuesday should provide a good look into how this technology earnings season should play out. Here are three earnings calls to watch next week:
- If there's one certainty on Wall Street, it's that Apple (NAS: AAPL) will continue its Joe DiMaggio-like streak of clobbering earnings expectations. Wall Street is currently sitting on $7.20 in adjusted earnings per share, up from an estimate of $7.02 just 30 days ago. The chorus of analysts upping their target should continue in the coming days as the pros try to get ahead of another record performance out of Cupertino. Apple closed today up 3%.
- Intel (NAS: INTC) should not only give some insight into general chip and PC demand, but it could also shed light into whether China is experiencing a slowdown. China recently became the world's largest PC market and has been powering Intel's returns in recent quarters. These concerns haven't led to much optimism surrounding Intel in recent weeks; its quarterly earnings estimate sits at $0.61 per share, below projections from 60 days ago.
- Finally, EMC (NYS: EMC) will shed some light on the state of IT spending. Oracle's (NAS: ORCL) latest earnings pointed toward a stabilizing IT environment after spending clamped up at the end of July amid economic fears. With data management and storage increasingly becoming a mission-critical area in IT spending, EMC's results will offer a good indicator of whether IT spending continues rebounding from its late-July fall.
Tech News No. 2: China on the rebound
A far-reaching upgrade of Chinese Internet stocks from Barclays that included Baidu (NAS: BIDU) , SINA (NAS: SINA) , and Sohu (NAS: SOHU) on Monday is widely cited for helping drive the sector higher. However, there's more at play here. Chinese Internet stocks were amongst the hardest hit this summer. Growth-oriented U.S. Internet stocks were also hammered during this time, but the Chinese Internet sector had the added triple-whammy of increasing fears that the Chinese economy is slowing, added scrutiny from regulators, and concerns that the Chinese government was reconsidering the structure Chinese companies use to list. So it's only natural the segment would rebound faster if optimism returned to the markets. There's quite a bit of uncertainty left in the market, and the sector could still see plenty of ups and downs, but even after the dramatic gains in the sector in the past week, most Chinese Internet stocks are well below their 52-week highs.
Tech News No. 3: Today's Gainers and Laggards
- Sprint Nextel (NYS: S) was up more than 7% today. The company was hammered on Friday and Monday after it announced aggressive plans to build out its 4G network. Investors fretted that the company wouldn't have the capital to fund its buildout -- Sprint has $4.2 billion in cash and $18.5 billion in debt and has generated $2.2 billion in cash flow in the past 12 months -- and abandoned the stock yesterday. There were six -- six! -- downgrades on Monday alone. However, the company found a defender today. FBR Capital named the company its top telecom pick, arguing that Sprint could refinance debt as a means for finding capital for its buildout.
- Research In Motion (NAS: RIMM) saw a 5% gain. Activist investor Jaguar Financial said it now has 8% of shareholders behind its plan to shake up the company. That investors are so willing to get excited by a plan from a small investment shop like Jaguar shows the desperate straits RIM finds itself in. Despite continuing high BlackBerry shipments, the company is losing market share in North America and posted negative free cash flow last quarter.
- Netflix (NAS: NFLX) continues getting hammered. The stock initially soared by more than 10% after it announced on Monday that it planned to reverse its decision to split itself. However, optimism was short-lived, and the selloff continued into today. Shares closed down another 3% and were down more than 6% in early trading. After a series of snafus and PR flubs, CEO Reed Hastings seems to have lost investors' faith in his leadership.
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At the time this article was published Eric Bleeker owns shares of Cirrus Logic. You can follow Eric on Twitter to see all of his technology and market commentary.The Motley Fool owns shares of Intel, Google, Apple, Oracle, and EMC.Motley Fool newsletter serviceshave recommended buying shares of Google, Sohu.com, SINA, Intel, Netflix, Apple, and Baidu, creating a diagonal call position in Intel, creating a bear put spread position in Netflix, and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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