Forget FANG, Trade FATS: A Preview Of Facebook, Alphabet, Twitter And Snap Earnings

Remember FANG, the widely popular acronym for Facebook Inc FB, Amazon.com, Inc. AMZN, Netflix, Inc. NFLX and Google GOOG GOOGL? It may be replaceable.

There is a new tech acronym in town that Wells Fargo is fond of, FATS — Facebook, Alphabet, Twitter Inc TWTR and Snap Inc SNAP, all four of which are preparing to deliver second-quarter earnings in upcoming weeks.

Facebook

Advertiser checks on Facebook suggest ad spending is continuing to grow rapidly and that Facebook continues to gain share of social advertising budgets.

"Within FB, our conversations with advertisers suggest somewhat greater strength for core Facebook vs. Instagram, and still modest adoption to date of sponsored Instagram Stories," said Wells Fargo analyst Peter Stabler.

Wells Fargo maintains an Outperform rating on Facebook.

Alphabet

Recent advertiser checks and reports from search engine marketing agency Merkle suggest a relatively strong quarter for Alphabet. Wells Fargo is lowering its GAAP EPS forecast for the second quarter, however, to reflect the impact of the $2.7 billion European Commission fine, and expects management will field questions related to action required to bring Google shopping into compliance with the EC's ruling.

Wells Fargo maintains an Outperform rating on Alphabet.

Twitter

Recent advertiser checks on Twitter appears to indicate that the platform may be improving. Although Twitter has had a consistent track record of advertising share losses in recent quarters, Twitter may now be maintaining its share of social ad spending, as the company ramps up video advertising products that appear to be resonating with brand advertisers. Wells Fargo remains cautious due to continued challenges in direct advertising, however, and maintains a Market Perform rating on Twitter.

Snap

While Snap's consumer-facing product innovation ramped up in the second quarter, Stabler views the product intros as unlikely to match the daily active users impact of Lenses in 2016. Strong Instagram Stories daily active user growth suggests potentially muted DAU growth, according to Stabler. Another item that is unclear surrounding Snap is small- and medium-sized business adoption, an area that has been key to Facebook's growth.

Wells Fargo maintains a Market Perform rating on Snap.

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