Author Archives: Scalper1

Will LinkedIn Avoid Another Stock-Gutting With Q1 Earnings?

LinkedIn ( LNKD ) saw its stock bomb 44% to a three-year low after the company reported fourth-quarter earnings on Feb. 5, as its Q1 guidance widely missed estimates. In the conference call that followed, LinkedIn acknowledged that a reshuffling of product strategy will impact short-term revenue growth in favor of the long term. Perhaps the most startling announcement was that LinkedIn will shutter a business called Lead Accelerator. That decision cut the company’s 2016 revenue forecast by $50 million, as analysts slashed their price targets on LinkedIn stock. Shares have since regained 11% of that decline, though LinkedIn stock was down 2.5%, near 119, in afternoon trading in the stock market today . Shares have a long way to go to get back near former levels. LinkedIn is scheduled to report first-quarter earnings after the market close Thursday. The consensus estimate for the networking site for professionals is revenue of $828.5 million, up 30% year over year. Analysts polled by Thomson Reuters expect earnings per share minus items of 60 cents, up 5% but a sharp drop from growth of 54% in the prior quarter. RBC Capital Markets analyst Mark Mahaney has a sector perform rating on LinkedIn, with a price target of 156. The Lead Accelerator business had been created out of LinkedIn’s $175 million acquisition of Bizo in July 2014. The technology focuses on boosting the ability of marketers to target prospects and had been considered a high-growth opportunity. LinkedIn said the manpower needed to boost Lead Accelerator was not worth the time and effort, and that it was “a higher-than-anticipated demand on resources.” The move did not go over well with analysts, with one calling it a “gigantic mistake.” Credit Suisse analyst Stephen Ju has an outperform rating on LinkedIn stock and a price target of 176, down from a previous target of 230. “We maintain our outperform rating but do concede that patience will be required for the company to start showing more meaningful catalysts to drive share price appreciation, namely margin expansion,” Ju wrote. Facebook ( FB ) Q1 earnings will come after the close Wednesday. The company soundly beat Q4 earnings expectations on booming mobile ad revenue. Facebook has posted double-digit growth in revenue, year over year, for more than four years — and analysts say another quarter of double-digit revenue growth is coming. The consensus on Facebook revenue is $5.25 billion, up 48%. Analysts expect EPS ex items of 62 cents, also up 48%.

Yahoo, Starboard Value Call A Truce, Agree To Four New Directors

In what Yahoo ( YHOO ) CEO Marissa Mayer called a “constructive resolution,” the troubled Web portal announced Wednesday that it had reached an agreement with activist investor Starboard Value to add four new independent directors to the company’s board. In March, Starboard had proposed replacing Yahoo’s entire nine-member board with its own slate, saying Yahoo’s current management team and board had “repeatedly failed shareholders” and shouldn’t be in charge of a strategic review of Yahoo’s core search and display ad business or determine the fate of Yahoo’s 15% stake in China e-commerce giant Alibaba Group ( BABA ) and its holdings in Yahoo Japan. Under the agreement announced Wednesday, Starboard has withdrawn its director nominees. Instead, Yahoo will add four new independent directors, including Starboard CEO and Chief Investment Officer Jeffrey Smith. Also joining the Yahoo board are Tor Braham, a former managing director and global head of technology mergers and acquisitions for Deutsche Bank Securities; media executive Eddy Hartenstein; and Richard Hill, the former interim CEO of Tessera Technologies ( TSRA ). At the company’s upcoming annual meeting, two incumbent directors will not stand for re-election, giving Yahoo an 11-member board going forward, the company said. “This constructive resolution will allow management and the board to keep our focus on our extremely important objectives,” Mayer said in a statement. Starboard’s Smith said, “We look forward to getting started right away and working closely with management and our fellow board members with the common goal of maximizing value for all shareholders.” Yahoo is in the process of evaluating buyout offers. Yahoo stock has more than doubled since Mayer, who had been a top executive at Alphabet ‘s ( ) Google, was hired as CEO in July 2012. But she’s been unable to spark significant earnings and revenue growth, and Yahoo has struggled to build online- and mobile-ad revenue vs. rivals Google, Facebook ( FB ) and others. Yahoo stock was down 1% in midday trading in the stock market today , near 37, down 18% in the past 12 months but up 40% since early February in anticipation of a sale. Last week, Yahoo gave no specifics on its efforts to find a buyer for its core business and perhaps its big stakes in Alibaba and Yahoo Japan. Most of Yahoo’s value comes from its Alibaba stake. Yahoo’s total market cap is near $34.8 billion. Yahoo last week reported Q1 earnings and revenue that topped Wall Street expectations, but its Q2 revenue outlook lagged analyst expectations. For Q2, the company forecast revenue of $1.05 billion to $1.09 billion, down 14% at the midpoint and below consensus views of $1.102 billion. Yahoo had reportedly had set a deadline of April 18 for bids by potential acquirers, with Verizon Communications ( VZ ), which owns AOL, rumored to be among the most active bidders. For Q2, Yahoo forecast revenue of $1.05 billion to $1.09 billion, down 14% at the midpoint and lagging consensus views of $1.102 billion. Alibaba stock was down nearly 2% midday Wednesday, near 77, while Verizon stock was up nearly 2%, near 51.

Why Comcast May Covet DreamWorks For China, Millennial TV Content

Comcast ’s ( CMCSA ) interest in acquiring DreamWorks Animation ( DWA ) likely goes beyond movies and stretches to content for Web TV streaming services, especially programming targeted at millennials. In addition, both DreamWorks and Comcast, which owns NBCUniversal, have been expanding in China. Comcast has been racing against  Verizon Communications ( VZ ) to make investments in original content for millennials, aged 18 to 34. Millennials spend more time watching Netflix ( NFLX ), Alphabet ‘s ( GOOGL )  YouTube and social video on Facebook ( FB ) than they do viewing traditional TV, according to studies. DreamWorks stock surged 18% to 32, hitting a two-year high, in midday trading in the stock market today on reports that Comcast is in talks to acquire the movie studio. Comcast did not directly comment on the DreamWorks speculation during its Q1 earnings conference call early Wednesday. “DreamWorks has a robust TV business, owns (millennial-focused) AwesomenessTV and has access to China via DreamWorks Oriental,” said Stan Meyers, a Piper Jaffray analyst, in a research report. “Comcast management has discussed launching a number of (Internet video) services, so we believe teaming up with DreamWorks would provide access to exclusive content.” Verizon in early April acquired a 24.5% stake in DreamWorks’ AwesomenessTV for $159 million. Both Comcast and Verizon have been pursuing original content for millennials, a demographic coveted by advertisers. Benjamin Mogil, an analyst at Stifel, says Comcast is likely eyeing a few DreamWorks assets. “China operations, which Universal could likely expand, is likely one area of focus,” wrote Mogil in a report. “On the Awesomeness TV front, we see the ability to carve out a window outside of Verizon’s mobile window for such content on a cable video-on-demand service, which would be attractive for Comcast.” DreamWorks’ current films include “Kung Fu Panda 3,” while its earlier box office hits include “Shrek” and “How to Train Your Dragon.” DreamWorks has also been developing TV shows for video streaming services. Customers include Netflix and Amazon.com ( AMZN ). NBCU owns cable channels including USA Network, SyFy and Bravo. Amid falling audience ratings, the cable channels also need better original content to compete with Web streaming services, analysts say. Aside from Universal Films, Comcast owns Focus Features and Illumination Entertainment, the latter of which developed the “Minions” movies. NBCU’s filmed entertainment revenue jumped 46% to $7.3 billion in 2015, thanks to the box office success of “Minions,” “Jurassic World,” “Furious 7” and “Fifty Shades of Grey.” NBCU’s film and entertainment revenue, however, fell 4.3% in Q1, to $1.38 billion.