The Zacks Analyst Blog Highlights: Twitter, International Business Machines, Facebook, Google and Wal-Mart Stores
CHICAGO, Feb. 4, 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 include the Twitter (NYSE:TWTR-Free Report), International Business Machines (NYSE:IBM-Free Report), Facebook (Nasdaq:FB-Free Report), Google (Nasdaq:GOOG-Free Report) and Wal-Mart Stores Inc (NYSE:WMT-Free Report).
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Here are highlights from Monday's Analyst Blog:
Twitter Widens Patent Trove, Earnings in Focus
Twitter (NYSE:TWTR-Free Report) recently bought approximately 900 patents from International Business Machines (NYSE:IBM-Free Report). The companies also entered a cross-licensing agreement, which will allow IBM to continue using the patents. However, the financial terms of the transaction were not disclosed.
Just prior to Twitter's Initial Public offering (IPO) in 2013, IBM threatened to sue the company for allegedly violating three of its patents. The current deal not only ended the skirmish but also expanded Twitter's patent portfolio substantially.
At the time of the IPO, Twitter had 9 patents with another 95 pending applications. This was meager compared to its closest peer Facebook's (Nasdaq:FB-Free Report) 774 patents prior to its IPO in 2012. The lack of patents made Twitter vulnerable to legal attacks, which would have stalled its expansion plans.
As Twitter plans to expand its services by offering new products including video, we believe that the enhanced patent portfolio will remove this vulnerability. According to Bloomberg, Twitter bought patents related to technologies used for video compression, messaging and international shipping requirements.
Twitter is set to release its first earnings report on Feb 5. The company's 232 million and growing monthly user base is the key growth catalyst. New products and services are expected to help the micro-blogging site attract new customers, going forward.
Since its IPO, Twitter has surged 43.7%. Twitter's bullish run is primarily driven by investor optimism on its ability to attract more advertising revenues, despite facing significant competition from Facebook and market leader, Google (Nasdaq:GOOG-Free Report).
As spending on online advertising is expected to increase manifolds compared to traditional media, Twitter has massive growth opportunity, due to its strong mobile products. Mobile advertisement contributes approximately 70.0% to Twitter's revenues.
According to market research firm, eMarketer, Twitter's revenue share in mobile advertising market is expected to increase from 2.6% in 2012 to 3.2% in 2013. This is further expected to increase to 4.1% in 2014 and 4.4% in 2015.
The Zacks Consensus Estimate for the last quarter is currently pegged at a loss of 10 cents on revenues of $212.0 million. For fiscal-year 2013, the Zacks Consensus Estimate is pegged at a loss of 76 cents on revenues of $634.0 million.
Currently, Twitter has a Zacks Rank #3 (Hold).
Wal-Mart Looks to Lower Q4 Profits
The largest global retailer Wal-Mart Stores Inc (NYSE:WMT-Free Report) has not had the best of times of late. It has been facing severe challenges since the last few quarters and showing signs of acute weakness. The recently lowered guidance for fiscal 2014 confirms many of these problems. Walmart is scheduled to release its fourth quarter and fiscal 2014 results on Feb 20.
For the fourth quarter, Walmart expects its earnings to be at or slightly below the low end of its previous forecast of $1.60 to $1.70 per share. For fiscal 2014, Walmart expects its earnings to be at or slightly below the low end of its previous forecast of $5.11 to $5.21 per share.
The lowered expectation signals that Walmart is under stress, owing to the restructuring of Sam's Club unit in the United States, food safety allegations, and weakness in the emerging markets, including the closure of stores in Brazil and China.
In addition, the retailer expects its fourth-quarter comparable store sales for its Walmart U.S. and Sam's Club segments to be slightly below its prior forecast. It previously expected same-store sales to be relatively unchanged at Walmart U.S. and flat to up 2%, without fuel, at Sam's Club. Lower comp sales are due to reduced food stamp benefits under SNAP (the U.S. government Supplemental Nutrition Assistance Program) for millions of Americans and unfavorable weather, which resulted in store closures.
After decades of robust growth, Walmart delivered weak results in all the three quarters of fiscal 2014. A challenging retail environment in the U.S. as well as in most international markets due to cautious consumer spending has been hurting the company's top line.
Weak spending from lower- and middle-income segment consumers is hurting the company's U.S. comparable store sales. Middle-class consumers are struggling to cope with rising gas prices, delayed income tax refunds and higher payroll taxes, which have increased 2% in the U.S. since Jan 2013. The economic strains in the U.S. and abroad are likely to pressurize its low-income shoppers for the rest of fiscal 2014 and fiscal 2015.
Walmart International has been witnessing sluggish comps for the past few quarters owing to weak consumer spending environment and changing consumer patterns. The unit is also the focus of a costly bribery probe. Moreover, it closed about 50 underperforming stores in Brazil and China last year, anticipating sluggish growth in the Brazilian market for the fourth straight year.
Most recently, Walmart announced that it is eliminating 2300 employees, including assistant managers and some hourly workers at its Sam's Club warehouse division in an effort to streamline its business structure.
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