These Six Social Media Stocks Have important Days Coming Up

In a report published Monday, Brean Capital analyst Sarah Hindlian previewed the SaaS and Social Media space ahead of earnings season. "We expect less upside to reported numbers and guidance due to FX headwinds, but believe our top picks

Facebook IncFB

and

ServiceNow IncNOW

both are benefiting from strong fundamentals that can help offset foreign exchange risk," Hindlian wrote. ". We are also not expecting our universe to raise guidance ranges with only one quarter under their belt and a difficult currency translation environment." Hindlian continued that foreign exchange headwinds are "well understood" by the investment community and are willing to look at numbers on a constant currency basis. The analyst added that overall, currency has moved one to three percent against reported U.S. dollar revenues in her coverage universe since guidance was provided, representing as much as 10 percent of a headwind year over year to the top line. Hindlian even suggested that the foreign exchange environment is the worst it has been in decades.

Social Media Sentiment Is ‘Very Bullish'
Hindlian stated that heading into the earnings season, the sentiment appears to be "very bullish" for both Facebook and Twitter Inc TWTR, largely backed by advancements in Facebook's Video advertisement initiatives and Twitter's new products. Investors are recommended to be long Facebook heading in to its earning print while "the key" to Twitter appears to be at least hitting its monthly active user guidance, if not coming in slightly above (approximately 14 million monthly active user net additions). Moving on to LinkedIn Corp LNKD, the company appears to have "more moderated" expectations with achievable estimates given a history of the company providing "easily beatable" guidance. The analyst stated that an update on the recently announced Lynda.com acquisition would be appreciated given a potential hindrance to near-term EBITDA and margins.

SaaS Sentiment Is ‘More Muted'

According to Hindlian, the sentiment within the SaaS space is "more muted" as investors are "fearful" of premium valuations. The analyst did note that SaaS adoption in Europe is "quite healthy," an indication that SaaS adoption overseas is "starting to pick up." ServiceNow's results are expected to be "somewhat more robust" than its peers, leading the analyst to state that the stock is a "core" long-term hold for fiscal 2015. On the other hand,

Net Suite IncN

is expected to report a "more modest" quarter with less upside than in the past given the company's exposure to Australian and Great Britain's currencies. Finally,

Paycom Software IncPAYC

is expected to report "solid numbers and outlook" driven by an ongoing adoption of its core Payroll product.

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