Brian Nelson

So…It’s Not a Smartphone: Our Thoughts on Facebook’s New Graph Search

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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 … Read more

Lululemon “Disappoints”; Under Armour Looks Worse

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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 … Read more

Valuentum’s January Edition of Its Best Ideas Newsletter! All Time Highs Set!

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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 … Read more

Dell Gets No Respect from the Street; Is it Time to Go Private?

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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 … Read more

More Holiday Results Pour In; Fortunes Diverge

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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 … Read more

Is Facebook’s Move Fundamentally Driven?

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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 … Read more

Best Buy’s Holiday Sales Were Solid; Margins Are the Issue

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This morning, the maligned big box electronics retailer Best Buy (click ticker for report: ) provided updates on its holiday sales results, which were relatively strong, in our view. Breaking the downward spiral, same-store sales in the US were flat compared to last year, but continued to decline internationally, down 6.4% year-over-year. However, overall sales declined to $12.8 billion for the 9-week holiday season compared to $12.9 billion for the same period last year, suggesting overall business was fairly solid. Consistent with trends throughout 2012, consumer electronics were weak, while ‘Computing and Mobile Phones’ revenues surged. Source: Best Buy Holiday Sales Report, Valuentum Consumer electronics, largely comprised of TVs, has been weak and probably will continue to be until we see … Read more

Is Tiffany Still Sparkling?

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Luxury retailer Tiffany (click ticker for report: ) reported challenging holiday sales Thursday. Global sales growth came in at 4% ($992 million)–the low end of the firm’s previous guidance range–after sales really slumped in North America. Same-store sales at the Tiffany 5th Avenue flagship store in New York and stores throughout North America declined 2% during the holiday period. Internet and catalog sales in the region did increase 4%, leading total sales in the Americas region to increase 2% on a constant currency basis (and 3% on a reported basis to $516 million). This could be a negative for other stores such as Saks (click ticker for report: ) that are so heavily tied to New York flagships, but we … Read more