Trading Nation

Big Tech earnings are out. Five market analysts on what to make of the reports

VIDEO4:1204:12
Big Tech reported earnings — Here's how five market pros are breaking down the numbers

Investors are busy digesting Big Tech earnings.

Facebook, Apple, Twitter, Amazon and Alphabet all reported earnings on Thursday to a tough crowd on Wall Street, jittery with a pivotal presidential election less than a week away and overwhelmed by the busiest day of the reporting season.

Shares of Facebook, Apple and Amazon all fell roughly 6% in Friday trading, with Twitter taking a greater than 20% hit. Alphabet shares were up 4% in afternoon trading.

Market analysts were largely keeping their expectations for the tech giants high. Here's what five of them told CNBC about the reports:

Facebook earnings: Surprising strength

Joe Terranova, chief market strategist at Virtus Investment Partners, said he was most surprised by Facebook's strength, particularly after widespread advertiser boycotts:

"I think the surprise for Facebook … [was] the July boycott. I think there was an expectation that we would really see a detrimental impact, but I think on the other side of this, as our good friend Kevin O'Leary has often talked about, [is] small businesses. It is so critical to conducting your business that you remain advertising on Facebook. It's just so incredibly purposeful. And I think it's reflected … in the strength of the numbers that were presented there."

Apple earnings: Cautiously bullish

Gene Munster, managing partner of Loup Ventures, wasn't surprised by Apple's lack of forward guidance:

"Apple hasn't given guidance since the pandemic started, so, this is consistent with what they've done before. Second is the iPhone miss. We've talked about that it's because of the timing of iPhone 12, missing a couple weeks in the quarter, but we haven't really qualified what that impact is. And [CNBC's] Josh Lipton said something important in his interview with [Apple CEO] Tim Cook mentioning that the iPhone was growing in low single digits by mid-September. That's really when the comps start to get kind of goofy. So, if you add in that 3% — assume it was on a trajectory to grow at 3% — and you look at Apple's overall revenue growth rate, you're going to get to 14-15% year over year in the quarter. That's a step up from 11% in the June quarter. So, actually, their growth accelerated. And you could argue that that is to be expected given [how] they're benefiting from work and learn from home. You could argue that that is an achievement because of where the world is at. I tend to favor the second perspective, that this is really impressive, what they're doing. … There is a key takeaway from the quarter or from this conference call. They are trying to give some guidance, trying to nudge people along. It is a subtle sign of confidence. And Tim Cook said — I counted — three times that he's bullish."

Twitter earnings: More than users

John Freeman, vice president of equity research at CFRA, raised questions about Twitter's growth prospects:

"There's only so many users I think it can grow in a given quarter. It has … a more narrowly defined sort of user base and kind of a hierarchy of those users, right? So, I think the growth driver for Twitter going forward from my perspective was really monetization, not user growth. And they have made some progress there, but obviously, the stock has, what, doubled since April? So, obviously, there's a lot more valuation-sensitive components to it when Twitter can't really blow out the numbers on the top line like some of these other social networks."

Amazon earnings: Execution challenges

Tom Forte, managing director and senior research analyst at D.A. Davidson, saw challenges ahead for Amazon:

"I think the fourth quarter is going to be incredibly challenging for Amazon, as the year has been, when you think about maximizing revenue and e-commerce to the extent that they're having challenges at their fulfillment centers as far as getting in products and out products as quickly as possible. So, the hope was having Prime Day in October would improve their yield at the fulfillment center level and help them maximize sales in the holiday quarter, but I do think this is going to be a challenge for the company."

Alphabet earnings: Buying opportunity

Karen Finerman, co-founder and CEO of Metropolitan Capital Advisors, said Alphabet deserved a higher valuation:

"Remember, Google has one of the biggest cash hoards ever. And so, we saw a little bit of buyback here. I think it was maybe about [$]8 billion. I'd like to see them do more, but this is really a validation. And remember, Google has much more exposure to the travel business, and obviously, travel business is not where you want to be right now, and so, I think that they're going to continue to see improvement. It should be higher. It's actually been surprisingly weak. So, if I didn't own any, I would probably buy some, even up — it's hard to buy something up this much, but I would want to own it because this is an extraordinary business and there's a lot to like. And remember, this is an evolution. When [Alphabet CFO] Ruth Porat got there, it was sort of a grown-up and then … they broke up the two businesses. We started to get more clarity. We'll get some more on cloud. So, I really like this name."

Disclaimer