What’s next for the share prices of Palantir, Cisco and Twilio?

Following a challenging 12 months for technology companies, Palantir, Cisco and Twilio all saw their share prices gain this week after earnings and revenue beats. However, despite signs that inflation has peaked, technology companies continue to trim costs in search of profits, with Twilio recently announcing a 17% staff cut.

- The share prices of Palantir, Twilio and Cisco all gain on earnings beats.

- Twilio is the latest tech company to announce lay-offs.

- ProShares Ultra Technology ETF gains 36% year-to-date.

The share prices of Palantir [PLTR], Cisco [CSCO] and Twilio [TWLO] all made gains this week following positive results.

Palantir shares rose 21.16% on Tuesday, after announcing a double beat and its first positive GAAP net income quarter in its fourth-quarter (Q4) 2022 results.

The Cisco share price gained 4% in after-hours trading on Wednesday following a double beat, while Twilio stock was up 12% after-hours as it turned a profitable quarter; analysts had been expecting a loss.

Palantir shares were already performing well in the year so far, and the response to its earnings report has pushed it further. The stock is now up 57.5% year-to-date, though it remains 27.6% down from its year-ago price.

Twilio’s share price is up 34.9% year-to-date, though down 64.7% in the past 12 months. Cisco shares are up 2.5% and down 7.7% over the respective periods.

While technology stocks have had a strong start in 2023, Twilio has become the latest to announce it is laying off 17% of staff in an effort to cut costs, as well as closing offices and reducing some employee benefits such as book allowances and sabbaticals.

Robust numbers

Palantir’s total revenue increased 18% year over year to $508.6m, 1.3% above the consensus expectations of analysts polled by Refinitiv. Adjusted EPS of $0.04 beat analyst expectations of $0.03, double the equivalent figure from the previous year.

Full-year revenue grew 24% to $1.91bn, narrowly beating analyst expectations of $1.90bn, while full-year EPS of $0.06 was 20% above analyst expectations. However, this figure marked a 53.8% decline from the previous year.

Palantir set expectations for Q1 2023 revenue at $503m to $507m, with expected income for the full year set at $2.18bn to $2.23bn. The results marked the company’s first profitable quarter; Palantir also stated that it expects to see a GAAP profit for the full year, something it hasn’t achieved before.

Twilio’s revenue grew 22% year-over-year to $1.02bn, surpassing by 2% analyst expectations of $1bn. Refinitiv analysts were expecting Twilio to post a loss of $0.09 per share, but the results showed earnings of $0.22 for Q4.

Through the full year, Twilio recorded revenue of $3.83bn, beating expectations of $3.8bn. Twilio’s full-year revenue grew 34.9% year-over-year. Full-year losses of $0.15 per share were a 67.4% improvement on the $0.46 per share that analysts had expected.

Cisco’s earnings for Q2 of its 2023 financial year came in at $0.88 per share, up 5% year-over-year and 2.3% above the $0.86 that analysts had forecast. Revenue of $13.6bn surpassed analysts’ $13.4bn, and marked a 6.9% year-over-year increase.

Qualified optimism

After suffering through 2022, technology stocks have surged during the first months of 2023: the Nasdaq Composite fell 33.1% during 2022, but has recovered 15.3% in 2023 so far.

One key driver of this recovery is evidence that inflation may have peaked.      

October, November and December 2022 all delivered lower-than-expected inflation data. The University of Michigan (UoM) Survey of Consumers showed that one-year inflation forecasts fell as low as 3.9% in January, though they have increased to 4.2% in February.

Consumer sentiment is also up, with UoM’s index reading of 66.4 for February being the highest it has reached since before the outbreak of the war in Ukraine.

Notwithstanding these encouraging figures, cost efficiency is key for the sector as it seeks to navigate what remains a difficult period.

Funds in focus: ProShares Ultra Technology ETF

Investors hoping that the technology sector will continue to rally through the year can select the ProShares Ultra Technology ETF [ROM], a fund that seeks to provide double the returns of the Dow Jones US Technology Index. ROM holds Palantir, Twilio and Cisco with weightings of 0.12%, 0.08% and 1.39%, respectively, as of 15 February.

ROM has fallen 38% in the past 12 months, but 2023’s tech rally has helped the fund gain 36% year-to-date.

Analysts polled by Refinitiv yield median 12-month price targets of $77.00 for Twilio, implying a 16.6% upside; $55.50 for Cisco, implying a 14.6% upside; and $8.00 for Palantir, implying a fall of 20.9%.

Mizuho analyst Matthew Broome raised his price target for Palantir to $8 from $7 following the results, maintaining a ‘neutral’ rating on the stock. While acknowledging some of the positive elements of the results, Broome highlighted that Palantir’s forward guidance was below Street expectations.

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