Member Articles

Twitter’s Valuation Enigma

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Here come the technicians — all aboard Twitter’s (TWTR) stock! Fortunately, we know better than to play the greater fool game. Enthusiasts will talk about how Twitter’s revenue doubled in its calendar fourth quarter and how the firm earned a whopping dozen pennies per share on a non-GAAP basis, exceeding expectations, but that’s not what’s going on. The reality is that Twitter posted a $125 million net loss in the fourth quarter and a $578 million net loss for the full year, both on a GAAP basis. It did so with 288 million monthly active users (MAUs), and that number is only growing 20%. The reality is that even after all the adjustments to arrive at 2014 adjusted EBITDA of … Read more

Some Wiggle Room, Please

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Let’s go around the horn. Staples (SPLS) and Office Depot (ODP) will, in fact, join forces. The duo announced February 4th that Staples will pay $6.3 billion for its rival, valuing Office Depot at $11 per share, a nice premium to its previous day close and relative to our fair value estimate. Management expects to generate at least $1 billion in annualized cost savings. Removing redundant overhead, streamlining distribution and carving out other efficiencies will be par for the course. We also think pricing will ease up a bit, though competition from Walmart (WMT) and Amazon (AMZN) will always be present. We wouldn’t expect Office Depot’s equity to converge to the take-out price until the regulatory review is completed, likely … Read more

Yum! Brands’ Fourth-Quarter Earnings Preview

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Yum! Brands reports after the bell today. Watch Valuentum’s President Brian Nelson on CNBCAsia at 5:40CT. If 16%+ comparable-store sales growth during any given period can ever be described as such, Chipotle (CMG) dropped the ball during its calendar fourth quarter. The fast-casual burrito maker’s shares are facing pressure as a result of management’s overly conservative comp guidance of low-to-mid-single digit growth for 2015, as if we haven’t seen this before. Chipotle sets the bar low and then hurdles over it like an Olympic high-jumper. McDonald’s (MCD), on the other hand, is in a world of hurt, and with CEO Don Thompson’s retirement, the brand has been shaken to the core as it struggles to connect with millennials. Investors in … Read more

The Savvy Strategy of Gilead’s Management

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Gilead investors’ only thing to fear is fear itself? I never thought I would refer to the first inauguration speech of Great Depression and World War II President Franklin Delano Roosevelt in explaining the situation with Gilead Sciences (GILD), but I just did. The psychology of the markets is perhaps the most difficult to assess, and I can almost feel portfolio managers behind their multi-screen terminals just scratching their heads, saying “Am I missing something?” To them, I say “No, you’re not.” Gilead’s shares are trading at bargain-basement levels, and its fourth-quarter results were stellar. Yet, to their dismay, they will wake up tomorrow to find Gilead’s shares trading lower than the day prior. It is almost as though the … Read more

Goodbye Radio Shack, Hello Office Products Behemoth

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RadioShack will close its doors, while Staples and Office Depot are planning to tie the knot. 3D printing stocks may be in for a world of hurt in 2016, while GM and Ford benefit from strong employment and low gas prices. RadioShack (RSH) has finally defaulted on its debt. The company is reportedly in talks to sell half of its stores to Sprint (S) and close the remainder, should Amazon (AMZN) lose interest. Standard General, the largest shareholder in the archaic electronics retailer holds most all the cards, however, and we’ll soon see whether complete liquidation is in RadioShack’s future in the coming days. The sad reality is that the struggling electronics store chain may only have its real estate … Read more

New England Wins!

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Does that mean we’re doomed in 2015? Don’t be silly. The Super Bowl indicator, which says that if a team from the NFC wins we’re in for a good year, is akin to reading the stars. But the AFC’s Patriots won the big game – so does that mean 2015 will disappoint? Perhaps 2015 will…but certainly not because of the Patriots won the Super Bowl. A person doesn’t have to look much further than the NFC’s New York Giants winning the Super Bowl in 2008 to understand why such things just don’t matter. The dawn of the Financial Crisis that year sent stocks a-tumbling. It’s unfortunate that such things get so much attention because it makes it sound like the … Read more

Dividend Increases/Decreases for the Week Ending January 30

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Let’s take a look at dividend increases/decreases for the week ending January 30.

Wealth or Income? You Decide.

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I know better than to jump up and down in sheer bliss with the S&P 500 (SPY) basing at 2,000. Frankly, the chart looks toppy and “tired,” and with the ongoing series of lower tops, I wouldn’t be surprised that we break down in the coming weeks. Earnings disappointments have been rampant, and following one of the strongest periods of economic expansion in some time during the third quarter (+5%), the pace of US GDP growth in the fourth quarter barely edged out half of the preceding period’s rate of expansion (+2.6%). But that’s yesterday’s news (well, last year’s really), and what concerns me most is that first-quarter GDP will be quite disappointing, even with the stimulus brought about by … Read more

Understanding Amazon’s Uncertain Earnings Leverage

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Valuentum’s President Brian Nelson talks about the massive earnings leverage in Amazon’s (AMZN) financial model, and why it creates tremendous uncertainty in estimating the company’s intrinsic worth. An excerpt from Part II of Valuentum’s four part investment education workshop. If you cannot see the video, please click here.