Busy Earnings Week, MLB And NHL Added To Twitter Streaming, Nintendo's Plunge - Eye On Tech

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Includes: AAPL, AMZN, BABA, DIA, ETFC, FB, GOOGL, MSFT, NTDOY, QQQ, SNE, SPY, TWTR, VZ, YAHOF, YHOO
by: Bret Kenwell

Summary

Shares of Nintendo dropped again Monday, following the company's warning that earnings would only have a slight impact from Pokémon Go.

It's a busy week for earnings, with Apple, Amazon, Alphabet and Facebook all on deck. Twitter adds the NHL and MLB to its portfolio of streaming deals.

It's final: Verizon buys Yahoo for $4.83 billion, E-Trade acquires OptionsHouse for $725 million and the Xbox One sees its price reduced to $250.

Busy Earnings Week for Tech

Usually we wouldn't cover something as broad as a "busy earnings week" in the Eye on Tech column. But given that there's almost $2 trillion tied up in market cap for just a handful of stocks that are scheduled to report their quarterly results this week, I figured it worthy of mentioning.

With Apple (NASDAQ:AAPL) on Tuesday, Facebook (NASDAQ:FB) on Wednesday and Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) on Thursday, we will surely get some insight into tech and the consumer.

Analysts are already warming up for Amazon, with Wedbush and Cantor Fitzgerald upping their price targets ahead of the results to $835 and $800, respectively.

It will also be an important week for the PowerShares QQQ Trust ETF QQQ, which has a roughly 30% weighting to these four stocks. It's also notable that, unlike the S&P 500 ETF SPY and Dow Jones Industrial Average ETF DIA, the QQQ hasn't hit a fresh 52-week high in the recent rally.

In other words, the ETF will likely be on the make-or-break schedule this week. Either these big names will propel it upward to new highs - and likely encourage broad buying in the rest of the stock market - or they will underwhelm the Street, dragging down the QQQ and to some degree overall investor confidence as well.

On the plus side, we'll get to find out pretty soon.

It Wouldn't Be Eye on Tech Without Mentioning the Verizon-Yahoo Deal

So it's official, Verizon (NYSE:VZ) will acquire Yahoo (NASDAQ:YHOO) and its real estate for $4.83 billion. The deal was all but official last Friday, however the details were still in question. Reports suggested the company bought Yahoo for $5 billion, which we now know was a touch more than the official figure.

Part of what made this auction so lengthy was what exactly was for sale. Because Yahoo has large stakes in other companies, patents and real estate, along with its core business, finding buyers - and what they wanted to buy - complicated the procedure.

In the end, Alibaba (NYSE:BABA) and Yahoo Japan (OTCPK:YAHOF) will not be included in the deal, nor will the company's patents or cash.

The deal is now expected to close in the first quarter of 2017, which will end with Yahoo changing its name and remaining a publicly-traded entity.

Cheers, Yahoo!

The Stream Continues to Flow for the Little Blue Bird

That's right, Twitter (NYSE:TWTR) has locked up another streaming deal. The microblogging site has previously lined up the NFL, the Pac 12 and CBS, and just last week inked a fresh deal with the NBA.

Management apparently wants to round out its sports-themed streaming portfolio as it now has deals to stream certain out-of-market MLB and NHL games. According to the deal, Twitter will be able to stream one game per week from the MLB and NHL.

Apparently, MLB games will be pushed globally, with the exception of a few regions. For now, both logged-in and logged-out users will be able to access this content. But it seems to me that at some point Twitter will make an effort to push these users into a logged-in state.

At one point in its publicly-traded life, Twitter had the benefit of the doubt from investors. But that benefit has waned considerably and now Twitter has very much become a "prove me" stock.

Although the company has introduced a number of different features, tweaks and future streaming agreements, there's been little proof of the turnaround so far. As recently as this month, renown SunTrust analyst Bob Peck downgraded the stock to neutral, explaining that the company's positive catalysts haven't panned out yet and that user growth remains stagnant.

Perhaps over the long-term, these initiatives and in particularly streaming will help to drive meaningful user growth for Twitter.

Ah, So That's What the Nintendo Shorts Were Betting Against…

Last week, we asked what had caused the short interest to triple in shares of Nintendo (OTCPK:NTDOY). Was it the fact that the stock more than doubled in less than a month, driven by Pokémon Go mania? Or was it the fact that the company only owns a ~32% stake in the Pokémon Company, which co-developed Pokémon Go with Niantic, and therefore was leaving Nintendo with a very small share of the profits?

If I was a short seller, the former would have probably got me interested and the latter would have sold me. In any regard, the stock has certainly suffered over the past week, falling more than 10% on Monday alone and some 17% in early-Monday trading.

So what caused the decline, pushing shares down more than 20% from last Tuesday? The company came out and warned investors that the hit game would only have "limited" impact on earnings. Even though we don't have any of the figures in front of us in terms of how Pokémon Go is doing and how much money it's generating, it didn't take much work to know that the doubling of its market cap clearly was overdoing it (again, because it has a less than one-third stake in the co-developer).

On the plus side, the company expects roughly $330 million in net profit this year, more than double from the year prior. Another plus is that with Pokémon Go's success, it paves the way for other, similar games to come to market in the future from Nintendo.

Get 'Em While They're Hot

The price of Microsoft's (NASDAQ:MSFT) Xbox One continues lower as the company looks to make way for the launch of its Xbox One S on August 2nd. We covered the One S earlier, but in a nutshell, it's 40% smaller, has up to double the storage space and supports super high-end graphics.

The price cut on the original Xbox One is the third one since May, as the console now costs just $250 - *half the price of when it first launched.

The Xbox One was only released in November of 2013, selling one million units within its first 24 hours and hitting 2 million units a little more than two weeks later. However, the numbers get fuzzy after that.

The last sales estimate puts the Xbox One somewhere around 20 million units, which may seem impressive, until it's compared to Sony's (NYSE:SNE) Playstation 4. The PS4, which was launched in November of 2013 as well, has sold more than 40 million units, and saw its last 10 million units sold over the last six months (as of May 26th).

That's darn impressive, and even more so that the company went from sales of 30 million to 40 million faster than it went from 20 million to 30 million. It shows that traction is strong and gamers remain attracted to the console.

More so, the console costs more than the Xbox as well.

So it only makes sense that Microsoft unveiled a new Xbox One S in order to spruce up sales. While I wouldn't say the Xbox is necessarily struggling, it's certainly not crushing its competitors - but perhaps that will change with a new and improved console.

*Drats! I knew I should have waited.

E-Trade Buys OptionsHouse

Perhaps this would fall under "Eye on Financials," but given that a lot of it's based on technology-powered brokerage apps, I decided to include E-Trade's (NASDAQ:ETFC) all-cash acquisition of OptionsHouse for $725 million in our column as well.

OptionsHouse has become known for trading - you guessed it - options. While E-Trade is a much larger brokerage platform boasting a market cap of $7.2 billion and offering banking, advice, trading and other products, it's assumed that the company is looking to bolster its portfolio of options and derivative products.

OptionsHouse was originally founded in 2006 by PEAK6, before merging with TradeMonster in 2015 and ultimately being acquired by General Atlantic, a private-equity firm.

The deal is expected to have an "about neutral" impact to earnings in 2017 and be accretive in the following year. The deal should close later this year, sometime in the fourth quarter.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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