4 tech giants to post big gains
Amazon, Qualcomm and others will likely benefit from stronger spending.
By Frank Byrt, TheStreet
Amazon.com (AMZN), Yahoo! (YHOO), EMC (EMC) and Qualcomm (QCOM) are expected by analysts to have closed out 2010 on a positive note as the recovering economy boosted demand for their products and services.
That sets the stage for potentially big gains in 2011. Technology stocks should benefit from customers' postponement of capital spending for the past two years, which means many are in dire need of upgrades to computer systems.
In addition, the increasing use of the Internet and the potential growth in advertising on Web pages, the booming use of mobile-computing devices and the concurrent demand for data storage -- thanks to the growth of cloud computing -- contribute to a positive outlook for each of these firms. Here are the fourth-quarter earnings expectations for the four companies, starting with Yahoo:
Yahoo! (YHOO) will release earnings Jan. 25 and is expected to report a profit of 22 cents per share compared with 11 cents in the same quarter a year earlier. That would bring 2010 earnings to 87 cents on $4.6 billion in revenue. In 2009, it earned 42 cents on $4.7 billion in revenue. The outlook for 2011 is for revenue flat to last year at $4.7 billion and earnings of 79 cents per share, or down 9%.
Yahoo is one of the most popular Internet destinations in the world but is facing increased competition from traditional media companies and hip new sites, such as Facebook and YouTube.
Yahoo has loads of cash to make acquisitions, which may be one way of diversifying and building revenue. It offers its users numerous free services, including search, e-mail, instant messenger, financial information, news, video downloads and a variety of community platforms. Advertising accounts for about 90% of sales, and the balance comes from fees on premium services.
EMC (EMC), a leader in the computer-storage industry for 30 years, posts earnings Jan. 25 and is expected to report 41 cents per share versus 33 cents last year. Over the past two years, it has a pattern of steadily improving quarterly earnings. Earnings for 2010 are forecast at $1.25 per share on revenue of $16.3 billion. It earned 90 cents in 2009. For fiscal 2011, analysts estimate that EMC's earnings per share will grow by 15% to $1.45.
Standard & Poor's analysts say EMC is "a market leader, generates consistent free cash flow and has a strong balance sheet. However, we see the storage segment as somewhat cyclical, highly competitive and often typified by pricing pressure."
But others think it will ride the exponential growth of the cloud-computing sector, where it has a 20% share of that market, to boost earnings. By 2013, cloud computing is expected to be a $16.7 billion niche market. EMC has more than $6 billion in cash on the books and more than $2 billion in recurring cash flow, so it has the resources to buy into new storage technologies as and fund development.
Qualcomm (QCOM), a leader in the digital wireless telecommunications sector, reports first-quarter earnings for its new fiscal year Jan. 26. Analysts expect 72 cents per share, compared with 62 cents last year on $10.4 billion in revenue. Earnings for 2010 are seen at $2.46 on annual revenue of $11 billion in revenue.
For 2011, the outlook jumps to earnings of $2.78 per share on revenue of $12.8 billion, then another jump in 2012, to earnings of $3.05 per share and revenue on $14 billion. The company is the innovator of code division multiple access (CDMA) technology, a key communications standard used in wireless networks, and it has a string of patents that makes it a formidable player for years to come in the rapidly growing industry.
A Morningstar analyst says the company "is poised for strong licensing revenue growth and improved profitability over the next several years, as all three next-generation 3G networks that are being adopted use CDMA technology."
Amazon.com (AMZN), the leading online retailer, is due to report quarterly earnings Jan. 27. They are expected to be 88 cents per share, up from 85 cents last year, but that brings earnings for 2010 to $2.50, up 22% from 2009. Revenue is seen growing 40% in 2010 to $34.2 billion, and that is expected to grow 28% to $44 billion in 2011. Analysts' outlook for 2011 is for earnings of $3.47 per share, according to Thomson Reuters.
Amazon.com designs its Web sites to attract buyers to a wide range of products across an array of sellers. It also manufactures and sells the Kindle e-reader. Standard & Poor's analysts say that its "relentless focus on providing value to consumers through selection and price bodes well for the company to gain notable market share during this challenging economic period."
The company has a market cap of $84.7 billion. Its founder and CEO, Jeff Bezos, owns almost 20% of its shares, worth roughly $17 billion.
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These hot movers could rise by double digits in coming months.
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