Tech stocks are in vogue on Friday.
Shares of three high-profile tech companies — Amazon.com Inc.(AMZN), Microsoft Corp.(MSFT) and Zynga Inc.(ZNGA) — are surging on the heels of their respective quarterly results.
They’re also giving a boost to the Nasdaq Composite, which is up 0.3% at 3941. The tech-heavy index is up 30% this year and is outpacing both the Dow Jones Industrial Average and the S&P 500.
Here’s a breakdown of what’s driving the results and stock performance for Amazon, Microsoft and Zynga.
AMAZONThe online retailer once again continued its logic-defying run in the stock market by reporting another quarterly loss — its third this year — that was largely overlooked by Wall Street. Instead, investors fixated on Amazon’s 24% increase in revenue, which exceeded analysts’ expectations and bodes well for the company heading into the holiday season, the most important quarter of the year.
Analysts pointed to Amazon’s strong sales growth and the fact that Amazon touted it added “millions” of new paying Prime members over the past 90 days. Such a trend is “a positive indicator of long-term purchase volumes, as AMZN said its Prime customers have very strong retention and do more cross-shopping,” says Brian Nowak, an analyst at Susquehanna. “In effect, Amazon is adding more higher lifetime value customers…which will lead to larger market share and earnings power.”
Share surged 10% to $365.30. The stock is up 46% this year.
MICROSOFTAmid an environment of struggling enterprise sales, Microsoft bucked the trend. The software giant notched a double-digit percentage jump in both revenue and profit, driven by robust sales to businesses.
“Upside to results was in contrast to Street apprehensions for a possible miss and a more likely guide lower,” says Rick Sherlund, an analyst at Nomura Securities. “While still not a great quarter, it was a surprise to the Street and any upside is good news when the set-up is so cautious.”
Shares jumped 6.5% to $35.91. The stock is up 34% year-to-date and is hovering near its highest level of the year.
ZYNGAThe social-game maker’s third-quarter loss narrowed from a year earlier as expenses dropped significantly. Shares jumped as the results beat expectations.
But the underlying problems plaguing Zynga still remain. The company’s daily active users dropped to 30 million in the third quarter, down from 39 million a quarter earlier and 60 million a year ago. Bookings, or the actual value of virtual goods Zynga sells in games, tumbled 40% to $152.1 million.
Zynga has taken steps to address these issues. Earlier this year the company announced it would cut 18% of its staff and close some offices to help reduce expenses.
“Incrementally positive monetization trends emerged in Q3, including healthy advertising [average revenue per user] growth, but we prefer to take a wait-and-see approach as the company positions for a potential 2014 recovery,” says Michael Olson, an analyst at PiperJaffray.
Shares rose 13% and jumped above $4 for the first time this year. The stock still remains well below its $10 IPO price in December 2011.
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