When the going gets tough, the tough cut their price targets. That only makes sense. After all, if a stock has dropped by, say, 50%, in three or four months, chances are pretty good that an older price target is out the window.
One of the sectors hardest hit in 2022 is information technology, which is down more than 18%. So analysts are fine-tuning their expectations, both before and after the companies report quarterly results. After Alphabet/Google reported results last week, a baker’s dozen brokerages reiterated their equivalent of a Buy rating on the stock, but all 13 lowered their price targets.
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Here is a look at four firms that are reporting earnings this week and two others that may report by mid-May.
Cloudflare
Cloud services provider Cloudflare Inc. (NYSE: NET) traded up by about 3% over the past 12 months at noon on Monday. When the company reports first-quarter results after markets close Thursday, May 5, analysts expect revenue to rise by 6.2% to $205.65 million sequentially and by 48.5% year over year. The company is also expected to break even on earnings per share (EPS), just as it did in the prior quarter, and better than the $0.03 per-share loss in the year-ago quarter.
Analysts at Cowen have reiterated their Outperform rating on the stock and lowered their price target from $250 to $200 per share. Cowen thinks the Wall Street revenue estimate is too low, citing the strong results posted by Amazon’s AWS and Microsoft’s Azure cloud service. Cowen’s analysts expect Cloudflare estimates to follow a “beat and raise” pattern in 2022.
The stock traded up about 2%, at $87.88 in a 52-week range of $64.84 to $221.64. Since reaching a high of $216.27 in early November, Cloudflare’s consensus price target has dipped to a current average of $153.00.
24/7 Wall St.Etsy
Online marketplace Etsy Inc. (NASDAQ: ETSY) has dropped more than 52% of its share price over the past 12 months. Shares were trading up about 2.2% ahead of the company’s earnings report, due out after markets close Wednesday. Analysts expect revenue to drop nearly 20% sequentially, while rising 4.4% year over year, as EPS tumbles 46.7% sequentially and 4.4% year over year.
Analyst Marvin Fong at BTIG reiterated the firm’s Buy rating but cut the price target from $195 to $140 (28.2%). Without specifically referring to a strike by some 14,000 Etsy sellers in mid-August, Fong cites the company’s dominant position in the handmade-goods vertical and the low risk of any competitor displacing the firm. Etsy claims about 5.3 million active sellers.
Etsy’s stock traded up about 1.8%, at $94.89 in a 52-week range of $90.63 to $307.75. The low was posted Monday morning. Since reaching a high of $1,702 in late November, the company’s consensus target has dipped to a current average of $199.72.
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Shopify
E-commerce platform provider Shopify Inc. (NYSE: SHOP) has seen its share price decline by nearly 63% over the past 12 months. From a high set in mid-November, shares are down nearly 74%. When the company reports quarterly results before markets open Thursday, analysts expect a sequential decline of 10% in revenue and 51% in EPS. Year over year, revenue is expected to rise by 1.2% while EPS drops by 66.7%.
Bhavin Shah at Deutsche Bank has kept a Hold rating on the stock but cut the price target from $900 to $550 (38.9%). Basically, Shah does not think that Shopify can match the profits it posted during the pandemic lockdowns. Most other firms that put up big numbers in 2020 and 2021 have not been able to duplicate that performance.
The stock traded up about 3.5% Monday, at $441.69 in a 52-week range of $411.17 to $1,762.92. The low was posted last Friday. Since reaching the 52-week high in late November, the company’s consensus price target has dipped from a high of around $1,713 to a current average of $872.10.
24/7 Wall St.Datadog
Cloud analytics provider Datadog Inc. (NASDAQ: DDOG) has put up a 40.2% share price gain over the past 12 months. Since early November, however, shares have dropped about 39%. When the company reports quarterly results early Thursday morning, analysts expect revenue to be up about 3.6% sequentially and 70% year over year. EPS are expected to drop 43.7% sequentially and rise by 83.3% year over year.
Analyst Matthew Hedberg at RBC Capital chopped the firm’s price target from $225 to $167 while keeping its Outperform rating. The cut reflects what Hedberg called weaker multiples among growth software companies. He expects more challenging year-over-year comparisons to give investors a reason to evaluate decelerating growth rates for the rest of the year.
Datadog’s stock traded down about 1% Monday, at $119.64 in a 52-week range of $69.73 to $199.68. Since reaching the 52-week high in early December, the company’s consensus price target has dipped from a high of around $213 to a current average of $201.48.
Alibaba
China-based e-commerce giant Alibaba Group Holding Ltd. (NYSE: BABA) has seen its share price plummet by 57% over the past 12 months. Shares traded up 2.4% Monday morning, but the stock still suffers from uncertainty over China’s economy. There is no firm date for the company to release its 2022 fiscal fourth-quarter results, but next Thursday, May 13, may be the best bet. Consensus estimates are calling for revenue to be down 20.7% sequentially and up year over year by a third. EPS are expected to soar 240% sequentially and by 22.4% year over year.
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James Lee of Mizuho maintained a Buy rating on the stock but lowered the price target from $180 to $160 (12.5%), citing uncertainty caused by the COVID-19 disruptions to consumer spending and business activity. Alibaba will not be the only internet company to feel the pinch, and as long as the Chinese government insists on its zero-COVID policies, economic recovery remains out of reach.
Alibaba’s stock traded up by about 1.9% Monday, at $98.95 in a 52-week range of $73.28 to $236.17. Since reaching the 52-week high in early May of last year, the company’s consensus price target has dipped from a high of around $320 to a current average of $158.91.
Baidu
Shares of China’s largest internet search engine, Baidu Inc. (NASDAQ: BIDU) have dropped nearly 41% of their value over the past 12 months. Like Alibaba, the company’s 52-week high was posted a year ago, and the company has not announced its released date for earnings, although next Wednesday remains the favorite. Consensus estimates call for a sequential drop of 19.1% in revenue and an EPS jump of 270.4%. Year over year, revenue is touted to dip by 1.9% while EPS is expected to drop by 55%.
Mizuho’s Lee has kept a Buy rating on the stock but lowered the $300 price target to $285 (down 5%). All the reasons he gave for cutting Alibaba’s price target also apply to Baidu.
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