SINGAPORE (Reuters) – Amazon.com Inc on Wednesday launched its subscription-based Prime service in Singapore that provides access to fast shipping, streaming and gaming, intensifying competition with incumbent rival Alibaba-backed Lazada in Southeast Asia.
FILE PHOTO – The logo of Amazon is seen at the company logistics center in Lauwin-Planque, northern France on February 20, 2017. REUTERS/Pascal Rossignol/File Photo
In July, the e-commerce giant made its biggest push into Southeast Asia by launching a free two-hour delivery service in the city-state, marking its first head-on battle with Chinese rival Alibaba Group Holding. (bit.ly/2AakmBO)
But in what was seen as the first step toward developing a major footprint in the fragmented region of 600 million people, some customers were underwhelmed by its initial limited product categories and it faced tough competition from rivals, such as Lazada.
Now Amazon, which had been offering its two-hour delivery service Prime Now for free on a S$40 ($29.70) minimum purchase in Singapore without any membership fee, will start charging S$8.99 per month after a limited introductory period.
While introducing the membership, the online retailer more than halved the threshold for free international shipping to Singapore and also cut delivery times, hoping the deal will attract more shoppers to its platform that will now give access to more than 5 million items from Amazon U.S..
Lazada had launched its own subscription-based customer loyalty program LiveUp in Singapore in April.
Reporting by Aradhana Aravindan; Editing by Miyoung Kim and Neil Fullick
Jack Ma, founder and executive chairman of Chinese e-commerce giant Alibaba, warned against President Donald Trump’s threatened trade war with China.
“It’s easy to launch a war, but it’s so difficult to stop a war,” Ma said on stage at the Fortune Global Forum business conference in Guangzhou, China on Tuesday.
Ma, whose company is pushing to become a global powerhouse, including in the United States, would, of course, be a big loser if the Trump Administration clamped down on China over what Trump describes as that country’s unfair trade practices. Imposing extra tariffs on Chinese imports would make goods sold through Alibaba’s web sites—which include rivals to eBay and Amazon—more expensive to U.S. customers.
Habitually optimistic, Ma avoided criticizing Trump, who he met at Trump Tower in January during the presidential transition and then gushed about in front of cameras downstairs as being “smart” and “open minded.” Instead, Ma minimized any differences between the two countries, saying “even a wife and husband have problems” while preaching the virtues of globalization.
“We have to make sure that every country benefits from globalization,” he said. “We have to make sure that farmers can sell things, we have to make sure that young people benefit.”
Alibaba, Ma argues, helps small U.S. businesses by giving them a huge international market for their products and a cheap source of supplies. And that translates into more U.S. jobs, something that is music to President Trump’s ears—at least when he’s not bashing China.
“He’s making progress,” Ma said of President Trump. “He’s trying hard.”
Ma’s advice is for business leaders to take the initiative when it comes to trade policy, no matter which way the wind is blowing in Washington or Beijing.
“We should never wait for policies,” Ma said. “We should go before the policy and try to do it.”
That simple strategy sounds convincing coming from Ma, a master salesman who transformed the startup he founded 18 years ago into an online powerhouse with market value of $433 billion. But reality can be a lot tougher when it comes to international trade diplomacy, especially with a president who campaigned on “America first” and unilaterally canceling trade deals.
In less than a decade, China has emerged as the world leader in e-commerce. It claims more online shoppers than any other nation. The numbers speak for themselves.
China is home to 730 million Internet users, it accounts for 40% of global retail e-commerce, and its mobile payment market is a whopping 11 times the size of the U.S. market.
“Whether we’re talking about transactions, technology, or money, China really stands out,” said McKinsey senior partner Jonathan Woetzel Tuesday at Fortune’s Brainstorm Tech International Conference in Guangzhou, China.
And this is only the beginning for China’s astronomical growth in the e-commerce space, Wortzel said. For one, China is still in the early days of the country’s middle-class boom. In other words, more than 300 million middle-class consumers with rising disposable incomes are propelling the consumption of China.
Zhang Xuhao is one Chinese entrepreneur who is taking advantage of this emerging trend. Xuhao is the CEO of Ele.me, China’s leading food delivery startup, which is valued at approximately $6 billion and counts Alibaba and Tencent among its investors.
“In China, more and more people don’t want to go out,” Xuhao said at the conference. “There are traffic jams, there are parking fees, so I think it’s a very reliable way for people to get food.”
Ele.me holds 55% of market share in the country, while its main competitor, Meituan Waimai comes in second with 41%. Here’s where it gets complicated: Alibaba was one of the original backers of Meituan before offloading its assets to focus on Ele.me.
“As you expand in China, relationships become very complicated,” Xuhao said. “Sometimes [our rivals] are our friends, and sometimes they are our enemies. The competition is so fierce.”
The company is one of China’s darling unicorns, with more than 260 million users in 2,000 cities across the country. Now, Xuhao says he’s focused on expanding the company’s retail categories, working with Alibaba to deliver goods straight from the platform, and entering more cities. “If you’re a winner in China, that means you can be a winner in the world,” he said, alluding to his global ambitions.
Woetzel said foreign business leaders need to pay close attention to e-commerce giants that are rapidly dominating the Chinese market. “The main thing people under-appreciate is how big a change you have to make in order to be successful in the digital world of China,” he said. “The growth is higher, the stakes are higher, and the competition is much more intense.”
Many Western companies have found China to be a difficult market to crack, and home-sharing giant Airbnb is no exception.
“Frankly, we weren’t sure [Airbnb’s model] was going to work here,” said Airbnb co-founder and chief strategy officer Nathan Blecharczyk at Fortune’s Brainstorm Tech International Conference in Guangzhou, China on Tuesday. “We had heard the stories about other tech companies and how hard it is to succeed in China, and so we weren’t sure whether to make it a priority or focus on other things that were more straightforward.”
Chinese tourists are the biggest spenders on international tourism with more than 135 million people traveling outside of China last year. The country has been the largest outbound travel market since 2012 and its tourist spending has had double-digit growth each year since 2004. “That alone is reason to prioritize it,” Blecharczyk said.
After a year of contemplation, Airbnb decided to make the leap and give it a go in China. But since launching its Chinese arm three years ago, Airbnb has faced fierce competition from local rivals and encountered discoverability issues related to government censorship of websites like Google, Facebook, and Twitter.
“So much of our site was dependent on those technologies, so we really had to localize the product,” Blecharczyk said.
Airbnb began building relationships with the government and built a 60-person product team in Beijing. Once the company began “localizing” the product, it saw an almost immediate lift in bookings.
For example, Airbnb unveiled a new brand name to be used in the country: ‘Aibiying’ (爱彼迎), which means “welcome each other with love.” The re-naming was part of a larger effort by the company to expand its visibility and presence in China. Airbnb also announced the launch of Trips, a feature that offers suggestions for local experiences, in China.
It also integrated Alipay, Alibaba’s online payment platform, into the Airbnb platform. Today, more than half of Airbnb China’s bookings are paid via Alipay.
These additions have led to some pretty impressive growth. To date, approximately 8.6 million Chinese guests use Airbnb when traveling abroad. Inside of China, there are about 120,000 homes listed on the Airbnb platform. Three years ago, that number was only 10,000.
Airbnb will continue investing heavily in the market to ensure that growth continues. Blecharczyk said the company is currently building a local customer service center and plans to triple its 60-person product team in the new year. Airbnb also recently announced it will invest $2 million through 2020 to support “innovative tourism projects” throughout the region. Airbnb has previously said that China is projected to be its largest origin market by 2020.
“That’s definitely the way it should be long-term,” Blecharczyk said. “China is the largest travel market both outbound and domestically, so it’s really big. And if you look at our trajectory, that is very possible.”
Bank of America (BAC) shares have greatly outperformed the broader market since Mr. Donald J. Trump was elected to be President, as BAC shares have increased in value by 70% while the S&P 500 is up only 25%.
BAC shareholders have rode the Trump train to impressive gains since November 2016 but, in my opinion, this bank still has a great story to tell as we progress toward 2018. As such, I believe that investors should stay on the train, because BAC’s long-term story is still intact and it is actually getting better with time.
Where Did We Come From? A Challenging Environment
Prior to 2016, BAC was viewed as the government’s piggy bank, as the bank paid well-over $90B in legal fines and settlements related to pre-Financial Crisis wrongdoings. As a direct result, the bank’s earnings fell off a cliff and investors jumped ship for greener pastures.
The bank, however, not only had to face rising legal expenses but it also had to contend with the headwinds that were caused by the low interest rate environment.
This bank could do no right in the eyes of most investors and, simply put, bearish sentiment wrecked havoc for BAC and its shareholders. It is, however, important to note that BAC was not the only bank that was punished during this period of time, as the three other large financial institutions – JPMorgan (JPM), Wells Fargo (WFC) and Citigroup (C) – also faced downward selling pressure.
On the other hand, a few short years ago, as described in this article, Mr. Brian Moynihan, CEO, started doing what was necessary to right the ship and the market finally realized that management’s plans were bearing fruit. Therefore, sentiment for the once ‘too-hot-to-hold’ bank slowly started to turn positive.
The Bank’s Latest Results Tell A Nice Story
On October 13, 2017, BAC reported better-than-expected Q3 2017 adjusted EPS of $0.48 on revenues of $21.8B, which compares favorably to what the bank reported in the same quarter of the prior year.
The highlights from BAC’s Q3 2017 results were the following:
Net income of $5.6B, which was a YoY increase of 13% (YTD net income was up 19% YoY).
Noninterest expenses were $13.1B, which was an improvement of 3% when compared to Q3 2016.
Average deposits were up 4% (or $45B) and average loans/leases were up 6% YoY.
Return on assets (“ROA”) of 0.98%.
Additionally, each of the bank’s business segments performed well over the most recent three-month period.
BAC’s quarterly results were already well-covered on Seeking Alpha (see here), so I do not want to spend my time rehashing what you all already know. Instead, I want to focus on two very important takeaways from the Q3 2017 results.
First, BAC’s below-average ROA has plagued this bank for years and it was actually one of the main talking points for the bears.
As shown, BAC’s ROA – a metric that most analysts believe should be around 1 or higher – has lagged the peer group over the last five years. The benefits of management improving BAC’s ROA are two-fold: (1) the bank is obviously earning more on its assets and (2) it improves investor sentiment in a major way. This is the reason why BAC’s close to 1% ROA for the most recent quarter is so important. Looking ahead, investors should bake in expectations for this metric to continue to climb because, in my opinion, Mr. Monyihan and team have BAC well-positioned to prosper in the changing operating environment.
The other major takeaway from the quarterly results was just how sensitive BAC is to interest rates (a topic that is well-known by most BAC shareholders). To this point, BAC reported a $1B YoY increase, or ~10%, in net interest income (“NII”) for the quarter.
This may not seem like much but it is. More importantly, management expects for BAC to greatly benefit from gradual increases in interest rates as we head into 2018 and beyond. Currently, management expects that the bank would benefit by the tune of $3.2B in additional NII on “+100bps parallel shift in the interest rate yield curve, driven primarily by sensitivity to short-end interest rates”.
BAC’s Q3 2017 results showed that Mr. Moynihan has this bank well-positioned for the future, and investors should be encouraged by the prospects that the U.S. banks will soon be operating in a more-favorable environment.
Where Are We Going? An Improving Environment
On November 28, 2017, BAC shares finished the trading day up almost 3% as the market digested Mr. Jerome Powell’s confirmation hearing to become the next Fed Chair. It was not only BAC shares that benefited from the hearing, as the financial sector finished up almost 3% on the same day.
The Powell hearing was, however, not the only positive news, as it has become more likely that the GOP may actually have the votes to push through a game-changing tax reform bill. In addition, the 10 year treasury has also been ticking higher over the last six months.
At the end of the day, BAC’s operating environment has slowly started to improve over the last two plus years and, more recently, the bank’s future growth prospects appear extremely promising from here. What used to hold BAC shares back (i.e. sentiment), is actually what has propelled the stock price higher so far in 2017. And, investors should not expect for this to change anytime soon.
BAC shares are trading at an attractive valuation when compared to the bank’s peer group.
It is important to note that BAC’s book value and T/BV were negatively impacted by the Berkshire (BRK.A) (BRK.B) stock conversion that occurred during the last quarter. If BAC shares were trading inline with JP Morgan (JPM) or Wells Fargo (WFC), the stock would be worth $34/share (upside potential of ~20%). Mr. Moynihan still has some work to do before BAC will be viewed in the same light as some of the bank’s competitors, but, in my opinion, the bank is without a doubt heading in the right direction and it will likely warrant a similar type of valuation in the near future.
BAC shares are still attractively valued at today’s price, even after the run-up since November 2016. I believe that this bank has a lot more going for it than just the potential benefits of interest rate hikes, as deregulation and the opportunity to return capital to shareholders have both become more important components of my investment thesis. BAC’s long-term story – an under-appreciated bank that is slowly gaining investor’s trust back by improving its expense base and returning capital to shareholders – is still intact and, in my opinion, the future looks even brighter for this large financial institution as we approach 2018.
At the end of the day, I believe that BAC shares are a great investment at today’s price so I would treat any pullbacks as long-term buying opportunities.
Author’s Note: BAC (common stock and TARP warrants) is a core holding in my R.I.P. Portfolio, and I have no plans to reduce my stake in the next few weeks.
If you found this article to be informative and would like to hear more about this company, or any other company that I analyze, please consider hitting the “Follow” button above. Or, consider joining the Going Long With W.G. premium service to get exclusive content and one-on-one interaction with William J. Block, CPA, President and Chief Investment Officer of W.G. Investment Research LLC.
Disclaimer: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.
Disclosure:I am/we are long BAC, C.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
This research report was jointly produced withHigh Dividend Opportunitiesco-authors Jussi Askola and Philip Mause.
During the year 2017, investors have favored “growth stocks” which have strongly outperformed at the expense of “value stocks”, and notably “value dividend stocks”. Investors have been under-allocating Property REITs, BDCs, and Midstream MLPs in favor of growth and momentum stocks such as Technology and FANG stocks (FANG being Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), and Google (NASDAQ:GOOG) (NASDAQ:GOOGL)). This has resulted in very high, and even excessive valuations, for many of these stocks.
The good news is that today, Property REITs, BDC Companies, and Midstream MLPs are trading at their lowest valuations in years and currently offer investors a unique entry point.
In the recent months, we have been very busy with the REIT sector (as well as with other High Yield sectors) which presented a large number of new opportunities. The market sentiment is today turning more and more pessimistic on certain specific names as a result of concerns over many factors. This includes the state of the retail industry, interest rate hikes, and even potential changes to tax policies. This led to large sell-offs, causing many REITs to drop to levels where the risk-to-reward outcomes appear increasingly interesting.
In this article, we aim to shortly outline our buy theses for 3 picks that we have covered in detail at “High Dividend Opportunities“, whereby many of our subscribers and followers are today invested in these names and enjoying high dividend yields, along with other high dividends from other sectors that we cover.
Pick #1: SOHO, High Yielding Hotel Opportunity, 7.6x FFO, 6.5% Yield
Sotherly Hotels (NASDAQ:SOHO) is a small cap hotel REIT with a particularly strong and convincing buy thesis. It combines extreme value with share buybacks, positive guidance, a high yield and a favorable track record.
Trading at 13% AFFO yield, the REIT pays out 6.5% dividend yield (which is covered at 200%), and reinvests the remaining in growth. This appears particularly inexpensive in a market where the broad REIT market at 19x FFO. There is more risk as a result of the small size and higher leverage, but the valuation gap is way excessive, in our opinion.
The Price to NAV provides additional evidence that Sotherly may be grossly undervalued. Rough estimates indicate up to a 50% discount to NAV at the current share price, making the recent share buybacks very accreditive.
Despite trading at a deep value share price, the track record has been relatively favorable with impressive growth. Moreover, the 2017 guidance is very encouraging. The management team is expected to generate an AFFO per share with a midpoint $0.92 – or a 2% increase in AFFO compared to 2016. This is despite the hurricane season which had a one-time effect on the REIT’s bottom line. Guidance prior to the hurricanes was at $1.05 (mid-range) or an increase in AFFO by 16.7%. Therefore, 2018 FFO is likely to grow at a faster rate, barring another hurricane disaster.
The dividend yield stands currently at 6.5% and represents only about 50% of its expected 2017 cash flow. Many high-yield stocks come with low/no growth, and yet, Sotherly has more than doubled its payout in the last three years alone.
Conclusion: There is a lot to like in Sotherly at today’s price. Despite the price having already increased by 15% since publishing our initial thesis, it remains one of the cheapest REITs out there as measured by its low AFFO multiple and high discount to NAV. Yet it owns a well performing portfolio and is being well managed. The market is today focused on short-term issues and high debt load and seems to forget the big picture. Sotherly has issued a positive guidance, owns good assets, and the high dividend is very well covered.
Washington Prime Group (NYSE:WPG) is a Class B mall REIT that has gotten way oversold because of extreme fears over the growth of e-commerce. The market is highly pessimistic today and is pricing WPG at only 4.3 times FFO, while the company is not seeing any “major” fundamental issue.
It is clear that e-commerce will keep on growing and certain tenants will suffer. That said, WPG is much better positioned than the retailers themselves as it can replace poorly performing tenants with superior ones and keep on collecting rent checks. So far, WPG has had no problem doing so as demonstrated by the stable occupancy rate, relatively resilient Net Operating Income (or NOI), and attractive returns on redevelopment projects.
Despite not showing any “major” fundamental flaws, WPG is one of the cheapest REITs today based on NAV discount, FFO multiple, and dividend yield. It is trading at an estimated 40-50% discount to NAV, 4.3 times its FFO, and a 13.9% dividend yield, which is covered at 165%.
One could point out that the cash flow is expected to keep declining a bit in the near term, but this is not due to “operational” difficulties; rather it is due to the “strategic” decision to sell lower quality malls and reduce debt. Moreover, this should not put the current dividend in danger.
WPG has an investment grade rating and ample liquidity to keep on executing its strategic plan of redeveloping certain properties and improving its portfolio quality which should eventually lead to a higher FFO multiple. Trading at 4.3 times its FFO, even a small upward adjustment would result in sizable gains.
Conclusion: the mismatch in fundamental performance and share price performance is what makes WPG a compelling investment. While the market has seen panic selling of the shares at each negative news, WPG has been consistently collecting its rental income and has managed to maintain fairly consistent profitability. Shares are down over 60% in the past 3 years, but the cash flow and fundamentals have not deteriorated nearly that much. We expect strong price recovery eventually as the market reevaluates its extremely pessimistic sentiment.
What matters the most in the REIT space is the quality of the management team. We consider Ladder Capital (NYSE:LADR) to be one of the best managed mREITs.
Its business model is diverse and allows it to adapt to changing market conditions. It results in superior returns to equity (‘ROE’), but this comes at the expense of more volatility over the short run.
Despite the higher ROE, LADR has maintained strong discipline in its lending as it has not experienced ANY credit loss since its inception.
The complex business model of LADR has resulted in a cheap valuation which is only pricing the firm at about 8x its 2Q 2017 Core Earnings. As such, the market is currently not factoring in any premium to LADR’s superior management and business model.
The 9.2% dividend yield is well covered at 130% and leaves room for further dividend growth as well as superior liquidity to the management.
It is an internally managed mREIT with significant insider ownership. Senior management has on average 28 years of industry experience and owns $175 million (or 11.6%) of the market cap of the Company.
A high single digit dividend yield + good potential for growth + superior management = Great shot at outperforming the market, in addition to a potential for double-digit return annually.
Conclusion: Ladder Capital sticks out as one of the highest quality mREITs as measured by its superior management and business model. Yet, it keeps trading at an attractive valuation and high-yield due to complexity risk and higher volatility in its earnings. We expect long term oriented investors to be well rewarded as long as they are patient and ignore the short-term volatility.
High yield often comes with high risk, and this is why it is always crucial to perform proper due diligence and to properly diversify your holdings. At High Dividend Opportunities, subscribers have access to 3 different portfolios with a “Core Portfolio” totaling 40 high-yield picks with an overall yield of 9.7%.
Lately, we have highlighted many deeply undervalued opportunities in the REIT sector and will continue to present the newest high yielding names to our readers. Just because the broad REIT index sells at a relatively low yield does not mean that high-yielding REITs have disappeared. Our job is to discover them and with proper due diligence, seek to identify the future outperformers in the high yield space.
In this sense, we believe that Sotherly, Washington, Ladder are set to deliver strong results going forward. In all three cases, the dividend yield is significantly above average and well covered. Moreover, given the currently low valuations, we expect strong price recovery to occur sooner or later. There is clear risk, but we consider the current risk-to-reward ratios to be very positively asymmetrical here.
High Dividend Opportunities is a leading and comprehensive dividend service ranked #1 in dividends on Seeking Alpha and is dedicated to high-yield securities trading at attractive valuations. It includes a managed portfolio currently yielding 9.7% – and a selection of the best high-yield Master Limited Partnerships, BDCs, U.S. Property REITs, Preferred Shares, and Closed-End Funds. We just launched our new “Portfolio Tracker,” which is a best-in-class tool for the income investors to track their dividend investments. For those interested, we have launched a video, which features the functionalities of our Portfolio Tracker. To watch the video click HERE.
The Portfolio Tracker is free to all subscribers. We invite readers for a two-week free trial currently offered by Seeking Alpha to have a closer look at our investment strategy. For more info, please click HERE.
Note: All images/tables above were extracted from the Company’s website, unless otherwise stated.
Disclosure:I am/we are long SOHO, WPG, CBL, SRC.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.
The event taps into the strength of two Fortune powerhouse series: Brainstorm Tech, which takes place each July in Aspen, and Global Forum, our long-running CEO summit. (Indeed, Brainstorm Tech International will colocate with this year’s Global Forum.) It takes place in Guangzhou, China’s southern gateway and an emerging center of tech innovation.
Fortune Brainstorm Tech International will explore the innovation revolution unfolding in China, a trend that is not yet fully appreciated or well understood around the world. The old notion of China as a tech copycat nation is being rapidly replaced by the emerging new reality of home grown innovation and mass implementation in fields that include artificial intelligence, social media, biotech, fintech, VR, automotive, the sharing economy, and mobile platforms. The conference program will feature the China innovators who are rewriting the rules and reshaping the landscape, in combination with tech leaders from around the world.
Fortune Brainstorm Tech International is at capacity but you can watch most of the program right here on this page. The festivities begin at 7:00 a.m. local time on Tuesday, Dec. 5 (or 6:00 p.m. Eastern on Mon. Dec. 4).
Numerous technology and semiconductor stocks fell today, with Micron (NASDAQ: MU) and Cypress Semiconductors (NASDAQ: CY) falling 8.7% and 7.0% respectively. I want to focus on the impact of this slide, and encourage investors to look at this as a great time for considering new opportunities for long positions in these companies.
I formerly wrote a piece on CY (you can read it here) and their growth potential as the Internet of Things (IoT) market grows, particularly with the popularity of smart technology entering the home and offices. Micron specializes in flash memory and storage, useful across the gamut of computing applications including mobile, workstation and IoT. For investors holding, be re-assured: the semiconductor industry is not going anywhere. As major firms move money out of technology holdings and into banking, which broadly saw an increase in price (ref. BAC, JPM, WFC), prospective investors would be foolish not to consider investing in a few technology stocks as stock prices begin to shore up.
While many investors (me included) are unsure what the outlook of the tech industry currently is, I think that this severe drop is a necessary correction, but that growth should still be expected for this sector. Many investors were spooked by Morgan Stanley’s cautionary expectations on pricing for NAND and labeling the stock still as overvalued. While I agree that the stock is overvalued, from considering the fundamentals of the company and their potential to further grow, I think that Micron is a great buy once it appears the stock has stabilized.
Considering the last 3 months, Micron has still seen incredible growth of 40%, including its most recent tumble. The RSI indicator shows that the stock is seriously undervalued, and I think that the ADX should be heeded at this point as it does not indicate that the stock has completely lost all of its momentum. Considering the last two support lines, it seems that we are reaching the previous support line around $42.50; yet I do not think that investors have any need to worry about the health of the stock unless the stock breaks through both support lines.
Price for MU for the last 3 months, with two support lines indicated in maroon. Relative Strength Index (RSI) and Average Directional Index (ADX) beneath. The ADX and RSI are both based on a 14 period calculation. Full size available here.
As a long-term value investor, I also think that the picture for CY is not as bleak as it instinctively appears. On the contrary, I believe that the stock has great potential, at a great price for new investors. Similar to Micron, CY is undervalued as indicated by the RSI and surprisingly, the ADX is not at an all-time low after the recent dip. Looking at the 50-period moving average, it shows that the stock has made sustained growth over the window of consideration, and that it will likely continue to perform well.
Price for CY over the last 3 months with 50-period moving average indicated in orange and support line in red. RSI and ADX below. Full size available here.
However, for all my optimism, it would be foolish to not look at the reasons for the sell-off. Morgan Stanley has downgraded its view on a number of semiconductor and tech stocks before its report on lower expectations for NAND memory pricing and a word of caution about the industry in general. Yet their price target for MU is up to $55 from $39, which gives bullish investors somewhat of a confidence boost. Regardless, stock valuation depends largely on investor confidence, and if Q4 reports show slowing growth, investors may begin to migrate away from technology in a more serious fashion.
In conclusion, I believe that this recent sell-off of technology and semiconductor stocks is not a major cause for concern for investors with open positions as long as the slide does not continue. For new investors, I think that this is an excellent opportunity to enter in a long position once prices stabilize. My word of advice to those who are nervous about continuing to hold, or to enter into a position would be to wait and see to determine whether this is a major change in market sentiment, or just an instinctive sell-off. Between CY and MU, I think that these stocks should continue to give investors a great return year-on-year and continue to outperform the competition.
Disclosure:I am/we are long CY.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I may also be interested in initiating a long position in MU over the next 72 hours.
Amazon.com(amzn) this week announced a flurry of new machine learning features for its Amazon Web Services cloud computing business, raising its challenge to Silicon Valley’s biggest tech firms for the lead in artificial intelligence.
The new offerings will enable AWS customers to develop and quickly “train” their own artificial intelligence algorithms, build software applications capable of translating language on the fly, analyze video, and scan text for trends or key phrases.
Artificial intelligence (AI) refers to machines carrying out tasks that are normally associated with human intelligence. Machine learning (ML) is a subset of AI in which sophisticated computer algorithms are developed to recognize patterns in large volumes of data to solve problems on their own.
For example, with two of the new AWS features a company could quickly transcribe customer phone calls and then analyze the text for customer sentiment.
Already Apple(aapl)Facebook Inc (fb), Amazon and other top tech companies are developing and using AI for their own products, but the new offerings from AWS could make it easier and more affordable for startups and less tech-savvy enterprises to implement AI technology.
The product announcements, made at AWS’s annual conference in Las Vegas, cap off a year in which Amazon released 1,300 new AWS features, up from a little more than 1,000 in 2016.
“As always, Amazon is making it easier for companies to get started using new technologies,” said Mikhail Naumov, co-founder of DigitalGenius, a London-based customer service startup that uses AI. “Now they are making it easier for companies of all sizes to leverage powerful ML tools in their business.”
Despite being the pioneer and dominant player in the cloud computing market, AWS is playing catch-up to chief rivals Microsoft Corp (msft) and Alphabet Inc’s Google (goog) when it comes to new AI offerings, several of which will not be generally available until sometime in 2018.
For more on artificial intelligence, watch Fortune’s video:
Microsoft, for example, offered Translator, a direct competitor to the new Amazon Translate, as far back as 2011, Microsoft said. And Google Cloud Platform introduced the Google Natural Language API, a rival to the new Amazon Comprehend, last November. Throughout 2017 both Microsoft and Google announced AI services that rival those unveiled this week by AWS.
“If Amazon can offer products that are just good enough, it can use its leading position,” said Chris Nicholson, CEO of Skymind, a San Francisco startup that provides AI solutions for enterprises.
Among Amazon’s AI announcements is Amazon SageMaker, which lets companies build and quickly train machine learning algorithms. It also announced Amazon Rekognition Video, which uses AI to detect objects and faces in customers’ video content; Amazon Transcribe, which turns audio into text; Amazon Translate, which translates text; and Amazon Comprehend, which analyzes text for sentiment and key phrases.
“We expect the big three to continue to play a game of leapfrog over the next several years as the enterprise moves from experimental to industrialization of AI and machine learning,” said Ken Corless, a principal in Deloitte Consulting’s cloud engineering practice. “Given their market share, AWS’s announcements are significant as they are signaling to the market that they will not cede this space to Microsoft or Google.”
LONDON (Reuters) – Europe is making major strides to eliminate barriers that have held back the region from developing tech firms that can compete on the scale of global giants Alphabet Inc’s Google, Amazon.com Inc or Tencent Holdings Inc, a report published on Thursday shows.
An attendee interacts with an illuminated panel at Google stand during the Mobile World Congress in Barcelona, Spain, March 1, 2017. REUTERS/Paul Hanna
The region has thriving tech hubs in major cities, with record new funding, experienced entrepreneurs, a growing base of technical talent and an improving regulatory climate, according to a study by European venture firm Atomico.
While even the largest European tech ventures remain a fraction of the size of the biggest U.S. and Asian rivals, global music streaming leader Spotify of Sweden marks the rising ambition of European entrepreneurs. Spotify is gearing up for a stock market flotation next year that could value it at upward of $20 billion. (reut.rs/2wYORnI)
“The probability that the next industry-defining company could come from Europe – and become one of the world’s most valuable companies – has never been higher,” said Tom Wehmeier, Atomico’s head of research, who authored the report.
Top venture capitalists and entrepreneurs in the region told Reuters they are increasingly confident that the next world-class companies could emerge from Europe in fields including artificial intelligence, video gaming, music and messaging.
“What we still need to develop is entrepreneurs who have the drive to take it all the way – I think we are starting to see that now,” said Bernard Liautaud, managing partner at venture fund Balderton Capital, who sold his software company Business Objects to SAP for $6.8 billion a decade ago.
The Atomico report is being published in conjunction with the annual Nordic technology start-up festival taking place in Helsinki this week and set to draw some 20,000 participants.
Capital invested in European tech companies is on track to reach a record this year, with $19.1 billion in funding projected through the end of 2017 – up 33 percent over 2016, according to investment tracking firm Dealroom.co.
The median size of European venture funds nearly tripled to around 58 million euros ($68.7 million) in 2017 compared with five years ago, according to Invest Europe’s European Data Cooperative on fundraising investment activity.
Beyond the availability of funding, Europe has a range of technical talent available to work more cheaply than in Silicon Valley, enabling start-ups to get going with far less funding.
With a pool of professional developers now numbering 5.5 million, European tech employment outpaces the comparable 4.4 million employed in the United States, according to data from Stack Overflow, a site popular with programmers.
London remains the top European city in terms of numbers of professional developers, but Germany, as a country, overtook Britain in the past year with 837,398 developers compared with 813,500, the report states, using Stack Overflow statistics.
While median salaries for software engineers are rising in top European cities Berlin, London, Paris and Barcelona, they are one-third to one-half the average cost of salaries in the San Francisco Bay Area, which is more than $129,000, based on Glassdoor recruiting data.
PUSHING UP AGAINST LIMITS
Big hurdles remain. A survey of 1,000 founders by authors of the report found European entrepreneurs were worried by Brexit, with concerns, especially in Britain, over hiring, investment and heightened uncertainty in the business climate.
Although Europe has deep engineering talent, many big startups focus on business model innovation in areas such as media, retail and gaming rather than on breakthrough technology developments that can usher in new industries, critics say.
Regulatory frameworks in Europe put the brakes on development on promising technologies such as cryptocurrencies, “flying taxis” and gene editing, while autonomous vehicles and drones face fewer obstacles, the report says.
A separate study by Index Ventures, also to be published on Thursday, found that employees at fast-growing tech start-ups in Europe tend to receive only half the stock option stakes that are a primary route to riches for their U.S. rivals. Yet their options are taxed twice as much.
The Index report said employees in successful, later-stage European tech start-ups receive around 10 percent of capital, compared with 20 percent ownership in Silicon Valley firms.
“There is quite a gap today between stock option practices in Europe and those in Silicon Valley,” Index Ventures partner Martin Mignot said in an interview. “There are other issues where Europe is behind, but we think stock options should be at the top of the agenda.”
Another factor holding back Europe is that regional stock markets encourage firms to go public prematurely, Liataud said.
“Europe has markets for average companies. In the U.S., going public is hard. You have to be really, really good. You have to be $100 million, minimum, in revenue,” the French entrepreneur-turned-investor said. “Nasdaq and the New York Stock Exchange have not lowered their standards.”
($1 = 0.8442 euros)
Reporting by Eric Auchard in London; Additional reporting by Jussi Rosendahl and Tuomas Forsell in Helsink; Editing by Leslie Adler
As an angel investor and business advisor on new ventures, I expect to see five-year financial projections from every entrepreneur. Yet I get more push-back on this request than almost any other issue.
Founders point to the great number of financial unknowns in any new business, and are reluctant to “commit” to any numbers which may come back to haunt them later.
From my perspective, projecting financial returns is part of the homework every business person needs to do in sizing customer opportunity, product costs, pricing, competition and customer value, before expending their own resources in a highly risky venture.
You need these projections to assess viability, set internal goals and milestones, and measure your team’s progress.
For investors, it’s more of a credibility and intelligence test. Does this entrepreneur understand the basics of business costs in the selected business domain, growth dynamics, and the competitive environment?
Reasonableness and business sense are the issues, rather than accuracy, since everyone knows that key parameters will change often before success.
There is no black magic involved in predicting numbers, and I always recommend sticking with the some basic guidelines, outlined here. With these, if you can paint a positive picture for your new venture, I assure you that investors will sit up and take notice, and you will also know how to drive yourself and your team:
1. Determine your gross margin on sales.
Per-unit cost less your cost per unit sold is your gross profit margin. If you lose money on every unit, you won’t make it up in volume.
As a rule of thumb, most new businesses need a margin above 50 percent, even on wholesale prices, to cover operational expenses and survive long-term as a business.
2. Project unit-volume and price levels.
Based on your market size and penetration expectations, size how many units you will sell, at what price, in every channel.
This should ideally be a “bottoms-up” commitment from your sales team, not your own optimistic guess. Be sure to include expected volume cost and price reductions over time.
3. Quantify overhead and growth costs.
It’s amazing how fast costs escalate as you grow. You need five percent or more of revenue for marketing, more for new development, and people costs will double as you add benefits, insurance, training, IT and processes.
Check competitor numbers and industry average statistics to get you in the right range.
4. Set a target growth and market penetration rate.
If you want to be assessed as a “premium” acquisition candidate down the road, an aggressive but reasonable target might be doubling revenue each year.
For credibility, market penetration within five years should be at least five percent. Numbers far afield from these need special explanations.
5. Calculate cash-burn rate and investment timing.
Initial sales success means more cash will be needed for inventory, receivables, facilities and people. Project your cash burn rate to keep at least 18 months between venture capital or angel investments. You need to know how many units to sell, and how much time you need to break-even.
From a planning and strategy standpoint, I offer these additional recommendations to maintain your credibility with outside investors, and to balance your risk due to market uncertainty:
Add a buffer to your investment calculations. Investment requirements should always be based on financial projections and cash-flow calculations, not on what you think you can negotiate. If your cash flow shows a shortfall of $750,000, add a 33 percent buffer, and ask for a million. Be willing to give up 20-33 percent of your equity to support this.
Avoid high-medium-low projections, as well as irrational ones. Investors want entrepreneurs to be aggressive, but don’t make projections that make you look like the next Google. Entrepreneurs tend to be driven by their own targets, so pick an aggressive one, and you will likely do better than starting with a conservative one.
You don’t need complicated ratios for a startup business plan, since you don’t have a history. On the other hand, without financial projections, you don’t have a viable venture proposal.
You don’t need an MBA to be credible with investors, just some common sense business expectations, and passion based on some data. Most of us need full investor support to turn our dream into reality.
One of my favorite movies is I Don’t Know How She Does It. It stars Sarah Jessica Parker and garnered a mere 17 percent on Rotten Tomatoes. In it, Parker tries to juggle the many roles she plays in life: mother, wife, friend, and manager at an investment firm.
I remember watching it for the first time while folding my baby’s laundry. Despite the fact that no one else seemed to enjoy the movie, I found myself nodding along with the heroine’s challenges as if she was telling the world our little secret: If you want something done, have a mother do it.
Here are three lessons I’ve learned as a mother — stay with me — that have made me a better entrepreneur:
1. Moms make every minute count.
Every day at 12 P.M. sharp I would put my little ones down for their naps, kiss each of their foreheads, quietly shut their doors, and then sprint to my home office. I would whip open my laptop and get right to work — no time for Facebook, no time for pinning new recipes. When kids are really little, nap time is the only time moms have any time to get things done. And, like little ticking time bombs, without knowing how long the kids would sleep, mothers have no choice but to make the most of every second of it.
Managing distractions is one of the single greatest skills mother’s learn. When your available hours for working are completely dependent on the whims of tiny, helpless humans, you don’t waste a single moment. With the growing body of research about the true detriment of a distracted workforce, this skill is even more valuable.
The next time you feel you don’t have enough time to meet a deadline, pretend you have a sleeping toddler in the next room who, at any moment could wake up and demand your full attention. That will motivate you to turn off your instagram notifications real quick.
2. Moms know how much a minute is worth.
I was a stay at home mom, was four months pregnant with my second child, and we were planning a remodel of our kitchen and entryway. We estimated the project would cost about ten thousand dollars.
However, right about that time I decided I wanted to start a business. I knew, in order to build that business, I would need more kid-free time. I remember sitting down with my husband and proposing that instead of spending that money on a remodel, we should spend it on childcare.
The phrase, “Time is money” is frequently associated with high-powered sales jobs. However, no one knows the price of a minute better than a mother does and not only in terms of dollars and cents.
I remember leaving the house one day after the nanny we hired arrived and my daughter sobbed, wanting me to stay. As I drove to the coffee shop to do my work that afternoon, I vowed to make every minute away (and dollar I invested to have those minutes) count.
Do you know how much a minute of your time is worth? If not, follow a mother’s advice and figure it out. And let that number motivate you to spend it — both the time and the money — better.
3. Moms can work anywhere.
No place is sacred in motherhood — the kids will always find you. On more than one occasion I’ve taken sales calls in my closet or sent an email while hiding the bathroom.
As a result, moms are extremely adaptive. The world is my office.
Sure, I prefer to sit at a desk, but sometimes my office is in my car while I wait in the elementary school pickup line. I’ve written many an Inc.com article while sitting in the boarding area waiting to catch a flight. The more work I get done on the road, the more time I’ll have at home with my kids.
The next time you forgo making some progress on a big project because the working environment is not quite right, think of the mom sending emails while on a play date at the park. If she can do it, why can’t you?
Even though I Don’t Know How She Does It doesn’t make any must-watch movie lists, don’t let the message be lost on you. Whether you watch the film or pay closer attention to the working mom on your block, make no mistake: Some of the greatest time managers are so because they’re mothers.
Apple’s next big innovation may be a foldable iPhone that opens and closes like a book.
The consumer technology giant filed a patent application last week with the U.S. Patent & Trade Office that details its research into electronic devices with flexible display screens.
A foldable iPhone could eliminate some of the inconvenience of carrying full-size smartphones in pockets and purses. Instead, people could fold and then unfold them like a piece of paper when they want to make a call or check their email.
The patent application said that the technology is related to any kind of electronic device that has a display, like a “laptop computer, a tablet computer, a cellular telephone, a wristwatch, or other electronic device (e.g., a portable device, handheld device, etc.).”
If it were to create a foldable iPhone screen, Apple could likely use similar technology in its other products like Mac computers and Apple Watch.
Apple isn’t the only company reportedly interested in foldable smartphones. Samsung is also rumored to be working on a foldable version of its Galaxy branded smartphones.
It should be noted that just because Apple has applied for a patent, doesn’t mean that it will indeed create a foldable iPhone. Companies routinely file and receive technology patents that never become actual products.
In any case, for people who just forked over $1,000 for a new iPhone X—don’t expect them to bend anytime soon.
Alphabet’s (goog) Waymo self-driving car unit asked a U.S. judge on Monday to postpone an upcoming trade secrets trial against Uber Technologies (uber), so Waymo could investigate whether Uber withheld important evidence in the case.
The trial is currently scheduled to begin on Dec. 4 in San Francisco federal court. Waymo said it learned of new evidence last week after the U.S. Department of Justice shared it with the judge overseeing the case.
The two companies are battling to dominate the fast-growing field of self-driving cars.
In its court filing on Monday, Waymo said it recently learned that a former Uber security analyst sent a letter to an Uber in-house lawyer more than six months ago, which contained important facts about the case.
Waymo’s court filing is partially redacted from public view, so the details of the analyst’s letter are unclear. However, Waymo said Uber concealed the letter despite demands from Waymo and the judge to disclose all relevant evidence.
Representatives for Uber could not immediately be reached for comment.
Waymo sued Uber in February, claiming that former Waymo executive Anthony Levandowski downloaded more than 14,000 confidential files before leaving to set up a self-driving truck company, called Otto, which Uber acquired soon after.
Uber denied using any of Waymo’s trade secrets. Levandowski has declined to answer questions about the allegations, citing constitutional protections against self-incrimination.
For more about the Waymo-Uber lawsuit, watch Fortune’s video:
Earlier this year U.S. District Judge William Alsup, who is hearing the civil action brought by Waymo, asked federal prosecutors to investigate whether criminal theft of trade secrets had occurred. That probe is being handled by the intellectual property unit of the Northern California U.S. Attorney’s office, sources familiar with the situation said. No charges have been filed.
Alsup disclosed last week that he had received a letter from prosecutors, which he did not reveal. However, Alsup ordered the former Uber security analyst, the Uber in-house lawyer and another witness to appear in court on Tuesday at a final pretrial conference.
It is unusual for prosecutors to share information with a judge days before a civil case is set to begin.