CHICAGO, April 30, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog includethe eBay Inc (Nasdaq:EBAY-Free Report), Twitter (NYSE:TWTR-Free Report), Facebook (Nasdaq:FB-Free Report), Yelp (NYSE:YELP-Free Report) andYahoo! (Nasdaq:YHOO-Free Report).
eBay Inc (Nasdaq:EBAY-Free Report) reported earnings after the bell today, posting an EPS of $0.58, and Revenues of $4.26 billion. These numbers beat both the Zacks Consensus Earnings Estimate of $0.57, and the Zacks Consensus Revenues Estimate of $4.231 billion.
The company increased the upper end of their guidance for Q2 2014, from $4.40 billion to between $4.325 billion and $4.425 billion. But the company did decrease their Q2 guidance, excluding one-time items, of $0.67 to $0.69, from $0.70. Management also touched on the Marketplaces segment, their e-commerce platform, came in at $2.2 billion, which was a 12% gain from a year ago numbers.
Another announcement was that management decided to repatriate $9 billion of foreign cash. This caused a one-time discrete tax charge of $3 billion dollars, but brought $6 billion back into the U.S. This hurt both the top and bottom lines for the company in Q1.
Over the past several months Carl Icahn has been making waves, demanding that eBay split off the payments subsidiary PayPal, and add two independent directors to the board. On May 13, Mr. Icahn jointly announced an agreement whereas he would withdraw his proposal to separate the segments, but the board capitulated to Mr. Icahn and added David Dorman as an independent director to its board. Mr. Icahn did state later, that he still believes that PayPal would be better off as a separate company. Moreover, Mr. Icahn stated that, "he (CEO John Donahoe) and I have agreed to meet regularly when he is in New York to discuss strategic alternatives." So this issue might not be completely finished, at least in Carl's eyes.
In afterhours trading, EBAY is down over 3% on high volume.
Social Media Stocks to Buy Post-Selloff
The recent sell-off of high flying social media stocks such as Twitter (NYSE:TWTR-Free Report) highlight intensifying investor concerns over their growth prospects. Although the stocks promise supernormal growth, lack of visibility into their operations and source of revenues increase investment risks.
Social media stocks depend on advertisements and subscription-based models that are primarily tied to the growth in user base and engagement. Hence, these stocks are largely dependent on advertising spending, which again relies on the overall macro-environment as well as the effectiveness of the social media in targeting users.
Marketers tend to prefer those social media platforms that cater to a diversified and growing user base. User engagement becomes more important as the platform gets bigger and user growth slows down. Social media companies are required to frequently update their products and services in order to limit the churn rate.
Despite their inherent risks, these stocks often trade at lofty valuations, which lacks justification and defy common sense. Although short-term investors find them attractive for their high flying ability, the high premium compels value investors to stay on the sidelines.
However, we believe that the recent sell-off makes some of these social media stocks cheap for value investors. We pick two such stocks that have strong growth potential:
Facebook (Nasdaq:FB-Free Report) – Best of the social media picks, we believe that the recent decline in Facebook's share price is unwarranted due its impressive first-quarter 2014 results. This Zacks Rank #2 (Buy) stock has strong growth potential in mobile, which accounted for 59.0% of its advertising revenues in the recently concluded quarter.
Mobile Monthly Active Users (MAUs) surged 34.0% year over year to 1.01 billion, a significant growth over a short span of time. We believe that Facebook's position in mobile will continue to improve due to new products that will drive user engagement and attract advertisers. Additionally, robust growth in Instagram and WhatsApp user base, strategic acquisitions and initiatives such as Internet.org are compelling positives.
Yelp (NYSE:YELP-Free Report) – Yelp is expected to benefit from strong growth in active local business accounts as well as improving mobile customer engagement. This Zacks Rank #2 stock diversified its revenue stream by offering new features such as the revenue estimator, Yelp platform and call-to-action.
We remain encouraged by the company's international expansion (Japan, Mexico and Portugal in 2014) which in turn will boost ad revenues. Moreover, Yelp's strategic partnerships with Yahoo! (Nasdaq:YHOO-Free Report) and YP will further increase customer engagement.
Yelp is set to report first-quarter 2014 results on Apr 30.
We believe that any improvement in the fundamentals of social media stocks will boost investors' confidence in the near term. Investors will eagerly await growth in user engagement, which will be the key catalyst in attracting advertisers going forward.
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