Sunday, July 29, 2012

Mobile Money: Facebook Advertising

This piece, from Peter Kim of MBA, highlights how effective Facebook mobile ads are and the rise in mobile use Right now, with the influx of smartphone owners and mobile browsers is having a great impact on how businesses market to their consumers. Mobile-targeted ads and marketing tactics are becoming both necessary and profitable in a wide range of industries, but in particular, web-based companies are reaping a great deal of mobile traffic and resulting ad revenue. The following infographic offers a specific example of one web-based company that’s bringing in big bucks with their mobile advertising strategy: Facebook. As Facebook prepared for its recent IPO, many people expressed concern with whether or not Facebook’s mobile platform would be a profitable addition to the company. But in true Facebook style, their mobile traffic and resulting revenue has skyrocketed rapidly, bringing in a huge contribution to the company’s already impressive revenue. As the world of mobile browsing and consuming continues to expand, savvy businesses will know to capitalize on just how profitable little apps and ads can be. Facebook Ads Infographic
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Monday, April 9, 2012

AOL (AOL) Sells Patents to Microsft for $1 Billion

AOL announced that the company has entered into a definitive agreement to sell over 800 of its patents to Microsoft Corporation (MSFT) and to grant Microsoft a non-exclusive license to its retained patent portfolio for aggregate proceeds of $1.056B in cash.  

Following the sale, AOL will continue to hold a significant patent portfolio of over 300 patents and patent applications spanning core and strategic technologies, including advertising, search, content generation/management, social networking, mapping, multimedia/streaming, and security among others. AOL also received a license to the patents being sold to Microsoft. The patent sale includes the sale of the stock of an AOL subsidiary upon which AOL expects to record a capital loss for tax purposes and as a result, cash taxes in connection with the sale should be immaterial. Additionally, AOL expects to utilize approximately $40M of its existing deferred tax assets, representing approximately 20% of its total deferred tax assets, to offset any ordinary income taxes resulting from the license of its remaining patent portfolio. AOL management and its board intend to return a significant portion of the sale proceeds to shareholders and will determine the most efficient and effective method to do so prior to the closing of the transaction. Pro forma for the sale and license, as of December 31, 2011, AOL would have had approximately $15 per share of cash on hand. The transaction is expected to be completed by the end of 2012, upon the satisfaction of customary conditions and regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. . Read More!

Sunday, April 8, 2012

Google's 1Q12 results as a barometer for Facebook's IPO

Google is set to report earnings this Thursday, April 12. Consensus sees net revenues of $8.125 billion and Non-GAAP EPS of $9.62. Investors will use this report, the first before Facebook’s IPO, to gauge the strength of the online advertising market, both display and search, and comments on the MMI acquisition, particularly how management plans to integrate this acquisition.

Most investors expect in-line results and expect the stock to stay flat post earnings. The impact of the difficult to predict FX hedges could impact the reported headline revenue number. On the cost side, investors are modeling cash operating expense growth of 26-28% y/y, which is down sharply from 35% y/y, in 4Q11, and 49% y/y in full year 2011. Hiring growth slowed in 4Q11 but investors expect another solid year of headcount additions for Google, putting pressure on opex growth for the balance of the year. Bonus accruals could be an issue in this quarter. 

On the metrics, investors are modeling paid click growth of 20-22% y/y for the quarter, down from 34% y/y in 4Q11. O&O Search is expected to grow 23-24% y/y with Network growth of 11-13% y/y. The SEM checks were mixed in the quarter, with Ignition One reporting 30% y/y growth in search activity in the U.S., with European spending up 10% y/y.

Efficient Frontier reported search spending of 14% y/y. Investors view both datasets as largely unreliable consistent indicators of Goolgle’s revenue growth results. Concepts likely to be discussed on the call (in response to questions) include:

1. Impact of the Facebook IPO
2. MMI acquisition integration
3. Headcount growth
4. Monetization runway and enhancements over the past few months
5. Panda Updates
6. Capex run rate
7. MMI 
8. Impact of mobile growth

Google trades at 15.3x 2012 Non-GAAP EPS and 8.5x 2012 EV/EBITDA, both reasonable multiples relative to growth prospects. Hence, most investors view the stock as undervalued given its growth and leadership position in the space. 

The stock is down 5% from highs in the beginning of the year but up 9% over the past year. Investors see the stock drifting down with any movement down in the macro environment. Advertising based stocks tend to be more sensitive to macro data. Investors see the stock working if Google is able to post a material beat in 1Q12, which of course goes without saying.

One thing is certain, Google’s report will be scrutinized for the impact to Facebook ahead of the IPO.
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The Verge reports first Google (GOOG) tablet in July

The Verge reports that Google's first tablet with a co-branded Android device will not be available until July 2012. People close to the project said that Google pushed back the release so it could make some cost-cutting tweaks in hopes of lowering the price from the current $249.Device partners include Asustek Computer (2357.TT), has a 7-inch screen, and is Wi-Fi only.  

Our view: Amazon's tablet is unique in that it taps into Amazon's ecosystem, which includes shopping, book reading/lending, and free video with Prime. We do not anticipate a dent in Amazon's sales from the Google Tablet. We think Google will fail to gain significant traction with the tablet because we find it hard to see how differentiated it will be. Apple's differentiation is the brand. To take share you need to intelligently offer a solution to a problem unsolved by Apple and Amazon. We do not see it. Read More!

Saturday, April 7, 2012

Bluefly (BFLY) reports Q1

EPS of ($0.22) vs $0.01 in the prior year Revenue $29.4M vs $28.6M in the prior year Read More!

Palo Alto Networks files for $175M IPO

Palo Alto Networks "pioneered the next generation of network security with our innovative platform that allows enterprises, service providers, and government entities to secure their networks and safely enable the increasingly complex and rapidly growing number of applications running on their networks." The core of its platform is a Next-Generation Firewall. Bankers are Morgan Stanley, Goldman Sachs and Citigroup Read More!

Ticketmaster (LYV) extends agreement with NFL

The NFL signed a 5 year contract extension with Ticketmaster to continue to operate the NFL Ticket Exchange. Read More!

Friday, April 6, 2012

Economy Added 120K Jobs in March

Mar US Nonfarm payrolls +120K Unemployment rate 8.2% vs. SA consensus 8.3% Average hourly earnings +0.2% Average weekly hours 34.5 Feb Non-farm payrolls revised to +240K from +227K Read More!

Thursday, April 5, 2012

Pandora (P) initiated Underweight at Barclays

Analyst Anthony DiClemente sets an $8 price target. Hard to not disagree with this analyst as there is currently zero operating leverage in this model, unless they find a way to stuff the ad load without degrading the listener experience. Read More!

Cinemark (CNK) joins S&P MidCap 400 index

The theater chain replaces NSTAR (NST), which is being acquired by Northeast Utilities, after the close of trading on Monday, April 9. This theater chain has a history of ourperforming peers and has a strong Latin American presence. Read More!

Pandora (P) Reports March Metrics

Listener hours for Pandora during the month of March 2012 crossed the 1B mark, an increase of 88% from 567M during the same time period last year. Share of total U.S. radio listening for Pandora in March 2012 was 5.79%, an increase from 3.04% at the same time last year. Active listeners reached 51M at the end of March 2012, an increase of 59% from 32M during the same time period last year. Read More!

LinkedIn (LNKD) Downgraded to Market Perform

That's from Outperform The analysts who initiated with SELLs or Neutral sure look wrong. Read More!

eBay (EBAY) Downgraded to Outfperform at Raymond James

Analyst Aaron Kessler maintains $39 price value. Mainly a valuation call. Downgrade was Strong BUY The stock has had a nice run so everyone is downgrading. Read More!

BSkyB hacked into emails

BSkyB confirms authorizing hacking of emails on two occasions Read More!

Strong March Retail Same Store Sales Growth

23 retailers Reported same store sales growth for the month march. 16 came in above consensus and 7 came in below consensus Read More!

Sirius XM (SIRI) Downgraded to Neutral at Miller Tabak

Sirius XM Radio downgraded to neutral at Miller Tabak Read More!

Liberty Won't Let $7Bn of Sirius XM NOLs Go

With all the talk about what John Malone will do with his 40% stake in Sirius we think it is unlikely he does a Reverse Morris Trust. We think they find a way to bring SIRI into the fold to gain access to the NOLs. Read More!

Wednesday, April 4, 2012

Tech Valuations

Technology Stock Valuations. Tech Multiples
Tech Trading
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Media Valuations

Media Valuations Media Multiples
Media Trading
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Telecom Valuations

Telecom Valuations Telecom Multiples
Telecom Trading
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Wednesday, March 21, 2012

Internet Valuations

Internet Valuation Click on Graphic to Enlarge Internet Multiples
Internet Share Prices
Internet Trading Statistics
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Friday, March 16, 2012

Next Up For Apple, Dividend And Stock Split

Now that the world has seen that the iPad 3 is just evolutionary and not revolutionary, it is time that Apple's management considers other means to increase shareholder value including returning cash to shareholders through a dividend. A stock split would increase demand for the shares as well. Just to be clear, Apple remains an in-expensive stock, trading at 12x EPS versus a consensus EPS growth rate of 18-20%. But to get the stock to increase materially from this point, Apple's management would need to do more than just sell products, which they will do plenty of, but we believe that growth has already been captured in consensus estimates for the company. Currently, Apple has $98 billion in cash, with $34 billion of that cash domiciled in the U.S. The dividends can only use the $34 billion in the U.S., unless Apple finds a way to tax efficiently repatriate some of the international cash. The issuance of a dividend would increase demand for the stock as income focused institutional investors who currently under-own Apple' shares, buy up shares. Most dividend paying Tech stocks trade at premium valuations to their peers, have outperformed their peers and the market over the past 10 years, and the higher the yield the better the performance. The empirical evidence supports the issuance for a dividend. Apple, we think, off the bat, could pay a 2% dividend yield consistent with most companies in the S&P 500, and progressively increase the yield toward 3%-4%. Consensus has Apple generating more than $50 billion in free cash flow per year over the next few years, with about 40% of that generated in the U.S., and available for a dividend. Management could pay a yield based on 50%-100% payout of that free cash flow. As for a stock split, it should drive up demand for the shares particularly from individual investors who would want to own the stock for the long-term in their investment funds. Apple's product owners are fanatical about the products and would want to participate in the ownership of the company. They view the share price as prohibitive from a psychological perspective and would be willing to participate in ownership at a lower absolute share price. Read More!

Saturday, January 28, 2012

Stocks that benefit from Facebook's IPO

By most accounts, Facebook’s IPO should raise $10 billion. What will FBOK do with its part of all that cash? The same thing Google has been doing. Buying up other companies to build up its ecosystem to ensure its longevity as well as assure investors that it is not a one trick pony. Google, several years ago, acquired several companies such as YouTube and DoubleClick and about a hundred more companies. What’s more interesting is that FBOK will force Google, Amazon, Apple, Microsoft and maybe even Yahoo! to step up their game. And that will mean nothing more than them acquiring other Internet companies.

Here are a few targets for Facebook and for the above named companies for that matter:

-Renren (RENN): The Chinese social networking site makes for an attractive acquisition as it would give FBOK an entry into the fast growing and lucrative China market. The shares are down 80% from its 52-week high and has a market cap of just $2 billion. (ACOM): Ancestry is a content based social network but it hasn’t been viewed as such. It has a loyal user base that spends upwards of $300 per year for the service. The benefits are a global presence, an attractive niche, significant barriers to entry, and the subscription model provides for revenue visibility. The market cap is only $1.3 billion.

-AOL (AOL): The company is in a turnaround phase and itself is being challenged by FBOK for share of display advertising dollars. AOL has rich self produced content that can be leveraged across FBOK. The market cap is only $1.6 billion. 

I will leave you with something to think about. It was Google is 2004. Facebook in 2012. Who will it be in 2020?
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Thursday, June 23, 2011

Yahoo! Pack it up pack it in...

There comes a time in a company's lifetime when insurmountable competitive forces and unfavorable industry dynamics draws the business model into the decline phase. Yahoo! has approached that moment.

In our last write-up on Yahoo! seen here, we outlined several steps management and the board should take to increase shareholder value culminating into the inevitable final step - a sale.

At the time we mentioned Microsoft or traditional media conglomerate companies but now we think a foreign company makes sense, with Baidu being the most logical acquirer.

Baidu has bigger aspirations than just China. If it wants to challenge Google then buying Yahoo! makes sense.

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Sunday, May 1, 2011

Valuevision Media: Our Top Small Cap Media Pick.

ValueVision Media (VVTV) is set to report earnings on May 11, 2011. Research firm Piper Jaffray is calling for revenues of $146.7 million, Adjusted EBITDA of ($0.962), and GAAP EPS of ($0.73). We think those estimates are easily beatable and the shares are likely to rally post the earnings.

Friday’s favorable decision from Liberty Interactive regarding the bondholder lawsuit should be viewed as a catalyst for the TV Shopping industry, and VVTV in particular, because it could mean that QVC and HSN would be cleared to merge in the future. Comcast in our view, would not sit idle and let QVC and HSN become overbearing as a combined competitor, and could invest in VVTV to make it more competitive. We think that would ultimately lead to a full acquisition of VVTV by Comcast.

In addition, Comcast’s declaration last week that it would cross promote its assets is also favorable for VVTV.

We have pushed the acquisition thesis on VVTV before, seen here, and thinks it makes sense for Comcast, but also for a company like, who could stand to both increase sales and margins if it had a TV distribution outlet. The margins on a multichannel shopping purchase is higher than that of a pure online shopping purchase or that of a pure TV shopping purchase. A TV channel would allow in our view to ultimately get to the double digit operating margin goal.

As a standalone business we are calculating a fair value for VVTV shares of around $8 based on a 8.5x multiple to fiscal 2013 consensus EBITDA of $50 million.

And as for the Wall Street Journal article about the insider share sales, which we view as fair to bring up, we note that the article did not mention that the CEO had purchased 1 million shares in the open market in 2009. From a pure corporate governance perspective we do not like one-time insider shares sales because of the signaling hypothesis. But be that it may, the business is fundamentally strong and has great momentum, so we are willing to overlook that at this time, and look to the upside potential from owning the shares.

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