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Wednesday, October 29, 2014

$fb sum of parts

1. Facebook (ad network)

Basically all revenue, which is driving the bulk of the valuation.

2. Messenger

Potential monetization: stickers, payments, selling user data 

3. Whatsapp

No potential relevant near term monetization. Most likely can be leveraged for payments and Facebook to use user data for better targeting of the ad network.

4. Instagram

Potential feed ads (including video) and user data for better targeting of the ad network. (Revenue can reach +$1b in 2-3 years.)

Best real-wold example of its potential is tumblr. Tumblr did about $100M in a short period of time since placing sponsored ads on the dashboard. 

5. Parse

Potential AWS-like revenue stream. But look negligible now, and for the next 2-3 years.

6. Oculus

Potential over the next five years. Not sure it will really move the needle until then.

7. $14.5B in cash and equivalents. 

Do the sum of the parts add to $185B for a company that derives most of the revenue from one property?

If whatsapp and Instagram are worth $20B a piece, and by the time they generate revenue they probably will be. (Not sure about Whatsapp.) But if this is the case, how do analysts reconcile twitter's valuation as they are already in the revenue stage? A disconnect exists.


Tuesday, October 28, 2014

$fb blah reaction to a good quarter

Surprised to see the lack of positive reaction.

Worst case scenario, bullishness is baked into the current premium of the stock. (Google saw about a 4 year consolidation when that took place.)

Interesting facts:

1. The last 4 quarters FB has seen +80% gross margins. (Should be Twitter's new margin bar.)

2. Facebook is a $200B market cap company that should do about $16-17B in revenue in 2015. (If it's started to consolidate, Google's price to sales is about 5. FB is at 20. But it may deserve a few point premium as FB is handely beating Google's Gross Margins.)

Monday, October 27, 2014

$twtr charts

twtr reported a decent quarter, but revenue guidence was not as expected and deviates from expectations. Given the weakness, below are the potential supports.

The 20 sma on the weekly. This level also coincides with ahorizintal support around 45 on the daily.


Although, if the action in after hours holds, the 43 horizontal support looks good. If negativity takes hold 38 is a hardcore support.


Given twitter's key role in real-time information, a $25b market capitalization seems too too low.




$twtr - not great but okay

Looks like they low balled Q4 revenue quidence. They should be able to beat $450M. (Statistically anyway, the pattern of revenue growth in Q4 suggests it.)

Still looking for GM expansion. (If FB can get +70-85% GMs, not sure what is stopping twtr from expanding similarly. Unless there are funky off-balance sheet activities taking place with FB and internet.org.)




Thursday, October 23, 2014

$amzn clockwork, almost


Clockwork for sales. Gross Margins keep improving. But increased spending within Fullfilment and Tech drove losses.


Clockwork cash positions.


Operational income was hit, obviously. Yet amzn ended the quarter with more cash than it started the quarter.

AH action is a way too negative.

Monday, October 20, 2014

$ibm i hate you, but respect you

Since Ginni took over earning reports have been a cluster fuck. Disappointment after disappointment, which I hate. But what i keep respecting, is Ginni's no-back-down taking-responsibility approach. She does not hide, does the right thing (however much a pre-announcement fucks with my trading) and tries to answer the obvious questions. 

IBM is now at a two year low, with a multi-year low trailing multiple.



Few differences from the last time the stock was trading under such conditions:

1. EPS was growing. Currently, eps is declining.

With a declining eps, earnings and revenue there is really no justification for a market normalized PE. A lowend PE is justified.

2. Proper financial engineering is meant to make cash productive, creating a higher premium to the stock. Leveraging the obvious supply / demand dynamics caused by a lower float but a demand, caused by solid fundamentals needs to exist. Even management knew this quarter was a bust, and probably the next few quarters will be too, because there was negligible buybacks last quarter. 



If the stock is going to trade at a lower multiple range (10.5-12), then IBM could trade between 163-180. This range is also supported by the monthly chart highlighted above.

The biggest differentiater IBM has going for it is the incorporation of Watson, and how it could be leveraged within the cloud, mobile and enterprise. But for now, IBM is a show me story, worthy only of trades from extremely oversold conditions.



Friday, October 17, 2014

Market reacts $spy

Good news:

1. Affirmation of peripheral EU bond buying by ECB.

2. Whispers of PBOC liquidity injections into china banks.

3. Goldman tells the world there really is no oil glut.

4. Central bank officials, seemingly globally, suggested / leaked a dovish stance if economic conditions shift.

Blah news:

1. The talks between Ukraine and Russia led to no where. (Which would suggest further economic weakness from Germany and the EU.)