Stock Analysis

Facebook Flop or Not?

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Facebook went public on Friday. After months of build up, there were some issues with trading, and finally, no big pop in stock price. This has led some media pundits to conclude that Facebook’s IPO was a flop. But was it really? Facebook IPO Trading Facebook’s IPO was not necessarily typical. However, there was little typical about it before it even began. There was the sheer size of the offering, making the Facebook IPO one of the largest of all time. Then, there was the intense media interest, which, believe it or not, is not typical of initial public offerings. The idea that Facebook’s IPO was a flop revolves around the concept that its stock price did not rise on its first day of trading. Indeed, there was ample evidence that Facebook’s underwriters were forced to step in and prop up the share price to keep it above the $38 offering price. Whether this is a flop or not depends on whose shoes you are in, and how much you care about what normally happens. Facebook IPO Pricing In the days leading up to the IPO, there was some concern that the price for Facebook stock was too high. After …

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Apple Earnings Good or Bad?

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Apple reports earnings on April 24. This report is actually for earnings from the 2nd quarter of Apple’s fiscal year, even though corporations on a calendar year are reporting first quarter earnings right now. (Several tech companies reported earnings last week.) After a rough week for the company in the headlines, these earnings will likely be used as a gauge for the short-term future of Apple stock. Recently, Apple has been the subject of legal action from the Justice Department regarding alleged price-fixing for ebooks. Although this makes up a tiny portion of Apple’s revenue, it is a major key in how the Apple store works. If there is a problem with this model for books, there could conceivably be issues in other markets as well. What is not in doubt is that Apple will continue to dominate the tablet computer market and that its prolific iPhone will continue to be a huge player in the smartphone market. There is little doubt among analysts that things in the marketplace look good for Apple in both the short and long-term. In fact, the only real question about Apple stock these days seems to be whether the company’s shares have risen too …

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Google Lower Cost Per Click Doesn’t Matter

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Google just reported its quarterly earnings. They did very well, beating pretty much every analyst’s numbers. Those who want to nitpick will complain that the price per click has gone down. However, that isn’t really surprising considering that the number of clicks went up. There are some issues coming with Google’s stock, but this isn’t one of them. Google Cost Per Click Down Google’s advertising model is based on advertisers paying either “per click” or “per impression.” Actually, advertisers pay per every thousand impressions, but that isn’t the point. Advertisers who pay using the per click model pay a certain amount each time someone clicks on their ad, but nothing if the ad goes unclicked. A smart online advertiser using the per click model will determine how much each click is worth. There can be many ways of determining this, and numerous intangibles are considered by some advertisers. However, the most simple concept would be something like this. Maximum payable cost per click = Amount of revenue generated per click / Number of clicks necessary to generate revenue. In other words, if you generate $1 per transaction (this is called a conversion) and it takes you 10 clicks to generate …

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Is Groupon Public Yet?

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Has Google Already Beating Groupon? Not long ago, Google offered to buy Groupon for $6 billion. Soon thereafter, Groupon did another round of private equity financing that essentially paid off company founders and early investors such that they have already locked in sizable gains. That might be a very good thing since Groupon seems to be in trouble before it even goes public. Update: Groupon has updated its IPO filing documents again. Follow the link for the latest. Groupon’s IPO Filing Groupon has already had to adjust the documents it originally filed in order to do an initial public offering (IPO) of stock. It de-emphasized a widely mocked financial metric that essentially didn’t count certain expenses. That isn’t a huge thing by itself, although it does potentially show what Groupon thinks of the sophistication level (or lack thereof) of those who would buy Groupon’s IPO. Groupon’s management took the somewhat controversial step of trying to comment on all the negative publicity its IPO has been getting by sending out a company-wide email to employees saying exactly the kinds of things that you aren’t allowed to say during the SEC mandated “quiet period” before a public offering. Of course, they were …

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Apple Earnings Way Up for Quarter

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Most analysts had expected a big quarter for Apple, propelled by big holiday sales numbers. They were right; they just didn’t go high enough with their estimates. Apple reported revenue of $26.7 billion for its first-quarter which ended on December 25th. (The company uses a fiscal year for its earnings and reporting.) That’s earnings of $6 billion, or 6.43 cents per share, which is up 78 percent from a year ago. FactSet Research said analysts were predicting earnings of around $5.42 per share and revenue of $24.4 billion. Not coincidentally, all of this good news comes the day after the company announced that CEO Steve Jobs was taking a medical leave of absence. Apple stock traded ended the day down 2.25 percent at $340.65. Trading in the stock was halted after hours. When it resumed, shares were up in after-hours trading.

IBM Earnings Up

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IBM reported its 2010 third-quarter earnings today. The company reported earnings per share of $2.82 which is up 18 percent. The company did not announce any increase in the dividend paid per share, although that was not unexpected. The company continues to use share buybacks as the primary method to "return money to shareholders." The company’s third-quarter earnings announcement notes that the company, "returned $4.5 billion to shareholders through $0.8 billion in dividends and $3.7 billion of share repurchases," a ratio of approximately 1 to 46. However, the company did note that its free cash flow was down $300 million to $7.6 billion for the first nine months of the year. Coming up later today, Apple reports its earnings. The company does not pay dividends at all, preferring to build an enormous hoard of cash for some future purpose.

Apple Stock Good Investment or Passing Fad

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People are always asking me if I think certain stocks are a good investment. There is a flaw in the question, but we’ll get to that in a minute. Right now, let’s get right to the real question people are always asking me these days. Is Apple Stock a good investment? What people mean when they ask me that is not whether or not Apple is a good investment, but whether or not I think Apple stock will go up a lot … soon … really soon. They also want to know whether or not I think Apple stock will go down, but that is not why they ask the question. They want to buy Apple stock because it sounds like a smart investment, or because it feels like a smart investment. Of course, none of this has anything to do with an in-depth analysis of the company’s stock and it’s prospects for future growth and earnings. It’s all about buzz. They heard about the iPhone and it’s a big hit! They heard about the iPad and it’s a big hit! They heard about the NEW iPhone, and it’s a big hit! Now, they hear that Apple’s earnings are higher …

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Are Share Buybacks Really Good For Shareholders?

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IBM released their quarterly earnings. As is customary, the company announced various financial numbers like how much it earned per share and how much revenue it generated for the quarter, and so on. As is customary for IBM, the company also announced yet another giant share repurchase using shareholder money to buyback IBM shares of stock. The idea of a stock buyback is that the company figures that its stock is undervalued on the stock market. By buying shares of stock at those low prices, the corporation is increasing shareholder value by making a good investment in itself. Theoretically, those shares repurchased by the company at a low price can be used to pay out earned stock options, for example, at a lower cost. But, IBM — along with many other companies — has perverted the concept of a share repurchase or stock buyback. IBM Stock is currently trading near an all-time high stock price. While, it is possible that even at that price per share the company believes its shares are undervalued, that is not what is really going on here. IBM Stock Buybacks Share Repurchase Run Amok IBM is not a “new” tech company like Microsoft, Google, Amazon, …

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Abby Joseph Cohen Track Record Accurate As A Broken Indicator Light

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indicator light

I fired off a quick post yesterday about the “news” that Goldman Sach’s Abby Joseph Cohen declared the recession over.  If you missed it, I made the point that an arrow pointing up painted on a wall had just as accurate of a track record as Ms. Cohen did over the past decade or so.  For some reason, Cohen has a set of groupies, or fan boys, or whatever that always like to remind people of when she was “right” and, of course, always forget about when she was wrong. The truth is that Abby Joseph Cohen has never been “right”.  If your answer to a yes/no question is always the same, you aren’t getting the questions right.  You are just happening upon the questions that were written with a yes answer.  That isn’t intelligence or ability, that’s statistics. Still, so as to avoid anyone showing up and (publicly, so far, it’s only messages) saying that I have forgotten about all the really great “calls” she has made, I offer the following factual data as proof that any upward pointing arrow would have made, and lost, investors just as much money as Abby Joseph Cohen over the last 10 years. …

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Abby Joseph Cohen at Goldman Sachs Declares Recession Over

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indicator light

You’ll forgive me if I don’t give a flying leap about whether or not Abby Joseph Cohen thinks the recession is over.  The Goldman Sachs perma-bull was famous for being “right” about the ever rising stock market of the 1990s.  Too bad she has never been right about a single declining stock market. Imagine you had a warning light that would light up red whenever the market was going to decline.  Imagine that light was broken and could never light up.  That light would be exactly as accurate as Abby Joseph Cohen has been since the 1990s. Compare the light to Cohen and you’ll find they have the exact same track record. Cohen Always Predicts Bull Markets The recession may actually be over.  In which case, her apologists will trot out this proclamation as another example of her being “right.”  Just keep in mind, the warning light is always making the same prediction.