Tech Stocks Look Poised to Rally. Here's What You Need to Know
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Tech stocks appear poised for a good day on Friday, with shares of the FANGs and other hot tech stocks all up solidly premarket trading.
Square and Fitbit could be among the biggest early winners. Square will look to bounce back from a rough week on the back of some analyst optimism. Fitbit, meanwhile, won praise from Wedbush for its health-technology business.
Here's what tech investors need to know for Friday.
Fitbit has been trying to diversity its business away from pure device sales for more than a year, but the company's health-solutions business is still a small component of revenue.
Wedbush analyst Michael Pachter is upbeat about opportunities in the segment, however, and he argued Friday that Fitbit could start to show a "meaningful contribution" from the business as early as next year.
Pachter upgraded Fitbit shares to Outperform from Neutral and set a price target of $6.50, above Thursday's close of $4.50.
"We think Fitbit has an excellent opportunity ahead with med-tech, particularly in collaboration with Google," he wrote.
Tech earnings season kicks off in earning next week, when Netflixreleases its third-quarter results on Tuesday. At least four analysts chimed in with their thoughts on Friday.
"Predicting Netflix quarters is a black-box, but we favor the set-up following a solid looking performance from the content slate, a lot of content coming and conservative-looking expectations versus historic seasonality," wrote MKM Partners analyst Rob Sanderson, who rates the stock a Buy with a $395 target.
Wedbush's Pachter thinks the company looks well positioned internationally, thanks to a host of high-quality original content this year, as well as marketing efforts. He also argues that the company could track ahead of its free-cash-flow outlook due to a somewhat light slate of big launches during the quarter. Pachter rates the stock at Outperform with a $125 price target.
Monness, Crespi, Hardt & Co. analyst Brian White said Netflix still isn't very good at predicting subscriber trends for future quarters. "Thus we expect volatility around this number to continue," he said.
Nonetheless, he's upbeat on fundamental trends such as international expansion and pricing flexibility. White rates the stock a Buy with a $430 price target.
B. Riley analyst Barton Crockett, meanwhile, wrote of "OK" search volume for Netflix and its shows. Search trends were positive for new Netflix originals, he said, but global searches for the term "Netflix" decelerated in the quarter.
Crockett has a Neutral rating and $313 target price on the shares, which are up 4% in premarket trading and leading the FANGs. The stock closed Thursday at $321.10.
Pivotal Research analyst Brian Wieser turned bullish on Snap on Friday, upgrading the stock to Buy from Hold, though he lowered his price target to $8 from $9.
"The data we look at is showing a widening user base, although one which is collectively reducing its time on the platform," Wieser wrote. "Our take is that it is not too late for management to find ways to reverse recent usage trends and generally improve monetization regardless of those usage trends."
Wieser also upgraded Twitter shares to sell from hold, while lowering his target to $24 from $26. In general, he's lukewarm on the big internet companies. Wieser rates Alphabet at Hold and Facebook at Sell.
Shares of Chinese tech stocks are rallying premarket, though analysts have been tempering their enthusiasm for the shares.
Stifel analyst Scott Devitt cut his Alibaba price target to $200 from $220 overnight, and he removed the stock from his firm's "select" list. Devitt still rates Alibaba at Buy, but like others on Wall Street, he's worried about macroeconomic issues.
UBS analyst Jerry Liu trimmed his Alibaba target to $220 from $230, and he lowered his JD.com target to $28 from $38. He has macro concerns as well and worries about both ad and demand weakness. Liu still rates the stocks at Buy.
Activision Blizzard released its Call of Duty: Black Ops 4 title on Friday, and Wall Street will be looking for early indications on sales and reception. Black Ops 4 is the videogame publisher's big title heading into the holiday season, and it features a new game-play mode that borrows from Fortnite's success.
Separately on Activision, Piper Jaffray analyst Michael Olson wrote Friday that his look at Twitch live-streaming data was positive for the publisher in the latest quarter. Olson only got in-line reads for rivals Electronic Arts and Take-Two Interactive Software based on the data.