To market, to market to buy a fat pig. Stocks eventually stabilised, we started worse for wear to begin with here in Jozi, but ended marginally in the green after the bell rang. ADP numbers missed expectations marginally, and notwithstanding a poor December non-farm payrolls number, the ADP December number was revised lower. Just a bit actually, but nearly three times more than the non-farm payrolls number. So, your guess as to what will happen tomorrow, with the most trumped up data point in the world, is as good as any. For the record, 175 thousand is the number, the same as the ADP read yesterday.
Meanwhile, here in Msanzi the platinum belt talks have broken down with AMCU and the mining companies not sitting at the table. If the platinum producers cede to the demands and put the entry level salary at 12500 ZAR per month, then according to the companies, their wage bill doubles. And if that were the case, then they would be bankrupt. Really. Amplats said last week in their results that labour represented 41 percent of their cost base, contractors around 7 percent and electricity and water at 12 percent. 60 percent of their fixed costs are labour and utilities. Wow. But AMCU is sticking to their guns and they have set their members up for these expectations. And expectations are a powerful and dangerous thing. We just hope that level heads will eventually overcome this very important hurdle in South African labour relations. Phew, it is crazy out there, keep your head low.
Tweets for you and tweets for me. Twitter led with their debut quarterly numbers since their listing, which also included the full year numbers for 2013. Here are the numbers as per the release: Twitter Reports Fourth Quarter and Fiscal Year 2013 Results. Let us focus on the full year numbers, because we do not really want to get sucked into this quarter on quarter comparisons. Even though, as you can see in the release, CEO Dick Costolo said this was the best quarter ever for Twitter. Their best and worst quarter as a listed business, seeing that the company has only been listed since November 2013.
For those of you who still do not know what Twitter is about, for me it is simple, it is a customisable news feed. You can take the journalists or news agencies or celebrities that you personally want to follow, and then off you go. There are no hard feeling for an unfollow, this is not Facebook, you do not unfriend someone. Paul often used to say that Twitter was the people that you wished you were friends with, whilst Facebook, well ... you can't choose your family and to a certain extent school and varsity friends.
They were all there in the same circles as you, and provided that they were *nice*, those folks ended up being your friend. But in the world of Twitter you can actually follow Katy Perry or Justin Bieber (collectively they have about 100 million followers, probably huge overlaps). Gaga (you know, Gaga) has 41 million followers and Taylor Swift has 38.8 million. The most followed sports personality is Cristiano Ronaldo, at 24.3 million followers. That is nearly two and a half times the population of Portugal from where he (Ronaldo) is from. Twitter is tailor-made for celebrities to share their best friends, their lunches, their new kit and so on. So that part is obviously very attractive for advertisers, to make sure that Twitter miners and advertisers insert adverts on your time line. As a user, you know what I am talking about. But Facebook has bigger numbers of followers, Perry and Bieber have 126 odd million Facebook fans collectively, around 63 million each. Cristiano Ronaldo has 73 million fans on Facebook.
Back to Twitter though. The growth in revenue was a whopping 110 percent, registering 664 million Dollars in 2013 from 316 million in 2012), monthly users now top 240 million, up 30 percent from a year ago when it was 185 million. But that is the part that spooked the short termers, the fact that the company only managed to add 10 million users in the last quarter, notwithstanding the listing and the hype around that. Also worrying a few folks was the timeline views started to fall off, indicating I guess that those who may have signed up haven't yet adopted the technology as of yet. This is it: Twitter Engagement: Q4'13 Timeline Views 148 billion, up 26% y/y. Some folks were hating on that. How does it go, haters be blocked yo. I can try my best, but even my eldest daughter told me that I was not cool.
The company made a modest profit on a per share basis, 2 cents for the quarter, but lost 18 cents for the year, obviously indicating that things are improving slowly. OK, there is a 2014 outlook in the release too, revenue is expected to be between 1.15 to 1.2 billion (nearly double again) and adjusted EBITDA to between 150 to 180 million Dollars. Capex as much as 390 million Dollars. And then something that always raises an eyebrow or two, stock based compensation expenses of 600 to 650 million Dollars. Phew. As Michael said, how do you justify half of revenues as stock compensation? 10 million odd options? Well, I guess that there are 555 million shares in issue, so ten million is not as much really.
After market the stock plunged 17 percent to indicate an open of somewhere in the region of 55 Dollars. Do I care, hell yes, of course I do. But does it worry me in the short term? Not really. It is still extremely difficult to gauge the future profitability of the business whilst they are in growth mode. That is the main issue that investors (and I use that term very lightly) have. As such there will be an enormous amount of volatility whilst the business ramps up revenue. Lest you forget, they are only planning on reaching 1 billion Dollars worth of sales THIS year. I guess that if you bought them on the assumption that they would attract a huge amount of followers quickly, that has to an extent happened, but Twitter is not as easy to use as Facebook. The ARPU is worked out as follows, Ad revenue for the quarter (242 million) divided by Monthly Active Users (241 million), you get a little over 1 Dollar per person. Next to nothing, if you think about it. Should that grow? For sure.
As companies interact more with their users in this instant and quick way, that should continue to power ahead. We think that this is still a growth company, but because the earnings expectations are likely to be all over the show in the coming quarters there could be many an opportunity, including today!! A transformative business that will continue to attract more and more advertising spend, the whole two screen idea. One screen in front of you, the other in your palm, being entirely interactive. And if you skipped it, in the release, three quarters of people use their phones or tablets to view Twitter.
Shorts. No eating of these.
That is interesting. Coca-Cola has taken a 10 percent stake in Green Mountain for 1.25 billion Dollars. You will recall that not so long ago we switched out of the fizzy and into the coffee, in the form of Starbucks in and Coca-Cola out. Why? Because it was starting to emerge that fizzy drinks and their link to obesity in particular were becoming the focus of law makers. Remember the famous Michael Bloomberg wanting to reduce the size of the soda cups that companies sold? Remember? Well, he (Bloomberg) is not alone.
So the obvious route for the most well known beverage manufacturer in the world to go to is coffee. The Scarlett Johansson advert for SodaStream which sideswipes at both Coke and Pepsi created a stir, if not having a big impact. But Coca-Cola know that they have to get into the faster growing beverage market that they have not been in, coffee. What are the two going to do? Simple, use the existing Keurig single coffee users concept of a Coca-Cola single serve pod based product. Will it work? Not sure, but certainly a sign that Coca-Cola are paying closer attention to this rapidly expanding market. For more on the deal, follow the link: The Coca-Cola Company and Green Mountain Coffee Roasters Enter into Long-Term Global Strategic Partnership.
An amazing announcement in more than one way yesterday CVS Caremark decided that they will stop selling cigarettes of any kind at their stores by October this year, potentially losing 2 billion Dollars in revenue a year. CVS has 7600 outlets, so this is in a sense a big deal. But, to show you how slow they have been, you might be surprised to know that they core business is being a pharmacy. That is right, like I said, in other news pharmacies still sell cigarettes in 2014. What? The press release from the company is predictable: This is the right thing to do.
The fact that it has taken them so long, the Surgeon General in the US first suggested (after four decades of work) that smoking was directly linked to risks associated with lung cancer and heart disease in 1964! It took another 50 years before a pharmacy chain decided to stop selling the product, on the basis that (as per the release): "Cigarettes and tobacco products have no place in a setting where health care is delivered." Quite right, I wonder what other pressures (from shareholders I suppose) would lead bigger companies, with a pure retail focus to follow suit? We still think that the industry, notwithstanding early stages of the e-cigarette revolution, is one in decline and do not want investments in the sector.
I really, really liked this post from our old pal Cullen Roche, an ex Merrill Lynch employee who now does it for himself, goes it alone in San Diego. This post titled The Fat Pitch Myth is an example of how people use recency bias as to why or how they are sitting on cash and have not invested any money since the 2008 financial crisis. The post was brought about by the comments that the crazy old Marc Faber makes from time to time, he is always calling for the market to sink, so that he can get in! The last of the penultimate paragraph is all that you need, if you are not going to read the whole thing: "The key to success in this business isn't about hitting home runs and swinging for the fences. It's about getting on base a lot and scoring runs efficiently and consistently over a long period of time." Everyone wants to hit a six every ball, but the truth is that a chase down of your targets means little risk taking and more level heads are likely to get you there in the end rather than master blasting.
Home again, home again, jiggety-jog. Markets are flat. That dressed up number tomorrow had better be exactly that, otherwise the angst is going to continue for a while. We will see tomorrow, I see the headlines trickling in suggesting that EM's are looking favourable again, the selling was/is overdone and so on. Hold the course sportslovers!!
Sasha Naryshkine, Byron Lotter and Michael Treherne Email us Follow Sasha, Byron and Michael on Twitter 011 022 5440
No comments:
Post a Comment