Tag: noah kiedrowski

IBM Posts Strong Quarterly Results and New CEO

Posted on by Noah Kiedrowski

International Business Machines (IBM) is fresh off its strong quarterly results, followed up by news that its CEO is stepping down. Each event separately drove the stock higher as investors cheered the duo of better than expected earnings and a change at the CEO level. 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. Over the past few years, IBM has taken a blended approach of M&A, realigning its business mix to current and future trends, maintaining its dividend payout, and continuing to buy back shares while layering-in the major Red Hat acquisition.

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 $144 after its recent Q4 2019 earnings. Long-term imperatives are beginning to bear fruit in emerging high-value segments that have 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 dependence on legacy businesses to the future of hybrid cloud, artificial intelligence, and analytics.

Q4 2019 Earnings – Better than Expected

IBM reported Q4 2019 earnings that were better than expected, beating on both the top and bottom line. These results boosted shares by ~4.5%. IBM reported EPS of $4.71 and revenue of $21.8 billion, which was flat year-over-year while beating analysts’ targets. IBM popped the following day to above the $145. The company laid out its growth narrative and Red Hat acquisition catalysts. IBM's revenue was flat across most of its business segments; however, Continue reading "IBM Posts Strong Quarterly Results and New CEO" →

Disney Delivers 26.5M Disney+ Subscribers

Posted on by Noah Kiedrowski

Disney (DIS) just delivered a stellar quarter beating on both the top and bottom lines while continuing to roll out its growth initiatives via streaming. Disney’s growth rotation is still in the early stages with the remediation of its ESPN property and flurry of growth initiatives to meet the demands of the modern-day media consumption trends. In the backdrop, the company continues to dominate the box office year after year with a long pipeline of blockbusters in the queue. Additionally, its Parks and Resorts continue to be a growth avenue with tremendous pricing power albeit the coronavirus will damper its Shanghai and Hong Kong operations. Disney is going all-in on the streaming front and acquired full ownership of Hulu and the company is launched its Disney branded streaming service. Disney Plus launched on November 12th with all of its content (Marvel, Star Wars, Disney and Pixar) which will be a formidable competitor in the ever-expanding streaming wars both domestically and internationally. As a result of its strong Q1 numbers, Disney has hit near all-time highs of ~$150 per share. I’ve been behind Disney for a long time, especially through this transition back to growth when the stock traded below $100 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.

Disney Plus, Hulu, ESPN Plus and Q4 Earnings

Disney’s Q1 earnings easily beat analysts’ expectations with strong gains in its streaming platforms such as ESPN Plus, Hulu and Disney Plus. Disney beat on both the top-line revenue and bottom-line profit. EPS came in at $1.53, beating by $0.09 per share and revenue came in at $20.86 billion, beating by $50 million. Revenue grew by 36% year-over-year and for the fiscal year.
Disney Plus subscribers came in at 26.5 million, well ahead of expectations that were ~20 million. ESPN Plus subscribers came in at 6.6 million and Hulu subscribers came in at 30.4 million. Hulu saw a 33% year-over-year growth in subscribers.

Disney’s business across the board came in strong, posting growth in every category. Continue reading "Disney Delivers 26.5M Disney+ Subscribers" →

The Market Says AMC Is Worthless - I Disagree

Posted on by Noah Kiedrowski

The market has rendered AMC Entertainment (AMC) a worthless company. The stock has nosedived from a 52-week high of $17 to $6.50 per share, resulting in a 62% reduction in market capitalization. Even worse, AMC was $33 per share in 2017 resulting in a multi-year meltdown of 80%. The catastrophic stock collapse has occurred in the backdrop of record numbers at the domestic and worldwide box office. There’s a paradoxical disconnect between the record multi-year box office stretch and AMC’s stock price.

AMC recently posted a strong quarter and has diversified its revenue stream by rolling out its own loyalty program that now has over 900,000 members to evolve a large segment of its business mix towards a subscription-based model to smooth out box office revenue fluctuations. This will allow durable and more predictable revenue streams in the backdrop of changing box office dynamics. AMC recently posted a record third-quarter attendance in the U.S. and international markets along with strong Q3 numbers. At current levels, the stock sports a hefty dividend yield of ~11% due to the decimated stock price.

Streaming threats from the likes of Netflix (NFLX), excessive debt load, bleak 2020 movie slate while being one of the most heavily shorted stocks (~60% of the float being sold short) has decimated the shares of AMC. I feel that AMC has significant upside considering its depressed valuation, improving financials, upcoming deleveraging, and creative initiatives to drive revenue growth.

Record Q3 2019 Numbers

First, AMC has been firing on all segments of its business on improving fundamentals across the entire enterprise over the previous quarter. For Q3 2019, AMC beat on the top line revenue with $1.32 billion, beating estimates by $10 million and missing on the bottom line with -$0.53 EPS, missing by $0.10 per share. Revenue grew by 7.8% and a record third-quarter attendance in each of its U.S. and international markets. Continue reading "The Market Says AMC Is Worthless - I Disagree" →

2020 Market Outlook - Margin Of Safety Required

Posted on by Noah Kiedrowski

Euphoric 2019 and Bleak 2020 Forecast

All three major indices ended 2019 in rarified territory as the Santa Claus rally capped off a euphoric market. The S&P 500, Nasdaq, and Dow Jones ended 2019 at all-time highs. The S&P 500 posted its best return in nearly 20 years, coming in at a 28.9% return.

2019 was a unique year on multiple fronts where the markets roared higher despite impeachment proceedings, U.S.-China trade war, Federal Reserve actions, inverted yield curve, and slowing economies abroad. Furthermore, for the first time in history, the U.S. economy has started and ended a decade without a recession, with the economy expanding for a record 126 consecutive months (Figure 1).

2020
Figure 1 – All three major indices reached all-time highs at the end of 2019

Currently, the markets are faced with stretched valuations absent of any significant volatility over the past few months. 2020 predictions are shaping up to widely variable from the collective grouping of investment firms (Figure 2). The average forecast is looking bleak after a banner 2019. I feel these bleak forecasts are rooted in political uncertainty, geopolitical tensions, slowing company buybacks, stretched valuations, and inevitable market volatility. As 2020 unfolds, a margin of safety via raising cash as a core position may be wise. Continue reading "2020 Market Outlook - Margin Of Safety Required" →

American Airlines Presents A Compelling Buy

Posted on by Noah Kiedrowski

American Airlines (AAL) is a cheap stock by many metrics and currently presents the best value in the airline sector based on valuation. Boeing’s (BA) 737 Max groundings have already been absorbed by the airline and moving forward, American is looking to settle with Boeing. Boeing took a $4.9 billion after-tax charge in Q2 to compensate airlines for the grounding. American is expected to see some cash from that amount once a settlement is reached between the two parties. The company is reducing its debt load, increasing free cash flow, returning value to shareholders, expanding its network while having the youngest fleet among the major airlines. American Airlines is near a 5-year low on the cusp of all the aspects mentioned above coming into the fold for 2020 and beyond. I feel that this stock presents a compelling buying opportunity in the backdrop of a frothy market for long-term investors.

Compelling Value

American presents a compelling value proposition across its enterprise with growth, decreased capital expenditures, youngest fleet of aircraft, debt reduction and increases in free cash flow. In an effort to drive growth, the company is expanding its network to add more gates in profitable hubs for 2019, 2020 and 2021 in Dallas-Fort Worth, Charlotte and Washington D.C., respectively (Figure 1). Early results indicate that hub growth is already creating value. Passenger revenue per available seat mile (PRASM) grew by 3.3% in 2019 from expansion in the Dallas-Forth Worth hub.

American Airlines
Figure 1 – 737 Max grounding and network growth plans already creating value

Starting in 2020, capital expenditures will begin to decrease, resulting in free cash flow increases drastically. At the end of 2019, over $30 billion was invested in the airline, and throughout 2020 and 2021, expenses will dramatically be reduced (Figure 2). These investments have resulted in American having the youngest fleet in the industry with over 50% of its aircraft being less than 10 years old (Figure 3). As expenses decrease, free cash flow will increase substantially to allow American to deleverage their debt. American will increase its free cash flow by $5.5 billion over 2020 and 2021 and over the long-term translating into an $8-$10 billion reduction of debt by 2024 (Figure 4). The company is in a position to increase earnings per share and income, even if the business doesn’t grow. Continue reading "American Airlines Presents A Compelling Buy" →