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Citi Cuts Amazon, NFLX, Google Price Targets On Stock Compensation

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.

BlackBerry Q4 Revenue Falls Far Short Of Estimates As Stock Tumbles

Deep in a turnaround effort that aims to slow its sinking revenue growth and return it to profitability, BlackBerry ( BBRY ) turned in mixed results Friday morning that sent its stock crashing. The provider of smartphones and security software reported revenue of $464 million for its fiscal Q4 ended Feb. 29, down 30% from the year-earlier quarter and missing the consensus estimate of $563.2 million. But it reported a per-share loss minus items of 3 centers where analysts polled by Thomson Reuters expected a 10-cent loss. BlackBerry stock was down more than 7%, near 7.50, in early trading in the stock market today . BlackBerry stock is down 19% in 2016 so far. The company, however, said that its software and services revenue rose 106% to $153 million, exceeding its estimates. “Overall, BlackBerry’s Q4 performance was solid as we made progress on the key elements of our strategy, which are to grow software faster than the mobility software market, achieve device profitability and generate positive free cash flow,” CEO John Chen said in the company’s earnings release. “Our strategy is on track and our growth engines are in place to continue to generate above-market growth in software and achieve our profitability objectives.” The smartphone maker that once dominated the field prior to the Apple ( AAPL ) iPhone, followed by Android from Alphabet ( GOOGL ), is pivoting to other areas. BlackBerry has made several acquisitions in the last two years, among them its $425 million purchase of Good Technology. The deal widely expanded BlackBerry’s security software platform to other smartphones and operating systems.

Can Struggling BlackBerry Show Improvements With Q4 Earnings?

Deep in a turnaround that aims to reverse a long deceleration in revenue, BlackBerry ( BBRY ) is set to report earnings before the market open Friday. The smartphone maker that once dominated the field prior to the Apple ( AAPL ) iPhone and Alphabet ’s ( GOOGL ) Android is pivoting to other areas. BlackBerry has made several acquisitions in the last two years, among them its $425 million purchase of software company Good Technology. The deal widely expanded BlackBerry’s security software platform to other smartphones and operating systems. BlackBerry will report fiscal fourth quarter earnings for the period that ended Feb. 29. The consensus estimate on revenue is $563.2 million — down 15% year over year but an improvement over the 31% drop in the prior quarter. Analysts polled by Thomson Reuters expect BlackBerry to report a loss of 10 cents per share. “While the company may currently be showing possible signs of a recovery, we note that much of this strength can be attributed to IP licensing sales of $53 million last quarter,” wrote Credit Suisse analyst Kulbinder Garcha. He has an underperform rating on BlackBerry and a price target of 6. BlackBerry stock closed at 8.09 Thursday, up 1%. Since hitting a low of 6.39 on Feb. 11, the stock is up 26%. “We believe the company is still faced with a challenging transition ahead,” Garcha wrote. “Despite strong software revenue last quarter of $162 million, we doubt the sustainability of the software business, as the IP licensing revenue seems unpredictable.”