Monday, 18 February 2019 09:37

Google Looks Like a Good Deal

(New York)

Looking for the best big tech stock to buy? Look no further than Google. Alphabet, the parent company of Google, is a better deal than it seems on paper right now. Yes, it is trading for 24x forward earnings, a 50% premium to the S&P, but it has some very strong redeeming qualities. Get this—revenue growth at Google has raged from 21% to 25% per quarter for the last 14 quarters. Further, the important thing about that valuation metric above is that it does not include Google’s massive $105 bn in cash. If you strip that out, along with the loss from its “moonshots” division, and Alphabet is trading at 19x earnings—not bad for a company with that kind of growth! The stock has been beat up lately because of significantly higher spending, which has hurt margins.


FINSUM: Okay, so margins are down a bit, but the c-suite says they are investing for the future. We think this may present a good buying opportunity. We never thought we’d be talking about a FAANG as a value stock!

Published in Eq: Tech
Thursday, 07 February 2019 08:27

The Nasdaq is Already Out of Its Bear Market

(New York)

Here is an eye-opener—all the carnage of December is almost in the rearview mirror for the Nasdaq. The index has just about risen out of its bear market, up 20% from its lows. That is an amazing turnaround from its nadir on December 24th. The index is heavily weighted towards big tech shares and has recently rallied on the back of optimism about improving US-China trade relations and a more dovish Fed.


FINSUM: We like good news, but the rally in the Nasdaq feels like too much too soon!

Published in Eq: Tech
Monday, 04 February 2019 11:15

Why Amazon Won’t Buy FedEx

(Seattle)

There has been a lot of speculation lately, including by FINSUM, that Amazon might buy FedEx. FedEx’s share price could be considered cheap, and it would be a bold and strategic move if Amazon is actually committed to building its logistics business. However, Barron’s is today arguing that Amazon will never buy FedEx. The reasons why are two-fold. The first is that the 10.7x p/e ratio is not actually very cheap, and secondly, because Amazon does not really need FedEx’s capabilities, which have less to do with last mile delivery than they do with “upstream sorting”.


FINSUM: The real question here is whether Amazon wants to build up a logistics business in its own right, not just internal capabilities to serve its ecommerce business. If it does, then it is a smart acquisition. However, it would likely face significant anti-trust hurdles.

Published in Eq: Tech
Wednesday, 30 January 2019 10:11

Amazon Should buy FedEx

(Seattle)

That is an eye-opening thought, is it not? Some investors and analysts are arguing that in light of FedEx’s stock being so beat up, Amazon should swoop in and buy the company. Amazon has been building its logistics operations for years, but buying FedEx could give it a big boost if it wants to become a shipping giant. One analyst summarizes it this way, “FedEx is inexpensive at 10.6x and 6.5x forward price-to-earnings and enterprise value to earnings before interest, taxes, depreciation and amortization multiples, respectively … Amazon could make an accretive acquisition of the best global network for a fraction of the cost of building it themselves”.


FINSUM: As mind-boggling as Amazon owning FedEx sounds, this idea appears quite logical and plausible.

Published in Eq: Tech
Friday, 25 January 2019 09:59

Why It’s a Great Time to Buy Facebook

(San Francisco)

Big tech companies got hit badly in last quarter’s selloff. On top of that broad volatility, Facebook has been going through its own particular troubles, most specifically related to the potential impact of its data leaks. However, all the bearishness may be in the past, and right now could be an excellent time to buy the stock, at least according to Jefferies. “FB’s status as leader in Social is unchanged and we see continued upside for FB shares as it digests the social hangover … FB remains a tier 1 platform for advertising spend with Instagram showing positive drivers of growth”, says the bank’s research team. The big growth driver is Instagram, whose revenue is growing at an estimated 60% annually. “We believe over the course of ’19, shares will slowly re-rate as rev growth & margin outlook become clearer”, says Jefferies.


FINSUM: We would tend to agree with this assessment. Despite all the concerns over data privacy, Facebook still has a very solid underlying business that is growing strongly.

Published in Eq: Tech
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