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The Morning Brief: Amazon Whiffs, but Facebook and Microsoft Soar

Will Amazon.com rock the markets when they open Friday? It is certainly possible after the e-commerce giant Thursday evening reported quarterly results that sharply missed estimates on the bottom line and came in slightly below expectations on the top line. The stock dropped more than 11 percent in after-hours trading on the news. Amazon, of course, was one of the big hedge fund momentum favorites known as the FANG (Facebook, Amazon, NetFlix, Google) stocks that mostly surged by triple-digit rates last year. Perhaps Microsoft’s earnings—a tech stock but not a member of the FANG—will soften the blow. Microsoft, also a hedge fund favorite, reported results Thursday evening, and easily beat earnings forecasts and slightly beat revenues estimates. Hold your stock statements!

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Another hedge fund favorite, credit-card giant Visa, also slightly beat earnings forecasts after the market closed Thursday. We earlier reported that Visa became the 11th-largest position for Lone Pine Capital’s long-short fund in the fourth quarter.

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Shares of hedge fund favorite Facebook—another FANG stock—surged 15.5 percent in Thursday’s trading to close at $109.11 after the social-media giant reported much stronger quarterly results than expected. In response, several investment banks raised their price targets. For example, Stifel Nicolaus lifted its target from $120 to $130, adding in a note to clients: “Facebook delivered broad strength across its entire suite of mobile advertising products and saw added upside this holiday season from Instagram and video ads. Facebook continues to see steady growth in user engagement, particularly in video.” Credit Suisse raised its price target from $135 to $140, calling the quarterly results “thesis-affirming.” Deutsche Bank raised its target from $125 to $145, noting: “The bull case on Facebook is pretty well documented at this point, so the primary driver of stock price performance should come from upward estimate revisions,” and the fourth quarter “delivered the greatest we’ve seen since mid-2013.”

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More bad news for Barry Rosenstein’s Jana Partners. Shares of Qualcomm dropped more than 8 percent Thursday after the chipmaker reported that earnings fell 24 percent in the most recent quarter and issued guidance for the current quarter that is lower than Wall Street analysts were expecting. Credit Suisse, which said the results were in line with expectations, lowered its 2016 estimates but retained its Outperform rating and $67 price target. Qualcomm became the New York hedge fund firm’s largest holding in the first quarter of 2015. The stock is now down 40 percent since the end of 2014.

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Omega Advisors’ Leon Cooperman disclosed that as of December 31 he owned about 18.58 million shares of First Data Corp., or 9.4 percent of the e-payments technology company. The filing was made in a 13G, suggesting it is a passive investment.

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Jeffrey Smith’s Starboard Value cut its stake in RealD to 4.97 percent, just below the 5 percent threshold at which the New York activist needs to file updates on its activity in the stock. RealD is a maker of projection technology for 3-D films.

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