6 Tech Earnings: 2 Buys, 2 To Hold, 2 To Consider

by: Richard Saintvilus

Earnings season can be both an exciting time as well as one that brings a lot of anxiety for companies and investors. It's called "the reporting period" for more than one reason - companies are essentially sharing their quarterly report cards. But not everyone gets a passing grade. It all depends on the expectations that were set. As such, here are a few names to keep on your watch list.

Buy Intel (INTC)

The semiconductor giant will report first-quarter earnings on Tuesday, April 16. Given the sad state of the PC industry, the Street isn't expecting great results from Intel as earnings-per-share estimates have been cut to 42 cents. In fact, analysts are expecting earnings to drop more than 20% year over year, from 53 cents. Depending on how you look at it, this may not be so bad.

Intel's Q4 results were mostly positive as the company posted revenues of $13.477 billion. While it barely missed consensus estimates, sales arrived at the midpoint of management's prior guidance and fell short of the Street's target by less than 1%. Nevertheless, investors shouldn't discount that Intel has been profitable over the past eight quarters.

Besides, Intel's story is not so much about where the company is today, but where it is heading. Investors should expect Intel to demonstrate continued strength in emerging markets, from the explosion of smartphones and mobile devices and from corporate and consumer migrations towards cloud infrastructures.

At $21.67 per share, the stock is trading almost 15% under my price target of $25 and it is 33% below highest price target that Intel has received of $29. Plus, given Intel's P/E of 10, the stock is trading at a considerable discount to the likes of NVDIA and Texas Instruments. If you are a value investor looking for a safe investment in technology and one that pays a respectable dividend, you should consider Intel.

Buy Yahoo (YHOO)

Investors weren't sure of what to make of Marissa Mayer when she was brought in last summer to lead Yahoo. Today, there is no question that it was once of the best decisions that Yahoo has ever made. While we can look at the 60% jump in the stock as evidence of her success, she has also brought to Yahoo a level of confidence that the company has not seen in quite a while.

The company will report earnings on April 16, and the Street expects Yahoo, which has gone under an impressive redesign/reorganization of its web assets, to build upon a solid fourth-quarter report, during which, gross revenue rose almost 2% year-over-year. Consensus EPS estimates is calling for 25 cents per share, which represents 4.2% increase year-over-year. Revenue is expected to arrive at $1.1 billion

Granted, it has been a while since Yahoo really made a splash on the market. However, changing a corporate culture and fundamentally repositioning of a company does not happen overnight. Patience is still the best way to approach this stock, given how well Mayer has been able to quickly erase concerns about the company's leverage.

Although 16 out of 27 analysts have a hold rating on the stock, I think investors should buy on any weakness as Yahoo has become one of the most attractive media companies on the market, especially since gross margin and operating income are now beginning to improve.

Hold eBay (EBAY) - Consider Facebook (FB)

Shares of eBay are up 12% on the year and are merely percentage points away from its 52-week high. The Street has gotten excited about the ecommerce giant and analysts are expecting solid results when eBay reports first-quarter results on Wednesday, April 17. The company is expected to post 54 cents in earnings-per-share, which would represent an increase of 12.5% year-over-year.

Revenue is expected to arrive at $3.67 billion, or almost 15% higher than the year-ago quarter. I think this is a pretty easy number for eBay to beat, given that the company posted 18% revenue growth in the fourth quarter, which extended its streak of double-digit growth to four consecutive quarters. During that span, growth has averaged more than 20%.

However, profitability was an issue in the fourth quarter as net income dropped 62%. This should be an area to keep an eye on for this quarter. Investors should also focus on how well management is moving the company towards the mobile platform. Given the popularity of mobile devices and the slumping PC market, eBay's future is tied in to how well consumers are embracing the new change.

This is the same reason why Facebook's home app was so significant. In the meantime, investors should expect continued growth from EBay over the next several years. That said, seeing as the Street has already fallen in love with the stock, I don't think there's immediate value left. I would hold here, pending new developments/progress with mobility.

By contrast, Facebook can't be ignored. Last week the company announced that "home" was where its profits will be. Not everybody agreed. Facebook said it plans to make the app the center of the phone. Not only will it take over your homescreens, but it will help users post, share, chat, and do a host of social functions much simpler.

Again recently, the company released the "home" app for Google's (NASDAQ:GOOG) Android devices. The Street, however, didn't seem too enamored, given that the stock is still trading at just $27 per share. But I think investors are overlooking the capabilities of "home." Besides, it's not only about the hardware, Facebook is addressing mobility.

The fact that Facebook is now putting resources towards what it really the wave of the future, is encouraging. And if Facebook can figure out a way to increase adoption of this app, while dominating adds, this stock can reach the low $40s by the end of the year. At $27, Facebook is making a lot of sense.

Hold SanDisk (SNDK) - Consider Seagate (STX)

As with eBay, shares of SanDisk are sitting near a 52-week high after the stock has risen more than 15% so far on the year. The question, though, is it deserved? While I do believe that SanDisk has some decent growth opportunities on the horizon, the company may begin to experience increased competition from the likes of Seagate, which has begun to move towards solid-state-drives, or SSD.

SanDisk will report earnings on Wednesday, April 17. And the Street has grown more positive about the results. Consensus EPS estimates has increased by 3 cents to 66 cents per share, which would reflect a year-over-year growth of 18%. Meanwhile, the Street will be looking for sales of $1.3 billion, which would represent 8% year-over-year growth.

However, while the growth rate may appear solid, that's not the whole story. While profitability has been consistent over the past eight quarters, SanDisk has also posted four consecutive quarters of eroding sales. This is while net income has also regressed during that span. I suppose one can point to the slumping PC industry as a catalyst. Then again, it begs the questions, why is the stock still hear its 52-week high?

I think Seagate, which has recently moved towards hybrid drives, is the better buy here. The company is coming off a quarter during which revenue climbed 15% year over year - helped by a 24% jump in hard disk drive units. Even though revenue fell 2% sequentially, Seagate surprised investors as client, non-computer segments and enterprise, each posted double-digit growth. Meanwhile, at a P/E of 4, Seagate's stock is too cheap to pass up.

Disclosure: I 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.