| 30 risks to markets in 2019 Posted: 23 Dec 2018 08:46 AM PST |
| Video Game Stocks - Bullish or Bearish? Posted: 23 Dec 2018 04:20 PM PST I've been following this industry for almost a year now and have my own view developed, but wanted to create a discussion thread since these names are fairly topical. Would love to get some back and forth going. Names I generally think of in this segment are EA, ATVI, TTWO, GME, NTDOY, etc. Kerrisdale Capital has this bullish write-up on EA posted to VIC recently. https://www.valueinvestorsclub.com/idea/Electronic_Arts/2008582929 I personally disagree with this thesis because: - The alpha test of Battlefield V did not receive good feedback counter to their claim it did. I heard directly from the alpha test community that air combat game play was a disaster, weapons werent balanced, other problems with the netcode, etc.
- EA claims they delayed BF V because they did not want to compete with COD 4 and RDR2 releases during the same window. But, because of the point above, DICE completely re-hauled the BF V code just two weeks prior to EA's announcement of the delay. Due to this, there was no way they could complete a satisfactory alpha / beta test session and meet the original deadline.
- Fortnite impact on industry is a larger discussion, but has nothing to do with "battle royale" mode.
- I disagree that video games are "annuity like" just because a new version comes out every year. Maybe MMOs since you purchase a subscription in some cases, but the examples he uses are definitely not annuities.
- No commentary on increased micro-transaction regulation risk or what % of EA's earnings come from that (its a lot). Surprising because EA's SW BF II micro-transaction debacle was huge news at the time.
- Digital purchases having higher margins and growing as a % of revenue share isn't a new thesis point.
- Actually, the digital purchase gross margin benefit is likely over-earning at the moment because up-front sticker pricing will probably need to decline in order to get consumers to purchase games when the back-end, digital / DLC content component is beginning to out weight the content available in the original game build.
- I don't really think the valuation is that compelling unless it was low enough to where you were getting the micro-transaction component of FCF for "free".
submitted by /u/redcards [link] [comments] |
| Watch CNBC's full interview with New York Fed President John Williams Posted: 23 Dec 2018 06:56 AM PST |
| FAANG Stock End of Year Valuation Metrics Posted: 23 Dec 2018 08:40 AM PST Facebook, Amazon, Apple, Netflix, Google. Since the Nasdaq index has hit a bear market since its September 2018 highs, what is the outlook for 2019? Here is a snapshot of FAANG stocks: | (TTM) | FB | AMZN | AAPL | NFLX | GOOGL | | Revenues | 51.89B | 220.96B | 265.60B | 14.89B | 129.87B | | EPS | 6.76 | 18.24 | 12.01 | 2.9 | 26.98 | | (Cash - Debt) / Share | 14.28 | 10.41 | 24.74 | -12.09 | 165.45 | | FCF / share | 4.66 | 20.84 | 11.86 | -5.46 | 20.16 / 27 (ADJ) | | P/E | 16.37 | 74.94 | 10.49 | 84.96 | 30.61 | | P/FCF | 23.75 | 65.6 | 10.62 | NM | 40.96 / 30.24 (ADJ) | | 3yr FCF/share CAGR | 44.88% | 39.72% | 1.03% | NM | -2.3% / 8.6% (ADJ) | | Approx. 5yr implied growth | 25-30% | 70-90% | 2-4% | 100%+ | 30-50% | | Total Dividends + Buybacks | 10.34B | 0 | 85.78B | 0 | 13.53B | *FCF is approximated by subtracting company-estimated RSU value *P/E, P/FCF measures are calculated by subtracting excess cash. *Approximate 5yr implied growth rate using gradual slowdown in earnings, 10% discount rate, and 3% terminal growth rate Some points: - Adjusted (ADJ) numbers are for Google's 5B fine to the EU. Could Google pay more fines in the future?
- FB's P/E and P/FCF have a wide disparity meaning they are significantly increasing CAPEX. As they stated on earnings calls, this increase in CAPEX is for networking/data center/security equipment. This will probably continue for 2019. Also, FB's operating margins have a guidance of 35-38% moving forward compared to the current 40%.
- Amazon has been cash flow positive the past couple of years. Will their profitability increase in the future?
- If you believe Apple's future, long-term growth rates will trend to the 8-10% range, it is currently undervalued with a potential 50% + upside. If you believe Apple will have very low growth in the future it is about fairly valued.
- Of all the FAANG stocks, only Netflix has a negative cash position on the balance sheet and negative free cash flows.
None of the implied growth rates here factor in a near term recession or drop in earnings. Also future uncertainty about the discount rate makes valuation more tricky at this point in the economic cycle. What are your guys thoughts? submitted by /u/resumeherenow [link] [comments] |
| Dynamics of Network Effects Posted: 23 Dec 2018 12:02 PM PST |
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