The four major social media companies are all performing well, but the diverging moves that the corresponding stocks made coming off earnings were have been defined by investor expectations, CNBC’s Jim Cramer said Friday.
The “Mad Money” host crowned the stocks of Twitter and Pinterest as winners; denoted Facebook and Snapchat-parent Snap as losers.
“It was about the expectations,” he said. “None of them had perfect results, but Facebook and Snap had run going into the quarter, while Twitter and Pinterest had sold off ahead. So Facebook and Snap got pulverized while Twitter and Pinterest caught fire.”
Below is his assessment of their quarterly reports and stock actions:
Snapchat, Facebook, Twitter, Messenger, Instagram and LinkedIn apps shown on a smartphone screen.
Chesnot | Getty Images
Twitter shares suffered a 22% downfall earlier this year after reporting top- and bottom line misses on its October quarterly report. The stock managed to recover almost all of those losses after reporting mixed results in its fourth-quarter results in early February.
The social media company came up short on earnings, but beat revenue expectations of $992 million by recording $1 billion on the top line, a year-over-year increase of more than 10%. Twitter also reported stronger-than-expected user growth, Cramer noted. The stock closed Friday at $38.31.
While Twitter is also investing in its business, which stunts profits, to improve the social experience, investors were more forgiving of this one, he said.
“I think it’s because the expectations for Twitter were lower, and also because the company’s proven it can overcome adversity. Even if this quarter wasn’t consistently better than expected, well it was certainly NABF — not as bad as feared.”
Pinterest shares rallied 23% from the start of 2019 before it reported earnings on Feb. 6. After delivering shareholders a top- and bottom-line beat and a bullish guidance, investors rewarded the stock with a nearly 10% increase the day after.
The ideas discovering app benefited from strong user growth and an ability to monetize it, Cramer said. While the stock is up more than 20% this year, its down almost $3 from its February closing high.
“Really, though, Pinterest is giving investors everything they want: strong revenue growth with steadily rising profitability. No wonder the stock ignited after the quarter. The stock surged to $26 two weeks ago. It has since cooled off back to $22 and, you know what, I think it’s kind of nuts that it went down that much.”
Facebook shares sold off almost 10% in the two days after reporting a fourth-quarter beat at the end of January. As of Friday’s close, the stock is down about 6% since the earnings report.
The social media giant, which owns the Instagram photo app and WhatsApp messaging platform, reported earnings per share of $2.56 and revenue of $21 billion, topping Wall Street estimates of $2.53 per share and $20.9 billion of revenue, according to FactSet.
Though Cramer was pleased by the results, he said Wall Street wanted to see a wider marginal beat. After Facebook gave investors a series of strong quarterly reports in 2019, the stock was doomed by high expectations, he said. Shares had risen more than 8% from the beginning of the year going into the Jan. 29 report.
Cramer said the stock was “priced for perfection going into the quarter.”
“It didn’t help that Facebook’s revenue guidance for the next quarter was less than stellar [and] management plans to spend more money than Wall Street was expecting,” he said. “Anything less than perfection was going to spark a sell-off, and that’s exactly what happened. Long term, I remain a believer in Facebook.”
Snap
Snap stock almost tripled to $16.72 per share over the course of 2019. Cramer applauded the company, which markets a photo- and message-disappearing app, for improving its Android user experience and growing its user base, which attracts advertising dollars to the platform.
The company came public at $24 in March 2017 and has not traded above $20 per share since February 2018, according to FactSet. Cramer recommended buying the stock in January at about $19 apiece.
“I had been concerned that Snap had caught too many upgrades going into earnings,” the host said. “That raises the bar, making it harder for the company to beat expectations.”
Still unprofitable, Snap’s quarterly losses were 5 cents per share worse than what Wall Street forecast and revenue came in just short. The company reported a loss of 17 cents per share, 21% lower than the year prior, and revenue of $561 million, up about 44%. Shares grew 16% from the start of 2019 before the earnings report earlier this month. The company lost nearly 15% of value the day after.
Shares closed Friday’s session at $16.70.
“Management said they’ll be losing more money than expected this quarter because they’re investing more heavily in the business. In response, the stock got completely eviscerated,” Cramer said. “It’s still down $3 from its high. That said, you know what, I’m telling you to buy it. I think you’re getting a great discount from where it was.”
Disclosure: Cramer’s charitable trust owns shares of Facebook.
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