Author: Noah Kiedrowski

Hasbro Is Going On The Offensive

Posted on by Noah Kiedrowski

Hasbro (HAS) is turning the corner and going on the offensive with a slew of revenue verticals with its Disney toy licensing deal (Marvel, Star Wars and Disney Princess lines), Hasbro Studios (Transformers’ Bumblebee, My Little Pony, Power Rangers), E-Sports (Dungeons and Dragons and Magic: The Gathering) and reinventing its legacy games (Monopoly and Nerf) while driving newer products (Beyblades). Hasbro blew out expectations for its Q1 2019 earnings and the stock jumped 16% breaking out above the $100 threshold, a level that hasn’t been seen in over 6 months. Hasbro is setting the post-Toys-R-Us bankruptcy narrative and laying out a business roadmap for long term profitable growth across its brands. Hasbro has had the tough task of getting out in front of the Toys-R-Us bankruptcy and working its way through the glut of merchandise. This positive sentiment has been further bolstered by positive commentary from its CEO that the company has effectively absolved itself of the Toy-R-Us related bankruptcy headwind. Hasbro has a compelling future across its portfolio with many catalysts on the near and long term time horizons.

Q1 2019 Earnings

Hasbro posted an unexpected profit for Q1 with EPS coming in at $0.32 against expectations of -$0.11, beating estimates by $0.32 per share. Revenue also came in much higher than expected with $732.5 million and beating estimates by 66.5 million (Figure 1).

“The global Hasbro team is executing very well and delivered a good start to the year,” said Brian Goldner, Hasbro’s chairman and chief executive officer. “Our long-term investments in new platforms provided a meaningful contribution from our digital and e-sports initiative, Magic: The Gathering Arena, as well as growth in MAGIC: THE GATHERING tabletop revenues. In addition, MONOPOLY, PLAY-DOH and TRANSFORMERS were among the brands posting revenue gains this quarter. We are beginning to see improvement in our commercial markets, notably in the U.S. and Europe, and operating profit was driven by high margin revenue growth and our cost savings activities. With most of the year ahead of us, we remain on track to deliver profitable growth for the full-year 2019.”
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IBM Continues To Win Over Investors

Posted on by Noah Kiedrowski

International Business Machines (IBM) continues its long turn back to growth, focusing on high-value faster-growing business segments while embracing the future of technology with AI and hybrid cloud architecture via the Red Hat acquisition. Investors are ostensibly being appeased with the blended approach of M&A, realigning its business mix to current and future trends, maintaining its dividend payout and continuing to buy back shares until the Red Hat acquisition closes. IBM’s stock has been on an upward trend after investors decided to move past its initial displeasure of announcing its RedHat acquisition when shares were sold-off and traded down to ~$108. IBM's executive leadership has set the growth and value narrative, and investors are quickly realizing the value that Red Hat brings to the table while washing away fears that IBM overpaid for the $34 billion acquisition. From the $108 dip, IBM has been in a position of strength and has broken out past $140 after its recent Q1 2019 earnings. Long-term imperatives are beginning to bear fruit in emerging high-value segments that has fundamentally changed its business mix while evolving its offerings to align with new age information technology demands. The Red Hat acquisition will augment its transition away from its dependency on legacy businesses to the future of hybrid cloud, artificial intelligence, and analytics. IBM presents a compelling investment opportunity with a 4.5% dividend yield, share buyback program and continuously acquiring companies to drive the business into the future.

Q1 2019 Earnings – Solid

IBM reported Q1 earnings that were solid, not great and investors seemed content. IBM reported EPS of $2.25 and revenue of $18.2 billion which was a -4.7% year-over-year decline while missing analysts’ targets. IBM slide the following day initially however quickly arrested that decline to rise above the $140 again. The company laid out its growth narrative and Red Hat acquisition catalysts. IBM's revenue was flat across most of its business segments; however, its Cloud revenue grew by 10%.

"In the first quarter, our cloud revenue growth accelerated, and we again grew in key, high-value areas in Cloud and Cognitive Software and in consulting,” "IBM’s investments in innovative technologies coupled with our industry expertise and our commitment to trust and security position us well to help clients move to chapter two of their digital reinvention."
Ginni Rometty, IBM chairman, president, and chief executive officer

IBM has slipped back into a revenue contraction in its last few quarters however I think there’s a lot to like moving forward. There’s a reassurance that the dividend is safe, stabilizing revenues and a lot of shots on goal for future growth especially with Red Hat coming into to fray and strategic imperatives becoming a larger segment of IBM’s overall revenue pie as this is a higher growth business (Figure 1). Continue reading "IBM Continues To Win Over Investors" →

Disney - Avengers: Endgame, Streaming, and Fox

Posted on by Noah Kiedrowski

Disney (DIS) is looking to continue off of Captain Marvel’s success with Avengers: Endgame debuting April 26th, 2019. Captain Marvel has already brought in more $1 billion in worldwide box office revenue and leading all 2019 movies by a wide margin. Disney is betting huge on Avengers: Endgame taking the torch to the $2 billion box office milestone, a feat that’s only been accomplished four times, one of them being Avengers: Infinity War last year with $2.05 billion. All the initiatives that Disney has taken over the previous two years to restore growth appear to be coming to fruition, namely its Fox (FOX) acquisition and it's streaming initiatives. The Fox acquisition is complete for the combined entity; thus Fox’s assets are now definitively being absorbed by Disney. Disney continues to invest heavily into its streaming services such as Hulu, ESPN Plus and it's soon to be released Disney branded streaming service that will directly compete with Netflix (NFLX). The Fox acquisition brings a majority stake in Hulu (60% ownership) while its ESPN Plus launched earlier this year and has over 2 million subscribers. Disney continues to dominate at the box office while posting great growth at its theme parks translating into robust and durable revenue streams. The company is evolving to meet the new age of media consumption demands of the consumer via streaming and on-demand content. Disney has been on an uptrend as of late, breaking through the $115 relative to an all-time of ~$120. I’ve been behind Disney for a long time, especially through this transition back to growth and I still feel that the company offers a compelling long-term investment opportunity given its growth catalysts that will continue to bear fruit over the coming years. Goldman Sachs recently championed Disney’s reinvention efforts and boosted its target price to $142, a 20% increase from the $115 current share price.

Goldman Sachs Backs Fox Acquisition and Future

Goldman Sachs has changed its view on Disney after the investment bank removed Disney from its buy recommendation in December of 2017. Now Goldman Sachs has come out to back Disney and labeled the stock as a buy. It's "the dawn of a new era" after the company bought the media assets of Twenty-First Century Fox, the acquisition which Goldman advised. Now the impending launch of Disney Plus marks a "momentous" shift in content monetization, though investors will need to be patient with some heavy lifting around the launch, suggests Drew Borst. Continue reading "Disney - Avengers: Endgame, Streaming, and Fox" →

Facebook - Frustrating and Volatile Situation

Posted on by Noah Kiedrowski

Facebook Inc. (FB) continues to be plagued by a slew of issues ranging from international regulatory scrutiny, user privacy issues, high-level employee mass exodus, and questionably toxic company culture. As a result of these overarching issues weighing on the company, the stock has become volatile with dramatic moves in both directions. The stock has traded over a $95 per share range during the past 52 weeks, logging a high of $218 and a low of $123. The magnitude of this move has been frustrating as one issue after another seems to impact the stock despite record revenue and EPS negatively. Pundits argue that the negative confluence of the issues above will drive up costs, narrow revenue streams and weaken the user base. The privacy scandal has already resulted in increased costs surrounding compliance, monitoring, censorship and scrubbing the platform from deceptive marketing.

PR Disaster

Facebook has been mired in privacy scandals, public relations mismanagement, a conference call that wiped out $119 billion in market capitalization in a single session and a very public exodus of many high-level departures across the company. There’s a laundry list of mishaps originating from its data misuse scandal involving Cambridge Analytica as that continued to surface across the globe. Security issues affecting 50 million accounts, a lawsuit alleging concealing video admeasurements and increasing EU scrutiny plagued the stock. The list continues to evolve, and now there’s a report that Facebook stored user passwords unencrypted for years while its AI is still being refined due to its inability to remove the New Zealand terrorist attack video promptly before it was viewed 4,000 times. Additionally, Facebook’s network of products suffered an outage which impacted Instagram and Whatsapp as well as its flagship Facebook platform (Figure 1). Facebook has a lot of work ahead of its to reign-in all these issues and retain talent in what appears to be a questionable company culture. Continue reading "Facebook - Frustrating and Volatile Situation" →

AMC - 10% Post Earnings Pop And Captain Marvel Catalyst

Posted on by Noah Kiedrowski

Captain Marvel has pumped life back into the domestic box office, delivering an epic $153 million opening weekend debut, while hauling in $455 million worldwide. AMC Entertainment Holdings Inc. (AMC) has been struggling as of late on the heels of a record-breaking year at the box office in 2018 in conjunction with the disastrous stock market in Q4 of 2018. Despite a robust slate of movies for 2019, the year has been off to a sluggish start at the box office. AMC will likely have a nice catalyst as the slate of 2019 movies roll out, and the box office numbers strengthen. To smooth out these box office revenue fluctuations, AMC has a rapidly growing loyalty program with over 700,000 members to evolve a large segment of its business mix towards a subscription-based model. This will allow durable and predictable revenue streams in the backdrop of changing box office dynamics. AMC offers a great dividend yield of over 5% and accelerating revenue and EPS growth. The company is reengaging the consumer via digital, mobile and loyalty program options, reformatting theaters to enhance the user experience and international expansion augmented by a healthy share buyback program. The stock looks very attractive considering its depressed valuation, solid Q4 earnings that drove the stock higher and company initiatives to drive the consumer experience. The long term growth narrative remains intact while revenue continues to grow at a healthy clip.

2019 Box Office Finally Jolted

Disney (DIS) has finally released its first highly anticipated film of 2019 with Captain Marvel (the first female lead for a Marvel film). The film has performed exceptionally well, delivering an opening weekend box office gross of $457 million worldwide and $153 million domestically (Figure 1). The first two months of the year for the domestic box office has been a struggle relative to 2018. Captain Marvel brought in the third highest March opening of all-time and places the film on par with past blockbusters such as The Dark Knight, The Hunger Games and Rouge One. Dumbo, Avengers 4, Aladdin, Toy Story 4, Lion King, Frozen 2 and Star Wars Episode 9 is Disney’s slate of films that will bode well for the box office on the domestic front as these films stand to rack in billions in box office receipts. It’s noteworthy to point out that Disney is poised to defend its box office dominance again in 2019 for the fourth consecutive year. Continue reading "AMC - 10% Post Earnings Pop And Captain Marvel Catalyst" →