The best gains come from getting in front of the herd. The second issue is that many tech companies go through periods of high growth yet can’t sustain this long-term unless there is excellent product market fit. Momentum investors and trend followers struggle most when it comes to FAANG-like gains because they can’t determine the true gems from those that are simply doing what most tech does (disrupt a market for a period of time).
IPO Report card: As of late, the underlying goal of IPOs appears to be how to get retailers to pay as much as possible until the lock-up expires. It doesn’t matter if Berkshire invests unless you get a chance to buy at the same price. Your shares could lose 50% and Berkshire would break even. That’s not a public offering by any stretch of the word. Please keep in mind, that many winners in tech retrace well below their opening price (up to 50% below opening price in the case of Crowdstrike). Prior to Snowflake raising its opening price (for…
In my latest Forbes article, I discussed a lesser-known announcement from Apple last month in regards to the required opt-in for the ID for Advertisers (IDFA). The IDFA is a number tied to the device that allows ad exchanges to track user interactions and behavior. The primary function is very similar to cookies in that it helps ad companies store data profiles and preferences for personalized messaging, regardless of which device you are logged into. In addition to targeting, the IDFA also helps with attribution and measurement. If you’ve never heard of the IDFA or are not aware that a…
About a week ago, Dan Shvartsman from Seeking Alpha interviewed Knox Ridley and I about the Zoom call we made last Fall, the trade made In January in the low-$60s, and the subsequent trades made in March in the low $100s and mid-$100s on our premium site. We discuss whether the company’s valuation matters now, and how our research site determines if we should hold on or add to the position amidst the rally. We also discuss the hard questions about Zoom, including the security issues the company faced in April and why removing friction from video conferencing is what…
Last July, I began covering bitcoin. The premise was based on three phases for widespread adoption: institutional adoption, global economic uncertainty, and mobile payments. With Square’s cash app reporting fifty percent of its payments being made in bitcoin, or $178 million, it’s time to revisit why bitcoin is a transformative technology that is often misunderstood. Square’s report was for the period between October 1st and December 31st, which represented an increase of 50 percent over the prior two quarters. Perhaps the more critical point to understand about bitcoin is that its purpose is not to polarize opinions on fiat currency.…
Paul Tudor Jones is one of many money managers who believes that protecting your money is more important than making it. In my latest article, I discussed this very concept in relation to cloud software stocks. The main risk to cloud software during a less-than-ideal economy is downgrades and churn. Signing new customers can also be a challenge. How a company is faring will often show up in net retention rates. My guess is we will see some cloud software companies remove this metric from their Q2 earnings report or we will see previously strong net retention rates dip below…
I recently wrote a report analyzing the future of Roku in 2020. My guess is investors will get Roku’s story wrong again this year as the company must choose between its top line and bottom line. Covid-19 offers an important opportunity for Roku as OTT usage is skyrocketing and the company must expand globally for long-term growth. In the earnings report this week, Roku gained 2.9 million incremental active accounts, or a 37% increase year-over-year to 39.8 million total, and streaming hours increased by 1.6 billion to a record 13.2 billion, or a 49% increase year-over-year. Oppenheimer analyst Jason Helfstein…
Last week I wrote an article explaining why I’m pivoting away from the bull thesis for The Trade Desk for 2020. But first, I should discuss my original bullish thesis. It’s important to remember that The Trade Desk is a “demand-side” or “buy-side’ ad platform which allows advertisers to buy ads in auction-like format through real-time bidding. This is an automated method for buying and selling inventory that eliminates the need to call up an agency or salespeople to place the ad. The Trade Desk’s financials and growth remain solid. Revenue grew 33% to $160.7 million with net income and…
Last week, I wrote about Slack’s product-market fit, and why it’s set to continue thriving in the work-from-home trend. The company’s user growth has been parabolic during the pandemic. According to a series of tweets from the CEO, Slack was at 1 million “simultaneously connected” users in 2015 and grew to 10 million by March 10th, 2020. From there, the company grew to 11 million one week later and 12.5 million the following week. Where the market gets uncomfortable with Slack is their current lack of profitability. The company recently released its fiscal year fourth quarter 2020 results on March…
Last week in Forbes, I explained why Netflix will remain the leader in the OTT market. The main reason is that it is a global media company, whereas the majority of OTT providers are domestic. The company outperforms globally with 70-87% of subscription OTT video service users in European English-speaking countries using the service and 55-64% of non-English speaking countries. When analysts incorrectly believed Disney Plus and Apple Plus were “Netflix killers,” I had pointed out at that time that they were being myopic as to Netflix’s global lead. Overall, OTT video is projected to grow to 6.4% of emerging…
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In a recent article, I pointed out that ad-tech may have a long road ahead before previous levels of demand return. Despite increased usage, Facebook, Google and Twitter have warned that Q1 is going to be lower than originally forecast. Media analysts have also weighed in with a consensus that ad demand will be weak this year. Usage across mobile and over-the-top television has been skyrocketing. Total streaming hours were up 24% between March 1st to March 16th from a year ago, according to Comscore, with Roku and Amazon up 16%. Live TV is also benefiting from the surge in…
I recently discussed Zoom Video and its continued phenomenal rise. In the face of a global pandemic, the company has become the top performing stock on the NASDAQ this year with over 130% gains, or nearly a 160% spread with the 30% market decline. From there, the stock has continually commanded the highest price-to-sales in the cloud software category and was able to hold its opening IPO price of $62 as support even when the market dumped cloud software last September with 30-40% drawdowns across the board. So what’s Zoom’s secret? Zoom’s easy access and URLs is the foundation of…
Last week, I wrote about how algorithms led to the fastest bear market in history. I explained that what’s driving the speed and severity of the bear market is the escalation of algorithmic trading, which is more prevalent than it was during the Great Recession in 2008. March 2020 holds the record for how quickly stock prices dropped into a bear market — only 16 days after the S&P 500 Index hit its last closing high Feb. 19. The second-fastest bear market was the notorious 1929 crash that set off the Great Depression, followed by the elevator drop of 1987’s Black…
Over thirty-six thousand cybersecurity professionals attended RSA in San Francisco last week, with a full roster of executive keynotes and four crowded expo floors. Although a few companies decided to not attend due to the coronavirus outbreak, such as IBM, AT&T and Verizon, there was certainly no shortage of vendors present. In fact, the biggest challenge for any public investor in cybersecurity stocks is sorting through an industry that is at peak saturation. As of 2018, there were over 1,200 cybersecurity companieswith up to 200 vendors competing in each layer. This leaves customers, such as Chief Information Security Officers (CISOs),…
Facebook stock has struggled to keep up with the stellar gains of its mega-cap tech peers, and the problem can be found at the product level, which discounted cash flow analysis does not help to detect. The company fires on all cylinders when considering Warren Buffet’s investing discipline to seek companies with strong free cash flow and no debt. Facebook’s dilemma is that its applications cannot co-exist with privacy in their current state. If regulations or reputation issues truly force the company to build privacy into the products, then Facebook won’t be quite the cash machine that it is today.…
Microsoft is unique from its peers as its cloud services were designed to serve the needs of large companies. This is particularly true with regards to Microsoft’s lead in hybrid cloud, which is attractive to many companies who are adopting cloud infrastructure for the first time, and who desire more flexibility than traditional cloud-only services can offer. The company’s fiscal Q2 2020 earnings report today prove that Microsoft’s slow and steady focus on the enterprise customers is paying off. Operating income and net income were especially healthy, rising 35% and 38% on a GAAP basis, respectively, from a year earlier.…
Netflix’s addressable market is set to grow from $68 billion in 2018 to $159 billion in 2024, while subscription services are projected to grow by $51 billion from 2018 to 2024, reaching a total of $87 billion. Netflix currently serves 87% of the United States market, 50-70% of all developed countries and up to 20% of the developing world. Prior to earnings, I covered the company’s stock price, its debt, and its 0.17% returns – or nearly 0% — over the past 12 months. I also addressed concerns about Netflix’s problems with free cash flow due to producing content for…
I recently wrote a column on Forbes detailing my predictionsn for tech stocks in 2020. Knowing what trends will prevail is especially important as this earnings season will mark the fourth consecutive quarter of year-over-year of net income declines. When taking into consideration buybacks, which help to reduce companies’ shares, the S&P 500 could post 0.6% EPS growth in all of 2019 compared to 2018’s 23% increase in EPS. Therefore, it’s important to choose investments wisely as we continue to maintain record highs. Here are the main points I covered – please read the full article on Forbes for a more…
Back in December, I wrote an article on how to pick winning cloud software stocks. I began by pointing out how – on average – cloud software companies have reported 10 to 20 times better revenue growth compared to S&P 500 Index companies, most of which grew at an average rate of 5.2% in the last quarter. Those are certainly impressive numbers, but investors weren’t interested in growth. What they wanted were companies that posted positive EPS numbers, particularly those that have at least 10% forward growth. This was the market’s response to cloud software stocks with high valuations in…
This past week, I wrote about how Silicon Valley is losing some of its entrepreneurial spirit as venture capitalists shifted their attention to later stage deals with higher valuations. In the analysis, I pointed out that 2019 was the most lucrative year for exits in more than a decade, with $200 billion in exits generated from venture-backed IPOs. For context, I went back to the golden years of Silicon Valley – 2006 to 2014. During this period, venture capital that was invested in deals below $5 million grew by 290%. However, things changed in 2015, when early stage deals from…
After soaring 147% to reach an all-time high of $147 per share, Alteryx’s stock price has been on a freefall and is currently trading around $98. Alteryx (AYX) fell victim to the cloud sell-off, which happened as the result of nose bleed valuations popping due to heightened recession fears. Other SAAS companies like Slack, Zoom Video, and Twilio have been declining as well, and so far with no end in sight. What’s interesting is that the Alteryx stock price declined even as the company did everything right. In other words, when a growth company in a hyper growth sector has…
It has been a difficult quarter for many top momentum stocks like Slack (WORK), Veeva Systems (VEEV), Alteryx (AYX) and Zoom Communications (ZM). The companies have continued to execute well but their stock prices have declined. These companies reported better-than-expected third quarter earnings, impressive growth, and boosted their forward guidance. In an analysis in MarketWatch this week, I reviewed why Momentum stocks are down and I look beyond the assumption it’s due to a “value rotation.” Instead, as I point out, there is a lot of volume that suggests institutional selling directly after earnings reports. This volume in momentum stocks…
Roku’s stock price is up by almost 500% over the past two years. Compare this to the S&P 500, which is up less than 25%. That’s 20X more returns than the average stock. The upward trend has not been on a straight line. Roku’s stock price has had four major drawdowns that average about 52%. Two of these drawdowns were greater than 60%. Being long a volatile company like Roku since its IPO is not easy, and it especially takes increased conviction to stay long Roku as we approach the end of the current cycle. However, for those that were…
As Apple’s stock price powers to new highs, returning over 60% YTD and touting the highest market cap in history, now might be a good time for investors to reflect as Apple trades at resistance. With upwards of $260 billion in revenue, a profit margin of 22%, Apple is a cash-generating machine. It produces around $50-$60 billion in free cash flow annually, with reserves of over $100 billion. It is extremely kind to shareholders, with one of the largest buyback programs on the Street. In fact, Apple has spent around $120 billion in stock buybacks since the beginning of 2018,…
Roku is a company that has proven nearly every bearish prediction wrong with consistent revenue growth despite being surrounded by steep competition and tech heavyweights in over-the-top media. Roku investors that have been long since its IPO have lived through three fifty-percent drawdowns. Therefore, the reaction to earnings this quarter was unlikely to phase anyone who has followed this stock for any length of time. I encouraged my readers to not be phased by market reactions when Roku was priced at $30, when it was priced at $60, and when it was priced again at $30. During that sell-off, I…
I grew critical of Apple earlier this year when it became clear the company would decline in revenue year-over-year, yet investors and analysts alike continued to pump the stock. With yesterday’s earnings report, we have further confirmation that Apple is not a growth company anymore although it continues to trade at growth valuations. While many celebrated yesterday’s earnings report, there were notable signs of erosion. To start, Apple has lost $5 billion in revenue year-over-year, from $265 billion to $260 billion. This is despite having the “best fourth quarter ever,” according to Tim Cook. The truth is that the EPS…
Unlike most tech stocks, Microsoft’s stock price has over 30 years of trading action to analyze. With more data to analyze, I tend to lean heavier on Elliott Wave theory to predict Microsoft’s future. stock price because of the many layers of wave patterns that will naturally unfold over time. This is a guest post provided by Technical Analyst, Knox Ridley This article will lean exclusively on Technical Analysis as we start from a monthly chart and zoom into a daily chart to reach the conclusion that Microsoft’s stock price may have some upside left in the trend, but a…
This week, Microsoft’s earnings will shed light on whether the fear over cloud valuations is warranted or not. Just last week, IBM results showed that its cloud segment grew by just 14%, boosted by its Red Hat acquisition. In more signs of trouble in the industry, Workday (WDAY) stock declined sharply last week after the company said that growth in its once-lucrative human capital management was slowing to 20%. This led to analyst cuts from Stifel, Deutsche Bank, and RBC. Morgan Stanley (MS) and Evercore ISI analysts have also rushed to downgradethe cloud industry ahead of the busy earnings extravaganza.…
Netflix critics see mountains of debt and bleeding free cash flow. Opportunists see a company with the world’s best track record for beating the odds in disrupting traditional media. For investors, it could be a costly mistake to be on the wrong side of that debate, as Netflix stock’s 52-week low is $231 and the high is $385, a sizable spread for a $125 billion market-cap company. In the two weeks that followed the streaming company’s second-quarter earnings release in July, Netflix shed $24 billion in market value. The Los Gatos, Calif.-based company releases third-quarter results Oct. 16. Investors are…
Another day, another headline saying Alphabet’s Google and Facebook are being investigated for allegedly breaking privacy laws and engaging in anti-trust behavior. Google GOOG, +0.95% GOOGL, +0.98% has been the subject of three antitrust investigations conducted by the European Union, resulting in more than $8 billion in fines. Now the company, which controls 31% of global digital ad dollars, will face the U.S. on anti-trust matters. A big question is if governments will be effective, as they may not understand how social-media and internet businesses operate. In April 2018, Congress tried to piece together how Facebook’s FB, +2.74% platform works. It ended up being a disaster. Anyone who…
The ride-sharing companies are subsidizing rides and overspending on technology, and soon their very business model may be upended in California. Ride-share company earnings prove that if you lower the bar to the ground, it’s easy to leap over. Uber UBER, -1.28% and Lyft LYFT, +1.42% each reported staggering losses recently, yet the reports were delivered with positive spins. Lyft released “record second-quarter results” while losing roughly the same amount of money as in previous years. Lyft’s improving loss guidance was meant to look attractive at $850 million to $875 million per year, compared with the $1.15 billion-$1.175 billion previously forecast. But that amount is higher…
Cloud software stocks suffered a reversal that has produced losses of close to 50% from record highs. The story for those stocks hasn’t changed, but the valuations have, and that could be a good thing for investors who know what they own. The biggest risk for investors in cloud stocks isn’t the losses that have pummeled prices over the past two weeks, but rather the big reversal that may scare them away from the sector. It’s painful to watch large declines in stocks, yet nobody wants to miss out on a potential 10-bagger either. When the market rewards, and penalizes,…
Slack Technologies is the fastest-growing software-as-a-service (SaaS) company of all time and a Silicon Valley favorite, yet the direct public offering (DPO) clearly did not go well for public investors. The shares WORK, +8.03% opened at $38.50 on June 20, rose to $42 intraday, and have now sunk to a record-low of $26.25 in after-market hours leading into its first earnings report as a public company. The losses are at 36% from its intraday high, and that occurred when many cloud-software initial public offerings (IPOs) have enjoyed triple-digit returns since going public. So what went wrong? And, more importantly for growth investors, will…
Okta is fundamentally weaker than many analysts believe, making its booming stock priced to perfection. The company was early out of the gate for cloud-subscription IPOs in 2017, and the valuation has reaped the benefits of Wall Street’s enthusiasm for subscription models. However, a reasonable price to initiate Okta as a buy-and-hold investment is now in the rearview mirror, rendering it a momentum play. That will be important for investors when they review its earnings report for the three months through July after the stock market closes Wednesday. Okta’s stock dropped 10% on weakening guidance for both revenue and earnings per…
Splunk Inc’s (NASDAQ: SPLK) shares are currently trading at $118.46 which represents flat gains over the past 12-months basis compared to the broader market returning flat gains over the same time frame. Second-quarter earnings were reported on Wednesday and the question of weakening cash flow is taking center stage. Splunk Overview Splunk is a hybrid cloud computing company that harnesses the power of artificial intelligence to offer data analytics solutions to a variety of organizations. The company is one of the leaders in the big data analysis and security space, which according to Statista is expected to grow from roughly $42 billion…
1. Amazon Calls on India to Reduce Ecommerce Restrictions Amazon executive Amit Agarwal recently told Reuters that India needs to reduce red tape and encourage ecommerce if it is to overcome sluggish domestic growth. “There is so much opportunity to just let ecommerce thrive versus trying to define every single guard rail under which it should operate,” Agarwal said. Agarwal’s comment was directed at India’s latest ecommerce laws which limits Amazon and Walmart’s ability to operate in the country. Pushing back on these new legislations, he emphasized Amazon’s role in helping small and medium enterprises in the country by enhancing…
Nvidia’s stock went from unstoppable to nearly uninvestable in the matter of a few weeks last year and has not recovered. The sudden drop in Nvidia’s stock price and a competitive ecosystem that’s hard to understand are two reasons the chipmaker has scared away growth investors, who have opted for momentum bets such as cloud-software companies. The fact that semiconductor companies are cyclical, and mired in the U.S.-China trade war, has further overshadowed Nvidia’s growth potential. But the real story is that Nvidia is spring-loaded as its product offerings quietly gather strength in a market of enormous magnitude: artificial intelligence (AI). The path…
Ride-share earnings this week proved that if you lower the bar to the ground, any earnings performance can leap over it. Both companies reported staggering losses that were delivered with positive PR spins. Lyft reported “record second quarter results” while losing roughly the same amount of money as previous years. Uber had an epic $5 billion loss that is closer to $1.3 billion adjusted. The second number only looks acceptable in the parallel universe where a $65 billion market cap company can report any losses at all, let alone $4 billion per year. Likewise, Lyft looks digestible compared to its counterpart…
“What makes a solid tech stock?” may be one of the most important questions an investor can answer. Over the last decade, tech companies started to penetrate the top ten list of global companies by market cap. Today, tech dominates this list with Apple, Microsoft, Google, Facebook and Alibaba. Not all tech stocks are winners, of course, with IBM and Yahoo flatlining over the past decade and Cisco unable to reclaim its valuation from nearly twenty years ago. This is why it is important to follow guidelines for individual tech stocks regardless of a broader bear or bull market. Basic…
The O’Reilly Open Source Convention (OSCON) is an annual convention for the discussion of free and open source software. Open source has seen tremendous support over the last decade after going through a dark winter of software commercialization in the 80s and 90s. A historical turning point was when Netscape released the Netscape Communicator internet suite as free software in 1998 and the source code was used to spur Mozilla Firefox, Thunderbird, SeaMonkey and KompoZer. Background on Open Source: Proponents of Free and Open Source (FOSS) during the 90s included heavy weight Microsoft, Oracle and IBM. For instance, a Microsoft…
MongoDB outperformed the tech sector a few times over the past 12 months, most notably during Q4, when MongoDB managed to trade between $65 and $80. The stock recouped losses by early December, when MongoDB reached new highs at $90 per share. By March, MongoDB had gained more than 50% off its new highs to $152 in March. MongoDB’s Atlas has proven to defy gravity even in the face of AWS launching a competing product called Amazon DocumentDB in January. This sent shares of MongoDB down 15 percent, with a few larger investors exiting based on the news, but the…
Bitcoin’s ultimate opportunity will be reached when the coin provides seamless and low-cost digital transactions. The free market is already moving towards capitalizing on bitcoin as many corporations do not want to miss out on this opportunity. Starbucks is partnering with Bakkt, and this will create a payment gateway for the security-backed exchange.
Bitcoin has emerged as a solid alternative to Venezuelan bolivars. Even when Bitcoin loses value from $19,000 to $3,000, it’s still out-performing the inflation of Venezuela’s currency. On the flip side, when bitcoin rises in value from $5,000 to $11,000 in one month, it allows global populations to hold an appreciating asset. Despite market volatility, bitcoin makes Venezuelans money, offers them accessible protection, and they are able to escape an autocratic regime.
Although many consider countries with the most dominant GDPs as the countries who set the world’s stage for economic conditions, the emerging markets play an important role as the unrest in these regions can lead to disruption.
The largest bitcoin conference in the world took place last month in San Francisco with many early pioneers discussing why bitcoin has made a good investment for them and why bitcoin investments will do well long-term. You can view highlights from the Bitcoin conference here. Bitcoin buyers fall into two camps (primarily). Those who trade the cryptocurrency and those who “stack Satoshis,” a term for stockpiling on bitcoin as a means of building long-term wealth. Stacking Satoshis may be the most successful tactic due to a few key iterations that bitcoin will go through to ultimately strengthen its price and…
Last week, the world’s largest bitcoin conference took place in San Francisco. Despite bitcoin holding a $200 billion market cap in Q2 2019, cryptocurrency conferences receive less press than tech conferences from companies with comparable market caps, such as Oracle World, Dream Force or even Oktane, a conference by a company with a fraction of the market cap that receives ample press coverage. Despite naysayers, Bitcoin has proven to be a revolutionary, digital asset. Worst case scenario, if you had invested in bitcoin as a long-term investment at the height of each bubble and sold at the bottom of the…
Crowdstrike is another Silicon Valley startup that recently went public with triple-digits across the board including revenue growth, net retention rate, and annual revenue-run rate, which may have you wondering, how does one tell all of these Silicon Valley IPOs apart? For the Crowdstrike IPO, as with most cybersecurity companies, competitive landscape is crucial and requires bulletproof product differentiation as security is a very crowded space. This analysis will look into the product differentiation between Crowdstrike and its competitors for endpoint security to achieve an understanding of valuation and to form a prediction of how Crowdstrike will perform as a…
Facebook has been clobbered by privacy issues for nearly 16 months now. A pivot into cryptocurrency could help save the social media giants market cap while making good use of the platform’s 2.3 billion users. The main issue for investors is the short-term risks with privacy and data may not outweigh the long-term opportunities with crypto this year. Background on Facebook’s Cryptocurrency: News has been circulating for some time about Facebook’s cryptocurrency venture with news officially breaking on Friday that Facebook has signed a consortium of firms known as the Libra Association to govern Facebook’s cryptocurrency. The list of names…
Uber’s CEO, Dara Khosrowshahi, is blaming timing and the trade war for the stock’s poor performance in its public market debut rather than focusing on the company’s unprofitability. When Uber filed to go public, the S-1 filing showed a massive operating loss of $3 billion per year. The most recent earnings report on May 30th showed the losses are getting worse at $1 billion per quarter for the “deeply unprofitable” company. Revenue is slowing down with growth of 20 percent to $3.1 billion in the most recent quarter compared to 25 percent revenue in the year-prior quarter. This was Uber’s…
June 20th is the official date of the Slack IPO, although the technical term is not an IPO but rather a DPO for Direct Public Offering. Of the cloud software companies to go public over the last few years, Slack may be Silicon Valley’s pet favorite. You can think of Slack as a cloud-based messaging and delivery hub for teams as email is ineffective for frequent communication and projects. The product is simply amazing in terms of productivity and team work flow. From a customer perspective, the cost of the paid product is offset by the time employees save by…
Despite Pinterest’s stock climbing from its initial public offering last month, analysts are expecting a first-quarter loss of 16 cents a share, adjusted, compared to a 10-cent loss in the year-ago quarter. With that said, analysts are expecting revenue of $197 million, reflecting growth of 50%, however there are discrepancies between the user base that is growing and the user base that is monetizing, which is what is causing the losses. Last month, I wrote an article on how mobile application companies hide user attrition and how Pinterest and Snap bury important key metrics in 10-Ks and S-1 filings. One…
On May 22nd at 4:30 pm Eastern, join four fundamental stock analysts on a webinar where they will discuss stock picks, trends and strategies to help strengthen your personal portfolio. Beth Kindig will discuss how to pick a solid tech growth stock and how to hedge in down market. Specifically, Beth Kindig will discuss the differences between how the financial industry defines growth and how the tech industry defines growth, and why a blend of both is essential for picking stocks in the number one growth sector. Beth predicted the biggest stock drop in history in Q2 2018 with Facebook’s…
By now, investors know that Lyft’s ride-sharing IPO didn’t reach $100 per share like many of the media talking heads stated it would, and this will likely weigh on Uber’s IPO. Two weeks prior to Lyft’s IPO, I had warned that the risk listed in the prospectus, which warned Lyft may not become profitable, was more than fine print. Ride-sharing companies use investment money to lower the cost of the ride to create demand, which means the ride you take in a Lyft or Uber is not profitable, and will likely never be profitable. Not one analyst rated Lyft as…
Will Roku miss earnings? I believe Roku will miss earnings at times, but for the big picture, Roku is at the center of an important trend in advertising and this will make for decent returns now and sizable returns in the future. I also don’t play the earnings game often with stocks as my analysis does not change monthly or quarterly. My conviction on Roku is high and can withstand trade war news or a fledgling quarter, which is normal for smaller companies on the edge of incipient trends. What Investors Got Wrong With Roku The first thing Wall Street…
This last week, we saw Tesla take advantage of the lack of information available on autonomous vehicle technology. Unfortunately, the facts around autonomous vehicles are elusive as PR copywriters fuel journalists, who are churning out content to meet deadlines. For starters, to get machines to respond like humans, within milliseconds, is one of the most difficult problems that technologists have aimed to solve. The truth about autonomous vehicles includes regulations, production cycles, and delays in implementation. I predicted when I wrote my analysis six months ago, that the gap between investor expectations (perception) and commercial deployments (reality) had created an…
Social media companies today are using smoke and mirrors to hide an important key metric. I’m going to pick on Pinterest first because the social media company recently revealed these issues in its S-1 Filing, and meanwhile, Pinterest stock saw a 25% pop on the day of its public debut. To be fair, this 25% IPO pop pales in comparison to Snap’s 135% stock price increase from December lows. My best guess is that investors are hoping for the next Facebook, or perhaps they aren’t reading beyond the financials, which are on page 13 of the prospectus, compared to the…
Towards the end of March, AdWeek broke the news that “Google Mulls Third-Party Ad-Targeting Restrictions.” Criteo’s stock dropped 30% and TradeDesk saw a 15% drop while Alphabet’s stock showed the least impact at 5%. I believe the market did not fully understand the implications of what advertising experts and insiders had leaked to AdWeek. It is my prediction Alphabet will have to let go of roughly $5 billion in quarterly revenue if the company aims to become a leader in artificial intelligence and sensitive data.
This week, I revisited Nvidia for the first time since the crypto bust. If you’re a regular reader of mine, then you’ll remember that I defended Nvidia as having a strong fundamental story due to their developer following and the GPU-powered cloud. We’ve seen the GPU-powered cloud story take shape with the recent acquisition of Mellanox. However, no analysis on Nvidia would be complete without a discussion on Xilinx, which is what I wrote about this week.
There are many positives to Apple’s story, with a wearables business up over 50%, cloud services up 40%, and Apple News readership at 85 million active monthly users. Apple Music is also now the number one streaming service in the United States over Spotify. Most importantly, Apple has a media announcement planned for March 25th, which will add to the growing services revenue. Investors should exercise caution, however, as the broader mobile market is slowing down and is nearing saturation.
Silicon Valley produces a lot of winners; however, I believe investors should be careful with both of these IPOs due to bubble-like valuations, accelerating net losses, and a lack of geographic expansion opportunities. Yet, another concern is the liquidity event the large cap IPO provides, and the level of PR that can be bought leading up to the IPO, which will likely focus on the growing sales…
AI may seem like an auxiliary technology to how we live our daily lives today, however, it will soon be the primary driver across the tech industry. PricewaterhouseCoopers estimates the world economy will reach an additional 15.7 trillion in value by 2030 due to artificial intelligence. To put this into perspective, the top 5 technology companies today have a combined value of about $4 trillion, which includes Apple, Amazon, Microsoft, Google and Facebook. Over the next decade, AI will drive a market 5x the size of tech’s current global spend. Although this growth is exciting on many levels, the panelists at MWC 2019 voiced concerns about the handling of inherent biases that comes from data, as clearly discrimination by age, race, gender, education or other factors within audience segmentation is counterproductive to the advancement of society that AI promises.
The financing firm Greensill puts the total cost for 5G at $2.7 trillion through the end of 2020. The issue is that it’ll take a few years to see any returns, which will put networks in the red until applications catch up. This, of course, is the fine print to 5G that the lights, camera and action of the booths at MWC didn’t portray. In fact, there was a panel where Mike Fries, the CEO of Liberty Global, pointed out that carriers in Europe have not recouped costs on 4G yet. “You’ve had 10 straight years of declining mobile revenues in Europe with the biggest issue being price,’ he said.
Facebook has financial statements that Wall Street dreams are made of. Profit margins are at 40 percent, free cash flow outperforms due to low capex, and annual growth exceeds 20 percent year-over-year. In fact, FB posted 35 percent growth this past year with lots of runway to go. Meanwhile many of its FAANG peers struggle with high capex (Netflix) and diminishing growth (Apple).
To put it simply, Facebook’s cash flow and profit margins are not only some of the best in the S&P 500, but the best in the world. The ad dollar machine has incredible inertia and advertisers simply can’t turn away. If you are looking at the income statements, then you have every reason to go all-in on this company.
Hybrid is what will drive near future adoption for IaaS. This means security is still the dominant concern while data accuracy and productivity are the primary benefits to IaaS. Therefore, small and mid-cap companies that assist with either of these can benefit from IaaS growth. Below are a few of the more popular stocks in the cloud space. Although it is my belief some of these are overbought, and will have to prove themselves if we do go through a bear market, it most certainly doesn’t hurt to have them on the radar and to look for the right entry point.
On a micro-level, mobile is hitting saturation, social media faces privacy regulations, chip makers are getting hurt in the trade war, and meanwhile, 5G, artificial intelligence, and autonomous vehicles are too nascent to see returns in the near term. This is one reason I continue to hammer on IaaS as a safe, secular bet. Companies are going through a major transition right now by transferring work loads into the cloud.
Nvidia and Intel had a different tone at CES this year in regards to autonomous vehicles. Nvidia’s launch of DRIVE AutoPilot is a smart strategy to boost sales in the short term while the AV future of Level 3 or Level 4 sorts itself out. The Mercedes CLA class is another great example of a strong Level 2 automation strategy. Intel is clearly betting on China, especially Baidu, although China is not …
To experience CES this year was to experience the sensation of exiting a large football stadium. You essentially walk in a continuous herd of over 180,000 people. There were many noteworthy displays and freebies, as long as you don’t mind standing in line for two hours or having hundreds of people blocking your view. (The only line I stood in was for Starbucks). I’m also not one for flying taxis or the never-ending release of new television screens. At this point, if you buy an 8K television, it will take years for content producers to catch up to 8K content…
In 2019, the biggest cloud customer in the world will be the United States Department of Defense. The DoD is currently reviewing bids to award a single cloud provider a multi-year contract. Obviously, this isn’t your typical enterprise IT department, transferring from on-premise servers, or a startup who needs the flexibility of cloud infrastructure to scale. The program is called the Joint Enterprise Defense Initiative, or JEDI, and its purpose is to move the DoD’s massive computing systems into the cloud. This one contract is worth $10 billion, or 25% of the current market, which currently stands at $40 billion…
The cloud infrastructure market is expected to reach $83.5 billion by 2021, up from $40.8 billion in 2018. Amazon Web Services was launched in 2006, which means it took twelve years for the infrastructure-as-a-service (IaaS) market to reach $40 billion – but will take only three years for the next $40 billion to accumulate. Therefore, the investment window for cloud infrastructure stocks is far from over. The IaaS segment is currently Amazon’s most profitable revenue stream comprising 55% of its quarterly operating profit, and is also the top growth-driver for Microsoft at 89%. Considering these are two of the three…
This week, General Motors Company cut more than 14,000 salaried staff and factory workers with plans to close seven factories worldwide in what Bloomberg calls a “sweeping realignment to prepare for a future of electric and self-driving vehicles.” Unfortunately for GM, and their employees, the future of autonomous vehicles is much farther off than what the company represents. Investors in GM stock should be cautious, and realistic, as to when new revenue streams will occur, as cutting costs, even to the tune of a net savings of $4.5 billion, might not be enough to wait out the innovation cycle. In…
Tech stocks are getting slammed right now, and Nvidia may be one of Wall Street’s biggest losers in the sell-off that began last month and continued into this week. Nvidia’s stock has seen a 30-day high of $292 and a whiplash low of $176 – equaling a 40% plunge in the matter of four weeks. Today, it stands at $197.60. Economic indicators and earnings from tech companies have not exactly warranted this reaction from the market. Fears the semi-conductor industry is slowing down based off Advanced Micro Devices earnings report were negated when Intel reported strong Q3 earnings. And while…
Roku’s earnings report for Q3 is scheduled on a potentially volatile trading day depending on how the broader markets react to the mid-term elections. The uncertainty around this outcome, along with rising rates, geopolitical trade uncertainty, and a host of companies tempering their Q4 outlook has caused a style rotation, which has pummeled tech stocks. Regardless, Roku is a mid-cap growth stock in the tech sector that will continually prove itself against headwinds as the company is poised to become one of the most opportunistic growth stories in the market by 2023. The reason for this is simple: connected TV…
Summary: According to Q3 earnings calls, Spotify may seek to broker user data in order to keep average revenue per user afloat. Known as programmatic advertising, this method of monetizing data to supplement music revenue may be Spotify’s only hope to stave off competitors who nip at the heels of the music-streaming app Portions of this article were originally published September 27th, 2018 under 8 Reasons Spotify will be a Sell Recommendation by 2019 at $184 per share. This analysis has been updated to include the recent partnership with Google and programmatic offering Ad Studio. Half Full or Half Empty? -6%…
Facebook’s earnings call today may be the most anticipated call of Q3. The stock has tumbled since the last quarterly earnings call from a high of $217 in July to a low of $142. Three months ago, Street analysts did not think this was possible – and many still have price targets at $200. I believe bullish financial analysts are distracted by Facebook’s security costs, news feed fatigue and Instagram while underestimating the most important number on Facebook’s earnings call tomorrow –user growth rate. Background on Facebook’s User Growth Trajectory Facebook’s rampant growth from 2004-2017 was due to a viral…
Last month, Autonomous Vehicles fell into the “trough of disillusionment,” which is the downward slope that analyst firm Gartner publishes to show the hype cycle for certain technologies. You can think of this as “winter is coming” for tech products – a time when all of the buzz and excitement finally meets reality (note: artificial intelligence winter is a well-documented thing). The reality for autonomous vehicles includes regulations, production cycles, and delays in implementation for what is an extraordinarily difficult problem to solve – how to get machines to respond like humans at crucial moments. This gap between investor expectations…
It’s understandable if you missed the headlines that Apple may buy Tesla. That piece of speculative news, like most news about Tesla, has been overshadowed by the PR storm that surrounds the CEO’s behavior rather than based on the technology behind the product. Here’s some background information for those who missed it. Simultaneously with the CEO’s investigation for violation SEC law 10b-5, rumors began to circulate that Apple may buy Tesla. Some of these rumors were started by Ross Gerber, a Tesla investor, while others sourced the VC firm Loup Ventures, and the gossip is still being echoed a month…
Bandwagons are easy to jump on but it can be hard to decide when it’s time to get off, especially considering Spotify stock has famous hedge funds like Soros Fund Management, Philippe Laffont of Coatue Management, and Louis Bacon’s Capital Management holding sizeable stakes. Since its IPO in April, Spotify has seen an $8 billion rally in market value for an all-time high market cap of $34 billion following Q2 earnings. The bull storyline is that Spotify is the leader in streaming music with nearly 40% of market share in 2017 – which is double what Apple Music holds and…
Roku’s stock (ROKU) is getting a lot of attention after it reported stellar second-quarter results due to 57% year-over-year revenue growth to $156.8 million beating the analyst forecast of $141 million. Compare this to 37% year-over-year revenue growth in Q1. However, as I stated in my Q1 article, the platform revenue is where Roku will continue to see a majority of the gains. The video streaming platform revenue was up 96% during the period to $90.3 million with player revenue up 24% to $66.5 million. Some of the analysis below is taken from an article I wrote last quarter on Seeking Alpha. The…
This is a crucial time to point out to investors that my predictions were correct. Last April, I published an in-depth analysis on Seeking Alpha along with predictions for Facebook (FB) stock. The analysis urged readers to ignore post-Cambridge Analytica hype as Facebook’s quarterly earnings would miss as a result of GDPR. Specifically, I stated the culprit would be revenue and data sources outside of the Facebook “family of apps.” However, with this article, I’d like to explore this point even further and explain with granularity why the issues have only begun and what Facebook isn’t telling you (source for Facebook…
To summarize, the $5 Billion Antitrust Fine on Google is due to the following issues: Google has required manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google’s app store (the Play Store); Google made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices; and Google has prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google (so-called “Android forks”) source: European Commission…
Summary: Infrastructure as a service (IaaS) is the fastest growing cloud segment and will continue to be with AI, machine learning and connected cars. Gartner, an authority in tech analysis, placed Oracle in the “niche player quadrant” (not the leader quadrant) for Infrastructure as a Service (IaaS) May 22. In addition to IaaS, Oracle’s Data as a Service business model will weaken as marketers fail to get proper consent for ad targeting. Cloud infrastructure is hot right now and for good reason. The world increasingly relies on cloud data centers due to server virtualization, smartphones, movies and entertainment, chatbots, office…
Summary: This analysis answers the following questions: Search is a large driver of revenue and doesn’t require data but what other portions of Alphabet’s advertising model will be affected by the GDPR? How much revenue do the higher risk methods currently contribute to earnings? Where is Alphabet most likely to incur GDPR fines? How will non-personalized ads affect earnings and network sites? Alphabet (GOOG) was announced in 2015 as a holding company to help separate Google’s advertising business from the sprawling investments in Fiber internet, cloud computing, smart home products and connected car products. While these new gadgets and the…
Summary: Despite knee jerk volatility, Roku will become a large cap stock in OTT (over-the-top) within 2-5 years. While Pay TV operators continue to bleed subscribers, Roku has the best business model to capitalize on these losses compared to highly fragmented OTT and SVOD competitors. In addition, Roku has maintained competitive vigor as the number one streaming device in the United States while remaining vendor agnostic. Going global will cement this position. Roku (ROKU) stock prices have fluctuated wildly from being one of the hottest stocks in 2017 with a 400% return from the IPO price of $14 to a…
Next month, when General Data Privacy Regulations (GDPR) take effect, there will be a seismic shift across many technology stocks reflecting a private data drought. Facebook is a half a trillion-dollar profit machine because of a business model dependent on first-party data which will come under scrutiny May 25 under the new GDPR policies. Average revenue per user (ARPU) currently stands at $26.76 compared to $4.08 at IPO. With strict policies for data control, consent, erasure and portability, ARPU and earnings will drop significantly. Editor’s note: This article was published on Seeking Alpha on April 17th, 2018 Investors should…
The average cloud software company reported 10% growth during the 2008-2009 recession. Meanwhile, we’ve seen the market react harshly towards companies guiding for 25% growth (such as Elastic). We know the winners from shelter-in-place but we are still sorting out what growth should look like in the middle of the category. My guess is that 25% is going to be higher than average by the time we exit this year. I spoke about this and other topics this week on a podcast with Simon Erickson from 7 Investing. Simon Erickson is the CEO and Founder of 7 Investing, a company…
