Tag Archives: ETSY

investment manager

Treasury Secretary Steven Mnuchin asked the White House about the possibility of using a government jet for his European honeymoon this summer but later withdrew the request.

A Treasury Department spokesperson told CNN in a statement that Mnuchin made the request to ensure he had access to secure lines of communication when he and his new wife, Louise Linton, were traveling.

“Treasury withdrew its request after a secure communications option was identified during the Secretary’s extended travel,” the spokesperson said Wednesday.

Treasury said it has a practice of considering a “wide range of options” to ensure Mnuchin has access to secure communications, including the possible use of military aircraft.

The Treasury spokesperson said it was “imperative” that Mnuchin, who is a member of the National Security Council and directly involved with national security issues tied to North Korea, Iran, and Venezuela, could communicate securely.

investment manager: SPDR S&P 500 ETF (SPY)

Advisors’ Opinion:

  • [By Arie Goren]

    Many investors prefer a diversified low-risk portfolio over theriskier strategy of stock-picking. The SPDR S&P 500 ETF Trust (NYSEMKT:SPY) is very popular for this purpose since it follows the S&P 500 index of 500 large cap companies listed on the NYSE or NASDAQ. However, in my opinion, investing in Berkshire (NYSE:BRK.B)stock could achieve the same purpose of diversification with even better results.

  • [By Wayne Duggan]

    The SPDR S&P 500 ETF Trust (NYSE: SPY) is up nearly 19 percent in 2017, and much of the rally has been driven by news out of Washington. According to one Wall Street analyst, there are still plenty of political fireworks to come between now and the end of the year.

  • [By WWW.THESTREET.COM]

    Many ETFs–especially the large diversified ones such as SPDR S&P 500 ETF (SPY) , PowerShares QQQ Trust (QQQ) and iShares Russell 2000 ETF (IWM) –in and of themselves are not dangerous.

  • [By Elizabeth Balboa]

    The SPDR Dow Jones Industrial Average ETF (NYSE: DIA) and the SPDR S&P 500 ETF Trust (NYSE: SPY) plunged 1.2 percent on the news, although it's worth noting that the markets had traded near these values Wednesday before riding a Thursday rally.

investment manager: Stanley Black & Decker Inc.(SWK)

Advisors’ Opinion:

  • [By Lisa Levin] Related TRST Earnings Scheduled For October 21, 2016 Major Accounting Changes Are Coming To The Financial Industry
    Related MORN One Of The World's Most Powerful Women, Fidelity Personal Investing President Kathleen Murphy, To Tell Her Story At The Benzinga Global Fintech Awards The 2017 Benzinga Global Fintech Awards Will Include An 'Unprecedented Group' Of Judges Morningstar Packs Conference Lineup For Financial Advisors (Investor’s Business Daily) Companies Reporting Before The Bell
    Rockwell Collins, Inc. (NYSE: COL) is estimated to report quarterly earnings at $1.31 per share on revenue of $1.33 billion.
    General Electric Company (NYSE: GE) is expected to report quarterly earnings at $0.17 per share on revenue of $26.46 billion.
    Honeywell International Inc. (NYSE: HON) is estimated to report quarterly earnings at $1.60 per share on revenue of $9.32 billion.
    Interpublic Group of Companies Inc (NYSE: IPG) is expected to report quarterly earnings at $0.03 per share on revenue of $1.76 billion.
    Schlumberger Limited. (NYSE: SLB) is estimated to report quarterly earnings at $0.26 per share on revenue of $7.02 billion.
    SunTrust Banks, Inc. (NYSE: STI) is expected to report quarterly earnings at $0.83 per share on revenue of $2.21 billion.
    ManpowerGroup Inc. (NYSE: MAN) is projected to report quarterly earnings at $1.11 per share on revenue of $4.68 billion.
    Kansas City Southern (NYSE: KSU) is estimated to report quarterly earnings at $1.15 per share on revenue of $593.82 million.
    Stanley Black & Decker, Inc. (NYSE: SWK) is projected to report quarterly earnings at $1.19 per share on revenue of $2.74 billion.
    WABCO Holdings Inc. (NYSE: WBC) is estimated to report quarterly earnings at $1.44 per share on revenue of $721.89 million.
  • [By Money Morning Staff Reports]

    Back in January, the company sold its iconic Craftsman brand to Stanley Black & Decker Inc. (NYSE: SWK) for $900 billion, although not all of it was in an upfront payment. Sears will still carry the brand in its stores, but now they must compete with other retailers to make any profit from it. And guess who else carries it now? Amazon.com Inc. (Nasdaq: AMZN). Great for Stanley shareholders, but not so much for Sears shareholders.

  • [By Sean Williams]

    For example, Sears Holdings (NASDAQ:SHLD) has been actively attracting short-sellers in recent months. Sears has been downsizing both its Sears and Kmart locations in an effort to save money, and it’s been parting ways with a couple of its core brands. In January, Sears announced that it was divesting its Craftsman brand to Stanley Black & Decker (NYSE:SWK), which will allow Stanley Black & Decker to get the Craftsman brand into far more department stores than just Sears.

  • [By Lisa Levin]

    Some of the stocks that may grab investor focus today are:

    Wall Street expects Honeywell International Inc. (NYSE: HON) to report quarterly earnings at $1.60 per share on revenue of $9.32 billion before the opening bell. Honeywell shares gained 0.11 percent to $123.91 in after-hours trading.
    Analysts expect General Electric Company (NYSE: GE) to report quarterly earnings at $0.17 per share on revenue of $26.46 billion before the opening bell. General Electric shares gained 1.06 percent to $30.59 in after-hours trading.
    Mattel, Inc. (NASDAQ: MAT) reported weaker-than-expected results for its first quarter on Thursday. Mattel shares dropped 6.78 percent to $23.50 in the after-hours trading session.
    Before the opening bell, Stanley Black & Decker, Inc. (NYSE: SWK) is estimated to report quarterly earnings at $1.19 per share on revenue of $2.74 billion. Stanley Black & Decker shares declined 0.01 percent to $132.70 in after-hours trading.
    Visa Inc (NYSE: V) posted stronger-than-expected results for its first quarter on Thursday. Visa shares rose 2.35 percent to $93.29 in the after-hours trading session.

    Find out what's going on in today's market and bring any questions you have to Benzinga's PreMarket Prep.

  • [By WWW.THESTREET.COM]

    In January, Sears sold its iconic Craftsman tool brand to Stanley Black & Decker (SWK) for just $900 million as one of several desperate attempts to raise cash.

  • [By Rich Duprey]

    The only disappointment here is the latest moves highlight what might have been possible with the Craftsman tool brand had Sears not ended up selling it to Stanley Black & Decker (NYSE:SWK). Although there was some creative thinking involved in the way the deal was structured, giving Sears a percentage of the revenues from Craftsman sales that Stanley generates for the next few years as well as allowing it to also make and sell Craftsman tools for the next decade, it’s a shame Sears had to let the brand go.

investment manager: Entercom Communications Corporation(ETM)

Advisors’ Opinion:

  • [By Peter Graham]

    Small cap radio broadcasting stock Entercom Communications Corp (NYSE: ETM), a potential peer of Emmis Communications Corporation (NASDAQ: EMMS), Saga Communications (NYSEAMERICAN: SGA) and troubled Cumulus Media (NASDAQ: CMLS), is the tenth most shorted stock on the NYSE with short interest of 45.06% according to Highshortnterest.com.

investment manager: Westinghouse Air Brake Technologies Corporation(WAB)

Advisors’ Opinion:

  • [By WWW.MONEYSHOW.COM]

    Westinghouse Air Brake Technologies Corporation (WAB) scores highly based on my Warren Buffett-based model, which is based on the book Buffettology, and also the Peter Lynch-inspired approach that uses the method outlined by Lynch in One Up on Wall Street.

investment manager: Etsy, Inc.(ETSY)

Advisors’ Opinion:

  • [By Brian Withers]

    If investors want to tap into the growing trend of e-commerce and diversify their portfolio beyond Amazon, Shopify (NYSE:SHOP) and Etsy (NASDAQ:ETSY) make the shortlist. Shopify is more a pick-and-shovelplay, as the company hasbuilt a powerful back office platform that essentially enables entrepreneursto run an e-commerce business from their phone. Etsy is a pure play marketplace that focuses on serving the creative entrepreneur. These two companies had similar revenue in 2016, were both started in almost the same year (Etsy 2005, Shopify 2006), and are in the business of helping product-selling entrepreneurs connect to buyers online. Let’s take a deeper dive into these two companies and see which is the better buy.

  • [By Jim Swanson]

    Benzinga's newsdesk monitors options activity to notice unusual patterns. These large volume (and often out of the money) trades were initially published intraday in Benzinga Professional . These trades were placed during Monday’s regular session.

  • [By Jeremy Bowman]

    Shares of craft-focused internet marketplaceEtsy(NASDAQ:ETSY)stumbled last month, falling 12% according to data from S&P Global Market Intelligenceafter a disappointing fourth-quarter report.

Top 10 Warren Buffett Stocks To Watch Right Now

Welcome the newest class of billionaires who have pledged to give the majority of their wealth to philanthropic causes.

Fourteen more billionaires have signed on to the Giving Pledge the initiative created by Bill and Melinda Gates and Warren Buffett in 2010 to help address societys most pressing problems by shifting the social norms of philanthropy toward giving more, giving sooner and giving smarter.

The new signatories plan to use their wealth to support causes focused on poverty alleviation, education, healthcare research, climate change and the environment.

We all have a moral obligation as the more affluent in society to give back as best we know how, MeTL Group CEO Mohammed Dewji of Tanzania said in a statement.

RELATED:

Top 10 Warren Buffett Stocks To Watch Right Now: Etsy, Inc.(ETSY)

Advisors’ Opinion:

  • [By Brian Withers]

    If investors want to tap into the growing trend of e-commerce and diversify their portfolio beyond Amazon, Shopify (NYSE:SHOP) and Etsy (NASDAQ:ETSY) make the shortlist. Shopify is more a pick-and-shovelplay, as the company hasbuilt a powerful back office platform that essentially enables entrepreneursto run an e-commerce business from their phone. Etsy is a pure play marketplace that focuses on serving the creative entrepreneur. These two companies had similar revenue in 2016, were both started in almost the same year (Etsy 2005, Shopify 2006), and are in the business of helping product-selling entrepreneurs connect to buyers online. Let’s take a deeper dive into these two companies and see which is the better buy.

  • [By Jim Swanson]

    Benzinga's newsdesk monitors options activity to notice unusual patterns. These large volume (and often out of the money) trades were initially published intraday in Benzinga Professional . These trades were placed during Monday’s regular session.

  • [By Jeremy Bowman]

    Shares of craft-focused internet marketplaceEtsy(NASDAQ:ETSY)stumbled last month, falling 12% according to data from S&P Global Market Intelligenceafter a disappointing fourth-quarter report.

Top 10 Warren Buffett Stocks To Watch Right Now: Affimed N.V.(AFMD)

Advisors’ Opinion:

  • [By Lisa Levin] Gainers
    Marathon Patent Group Inc (NASDAQ: MARA) shares rose 47.1 percent to $3.22 in pre-market trading after jumping 54.23 percent on Wednesday.
    Digital Power Corporation (NYSE: DPW) rose 27.6 percent to $0.800 in pre-market trading after gaining 9.79 percent on Wednesday.
    Social Reality Inc (NASDAQ: SRAX) shares rose 23.1 percent to $7.16 in the pre-market trading session after surging 37.59 percent on Wednesday.
    China Auto Logistics Inc (NASDAQ: CALA) rose 16.9 percent to $4.15 in pre-market trading after gaining 4.11 percent on Wednesday.
    Riot Blockchain Inc (NASDAQ: RIOT) rose 15.1 percent to $18.40 in pre-market trading after climbing 42.01 percent on Wednesday.
    Seven Stars Cloud Group Inc (NASDAQ: SSC) rose 14.5 percent to $2.85 in the pre-market trading session after gaining 0.40 percent on Wednesday.
    Affimed NV (NASDAQ: AFMD) shares rose 14.3 percent to $2.40 in pre-market trading after gaining 4.88 percent on Wednesday.
    Corecivic Inc (NYSE: CXW) rose 10.2 percent to $25.56 in pre-market trading after climbing 0.65 percent on Wednesday.
    LM Funding America, Inc. (NASDAQ: LMFA) rose 9.6 percent to $3.30 in pre-market trading after surging 34.98 percent on Wednesday.
    U.S. Global Investors, Inc. (NASDAQ: GROW) rose 7.2 percent to $3.30 in pre-market trading after dropping 8.06 percent on Wednesday.
    Xunlei Ltd (NASDAQ: XNET) rose 6.8 percent to $25.61 in pre-market trading after climbing 11.74 percent on Wednesday.
    Net 1 UEPS Technologies Inc (NASDAQ: UEPS) shares rose 5.9 percent to $13.00 in pre-market trading after gaining 21.34 percent on Wednesday.
    Addus Homecare Corporation (NASDAQ: ADUS) rose 5.5 percent to $35.60 in pre-market trading after gaining 3.69 percent on Wednesday.
    TOP SHIPS Inc (NASDAQ: TOPS) rose 5.2 percent to $0.528 in pre-market trading after falling 10.36 percent on Wednesday.
    Teva Pharmaceutical Industries Ltd (ADR) (NYSE: TEVA) rose 4.7 percent to $14.11 in pre-market trading. Teva Pharma
  • [By Lisa Levin]

    Shares of Affimed NV (NASDAQ: AFMD) were down around 21 percent to $1.70. Affimed priced its public offering of 10,000,000 of its common shares at $1.80 per common share.

Top 10 Warren Buffett Stocks To Watch Right Now: Methanex Corporation(MEOH)

Advisors’ Opinion:

  • [By Jim Robertson]

    Back in February of last year, we suggested Methanex Corporation (MEOH), which ended up providing us with some pretty good gains in a fairly short amount of time, and based on what’s happening with the stock technically right now, it could be another gainer over the next several days to few weeks.

Top 10 Warren Buffett Stocks To Watch Right Now: Brookfield Renewable Powerr Fund(BEP)

Advisors’ Opinion:

  • [By Federico Zaldua]

    I expect the Brookfield Group of Companies, which is composed of no fewer than 15 publicly traded entities, to be very active acquisitive in the near-term future. Here I focus my attention on three members of the Brookfield Group that are going to be the most active with M&A. While Brookfield Asset Management (BAM) will concentrate its M&A efforts into all geographies and all asset classes, Brookfield Renewable Energy Partners (BEP) and Brookfield Infrastructure Partners (BIP) will concentrate on their respective industries. Let’s see whether you should go long on any of this separate -although related – entities.

    Good Operational Performance

    Brookfield Asset Management, held by Lou Simpson and Ron Baron, counts with a liquidity position of more than $5 billion at the parent and principal subsidiaries along with nearly $10 billion drawable private fund commitments. More importantly, the company has expressed its interest into using this liquidity to make acquisitions. Management clearly stated in its letter to shareholders:

Top 10 Warren Buffett Stocks To Watch Right Now: Endologix, Inc.(ELGX)

Advisors’ Opinion:

  • [By Lisa Levin]

    Endologix, Inc. (NASDAQ: ELGX) shares dropped 23 percent to $7.59 as the company issued an update on Nellix PMA process. Endologix disclosed that the FDA has requested the company to provide a two-year patient follow-up data from the EVAS-FORWARD IDE study of Nellix System.

  • [By Paul Ausick]

    Endologix Inc. (NASDAQ: ELGX) dropped about 9.3% on Wednesday to post a new 52-week low of $4.78 against a 52-week high of $14.50 and a Tuesday close of $5.27. Volume of about 6 million was more than 3 times the daily average of around 1.7 million. The company on Tuesday announced a temporary shipping hold on its best-selling heart device, saying there was a manufacturing issue.

Top 10 Warren Buffett Stocks To Watch Right Now: Antares Pharma, Inc.(ATRS)

Advisors’ Opinion:

  • [By Lisa Levin]

    In trading on Friday, healthcare shares fell 0.32 percent. Meanwhile, top losers in the sector included Antares Pharma Inc (NASDAQ: ATRS), down 38 percent, and Infinity Pharmaceuticals Inc. (NASDAQ: INFI) down 16 percent.

Top 10 Warren Buffett Stocks To Watch Right Now: Check Point Software Technologies Ltd.(CHKP)

Advisors’ Opinion:

  • [By Harsh Chauhan]

    But is it a good idea to buy FireEye based on this one incident, despite its huge losses, or should investors look at Check Point Software Technologies(NASDAQ:CHKP), given its focus on growing its bottom line? Let’s find out.

  • [By Jayson Derrick]

    It is unclear which company or companies will benefit from this executive order. But that isn’t stopping investors from placing their bets as most cybersecurity stocks were trading higher during Friday’s trading session; at the same time, the Dow Jones Industrial Average and S&P 500 index were trading in the red.

    Shares of Barracuda Networks Inc (NYSE: CUDA) were trading higher by 2.98 percent at $21.77. Shares of Check Point Software Technologies Ltd. (NASDAQ: CHKP) were trading higher by 1.21 percent at $107.00. Shares of FireEye Inc (NASDAQ: FEYE) were trading higher by 0.70 percent at $14.55. Shares of Palo Alto Networks Inc (NYSE: PANW) were trading higher by 0.62 percent at $115.86.

    Related Links:

  • [By WWW.THESTREET.COM]

    Turning Around Cybersecurity Through Activism
    As competition climbs and spending slows, security has attracted activists. (FEYE) (IMPV) (FTNT) (CHKP) Full story

Top 10 Warren Buffett Stocks To Watch Right Now: National Health Investors, Inc.(NHI)

Advisors’ Opinion:

  • [By Monica Gerson]

    National Health Investors Inc (NYSE: NHI) is expected to post its quarterly earnings at $1.17 per share on revenue of $57.82 million.

    Berkshire Hathaway Inc. (NYSE: BRK.B) is projected to post its quarterly earnings at $1.75 per share.

Top 10 Warren Buffett Stocks To Watch Right Now: Unilife Corporation(UNIS)

Advisors’ Opinion:

  • [By Lisa Levin]

    Unilife Corp (NASDAQ: UNIS) shares dropped 76 percent to $0.295. Unilife reduced its workforce by 51 employees and expects to record charge of $0.6 million.

Top 10 Warren Buffett Stocks To Watch Right Now: SCIENCE APPLICATIONS INTERNATIONAL CORPORATION(SAIC)

Advisors’ Opinion:

  • [By Monica Gerson]

    Wall Street expects Science Applications International Corp (NYSE: SAIC) to report its quarterly earnings at $0.74 per share on revenue of $1.15 billion. SAIC shares gained 0.96 percent to $57.87 in after-hours trading.

  • [By Monica Gerson]

    Science Applications International Corp (NYSE: SAIC) is estimated to report its quarterly earnings at $0.74 per share on revenue of $1.15 billion.

Sea: Not The Quarter We Were Looking For

I’ve never understood why any investors were particularly excited about the Sea (NYSE: SE) IPO, the Singapore-based internet platform that operates a digital gaming platform and distributes League of Legends in Southeast Asia (its biggest source of revenues), an e-commerce platform that has yet to generate significant revenue, and a burgeoning digital wallet/payments product that’s akin to Southeast Asia’s PayPal (NASDAQ: PYPL). The company got a kick earlier this month when the quiet period expired and Wall Street started doling out praises for the company. Most notably, Goldman Sachs (NYSE: GS) came out in full cheerleader mode for the company, setting a $22 price target; though we also have to note Goldman was lead left bookrunner on the IPO and we have to take its word with a bit (or a lot) of salt.

Yes, the company operates in some of the largest “tiger economy” countries in the world – but what happens when its games stop becoming popular? The teenagers that make up the majority of Sea’s fan base undoubtedly have changing tastes, and if they stop buying the virtual items that provide ~85% of Sea’s revenue, the company is lost. With net margins worse than -100% and losses doubling y/y, it’s not clear whether this company has a path to sustained growth.

At Sea’s current market cap of $4.5 billion, it’s valued at ~33% more than Zynga (NASDAQ: ZNGA), which has a market cap of $3.5 billion. Zynga has twice the revenue base of Sea and grew revenues by 23% in its most recent quarter, after a period of struggling with decline; and it also started turning profits in Q2 of this year. While I wouldn’t recommend either company, if you must buy a gaming company, at least go for Zynga.

Chart
SE data by YCharts

As seen from the chart above, Sea has started to slip from its IPO at the $15 handle. Practically the only positive factor supporting the stock’s valuation is the company’s exposure to Greater Southeast Asia (GSEA), but with the Sea’s rather poor execution, it may hardly matter. As I wrote in my initial article, it’s important for the company to show revenue diversification beyond gaming. If it’s going to aspire to be the Alibaba (NYSE: BABA) of GSEA, then it had better start showing monetization in e-commerce and payments – not just GMV increases. Q3, despite posting $3.2 million in revenues in the e-commerce segment for the first time, showed no meaningful progress in this regard as it’s still a tiny portion of the company’s overall revenues.

Continue to stay away from Sea. Better internet/e-commerce companies to invest in include PayPal (NASDAQ: PYPL), Etsy (NASDAQ: ETSY), and Stitch Fix (NASDAQ: SFIX). I doubt it’ll be long before Sea slips below $10, and even then at a $3 billion market cap, it’s still overvalued.

Q3 recap

Let’s take a closer look at Sea’s Q3, its first earnings release since going public (also note that usually, a poor reaction to the first earnings release is a terrible indicator for IPO momentum).

Figure 1. Sea Q3 revenues
Source: Sea Q3 earnings release

As seen in the chart above, taken from Sea’s Q3 earnings release, Digital Entertainment still commanded the lion’s share of business in Q3, with 85% of revenues (though this is down from 95% in the year-ago quarter). Total gaming revenues actually declined 7% y/y, however, to $79.8 million – illustrating just how risky it is to tether an entire business to online gaming.

Digital gaming’s gross margin also fell considerably to 30% in the quarter, down from 46% in the prior-year quarter. As a distributor, Sea doesn’t own the creative rights to games like League of Legends, and it’s subject to higher licensing fees by content creators. The entertainment industry as a whole is placing greater emphasis on content, which underpins Netflix’s (NASDAQ: NFLX) multi-billion dollar investment into Netflix Originals and deals like AT&T’s (NYSE: T) bid for Time Warner and Disney (NYSE: DIS) and Verizon’s (NASDAQ: VZ) interest in Fox (NYSE: FOXA). Even though Sea is in a slightly different industry and a continent away, the fundamental rules still apply: it’s the content owners that call the shots, not the distributors. While it’s too early to call Sea’s margin decline a sustained trend, the lack of real control over its margins will always be a risk.

Sea’s earnings release highlights billings growth instead of its rather lackluster revenue growth. This is a metric more commonly associated with enterprise software companies, calculated by adding the change in deferred revenues to revenue in any given quarter. Sea’s in-game items and virtual currency sales, as a refresher, are accounted for as deferred revenue on the balance sheet and are recognized as revenue as the items expire. Total billings grew 73% y/y to $151.7 million (also a 21% sequential growth rate from Q2), so this marks somewhat of a bright spot, but still doesn’t excuse the poor revenue growth seen in Q2.

In Sea’s “Other” segment – which accounts for its e-commerce (Shoppee) and financial services (AirPay) products, revenue grew 3x to $14.3 million, but at only 15% of the total revenue base, it’s still an insignificant contribution to Sea as a whole. Consider especially that this line of business has a negative gross margin – its cost of revenue is $27.7 million to produce $14.3 million of revenue, indicating nearly a -200% gross margin.

In “high growth mode,” profitability is less important – it’s forgivable if the company operates at a loss. But gross margin, at least, should be positive – especially for an internet business with few raw inputs beyond server costs and customer support bills.

The company finally started showing revenue in e-commerce ($3.2 million) that didn’t exist in the prior year quarter, but at such poor margins, investors can hardly be blamed for being less than enthusiastic.

Overall, the company produced a net loss of -$132.8 million in the quarter, approximately double 3Q16’s loss of -$65.6 million. A quick note here: most tech IPOs typically show large net losses due to stock comp; their pro forma earnings figures are a lot less scary when you add back these non-cash charges. Sea, however, has minimal stock-based comp expenses ($5.7 million), so its adjusted loss is still a frighteningly high figure, -$127.1 million.

Based even on its adjusted figure, Sea posted a -135% net margin and a per-share net loss of -$0.75. Not a company I’d want to bet my portfolio on.

60-second summary

Sea operates an oddball mix of businesses: gaming, e-commerce, and digital financial services. The latter two have much more synergy and are much more promising in the longer term, but at only 15% of the current revenue base, even hopeful investors have to agree that these businesses are years away from achieving meaningful scale.

Thus we have to look at Sea as a gaming business – an industry that’s notoriously fickle and prone to fads. In particular, what we saw in Q3 – declining revenues (despite billings growth) and contracting margins – sends out a scary signal for long investors in Sea. The company’s main revenue engine is seeing signs of weakness while its burgeoning e-commerce and fintech businesses are creating massive losses. At some point, it’s worth asking whether or not it’s realistic for a company like Sea to fulfill its vision of becoming GSEA’s Alibaba before running out of cash. More than likely, other Asian internet conglomerates (and there are plenty) will rush in to claim the market and knock Sea down to its heels. And with Sea’s gaming business weighing down the company with its lack of proprietary content and shrinking margins, I don’t really see Sea as an M&A target either.

Continue to avoid Sea – the limited support the stock has seen since going public will erode soon enough. There are better internet companies to invest in.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, IPO Analysis, Technology, Multimedia & Graphics Software, SingaporeWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here

Top 10 Undervalued Stocks For 2018

The Economist has a nice piece which highlights the fundamental conflict at the heart of Bitcoin. Miners want the price of bitcoin to keep on rising, because this gives them an incentive to keep mining despite the ever-rising energy cost of doing so. Users, however, want liquidity. They want transactions settled quickly and efficiently, at low cost.

Why is this a conflict, you ask? Simple. It is in the miners’ interests to restrict liquidity in the system, because doing so raises their returns. Liquidity is undervalued in the Bitcoin system – hence the hard cap on issuance and designed-in capacity limitations. So there is a clear incentive to hoard. Keeping bitcoins out of circulation pushes up the price at the expense of liquidity, which pleases the miners at the expense of the users.

Shutterstock

Top 10 Undervalued Stocks For 2018: CVR Energy Inc.(CVI)

Advisors’ Opinion:

  • [By Robert Rapier]

    CVR Partners’ fertilizer plant is located in Coffeyville, Kansas, adjacent to the refinery owned by CVR Refining (NYSE: CVRR). CVR Energy (NYSE: CVI), majority-owned by Carl Icahn via Icahn Enterprises (NYSE: IEP), is the general partner and owns most of the units for both CVR Partners and CVR Refining.

  • [By elliottwave]

    CVR Energy, Inc. (NYSE: CVI) is currently correcting the bullish 5 waves cycle from November 2016 low as a triple three structure reaching equal legs area $20.48 – $19.56 . The move can extend lower toward the 50-61.8 percent Fibonacci area ( $18.98 – $17.34 ) as a double three but will remain supported as the stock is still looking for a move higher toward at least $31 to finish 3 waves correcting 2014 cycle. If the stock fails to make new highs after bouncing from the current inflection area , then the pullback can extend lower against $12.03 low which should hold to allow CVI to the resume higher later on

Top 10 Undervalued Stocks For 2018: HCP, Inc.(HCP)

Advisors’ Opinion:

  • [By Matthew Frankel]

    Healthcare REIT HCP, Inc. (NYSE:HCP) had an eventful 2016. The year started off quite turbulent, with dismal results from the company’s HCR ManorCare properties leading to a surprise loss, but recovered nicely as the company decided to spin off those and other troubled assets. What could be in store for HCP investors in the coming decade?

  • [By WWW.KIPLINGER.COM]

    HCP, Inc. (HCP) is a REIT that focuses on senior housing facilities and other healthcare properties.

    With a yield of 5.8%, HCP is the highest yielder of all the aristocrat dividend stocks. HCP has upped its payout for 30 straight years and now pays 57.5 cents per unit quarterly.

  • [By Matthew Frankel]

    One smart way to capitalize on this trend over the next few decades is with a healthcare REIT like HCP (NYSE:HCP), which specializes in private-pay senior housing, medical office, and life science properties.

Top 10 Undervalued Stocks For 2018: Berjaya Sports Toto Berhad (BJSAF)

Advisors’ Opinion:

  • [By SEEKINGALPHA.COM]

    Listed on the Malaysian Bursa and also traded over the US OTC markets (OTCPK:BJSAF), Berjaya Sports Toto (BToto) is a Malaysian company primarily engaged in toto betting, leasing of online lottery equipment, and the manufacture and distribution of computerized lottery and voting systems. As part of its diversification plans, BToto also operates a hotel in the Philippines and retails luxury motor brands in the UK.

Top 10 Undervalued Stocks For 2018: Crescent Point Energy Corp (16)

Advisors’ Opinion:

  • [By Kana Nishizawa]

    China Coal Energy Co., the countrys second-largest producer of the fuel, sank 3.1 percent after the government said it will cut coal consumption. Sun Hung Kai Properties Ltd. (16), the worlds second-biggest developer, fell 1.4 percent after trimming its sales target. Gold producers led materials companies lower as the precious metal headed for its steepest weekly loss since June amid expectations the U.S. Federal Open Market Committee will next week decide to reduce stimulus.

Top 10 Undervalued Stocks For 2018: American Assets Trust, Inc.(AAT)

Advisors’ Opinion:

  • [By Markus Aarnio]

    Owens Realty Mortgage’s competitors include American Assets Trust (AAT), Alexandria Real Estate Equities (ARE) and Boston Properties (BXP). American Assets Trust has seen five insider buy transactions and four insider sell transactions this year. American Assets Trust has a dividend yield of 2.78%. Alexandria Real Estate Equities has seen 14 insider sell transactions this year. Alexandria Real Estate Equities has a dividend yield of 4.10%. Boston Properties has seen one insider buy transaction and four insider sell transactions this year. Boston Properties has a dividend yield of 2.43%.

Top 10 Undervalued Stocks For 2018: Pinnacle Entertainment Inc.(PNK)

Advisors’ Opinion:

  • [By Ben Levisohn]

    Pinnacle Entertainment (PNK) has gained 56% this year; Las Vegas Sands (LVS) has climbed 38%. And Deutsche Bank has nice things to say about both today.

    Bloomberg

    First Pinnacle. Deutsche Bank’s Carlo Santarelli ponders the stock’s big move and comes away still seeing value in its shares. He writes:

    When we upgraded PNK in April, our thesis centered on the FCF strength of the combined entities [Pinnacle completed its acquisition of Ameristar Casinos on Aug. 14], a handful of favorable catalysts, easing regional gaming comps, & an inexpensive relative valuation. Given the shares’ sizeable move since then, we believe it is worth revisiting the investment case. Post the announcement of several asset sales and the closing of the transaction, we are adjusting our estimates, raising our PT to $30 from $24, and maintaining our bullish view at current levels given what we still believe to be an attractive free cash flow valuation, meaningful potential synergy realization beyond the $40 mm of announced benefits, and a free option on a lagging regional recovery.

    Santarelli also revisited Las Vegas Sands and there too, he likes what he sees. He writes:

    With…LVS at [a share price level] that have been challenging to break from over the last year plus, we believe this time is different and hence we see continued upward momentum…In the case of LVS, we see; 1) meaningful mass market strength continuing through year end, setting the stage for upward company and market estimate revisions for 2014, 2) continued cash flow appreciation and capital returns serving as downside protection and positive catalysts, and 3) continued shared gains, largely driven by table optimization and mass market strength, driving both estimates and sentiment.

    He also likes Wynn Resorts (WYNN), despite its 34% gain.Santarelli writes:

    As for WYNN, we believe near-term estimates continue to take a back seat to capital return

Top 10 Undervalued Stocks For 2018: Texas Roadhouse, Inc.(TXRH)

Advisors’ Opinion:

  • [By Jon C. Ogg]

    Texas Roadhouse Inc. (NASDAQ: TXRH) was raised to Buy from Neutral at BTIG Research.

    USG Corp. (NYSE: USG) was reiterated as Hold but the price target was raised to $35 from $29 (versus a $34.23 close) at Jefferies.

  • [By Demitrios Kalogeropoulos]

    As for individual stocks, Texas Roadhouse (NASDAQ:TXRH) and Garmin (NASDAQ:GRMN)made large moves following their quarterly earnings announcements.

  • [By Teresa Rivas]

    Texas Roadhouse(TXRH) tumbled more than 12% on Wednesday as itsfourth-quarter earningsand revenue fell short of expectations.

    Pixabay

    The restaurant chain said it earned 29 cents a share on revenue of $484.7 million. Analysts were expecting earnings per share of 38 cents on revenue of $497.3 million.

    Same-restaurant sales grew 1.2% at company restaurants and 2% at domestic franchises. For the first 55 days of the first quarter, Texas Roadhouse said that same-store sales rose 1.5%.

    The company also raised its dividend 10.5% to 21 cents a share.

    Some analysts urged investors to keep the faith in the stock.Barclay’s JeffreyBernsteinreiterated an Overweight rating and $47 price target on thestock:

    We believe TXRH fundamentals remain best-in-class. That said, the near-term focus remains on directional comps. And not unlike the broader industry, TXRH comps eased significantly to close 2016. Such led to disappointing 4Q16 results from top to bottom. Importantly, while the brand ‘is not immune’ to industry comp headwinds, the relative outperformance to the category was maintained. Looking to 2017, key guidance metrics were reiterated. While questions remain on whether the recent easing of industry comps will persist, we remain comforted by TXRH’s relative outperformance and easing comps as we move through 2017.

    Maxim’s Stephen Andersonreiterated a Buy rating, although he took his price target down $4, to $52:

    In our view, TXRH is not immune to the broader slowdown in Casual Dining, but we believe the company will emerge stronger than peers in the next few quarters.TXRHs disappointing 4Q16 comp of +1.3% (blended) was pulled down by a rare negative comp month in December (-2.1%), marking the first time this occurred in almost four years. Comps were +3% or better in both October and November, and comps so far in 1Q17 are positive despite a stormy start to the quarter in

  • [By Dan Caplinger]

    Steakhouse chain Texas Roadhouse (NASDAQ:TXRH) has had to deal with an extremely difficult business environment for restaurant companies, and investors know all too well how tough times can hurt major players in the industry. Last quarter, Texas Roadhouse disappointed investors with sluggish results, and the company wanted to start 2017 on a better footing.

Top 10 Undervalued Stocks For 2018: Etsy, Inc.(ETSY)

Advisors’ Opinion:

  • [By Jim Swanson]

    Benzinga's newsdesk monitors options activity to notice unusual patterns. These large volume (and often out of the money) trades were initially published intraday in Benzinga Professional . These trades were placed during Monday’s regular session.

  • [By Jeremy Bowman]

    Shares of craft-focused internet marketplaceEtsy(NASDAQ:ETSY)stumbled last month, falling 12% according to data from S&P Global Market Intelligenceafter a disappointing fourth-quarter report.

  • [By Brian Withers]

    If investors want to tap into the growing trend of e-commerce and diversify their portfolio beyond Amazon, Shopify (NYSE:SHOP) and Etsy (NASDAQ:ETSY) make the shortlist. Shopify is more a pick-and-shovelplay, as the company hasbuilt a powerful back office platform that essentially enables entrepreneursto run an e-commerce business from their phone. Etsy is a pure play marketplace that focuses on serving the creative entrepreneur. These two companies had similar revenue in 2016, were both started in almost the same year (Etsy 2005, Shopify 2006), and are in the business of helping product-selling entrepreneurs connect to buyers online. Let’s take a deeper dive into these two companies and see which is the better buy.

Top 10 Undervalued Stocks For 2018: Toro Company (The)(TTC)

Advisors’ Opinion:

  • [By WWW.THESTREET.COM]

    In his “Homework” segment, Cramer followed up on a few stocks that had stumped him during earlier shows. He said that he’s taking a pass on Toro (TTC) , a stock that’s just off its highs and trades at a premium to rival Deere & Company (DE) .

  • [By Mitchell Clark]

     The Toro Company (NYSE:TTC) is one of my favorite small-caps for medium- to long-term investors. Selling specialized equipment for turf management and other industries, Toro is a proven winner that has provided very consistent growth in sales and earnings over the years.

    It’s not the fastest growing small-cap business, but it pays a decent dividend and has a loyal customer base in the golf course and contractor markets.

    Toro is now offering sprinkler refit equipment for water-starved jurisdictions like California. This company’s share price performance has been exemplary.

Top 10 Undervalued Stocks For 2018: Varex Imaging Corporation (VREX)

Advisors’ Opinion:

  • [By Ben Levisohn]

    Varex Imaging (VREX), a stock that wasn’t even in the index yesterday, soared to the top of the S&P 500 today after being spun out of Varian Medical Systems (VAR).

    Agence France-Presse/Getty Images

    Varex Imaging gained 7.3% to $27.27 today, while the S&P 500 declined 0.6% to2,280.90. Varian Medical Systems fell 1.2% to $77.68.

    Varian Medical Systems reported net income of $402 million on sales of $3.2 billion in 2016.

  • [By Jim Robertson]

    Small cap homeland security and screening stocks like FLIR Systems (NASDAQ: FLIR), OSI Systems (NASDAQ: OSIS),Varex Imaging Corp (NASDAQ: VREX) and Patriot One Technologies (OTCQB: PTOTF) stand to benefit fromTrumps focus on border andinternal security in general. Heres what you need to know about all four:

Sea: Not The Quarter We Were Looking For

I’ve never understood why any investors were particularly excited about the Sea (NYSE: SE) IPO, the Singapore-based internet platform that operates a digital gaming platform and distributes League of Legends in Southeast Asia (its biggest source of revenues), an e-commerce platform that has yet to generate significant revenue, and a burgeoning digital wallet/payments product that’s akin to Southeast Asia’s PayPal (NASDAQ: PYPL). The company got a kick earlier this month when the quiet period expired and Wall Street started doling out praises for the company. Most notably, Goldman Sachs (NYSE: GS) came out in full cheerleader mode for the company, setting a $22 price target; though we also have to note Goldman was lead left bookrunner on the IPO and we have to take its word with a bit (or a lot) of salt.

Yes, the company operates in some of the largest “tiger economy” countries in the world – but what happens when its games stop becoming popular? The teenagers that make up the majority of Sea’s fan base undoubtedly have changing tastes, and if they stop buying the virtual items that provide ~85% of Sea’s revenue, the company is lost. With net margins worse than -100% and losses doubling y/y, it’s not clear whether this company has a path to sustained growth.

At Sea’s current market cap of $4.5 billion, it’s valued at ~33% more than Zynga (NASDAQ: ZNGA), which has a market cap of $3.5 billion. Zynga has twice the revenue base of Sea and grew revenues by 23% in its most recent quarter, after a period of struggling with decline; and it also started turning profits in Q2 of this year. While I wouldn’t recommend either company, if you must buy a gaming company, at least go for Zynga.

Chart
SE data by YCharts

As seen from the chart above, Sea has started to slip from its IPO at the $15 handle. Practically the only positive factor supporting the stock’s valuation is the company’s exposure to Greater Southeast Asia (GSEA), but with the Sea’s rather poor execution, it may hardly matter. As I wrote in my initial article, it’s important for the company to show revenue diversification beyond gaming. If it’s going to aspire to be the Alibaba (NYSE: BABA) of GSEA, then it had better start showing monetization in e-commerce and payments – not just GMV increases. Q3, despite posting $3.2 million in revenues in the e-commerce segment for the first time, showed no meaningful progress in this regard as it’s still a tiny portion of the company’s overall revenues.

Continue to stay away from Sea. Better internet/e-commerce companies to invest in include PayPal (NASDAQ: PYPL), Etsy (NASDAQ: ETSY), and Stitch Fix (NASDAQ: SFIX). I doubt it’ll be long before Sea slips below $10, and even then at a $3 billion market cap, it’s still overvalued.

Q3 recap

Let’s take a closer look at Sea’s Q3, its first earnings release since going public (also note that usually, a poor reaction to the first earnings release is a terrible indicator for IPO momentum).

Figure 1. Sea Q3 revenues
Source: Sea Q3 earnings release

As seen in the chart above, taken from Sea’s Q3 earnings release, Digital Entertainment still commanded the lion’s share of business in Q3, with 85% of revenues (though this is down from 95% in the year-ago quarter). Total gaming revenues actually declined 7% y/y, however, to $79.8 million – illustrating just how risky it is to tether an entire business to online gaming.

Digital gaming’s gross margin also fell considerably to 30% in the quarter, down from 46% in the prior-year quarter. As a distributor, Sea doesn’t own the creative rights to games like League of Legends, and it’s subject to higher licensing fees by content creators. The entertainment industry as a whole is placing greater emphasis on content, which underpins Netflix’s (NASDAQ: NFLX) multi-billion dollar investment into Netflix Originals and deals like AT&T’s (NYSE: T) bid for Time Warner and Disney (NYSE: DIS) and Verizon’s (NASDAQ: VZ) interest in Fox (NYSE: FOXA). Even though Sea is in a slightly different industry and a continent away, the fundamental rules still apply: it’s the content owners that call the shots, not the distributors. While it’s too early to call Sea’s margin decline a sustained trend, the lack of real control over its margins will always be a risk.

Sea’s earnings release highlights billings growth instead of its rather lackluster revenue growth. This is a metric more commonly associated with enterprise software companies, calculated by adding the change in deferred revenues to revenue in any given quarter. Sea’s in-game items and virtual currency sales, as a refresher, are accounted for as deferred revenue on the balance sheet and are recognized as revenue as the items expire. Total billings grew 73% y/y to $151.7 million (also a 21% sequential growth rate from Q2), so this marks somewhat of a bright spot, but still doesn’t excuse the poor revenue growth seen in Q2.

In Sea’s “Other” segment – which accounts for its e-commerce (Shoppee) and financial services (AirPay) products, revenue grew 3x to $14.3 million, but at only 15% of the total revenue base, it’s still an insignificant contribution to Sea as a whole. Consider especially that this line of business has a negative gross margin – its cost of revenue is $27.7 million to produce $14.3 million of revenue, indicating nearly a -200% gross margin.

In “high growth mode,” profitability is less important – it’s forgivable if the company operates at a loss. But gross margin, at least, should be positive – especially for an internet business with few raw inputs beyond server costs and customer support bills.

The company finally started showing revenue in e-commerce ($3.2 million) that didn’t exist in the prior year quarter, but at such poor margins, investors can hardly be blamed for being less than enthusiastic.

Overall, the company produced a net loss of -$132.8 million in the quarter, approximately double 3Q16’s loss of -$65.6 million. A quick note here: most tech IPOs typically show large net losses due to stock comp; their pro forma earnings figures are a lot less scary when you add back these non-cash charges. Sea, however, has minimal stock-based comp expenses ($5.7 million), so its adjusted loss is still a frighteningly high figure, -$127.1 million.

Based even on its adjusted figure, Sea posted a -135% net margin and a per-share net loss of -$0.75. Not a company I’d want to bet my portfolio on.

60-second summary

Sea operates an oddball mix of businesses: gaming, e-commerce, and digital financial services. The latter two have much more synergy and are much more promising in the longer term, but at only 15% of the current revenue base, even hopeful investors have to agree that these businesses are years away from achieving meaningful scale.

Thus we have to look at Sea as a gaming business – an industry that’s notoriously fickle and prone to fads. In particular, what we saw in Q3 – declining revenues (despite billings growth) and contracting margins – sends out a scary signal for long investors in Sea. The company’s main revenue engine is seeing signs of weakness while its burgeoning e-commerce and fintech businesses are creating massive losses. At some point, it’s worth asking whether or not it’s realistic for a company like Sea to fulfill its vision of becoming GSEA’s Alibaba before running out of cash. More than likely, other Asian internet conglomerates (and there are plenty) will rush in to claim the market and knock Sea down to its heels. And with Sea’s gaming business weighing down the company with its lack of proprietary content and shrinking margins, I don’t really see Sea as an M&A target either.

Continue to avoid Sea – the limited support the stock has seen since going public will erode soon enough. There are better internet companies to invest in.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, IPO Analysis, Technology, Multimedia & Graphics Software, SingaporeWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here

Sea: Not The Quarter We Were Looking For

I’ve never understood why any investors were particularly excited about the Sea (NYSE: SE) IPO, the Singapore-based internet platform that operates a digital gaming platform and distributes League of Legends in Southeast Asia (its biggest source of revenues), an e-commerce platform that has yet to generate significant revenue, and a burgeoning digital wallet/payments product that’s akin to Southeast Asia’s PayPal (NASDAQ: PYPL). The company got a kick earlier this month when the quiet period expired and Wall Street started doling out praises for the company. Most notably, Goldman Sachs (NYSE: GS) came out in full cheerleader mode for the company, setting a $22 price target; though we also have to note Goldman was lead left bookrunner on the IPO and we have to take its word with a bit (or a lot) of salt.

Yes, the company operates in some of the largest “tiger economy” countries in the world – but what happens when its games stop becoming popular? The teenagers that make up the majority of Sea’s fan base undoubtedly have changing tastes, and if they stop buying the virtual items that provide ~85% of Sea’s revenue, the company is lost. With net margins worse than -100% and losses doubling y/y, it’s not clear whether this company has a path to sustained growth.

At Sea’s current market cap of $4.5 billion, it’s valued at ~33% more than Zynga (NASDAQ: ZNGA), which has a market cap of $3.5 billion. Zynga has twice the revenue base of Sea and grew revenues by 23% in its most recent quarter, after a period of struggling with decline; and it also started turning profits in Q2 of this year. While I wouldn’t recommend either company, if you must buy a gaming company, at least go for Zynga.

Chart
SE data by YCharts

As seen from the chart above, Sea has started to slip from its IPO at the $15 handle. Practically the only positive factor supporting the stock’s valuation is the company’s exposure to Greater Southeast Asia (GSEA), but with the Sea’s rather poor execution, it may hardly matter. As I wrote in my initial article, it’s important for the company to show revenue diversification beyond gaming. If it’s going to aspire to be the Alibaba (NYSE: BABA) of GSEA, then it had better start showing monetization in e-commerce and payments – not just GMV increases. Q3, despite posting $3.2 million in revenues in the e-commerce segment for the first time, showed no meaningful progress in this regard as it’s still a tiny portion of the company’s overall revenues.

Continue to stay away from Sea. Better internet/e-commerce companies to invest in include PayPal (NASDAQ: PYPL), Etsy (NASDAQ: ETSY), and Stitch Fix (NASDAQ: SFIX). I doubt it’ll be long before Sea slips below $10, and even then at a $3 billion market cap, it’s still overvalued.

Q3 recap

Let’s take a closer look at Sea’s Q3, its first earnings release since going public (also note that usually, a poor reaction to the first earnings release is a terrible indicator for IPO momentum).

Figure 1. Sea Q3 revenues
Source: Sea Q3 earnings release

As seen in the chart above, taken from Sea’s Q3 earnings release, Digital Entertainment still commanded the lion’s share of business in Q3, with 85% of revenues (though this is down from 95% in the year-ago quarter). Total gaming revenues actually declined 7% y/y, however, to $79.8 million – illustrating just how risky it is to tether an entire business to online gaming.

Digital gaming’s gross margin also fell considerably to 30% in the quarter, down from 46% in the prior-year quarter. As a distributor, Sea doesn’t own the creative rights to games like League of Legends, and it’s subject to higher licensing fees by content creators. The entertainment industry as a whole is placing greater emphasis on content, which underpins Netflix’s (NASDAQ: NFLX) multi-billion dollar investment into Netflix Originals and deals like AT&T’s (NYSE: T) bid for Time Warner and Disney (NYSE: DIS) and Verizon’s (NASDAQ: VZ) interest in Fox (NYSE: FOXA). Even though Sea is in a slightly different industry and a continent away, the fundamental rules still apply: it’s the content owners that call the shots, not the distributors. While it’s too early to call Sea’s margin decline a sustained trend, the lack of real control over its margins will always be a risk.

Sea’s earnings release highlights billings growth instead of its rather lackluster revenue growth. This is a metric more commonly associated with enterprise software companies, calculated by adding the change in deferred revenues to revenue in any given quarter. Sea’s in-game items and virtual currency sales, as a refresher, are accounted for as deferred revenue on the balance sheet and are recognized as revenue as the items expire. Total billings grew 73% y/y to $151.7 million (also a 21% sequential growth rate from Q2), so this marks somewhat of a bright spot, but still doesn’t excuse the poor revenue growth seen in Q2.

In Sea’s “Other” segment – which accounts for its e-commerce (Shoppee) and financial services (AirPay) products, revenue grew 3x to $14.3 million, but at only 15% of the total revenue base, it’s still an insignificant contribution to Sea as a whole. Consider especially that this line of business has a negative gross margin – its cost of revenue is $27.7 million to produce $14.3 million of revenue, indicating nearly a -200% gross margin.

In “high growth mode,” profitability is less important – it’s forgivable if the company operates at a loss. But gross margin, at least, should be positive – especially for an internet business with few raw inputs beyond server costs and customer support bills.

The company finally started showing revenue in e-commerce ($3.2 million) that didn’t exist in the prior year quarter, but at such poor margins, investors can hardly be blamed for being less than enthusiastic.

Overall, the company produced a net loss of -$132.8 million in the quarter, approximately double 3Q16’s loss of -$65.6 million. A quick note here: most tech IPOs typically show large net losses due to stock comp; their pro forma earnings figures are a lot less scary when you add back these non-cash charges. Sea, however, has minimal stock-based comp expenses ($5.7 million), so its adjusted loss is still a frighteningly high figure, -$127.1 million.

Based even on its adjusted figure, Sea posted a -135% net margin and a per-share net loss of -$0.75. Not a company I’d want to bet my portfolio on.

60-second summary

Sea operates an oddball mix of businesses: gaming, e-commerce, and digital financial services. The latter two have much more synergy and are much more promising in the longer term, but at only 15% of the current revenue base, even hopeful investors have to agree that these businesses are years away from achieving meaningful scale.

Thus we have to look at Sea as a gaming business – an industry that’s notoriously fickle and prone to fads. In particular, what we saw in Q3 – declining revenues (despite billings growth) and contracting margins – sends out a scary signal for long investors in Sea. The company’s main revenue engine is seeing signs of weakness while its burgeoning e-commerce and fintech businesses are creating massive losses. At some point, it’s worth asking whether or not it’s realistic for a company like Sea to fulfill its vision of becoming GSEA’s Alibaba before running out of cash. More than likely, other Asian internet conglomerates (and there are plenty) will rush in to claim the market and knock Sea down to its heels. And with Sea’s gaming business weighing down the company with its lack of proprietary content and shrinking margins, I don’t really see Sea as an M&A target either.

Continue to avoid Sea – the limited support the stock has seen since going public will erode soon enough. There are better internet companies to invest in.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, IPO Analysis, Technology, Multimedia & Graphics Software, SingaporeWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here

Hot Clean Energy Stocks To Buy Right Now

Amanda Freund remembers the exact moment when her uncle, Ben Freund, raised the idea of bringing a robotic milking system to the family’s dairy farm.

“It was January, 2015, and we were in the office, just there next to where those cows are,” she says, gesturing past the group of dry cows (the ones preparing to have their calves) that are grazing in one of the Freund barns. “And at the time, I was really perplexed. Like, how do we even begin to take on that kind of financial burden?”

Located in the northwest corner of Connecticut, in East Canaan, the Freund farm was established in 1949, when Amanda’s grandparents, Eugene and Esther Freund, began tilling the land. Today, the 200-acre farm is a thoroughly modern – and sustainable – operation, complete with more than 700 solar panels that meet the farm’s entire energy needs and a methane digester for converting manure into biogas that, in turn, heats the Freund’s house. 

Hot Clean Energy Stocks To Buy Right Now: Wyndham Worldwide Corp(WYN)

Advisors’ Opinion:

  • [By Travis Hoium]

    Shares of hotel brand Wyndham Worldwide Corporation (NYSE:WYN) jumped as much as 11.1% in trading Wednesday after reporting first-quarter 2017 earnings. At 3:45 p.m. EDT on Wall Street, shares were still up an impressive 9.6% on the day.

  • [By Lisa Levin]

    Wednesday afternoon, the cyclical consumer goods & services sector proved to be a source of strength for the market. Leading the sector was strength from Conn's Inc (NASDAQ: CONN) and Wyndham Worldwide Corporation (NYSE: WYN).

  • [By Lee Jackson]

    The chief financial officerat Wyndham Worldwide Corp. (NYSE: WYN) wasselling stock this past week. Thomas Conforti parted with 25,900 shares of the hotel giant at $82.41 apiece. The total for the trade was posted at $2 million. The shares closed Friday at $82.65. The 52-week range is $62.60 to $86.72, and the consensus price target is $90.

Hot Clean Energy Stocks To Buy Right Now: Cresud S.A.C.I.F. y A.(CRESY)

Advisors’ Opinion:

  • [By Cameron Swinehart]

    Cresud (CRESY) –

    An Argentinean based agriculture company that currently owns roughly 2.4 million acres of farmland in Argentina, Brazil, Paraguay and Bolivia. CRESY produces a variety of crops consisting of soybeans, corn, and sugarcane. It also has operations in beef cattle and milk production. In the second quarter, Cresud sold 4 of its farms for roughly $60.5 million and saw large gains in its farmland development business. CRESY is currently trading down roughly 60% from its highs back in late 2010. Many farming companies have struggled to release value for shareholders with the drop in crop prices but now many are beginning to see value with the sale of farmland.

Hot Clean Energy Stocks To Buy Right Now: Etsy, Inc.(ETSY)

Advisors’ Opinion:

  • [By Jeremy Bowman]

    Shares of craft-focused internet marketplaceEtsy(NASDAQ:ETSY)stumbled last month, falling 12% according to data from S&P Global Market Intelligenceafter a disappointing fourth-quarter report.

  • [By Brian Withers]

    If investors want to tap into the growing trend of e-commerce and diversify their portfolio beyond Amazon, Shopify (NYSE:SHOP) and Etsy (NASDAQ:ETSY) make the shortlist. Shopify is more a pick-and-shovelplay, as the company hasbuilt a powerful back office platform that essentially enables entrepreneursto run an e-commerce business from their phone. Etsy is a pure play marketplace that focuses on serving the creative entrepreneur. These two companies had similar revenue in 2016, were both started in almost the same year (Etsy 2005, Shopify 2006), and are in the business of helping product-selling entrepreneurs connect to buyers online. Let’s take a deeper dive into these two companies and see which is the better buy.

  • [By Jim Swanson]

    Benzinga's newsdesk monitors options activity to notice unusual patterns. These large volume (and often out of the money) trades were initially published intraday in Benzinga Professional . These trades were placed during Monday’s regular session.

Hot Clean Energy Stocks To Buy Right Now: CareDx, Inc.(CDNA)

Advisors’ Opinion:

  • [By Lisa Levin]

    CareDx Inc (NASDAQ: CDNA) was down, falling around 25 percent to $1.61 after the company reported weak preliminary sales for fourth quarter and FY 2016.

Hot Clean Energy Stocks To Buy Right Now: iShares Core S&P Mid-Cap (IJH)

Advisors’ Opinion:

  • [By WWW.GURUFOCUS.COM]

    For the details of Lubar & Co., Inc’s stock buys and sells, go to www.gurufocus.com/StockBuy.php?GuruName=Lubar+%26+Co.%2C+Inc

    These are the top 5 holdings of Lubar & Co., IncEnLink Midstream LLC (ENLC) – 1,882,007 shares, 37.97% of the total portfolio. Shares added by 0.40%Hallador Energy Co (HNRG) – 2,788,685 shares, 23.23% of the total portfolio. Vanguard Value ETF – DNQ (VTV) – 77,126 shares, 7.65% of the total portfolio. iShares Core S&P Mid-Cap (IJH) – 38,400 shares, 6.84% of the total portfolio. New PositionVanguard Mid-Cap Value ETF – DNQ (VOE) – 61,550 shares, 6.52% of the tota

Hot Clean Energy Stocks To Buy Right Now: Energy XXI Ltd. (EXXIQ)

Advisors’ Opinion:

  • [By SEEKINGALPHA.COM]

    The reality is often different. What is going on with Bellatrix Exploration is actually above average. I have written about many companies such as Sandridge Energy (NYSE:SD), Energy XXI (OTCPK:EXXIQ), and Halcon Resources (NYSE:HK) where the companies supposedly has premier assets, fantastically valuable reserves, and the investors lost everything. Right now Chesapeake Energy (NYSE:CHK) appears to be heading down the same miserable pathway as the others. At least with Bellatrix, the company appears to be entering the slow turnaround phase. But this has definitely not been a painless experience.

Stamps.Com: Where Growth And Value Meet

Stamps.com (NASDAQ: STMP) is a leading provider of online postage and shipping solutions and operates primarily in the United States. The software-based company consists of five major brands including Stamps.com, Encidia, Shipworks, Shipstation, and Shipping Easy. Stamps.com was founded in 1996 and began trading on the Nasdaq exchange in 1999 but was relatively unknown in the investing world until the last three years. Even today its trading volume is just over 400,000 and unless you use their products, own shares, or own shares of a competitor, it is likely you don’t know much about the company. In this article, I will explain my thesis as to why this is a company that is worth putting on your investing radar.

Ecommerce is growing by leaps and bounds.

In the interest of full disclosure, I will start by pointing out that I have had a vested interest in Stamps.com for some time. I owned the stock for about a year back in 2012 and sold for a very small gain and have kept tabs on it ever since. About a year ago, I initiated a new position and have since added to the position to the point where it is now my second largest holding, representing 12% my personal portfolio.

Opinions on Stamps.com vary wildly, and that variance can be seen in its stock price action over the past couple of years. The chart below shows the outsized gains and losses stockholders have endured in the last couple of years, at least on paper. With significant skin in the game, I believe it is prudent to vet all the opinions, both bullish and bearish to determine which opinions carry the most weight and determine a strategy going forward. In the balance of the article, I will examine the most prevalent reasons for the recent pullback and explain why I am convinced Stamps.com provides an excellent combination of growth and value for your portfolio.

Chart
STMP data by YCharts

The fall from grace

On November 2nd, STMP opened at $226.45 and reported what appeared to be blowout earnings after the bell. The company reported earnings of $2.68 per share, trouncing estimates of $1.95 per share. On a GAAP basis, earnings were $2.49 per share. Total revenue and EBITDA were both up 24% YOY (year over year).

Despite the strong beat on both revenue and earnings, the bears came out of hibernation after the close. Interestingly, the stock started dropping even before earnings results were released. By the time the market closed on November 3rd, STMP was trading at $171.10 per share, representing a 24% drop in just two days. Before we get into potential catalysts for the stock going forward, let’s examine the main arguments given for the sell-off and decide how much they should affect our investing thesis going forward.

1. Competitive threats

The company’s main competitors include UPS (NYSE: UPS), FedEx (NYSE: FDX), Pitney Bowes (NYSE: PBI), Amazon (NASDAQ: AMZN), and Etsy (NASDAQ:ETSY). Clearly, Amazon and Pitney Bowes are the two competitors that have investors most concerned. Pitney Bowes unveiled a low-cost offering in June with the intent of taking market share and Amazon recently announced a new offering called Seller Flex.

Now, competition matters and the management team at Stamps.com takes it seriously. At the same time, I’m not ready to overreact to recent moves by either competitor. Pitney Bowes’ latest move was to acquire a warehouse company with 1.2 million square feet of warehouse space. That is not even a part of Stamps.com’s business. As far as Amazon is concerned, anytime Amazon is mentioned as a competitor, investor fears go into overdrive. An interesting thing about Stamps.com’s business is that their main competitors in some aspects of their business are partners in other aspects. Stamp.com CEO Ken McBride stated that he actually sees Seller Flex as an enhancement to his company’s solutions.

2. Slowing growth

A case could be made that revenue growth is slowing. In Q2, Stamps.com revenues showed a 38% uptick over the same period on 2016. In Q3, sales growth slowed to 24%. While there is no denying 24 is less than 38, there is also no denying the fact that 24% growth is a pretty robust number. According to Yahoo Finance, the five analysts following the stock expect earnings to grow by 15% over the next five years. That is a number most companies would love to have.

3. Insider sales

In early November, Barron’s penned an article highlighting an unusually high volume of insider sales. The author implied these were deceptive trades and referred to them as “back of the envelope” calculations. Certainly, that was worth checking into.

The first thing I learned while researching the matter was there was nothing sneaky involved. In fact, it took me about 30 seconds to find all the insider trading activity on the company’s website. A closer look at SEC documents revealed the fact that several executives did indeed sell stock but they simultaneously exercised options for an equal number of shares. Since most options were exercised for well under $100, the simultaneous move of exercising options and selling stock made sense to me. By liquidating a significant amount of money they can use in their daily lives and turning options into and an equal number of shares, the executives were able to have their cake and eat it too.

The insinuation with any article highlighting insider sales is that executives think their company’s stock is fully valued, or even overpriced. That simply is not true. Google’s founding executives exercised plenty of options as the company matured. Howard Schultz sold plenty of Starbucks stock, even as the company was growing. While there is no way of knowing for sure, it seems that in the case of Stamps.com, the company does not believe its stock is overvalued. My main evidence for this statement is the fact that the company repurchased $103 million worth of stock and paid out $33 million in stock compensation. Those are hardly the actions of a management team who believes its stock price will decline.

4. Tax credit

As noted earlier, the company reported Q3 results that, on the surface, blew away expectations. The company’s revenue was up 24% YOY and earnings per share were up 73%. Naysayers will point to the $11 million tax credit which inflated earnings numbers and to a point they are correct. Both the tax credit and changing tax rates inflated EPS numbers and made YOY comparisons a little cloudier. However, investors who want to avoid the confusion that comes with these tax items do have other numbers to look at. Specifically, investors can see that revenues rose by 24%, gross margin was up about 1%, EBITDA rose by 24%, and income before taxes rose by 13%. All of these numbers negate the effect of the tax credit and represent solid financial performance.

5. High short interest

This is a non-issue. Short interest does not necessarily have anything to do with the underlying fundamentals of a company.

6. A personal concern

Stamps.com does pay out a very high percentage of its net income in stock-based compensation. In theory, I like stock-based compensation because it ensures that the company’s interests are aligned with those of its shareholders. However, with Stamps.com, the amount of stock-based compensation is a little higher than I would like. The table below shows the amount of stock-based compensation paid over the last three quarters by Stamps.com and one of its largest competitors.

Company Net Income Stock-Based Compensation % of Net Income
Stamps.com $110,403,000 $33,669,000 30.5%
Pitney Bowes $171,392,000 $18,312,000 10.7%

SOURCE: SEC FILINGS FOR STAMPS.COM AND PITNEY BOWES

Why Stamps.com is likely to rebound

The growth story continues

In September, Forbes Magazine named Stamps.com to its list of 25 Fastest Growing Public Tech Companies. The chart below shows that the company has rewarded shareholders to the tune of 276% in the past three years and justified that uptick with a corresponding jump in both revenues and net income. In addition to the metrics shown in the chart, paying customers and average revenue per user are both coming in at an all-time high. The five analysts that follow the company continue to expect significant growth going forward with a five-year annual growth projection of 15%.

Chart
STMP data by YCharts

The value proposition

One would think that with a stock price rising almost 300% in three years, the stock’s valuation would become a little rich and ripe for a pullback. In actuality, the chart above shows that earnings growth has slightly outpaced the stock price. The valuation has stayed in check.

Further, I’d like to point out that most major financial websites overstate the company’s PE ratio. Yahoo Finance shows STMP as having a PE of 28.12 and FactSet shows a PE of 22.91. If you take the midpoint of those two numbers, you get a PE of 25, right in line with that of the S&P 500. If you do your own math, however, you will find that STMP has an even lower valuation than reported by these sites.

As we look at the last four quarter sequentially, we see EPS numbers of $2.73, $1.83, $2.08 and $2.68. Adding them up gives us a trailing 12 months EPS of $9.32. Using Monday’s opening stock price of $175, that gives us a trailing 12 month PE of 17.78. That is a surprisingly low valuation for a company expected to grow earnings at 15% annually for the next five years.

Looking ahead

As investors, especially long-term investors, we are much more interested in where a stock is going than where it is right now. With that in mind, I will make a conservative projection based on analysts’ predicted growth rates. Since Stamps.com has handily beaten estimates in each of the last five quarters, I would expect them to at least meet expectations in the next four quarters so I will apply the consensus 15% growth rate to the first year. After that, I will model for 14% growth in years two and three and 12% growth in years four and five. Then, I will apply a PE of 21 for the year 2022 and we will see where we land. The yearly calculations are below:

Year EPS Growth Earnings Per Share Stock Price
2018 15% $10.72 $225
2019 14% $12.22 $256
2020 14% $13.93 $293
2021 12% $15.60 $327
2022 12% $17.42 $367

DATA SOURCE: STAMPS.COM AND YAHOO FINANCE

Final take

Stamps.com seems to be in exactly the right place at exactly the right time. Stamps.com is a rapidly growing company and a fast-growing industry that is showing no signs of slowing down. While I could nitpick and find a couple flaws, like their overgenerous stock-based compensation formula, all in all, things look promising going forward. As the only pureplay in software postage and shipping solutions, I believe Stamps.com will continue to reap the benefits of the growth in e-commerce and as an investor, the potential rewards far outweigh any risks.

Disclosure: I am/we are long STMP.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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