AMZN

Disney’s Disappointment

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On August 4, media giant and consumer spending bellwether Walt Disney (DIS) put up decent fiscal third-quarter results, but concerns about the future of pay-TV left investors a bit cautious on its outlook. We don’t expect a material change to our $94 per share fair value estimate of the company (we have been far below the market price of $120+), and we point to most of the sell off as profit-taking following a very strong multi-year share-price run. During the fiscal third-quarter (ended June 27, 2015), revenue leapt to $13.1 billion from $12.5 billion in the year-ago period (a 5% increase), while diluted earnings per share advanced at a nice 13% clip, to $1.45 per share. On display yet again … Read more

eBay – PayPal Split

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Under previous but subsiding pressure from Carl Icahn and other shareholders, eBay (EBAY) announced last September that it would separate its payments business PayPal in July of this year. Now that July is here, we wanted to remind members of the split and explain what it means for the holdings in the Best Ideas Newsletter portfolio. On July 17, eBay shareholders will receive one share of PayPal under the ticker PYPL for each share of eBay owned. We will be launching coverage of PayPal shortly after it becomes an independent, publicly-traded company. The separation of eBay and PayPal will make eBay leaner and more efficient while greatly increasing the potential for expansion of PayPal within the booming mobile payments market. … Read more

Friday Evening News

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Square to Go Public According to Forbes, San Francisco based mobile payment company, Square, is expected to go public sometime in 2015. In fact, sources close to the situation report that the firm is expected to file a confidential registration statement very soon, if it hasn’t happened already. Under the JOBS Act, emerging, growing companies can file for an IPO confidentially if they meet certain requirements, including having less than $1 billion in annual revenue. Internal debate over the ideal time for the firm’s IPO has clouded the situation, as has the appointment of co-founder and CEO Jack Dorsey as Twitter’s (TWTR) interim CEO. Also this week, Square launched a new credit card and phone reader designed to allow businesses … Read more

Target or Walmart?

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Image Source: Steven Depolo It’s not the roaring 1990s anymore, investors! There are serious risks to the business models of Target (TGT) and Walmart (WMT), and everyone is looking the other way, consoling themselves with their steady and growing stream of dividends. These investors say, “as long as they pay the dividend, I don’t care,” as if this signals a proud achievement in some way, by which many experienced market participants will then respond, “and now we know why the individual investor is frequently blindsided.” The dividend is a symptom of the health of free cash flow, and management teams can dip into the balance sheet to support the payout. Only trends in free cash flow generation, supported by moaty … Read more

Yet Another Best Ideas Portfolio Holding Surges!

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Best Ideas portfolio holding eBay (EBAY) reported excellent first-quarter results, and shares are surging today. We’ve profiled the company many a time before, and it has been in the Best Ideas portfolio for a couple years now, doubling the cost basis. Approaching $60 per share, this story is far from over, and we’re expecting continued value realization following the eBay-PayPal split. The hot hand continues. eBay’s landing page >> 

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

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.

Valuentum Mosaic Exclusive: Talks Between Yahoo and eBay Probable

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Let’s put it this way: the combined eBay and PayPal entity presently listed under the ticker symbol eBay (EBAY) is cheap. The combined company is trading in the mid-$50s with a market capitalization of ~$69 billion at present, and we value its shares in the mid-$70s (a ~$90+ billion valuation). We’re not the only one, in case you think that, despite everything we seem to get correct, we’re off our rockers with this valuation. Stifel, for example, recently labeled $75 per share as an upside case for the company. eBay remains a holding in the Best Ideas portfolio, and the equity markets are simply getting the company’s valuation wrong, in our view. It is one of the few true bargains … Read more

Thanksgiving Weekend Sales Were Weak…

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According to preliminary survey results released Sunday by the National Retail Federation, retail sales during the Thanksgiving weekend tumbled 11% to $50.9 billion from $57.4 billion during the same weekend last year. Executives are having a difficult time explaining the sharp drop off in retail sales (RTH), given similar aggressive strategies and promotions as previous years, but we think there are a few reasons for the hefty decline. For one, the lure of the post-Thanksgiving “mad-rush” may be wearing off, and the emerging “negative” social stigma of those willing to shop (instead of resting with family) coupled with those who believe they are “being forced to work” during the holiday (see Walmart strike) without fair wages may be turning off … Read more

Best Buy Beats in Third Quarter

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Best Buy (BBY) has been marked for dead for years. The demise of Circuit City and strategic concerns about excess floor space are two of the biggest red flags for a business model such as that of Best Buy. But the dagger in the Best Buy long thesis has always been that the company is merely a showroom where consumers flock to in order to try out new gadgets only to buy them at online competitors such as Amazon (AMZN) or eBay (EBAY) for a discount. Best Buy revealed in its third-quarter results, however, that it is handling the tumultuous competitive market quite well, and we think the firm’s fundamental resilience speaks to the general health of the brick-and-mortar big … Read more