Scalper1 News
Citigroup slashed its price target on LinkedIn and also lowered its targets on shares of Amazon.com ( AMZN ), Alphabet ( GOOGL ), Facebook ( FB ) and Netflix ( NFLX ) in a report that takes a close look at the earnings dilution from stock compensation grants. Tech companies, and some others, typically report both non-GAAP (generally accepted accounted principles) earnings — which exclude stock grants to employees, among other items — and earnings under GAAP, which include everything. Financial analysts typically provide non-GAAP estimates for quarterly results, and those numbers frequently get more play in quarterly earnings stories in the business press. “We are adjusting our models and price targets to better reflect the impact of stock-based compensation (SBC),” said Citigroup analyst Mark May in the research report. “Some may say this is a bear market issue, but we believe it is a necessary change that is long overdue.” Citigroup cut its price target on LinkedIn ( LNKD ) to 130 from 194. It lowered Amazon’s price target to 760 from 780, Google-owner Alphabet’s target to 900 from 924, Netflix to 116 from 121, and Facebook to 133 from 134. Citigroup maintained buy ratings on Amazon, Facebook and Google. It has neutral ratings on LinkedIn and Netflix. In morning trading on the stock market today , LinkedIn stock was near 115, Amazon near 597, Alphabet near 763, Netflix near 104, and Facebook near 115. All were up a fraction except Netflix, which was up 2%. The report also looks at the stock-based compensation of eBay ( EBAY ), Twitter ( TWTR ) and Yahoo ( YHOO ). “While most (investors) view Twitter as having the highest stock-based compensation ratio, LinkedIn’s grants as a percentage of revenue are higher than Twitter, and LinkedIn saw this ratio increase last year,” said the report. “While most view Amazon as having high stock-based compensation, it actually ranks near Netflix as among the lowest. Facebook ranks high, but grants declined last year, and its revenue growth, profitability and stock price performance provide important offsets. “The impact of stock-based compensation provides additional reason to remain cautious on LinkedIn and Twitter. “Unlike some people, we do not think stock-based compensation should be treated as a cash expense, mostly because it is in fact not a cash item. Instead, we account for it consistent with what it is — an ongoing source of dilution to equity holders.” According to Citigroup, on a percentage of revenue basis, the company with the highest stock compensation grants in 2015 was LinkedIn, followed by Twitter, Yahoo, Facebook, Google, eBay, Amazon and Netflix, respectively. Scalper1 News
Scalper1 News