Two Trending Tech Stocks Heading in Opposite Directions on Earnings

Two of the most important tech companies, whose earnings have been awaited for weeks and sparked a lot of conversation, are Apple Inc. (NASDAQ:AAPL) and Twitter Inc (NYSE:TWTR). Both companies released their financial results for the latest quarter yesterday, after the bell, and the results sent their respective stocks in opposing directions in extended trading. The hedge fund sentiment towards both Apple and Twitter has been somewhat similar to the market reaction to the earnings results, which we’ll examine below.

The hedge fund sentiment towards a stock is an important metric that we assess by analyzing 13F filings of over 700 of the best-performing smart money investors. We think that it is important to see in which stocks the most hedge funds prefer to invest, because in this way we can benefit from their analysis and approach towards picking the best companies on the market. However, our research showed that following their most popular picks is not as efficient as focusing on their top small-cap ideas. Our strategy involves imitating a portfolio of the 15 most popular small-cap stocks among the funds we track and it has returned 102% since August 2012 and outperformed the S&P 500 ETF (SPY) by some 53 percentage points (see more details here).

Let’s take a closer look at Apple Inc. (NASDAQ:AAPL) and Twitter’s earnings and see what some of the best money managers think about them. Apple delivered net sales of $51.50 billion in the firm’s fourth quarter of fiscal 2015, ended September 26, up from $42.12 billion a year earlier. Its EPS of $1.96 also made a big leap, from $1.42. Both earnings and revenue managed to beat the estimates of $1.88 and $51.11 billion respectively.

The results confirmed once again that Apple Inc. (NASDAQ:AAPL) is a one-product company, as iPhone sales went up by 36% on the year to $32.21 billion, representing the largest share of the company’s total sales. At the same time, sales of the iPad declined by 20% to $4.28 billion year-over-year. During the fiscal fourth quarter period, the company shipped around 48.05 million iPhones, compared to 47.53 million a year earlier, but below the estimates of 48.10 million. Across regions, Apple Inc. (NASDAQ:AAPL) had the most sales in the Americas, where sales inched up by 10% on the year to $21.77 billion. In Greater China, the company registered a 99% annual growth, but sequentially the sales fell by 5% to $12.52 billion.

For the current quarter, Apple Inc. (NASDAQ:AAPL) provided guidance in line with current expectations, forecasting revenue in the range of $75.5 billion-to-$77.5 billion. Apple also has set a dividend of $0.52 per share and returned $17 billion to shareholders during the last quarter, having completed $143 billion of its $200 billion capital return program.

Among the funds from our database, Apple Inc. (NASDAQ:AAPL) has always been one of the most popular companies. It ranked on the second spot following the latest round of 13F filings, being included in the equity portfolios of 144 funds from our database. Meanwhile, in the current round of 13F filings, billionaire Ken Fisher‘s Fisher Asset Management reported ownership of 11.12 million shares of the company.

On the following page we will turn our attention to Twitter and its financial results for the recent quarter.

On the other hand, Twitter Inc (NYSE:TWTR)‘s stock plunged in extended trading, even though the company posted better-than-expected earnings and revenue, of $0.10 and $569 million for the third quarter, respectively, versus estimates of $0.05 and $560 million. The company’s earnings and revenue went up significantly during the third quarter, but investors were probably disappointed to see light guidance and lower monthly active user growth in sequential terms. Twitter Inc (NYSE:TWTR) said it had 307 million monthly active users during the third quarter (excluding SMS Fast Followers), slightly up from 304 million a quarter earlier. For the fourth quarter of 2015, the company projects revenue between $695 million and $710 million, lower than the $739.70 million expected by analysts.

Among smart money investors, Twitter Inc (NYSE:TWTR) has also lost some fans since earlier in the year. According to our data, 47 funds held long stakes in Twitter at the end of June, down from 64 a quarter earlier, while the aggregate value of their stakes stood at roughly 3% of the company. One of the funds bullish on Twitter is Daniel Benton‘s Andor Capital Management, which held 1.50 million shares at the end of June.

Disclosure: None