Tag: Recommendations

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Technology Stocks

Twitter’s Mix of Direct Response and Brand Offerings Continues To Improve

. Twitter is an open distribution platform for (and a conversational one around) short-form text, image, and video content. Its users can access real-time information regarding a wide array of topics or news events. They can also share information and content, interact with content, and express their reactions to other Twitter users. These types of interactions allow Twitter to compile more data about its users, their interests, and their behavior, which is then licensed and/or utilized by Twitter and advertisers to launch online brand and targeted ads.

Product enhancements such as the Explore tab may have helped increase initial user engagement and improve user retention, but the firm’s network effect is weakening considerably as its user base shrinks in size relative to rivals. As the likelihood of Twitter attracting more users via content improvement and increasing focus on more live premium content will probably decline (due to significant competition on both fronts), so will the firm’s access to more user data. As a result, more advertisers will increasingly gravitate toward other platforms that offer better targeting capabilities.

Financial Strength

Twitter reported excellent second-quarter results that exceeded our expectations and the FactSet consensus estimates. In addition, some of the firm’s latest non-ad offerings could gain traction in the long run and slightly reduce dependence on advertising, while contributing a bit to revenue growth. Our higher projections resulted in a $58 fair value estimate, up from $52. We recommend new investors to wait for a margin of safety before investing in Twitter as the stock increased 6% in after-hours, trading at 1.27 times our fair value estimate, and 10 times and 35 times our 2021 sales and adjusted EBITDA projections, respectively.

Twitter posted total revenue of $1.19 billion, up 74% from the pandemic-ridden second quarter of 2020, with ad revenue up 87% to $1.05 billion and data licensing and other revenue up 13% to $137 million. The firm’s user count increased 11% to 206 million, with U.S. and international users up 3% and 13%, respectively. The firm has also begun to help small and medium-size businesses launch direct response campaigns based on location, age, and gender. While we had expected such a feature, referred to as Twitter’s Quick Promote, to be available much earlier, it will still likely attract more advertisers.

The firm generated operating income of $30.3 million (2.5% margin) driven by revenue growth, compared with an operating loss of $273.9 million last year–which included a $150 million fine by the FTC regarding usage of phone numbers and email addresses for target marketing. Management guided for $1.22 billion-$1.3 billion in revenue during the third quarter, and operating losses between zero and $50 million. Twitter expects operating expenses to grow by 30% and revenue growth to exceed that. The firm also expects share-based compensation expense of $600 million and capital expenditure of $900 million-$950 million this year.

Twitter has a strong balance sheet with net cash of $5.9 billion. The firm generates cash from operations, and we expect it to generate free cash flow going forward. Twitter’s free cash flow to equity/revenue ratio averaged 18% over the past three years, and we project this ratio to improve to over 26% in 2025.

Company Profile

Twitter is an open distribution platform for and a conversational platform around short-form text (a maximum of 280 characters), image, and video content. Its users can create different social networks based on their interests, thereby creating an interest graph. Many prominent celebrities and public figures have Twitter accounts. Twitter generates revenue from advertising (90%) and licensing the user data that it compiles (10%).

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Dividend Stocks Shares

Xcel Energy Pushing Through Its Regulatory Agenda; Raising Fair Value Estimate

On July 2, Xcel filed a $343 million rate increase request that we think will be one of its most important and hotly debated rate requests ever in Colorado, its largest jurisdiction. The proceedings during the next six months will test whether regulators are willing to raise customer rates to pay for Xcel’s clean energy and safety investments along with supporting Colorado law that requires Xcel to supply 100% carbon-free electricity by 2050.

Rate settlements in Xcel’s

The Colorado outcome could affect Xcel’s five-year, $24 billion investment plan and management’s 5%-7% annual earnings growth target in the near term. That difference accounts for about 15% of Xcel’s rate increase request. Rate settlements in Xcel’s three smallest jurisdictions are in line with our estimates. In New Mexico, Xcel settled for a $62 million rate increase ($88 million request) and 9.35% allowed ROE (10.35% request). In Wisconsin, Xcel settled for a $45 million combined electric and gas rate increase in 2022 and a $21 million combined rate increase in 2023 based on a 9.8% allowed ROE in 2022 and 10% allowed ROE in 2023. In North Dakota, Xcel settled for a $7 million rate increase ($13 million revised request) and 9.5% allowed ROE (10.2% request).

Company Profile
Xcel Energy manages utilities serving 3.7 million electric customers and 2.1 million natural gas customers in eight states. Its utilities are Northern States Power, which serves customers in Minnesota, North Dakota, South Dakota, Wisconsin, and Michigan; Public Service Company of Colorado; and Southwestern Public Service Company, which serves customers in Texas and New Mexico. It is one of the largest renewable energy providers in the U.S. with one third of its electricity sales coming from renewable energy.

(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

Sonic Has a Record Second Quarter, Joining the Dealer Space.

Modern financier with papers sitting in front of computer monitor with chart and graph of sales rate

We are raising our fair value estimate to $60 from $58. The change is from the time value of money, higher revenue growth based on how 2021 is unfolding, and a 20 basis point increase in our midscale operating margin including floor plan interest to 3%. We made the latter change to reflect our expectation of better overhead cost leveraging long-term due to the chance that inventories will be lower than pre-pandemic levels after the] semiconductor shortage ends, which should enable better pricing power long-term. Sonic is also due to introduce a digital commerce platform in the fourth quarter that will start at the Echo Park used vehicle stores but likely be rolled out companywide over time. This platform could enable further overhead cost efficiencies long-term.

Second-quarter results were in our view strong and we are encouraged to see same-store revenue up 24.9% compared with the second quarter of 2019. The lucrative service business also did well with same-store service gross profit up 6.9% versus second-quarter 2019. We see more upside this year from this nearly 50% gross margin business because the warranty side of it has not rebounded yet from the pandemic while customer pay has; and management said its California stores, which made up 26.4% of 2020 total revenue, have not rebounded as much from the pandemic as the rest of Sonics stores.

Company’s Future Outlook

Echo Park lost $14.4 million in pretax income for the quarter as high auction prices made sourcing inventory more expensive. Management now sees Echo Park annually selling two million vehicles once it is mature sometime in the 2030s. The more noteworthy news though is Sonic’s board is “considering a full range” of alternatives for Echo Park and has hired Lazard and Kirkland & Ellis as advisors, though no deal may occur. We’d prefer to see Echo Park get larger over time before a divestiture so Sonic shareholders could benefit but it is possible that a sale or spin-off, should it occur, could unlock value for Echo Park not currently recognized by the market. The downside, in our view, of divesting Echo Park is once it’s gone from Sonic; Sonic will not have an exciting growth story to talk about beyond its franchise business. We have about $36 billion of Echo Park revenue modeled for 2021-25.

Company Profile

Sonic Automotive is by our estimate the sixth-largest public auto dealership group in the United States by new-vehicle unit sales. The company has 84 franchised stores in 12 states, primarily in metropolitan areas in California, Texas, and the Southeast, plus 25 Echo Park used-vehicle stores. In addition to new- and used-vehicle sales, the company derives revenue from parts and collision repair, finance, insurance, and wholesale auctions. Luxury and import dealerships make up about 88% of new-vehicle revenue, while Honda, BMW, Mercedes, and Toyota constitute about 60% of new-vehicle revenue. BMW is the largest brand at over 24%. 2020’s revenue was $9.8 billion, with Echo Park’s portion totaling $1.4 billion.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

BioMarin Maintaining FVE in the Quarter 2 as the 2021-22 Launches Approach

despite the headwind from generic Kuvan. BioMarin raised guidance for each of these drugs based on sales in the first half of the year, leading to expected non-GAAP income of $190-$240 million for the year, up from prior guidance of $170-$220 million.

Recent data indicates that Roctavian has continued durability of efficacy through five years, although factor VIII levels continue to decline over time, hinting that the efficacy of BioMarin’s gene therapy will not last a lifetime. Despite this, we think there is still a place for Roctavian, especially considering its significant lead over other gene therapy programs as well as the likely positive reception from patients.

Company’s Future Outlook

Two drug candidates continue to drive our expectation for significant increases to revenue growth beginning in 2022. BioMarin expects European approval of Voxzogo (vosoritide for achodroplasia) in the third quarter and Roctavian (hemophilia a gene therapy) in the first half of 2022. In the U.S., we expect Voxzogo to gain approval by its PDUFA date in November 2021, and Roctavian should be filed with the FDA in the second quarter of 2022, once two-year data from the phase 3 studies is available in early 2022.

In addition, the Institute for Clinical and Economic Review also determined that a potential price tag of $2.5 million would be cost effective based on three years of efficacy data, which gives us confidence in our blended global price tag of roughly $1.2 million per patient.

Company Profile

BioMarin’s focus is on rare-disease therapies. Genzyme (now part of Sanofi) markets Aldurazyme through its joint venture with BioMarin, and BioMarin markets Naglazyme, Vimizim, and Brineura independently. BioMarin also markets Kuvan and Palynziq to treat the rare metabolic disorder PKU (in addition to long-standing U.S. rights, BioMarin has reacquired international rights for Kuvan and Palynziq from Merck KGaA). BioMarin’s Roctavian (hemophilia A gene therapy) and vosoritide (treatment for achondroplasia) are poised to potentially launch in the 2021-22 timeframe.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

Coke implementing post-pandemic ambitions: leveraging process, innovation, and technology

The runway for growth is supported by ample room for share gains as well as geographic tailwinds. We estimate Coke derives more than 40% of sales from developing or emerging economies with burgeoning middle classes and low per-capita CSD consumption. We expect commercial drinks will become a larger portion of beverage consumption globally, and see the company executing against each of its market-specific strategies.

In developed markets, where Coke has firmly established the resonance of its brands, its strategies are geared toward profit growth driven by innovation. In developing markets, where its trademarks are visible but competition is rife, differentiation and eventual migration into higher-margin offerings is key. In emerging markets where the firm is less established, it is focused on driving volume growth even at the expense of modest margin dilution. We view these approaches as prudent and believe the decision to cull peripheral brands (going from 400 master brands to 200) will facilitate execution.

Financial Strength

We believe Coca-Cola is in stellar financial health. The firm deliberately skews its capital structure toward debt, on the premise that the lower-cost financing ultimately increases returns to shareholders. Coke regularly generates free cash flow above $8 billion (in the high teens to low 20s range as a percentage of sales), even amid the disruption caused by COVID-19. Even higher levels are driven by improving margins and working capital initiatives. Management has made commendable strides toward top-tier receivable and payable management, and the supply chain initiatives combined with a reworked bottler system should yield modest improvements in inventory management.

Moreover, Coca-Cola boasts strong coverage ratios above its peers. Coke’s financial strength is its ability to operate one of the larger domestic commercial paper programs. Issuing commercial paper is an integral part of the company’s cash management strategy, and the fact that investors and financial institutions are consistently willing to finance the company at such low rates lends credence to the reliability of its cash flows.

Bull Says

  • By volume, Coke is almost 3 times the size of its next largest competitor in the global nonalcoholic ready to- drink market, which begets scale benefits.
  • Despite a greater focus on marketing efficiency, its ad budget is still unparalleled and should help maintain consumer awareness and brand relevance.
  • The recently established platform services group should allow Coke to more effectively leverage data and improve technological capabilities across its mammoth production and go-to-market system.

Company Profile

Coca-Cola is the largest nonalcoholic beverage entity in the world, owning and marketing some of the leading carbonated beverage brands, such as Coke, Fanta, and Sprite, as well as nonsparkling brands, such as Minute Maid, Georgia Coffee, Costa, and Glaceau. Operationally, the firm focuses its manufacturing efforts early in the supply chain, making the concentrate (or beverage bases) for its drinks that are then processed and distributed by its network of more than 100 bottlers. Concentrate operations represent roughly 85% of the company’s unit case volume. The firm generates most of its revenue internationally, with countries like Mexico, Brazil, and Japan being key markets outside of the U.S.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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LICs LICs

APL Provides Update on Conditional Tender Offer (CTO)

The company’s main discount management approach is the CTO. If the average daily discount over the 12-month period ending October 18, 2021 is greater than 7.5 percent, the CTO is triggered. Since the beginning of the term through 14 May 2021, the average daily discount has been 11.5percent.

The CTO allows shareholders to sell APL shares to the company via an off-market buy-back at a price equal to the current post-tax NTA less 2% if it is triggered. A maximum of 25% of the company’s issued capital will be repurchased.

Since the average daily discount stays above the discount threshold of 7.5 percent, the CTO will be triggered until the discount narrows significantly in the future months. There may be an arbitrage opportunity for shareholders depending on where the share price is trading at the end of the time.

NTA before tax was $1.248. The current performance was marked at 21% approximately in June 2021. The present dividend of APL for the year 2021 is 2%.

Company Profile

APL was founded in 2015 by Jacob Mitchell, formerly Deputy Chief Investment Officer of Platinum Asset Management and majority owned by its investment team. Antipodes Global Investment Company (ASX: APL) is an Australian-LIC that offers shareholders exposure to a long-short global equity portfolio with a currency overlay. By purchasing exceptional and undervalued firms, the Company aims to outperform global stock markets while also safeguarding our stockholders from risk and volatility.

(Source: fool.com.au)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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LICs LICs

Pengana International Equities Limited (PIA) Appoints New Manager

New Jersey  based, Harding Loevner LP is appointed as a new investment team. Harding Loevner is a global equity manager with over the staff of 100 employees and over US$84b Assets .

PIA will use the Harding Loevner global equity strategy with the inclusion of PIA’s ethical filters as a result of the appointment.

Currently, Share price of Pengana International Equities Limited (PIA) is $1.360. On 16th July Net Tangible Assets for Pre – Tax is $1.491 and Performance of Pegana International Equities Limited is 14.30%.

Harding Loevner’s investment strategy, as per PIA, supports the company’s goal of providing shareholders with capital growth through holdings in an ethically screened and actively managed portfolio of worldwide firms, as well as regular, predictable, and fully franked dividends.

Currently, IIR Ratings is ‘on watch ’ for PIA and will be full evaluation once it is reviewed for new investment team and strategy is completed.

Company Profile

Pengana International Equities Ltd, formerly Hunter Hall Global Value Limited, is a listed investment company (LIC). The Company’s investment objective is to generate positive absolute returns in excess of the investment portfolio’s benchmark over an investment horizon of approximately five years. The Company operates through investment in securities segment. The Company’s portfolio is invested in equities. The Company invests in a range of sectors, such as consumer staples, financials, healthcare, industrials, information technology, materials, telecom services and consumer discretionary. The Company operates through various countries, such as Italy, Brazil, Australia, Japan, South Korea, the United Kingdom and the United States. The Company gives investors easy access to a portfolio of global equities, including a strategic allocation to Australian equities. The Company’s investment manager is Hunter Hall Investment Management Limited.

(Source: FN Arena )

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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LICs LICs

LICs that are sold for less than their true value

The LIC may or may not be completely transparent when it comes to revealing its holdings or NTA [net tangible assets]/performance numbers, and the costs are substantially higher — moreover they usually earn a bonus if they outperform.

LIC share prices, like that of every other publicly traded company, fluctuate based on supply and demand. This means that while the fund may have $1 in assets per share, the stock may be trading for 80 percents… or $1.20.

A large fish may buy out LIC, which is trading at a significant discount to the NTA, and liquidate it for a profit.

LICs can occasionally provide good discounts.

LIC managers tend to get upset when their fund gravy train gets taken away from them

The LIC gets smacked sometimes, especially during periods of acute lack of confidence, while the assets it holds bounce swiftly, thus buying the LIC at a discount is like going back in time and buying those equities before the rally.

(Source: The Motley Fool)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
LICs LICs

The War of WAM on ASX! Wilson’s New LIC Hits the Share Market

The founder of WAM in charge of WAM Strategic Value is Geoff Wilson, assures investors in WAM Strategic Value’s ASX WAR prospectus that the company will focus on “finding and investing in $1 of assets for 80 cents.

The LIC intends to accomplish this by grabbing the opportunity of market mispricing like securities trading at discounts to assets or NTA (net tangible assets), corporate transactions, and dividend yield arbitrages with franking credit benefits.

WAM Strategic Value will largely be in the business of purchasing assets from other LICs and Listed Investment Trusts (LITs) for less than their true value. After all, with its $200 million+ funding, it’s likely invested in quite a bit so far. Back then, their units were trading at a 12.2 percent discount to their NTA value.

(Source: msn.com)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Technology Stocks

Sustainalytics Rated Weibo – Medium ESG Risk

daily newspaper and a magnifying glass to find news

Weibo’s recent content enhancements include video accounts (similar to Weixin’s), video pages with both professionally generated content and user-generated content (similar to YouTube channels), the discovery zone (where users can find the popular discussion topics at the main entrance of Weibo), and vertical videos focused on user-generated content.

With the increasing importance of more focused marketing and return on investment for advertisers, Weibo has started to catch up. For example, Weibo introduced optimized cost per x model in 2019. Advertisers can also evaluate their sales conversion on Tmall from the fans accumulated through advertising campaigns on Weibo in collaboration with Alibaba through the uni-marketing program. We expect to see increasing product development costs in the next few quarters. We believe investment in research and development is vital for Weibo even if that means near-term margin compression.

To improve small and medium-size enterprise ad revenue, Weibo is expanding into untapped and faster-growing verticals such as Taobao merchants, online education, and online gaming by restructuring its sales team since 2019. For example, it has enhanced cooperation between sales and technical teams to provide customized services to top SMEs of key verticals. The success of the new model is unclear because of the disruption from COVID-19.

Financial Strength

Weibo has a strong balance sheet with a net cash position of $1.06 billion as of December 2020. The company started to make a profit in the second quarter of 2015. Operating leverage has increased significantly in recent years; the operating margin improved from 7.8% in 2015 to 25.5% in 2018 and 30.0% in 2020. This has helped the company to generate free cash flow from 2015 to 2020. The company has significantly beefed up its cash war chest through operating activities and note issuances in the past few years. The balance sheet displayed an increase in long-term investments from $695 million in December 2018 to $1,179 million in December 2020, while generating operating cash flow of $742 million during 2020. We expect Weibo to continue to make long-term strategic investments with its cash. We do not expect it to pay dividend in the next few years. As of March 30, 2021, Moody’s assigned a Baa2 (previously Baa1) issuer rating to Weibo with a stable outlook (previously negative). Moody’s been concerned about using Weibo’s assets and cash to service or repays the privatization debt of Sina.

Bulls Say

  • Weibo has been able to sustain its status as the go to platform for following top trends and topics and celebrities.
  • Weibo puts more focus on return on investment for advertisers and now provides optimized cost per x.
  • Weibo upgraded its ad platform to enhance marketing scenarios, ad formats, algorithms, and Big Data analysis to increase its competitiveness.

Company Profile

Weibo is the largest social media platform in China. As of 2020, Weibo had 521 million monthly active users and 225 million daily active users, many of whom are drawn there by the millions of key opinion leaders in entertainment, sports, and business circles. Sina is the major shareholder, holding 44.7% of shares and with 70.8% voting power; Alibaba holds 29.8% of shares and 15.7% voting power

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.