Apple (AAPL, $121.35) reports fiscal Q1 (Dec.) EPS of $3.36, 14 cents above the consensus estimate of $3.22, on revenue of $78.4 billion, vs. the consensus of $77.38 billion. Services revenue rose 18% to $7.17 billion. Gross margin of 38.5% was in line with the guidance range of 38% to 38.5%.

FQ1 Unit Sales by Product

iPhone: 78.3 million—Beats consensus of 77.3 million

iPad: 13.1 million—Misses consensus of 14.7 million

Mac: 5.4 million—Beats consensus of 5.2 million

For FQ2, Apple expects revenue of $51.5 billion to $53.5 billion, vs. the consensus of $53.9 billion. Gross margin guidance: 38% to 39%.

OpCo says Microsoft (MSFT, $64.91) is only getting stronger in hybrid cloud. After another solid quarter, the firm believes Microsoft has proven it can execute on its hybrid cloud strategy. 

New product introductions and increased intelligent functionality throughout the cloud-software portfolio should lead to accelerating growth on both the top and bottom lines through 2019, says OpCo.

In addition, the firm sees potential upside from the LinkedIn integration. OpCo maintains its MSFT price target of $70.

Imperial Capital raises its Proofpoint (PFPT, $77.93) price target to $100 from $85 based on continued strong growth and execution in Q4. The firm says Proofpoint is benefiting from escalating threats (including business email compromise) as well as expanding demand for social media security and compliance solutions.

Imperial sees potential upside from new products, international expansion, conversions of larger McAfee customers, sizable archiving transactions and increased partner traction.

With Apple (AAPL, $121.95) shares so far this year showing a gain of 5.3%, expectations are elevated going into Tuesday’s fiscal Q1 (Dec.) earnings report. Investors are anxious at these elevated levels (the 52-week high stands at $122.44), so one bad metric could take the stock down.

Guidance for the March quarter will be key, as investors are concerned about iPhone sales momentum following the strong holiday period and ahead of the release of the next major handset later this year.

Following the release of FQ4 results in late October, Apple shares over the next eight sessions declined as much as 8.5%. The pullback occurred even though Apple offered FQ1 revenue guidance above the consensus estimate.

Shares of Microsoft (MSFT, $65.72) today are up more than 2%, hitting a new all-time high at $65.91 following last night’s solid fiscal Q2 report. 

Revenue in the December quarter rose 2% to $26.07 billion, above the consensus estimate of $25.2 billion. EPS of 83 cents beat the consensus by four cents.

Some key positive metrics in FQ2:

*Commercial Cloud annualized revenue run rate exceeds $14 billion +49%

*Commercial unearned revenue of $21.1 billion rose 8%

*Office 365 commercial revenue +47%

*Office 365 commercial seats +37%

*Dynamics 365 paid seats more than doubled

*Azure revenue +93%

*Azure compute usage more than doubled 

For more on Microsoft, see our profile in the January 2017 issue of Tech-Stock Prospector.

Cowen reiterates its Alphabet (GOOGL, $856.98) price target of $1,050 following the release of strong Q4 results (revenue up 22%), driven by mobile search and YouTube. 

Stifel lifts its GOOGL target to $1,050 from $950, calling Q4 revenue growth “impressive.” The firm calls out Google Play’s healthy growth in both developed and emerging markets, with user spend up more than 70% y/y in key countries such as India and Mexico.

Intel (INTC, $37.56) reports Q4 EPS of 79 cents, four cents above the consensus estimate, on revenue of $16.4 billion (+10% y/y), vs. the consensus of $15.75 billion.

For Q1, the company sees EPS of 65 cents (+/- 5 cents), vs. the consensus of 61 cents. Expected revenue of $14.8 billion (+/- $500 million) is above the consensus of $14.5 billion.

Wunderlich lifts its ServiceNow (NOW, $90.56) price target to $107 from $95, saying the company is establishing itself as “the ERP of IT,” closing a number of Q4 deals that included three or more products. 

The firm points out that core IT service management (ITSM) continues to drive ServiceNow’s business, while non-core offerings in Q4 represented 46% of net new ACV, as IT operations management (ITOM) and customer service showed particular strength.

Baird reiterates its Tableau Software (DATA, $48.75) price target of $55, saying the company is in the process of addressing its two most important issues by improving enterprise go-to-market and expanding its product offerings to include key enterprise features. 

While the firm looks for more volatility over the next few quarters, it believes the stock presents a good entry point at current levels because of low expectations and an attractive valuation.

D.A. Davidson starts Arista Networks (ANET, $92.76) at ‘Buy’ with a price target of $118, saying the “legal liability” discount the stock’s valuation currently carries should dissipate as the company’s path through the legal thicket with Cisco Systems (CSCO) becomes more apparent. 

The firm believes Arista’s decision to bring manufacturing into the U.S. has mitigated its legal exposure. Arista’s path to sustained growth could even include some short-cuts if a number of pending rulings over the next seven months go in the company’s favor, says Davidson.

The firm expects Arista, the fastest-growing Ethernet switch company, to continue to take market share in the cloud-switching segment, particularly from Cisco.

New Relic (NEWR, $37.18) shares today are up more 11% on news that privately held competitor AppDynamics has agreed to be acquired by Cisco Systems (CSCO) at a big premium just a day before its planned IPO. 

Cisco is paying $3.7 billion in cash & assumed equity awards for AppDynamics. 

New Relic’s sharp upside move today is a valuation step-up based on what Cisco is paying for AppDynamics. Earlier this morning, New Relic shares traded to a new 52-week high at $40.10.

New Relic is a holding in the Tech-Stock Prospector Small-Cap Portfolio.

Western Digital (WDC, $76.01) shares yesterday hit a new 52-week high at $76.51. 

In the April 2016 issue of Tech-Stock Prospector, we wrote that Western Digital stock—then trading at $43.10—had upside potential to around $55. Our fair-value price target at the time was based on expected deal synergies from the SanDisk acquisition, which was finalized in May 2016.

After reaching the $55 level in September, Western Digital shares have continued to advance, gaining 45% just since the October low.

On the fiscal 2017 (June) consensus EPS estimate of $7.10, Western Digital now sports a P/E of 10.7. The FY’18 consensus EPS estimate of $8.35 indicates growth of 17.6%. The latest Street-high estimate for next year is $9.91.

Alphabet (GOOGL, $837.93) shares today hit a new all-time high at $839.67.

Alphabet is a long-term holding in the Tech-Stock Prospector Vulture Portfolio, added in May 2010 at $249.63.

Shares of Atlassian (TEAM, $28.03) today rose 2.2% after the provider of team planning & collaboration solutions last night reported fiscal Q2 (Dec.) revenue of $148.9 million (+36% y/y), above the consensus estimate of $144 million. Cloud-based subscription revenue rose 66% to $56.3 million.

For FY’17 (June), Atlassian now expects revenue of $611 million to $615 million (including ~$4 million from the recently announced Trello acquisition), up from previous guidance of $597 million to $603 million. The consensus estimate was $600.8 million.

Goldman Sachs upgrades Mobileye (MBLY, $43.62) to ‘Buy’ with a price target of $50 (up from $40), saying it’s bullish based on potential further wins in fully autonomous driving and earnings upside momentum.

For more on Mobileye, see TechStock Radar—January 13, 2017.

Following a strong Q4 performance (domestic net subscriber additions of 1.93 million and international net additions of 5.12 million), Netflix (NFLX, $133.26) is on track to surpass 100 million subscribers by Q2. With roughly 47% of total members now outside the U.S., the international crossover point could occur in Q3.

*Total domestic memberships: 49.43 million  (Q1 guide: 50.93 million)

*Total international memberships: 44.37 million (Q1 guide: 48.07 million)

FBR Capital says the latest results clearly show Netflix content is resonating with consumers. The firm lifts its price target to $144 from $100. OpCo goes to $165 from $134, while RBC Capital is more bullish, now at $175 from $150.

Gigamon (GIMO, $31.38) stock today slumped more than 28% on massive volume after the company last night issued a negative pre-announcement for Q4. The intraday low was $30.50.

Blaming lower than expected product bookings in its North America West region caused by “several significant existing customer accounts” deferring purchasing decisions into 2017, Gigamon, a provider of networking traffic visibility solutions, reduced its Q4 revenue guidance:

NEW: $84.5 million to $85 million

OLD: $91 million to $93 million

Consensus: $92.2 million

The main question now: Is this the start of a series of misses? Many investors obviously decided not to wait around for the earnings conference call in early February to get management’s views on the stumble. Full Q4 results will be released on February 2.

After ending 2015 at $26.57, Gigamon shares in November traded to an all-time high of $61.25. In 2016, the stock advanced 71%.

Nutanix (NTNX, $28.79) shares today are down more than 4% after HP Enterprise (HPE) announces the acquisition of direct competitor SimpliVity for $650 million in cash.

HPE says the market for hyperconverged infrastructure (HCI), estimated at $2.4 billion in 2016, is expected to grow at a CAGR of 25%, reaching nearly $6 billion by 2020.

It’s estimated that Nutanix controls 52% of the HCI market, vs. 18% for SimpliVity.

Miller Tabak starts Expedia (EXPE, $118.58) at ‘Buy’ with a price target of $150. 

With acquisition digestion out of the way, Expedia is now well positioned to grain traction on multiple fronts thanks to secular growth in the online travel industry, aggressive expansion of its supplier network in international markets (where the company remains under-indexed) and the unlocking of growth potential for HomeAway, says the firm.

Morgan Stanley reduces its Apple (AAPL, $119.04) iPhone unit sales estimates to 75 million for the December quarter (down from 79 million) and 51 million for the March quarter (down from 55 million). 

The firm says the move reflects reduced demand ahead of the upcoming “supercycle” expected with the release of the 10-year anniversary iPhone later this year. Morgan Stanley ups its FY’18 iPhone revenue estimate by 6%. The firm maintains its price target of $148.

Security stocks are once again attracting buyers. Here are the five strongest security names at the moment (ranked by RSI):

1-CHKP—77.8

2-SYMC—72.4

3-CYBR—70.5

4-PFPT—68.6

5-FTNT—65.8

Morgan Stanley lifts its Netflix (NFLX, $132.79) price target to $150 from $130, citing expectations for reduced churn in both the U.S. and internationally, helped out by the company’s ongoing success with original programming.

While the consensus forecast calls for deceleration in net subscriber adds, the firm looks for acceleration. For 2017, Morgan Stanley sees U.S. net adds of 4.3 million, with international net adds of 13.3 million.

Jefferies starts coverage of Mobileye (MBLY, $41.88) at ‘Buy’ with a price target of $52, saying it expects robust sales growth through 2020 given the company’s favorable market positioning as a leading supplier to the rapidly expanding active vehicle safety segment.

As a basis for its bullish view, Jefferies calls out Mobileye’s OEM contract wins/partnerships and a customer base seeking first-to-market advantages.

Raymond James upgrades Facebook (FB, $126.62) to ‘Strong Buy’ with a price target of $160 following Q4 checks showing continued positive momentum related to ad revenue.

Despite some debate around ad load growth in 2017, Raymond James believes Facebook can continue to report upside to consensus estimates.

The firm says the risk/reward on the stock is attractive at current levels.

Shares of Box (BOX, $16.95), provider of a cloud-based enterprise content management platform, today rose 3.3% on heavy volume (1.9x average daily volume), closing the session at a new 52-week high.

Box shares have been under accumulation since the end of December, advancing eight sessions in a row, often on heavy volume. So far in 2017, the stock is up 22%. Box stock hasn’t been at these levels since July 2015.

Summit Redstone initiates coverage of Twilio (TWLO, $27.99) at ‘Buy’ with a price target of $36, saying it believes investors are underestimating the company’s current growth trajectory. 

Twilio has built a competitive barrier in communications infrastructure that would be difficult to surmount, and has improving scale and leverage, according to the firm. 

MoffettNathanson is sticking with its ‘Sell’ rating and $11 price target on Twitter (TWTR, $17.30), citing several reasons:

1-Senior leadership defections without replacements

2-Streaming sports transformation likely to fail as NFL explores new options

3-Checks indicating U.S. business could have been down in Q4

4-Limited global growth prospects

4-High valuation relative to Internet peers

Workday (WDAY, $81.71) stock today jumped 9.8% after the provider of cloud-based enterprise software announced a mega contract win with Walmart. Trading was extremely heavy at 7.75 million shares, 3.9 times average daily volume.

With today’s sharp upside move, Workday closed above the 200-day moving average of $79.79 and took out the downtrend line from the 52-week high of $93.35 reached in early October.

Credit Suisse starts Yelp (YELP, $40.32) at ‘Outperform’ with a price target of $47, saying it’s positive on the company’s leadership position as a top destination for reviews/info on local businesses. 

The firm likes the recent trajectory of accelerating local ad revenue growth, upward estimate revisions and improving incremental EBITDA margins.

Credit Suisse says recent sales force growth at Yelp bodes well for local ad revenue in 1H’17, with an emphasis on national accounts possibly making the business less volatile.

Apple (AAPL, $117.91) shares today gained 1.1% and hit a high of $118.16, just below the 52-week high of $118.69 reached on October 11. The RSI is up to 66.8.

Longbow Research remains upbeat on Apple, reiterating its price target of $140. The firm expects a respectable iPhone 7 cycle and sees the potential for a much more robust next-gen iPhone cycle starting later this year.

OpCo remains positive on Pure Storage (PSTG, $11.97), reiterating its price target of $17. The firm says investors have not fully embraced the size of the FlashBlade opportunity or the company’s potential as it moves into NVMe, the new communications protocol for SSDs. 

OpCo also calls out Pure’s strengthening relationship with Cisco Systems (CSCO), saying it helps the smaller vendor better compete with main rival Dell/EMC.

Shopify (SHOP, $46.96) shares today are up 6.4% following confirmation of a new partnership with Amazon (AMZN). 

The Shopify website says the Amazon sales channel is coming soon. Merchants are invited to join a waiting list to be notified when products on the Shopify platform can be listed and sold on Amazon. 

Earlier this afternoon, Shopify shares traded to a new post-IPO high of $47.89.

For more on Shopify, see the December 2016 issue of Tech-Stock Prospector (TSP #178).

BMO Capital upgrades Pure Storage (PSTG, $11.57) to ‘Outperform’ with a price target of $14, saying the pullback from the November high of $15.14 has created a buying opportunity. 

Operating margin can turn positive by the end of 2017, says the firm. BMO Capital believes Pure has a path to profitability.

Needham starts Expedia (EXPE, $113.98) at ‘Buy’ with a price target of $140, saying the company has one of the best brands in the travel industry. 

The firm calls out strong online travel market trends (continued share gains), along with high customer satisfaction and repeat visitation metrics. 

Expedia’s comparative pricing focus gives travelers confidence that they’ve explored the various price/value options across a wide variety of choices, says Needham. That keeps users coming back.

Goldman Sachs upgrades ON Semiconductor (ON, $13.18) to ‘Buy’ and raises its price target to $15 from $12, saying product cycles and margin improvement can drive outperformance and annual growth of 29% over the next two years.

In September, ON completed its $2.4-billion acquisition of Fairchild Semiconductor. The company expects to achieve an annual cost savings run rate of $160 million by the end of 2017, $200 million by the end of 2018 and $225 million by the end of 2019.

Aegis starts Facebook (FB, $115.05) at ‘Buy’ with a price target of $150, saying the valuation looks attractive relative to its growth estimates. The firm sees Facebook as the best way to continue to play the social media user time and advertising shift.

Aegis expects the following factors to help offset the lack of ad load growth: user growth, advertiser demand, time spent, live video, video ads, improved ad targeting and Instagram monetization.