The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Mid Week Trading Update: Disney is up, Twitter is out, Linked In is up and out for no fault of it (US:GMCR, US:LNKD, US:DIS, US:NEWS, US:NYT, US:TWTR)


A tweet from News Corp’s WSJ tweeters

Linkedin has single handedly managed to create a digital business that is worth guidance of $2 Bln plus in Sales in Q1 2014 after having grown members for another 37% growth in members on year and 7% sequentially, and most retail businesses can tell you that is a tough ask indeed.  Linked In’s 278 mln members have definitely outgrown Twitter not just  in connecting them but also in effectively engaging its visitors  increasing revenues likewise by 47% to $447 mln. After a 10 mln jump in comscore visitors on Pulse launch in 2014Q2, year end comScore stats also settled well higher over last year at 139 mln.

The markets however, buffeted by overeager digital analysts with higher guidance data , beat the stock down 7% in after hours quotes, making its next cycle of investors a happier lot indeed.  After Tax Earnings are likely to scrape the bottom of the barrel for another couple of quarters. Its 45 B page views are a jump of 20% on year and they focus on growing Advertising and Talent Solution sales with content and 60% of its business still sourced online

It’s Q4 revenues of $1.53 Bln means a near 33% jump to its own Q1 guidance and the company guidance remains a good enough benchmark for new investment.

Twitter on the other hand, mostly got what was coming to it, retracing to $50 levels in Thursday’s trading after it reported 3.8% in user growth, putting paid to investors’ ambitions of trying to get someone to leapfrog Facebook. It’s advertising revenues doubled easily on a low base and it promised to make more dollars per page view but as digital models remain mostly low value add ons and Twitter hopes to start selling tupperware on the page to get money in the door. Its monthly active user base at 241 mln is probably lower than what you would even expect at Linkedin, though of course one is comparing Apples and oranges in many ways. Twitter having lost a chance to be sold to another business, must now watch and suffer as Facebook and its new Paper app takes control of the new mobile users while Linkedin pushes content on Pulse and allied direct engagement activity. As the innovators of the failwhale, that twit of a network was quick to shutdown its investor site though it did live blog its tale of woe on $220 mln odd in advertising revenue


ESPN (Photo credit: Wikipedia)

Even ESPN may have found it tough to manage that kind of traction as Disney tracks in on sheer growth in four diverse businesses with the network leading Disney’s stellar growth in the quarter. While Disney and ESPN are being feted, not least because of another strong year ahead with NFL,NHL and other sports franchises. Disney improved earnings by 33% and with the small kicker from an admittedly tiny buyback program diluted earnings improved 34%. All its four businesses have now delivered 4 or 5 quarters of consistent revenue and earnings growth. Studio entertainment business revenues were $1.893 Bln aided by just two weeks of the new all time highest Animation grosser in “Frozen” with Captain America and other Marvel franchises in for a strong showing again in the new year. 19 0f the Top 20 all time grossers come from Disney, Lucasfim, Marvel and Pixar and contribute to its now stable and growing theme park business as well. Parks and Resorts scored $3.6 Bln revenues and $671 mln in operating income in just this  quarter.

Operating income at our international parks and resorts was comparable to the prior-year quarter as
increased guest spending at Disneyland Paris and Hong Kong Disneyland Resort and higher attendance at
Hong Kong Disneyland Resort were largely offset by lower attendance and occupied room nights at
Disneyland Paris.

Broadcasting was weak seemingly as more programming sloughed off (program write offs) and only Modern Family survived with costs increasing for the successful franchise


Media revenues led by ESPN grew to a ginormous $5.29 Bln and a 20% jump in Operating income from advertising realisation at the Sports media giant

Activision reported good earnings though that did not help Vivendi which still owns a 12% stake in the gamer pod, when the European markets opened for trading hours earlier.

Moody’s delivered a full year revenue under $3 Bln and probably needs to maintain relevance with better earnings traction as well but reported better than estimates and EPS of 94 cents was still a 34% jump from 2013 with 5% lower expenses.

Healthcare giant Cigna stopped growing members but reported 7% higher revenues at $8.15Bln and earnings at $1.29 were 15% lower than estimates. Margins in medicare fell to 5%. The company also expects earnings of $6.80-$7.20 in 2014 below analyst estimates

Gap reported better January same store sales in the face of a tough post holiday season and will likely report better with Macys and other luxe retailers because of its global business at the end of the month.

The Dow enjoyed its best performance for the new year yesterday, Apple up 3% after a $14 Bln injection by the company in buyback plans. The WSJ parent Newscorp thus performed right on time announcing standalone profits improving to $166 mln or 31 cents per share excluding one time items. Almost $500 mln or 20% of its revenues build from book publishing and digital businesses while Advertising revenue remains weak

New York Times on the other hand, failed to capitalise on distress sales of the Boston Globe and at least 2 other properties with Circulation revenues catching upto Advertising revenues at $200 mln each. Though the profits fell to a measly $65 mln for the year, its previous year included a $164 mln gain from disposals (USA Today)

Coke signed up a $10 Bln non exclusive deal for single serve cold beverages on Green Mountain platforms lending a little rosy cheer to that stock

As expected the Jobs report again ducked the 185k number and reported a low 113k job additions in snow season, unlikely to ruffle markets but postponing bets on the recovery till after the weekend. My bet though, Disney and Linked In. Starbucks is trading back up with a grand performance on digital keeping non branded competitors betting anew on changing career plans. Activision is doing fine with Call of Duty (US:ATVI and US:SBUX confirmed by Bloomberg premarket open)

Barclays is following UBS into the increasing bonus pool even as Cash Bonus ceilings take effect and might even be as low as 100% of Base salaries. It seems banks like Barclays would be looking at disbursing a third tranche of salaries whose classification they can keep away from fixed and variable salaries but regulators are likely watching even as the battle for talent turns ugly. The Euro remains up as Draghi shied away from new liquidity ops and Germans reported a grand $199 mln surplus for 2013 still fighting allegations of domineering the south where inflation remains healthy and bond investments seem still the best yielding investments, spreads at their narrowest in Spain. Catalunya in spain and Scotland are considering independence moves for their nationalities, that would start them off for independent memberships of the EU and independent decisions on being part of the Euro in due course

The Big Four US banks are still down in the first week of February after huge gains in a receptive market yesterday



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