Tag: noah kiedrowski

Facebook - Privacy Scandal Amnesia

Posted on by Noah Kiedrowski

Facebook Inc. (FB) crushed its Q1 2019 earnings estimates on both top line revenue and bottom line profit. Revenue grew 26% year-over-year, giving rise to investor amnesia as it relates to its string of privacy scandals. Facebook is now testing its all-time highs with a reasonable price-to-earnings multiple when compared to its tech cohort. As the company attempts to move past its privacy issues while restoring trust with its user base, negative sentiment has abated. Facebook continues to post unparalleled growth for a company of its size while its platforms are the go-to properties for advertisers and influencers. Will Facebook be able to march forward without being plagued by the slew of issues ranging from international regulatory scrutiny, user privacy issues, high-level employee mass exodus, and a questionably toxic company culture? Some analysts argue that the negative confluence of the aforementioned issues will drive up costs, narrow revenue streams, and weaken the user base. The privacy scandal has already resulted in increased costs surrounding compliance, monitoring, censorship, and scrubbing the platform from deceptive marketing. If the company continues its path forward on the privacy front while posting best-in-class revenue growth, the stock will likely continue to elevate higher.

Q1 Blowout Quarter

Facebook continues to deliver phenomenal growth across the company while its cash hoard swells to $45 billion. The company posted EPS and revenue of $1.89 and $15.08 billion, respectively. These numbers beat on EPS by $0.27 and beat on revenue by $104.3 million.

"We had a good quarter, and our business and community continue to grow," said Mark Zuckerberg, Facebook founder, and CEO. "We are focused on building out our privacy-focused vision for the future of social networking, and working collaboratively to address important issues around the internet."

The stock exploded higher on the earnings news, shooting from $182 to $195 or 7% in a single session. Facebook’s properties continue to grow and continue to expand its revenue moat in advertising spend. Instagram and Whatsapp will likely serve as major growth catalysts as these assets still have a lot of room for its monetization efforts. Continue reading "Facebook - Privacy Scandal Amnesia" →

Hasbro Is Going On The Offensive

Posted on by Noah Kiedrowski

Hasbro (HAS) is turning the corner and going on the offensive with a slew of revenue verticals with its Disney toy licensing deal (Marvel, Star Wars and Disney Princess lines), Hasbro Studios (Transformers’ Bumblebee, My Little Pony, Power Rangers), E-Sports (Dungeons and Dragons and Magic: The Gathering) and reinventing its legacy games (Monopoly and Nerf) while driving newer products (Beyblades). Hasbro blew out expectations for its Q1 2019 earnings and the stock jumped 16% breaking out above the $100 threshold, a level that hasn’t been seen in over 6 months. Hasbro is setting the post-Toys-R-Us bankruptcy narrative and laying out a business roadmap for long term profitable growth across its brands. Hasbro has had the tough task of getting out in front of the Toys-R-Us bankruptcy and working its way through the glut of merchandise. This positive sentiment has been further bolstered by positive commentary from its CEO that the company has effectively absolved itself of the Toy-R-Us related bankruptcy headwind. Hasbro has a compelling future across its portfolio with many catalysts on the near and long term time horizons.

Q1 2019 Earnings

Hasbro posted an unexpected profit for Q1 with EPS coming in at $0.32 against expectations of -$0.11, beating estimates by $0.32 per share. Revenue also came in much higher than expected with $732.5 million and beating estimates by 66.5 million (Figure 1).

“The global Hasbro team is executing very well and delivered a good start to the year,” said Brian Goldner, Hasbro’s chairman and chief executive officer. “Our long-term investments in new platforms provided a meaningful contribution from our digital and e-sports initiative, Magic: The Gathering Arena, as well as growth in MAGIC: THE GATHERING tabletop revenues. In addition, MONOPOLY, PLAY-DOH and TRANSFORMERS were among the brands posting revenue gains this quarter. We are beginning to see improvement in our commercial markets, notably in the U.S. and Europe, and operating profit was driven by high margin revenue growth and our cost savings activities. With most of the year ahead of us, we remain on track to deliver profitable growth for the full-year 2019.”
Continue reading "Hasbro Is Going On The Offensive" →

IBM Continues To Win Over Investors

Posted on by Noah Kiedrowski

International Business Machines (IBM) continues its long turn back to growth, focusing on high-value faster-growing business segments while embracing the future of technology with AI and hybrid cloud architecture via the Red Hat acquisition. Investors are ostensibly being appeased with the blended approach of M&A, realigning its business mix to current and future trends, maintaining its dividend payout and continuing to buy back shares until the Red Hat acquisition closes. IBM’s stock has been on an upward trend after investors decided to move past its initial displeasure of announcing its RedHat acquisition when shares were sold-off and traded down to ~$108. IBM's executive leadership has set the growth and value narrative, and investors are quickly realizing the value that Red Hat brings to the table while washing away fears that IBM overpaid for the $34 billion acquisition. From the $108 dip, IBM has been in a position of strength and has broken out past $140 after its recent Q1 2019 earnings. Long-term imperatives are beginning to bear fruit in emerging high-value segments that has fundamentally changed its business mix while evolving its offerings to align with new age information technology demands. The Red Hat acquisition will augment its transition away from its dependency on legacy businesses to the future of hybrid cloud, artificial intelligence, and analytics. IBM presents a compelling investment opportunity with a 4.5% dividend yield, share buyback program and continuously acquiring companies to drive the business into the future.

Q1 2019 Earnings – Solid

IBM reported Q1 earnings that were solid, not great and investors seemed content. IBM reported EPS of $2.25 and revenue of $18.2 billion which was a -4.7% year-over-year decline while missing analysts’ targets. IBM slide the following day initially however quickly arrested that decline to rise above the $140 again. The company laid out its growth narrative and Red Hat acquisition catalysts. IBM's revenue was flat across most of its business segments; however, its Cloud revenue grew by 10%.

"In the first quarter, our cloud revenue growth accelerated, and we again grew in key, high-value areas in Cloud and Cognitive Software and in consulting,” "IBM’s investments in innovative technologies coupled with our industry expertise and our commitment to trust and security position us well to help clients move to chapter two of their digital reinvention."
Ginni Rometty, IBM chairman, president, and chief executive officer

IBM has slipped back into a revenue contraction in its last few quarters however I think there’s a lot to like moving forward. There’s a reassurance that the dividend is safe, stabilizing revenues and a lot of shots on goal for future growth especially with Red Hat coming into to fray and strategic imperatives becoming a larger segment of IBM’s overall revenue pie as this is a higher growth business (Figure 1). Continue reading "IBM Continues To Win Over Investors" →

Disney - Avengers: Endgame, Streaming, and Fox

Posted on by Noah Kiedrowski

Disney (DIS) is looking to continue off of Captain Marvel’s success with Avengers: Endgame debuting April 26th, 2019. Captain Marvel has already brought in more $1 billion in worldwide box office revenue and leading all 2019 movies by a wide margin. Disney is betting huge on Avengers: Endgame taking the torch to the $2 billion box office milestone, a feat that’s only been accomplished four times, one of them being Avengers: Infinity War last year with $2.05 billion. All the initiatives that Disney has taken over the previous two years to restore growth appear to be coming to fruition, namely its Fox (FOX) acquisition and it's streaming initiatives. The Fox acquisition is complete for the combined entity; thus Fox’s assets are now definitively being absorbed by Disney. Disney continues to invest heavily into its streaming services such as Hulu, ESPN Plus and it's soon to be released Disney branded streaming service that will directly compete with Netflix (NFLX). The Fox acquisition brings a majority stake in Hulu (60% ownership) while its ESPN Plus launched earlier this year and has over 2 million subscribers. Disney continues to dominate at the box office while posting great growth at its theme parks translating into robust and durable revenue streams. The company is evolving to meet the new age of media consumption demands of the consumer via streaming and on-demand content. Disney has been on an uptrend as of late, breaking through the $115 relative to an all-time of ~$120. I’ve been behind Disney for a long time, especially through this transition back to growth and I still feel that the company offers a compelling long-term investment opportunity given its growth catalysts that will continue to bear fruit over the coming years. Goldman Sachs recently championed Disney’s reinvention efforts and boosted its target price to $142, a 20% increase from the $115 current share price.

Goldman Sachs Backs Fox Acquisition and Future

Goldman Sachs has changed its view on Disney after the investment bank removed Disney from its buy recommendation in December of 2017. Now Goldman Sachs has come out to back Disney and labeled the stock as a buy. It's "the dawn of a new era" after the company bought the media assets of Twenty-First Century Fox, the acquisition which Goldman advised. Now the impending launch of Disney Plus marks a "momentous" shift in content monetization, though investors will need to be patient with some heavy lifting around the launch, suggests Drew Borst. Continue reading "Disney - Avengers: Endgame, Streaming, and Fox" →

Facebook - Frustrating and Volatile Situation

Posted on by Noah Kiedrowski

Facebook Inc. (FB) continues to be plagued by a slew of issues ranging from international regulatory scrutiny, user privacy issues, high-level employee mass exodus, and questionably toxic company culture. As a result of these overarching issues weighing on the company, the stock has become volatile with dramatic moves in both directions. The stock has traded over a $95 per share range during the past 52 weeks, logging a high of $218 and a low of $123. The magnitude of this move has been frustrating as one issue after another seems to impact the stock despite record revenue and EPS negatively. Pundits argue that the negative confluence of the issues above will drive up costs, narrow revenue streams and weaken the user base. The privacy scandal has already resulted in increased costs surrounding compliance, monitoring, censorship and scrubbing the platform from deceptive marketing.

PR Disaster

Facebook has been mired in privacy scandals, public relations mismanagement, a conference call that wiped out $119 billion in market capitalization in a single session and a very public exodus of many high-level departures across the company. There’s a laundry list of mishaps originating from its data misuse scandal involving Cambridge Analytica as that continued to surface across the globe. Security issues affecting 50 million accounts, a lawsuit alleging concealing video admeasurements and increasing EU scrutiny plagued the stock. The list continues to evolve, and now there’s a report that Facebook stored user passwords unencrypted for years while its AI is still being refined due to its inability to remove the New Zealand terrorist attack video promptly before it was viewed 4,000 times. Additionally, Facebook’s network of products suffered an outage which impacted Instagram and Whatsapp as well as its flagship Facebook platform (Figure 1). Facebook has a lot of work ahead of its to reign-in all these issues and retain talent in what appears to be a questionable company culture. Continue reading "Facebook - Frustrating and Volatile Situation" →