Key Takeaways From Cowen's Preview Of Q1 Earnings From Amazon, Twitter & More

Previewing the calendar year's first-quarter results of internet companies, Cowen said overall sentiment is generally positive for Amazon.com, Inc. AMZN, Facebook Inc FB and IAC/InterActiveCorp IAC. Sentiment is improving for Alphabet Inc GOOG GOOGL and Match Group Inc MTCH, while it has remained negative for Twitter Inc TWTR, the firm added.

Amazon: Top 2017 Idea

Earnings Date: Thursday Rating: Outperform Price Target: $1,050

Analysts John Blackledge, Nick Yako and Thomas Champion said their bullish thesis on Amazon remains unchanged. The analysts expect the company to continue to win in large "non-core" retail markets, specifically food and beverage, grocery, consumables and apparel at the expense of traditional retailers and local merchants.

"AMZN is best positioned to capture the accelerating shift of dollars from offline to online. We also expect continued strength at AWS and solid growth within Amazon's nascent ad biz, which is inherently much higher margin than the core biz or AWS," the analysts said.

Q1 Expectations

• $35.7 billion in revenues vs. consensus of $35.3 billion.
• Gross margin of 36 percent, up 80 basis points.
• GAAP Operating income: $1.17 billion vs. consensus of $1.18 billion.

Concerns On Facebook Abating

Earnings Date: May 3, 2017 Rating: Outperform Price Target: $156

Cowen said several concerns on Facebook that arose at the end of 2016 have somewhat abated, with the shares up 25 percent year-to-date after ending 2016 mixed. The concerns that weighed on Facebook in 2016 included impact from Snap Inc SNAP's Snapchat and Facebook's Instagram engagement and/or user growth, decelerating ad revenue growth and noise around Facebook's measurement issues.

Q1 Expectations

• $7.77 billion in revenues vs. consensus of $7.82 billion.
• $7.6 billion in ad revenue, up 46 percent year-over-year.
• Non-GAAP EPS $1.11 vs. consensus of $1.12.
• User engagement: MAU at 1.88 billion, up 13.5 percent year-over-year.

Investor Sentiment On Google Mixed

Earnings Date: Thursday Rating: Outperform Price Target: $1,050

While noting investor sentiment toward Google has been mixed thus far in 2017, Cowen said it sees some positives, including:

• Strong mobile search growth.
• Robust growth in Product Listing Ads.
• Increasing adoption of new product innovations.
• Company's commitment to returning cash to shareholders via share buybacks.

That said, Cowen said it remains concerned about rising TAC and impact on core margins, impact from ad boycott of YouTube and impact, any from, EC regulatory.

Q1 Expectations

• $24.1 billion in revenues, In line with the consensus.
• GAAP EPS $7.15 vs. consensus of $7.40.
• Search operating metrics: paid click growth — 25 percent, cost per click — 8 percent decline.

Match Investors Focused On Several Key Areas

Earnings Date: May 2, 2017 Rating: Outperform Price Target: $22

Cowens said it is focused on several key areas of Match, including Tinder, core North American and International Match PMC trends, update to 2017 guidance, status of the Tinder advertising business/timing of Facebook partnership rollout, further details on the runoff of low ROI affinity subs in 2017, etc.

Q1 Expectations

• $294 million in revenues, up 34 percent year-over-year.
• Adjusted EPS of $0.13 vs. consensus of $0.12.

Remaining Buyers Of IAC On HomeAdvisor Business

Earnings Date: May 3, 2017 Rating: Outperform Price Target: $90

Cowen said it remains a buyer of IAC, due to its belief in the HomeAdvisor business despite the shares being up 19 percent in the year-to-date period. The firm thinks the valuation is inexpensive.

Q1 Expectations

• $723 million in revenues vs. consensus estimate of $717 million.
• Adjusted EPS of $0.31 vs. consensus of $0.34.

Investor Sentiment On Twitter Remains Negative

Earnings Date: Wednesday Rating: Underperform Price Target: $12

Following a tough fourth-quarter print in early February, which included guidance for a 17-percent drop in Q1 revenues at the midpoint, Cowen said investment sentiment for Twitter continues to remain negative.

Q1 Expectations

• $496 million in revenues vs. consensus of $513 million.
• Adjusted EPS of $0.10 vs. consensus of $0.01.
• MAU 322 million.

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