Visine ($FEYE Earnings)

FireEye (FEYE) is set to report Q3 results tonight after the close with a conference call to follow at 5pm ET. FEYE is expected to report results at 4:01pm. Current Capital IQ consensus stands at a Loss of ($0.31) per share on Revenue of $182.26 mln.

Analysts remain cautious on the company ahead of the Q3 report as channel checks are suggesting an in line quarter at best. There is some hope though as FEYE released there new MVX sensor product in August and a new cloud product that will allow the co to reach smaller price-sensitive customers is expected on the horizon (most are hoping it will be announced this afternoon).

Q2 Recap

• FEYE reported Q2 (Jun) loss of $0.33 per share, excluding non-recurring items, $0.06 better than the Capital IQ Consensus of ($0.39). Revenues rose 18.9% year/year to $175 mln vs the $181.57 mln Capital IQ Consensus.
• Co issued guidance for Q3, seeing EPS of ($0.32)-($0.30), excluding non-recurring items, vs. ($0.24) Capital IQ Consensus Estimate. FEYE expectes revenue in the range of $180-186 mln vs. $208.09 mln Capital IQ Consensus Estimate.
  • Total Billings in the range of $200-215 mln.
  • Operating margin in the negative 25-27% range.

Getting Organic ($WFM Earnings)

Whole Foods (WFM) is scheduled to report Q4 earnings after the bell today. 

Cap IQ consensus calls for Q4 adj. EPS of $0.24 on revs +6% to $3.5 bln. 

Current Cap IQ Consensus estimates FY 17 EPS of $1.47 on revs +4% to $16.4 bln

Look for co to provide FY 17 guidance in the release. Last Q4 the co provided guidance for the following:

• Sales growth, comps, new stores, square footage growth, EBITDA margin, Capex, and ROIC
• The co also commented on its quarterly comps expectations

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Shares have traded in the 27.5/29.5 range for the next two months and WFM is currently trading at 28.25 (down 16% from pre-last quarter's earnings).

• Expects FY 17 Square footage growth of ~6%
• Q4 Guidance: Noted comps quarter-to-date of -2.4% as of July 27

On September 23, the co announced plans to purchase stake in Instacart, according to Bloomberg Bloomberg Article

Grocers: KR, SVU, WMT, WFM, TGT, SFM, WMK

Tanning Bed ($FSLR Earnings)

First Solar (FSLR) is set to report Q3 earnings after the close with a conference call to follow at 4:30pm ET. FSLR reports right after the bell and provides additional details in a presentation shortly ahead of its call.

Current Capital IQ consensus stands at EPS of $0.66 on Revenue of $985 mln.

Shares of FSLR are holding steady at the $40 level ahead of the report. Shares hit a 52-week low of $33.74 on September 20 and are up over 20% but buyers have been unwilling to move in above the $40 level. The company needs to show it is meeting the worries about 2017 head on and that the concerns in the markets are overdone before it can press back toward the $50 level. This stands as a key quarter for the company.

FY16 Guidance

• Net Sales $3.8-4.0 bln (Was reaffirmed in Q2);
• Gross Margin (GAAP)- 18.5-19.0% (Prior 18-19%);
• Operating Expense $380-400 mln (Reaffirmed);
• Operating Income $310-370 mln (Prior 300-370 mln);
• EPS $4.20-4.50 (Prior $4.10-4.50);
• Operating Cash Flow $500-600 mln (Prior $500-700 mln);
• CapEX $275-325 mln (Prior $300-400 mln);
• Shipments- 2.9-3.0 GW (Unchanged)

Get Your Fat On ($FIT Earnings)

Fitbit (FIT) is set to report Q3 results after the bell (released results last quarter at 4:05pm ET). The co has a conference call scheduled to follow at 5:00pm ET.

 Cap IQ Consensus estimates Q3 EPS of $0.19 (vs. $0.24 in 3Q15) w/revs of $506.6 mln (+23.6% y/y). 

Guidance

• On the Q2 call, co issued guidance for Q3, sees EPS of $0.17-0.19 vs. the $0.17 Capital IQ Consensus Estimate (at the time); sees Q3 revs of $490-510 mln vs. the $497.82 mln Capital IQ Consensus Estimate (at the time).
• On the Q2 call, co reaffirms guidance for FY16, sees EPS of $1.12-1.24 vs. the $1.17 Capital IQ Consensus Estimate (at the time); sees FY16 revs of $2.5-2.6 bln vs. the $2.58 bln Capital IQ Consensus Estimate (at the time).

Based on FIT options, the current implied volatility stands at ~ 75%, which is 64% higher than historical volatility (over the past 30 days). Based on the FIT Weekly Nov04 $12.5 straddle, the options market is currently pricing in a move of ~12% in either direction by weekly expiration (Friday).

Technical Take

Technically, FIT has been in a range for the better portion of this year. It found support in Feb and June with each probe of the $12-level, but also struggled to maintain strength above the $16-area. 

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$FB Earnings Preview

FB is set to report Earnings tonight after the close. Expectations for Facebook remain quite high.

• FB is up 19% from the post-Brexit low on June 27 and up 4.6% since its second quarter report on July 27.  
  • FB is sitting right on top of its 50-day simple moving average (128.63), so technical traders will be watching to see if FB can hold that line of technical support after its report

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FB Weekly Chart

Key Metrics

• Daily active users (DAUs)-  Expectations are for 3 DAUs to be approx 1.16 bln which would represent approx 15% growth.  Q2 DAUs were 1.13 billion on average for June 2016, an increase of 17% y/y; Q1 +16%, Q4 +17%; 
  • Mobile DAUs- Mobile DAUs were 1.03 billion on average for June 2016, an increase of 22% y/y; Q1 was +24%, Q4 was +25%; 3Q16 was 894 mln so the co needs to hit approx 1.09 bln to keep that 22% growth rate.
• Monthly active users (MAUs)- Expectations are for this to be approx 1.76 bln which would represent growth of approx 13%; MAUs were 1.71 billion, better than expected, as of June 30, 2016, an increase of 15% y/y
  • Mobile MAUs were 1.57 billion as of June 30, 2016, an increase of 20% year-over-year; Q1 and Q4 was 21% so FB needs to come in at around 1.67 bln in order to keep the growth rates in the 20% range. 

• Ad spending drives Facebook's top line, accounting for 97% of the company's revenue in the second quarter.  Facebook, therefore, is watched closely as a barometer for how advertisers are spending and where they are allocating their advertising budgets.
  • Mobile advertising represented approximately 84% of advertising revenue
  • Facebook has a large international presence with 86% of its monthly active users at the end of 2015 residing outside the U.S. and Canada and 50% of its total 2015 revenue derived outside the U.S. and Canada. Facebook, then, will have some revealing insight to share on global user activity and the impact of foreign currency on its operating results.

Stocks Affected

• FB
• • Twitter (TWTR)
  • LinkedIn (LNKD)
  • Microsoft (MSFT)
  • Yelp (YELP)
  • Alphabet (GOOG/GOOGL

Related ETFs

• PowerShares QQQ Trust (QQQ)
• SPDR S&P 500 ETF (SPY)
• Global X Social Media Index ETF (SOCL)
  • FB is third largest holding at 9.36% of assets

Swipin ($MTCH Earnings)

Match Group (MTCH) will report Q3 results after the bell. The company will release a slide presentation with guidance soon after the press release and host a call tomorrow morning at 8:30.

• The Street is looking for adj. EPS of $0.20 with revenue +16% to $318 mln and Adj. EBITDA +29% to $108.5 mln.
  • Match guided for Dating revenue up 2-3% Q/Q (to $280.8-283.6 mln) with a Dating adj. EBITDA margin of 35-37%.
• Match already guided for Q4 Dating revenue +4-6% Q/Q with Dating adj. EBITDA margins in the mid 40% range.
• Match also guided for FY16 adj. EBITDA of $400-415 mln with Dating revenue of $1.10-1.14 bln. Last quarter, strength in Dating revenue, led by Tinder, was offset by lower than expected indirect (adverting) revenue.
• Last quarter, Match pushed out expectations for the advertising model as Tinder chose to focus on driving user growth and engagement. Less advertising was more than offset by higher direct rev but the company also increased its investment in Tinder (mostly headcount), which resulted in lower EBITDA guidance for 2016.
• Tinder's Q2 paid member count (PMC) was up 20% Q/Q to 1.23 mln. Match reaffirmed guidance for PMC doubling this year to 1.6 mln. Match is focused on adding features to drive Tinder user growth and engagement as there is competition in this low barrier to entry business. That said, network effects are on its side. Still, Tinder is focused on growing the business before really ramping up the advertising business model on top of it.
• Q2 total dating rev was up 23% with avg. PMC +30% to 5.3 mln. Indirect (advertising) revenue was up 25% at just $11.9 mln. Non-dating revenue consists of just the Princeton Review, which averages ~$25 mln in revenue per quarter.
• Tinder essentially changed the game of dating with its simple swipe left/right app based on location and a quick profile with pictures.
  • Bears see competition in a low barriers to entry business and Tinder cannibalizing the company's legacy dating brands as serious risks.
  • Bulls point to secular tailwinds like the shift to online dating and the fact that millennials are staying single longer.
• Match's legacy dating brands like Match and OkCupid have struggled with the shift to mobile. As Tinder reduces the stigma of online dating, it could be a benefit to the legacy dating brands longer term.
• IAC (IAC) still owns 83.8% of the shares outstanding after spinning off MTCH one year ago.
• Meanwhile, 23% of the float is sold short.
• MTCH broke out to a new all time high two weeks ago but the stock has since pulled back to retest the level that offered resistance for most of October. 

$GILD Earnings

Gilead Sciences is expected to report Q3 earnings today after the close with a conference call to follow at 4:30 pm ET the same day.

Capital IQ Consensus calls for EPS of $2.84 & a revenue decline of 12.5% to $7.44 bln, compared to EPS of $3.22 on revenue of $8.51 bln in the same quarter last year.

FY16 guidance

• Co updated guidance for FY16 in their Q2 earnings release.
  • Lowered net product sales to between $29.5-30.5 bln from $30-31 bln; reaffirmed adj gross margin between 88-90%.

Techs:

GILD has been in a slump throughout 2016 as it sits down -26% YTD near the $73-area. The path of least resistance remains to the downside as price flirts with 2-1/2 year lows & its down-trending 50-day simple moving avg near $77.

Options Activity

Based on GILD options, the current implied volatility stands at ~ 33%, which is 67% higher than historical volatility (over the past 30 days). Based on the GILD Weekly Nov04 $74 straddle, the options market is currently pricing in a move of ~5% in either direction by weekly expiration (Friday).

Peers include: AMGN, RHHBY, NVS, CELG, SHPG, REGN, BMRN, ALXN, BIIB

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RESULTS:

Gilead Sciences misses by $0.09, reports revs in-line; reaffirms FY16 (Dec) revs in-line

• Reports Q3 (Sep) earnings of $2.75 per share, $0.09 worse than the Capital IQ Consensus of $2.84.
  • Antiviral product sales, which include primarily products in Gilead's HIV and liver disease areas, were $6.8 billion for the third quarter of 2016 compared to $7.7 billion for the same period in 2015.
    • HIV and other antiviral product sales were $3.5 billion compared to $2.9 billion for the same period in 2015.
    • HCV product sales, which consist of Harvoni (ledipasvir 90 mg/sofosbuvir 400 mg), Sovaldi (sofosbuvir 400 mg) and Epclusa (sofosbuvir 400 mg/velpatasvir 100 mg), were $3.3 billion compared to $4.8 billion for the same period in 2015.
  • Other product sales, which include Letairis (ambrisentan), Ranexa (ranolazine) and AmBisome (amphotericin B liposome for injection), were $564 million for the third quarter of 2016 compared to $509 million for the same period in 2015.
• Co reaffirms guidance for FY16 (Dec), sees FY16 (Dec) revs of 29.5-30.5 vs. $30.38 bln Capital IQ Consensus Estimate.

GILD notes they have seen 'strong adoption' of TAF-based regimens where they received reimbursement

• In the US, of the nearly 840k people on antiretroviral therapy, 80% receive a Gilead regiment

Anticipated Milestones:

• Achieve 48-week endpoint in Phase 3 studies in treatment-naïve and switch patients
• Complete Phase 1 study in HIV cure.
• Complete enrollment of Phase 2 study in HCM
• Complete Phase 3 study in LQT-3 syndrome
• Complete Phase 2 study in HCM
• Complete Phase 2 study in ebola virus disease

It's in the Game ($EA Earnings)

Electronic Arts (EA) is set to report Q2 results after the bell (released results last quarter at 4:00pm ET). The co has a conference call scheduled to follow at 5:00pm ET. Cap IQ Consensus estimates Q2 EPS of $0.43 (vs. $0.65 in 2Q15) w/revs of $1.09 bln (-4.8% y/y). 

Guidance

Q2

• GAAP net revenue is expected to be approximately $915 million.
• GAAP net loss is expected to be approximately ($51) million.
• GAAP loss per share is expected to be approximately ($0.17).

FY17

• Ending March 31, 2017 GAAP net revenue is expected to be approximately $4.750 billion (Reaffirm).
• GAAP net income is expected to be approximately $809 million.
• GAAP diluted earnings per share is expected to be approximately $2.56 (Prior guidance was $2.53)

Options Activity

• Based on EA options, the current implied volatility stands at ~ 39%, which is 95% higher than historical volatility (over the past 30 days). Based on the EA Weekly Nov04 $77 straddle, the options market is currently pricing in a move of ~7% in either direction by weekly expiration (Friday).

TECHS:

Last week's downgrade took the wind out of the stock. Sellers responded with an aggressive drop below its rising 50-day moving average which has price in "no-man's land" ahead of earnings. Next key support is the 200-day simple ma near 73.

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Alphabetical ($GOOGL Earnings)

Alphabet (GOOGL, GOOG) is set to report Q3 earnings tonight after the close with a conference call to follow at 4:30pm ET. GOOGL reported Q2 results at 4:01pm, the company does not guide. 

Current Capital IQ consensus stands at EPS of $8.60 on Revenue of $22.03 bln.

Shares of GOOGL hit an all time high of $838.50 on Monday but we have seen some profit taking ahead of tonight's report as the stock has pulled back to $820. The company is coming of an impressive Q2 in which it was able to accelerate revenue growth to over 20% for the first time in three years.

The growth was driven by Google website revenues as strength in the mobile and YouTube segments provided a boost. The rise in mobile has also boosted the growth in partners and website TAC which will be an area to watch.

The all time high will certainly be in play, especially when one views the Forward P/E of 20.5x being reasonable for a co that is posting 20%+ revenue increases despite being a $20+ bln a quarter company, no easy feat. A miss by GOOGL should prove interesting with the $783.50 Post-Q2 results being a key level of support. A break of this will send the shares to the $760 with the 200-sm ($757.29) in play.

Key Metrics

• Revenue Growth
• Operating Margins
• Aggregate Paid Clicks-  Q3 expected to increase approx 26% y/y; Q2 +29%;-Q1 +29%;Q4 +31%; Q3 +23%.
  • Paid Clicks on Google websites- Q2 +37%;Q1 +38%; Q4 +40%; Q3 +35%.
  • Paid clicks on member sites- Q2 0%;Q1 +2%; Q4 +2%; Q3 -5%.
• Aggregate cost per click- Q3 is expected to decline approx 5% y/y; Q2 -7%; Q1 -9%; Q4 -13%; Q3 -11%
  • CPC on Google sites- Q2 -9%; Q1 -12%; Q4 -16%; Q3 -16%.
  • CPC on member sites- Q1 -8%; -8%; Q4 -8%; Q3 -4%.
  • If curious: Cost-per-click is defined as click-driven revenue divided by our total number of paid clicks and represents the average cost we charge advertisers for each engagement by users.

Q2 Recap

GOOGL reported Q2 (Jun) earnings of $8.42 per share, $0.38 better than the Capital IQ Consensus of $8.04. Revenues rose 21.3% year/year to $21.5 bln vs the $20.77 bln Capital IQ Consensus.

RESULTS

GOOGL/GOOG beats by $0.46, beats on revs  

• Reports Q3 (Sep) earnings of $9.06 per share, $0.46 better than the Capital IQ Consensus of $8.60; revenues rose 20.2% year/year to $22.45 bln vs the $22.04 bln Capital IQ Consensus.
• Non-GAAP Operating Margin 34% compared to 33% prior year
• Other Bets revenue $197 mln compared to $141 mln in prior year
  • Other Bets operating loss ($865) mln compared ot ($980)mln in prior year
• Cost of revenues as %- 39% compared to 38% in prior year
• Google Website Revenue Growth 23%
• Google Network Members Websites 1%
• Google Other Revenues 39%
• Google segment Revenues 20%
• TAC as a % of revenue 21% compared to 21% in the prior year
• Aggregate Paid Clicks-
  • Q3 +33%, expected to increase approx 26% y/y; Q2 +29%;-Q1 +29%;Q4 +31%; Q3 +23%.
  • Paid Clicks on Google websites- Q3 +42%; Q2 +37%;Q1 +38%; Q4 +40%; Q3 +35%.
  • Paid clicks on member sites- Q3 +1%; Q2 0%;Q1 +2%; Q4 +2%; Q3 -5%.
• Aggregate cost per click-
  • Q3 -11%, expected to decline approx 5% y/y; Q2 -7%; Q1 -9%; Q4 -13%; Q3 -11%
  • CPC on Google sites- Q3 -13%; Q2 -9%; Q1 -12%; Q4 -16%; Q3 -16%.
  • CPC on member sites- Q3 -14%; Q1 -8%; -8%; Q4 -8%; Q3 -4%.

Bezos ($AMZN Earnings)

Online retail giant and heavyweight tech name Amazon.com (AMZN) is set to report Q3 earnings today after the close today followed by conference call at 5:30pm ET. 

Current Quarter Expectations: Operating income and revenues estimates are usually near the upper end of the company's guidance—which tends to be conservative—but headed into this quarter, operating income estimates are above the high end of outlook provided with the Q2 earnings release. Q3 is a typically a lower operating income quarter as the company prepares for the holiday peak in Q4. 

Look for the following:

• Customer/seller growth metrics (discussed during the conference call)

• • Q2 Seller units/third party were 49% of paid units (48% last qtr)

  • Q2 unit growth metric was 28% (slightly higher than 27% from prior qtr and well above 22% reported prior year)

• Based on AMZN options, the current implied volatility is 2x higher than the historical volatility (over the past 30 days). The 1-day event volatility is ~50 points (6%).

• Secondary plays: Retail focus - WMT (reports earnings Nov 17 before the open), ETSY (earnings Nov 1; AMZN competing service - Handmade service), BBY (earnings expected mid November), W (earnings Nov 8 before the open), EBAY (reported last week), BABA (earnings late October). Shipping - UPS and FDX (ATSG new partner). Cloud -- SKYY (ETF). Food delivery(been expanding Prime Now local restaurant delivery service): Grubhub (GRUB), Yelp (YELP) and Square (SQ). Prints service: Shutterfly (SFLY), Kodak (KODK).

• ETF/index components: S&P500 (SPX) 1.8%, Retail HOLDRS Trust (RTH) 18%, Consumer Dis Spdr (XLY) 14%, US Consumer Services (IYC) 11%, PowerShares QQQ (QQQ) 7.6%, First Trust Cloud ETF (SKYY) 5%, SPDR Retail (XRT) 1.3%

RESULTS:

• Reports Q3 (Sep) earnings of $0.52 per share, $0.30 worse than the Capital IQ Consensus of $0.82; revenues rose 29.0% year/year to $32.71 bln vs the $32.65 bln Capital IQ Consensus; operating income $575 mln vs. $50-650 mln guidance and $670 mln estimates.
  • NA net sales +26% to $18.9 bln; GAAP operating income 37% to $255 mln
  • Int'l net sales 28% to $10.6 bln; GAAP OI ($541) mln.
  • AWS net sales +54.5% to $3.2 bln; GAAP operating income +101% to $861 mln. 
• Co issues in-line guidance for Q4, sees Q4 revs of $42.0-45.5 bln vs. $44.65 bln Capital IQ Consensus. Operating income is expected to be between $0 and $1.25 billion, below estimates, vs. $1.1 billion in fourth quarter 2015.

 

Rigged ($XOM Earnings)

Oil and gas major-giant giant Exxon Mobil (XOM) is scheduled to release its Q3 earnings results tomorrow on Oct 28 before the opens with a conference call to follow at 9:30 am ET the same day.

Capital IQ Consensus calls for EPS of $0.60 and a revenue decline of 10.0% to $60.6 bln, compared to EPS of $1.01 on revenue of $67.3 bln in 3Q15

The company announced an oil discovery in offshore Nigeria; potential recoverable resource of between 500 mln & 1 bln barrels of oil. Some color about this find was in the press release. Color on this tomorrow will be good.

In other news that just came out a couple of hours ago, Exxon Mobil is mulling setting up a full-scale trading division, according to the FT.

XOM Chart: https://www.tradingview.com/x/ceKwvDIR/

Peers include: PTR, EC, TOT, SNP, STO, E, OXY, SSL, MITSY, ECA, YPF, PZE, RDS.A, BP, CVX

Dirty Burrito; $CMG Earnings

CMG is expected to report Q3 earnings tonight after the close. There is a conference call scheduled for 16:30 (the company typically does not provide any EPS or revenue guidance).

Capital IQ consensus calls for Q3 EPS of $1.62 (versus $4.59 last year) on revenue of $1.048 bln (-13% YoY).

• For Q3, the Street is expecting Q3 comps to decline by 18%

• The company is still seeing the impacts of the E Coli crisis which negatively impacted comps and earnings.

• FY16 Guidance: For 2016, co expects 220 - 235 new restaurant openings & an effective full year tax rate of ~ 38.4%

Pershing Square 9.9% Stake

•  On September 6, shares spiked as much as 8% after Pershing Square disclosed a 9.9% active stake, intends to engage in discussions w/ mgmt. and the Board.
• On October 21, Pershing Square affirmed the 9.9% active stake, disclosed the purchase of 2,328,250 shares of Common Stock for an aggregate purchase price of $947,367,983 pursuant to forward purchase contracts described in the Original 13D

PEERS TO WATCH: JACK, PNRA, BWLD, DPZ

$BA Earnings

Boeing will report Q3 results before the bell tomorrow (released results last quarter at 7:30am ET). The co has a conference call scheduled to follow at 11:30am ET. 

Cap IQ Consensus estimates Q3 EPS of $2.62 (vs. $2.52 in 3Q15) w/revs of $23.60 bln ( -8.7% y/y).

In the Q2 earnings release, co lowers FY16 EPS to $6.10-6.30 from $8.15-8.35 vs. the $8.50 consensus; reaffirms FY16 revs of $93-95 bln vs. the $93.84 bln Consensus; reaffirms 740-745 commercial airplane deliveries but lowers operating margin to 4.5-5% from 9%.

BA was initiated with an Outperform at Robert W. Baird; tgt $161. Firm believes the FCF dynamic at BA continues to be underappreciated especially with $25 billion in FCF being generated during 2017-19 with ~$17 billion available for buybacks after dividends. Ramping build rates, seven-year backlog visibility with record low deferral rates, stable R&D costs, and productivity improvements lend to returning significant cash to shareholders. Their price target is $161 based on 11x their 2018 FCF estimate. Buying the pullback in BA shares as bear points priced in at current levels (October 6th).

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Boeing reports Q3 (Sep) results, beats on revs; reaffirms FY16 EP ex-tax benefit; raises rev on higher commercial deliveries  

• Reports Q3 (Sep) earnings of $3.51 per share, including $.98 in favorable tax items, may not be comparable to the Capital IQ Consensus of $2.62; revenues fell 7.5% year/year to $23.9 bln vs the $23.6 bln Capital IQ Consensus.
• Co issues reaffirms guidance for FY16, sees EPS of $6.10-6.30 ex-$0.70 favorable tax adjustment vs. $6.29 Capital IQ Consensus Estimate; raises FY16 revs $500 mln to $93.5-95.5 bln vs. $94.04 bln Capital IQ Consensus on higher commercial deliveries: to 745-750 from 740-745. 

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Call Notes

• Co anticipates modest U.S. Federal defense spending growth in the next five years.
• Regarding the 747 program, the co is encouraged by modest recovery in the air cargo market.
• Co delivered 188 commercial airplanes in the quarter. 
• Defense, space and security orders valued at $6 billion with a backlog of $53 billion
• 38% of business comes from customers outside of the United States.
• Co paid $700 mln in dividends, repurchased 51 million shares during the quarter for a total of $6.5 billion.
• So far in 2016 co has added 17 net new 777 orders, on track to transition to 7 per month.
• Encouraged by recent Qatar airways decision for 10 777s. 
• Co will provide FY17 guidance during the Q4 earnings call.

Slicing the Competition ($AAPL Earnings Preview)

Apple, will report Earnings after Tuesday's close.

• Investors are anxious to see what type of sell-through Apple has achieved with its new iPhone 7 and what the company says about demand expectations for the fiscal first quarter, which will encompass the holiday selling period
• Shares of AAPL have surged 21% since the company's better-than-feared fiscal third quarter report in July.  Investors will have higher expectations from AAPL's earnings which provides guidance. Failure on either front could lead to some material downside for the stock, which would act as a major drag on the broader market.

Expectations have ratcheted up in recent weeks on the back of Samsung's disclosure that it has stopped production, and sales, of its Galaxy Note 7

• International sales accounted for approximately 60% of revenues in fiscal 2015, so investors will be looking for remarks on global demand trends and the impact of foreign exchange
• Apple is the most heavily-weighted stock in the market-cap weighted S&P 500, the most heavily-weighted stock in the market-cap weighted Nasdaq 100, and the seventh highest-priced stock in the price-weighted Dow Jones Industrial Average, so it clearly has market-moving capability
• With a huge installed base of Apple products around the globe (iPhone, iPad, Mac, iTunes, iPod, and Apple Watch), the company's performance is watched closely as a gauge of consumer spending activity
   

Key Earnings Items

• Any color on the iPhone 7 release as a demand driver
• Average selling price and gross margin trends
• Apple's ability to monetize its installed base (viewed through revenue growth in the services businesses)
• The performance of its "Other Products" (Apple Watch, iPod, and Apple Pay)
• The performance, and outlook, for its three largest geographic regions
  • Americas segment accounted for 40.2% of net revenue last year
  • Greater China accounted for 25.1% of net revenue last year (China is seen as company's most important growth market)
  • Europe accounted for 21.5% of net revenue last year
     

Stocks Affected
 

Smartphones

• Samsung (SSNLF)
• Blackberry (BBRY)
   

Component suppliers

• Broadcom (AVGO; Apple more than 20% of fiscal 2015 net sales)
• Cirrus Logic (CRUS; Apple was 72% of fiscal 2015 sales)
• InvenSense (INVN; Apple 30% of fiscal 2015 net sales) 
• Qualcomm (QCOM) 
• NXP Semiconductors (NXPI)
• Micron Technology (MU)
• Analog Devices (ADI)
• Skyworks Solutions (SWKS)
• On Semiconductor (ON)
• Western Digital (WDC)
• Seagate Technology (STX)
   

Wearables 

• Fitbit (FIT)
• Garmin (GRMN)

Wireless carriers 

• AT&T (T)
• Verizon (VZ)
• T-Mobile (TMUS)
• Sprint (S)
• China Mobile (CHL)
   

Related ETFs

• PowerShares QQQ ETF (QQQ)
  • AAPL is top-weighted holding at 10.77% of assets
• SPDR S&P 500 ETF (SPY)
  • AAPL is top-weighted holding at 3.24% of assets
• SPDR Dow Jones Industrial Average ETF (DIA)
  • AAPL is tenth-weighted holding at 4.22% of assets
• Technology Select Sector SPDR ETF (XLK)
  • AAPL is top-weighted holding at 13.56% of assets

 

Uncharted Waters Week of 8/29/16

Many individuals like to make predictions and like to try their luck with where they think the market will head. I try to avoid that game and simply trade what I see. Though last week was the first week where it "felt" like we may be heading lower it certainly won't be the last. That said, there are still plenty of strong stocks out there and relinquishing gains will not come easy for the bears this go around. As far as indexes go, I'm focusing primarily on the IWM and the NASX as they've been the leaders of late. 

INDEXES

STRENGTH STILL REMAINS:

EARNINGS

Two names you want to keep your eye out for tomorrow are PANW and VEEV. PANW has seen UOA as of late and VEEV has been a serial performer as of late. 

WEAKNESS POTENTIAL

ULTA & SPLK have been strong until their earnings report last week. Look for signs of continued roll over or for a new base to form.

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Electric Overdrive ($TSLA Earnings)

Tesla (TSLA) will report Q2 results in shareholder letter on its website after the bell and host a call at 17:30.

Tesla is expected to report Q2 non-GAP EPS of ($0.65) vs. ($0.48) last year with non-GAAP rev up 38% to $1.65 bln.

• Tesla delivered 14,370 vehicles during Q2 vs. 17,000 guidance. Production came in 18,345 vehicles vs. 20,000 guidance.
• Tesla said it will produce and deliver 50,000 vehicles in the second half of the year, which effectively lowered 2016 delivery guidance to just under 80K (79.2K) from 80-90K previously.
  • Prior FY16 guidance also called for 30% non-GAAP Model S gross margin and 25% Model X non-GAAP gross margin by year end, cap-ex $2.25 bln and non-GAAP op-ex +20-25%.         

Tesla has consistently missed production and delivery targets.

• Still, Tesla investors look at the big picture as demand for its electric vehicles remains strong.
• There is a great deal of skepticism that Tesla will hit its increased (and seemingly impossible) production plan: 500K Model S, X & 3 vehicles by 2018.
• July 26: Mobileye (MBLY) announces its relationship with Tesla won't go beyond its current EyeQ3 chip. 

The stock has been very resilient despite added risks as investors give Elon Musk the benefit of the doubt.

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Nice Tan ($FSLR Earnings)

First Solar (FSLR) is set to report earnings tonight after the close with a conference call to follow at 4:30pm ET. FSLR reports at 4:05pm.

Current Capital IQ consensus stands at EPS of $0.55 on Revenues of $862 mln.

The FSLR revenue recognition model makes it extremely difficult for analysts to provide accurate quarterly estimates.  The company has been able to handily beat EPS expectations by an average of $1.03. Revenue has been a little less friendly with two big misses and three big beats over the past five quarters.

The annual projections remain the primary focus for the underlying health of the company and that is where we will be looking to judge the overall performance and outlook. Shares of FSLR have had a difficult 2016. The stock got out of the gates strong hitting a two year high of $74.29 on March 18. But the shares have tumbled 33% since that high water mark.

2016 Guidance

• Net Sales $3.8-4.0 bln was reaffirmed in Q1
• Gross Margin 18-19% (Prior 17-18%)
• Operating Expenses $380-400 mln (Reaffirmed)
• Operating Income $300-370 mln (Prior $260-330 mln)
• EPS $4.10-4.50 (Prior $4.00-4.50)
• Net Cash Balance $1.9-2.2 bln (Reaffirmed)
• Operating Cash Flow $500-700 mln (Prior $400-600 mln)
• CapEx $300-400 mln (Reaffirmed)
• Shipments 2.9-3.0 GW (Reaffirmed)

TECHS:

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CAR Accident ($CAR Earnings)

Avis Budget (CAR) is set to report Q2 earnings tonight after the close with a conference call to follow tomorrow morning at 8:30am ET. CAR reported Q1 results at 4:15pm. Current Capital IQ consensus stands at EPS of

Shares of CAR have had a solid run since reporting Q1 results in early May. The co missed its EPS by 22 cents but revenues were in line and, most importantly, it guided FY16 revenue above the consensus. The primary driver, and what attracted investors, was commentary from the company that it was starting to see a turn around in the pricing environment for the troubled car rental business.

This stock fell from the $50 area in October of 2015 all the way to $22. So the recent upward trend allowed the stock to recapture approx 55% of its losses. But we are seeing the stock under pressure today as it has given up nearly 5% ahead of today's report. Shares are down approx 12% over the past week. This suggests that investors remain cautious on the name and are taking profits after buying low.

CAR will need to show a continued improvement in pricing to entice more investors into the name. It does have some solid support below at the 200-sma ($31.90) and the $33-34 area which both linger just below. Also we would keep an eye on Hertz (HTZ) which will trade closely with CAR on the news.

Key Metrics

• Pricing- CAR expects it to decline 1% in FY16. Pricing in Q1 declined by 5% so investors are looking for a deceleration in the price decline.
• Rental Days- FY16 guidance is for this to increase 2-4%. Rental Days increased by a healthy 8% in Q1.
• Per Unit Fleet Costs- Expected to be $280-290 per month in 2016. This figure ran hot in Q1 as it came in at $312 per month, up 6% y/y.

Guidance

• Co expects FY16 EPS in the range of $2.70-3.30, excluding non-recurring items, vs. then-$2.97 Capital IQ Consensus Estimate. Revenue is expected to come in the range of $8.75-8.90 bln which was an upgrade from the prior outlook of $8.70-8.85 bln vs. then-$8.7 bln Capital IQ Consensus.
• Car reaffirmed its FY16 EBITDA expectations of $820-900 mln.
• The Company also expects that it will generate $450 to $500 million of free cash flow in 2016, and that it will repurchase $300 to $400 million of common stock in 2016.

Q1 Recap

• CAR reported Q1 (Mar) loss of $0.28 per share, excluding non-recurring items, $0.22 worse than the Capital IQ Consensus of ($0.06). Revenues rose 1.7% year/year to $1.88 bln vs the $1.88 bln Capital IQ Consensus, +3% in constant currency, primarily due to an 8% increase in rental days (5% excluding the acquisition of Maggiore).
• First quarter Adjusted EBITDA was $44 million.
• Results benefited from increased rental volumes, offset by reduced pricing, higher per-unit fleet costs and a $33 million negative impact from currency movements, including losses on currency hedges.

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