Market 2018-02-02 and ER Analysis of FB, GOOG, AMZN & AAPL

It is a bloody Friday. The economy added 200,000 jobs in January as the unemployment rate stayed at 4.1 percent. Treasury yields jump again, 10-yr note @ 2.84%. The high interest fear causes the panic sell in market today.

As I said last weekend, market was facing selling pressure this week. For the week, Nasdaq -3.9%, S&P 500 -3.5%, Dow Jones -4.2%.

Crude -1.09% to $65.08. Gold -1.09% to $1,333.20. Dollar recovers (UUP +0.6%).

Another focus this week is the earnings from Big Four: Amazon, Apple, Facebook, Google

1. Cloud Service

Amazon is known as online retailer. However, the majority operating income (60%) comes from its AWS (Amazon Web Service Cloud), which presents 10% revenue in 2017. AWS is growing at 45% YoY, which is much slower than Microsoft (98%) and Google (claimed to be the fastest). Therefore, Microsoft and Google are eroding the market share from Amazon. Behind this three are IBM and Oracle. IBM cloud is growing at 24% rate.

2. Advertising

The #1 player is of course Google. #2 is Facebook. #3 is Amazon, which may surprise you. As more users move to mobile, google is facing challenges. Google needs to pay Apple for the ads on iOS, which causes the spike in ad costs and the selloff after ER. Facebook is fine, which makes the stock gain after ER. Amazon's Ads business is growing rapidly although it is still a small player. As google knows you searching/viewing habits, Facebook knows your social network and daily life, Amazon knows your shopping preference, which makes Amazon have huge potential in Advertising. 

3. Hardware

Apple relies heavily on iPhone. For 18Q1, handset count is actually flat although average price is $100 higher than 17Q1. Chinese market is key for growth. Google bets on Pixel phones and Google Home, and Amazon focuses on Echo. Microsoft's windows phone is shrinking. Facebook has a lot to catch up.

4. Media

Netflix is dominating the video streaming services. However, Google (Youtube), Amazon and Apple are all trying to develop their Media department. One highlight of Apple's ER is paid subscriptions among services passed 240M (+30M Q/Q). As Apple says the company plans to reduce its net cash balance ($163B by end of 18Q1) to “approximately zero”, I am expecting dividend hike and acquisitions of Media companies.

In summary

  • GOOG: despite the higher cost, it is still a cash cow. Cloud service is growing rapidly. The company is leading self-driving cars, which provides hugh potential.
  • Apple: you should not bet against a company who is willing to spend $163B. Its Chinese business is growing well.
  • Facebook: no complaints of nearly 50% growth rate.
  • Amazon: its cloud service is losing market share although it is still growing 40+% Y/Y. Its advertising has huge potential.
  • All big 4 are growing rapidly (FB fastest, then AMZN and GOOG, AAPL slowest). Catch the buying opportunities in near-term.

Winners

AMZN +2.9% after ER beats.

DUST(3x gold miner bear ETF) +10.1% as NUGT -10.8%.

S +5.1% after ER on improved profitability and cash flow, and raising full-year guidance.

EW +3.8% after ER beats:  Q4 EPS of $0.94 beats by $0.03. Revenue of $888.5M (+15.7% Y/Y) beats by $21.41M.

DATA +9% on Q4 beats, upside FY18 revenue guidance. It is difficult to valuate DATA for me.

 MAT +8% in sudden swing of sentiment. It was -7% in pre-market after an ugly earnings report.

 CHTR +4.4% as it adds customers, beats in Q4.

Losers

GOOG -4.8%. See my comments above.

AAPL -4.3%. See my comments above.

Chevron (CVX -5.6%) Exxon Mobil (XOM -5.1%) shares plunge following their Q4 ERs, as cost cuts and rising oil prices failed to offset weakness in international refining operations. As comparison, COP (-2.7%) is pure upstream player, which is positioned better for the rising crude price era.

V -3.8% as investors concern rising operating expenses. AXP -3.3%, MA -1.4%, SQ -1.9%, PYPL -2.3%...

CLX -6.7% after reporting Q2 EPS of $1.23 in-line. Revenue of $1.42B (+0.7% Y/Y) misses by $10M; despite nice guidance --- full-year sales growth of 1-3% and EPS of $6.17-6.37 vs. $5.66 consensus. PG -1.9%.

My Trades Today


  • Initiated position in AAPL @ $161.6.
  • Initiated position in V @ $120.8.
  • Bought back BGS @ $31.6 (sold a few days ago @ $33.6).
  • Added more PG, LIT, BOTZ, AMAT.


Comments

  1. Betty C stanfillJune 5, 2018 at 7:34 AM

    What insanity will take place this year as the Superstars of WWE throw caution to the wind in the pursuit of championship glory? Find out for yourself by securing your Money in the Bank tickets!

    Money In The Bank 2018 Live Streaming Free

    ReplyDelete

Post a Comment

Popular posts from this blog

Wanna Retire Early, Start Planning Now!

Image
It is very important to plan your retirement  as early as possible.  Why? It is because the money you put into investment will grow fast. If you put $1k into your retirement account at age 20, it will grow into $15k when you reach age 60, assuming 7% annual return rate. As comparison, if you put $1k at age 30, it will only grow into only $7.6k, about half of the former case! One popular topic these days is to get retired early, for instance, at the age 50. Assuming the average yearly expense (including medical cost) is $100k and you live to age 90, you need at least $4M by age 50. Of course if you plan to get retired at age 60, then the retirement fund will be smaller ( $3M ). There is a new phrase " Million Dollar Poor "  ---- $1M may only support you from age 70 to 80 --- retire @ age 70 and decease @ age 80. In this article, I would like to introduce the possible stable income sources for retirement. (This is a brief introduction, for more details, p...
Read more

Impacts of Tax Reform --- My First Thoughts

Senate passed the messy tax reform bill last night. The new tax code will start in 2019 (not 2018). The next step will be negotiation between Senate and the House to put together the final bill for Trump to sign. Put aside how the tax reform will affect personal finance, one thing is for sure --- corporate tax rate will drop from 35% to 20% . Multinational companies will also bring cash back to US. Corperate Tax Rate Drop Well, many big companies have already managed to pay low tax rate, for instance, IBM pays only ~10%. You can find tax rate information in companies' ER. Therefore, not everyone benefits from the 20% tax rate. Following are a few companies who are paying tax rate > 35% (most in retailers and restaurants). Restaurant: CMG, DENN... Retailers: CVS, LVS, GPS, JWN, M... Auto retailers: AN, KMX... Healthcare: Anthem, HUM, DGX, DVA... Transportation: JBHT, LUV... Energy: COP, PSX... Industrial: GWW... Financial: SCHW, PAYX... Utility: WEC... ...
Read more

Market 2018-02-05 (WOW.... Bloody)

The quick bounce in the morning turned out to be a trap. The selloff is so violent that there are almost no survivors. The deep dip  around 3pm is especially evil. The market is definitely in panic mode. Dow -4.6% to 24,343. S&P -4.1% to 2,649. Nasdaq -3.8% to 6,967. And the selloff continues in AH. The money floods into Treasuries : 30-year +1.12%. 10-yr +0.74%. 5-yr +0.51% . 10-yr note drops from above 2.85% to 2.7% (about last Tuesday/Wednesday level). This may calm some nerve. Currently it is hard to predict how much lower indices will go. I would suggest to prepare your own shopping list and start to add positions. I am fully positioned myself. I plan to hold and wait. Commodities: Crude -2.73% to $63.66 . Gold +0.28% to $1,341.00 . Bitcoin is also facing another run of selloff as major US & UK banks ban Bitcoin credit card purchases . The lowest price today is below $6600 from coindesk. To be honest, there is no particular bad economic news today. Ins...
Read more

US Treasuries and Yields

Image
Rising Treasury Yields have been a hot topic in the past few weeks, which is blamed to be the reason behind recent  market correction. Some people are totally panicked as 10-year yield approaches 3%. I would suggest to " Keep Calm and Carry On ". In this article, I would like to give you some background, and possible trend. US Treasuries Basically US treasuries, including short-term and long-term, are the national debt of United States (国债). US currently have debt of $20T . Debt/GDP ratio is 104% in 2017 , as shown in the chart below (grey bars represent recessions). As comparison, China Debt/GDP ratio is 46% in 2016; Japan is 238% . The debt falls into two broad categories: Intragovernmental Holdings and Debt Held by the Public. Intragovernmental Holdings $5.6T, 30% of total. This is the portion of the federal debt owed to 230 other federal agencies, such as the Social Security Trust Fund. This part is not affected by market. Debt Held by the Public $1...
Read more

Market 2018-02-06 (XIV, MU, MOH, and more)

It is a choppy day. The early tradings are similar to yesterday --- opened low followed by a quick bounce. However, indices hung around afterwards and marched north around 2:30 pm. Dow +2.3% , S&P +1.7% & Nasdaq +2.1% . I think the -10% correction is over. The indices retreated back to pre-TAX-Reform level in the intraday low. However, it could remain the choppy way for near-term. Utilities has the worst performance, XLU -1.5% despite the broad market rally in late hours. Treasurys: 30-year -0.9%. 10-yr -0.6%. 5-yr -0.4% . 10-yr note stays @ 2.8%. Commodities: Crude -1.1% to $63.45. Gold -0.9% to $1,324 . The American Petroleum Institute (API) reportedly shows -1.05M barrels of crude oil for the week ending Feb. 1 vs. last week's build of +3.23M barrels. Gasoline reportedly shows -227K barrels and distillates show a build of +4.52M barrels. I think refiners face margin challenges. Yesterday, many analysts called for buying dip instead of being panic. Goldman's D...
Read more