With the earnings season shifting in to high gear, we will start to see more industries with groups of stocks reporting earnings in the same week. This week we have industries like airlines, banks, chemicals, railroads, and semiconductors with groups of companies reporting. The industry theme continues next week with more semiconductors, a big group of software stocks, and several other industries with large groups reporting. One particular industry that got my attention was internet/social media.
On Thursday, October 29, Facebook (FB), Alphabet (GOOGL), and Twitter (TWTR) will all report earnings results. While all three reporting on the same day got my attention, we also had the U.S. Department of Justice file an antitrust lawsuit against Google on October 20. This case could be the first of many with the goal being to break up some of the large tech giants including Facebook, Amazon, and others.
While it will likely take months or years for the legal battles to play out, I want to focus on the earnings reports of the three stocks I mentioned above. Tickeron has a positive outlook on the group and predicts a further increase by more than 4.00% within the next month with a likelihood of 86%.
I was a little surprised when I looked at the Tickeron Scorecard for the three stocks as there was quite a diverse set of readings. Facebook and Twitter both receive “sell” ratings right now while Alphabet has a “strong buy” rating.
The A.I. Predictions for the next week and the next month all three show the stocks moving higher with Twitter showing the greatest convictions in terms of the percentages.
There were also big discrepancies between the fundamental and technical analysis indicators. Facebook and Alphabet both show zero negatives from the fundamentals and Facebook has four positive readings and Alphabet shows three. Twitter shows only one positive and three negative readings.
The technical indicators are even more interesting. Google shows four bullish signals and not a single bearish signal. Facebook shows two bullish signals and two bearish signals. Twitter shows one bullish signal and five bearish signals.
Looking deeper in to the fundamental indicators, the only area where there was a consensus for the three stocks was in the valuation ratings. All three stocks are rated as fairly valued at this time. For Twitter the two biggest negative readings were its outlook rating and its SMR rating. The company’s Price Growth Rating was the only positive.
Facebook has really strong readings in its Profit vs. Risk Rating, SMR Rating, and Price Growth Rating. The outlook rating is also positive, but the reading isn’t as strong as those other three indicators.
Alphabet has a really good Profit vs. Risk rating and it scores well in the P/E Growth Rating and Seasonality Score.
Turning our attention to the charts, all three of them experienced nice rallies from March through August. But Facebook and Alphabet both experienced small pullbacks in September. Twitter didn’t drop in September like the other two and now it is overbought based on the 10-week RSI and the weekly stochastic readings.
Neither Alphabet nor Facebook are in overbought territory at this time. Both of their RSIs are near 60 and both of their stochastic indicators are down around the 50 range.
As for the sentiment toward the stocks, the only area where there is any hint of bearish sentiment is on Twitter. The overall analysts’ ratings for the stock show only nine “buy” ratings out of 39 total ratings. There are 26 “hold” ratings and four “sell” ratings. This gives us a buy percentage of 23% and that is well below the average buy percentage which is in the 65% to 75% range. The buy percentages for Alphabet and Facebook are both over 85% and indicate high levels of optimism.
The short interest ratios are all below 2.0 and the average short interest ratio is in the 3.0 range. Facebook’s ratio is extremely low at 1.01.
Looking at the entire picture for each of these three stocks, I have to agree with the Tickeron Scorecard. The most bullish case can be made for Alphabet. The combination of fundamentals, technical indicators, not being overbought… It all adds up, except for the sentiment being bullish, but that seems to be warranted. The outlook for Facebook is pretty good and the outlook for Twitter is a little more muddled because the fundamentals aren’t as strong as the other two.