TWTR

The Flight to Safety

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Image Source: Pravine Chester It’s no secret that investors have been disappointed with returns across the equity market in 2015, and this week has not made the unrest any easier to deal with. Money managers across the globe will be looking at a short-term chart of the S&P 500 (SPY), observing that the broad US index has finally broken down from a critical multi-month base, and many will look to “lighten up” on some of their equity positions that they have been reluctantly “letting run” for months. It is no surprise to us why Netflix (NFLX) was one of the market’s worst performers in Thursday’s trading session. The company is trading at nearly 500 times earnings (not a typo), and the low … Read more

Social Media Posts Mixed Trends

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Image: Twitter has tumbled significantly following the release of the past two of its quarterly earnings reports. The difference between a social media network success story and failure is simple: product iteration and innovation coupled with disciplined execution. This has been the difference between social media giant Facebook (FB) and Twitter (TWTR). While Twitter has spent time fighting through management shifts and attempting to discover its true calling as a social media platform, Facebook has been busy growing its global scale. LinkedIn (LNKD) continues to navigate its wide range of fair value outcomes, and we maintain our view that the company’s business model has yet to be tested. Twitter’s Valuation Distribution: A Lotto Ticket Twitter is still in the midst … Read more

Google Shows Why It Has Been a Best Idea

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Sometimes valuation is its own catalyst. That’s what we think has happened to Google (GOOG, GOOGL). This isn’t our first note on Google; the search giant was added to the Best Ideas Newsletter portfolio October 2012 at ~$340. Shares are approaching $700 at present. As with all of the holdings in the newsletter portfolios, they represent our best ideas at any given time. Image Source: Google Google’s financial profile continues to be one of the best in our coverage universe. A cash balance of nearly $70 billion showcases the firm’s tremendous financial flexibility; its short and long-term debt was just over $5 billion at the end of the second quarter. Cash flow generating from operating activities expanded nicely on a … 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

May Dividend Growth Newsletter to Be Released Monday, May 4

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Twitter (TWTR) and LinkedIn (LNKD) – perhaps two of the most “un-ownable” stocks on the market today offered terrible outlooks in their calendar first-quarter reports. Frankly, we’re not surprised. Wall Street is off its rocker with their valuations. We put the largest fair value bands in our coverage on these two stocks, and we wouldn’t touch either one with a ten-foot pole. Investors are reeling. LinkedIn is down ~20% on Friday, and Twitter has dropped more than 20% from earlier this week, to under $40 per share. We’re not harping on these stocks because they are speculative and unproven. That’s a given. We’re bringing this to your attention because we just don’t see the investment case in either one. Their normalized … Read more

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

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

Reiterating Our $100 Per Share Valuation of Facebook

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Summary: We think Facebook has just scratched the surface of its earnings potential. Let’s address the potential for a single stock bubble in Facebook, the company’s most recent results, and why we think it garners a very attractive Economic Castle rating. We value shares of Facebook at $100 each, implying roughly 25% upside based on the firm’s most recent closing price. ———- “Intrinsic value represents the conclusion to any and all stock research: What is the company worth? DCF valuation captures the expectations of a firm’s competitive advantages, growth prospects, strategic endeavors, and any other qualitative factor. No other process does this. Putting to numbers a plethora of advanced fundamental items in arriving at a fair value estimate is the … Read more

Facebook Has Increased Four-Fold Since Its September 2012 Bottom

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Facebook’s (FB) share price is taking a beating after the company posted better-than-expected third-quarter results. Savvy investors know that the future is all that matters, and once a quarter is complete, the only thing that matters is what the company says about its outlook. What Facebook said about the remainder of 2014 and 2015 wasn’t great with respect to spending guidance. Wise investors, however, will look to 2016 and beyond to assess the firm’s earnings potential. Facebook’s third-quarter results were fine. In fact, they were excellent. Revenue for the third quarter totaled $3.2 billion, a near-60% increase from last year’s quarter. Mobile advertising revenue represented nearly two thirds of advertising revenue during the period, up from about half during the … Read more

Twitter Earns a Penny Per Share in Third Quarter…on a Non-GAAP Basis

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Valuentum may try advertising on Twitter (TWTR) again someday, but probably not anytime soon. Frankly, it’s just too limiting with less than 140 characters to get across a fresh, unique, and interesting concept to readers. In fact, advertising on Twitter may do more harm to a new brand than help it. For products with a relatively steep learning curve, advertising in general is not easy, but the barriers to advertising success on Twitter are monumental for these types of firms. It’s probably not too big of a stretch to assume that if we’re not happy advertising on Twitter, there are millions of other small businesses that aren’t either. We think this troubling dynamic speaks to Twitter’s performance in the third … Read more