Superb Growth Continues at Best Ideas Portfolio Holding eBay
January 17, 2013
Not surprisingly, fantastic growth continued during the fourth quarter at Best Ideas Newsletter holding eBay (click ticker for report: ). Revenue surged 18% year-over-year to $4 billion, a touch better than consensus expectations. Earnings per share, on a non-GAAP basis, grew 17% compared to a year ago to $0.70. We continue to like this holding of our Best Ideas Newsletter portfolio. The continued resurgence of the core eBay business continued uninterrupted, as revenue surged 16% year-over-year to $2 billion, which coincided with 16% gross merchandise volume growth ($19.1 billion). While PayPal grabs all the headlines, the performance of eBay’s marketplace has been fantastic over the last several quarters. The eBay marketplace, in our view, has reached a similar positioning as
Growth Slowing at Chipotle
January 17, 2013
Fast-growing restaurant chain Chipotle (click ticker for report: ) announced its preliminary fourth-quarter results ahead of its presentation at the ICR Conference. Productivity growth at the restaurant appears to be slowing, as same-store sales climbed just 3.8% year-over-year. Overall revenue growth remains strong, up 17% year-over-year to $699 million, slightly above consensus estimates. However, earnings look incredibly disappointing, as the firm estimates earnings per share of $1.92-$1.97—well below the consensus estimate of $2.09 and only a small increase from the same period a year ago. According to the firm’s press release, food costs jumped 130 basis points to 33.5% of sales—the main culprit behind restaurant operating margins dropping 150 basis points compared to the same period a year ago. Though
Improving Credit Quality at JP Morgan and Wells Fargo
January 16, 2013
Over the past week, both JP Morgan (click ticker for report: ) and Wells Fargo (click ticker for report: ), two of the nation’s most important banks, reported fourth quarter results. JP Morgan reported better than anticipated earnings of $1.39 per share, but the firm’s net interest margin (NIM)—return on deposits less the cost of deposits—continues to decline. As the graph below shows, the bank’s NIM has fallen to 2.4% in the most recently-reported quarter from 3.42% in fiscal year 2009 (Image Source: JPM Q4 2012 Earnings Presentation). Such a trend remains an ongoing problem with the banking sector as a whole, but the weakness is not tragic and does not alter our long-term thesis on the group, which is tied to improving real
So…It’s Not a Smartphone: Our Thoughts on Facebook’s New Graph Search
January 16, 2013
Rumors have swirled since Facebook (click ticker for report: ) announced an event to reveal “something it was building” that took place earlier today. We’ve heard everything: Facebook is buying RIM, the company is building its own smartphone, or maybe Zuckerberg was ready for his Steve Jobs moment, where he’d show the world something we didn’t even know could exist. At the end of the day, it was an evolution of the existing timeline feature and a direct attack at Google (click ticker for report: ), Yelp (YELP), and even Twitter. This innovation is the Graph Search. When we profiled Facebook after its IPO, we suggested that one of the company’s greatest paths to profitability was search, and we continue
Lululemon “Disappoints”; Under Armour Looks Worse
January 16, 2013
Athletic retailer lululemon (click ticker for report: ) raised its fourth quarter guidance yesterday, but not as much as the Street had hoped for, as shares have been tumbling since. The firm announced its revenue is likely to be $475 million to $480 million, the high end of its guidance range, but below the consensus estimate of $489 million. Same-store sales guidance of high-single-digit growth was reiterated (consensus was at 10%), driving earnings per share of $0.74—above the firm’s prior guidance of $0.71-$0.73 and equal with consensus. In our view, the stock’s move to the downside was an overreaction, but understandable. Given the company’s lofty valuation, we think market participants are looking for any weakness to close a long position
Valuentum’s January Edition of Its Best Ideas Newsletter! All Time Highs Set!
January 15, 2013
Hey, Who Took My Raise?, by Brian Nelson, CFA For those of you that already received your first paycheck in 2013, you might be asking: Who took my raise? Or, if you’re like most Americans, your paycheck may have shrunk. Well, it turns out that the “fiscal cliff” deal that many applauded included a clause to increase the Social Security payroll tax to 6.2% from 4.2%. Though the change reverts back to the tax rate levels of 2010, according to the Tax Policy Center in Washington, it will cost the average worker about $700 per year. And for household incomes making $100,000 annually, it means $2,000 less in take-home pay. Bummer! We’re not sweating it. To us, it means that
Dell Gets No Respect from the Street; Is it Time to Go Private?
January 15, 2013
Rumors surrounding computer maker Dell (click ticker for report: ) going private stole the show yesterday afternoon. Several reports indicate that CEO and founder Michael Dell could be leading the charge to take the company private as the market continues to saddle the firm with a low multiple. We peg Dell’s fair value at $18 per share, so we completely understand what private equity investors are looking at. We think the deal makes a lot of sense for shareholders, but not necessarily for the company. Shares have been steadily declining as the firm’s core PC business fades, and we believe plenty of shareholders would love to be bailed out by a private equity bid that values the company at a
Taking a Ride in Ford’s Stock
January 14, 2013
<< Best Ideas Portfolio Transaction Log << Our Reports on the Auto Manufacturers
More Holiday Results Pour In; Fortunes Diverge
January 14, 2013
Monday morning, additional holiday results have rolled in, and not surprisingly, the results diverged materially. Hhgregg (HGG), the electronics and appliances retailer that has attempted to fill the void left by Circuit City’s closing, reported terrible third-quarter results. Total sales dropped 3.6% year-over-year to $799.6 million, with same-store sales tumbling 9.7% compared to the year ago period. The decline was driven by weak video (TV) sales, which fell 24.6% on a comparable-basis, and a 6.1% increase in appliances that was well behind Best Buy’s (click ticker for report: ) performance. As we’ve previously addressed, the big box electronics retailers are having a tough time not only finding new items to fill the void of declining media sales, but firms have
Is Facebook’s Move Fundamentally Driven?
January 14, 2013
After bottoming in early September last year, shares of Facebook (click ticker for report: ) have been off to the races, climbing back to over $31 at a rapid pace. The company is still trading below its initial offer price, however. The big jump has been (in part) a result of the company reporting a tremendous jump in mobile revenue, and thus far, we’ve seen Facebook prove to be one of the best companies at profiting from the rapid shift from PCs to mobile. Without question, we think the good news about mobile revenue is a positive shift in fundamental data. However, we do not think such news is worthy of the incredibly positive price action. We continue to believe that fast-money traders and speculators
