NEWS Corp – because Murdoch Means Money

English: Rupert Murdoch at the Vanity Fair par...

English: Rupert Murdoch at the Vanity Fair party celebrating the 10th anniversary of the Tribeca Film Festival. (Photo credit: Wikipedia)

News Corp.

NWSA : NASDAQ : US$25.49
BUY Target: US$30.00

COMPANY DESCRIPTION:
News Corp is one of the world’s largest media companies. The company’s operations include the production and distribution of motion pictures and television programming. The company also manages direct broadcast satellite operations in the UK, Italy and Asia. News Corp also publishes newspapers in the UK, Australia and the US.

Summary
NWSA has benefited from a systematic rehab of its investments, operations and capital allocation practices over the past 18 months. Last year, NWSA sold MySpace and initiated a $5bn share repurchase plan, which was repeated this year. More recently, NWSA consolidated
several investments (Fox Pan American Sports, ESPN Star Sports and CMH) which will make them easier to value. NWSA’s next move, spinning off the Publishing division this spring, will be the next major step in this metamorphosis. While NWSA has already appreciated to the spin news, we wanted to reflect it (and other changes) in our valuation.
Highlights
 Increasing target from $25 to $30. As NWSA prepares to spin out the Publishing division, we are updating our valuation to reflect slightly revised multiples, revised estimates and several investments. The two largest components of our higher valuation  are a higher Cable Network segment value (driven by a 1x higher multiple turn) and CMH, which, now that it’s consolidated, should benefit from a higher multiple as well.
 Revising lower FY13 est. We are revising lower several of our FY13 revenue and OI est. All told, our revenue est. decline from $35.3bn to $34.7bn and our OI est. decline from $6.19bn to $5.98bn

 

Groupon Forecast to Fall To $ 2

groupon

groupon (Photo credit: Sean MacEntee)

Nov 10

 

Groupon  : No Deal To Analysts

In the wake of yet another disappointing quarter, Groupon’s stock has crashed to a new all-time low below $3 a share.The stock is now down more than 85% from its $20 IPO price a year ago.

The latest stumble has caused some Wall Street analysts to finally cut their “Buy” ratings.

One skeptical Groupon analyst, meanwhile, has taken this opportunity to reiterate his CONVICTION SELL rating and slash his price target from $3 to $2.

Ken Sena of Evercore, who has been on the right side of Groupon since this summer, cites a litany of discouraging data.

Sena also points out that the bullish “value” story about Groupon down here–that the company has $1.2 billion in cash–is based on a false premise. The company does have that cash balance, but it also has ~$600 million in payables and accrued expenses. So the net cash balance is far lower than it might seem.

The good news is that, at least for now, Groupon is still profitable. So there should be a bottom here somewhere.

Here are Sena’s bullets:

Flat q/q revenue growth was 5% below expectation at $569 mm. Daily Deals revenue of $424 (75% of business) was down -16% q/q, 17% below our $506 mm estimate. EBIT was $25 mm, $5 mm higher than our $20 million estimate (3.3% of rev), but 40% below the Street at $35 mm. However, EPS of $0.03 was in-line with EVR / Street estimates of $0.02 / $0.04 on lower than expected taxes.

COGS [Cost Of Goods Sold] soar on higher first-party Goods transactions. Direct revenue (where first party Goods sales are booked) increased 122% q/q to $145.0 million in 3Q12, vs. our $90 mm est., driving COGS as a percentage of revenue from 23.8% in 2Q12 to 32.0% vs. our 26.6% estimate.

International story worsens. International revenues were up 3.1% y/y (+13% y/y x-FX) to $277 mm, or down 10% q/q, which missed our $314 mm estimate by 12%. This miss was despite an $18.5 million one-time true-up of unredeemed voucher revenues related to a tax ruling in Germany. Moreover, while Groupon cited improving EMEA signs in September, the comment unfortunately suggests that their 3Q12 guidance was potentially knowingly aggressive when provided in August.

FCF down 46% q/q to $26.1 mm driven by 60% reduction in adjusted net income to $24.1 mm.

Reducing Estimates. We are reducing our 2013 EBITDA estimate for Groupon from $260 million to $176 million on the expectation for higher COGS from 1P Goods and slower growth from higher margin Daily Deals. Given the stronger growth from Goods, we now see Goods contributing $1.4 billion in revenue (~48% of billings) in 2013, vs. our previous estimate of $678 million. Meanwhile, we now expect $3.9 billion in Daily Deal Gross Billings versus $5.4 bn previously (-17% y/y vs. +3.7% y/y).

Reducing Target. Groupon currently trades at 52.3x our 2013 EBITDA estimate of $19 mm (inclusive of $157 mm in SBE), or 6x our $176 mm estimate x-SBE. Although the company has $1.2 billion in cash on its balance sheet, ~$600 mm is in accrued payables and expenses, suggesting less cash valuation support than it would seem. Our newly lowered target of $2.00 (from $3.00) implies that Groupon should trade at 6x our EBITDA estimate (inclusive of SBE), or 1x EBITDA x-SBE. Therefore, we see further risk and maintain our Conviction Underweight rating.

Virgin Media BUY Target $41

Virgin Media

Virgin Media (Photo credit: Wikipedia)

Oct. 25

Virgin Media

VMED : NASDAQ : US$32.94  BUY  Target $41

COMPANY DESCRIPTION:

Virgin Media is one of the largest UK providers of broadband, television, mobile telephone, and fixed line telephone services. The company distributes the video and data services via its hybrid-fiber cable network and its phone through its copper-pair infra-structure.

Summary

We believe investors should take advantage of VMED’s 3.5% pullback Wednesday as the company’s 3Q12 results indicate materially improving fundamentals. Pointedly, we saw significantly higher y/y video and broadband net adds despite increased competition in the marketplace (from BT Infinity and YouView). Importantly, the sub growth was driven by lower churn, not greater gross adds, reflecting increased consumer loyalty. We expect this sub growth to continue into 4Q12 and FY13.

At the same time, we are increasing our 4Q12 and FY12 OCF estimates, which demonstrate VMED’s ability to grow market share as well as margin. And as we roll our valuation forward to reflect FY13, our target increases from $33 to $41.

Increasing the target to $ 41 we capitalize our FY13 OCF estimates at 7x. Backing out net debt, we arrive at a $41 target. Notably, our FCF DCF calculation, which indicates a $50 valuation (based on 0% terminal growth rate and 8.5% WACC), suggests a 8x FY13 OCF multiple. To be  conservative, we utilize our lower valuation.

Increasing the Q4 subscriber net adds estimate because we expect the steady  improvement in churn to continue. Most notably, we are increasing our broadband estimate from 29k to 45k, nearly double the pre- 3Q12 report consensus estimate. That said, we would not be surprised if all subscriber consensus estimates increase.


 

Facebook Head High On Results

Image representing Facebook as depicted in Cru...

Image via CrunchBase

Oct. 25

Facebook (FB : NASDAQ : US$23.21)

Poke

Shares of Facebook got a much needed lift Wednesday after its most recent quarterly results showed improvement in its mobile ad revenue, a key area for the company’s growth. Recurring earnings in the quarter were $0.12 per share which revenue increased 32% to $1.26 billion (or just over $1.24 per active Facebook user.) Analysts were expecting earnings of $0.11 on revenue of $1.23 billion. Fourteen percent, or roughly $150 million, of the company’s ad revenue in the quarter came from mobile ads, roughly “two and a half times the number” that one Wall Street analyst though the company would post.

COO Sheryl Sandberg noted that as of earlier this year, the company was making no revenue from mobile devices, and many analysts and investors have questioned the company’s ability to monetize its mobile service. Active users in the quarter rose 26% from the prior year to 1.01 billion while mobile monthly active users were 604 million, up 61% from the prior year.

 

 

Yahoo! Update Web Portal Turnaround ?

Marissa Mayer

Marissa Mayer (Photo credit: Wikipedia)

Yahoo! (YHOO : NASDAQ : US$16.67)

Oct 24

You might find all of this through Google.

Yahoo! touched a 52-week high after new CEO Marissa Mayer outlined her turnaround strategy for the biggest U.S. web portal, emphasizing mobile technology and personalized services.

The third-quarter results announced Monday weren’t astounding, but they were better than analysts anticipated. Most importantly, Yahoo!’s net revenue crept higher for the third-straight year. Mayer, the company’s fifth CEO in four years, said on a conference call with analysts that she aims to grow as fast as competitors in online search, display advertising, mobile applications, and products such as email.

Mayer also plans to focus on small acquisitions of less than $100 million rather than large deals, and expects to move workers around within Yahoo! instead of cutting large groups of employees. “Our vision and direction for Yahoo! is to make the world’s daily habits inspiring and entertaining,” Mayer said. “We’ll become a growth company by inspiring and delighting our users

Zillow – Strong Growth / Evolution Target $45

Image representing Zillow as depicted in Crunc...

Image via CrunchBase

Zillow | Michael Graham
Z : NASDAQ : US$41.76 | Buy , Target US$45.00 

August 10
• Strong Q2 results; guidance likely conservative; maintaining BUY recommendation, raising target to $45 (from $42)
Summary
Zillow reported another strong quarter highlighted by outsized growth in PA subs, a mostly optical sequential decline in ARPU, and further evolution from marketing channel to solutions platform for real estate professionals.
Key Points
• “Third slot” monetization and Premier Silver Agents (who signed up for the free website feature) brought in ~4k new PA subs, mostly late in the quarter, compared with our estimate of ~1.8k. Generally, we now model more subs at a lower ARPU, but our revenue estimates go up.
Leverage remains robust, with nearly all incremental revenue falling to the bottom line. Expenses stay high this year but we see potential for
considerable leverage next year.
• As it buys and builds technology and incorporates it into a growing platform, Zillow is rapidly adding new services (Web sites, Z-Pro) and verticals (Mortgages, Rentals) that are raising the competitive stakes in this fast growing sector.
• We raise our EPS estimates for 2012, 2013, and 2014 $0.35, $0.78, and $1.42.
Valuation
Our new price target of $45 (up from $42) reflects 40x our new 2014 EPS  estimate of $1.42 (up from $1.32), discounted to present at a rate of 12.1%.

 

Apple After Pinterest Rival Fancy

Fancy

Fancy (Photo credit: woordenaar)

August 6

Fancy That !

Apple is in talks to acquire The Fancy, a fast-growing social commerce site backed by cofounders of Twitter and Facebook, Business Insiderhas learned.The objective: to secure a role for Apple in the growing e-commerce market, putting the 400 million-plus users with credit cards on file with Apple’s iTunesStore to work shopping—with Apple getting a cut of the action.While The Fancy is far smaller than archrival Pinterest, which similarly lets users make lists of things they find interesting, the 20-person New York startup, led by cofounder and CEO Joe Einhorn, is much farther along in linking its users to transactions. The Fancy takes a 10 percent cut of purchases. Last we checked in, sales were exploding.

There is no signed deal and no guarantee one will happen. We do not know the price Apple has proposed to pay for The Fancy or how recently talks took place.

However, given what we’ve learned, it was apparently no coincidence that Einhorn and Apple CEO Tim Cook met at Allen & Co.’s Sun Valley conference earlier this year. The notoriously private Cook, who does not visibly participate in any well-known social media sites, started using The Fancy shortly afterwards.

The Fancy raised a $10 million round at a reported valuation of $100 million last fall, led by PPR, the French luxury conglomerate behind Gucci. It previously raised $6 million in 2010; $2.7 million of that round went to Einhorn and his cofounder, his brother Jack Einhorn, according to an SEC filing. Investment bank Allen & Co. was an early investor.

It would be reasonable to think its investors would expect a healthy return—call it 3 to 5 times what they paid. (Consider that nothing more than informed speculation, based on similar deals.)

Twitter cofounder Jack Dorsey and Facebook co-founder Chris Hughes are on the board, along with LeRoy Kim of Allen & Co. and James Pallotta, the owner of the Boston Celtics. Marc Andreessen and Ben Horowitz, the co-founders of venture-capital firm Andreessen Horowitz, are also investors.

Apple is not known for making big, splashy acquisitions. But a source familiar with Apple’s acquisition strategy noted to us that The Fancy is at a stage where Apple typically buys companies.

For example, in recent years, it has bought several companies to bolster its online offerings, like Chomp, an app search engine; Lala.com, an online music service; and Placebase, a digital mapping company. It is in the process of trying to buy AuthenTec, a mobile security company.

Still, how can a two-year-old company with 20 employees possibly be worth that much to Apple?

Apple’s history in e-commerce stretches back almost 15 years to November 10, 1997, when it opened its first online store. On April 28, 2003, it got into digital commerce with the iTunes Music Store. Those foundations in e-commerce let it roll out the iPhone‘s App Store. As Apple’s sales of mobile devices exploded, so did its rolls of online customers registered with a credit card.

But as its tentative moves into general e-commerce have shown, sending those customers on a shopping spree isn’t a simple matter. PassBook, a new online wallet introduced in the latest version of iOS, Apple’s mobile operating system, lets users store discounts, gift cards, and airline tickets—but it doesn’t let people spend money with stored credit cards.

The Fancy could change all that by giving Apple a clear route to converting people’s interest in an object into a sale.

Apple could well build an e-commerce layer into its operating system and let application developers hook into it, giving them a way to make money besides advertising.

The Fancy has recently rolled out a system that gives users a cut of the sales their lists of objects generate.

Einhorn’s company began life as a project called Thing Daemon, or ThingD, which aimed to be a universal database of things. In February, it adopted a model focused around e-commerce—and its business has taken off since.

The Fancy’s offices are situated above an Apple Store in New York City. We don’t think that has anything to do with anything, but it’s funny, given the circumstances.

Einhorn declined to comment. Apple, Dorsey, Hughes, and PPR did not respond to requests for comment

The 7 Ugly Truths About Facebook and Insider Selling

Image representing Facebook as depicted in Cru...

Image via CrunchBase

from Yahoo Finance August 6

But since going public on May 17, the ever popular social network has started to show a few kinks in its digital armor. First the stock price tanked. Then its domestic user growth slowed. And of course privacy concerns and data security remain ongoing issues for the company as it expands globally.

But for all the hype surrounding Facebook, the fact remains that it is an imperfect company with its fair share of internal and external struggles, like any firm. Consider these seven little-known facts about the world’s largest social network.

1. It has a problem with fake accounts

According to a regulatory filing released earlier this week, Facebook itself estimates that as many as 8.7 percent of its 955 million worldwide active accounts are in fact duplicates or fakes, accounting for some 83 million “users.” Of these, about 46 million are duplicate accounts (which anyone who has a “work” and a “personal” Facebook account can understand), 23 million are user-misclassified accounts (such as profiles assigned to pets or businesses) and about 14 million are pages set up for spamming or other untoward uses.

“These estimates are based on an internal review of a limited sample of accounts,” the company said in its SEC filing, “and we apply significant judgment in making this determination, such as identifying names that appear to be fake or other behavior that appears inauthentic to the reviewers.”

2. Bots may be gaming its advertising

A startup called Limited Run has stopped advertising on Facebook and recently went public about its experiences with the company, saying that as many as 80 percent of the clicks it received on its Facebook ads appeared to be from “bots” (web robots) and not real people. The allegation implies that Facebook is juicing its click rate to overcharge its advertising clients and give the appearance of increased traffic.

In response, Facebook told CNBC it is “currently investigating their claims.”

3. Its revenues aren’t that great

Despite all outward appearances (the 955 million users, the splashy IPO, the globetrotting CEO), Facebook isn’t exactly raking in the cash when compared to other Internet firms. In fact, PaidContent recently released a list of 10 Web companies that are doing better than Facebook in the revenue department.

That’s right — Facebook dominates the business pages almost every day but is only the eleventh richest digital content site on the Web.

Obviously Google leads the pack, but there are some surprising names on the PaidContent list, including Microsoft, Bloomberg, Thomson Reuters and, yes, even Yahoo!.

4. Its stock price won’t stop falling

Facebook’s IPO was priced at $38 a share on May 17 and has pretty much sunk like a stone ever since, recently slipping under $20 a share for the first time, a 45 percent drop. What happened? Everyone has a theory — maybe the IPO was mishandled, maybe there was too much hype, maybe Facebook was just overvalued from the start — but the fact remains that the social network has lost about $43 billion in market cap in the past two months (half of its original valuation) and is already one of the worst performing social media IPOs to date.

Unfortunately for Facebook, the worst may be yet to come. Starting next month, nearly 1.7 billion more shares could start hitting the market as employees become freed up to start selling their holdings, which could more than quadruple the number of Facebook shares now trading.

5. Executives are leaving

As happens just about any time a startup goes public — early employees stick around through the IPO, cash out and then move on to new things. At Facebook, however, several high-profile recent defections have raised questions about the company’s leadership and its prospects going forward.

This week, both Katie Mitic, Facebook’s former director of platform marketing, and Ethan Beard, the company’s former director of platform partnerships, announced plans to leave the company, bringing the total number of executive departures since Facebook’s IPO to three. Bret Taylor, the company’s former CTO, left in June.

6. Its reputation is suffering

It seems like a lifetime ago that Facebook was the hot, new startup that engineers were begging to work at (even competing in coding competitions to earn coveted internship spots, if 2010 film “The Social Network” is to be believed). But that glitter has faded post-IPO and, although Facebook remains a force in Silicon Valley hiring, it is starting to run into opposition for the first time in its brief history.

Case in point: App.net founder Dalton Caldwell stirred up controversy earlier this week after he effectively turned down an “acqui-hire” offer from Facebook, in which his startup would be purchased by the social network and then shut down as a way to bring his staff on board.

Caldwell’s very public “thanks, but no thanks” response set off a firestorm of discussion in Silicon Valley, where acqui-hiring is a common and generally accepted part of doing business. But, like his stance or not, the fact remains that there are now developers in California who do not want to work at Facebook, and that’s a new reality for the company.

7. Insiders are selling their stock

More than a few Facebook insiders dumped their stock on the IPO, making millions in the process. That fact alone was not surprising; many of these folks had been waiting for years to cash in on their investments.

But when an IPO goes as badly as Facebook’s did, having a group of investors and senior executives sell their stock at or near the peak price does tend to discourage other buyers. Overall, Facebook’s insiders sold $9.8 billion worth of stock at the IPO, accounting for some 241 million shares, with CEO Mark Zuckerberg taking home a cool $1.14 billion and early Facebook investors Accel Partners selling 57.7 million shares for $2.1 billion.

Had these insiders waited until today to sell, their shares would now be worth less than half what they got, or about $4.8 billion in total. Zuckerberg himself lost $423 million on paper after yesterday’s drop, knocking him out of the top 10 of the richest technology titans.

Facebook Insiders Who Dumped Stock Just Before It Crashed

Timing isn’t everything in life, but it helps.

And now that Facebook’s (FB) stock has been cut in half since its May IPO, which priced at $38 per share, it’s time to compliment the clever folks who sold when everyone else was convinced that playing the Facebook IPO was pretty much a sure thing. Ahead of the IPO I placed fair value for the social media giant somewhere between $16 to $24. Aaron Task and I discuss Facebook’s valuation in the attached clip. (Editor’s note: video was taped August 2.)

At the time of the IPO, of course, these sellers appeared almost selfless: demand for Facebook’s stock was so intense that it seemed the inside sellers would soon look like schmoes for selling too cheap.

Alas, if there’s one lesson that gets repeated endlessly on Wall Street it’s that anything that seems like a free lunch almost certainly isn’t.

And now, the Facebook insiders who sold on the IPO look, well, savvy.

So, who were these folks? How much did they make?

Here are some highlights:

  • Mark Zuckerberg, Facebook’s CEO, sold 30.2 million shares for $1.14 billion
  • Accel Partners, an early Facebook investor, sold 57.7 million shares for $2.1 billion
  • Peter Thiel, a very early Facebook investor, sold 16.8 million shares for $638 million
  • DST Global, a Russian investment fund, sold 45.7 million shares for $1.7 billion
  • Goldman Sachs, a Facebook investor, sold 24.3 million shares for $923 million
  • Elevation Partners, a Facebook investor, sold 4.6 million shares for $175 million
  • Greylock Partners, a Facebook investor, sold 7.6 million shares for $289 million
  • Mail.ru Group, a Russian Internet company, sold 19.6 million shares for $745 million
  • Mark Pincus, the CEO of Zynga, sold 1 million shares for $38 million. Mr. Pincus also dumped stock in Zynga in April, right before that stock crashed.
  • Meritech Capital sold 7 million shares for $266 million
  • Microsoft, a Facebook partner and investor, sold 6.6 million shares for $250 million
  • Tiger Global, a hedge fund, sold 19 million shares for $722 million
  • Reid Hoffman, a Silicon Valley investor, sold 943,000 shares for $36 million

In aggregate, Facebook insiders dumped 241 million shares for $9.8 billion.

Those shares are now worth $4.8 billion.

Yes, all of these Facebook insiders still own a lot of Facebook stock, so they’re all getting gobsmacked by the collapse.

But still…

Nice timing!

Direct TV : Q2 Messy – Target $ 68

DirecTV

DirecTV (Photo credit: Wikipedia)

DirecTV

August 3
DTV : NASDAQ : $48.80  Buy , Target US$68.00

Thesis intact
Summary
DTV 2Q12 results fed the bears’ concerns with greater US sub losses and declining LatAm OPBDA growth.

If it were only so simple. Fortunately for DTV holders, we expect US 3Q12 sub adds will more than offset 2Q’s losses and LatAm 2H12
OPBDA margin will improve. And although DTV’s results were messier than we expected, we believe they are still positioned to generate the best balance of overall customer and OCF growth – all while repurchasing 15-17% of shares per year and trading at a discount to their cable peers (5.0x vs mid 6’s).

Maintain BUY
Highlights
• 3Q12 sub adds likely 150k plus. Should gross adds decline by 10% (in line with mgmt expectation) and churn increase to 1.66% (above 1.62% in 3Q11), net adds would amount to 158k. See table below. While this is below our 180k est, its would assuage concern that DTV has lost its competitive edge.

Helping 3Q sub growth is the Sunday Ticket. With 1.5mm customers taking the NFL package last year, DTV could double the number of typically renewing customers (and renew 200k subscribers) with just half the typical renewal rate (or 15%).
• FY12 US OPBDA likely exceed guidance. With 1H12 US OPBDA up 6.6%, the division could beat guidance by growing 2H12 OCF by just 7.4%. 3Q12 OPBDA growth might amount to below 7.4% due to the extra NBA game in September, but that could be offset in 4Q12. See table on the following page.
• LatAm OPBDA growth of 13-14% appears achievable. With 13.1% 1H12 OPBDA growth, the division needs to grow by 13% to 14.8% to reach FY12 growth of 13-14%, the new, slightly lower guidance. While some of 2Q12’s higher cost structure will continue into 3Q12 (such as the labor for the new call center and Columbia soccer programming costs), others will not, enabling a sequentially higher growth rate.

Time Warner – Waiting For Batman Profits

Warner Bros. Television shield.

Warner Bros. Television shield. (Photo credit: Wikipedia)

Time Warner (TWX : NYSE : US$39.60)

August 2
Time Warner posted a lower Q2 profit as its Warner Bros. movie studio had weaker releases compared with a year ago.

The blockbuster Batman movie “The Dark Knight Rises” didn’t open in theaters until the quarter ended.

While, in the same quarter last year, Time Warner had “The Hangover Part II” in theaters and the next-to-last Harry Potter movie on home video. Net income for the quarter fell to $429 million, or $0.44 a share, compared with $637 million, or $0.59 a share, a year earlier.

Excluding some items, profit of $0.59 a share beat the consensus estimate by a penny. Revenue fell 4% to $6.7 billion. Television networks were strong and represented the largest and most profitable part of the company in the second quarter.

Gains there weren’t enough to offset the declines at Warner Bros. and at the Time Inc. magazine division, which saw sales decline 9%. Looking ahead, Time Warner reaffirmed its outlook for the year. The company said percentage growth in adjusted income should be in the low double digits for the full year as it expects Warner Bros. to do better in the current quarter. It said “The Dark Knight Rises” sold more than $535 million in box office tickets worldwide in the first 10 days, while “Magic Mike,” released just as the second quarter was ending, has sold more than $100 million in tickets in the United States.

Warner Bros., which also produces television shows for CBS and other networks, got orders for 16 returning series and nine new series on U.S. prime-time schedules during the TV season that starts in September.

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