MILN

Microsoft Hinted at Trouble in Calendar Q2 But AMD’s Massive $1 Billion Quarterly Q3 Revenue Miss Spells Big Problems for PC Market; Search and News Advertising Revenue Also Likely Weakening Substantially

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  Image Source: Fritzchens Fritz By Brian Nelson, CFA Things aren’t going well across the technology (XLK) landscape these days. Microsoft Corp (MSFT) said in mid-July Windows OEM revenue faced pressure in its quarter ended June 30, its fourth quarter of fiscal 2022, and noted that the “PC market…deteriorated in June (slide 15).” On its fourth-quarter fiscal 2022 conference call, the software and gaming giant said that its outlook “has the trends (it) saw in June continu(ing) through Q1 (the quarter ending in September 2022). Continued weakness in the PC market demand and advertising spend (is expected to) impact Windows OEM, Surface, LinkedIn and search and news advertising revenue.” We took note of this weakness at the time, but it … Read more

Nike’s Fundamental Backdrop Speaks of Serious Impending Global Recession

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Image Source: Raul Gonzalez By Brian Nelson, CFA In a rapidly declining market as we have been witnessing the past many months, it becomes a relative “game.” Taking on outsize risk to drive positive returns is a quick way to the poor house. There are too many things working against the market for it to pull sustainably higher before year’s end, and we think investors are better off playing defense than attacking the bear. Things are bad out there, and they are likely going to get worse, “Things Are Bad Out There.” It is perfectly reasonable and understandable to have been bullish during the first half of this year, as we were, to at least give the market some breathing … Read more

Facebook’s Third-Quarter 2021 Results Better Than Feared

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Image: Facebook continues to put up impressive levels of free cash flow generation. We remain huge fans of the stock. Image Source: Facebook By Brian Nelson, CFA Expectations were low for Facebook’s (FB) third-quarter 2021 results, released October 25, following a read-through from news in recent weeks, including Snapchat’s (SNAP) weak third-quarter performance due to Apple’s (AAPL) iOS 14 changes and supply chain issues that may be slowing ad growth. Though Facebook’s third-quarter results still felt an impact from Apple’s iOS 14 changes and perhaps advertisers slowing some spending due to reduced product availability, the social media giant revealed that it remains a net-cash-rich, free cash flow generating powerhouse that continues to benefit from secular ad growth trends, and one … Read more

Facebook’s Stock Sell Off Explained

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Image: Facebook’s free cash flow generation has been resilient in the face of prior iOS updates, and we think it will continue to grow rapidly in the future. Source: Facebook. By Brian Nelson, CFA We never like to see a 10-rated stock sell off, even if it’s up more than 30% so far this year and up over 140% since it registered a 10 on the Valuentum Buying Index in January 2019, but that’s what we’ve been closely following with Facebook (FB). The stock experienced similar selling pressure during the summer of 2018, and while we’re huge fans of this underpriced tech giant in the long run, we think shares may face more selling pressure in the near term. Nonetheless, … Read more

Best Idea Facebook Soars!

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Image Shown: Facebook’s shares soared during the trading session June 28 as the company received a favorable ruling regarding a couple complaints that tried to make the case it is operating as a monopoly. By Brian Nelson, CFA On June 28, a federal judge ruled that a couple antitrust cases lacked legal merit in their attempt to peg Facebook (FB) as a monopoly. We view the development positively, and while there is a possibility that amended arguments could be filed, Facebook’s shares remain cheap whether it is preserved in current form or whether the market is forced to value it on a sum of the parts basis. Shares of Facebook soared to $355+ on the news, and our fair value … Read more

Best Idea Facebook Posts Blowout Earnings Report

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Image Shown: Facebook Inc’s digital advertising business is a behemoth and enabled the firm to put up banner first quarter 2021 performance. We continue to be enormous fans of Facebook and include shares of FB as a top-weighted idea in our Best Ideas Newsletter portfolio. Image Source: Facebook Inc – First Quarter of 2021 IR Earnings Presentation By Callum Turcan We continue to view Facebook Inc (FB) as one of the most attractive capital appreciation opportunities out there as shares of FB, as of this writing, are trading at a steep discount to their intrinsic value on the basis of enterprise cash flow analysis. Our fair value estimate for Facebook sits at $413 per share with room for upside as … Read more

New Issue Airbnb’s Shares Pricing In Strong Recovery and Then Some

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Image Shown: Airbnb is losing money hand over fist while as it grows into its substantial market opportunity. Source: S-1. By Brian Nelson, CFA Rental platform Airbnb (ABNB) has been a part of the latest series of IPOs that have soared out of the gates recently. Shares went public at $68 per share December 10, and now the equity is trading at more than $148 per share at the time of this writing. For those that don’t know the story of Airbnb (AirBed & Breakfast), the concept started in 2007 when, after discovering that every hotel was sold out during an international design conference in San Francisco, the founders started renting airbeds in their apartment to conference attendees. Thirteen years have now … Read more

Zillow Continues to Disrupt Real Estate Market

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Image Source: Zillow Group Inc – May 2020 IR Presentation By Callum Turcan Record low interest rates for mortgages in the US, largely a product of the Fed’s monetary stimulus measures (quantitative easing and near-zero interest rates), has gone a long way in stimulating demand for homes. According to the US Census Bureau, the national homeownership rate stood at 67.4% in the second quarter of 2020, up ~260 basis points from the same period the prior year. For reference, the domestic homeownership rate has been steadily climbing higher since 2015-2016 (when homeownership rates were in the low-60s% range) according to data provided by the US Census Bureau. Homeownership rates peaked in 2005-2006 at the high-60s% level before sliding significantly lower … Read more

Earnings Brief: Facebook and Alphabet

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Image: Facebook (orange) and Alphabet (blue) have advanced 26% and 20%, respectively, thus far in 2020 versus roughly flat performance of the S&P 500. We continue to like both names as the highest-weighted constituents in the Best Ideas Newsletter portfolio. By Brian Nelson, CFA We’re not making any changes to our fair value estimates of Facebook (FB) and Alphabet (GOOG) following their respective third-quarter reports, released October 29. Both Facebook and Alphabet are the highest-weighted positions in the Best Ideas Newsletter portfolio, and they have been for some time now. Collectively 26% of the newsletter portfolio at the high end of their respective weighting ranges, shares of Facebook and Alphabet have advanced more than 20% this year, while the S&P … Read more

News Brief: We Like Large Cap Growth, Big Cap Tech, and the NASDAQ

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Image: Since 2010, a large cap growth ETF has outperformed the S&P 500 by nearly 150 percentage points (15,000 basis points). Since 2010, a large cap growth ETF has outperformed a small cap value ETF by over 275 percentage points, or 27,500 basis points (image not shown). We expect continued outperformance from companies within the large cap growth bucket. By Brian Nelson, CFA The markets have been see-sawing the past couple weeks as the global economy continues to recover and much of the world awaits the outcome of the 2020 US Presidential election. We think the equity markets have largely factored in the forecasted epidemiology curve with respect to COVID-19, including infection spikes across the world, so recent market volatility … Read more