Search This Blog

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

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.)

Thursday, October 16, 2014

$goog slower growth

They missed. Android has yet to prove itself, financially. (At least against the cost of subsidizing an OS for all OEMs.) 

Taxes have been steadily increasing to more normal levels. (Considering this is the main reason they beat the last few times beats took place.)

Growth has obviously slowed. Questions still remain as to how long the high multiple will remain. If a reversion to mean is taking place, goog will see a trailing multiple of 24-26. 

Technically, there is horizontal support in the low 500s. Although the longer-term 50sma (from weekly) trend was broken. 

On the monthly, if 500 breaks, settling near the 38sma makes sense. And corroborates with the trailing multiple reverting to the mean. 

$gs chart

They crushed the last few quarters. If estimates hold, GS should be at 180 by year end. Looking for entry near 165.

Wednesday, October 15, 2014

Mrs Market, wtf?!?

The last time the market started to test the 320-360sma support, the EU was at real risk of collapsing. 

There are always concerns in the world. Currently we face severe threats of Ebola and IS. But these major society concerns, not financial concerns, that will have limited effect on economic conditions. The major financial concerns are:

1. China slow down. (But the central bank head re-confirmed his thoughts on hitting the target GDP rate.)

2. EU slow down. (Mostly tied to Russian sanctions. Real society effects, that can hit economies are the very high youth unemployment in the EU. Fiscal policy changes must act on this. Does it merit 9% decline in US markets? Questionable.)

3. Russia. (When they decide to stop being bullies, oil will probably stabilize.)

Anyway, I thought we bottomed te other day. So today I am more of a bull. 

Monday, October 13, 2014

Market Thought... bottom

Serious concerns:

1. Ebola headline risk

2. IS continued advances

3. Russia (which facilitated the Germany slowdown)

Projecting earnings through December we can see at current SP500 levels, the market will have a multiple of high 16s. The market is either discounting lower earnings or being inefficient. 

The market conditions were the same as they were a month ago: low rates, decent earnings, robust US economy. The difference, fear has allowed the market to correct. 

Saturday, October 11, 2014

$ibm higher margins

Jefferies downgraded IBM Friday morning. However, Infosys reported solid numbers too. Suggesting IBM may do the same.

IBM's strategy, during their transition, has always been to carve out higher profits while sacrificing some revenue. This concept is a few years old, so when I see a downgrade on this very premise, I question the validity of the analyst and firm. This is shown by the year-over-year increase in gross margins.

The biggest knock on IBM was their previous cloud strategy. It cost them the CIA contract and highlighted a weakness of scalability. In response, management acted quickly, and brought on board SoftLayer. Key takeaway is that management knows how to readjust and reposition despite an established game plan. Since then, we find Watson in the cloud with a bunch of interesting APIs, and an Apple partnership. And the fact that the number of diluted shares keeps decreasing, while gross margins increase and eps rises, doesnt hurt either.

(March 2014 for earnings and eps includes onetime charges.)

Thursday, October 9, 2014

Market Thought... From the US, with a side of freedom fries

Fear levels are pretty high. The SP500 is now at an overlay, suggesting a bottom. (Especially considering the lack of known systemic issues.)

The crazy volatility started with Europe's slow down, but that was not at all surprising. For the better part of 4-5 years many EU countries were in a depression like state, but Germany and France would pull the zone in a slightly positive growth direction. France started to fade. Putin started to act like an asshole, and bully his weaker classmate. Sanctions started. At first they were weak, but as the rebels shot down a fucking commercial jet liner, sanctions got tougher. Germany's GDP starts to fade. 

Despite the relatively weak sanctions on Russia, the real nail-in-the-coffin is oil. The markets are now providing the biggest sanction the west could ever imagine, seriously lower income. (Some estimates suggest a price of around $110 needed for state expenses.)

Lower oil is most likely the combo of slower global economic activity and the rise in the US Dollar. (A consequence of the declining global currencies.)

Not sure how long these conditions will last, but the dollar is at the high-end of its trading range.

I'm not a fan of bullies, so if this gives a bully a one-two punch, I do not mind it continuing for a few weeks. After all, the set up allows to enter a great American company, at a wonderful entry point.

The 20sma, on the monthly, has shown to be a good entry point for xom. (And lets not forget, while global GDP has slowed, its still +3%. Pretty good for a global company to benefit.)



$aapl holders should now thank Icahn

Before Icahn's tease tweet yesterday, aapl was on the verge of retracing to the 98sma on the daily or as low as the 38sma on the weekly.

But the tease firmed up the stock, and today the open letter re-calibrated the street's expectations. The stock now appears to be firm, and the trend up maintained. 

I for one am annoyed, as I wanted to re-enter aapl as it was retracing. But am happy for current holders. Oh legal manipulation of stocks appears to be grand. Wonder the psychological effect on a person that can control the stock of the largest most powerful technology company in the world. (How ever briefly that control lasts.)

Friday, October 3, 2014

$yhoo Snapchat investment

That would be good news. Why would that be? Watch the video:

 (Although the founder annoys me, the service is beyond popular with the demographic Yahoo needs.)

Update: The market doest know what to think.

But its probably one of the best uses of the baba cash.

Thursday, October 2, 2014

Market Thought... Oktoberfest

The market has some interesting dance moves, bouncing and stomping around. Market premium is no more. The SP500 got wasted, and has has decline about 4% from its high.

Fear is at levels suggesting a bottoming.

Along with the SP500 being at the 123sma support, and the NYSE Composite is at supports too.

A steady decline on the Vix from the end-of-world days justifies the lower fear level.

More fundamental reasons for the lower risk level:

1. Currency declines support economies (although the US is doing pretty well with a stronger currency.

2. Combating IS from a true multilateral front 

3. Russia holding steady (but still a desabilizing force)

4. US jobs are doing pretty well

Non-the-less, the treasury decided the above merits the opposite.


Some legitimate concerns:

1. China allowing their economy to cool

2. Europe can not get out of their depression like state

3. Increased terrorist activity in major cities

A removed concern is the affect of higher rate on the equity market. (The recent declines removes this premium.)

SP500 earnings estimates are holding steady. (They were revised up slightly.) if estimates hold, the equity markets can sustain a complete premium removal without causing too much damage to the SP500.

Markets look to have started the new trading dynamic. The multiple is no longer expanding, and trading range is no longer widing.

It's October. Lliking the market is hard, but it looks juicy. Have a beer, enjoy the festivities, look for the opportunities to start dancing again.