Luck is what happens when preparation meets opportunity. Now that earnings season is running on full steam, investors need to know where to look and what to look for in order to find the best investment alternatives in the market.
In the following roundtable, our contributors share with our readers why they will be keeping a close eye on Zillow Group (Z -1.10%) (ZG -1.10%), NVIDIA (NVDA 3.71%), and Twitter (TWTR) in their upcoming earnings reports.
Andres Cardenal (Twitter): Twitter is an enormously valuable platform. According to management, Twitter has a brand awareness level of 95% across the most important global markets. On the other hand, user growth has been downright disappointing lately, since many users find the platform too confusing or they just don't know how to extract all the juice from Twitter. Management fully acknowledges the problem, and is actively working to find a solution.
Image source: Twitter.
Its recently launched Moments initiative aims to make the Twitter experience simpler and easier to enjoy for users who don't know much about the platform. In addition, the social network is planning to reduce its global workforce by 8%, meaning that it is firing 336 employees. The main idea is that a smaller and nimbler team should allow it to move faster and drive more innovation in the future.
Twitter is scheduled to report earnings for the third quarter of 2015 on Oct. 27. Sales and earnings figures are always important, but user growth is absolutely key when it comes to measuring Twitter's ability to realize its potential over time. In addition, it's not just about performance in the last quarter. Investors should carefully listen to what management has to say regarding the main initiatives to drive user growth and engagement in the coming months.
Steve Symington (Zillow Group): Shares of Zillow Group initially popped almost 10% the day after its second-quarter results handily beat analysts' expectations, only to give up most of those gains as the market effectively shrugged off the encouraging report.
But things have gotten much more exciting since then. Zillow stock is up more than 30% since Sept. 9, when the company revealed it completed its integration of Trulia significantly ahead of schedule. The ambitious effort began when Zillow closed on its acquisition of Trulia this past February, and was capped last month by the complicated integration of Trulia's and Zillow's real estate advertising products into a single platform. Now, clients can seamlessly purchase ads from one company and have them show up across all four of Zillow Group's consumer-facing brands: Zillow, Trulia, HotPads, and StreetEasy.
Also last month, Zillow completed the sale of its Market Leader division -- a real estate CRM business inherited in the acquisition, and previously placed under strategic review -- to the Perseus Division of Constellation Software. With Market Leader formally under the wing of its new owner, Zillow can better hone its focus and grow its share of the other key rentals, mortgages, and real estate ad markets.
Image source: Zillow Group.
Finally, Zillow recently announced almost two-thirds of its agent listings now come from direct multiple listing services, indicating the company continues to make progress in its direct-MLS initiative. That's particularly encouraging as Zillow previously worried investors by letting its old deal to receive many MLS listings from competitor-owned ListHub expire in April.
All things considered, it seems Zillow Group is doing plenty of things right, and shareholders have been rewarded in recent weeks as a result. But if the aforementioned catalysts show signs of bearing fruit when Zillow reports third-quarter results next month, the recent gains might prove to be just the beginning of a much longer trend.
Tim Green (NVIDIA): Graphics chip company NVIDIA has had quite a year so far. The stock has risen about 30% year to date, with weak PC sales unable to negatively affect the company's gaming graphics card business. NVIDIA's discrete graphics card market share has reached record levels, with the company claiming 82% of the market by units during the second quarter, relegating rival Advanced Micro Devices (NASDAQ: AMD) to a distant second-place position.
NVIDIA is set to report its third-quarter results early next month, and all eyes will be on how its gaming business is holding up. AMD launched a new slate of graphics cards toward the end of the second quarter, and any market share gains could be problematic for NVIDIA's core business. The PC market continues to be weak, with Gartner reporting that global PC shipments slumped 7.7% year over year during the third quarter. While NVIDIA is far less dependent on sales to OEMs today compared to a few years ago, the company is still expecting revenue to decline slightly year over year in the third quarter.
Investors should also pay close attention to the growth of NVIDIA's other businesses. During the third quarter, the company announced that its GRID graphics virtualization platform would be offered on Microsoft's Azure cloud platform, and investors should expect management to discuss the progress of GRID during the earnings conference call. Automotive is also an important area for NVIDIA, and the success of its Tegra business ultimately depends on increasing sales to automotive companies.
NVIDIA has had an incredible year so far, all things considered, and the company's third-quarter results should provide plenty for investors to chew on.
