Hollywood will take a break from awards season to intermittently focus its gaze on the stock market over the next three weeks, as Wall Street’s four erstwhile darlings with serious content ambitions — Facebook, Amazon, Netflix and Google parent Alphabet — will report their fourth-quarter and full-year earnings.
Investors will be scrutinizing those reports closely after all four mega-corporations ended last year with a whimper, underperforming the Dow Jones industrial average after a torrid 2015.
However, Wall Street still looks to Facebook, Amazon, Netflix and Google — also known as the “FANG” stocks — to get a sense of what some of the biggest companies at the nexus of technology and media are focused on and, more importantly, what’s working. Here’s what investors will be looking for when this Big Four reports:
Facebook (Feb. 1, close of market)
What to watch for: dealing with “fake news,” video ads
Actual fake news with incorrect facts and a false premise, not just news branded fake because it makes people uncomfortable, has been a major headline of America’s post-election autopsy. Facebook, where 62 percent of Americans get news at least occasionally, has implied a little bit of culpability through a new fact-checking protocol and its hiring of experienced journalist Campbell Brown to work with media organizations.
But more germane to Wall Street is Facebook’s recent decision to allow mid-roll ads in videos posted by publishers, which would play after a video is viewed for at least 20 seconds. That ought to help publishers make more money off Facebook traffic — which many have complained about — as well as entice legitimate news sources to post more of their content on the social network.
Investors will pay close attention to any update Facebook has on new ad products, especially after the company’s chief financial officer warned of a slowdown in ad revenue during last quarter’s earnings call.
Amazon (Jan. 26, close of market)
What to watch for: Amazon Web Services, new Prime Video markets
Hugely profitable cloud computing division Amazon Web Services and expectedly huge holiday shopping numbers will be where most investors’ eyes are when Amazon reports earnings, but they’ll also pay attention to its burgeoning Prime Video content empire. As it was last year (and as is fellow streaming behemoth Netflix), Amazon is expected to be one of the most aggressive buyers at Sundance and elsewhere as it looks to lock down exclusive content to entice viewers to sign up for its subscription video service.
Last month, Amazon Prime Video launched in 242 countries, giving it a wider footprint than even Netflix. And if Amazon shares more data that shows its content ambitions are proceeding nicely, that could give investors another reason to buy into what’s already an e-commerce and cloud computing force of nature.
Netflix (Jan. 18, close of market)
What to watch for: Subscribers, international growth
At last January’s Consumer Electronics Show, Netflix announced its expansion into 130 countries, bringing it to 190 in all — but like Amazon Prime Video, not China. One year on, investors will want to see what kind of dividends that global rollout is paying.
Analysts at investment bank William Blair are expecting Netflix to top 100 million subscribers worldwide in 2017, with more than half coming from international markets. And with Netflix announcing on its last earnings call that it was planning on spending $6 billion on content in 2017, that global growth needs to happen fast to pay for all that programming. Netflix added 3.6 million subscribers during the last quarter, with 3.2 million being non-U.S., which should provide a benchmark to measure international growth.
Netflix’ original series continue to garner critical acclaim, which ought to help attract subscribers. “Stranger Things” and “The Crown” were both nominated for best TV drama at this year’s Golden Globes, and “The Crown” and lead actress Claire Foy picked up trophies.
Google (Alphabet Inc.) (Jan. 26, close of market)
What to watch for: mobile search, YouTube, Android TV
Better-than-expected mobile advertising numbers helped Google’s parent company beat expectations when it reported third-quarter earnings, and given the way this year’s election season kept people glued to their phones, investors are expecting continued strength in mobile ads. But as viewers migrate from big cable packages to watching internet video, YouTube is also becoming a bigger part of Alphabet’s success.
Alphabet Chief Financial Officer Ruth Porat said “YouTube revenue continues to grow at a very significant rate” on the last earnings call, and investors will want to see if that continues, especially with Facebook making a heavy push into video and streaming TV alternatives like DirecTV Now and Sling emerging. Google is also developing its own smart TV platform, Android TV, and as streaming continues to develop, it will be worth noting if Alphabet shares any updates on Android TV — which is still not compatible with several major video apps and services, including DirecTV Now.