JRN3200

Prof. Michael.Bobelian

Naotaka Washimi

Despite slow auto sale in foreign market, GM met Wall Street expectation helped by demand for the pickups.

Despite sharp decrease of third quarter earnings of General Motor Co. (NYSE: GM) compare to same period a year ago, the company met expectations of investors resulting in rose the most in eight weeks after announcing a third-quarter profit due to the demand for redesigned pickups and other models in North America.

The results, which were affected by a special charge to repurchase preferred stock from the United Auto Workers (UAW) retiree trust to the tune of $3.2 billion. Due to the repurchase of 120 million shares of preferred stock, companywide net income fell in the third quarter to $1.72 billion from $1.8 billion during the same quarter a year ago and 2.0billion of second quarter in 2013.

GM’s revenue for third quarter in 2013 was 38.98billion or 96 cents a share, 3.7 percent increase compared to prior year’s third quarter results.                          Despite the modest growth, revenues fell short compared to consensus estimates of $39.4 billion.

In the first nine months of the year, G.M. sales increased 7.6 percent in the United States, compared with a rise of 8.1 percent for the overall market.  U.S. auto sales are universally expected exceed the 2012 sales of 14.5million to top 15.5 million units this year for passenger cars and light trucks due to the stable gas price and high consumer’s repurchase demand. Auto sales in October of three U.S auto companies exceeded above 10percent growth compare to year ago while their rivals Toyota, and Honda was 8.8 percent and 7.1 percent respectively.  By segment, light truck show huge increase of 14.6percent compare with 6.6 percent of passenger cars.

Another bright side is that GM strong sell in Chinese market that benefited in the third quarter and better-than-expected performance in Europe. The company said its European operations were improving but were still posting heavy losses. It had a pretax loss of $214 million in the quarter, versus a $487 million loss last year. Much of losses were mainly brought by GM’s subsidiary of Opel. GM’s restructuring effort is under way since the company had announced that it reached a preliminary agreement with workers to close a factory in Bochum, Germany, at the end of next year. With European auto sales near a 20-year low and overcapacity is likely to continue to be a problem for the European car industry until demand picks up.

“G.M. is still in a rebuilding process,” said Karl Brauer, an analyst with the auto research firm Kelley Blue Book. “It’s smaller and stronger than before, but they are retrenching.” The company continues to replace its model lineup methodically, with new versions that have better quality and improved features. Dan Ammann, chief financial officer of GM said to Bloomberg that “We’re in the very heart of the product launch activity right now and we’re going to build on the momentum that we’ve established here,” The relatively low gas price over the year brought positive result to GM which known for producing gas guzzling trucks. According to Marklines the auto research company, The 4 units of General Motors, Buick, Chevrolet, Cadillac and GMC contributed high sales growth of 32.2%, 14.7%, 9.5% and 15.7% respectively.

However even GM is doing so well in North America, there is still concern for upcoming auto sale in foreign market. The earnings of its Asian division, which includes China, India and Southeast Asia, fell to $299 million, down from $761 million in the same period last year due to the intense price competition from Toyota Motor Corp and ongoing extensive recalls in India.GM is a global company, with 72% of its sales coming from outside the United States, so making the European operation break-even is the first step for building strong GM ever since company filed bankruptcy five years ago.

The biggest challenge the company will face in coming year is that while GM is dramatically improving its lineup and profitability, North America earnings is offsetting weaker performances in the rest of the world. Currency fluctuation in South America operation and weakened Japanese yen are other troublesome factors for GM’s global sale. In coming year, GM will make huge effort on restructuring such as shutting down Opel’s Bochum assembly plants to make the sales of EU operation break-even as GM CFO for North America said “We expect to incur significant restructuring costs,”.

With the third quarter ending on September 30, 2013, Google Inc. reported $14.89 billion in revenues.  Google (GOOG) had a closing price of $875.91 that day, increasing $6.83 per share from its opening price of $869.08.

Google’s $14.89 billion revenue signified a 12% increase from 2012’s Q3 revenue reports.  Furthermore, profits were recorded at $10.74 per share, versus 2012’s mere $8.87 a share.

“Google had another strong quarter with $14.9 billion in revenue and great product progress,” said Larry Page, CEO of Google.  “We are closing in on our goal of a beautiful, simple, and intuitive experience regardless of your device.”

Page, who suffers from a degenerative disease and partially, paralyzed vocal cords, also announced that he would be stepping back from participating in earnings calls.  However, this news did not manage to diminish shareholder confidence in the company.  In fact, share prices saw an 8.1% growth in after-hours trading on October 17, the day of the announcement.  Eventually closing at $961, Google stock surpassed its previous high closing of $924.69 on July 15.

Over the past quarter, Google has continued promoting versatility across all platforms – mobile, tablet, computer, etc.  With the implementation of Enhanced Campaigns, new from AdWords, they have made it easier for advertisers to plan a single campaign that will carry across all platforms and more effectively reach consumers.  The success of Enhanced Campaign can be attributed to the 4% quarterly growth in advertising revenues that the company saw, coming in at around $12.5 billion.

USA Today’s Alistair Barr reported, “We’re seeing great progress in terms of people already advertising,” Nikesh Arora, chief business officer at Google, said Thursday. “[These] are the first set of steps we’ve taken towards the future of multiscreen devices and multiscreen advertising, but we think this is the way things will keep evolving.”  Such progression of innovative technological advertising garners hope for an even more promising fourth quarter and can be seen as encouragement for shareholders.

As Google looks to continue producing and progressing technology, Page expressed the desire to hold on to the start-up essence of the growing business.  He hopes that by continuing in that same spirit will lead to the “velocity and execution” that he finds so key to the company’s ongoing success.

Such success can be seen in Chromecast, Google’s television service, which was met with great consumer reception.  YouTube’s mobile traffic is up to 40%, a 25% increase from last year.

Page even discussed the company’s progress in the development of the self-driving car, “We’ve made tremendous progress and we’ve driven large amounts of miles. We’ve changed the business from something that wasn’t going to happen at all to something inevitable. That said, it’s still early days. It’s still a ways from being a commercial product. We probably over estimate that in the short term and underestimate it in the long term.”

When it comes to Motorola Mobile, however, revenues were down to $1.18 billion from $1.78 billion in last year’s third quarter.  Despite launching the Moto X phone, Motorola losses have increased 24% to $248 million.  Google remains confident that this is only the beginning for Motorola, since acquiring the company last year, and that it will begin to bring in more revenue as they continue expanding and developing the brand.

Sources:

http://www.theverge.com/2013/10/17/4849472/google-earnings-q3-2013

http://investor.google.com/financial/tables.html

http://www.businessinsider.com/live-googles-q3-earnings-2013-10

http://investor.google.com/earnings.html

http://www.usatoday.com/story/tech/2013/10/17/google-third-quarter-results/3003603/

By Choong Ming Ye

Facebook has surprised us before and it has done it again. Despite worried investors, its profits for the third quarter of 2013 beat expectations.

Facebook’s stock surged to $0.25 per share, beating investor expectations of $0.19 per share and revenue expectations of $1.91 billion; a share of Facebook stock is now worth $48.99. Facebook reported that this quarter’s net income of $425 million rose from a loss of $59 million in the same quarter of 2012 — an increase of nearly 820%.

Revenues stood at $2.02 billion in this third quarter — a 60% increase from last year’s $1.26 billion. Much of that revenue came in the form of advertising which comprised $1.80 billion or a 66% increase from the same quarter last year.

Of that advertisement revenue, mobile advertising comprised nearly half at 49%, which was a nominal increase from 41% of last year’s quarter. At its current rate, Facebook observed that mobile advertisements may outpace its desktop advertisement income.

While the decrease in teenage users may have investors’ worries well justified, Mark Zuckerberg seems to be more focused on long term growth.  He is “prepared for the next phase of [his] company, as [they] work to bring the next five billion people online and into the knowledge economy.”

Facebook’s relevance among teens, in this quarter of 2013, still remains high compared to other competitors. According to an analysis by Piper Jaffray Companies, Facebook commands 23% of the teenage market compared to Twitter at 26%, Instagram at 23%, Tumblr at 4% and Google+ at 3%. Steve Haller of Motley Fool commented that “a little perspective,” is needed and further commented that “no company can fully escape investors’ worries.”

Commenting on the declining teenager uses, CFO David Ebersman states that it “is a hard issue for [them] to measure,” but admitted it “is of questionable significance.”

Since Facebook is primarily a social media service company, it naturally tends to gravitate towards web-based services and should be measured accordingly. Zuckerberg commented that “20% of time in the U.S. spent in apps is on Facebook, according to comScore,” meaning one in every five person. “We don’t build services to make money; we make money to build better services,” Zuckerberg said.

Facebook COO Sheryl Sandberg remarks that “[they’re] in the early stages of a major transformation in advertising.” She attributes much the shift from TV to digital media as a result of mobile app install ads and mobile app engagement ads. “The mobile app install add market didn’t even exist a few years ago…we’re pretty excited about this part of the market because we think it can grow so quickly,” Sandberg said.

In relation to its competition, Sandberg also mentioned that Facebook and Instagram users “spend more of their time on those two social networks on mobile than other popular streams like Youtube, Tumblr, Pandora and others combined in the U.S.

Ken Sena and Andrew McNellis of Evercore, an analyst group, believe that Instagram will help Facebook pull in as much as $340 million in 2014. They also estimated that this reported revenue will help boost a share of Facebook’s stock to $60.

According to Yahoo Finance, Facebook places fifth in comparison to its competitors by market cap of $120 billion as an information provider company. Tenecent Holdings Ltd currently has the largest market cap at $769 billion, followed by Baidu, Inc. at $722 billion, Yahoo! Inc. at $479 billion and Google Inc. at $345 billion.

In spite of not completely satisfying investors, Facebook is clearly in it for the long haul. As Zuckerberg states in his initial filing with the SEC, “Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected.”

NEW YORK — Google Inc. has beat Wall Street estimate with another strong quarter after disappointing the markets for the last two quarters coming in below expectations.

For this quarter, Wall Street forecasted Google’s revenue to be $14.80 billion and earnings per share of $10.34. Google had beaten that with $14.98 billion in revenue and earnings of $10.47 per share. Earnings per share were $10.74, compared with $9.03 a share for the year-earlier period.  Analysts polled by Thomson Reuters expected revenue to climb to $14.82 billion, but only expected earning of $10.35 per share.

Google’s new Improved Campaigns, a sequence of recent changes in its marketing policy, has resulted in higher click volumes, however some analysts are concerned with the lower costs per click for the quarter, which results in lower ad revenue for the search giant.

Although Google benefited from a rise in aggregate paid clicks, one of the few negatives for  Google on the quarter was that its cost-per-click deceased by 8% year-over-year in Q3 2013. The company also published some negative news from its Motorola mobility segment.  Its revenues decrease from $1.78 billion in Q3 2012 to $1.18 billion in Q2 2013 while posting a $248 million loss on the quarter. Google shares rose by more than 6% in just after hours of trading.

Furthermore, According to Chief Business Officer Nikesh Arora, an increased in the mobile traffic, which the company has attempted to address through improving the Campaigns, was “a process. … This is definitely the first step we’ve taken toward multi-screen and multi-device advertising.”

Revenue for the well known search engine is up in several areas, with Google focusing on the new market segments which includes its Google Play marketplace, where it charges for downloads of media and apps through electronic devices, as well as new hardware such as the Chrome cast streaming device and Moto smartphone, from Motorola Mobility.

Meanwhile, the company reported that revenues for the quarter ended September 30, 2013 were $14.89 billion, an increase of 12% compared to the third quarter of 2012. Net income in the third quarter of 2013 was $2.97 billion, compared to $2.18 billion in the third quarter of 2012.

Google segment revenues were $13.77 billion, or 92% of consolidated revenues, in the third quarter of 2013, representing a 19% increase over third quarter 2012 Google segment revenues of $11.53 billion. While, Google owned sites generated segment revenues of $9.39 billion, or 68% of total Google segment revenues, in the third quarter of 2013. This represents a 22% increase over third quarter 2012 Google sites segment revenues of $7.73 billion.

In addition, Google’s partner sites generated segment revenues of $3.15 billion, or 23% of total Google segment revenues, in the third quarter of 2013, compared to $3.13 billion of Google network segment revenues in the third quarter of 2012.

Other revenues from the Google segment were $1.23 billion, or 9% of total Google segment revenues, in the third quarter of 2013. This represents an 85% increase over third quarter 2012 other Google segment revenues of $666 million.

Also, Ad revenue from YouTube also benefited, while 40 percent of streaming came from mobile, up from 6 percent one year ago.

Indeed, As a result of the company’s financial status which beat the Wall Street goals, the company’s stock has climbed to 10% in premarket trading, which reached approximately $980 per share.

Sources

2013 Earning report

http://investor.google.com/earnings/2013/Q3_google_earnings.html

http://www.theverge.com/2013/10/17/4849472/google-earnings-q3-2013

http://www.ibtimes.com/google-inc-goog-q3-2013-earnings-report-beats-wall-street-estimates-1431124

Arguably the most popular fast food chain in the world met expectations this previous quarter cashing in over $4.9 billion in income, a 2% increase from last years third quarter. McDonald’s has held some stability over the past few years and shows no signs of any significant decline from any expected numbers. Expectations had the company probably raking in $7.33 billion. this quarter and was just short reporting that amount by a hair, coming up with $7.32 billion. Keeping up with expectations is something McDonald’s  is probably going to do. They aren’t going to wow anyone with crazy numbers or shock the world with significant plummets but the company is expected to keep a nice steady pace for years to come and this quarter is no different.

Being such a large business globally, McDonald’s is disadvantaged by the fact that at the time being, the global economy is rather weak therefore causing everyday consumers to reduce their spending in things such as fast food. “For the quarter, our results reflect McDonald’s ability to grow amid the broad-based challenges of the current environment by focusing on those areas of the business within our control,” says CEO of McDonald’s Don Thompson. By the end of the quarter on September 30th, McDonald’s held a $97/share.

In September, McDonald’s launched a new product called Mighty Wings. Originally, as many advertisements depicted, they were meant to target football fans as the season began for them to consume during football games. However, the success of Mighty Wings never actually happened. There are many factors that contributed to its flop. For one, they did not look all that appealing. They weren’t even shaped like wings. As well as them being to spicy for most customers to handle, customers will not miss them much when they leave the menu by the end of November. Financially, the wings were a little too expensive for people to even consider buying topping out at $9.69 for a 10 piece box which compared to other wing spots such as Atomic Wings and Buffalo Wild Wings, were right on par but for them being fast food quality wings it was a little pricey. Not to mention, economically, people are struggling and won’t even consider buying them since most McDonald’s customers already have a variety of options on the menu for them to choose from. It is safe to say mighty wings was anything but mighty in helping McDonald’s this quarter.

One thing McDonald’s had been good at doing since it became the big name it is today is keeping its core products as great as they have always been. The old adage goes “why change what isn’t broken?” and McDonald’s is proof that keeping things the same does have its perks. However, this quarter McDonald’s decided to change it up a little and introduce three new sandwiches from one if its core products: The Quarter Pounder.  Introducing three different varieties of this classic burger, McDonald’s was hoping to make a splash and with these new sandwiches but didn’t accomplish much with this. The sales for these new sandwiches were low considering the expectations but not dramatic. Thompson is optimistic that these new sandwiches will help in the growth of McDonald’s in the future.

All in all, McDonald’s is keeping a steady hand and not close to any significant declines or shocking rises. McDonald’s is expected to keep relatively similar number for following quarters and years ahead.

Despite Mounting Losses, Amazon Stock Continues to Skyrocket

 By: Ari Goldstein

November 14, 2013

Though Amazon again reported a quarterly loss, investors keep pouring money into the Seattle-based Internet retail giant.

Amazon reported third quarter revenues of $17.1 billion and losses of $41 million or – $0.09 cents per share. The losses came despite a 24 percent increase in net sales, and compared to a loss of $274 million, or 60 cents per share in the same quarter last year.

The losses fell in line with Wall Street’s expectations, and revenues surpassed it, but only by a little. Analyst forecast for Amazon’s third quarter earnings were -$0.09 per share and revenues of $16.76 billion.

After releasing its earnings on October 24^th, Amazons stock initially rose eight percent in after hours trading, but was up only 1.67 percent and closed at $332.21 the day the report was released. The following day Amazon’s stock traded over $360, more than $100 increase from the previous year, and nearly triple from $128 in 2010. The stock is currently trading at $356.

Since mid-2010 the company has not earned profits that investors would usually anticipate from a company that is expected to post $75 billion in revenue this year. Amazon’s investors and shareholders seem to be indifferent to the losses and are betting primarily on its increase in revenue, not profits.

Investors keep a close eye on Amazon’s operating expenses, knowing that if amazon is buying more warehouses or making more kindles its market share is growing. The company reported $17.117 billion in operating expenses this quarter, the exact same amount it reported in revenue.

Amazon has great ambitions and is aggressively trying to gain market share in the global retail industry. Despite the losses, many investors are confident that Amazon has the ability to switch from losses to profit, and understand that its undertaking immense investments to grow an even larger sales base – meaning it is not a question of if it has the ability to profit – but rather, when it will decide to do so.

Since it went public in 1997, Amazon has reached revenues exceeding $200 billion; at the same time it has reported less than $2 billion in profit over that period. The company has missed expectations in three of its last four quarters, and has been in the red in two of them.

The losses have put Jeff Bezos, Amazon’s founder and CEO, under fire by skeptical investors calling it a “charitable organization being run by elements of the investment community for the benefit of consumer,” says Matthew Yglesias an economics journalist and business correspondent for slate.

Bezos has historically stressed that Amazon’s business model focuses on revenue growth rather than profitability. Since 1998, Bezos has attached his original annual letter to shareholders stressing the emphasis on Amazon’s long term prospects and outlook, and amplifying that its decision making process is based on that philosophy. Since its inception, Amazon has traded short-term gains to achieve long-term goals. This concept has been the driving force to Amazon’s growth and as of now there seems to be no end in sight as the company continues growing.

Amazon is investing heavily in different aspects of its business including research and development (R&D), filling orders and innovation. Since 2012 the company has consistently spent over $1 billion per quarter in R&D. This quarter it nearly hit $2 billion. The company added over eight million square feet of new warehouse space in the past three months in an attempt to get packages out more quickly to consumers.

This week, it announced a new arrangement with the U.S. Postal service that will offer customers Sunday delivery in New York and Los Angeles at no extra cost. The company is also looking to expand its AmazonFresh food delivery service outside of its current locations in Seattle and Los Angeles.

Online spending is up 18 percent in the second quarter, according to the U.S. Department of Commerce according. The National Retail Federation has predicted holiday sales in November and December to increase by about 15 percent from those months last year to approximately $82 billion. This number is significant for Amazon going into the holiday season as the company added 15,000 temporary workers to deal with the holiday rush.

Looking ahead, Amazon’s predictions for its fourth quarter earnings are between $23.5 and $26.5 billion, which amounts to a growth rate of 10 and 25 percent compared to the fourth quarter of 2012. Analysts are expecting that number to be closer to $26 billion and are calling for 22.4 percent increase in sales growth.

Amazon’s stock has proven to be resilient to its bottom line numbers. As long it continues to grow, and its losses are accounted for and meet Wall Street’s expectations, investors and shareholders seem to be willing to turn a blind eye to its lack of profit – for now.

Starwood’s Increase in Worldwide Expansion Leads to Higher Profit and More SVOs

Starwood Hotels & Resorts Worldwide Inc. released its third quarter analysis at the end of October and reported not only that its stock is at it’s highest since the company’s personal peak in 2007, but that it’s rate of occupancy (RevPAR) is also at an all time high. This, the company says, is what gives it the confidence to continue expanding and open over 30 hotels worldwide starting in 2014.

In the press conference call, Frits D. van Paasschen, Chief Executive Officer, President and Director of the company, assured that they have exceeded profit expectations “despite revenues coming in at the low end of our outlook range,” and discussed the company’s profits on a global scale.

Starwood brands, which own hotels such as the Sheraton, W Hotels, Aloft hotel, St. Regis and more, accounted for nearly 1 in 5 of all new-branded, upper upscale and luxury hotel openings or conversions worldwide. Throughout the third quarter, Starwood has returned $257 million through the share repurchases, and will increase their dividend to $1.35 per share. The company’s stock price is the highest it has been since 2007, at $74.11, and has increased 43% in the past year alone.

Van Paasschen explained that this growth was somewhat of a pleasant surprise to the company, seeing as how there has been a lack of revenue coming in at the low end of the company’s outlook range. “We have said for some time that this up cycle is unlike any we have seen before due to the unprecedented lack of supply growth in the developed economies,” he said.

Van Paasschen also mentioned that while the United States and Canada had record occupancy levels, Starwood saw it’s RevPAR rate increased in a similar fashion on a global scale. “As such in North America, we’ve had very steady REVPAR growth between 6% and 7% for the past 2 years in a macroeconomic environment that remains somewhat unpredictable and generally weaker than expected.”

“Our pipeline of about 400 hotels and 100,000 rooms has translated into about 70 to 80 new properties a year. That number is likely to grow,” van Paasschen said, “We’ve signed more agreements to open more hotels. Of the 208 managed and franchised deals signed in 2010 and 2011, over 80% are now either operating or under construction. And our 131 deals from 2012 are similarly on track.”

The company insists that it has its long-term trends intact and is “well-positioned for profane growth in high-end global hospitality,” according to the report. They stated that “The hotels are in the best shape ever,” and are benefiting from over $800 million in capital, which has been documented from the start of 2010 through the end of this year.

Starwood stated that it predicts 80% of earnings coming from various additional fees the company plans to implement by the end of 2016. “With many hotels ready to market and active discussions underway on a few hotels, we’re working towards our asset light goal,” Van Paasschen said.

One way the company plans on achieving its high profit goal is through an increase in sales of Vacation ownerships (SVO). Most recently, The Westin St. John converted to an SVO in hopes to turn the entire resort to vacation ownership. “The signs of SVO today means that a larger portion of our business is generated from sources beyond unit sales,” said Vasant M. Prabhu, Vice Chairman, Chief Financial Officer and Executive Vice President of Starwood.

He also explained that SVO’s generate recurring fees like those from homeowners associations, and that their unsold SVO units generate as much profit as those in an owned hotel. “Our experience is that the occupancy at these resorts is even more stable than traditional hotels over time,” Prabhu said.

From these potential profit increases, Prabhu explained that by expanding and opening new hotels, it is a sure way for them to remain on a consistent incline. “New hotels give us a healthy base of properties that in turn build the strength of our brands,” he said.

Out of Starwood’s 883 existing upper upscale and luxury hotels, about 20% were constructed in the past 4 years, which includes new hotels or converted with a major renovation. The company has doubled its luxury footprint in the last 5 years and has added luxury and upper upscale rooms at a rate of 5% per year

Just last week the company has confirmed three new Sheraton hotels throughout Africa, which will increase its African portfolio by over 30%, with more than 15 new hotels set to open around the continent over the next five years. This growth will add more than 5,000 guest rooms and create thousands of local employment opportunities.  Starwood also recently revealed that they will open a Sheraton in Thailand and in Rio by 2014, just in time for the World Cup.

Prabhu assured that while group revenue growth has been slower, it has been steady, at around 3% to 4%. “This, in our view, is healthy, balanced and sustainable revenue growth,” he said. “With no meaningful change in the supply situation evident in the near term, we expect these trends to extend into 2014.”

Facebook 3Q Earnings Up But Investors Worried

By Aleksandra Neizvestnaya

Facebook, Inc. (FB) shares spiked after earnings came out Wednesday, October 30th, but plunged after company executives released their outlooks for the future.

Revenue pulled in at $2.02 billion, exceeding analyst expectation of $1.87 billion for the quarter ending September 30th. This is a 60% increase from its 2012 third quarter results of $1.26 billion. Net income came to be $425 million, compared to a loss of $59 million the year before.

“Growth continues to be driven by mobile,” said Facebook’s CFO David Ebersman in a press release. Year-over-year total ad revenue grew 66% to $1.8 billion. Mobile ad revenue grew to 49% of the total ad revenue, compared to 41% last quarter. “This is a remarkable milestone in the short time since we introduced mobile News Feed ads just last year.” Ad revenue makes up 89% of the company’s total revenue.

Sheryl Sandberg, Facebook’s COO, commented that in 2013 “for the very first time, people will spend more time with digital media than watching TV.” According to Sandberg, Facebook is in a good position to benefit from this shift. In the United States, Facebook, including Instagram, gets one in five minutes of the time people spend on mobile, and one in eight minutes on desktop.

Daily active users worldwide climbed to 728 million, up 25% from the same period a year ago. Daily users represented 61% of the 1.19 billion people who accessed Facebook during the month of September.

What frightened investors was the CFO’s remark regarding the decline in daily users among younger teens. Furthermore, the company does not expect to significantly increase ads in users’ feeds, which was a meaningful driver of revenue growth in 2013. Instead, the social media will continue working on improving the quality and relevance of ads.

The company’s stock rose as much as 17% to $57.98 in after-hours trading after the quarterly results were released but the company’s earnings call led to an about-face. On midday Thursday, the price flattened out at about $50.21.

Facebook stock has been up roughly 79% so far this year and more than 100% over the last 12 months. It has outperformed the S&P 500 Index (SPX) by nearly 23% during the past three months. After having a rocky start since going public in 2012, it took the stock price of the biggest social networking website over a year to get back to its IPO price. The end of July of this year marked the 14 months that it took.

Looking at Facebook’s competition, Google (GOOG) reported $14.9 billion in revenue, and $2.97 billion in net income in the third quarter. LinkedIn (LNKD) announced a revenue of $393 million and a net loss of $3.4 million. Also, Twitter (TWTR), after going public on Thursday, November 7th, is estimated to have a revenue of $215.8 million in the current quarter. Currently, Facebook stands in fifth place among the top companies in the Internet Information Providers industry.

According to 33 of Wall Street’s analysts, Facebook is estimated to have a revenue of $2.15 billion in the next quarter, and to end with a year revenue of $7.28 billion. Stock is expected to grow 29.4% by the end of the year.

“Looking ahead, you can expect us to keep preparing for the future,” said Mark Zuckerberg, the company’s CEO, “even as we keep on building momentum today.” The company’s executives have their focus on, “continuing to capitalize on the shift to mobile, increasing the number of marketers who advertise with us and continuing to invest in our ad products.”

Sources:

(Form 10Q) http://investor.fb.com/sec.cfm

(Earnings Press Release; Conference Call; Earnings Slides) http://investor.fb.co/results.cfm

(Earnings Estimates) http://finance.yahoo.com/q/ae?s=FB

(Industry Rank) http://finance.yahoo.com/q/in?s=FB+Industry

November 14, 2013

Investors Concerned About Amazon’s Growth Capabilities

By Timmy Wu

New York – Amazon has taken over the electronic commerce industry with its extreme popularity throughout the year. This popularity has brought years of success to Amazon. Although Amazon is extremely popular and has its many upsides in the year, it also fluctuates and has its downsides causing Amazon’s revenue to stay the same.

As in former recent quarters, CFO Tom Szkutak credited the loss to the company’s continuing expansion. Amazon’s increasing system of coarsely 100 fulfillment centers continues to take its toll in the short-term but other factors such as tablet competition, application store competition, and poor Amazon web service decisions.

On Friday, the company reported a loss in net income of 9 cents a share, or $41 million, just as it had expected. The loss was a 24% increase from the 60 cents a share, or $274 million, the company lost last year.

Amazon’s founder and CEO Jeff Bezos turned heads recently when he purchased the Washington Post in a cash deal for $250 million. Bezos is obviously looking towards the future. His increasing works in the fulfillment centers is dedicated to his long-term plan of offering more items and customer service for customers. Although this plan is hurting the company shot-term, Bezos believes it will help in the long run.

Another concern for Amazon is its heavy investment into the Kindle and Kindle Fire. These e-readers are in heavy competition with the tablet marker. The tablet market is extremely fierce today with the Apple Ipads, android tablet, and any computer company that is coming up with a new invention. With such a great demand for the tablet, many companies are entering the market for tablets creating an enormous market. Amazon also has to fight off the fact that less and less people want to own an e-reader because they can simply purchase a tablet. E-readers are becoming less popular and customers are switching to tablets.

Amazon has also recently made a controversial decision to increase its free shipping policy. Instead of a minimum purchase of $25, customers now must have a minimum purchase of $35 to receive free shipping. Customers are now required to buy more items so that they can receive free shipping. This decision could lead to the worst for Amazon resulting in fewer customer purchases.

Meanwhile, Amazon’s revenue increased 22% to $15.70 billion in the second quarter, compared with $12.83 billion in second quarter 2012. That news sent Amazon’s stock up about 8 percent in after-hours trading, after closing at $361 on Tuesday.

In a conference call with analysts, Szkutak focused on what he called “a nice steady acceleration of growth” in North America since last year’s fourth quarter. Focused on the new perks of the company, Szkutak is investing in the future of the company and want to see the company succeed in the long run. Szkutak believes that Amazon Prime is one of the fastest growing services that Amazon provides. The service charges customers $79 for one year and will deliver their packages for any order for free.

Amazon has major growth capabilities where they can truly become successful. CEO Bezos and CFO Szkutak must think over these important dangers to their companies. They should evaluate where the important parts of expanding their company are.

Source:
(Form 10Q) http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsother

(Earnings Press Release; Conference Call; Earnings Slides) http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsother

(Earnings Estimates) http://finance.yahoo.com/q/ae?s=AMZN+Analyst+Estimates

November 11, 2013

Wal-Mart Experienced Slow Sales, Below Expectations, in 2nd Quarter

By: Sophia Williams

New York – Wal-Mart U.S. stores missed Wall Street expectations, as they reported slow sales as consumers had less money to spend due to increased gas prices and taxes.

Second quarter financial reports showed that Wal-Mart consolidated net sales came in at $116.2 billion, a $2.7 billion or 2.4 % increase from last year’s second quarter.  Total revenues of $116.9 billion (including membership and other income) fell short of analysts expectations of $119.7 billion.  In addition, the global retail store earnings per share of $1.24 had a 5.1% increase from last year’s $1.18 and did slightly missed expectations of a $1.25.   Earnings per share was charge with $0.01 for non-income tax in operating expenses associated with Wal-Mart International.  

In terms of store sales, the retail giant U.S. stores opened for at least one year, have seen a loss of 0.3% during the second quarter.  That failed to fulfill Wall Street expectations of a 1% gain.  Wal-Mart has also slashed its revenue and profit predictions for the year while its stock has fell to a near 3%.

During a media call on second quarter earnings results, Wal-Mart’s Chief Financial Officer, Charles Holley, identified three reasons for decreases in store sales.  Holley was quoted saying, “U.S. sales were weighted down by 2% cut in payroll tax, lack of inflation that we would have anticipated particularly in the Grocery area, and the general reluctance of customers to spend on discretionary items currently.”  It is important to note that Holley emphasized that Wal-Mart’s U.S. stores were not the only ones experiencing challenges, with his statement, “The retail environment was challenging across all markets.”

On the other hand, Wal-Mart Sam’s Club stores proved positive results during the second quarter, as membership went up, its total sales — including impact of fuel — had a 2.6% increase to $14.5 billion, its comps — excluding impact of fuel — had an increase of 1.7%, business member traffic improved, operating income grew to $0.56 billion with an 8% jump, and profits went up by 3%.

President & CEO, Mike Duke, expressed his gratitude of Sam’s Club achievements when he said, “I’m pleased that Sam’s new membership enhancements and fee structure contributed to bottom line improvement.”

As with the U.S. market, Wal-Mart international also experienced a challenging store sales environment during second quarter earnings.  Net sales went up to 2.9% from last year to $33 billion.  Acquisitions totaled $216 billion.  Operating income fell 1.3% due to a smaller operating expense.

Sales missed Wal-Mart’s management expectations as a result of low customer spending.

The President & CEO of Wal-Mart International, Doug McMillon, said the retail company is focused on three important areas to improve sales internationally.  Those areas include, improving price leadership with an “every day low pricing” (EDLP) specific approach, driving the productivity loop,  and lastly, focusing on the efficient use of capital.

Doug McMillon, stated in the management earnings call that, “During the first half of the year, we saw consumers in both mature and emerging markets curb their spending, and we believe these trends will persist through the remainder of the year.”

However, a bribery scandal may possibly slow down sales internationally as allegations in early 2012 indicated that Wal-Mart did not inform the police that company officials allowed bribes worth millions in Mexico to increase the rate of gaining building permits, amongst other services.  Since then, Wal-Mart is working and complying with the U.S. and Mexican governments during the investigation.

In more recent international news, Wal-Mart has just “indefinitely delayed” plans to open many superstores in the Asian market of India because the Indian government demands foreign retailers to make a 30% product purchase from local Indian businesses.  

In another Asian market, China, Wal-Mart is moving full steam ahead to add 110 stores within a three year period, though it will also be closing some under-performing stores while revamping others in  China and Brazil.   

Overall, the international business is the primary contributor to Wal-Mart’s growth with countries like, Mexico, Brazil, and China leading in their strong support of overseas sales.

For third quarter expectations, Wal-Mart predicts its earnings to be between $1.11 and $1.16 per share and that 40% of its international revenue would come from comparable store sales growth.