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  • The Seville Reporters

In Focus: Quick Hits

Updated: Jul 28, 2019

Thanks for checking out this week's In Focus, a look into a company, companies, or markets that made Wall Street's news cycle. This week I bring a little bit of everything in focus.

Last week produced a lot of news on the back of Q2 earnings. We had Facebook (FB), Amazon (AMZN), Google (GOOGL), Snap (SNAP), Twitter (TWTR), and Tesla (TSLA) all release earnings last week. There were a few stories but none captivating enough to get an entire In Focus dedicated to it. The companies that did have interesting stories behind them like Tesla, Snap, and Google we've recently discussed.

This week I just wanted to touch on a few things that caught my eye and ear.

Source: UPS

United Parcel Service (UPS)

After reporting an earnings beat on revenue and earnings per share Wall Street fell in love with UPS again. The stock jumped over 14% after releasing it's earnings. While there was a lot to be excited about like a 3.4% increase in revenue and a 6.3% increase in operating profits, as well as increased demand for air services I could not join Wall Street's party for UPS.

I like UPS, but it's hard to get excited with Amazon lurking. I believe that many investors think Amazon is building a fleet of planes just to handle Amazon's shipping. I think they aren't seeing that Amazon is gearing up to be a competitor to UPS and FedEx (FDX), by handling shipping for other companies as well as their own shipping needs.

We've made UPS a newsletter recommendation in the past, the last one occurred in March of 2018 around $106 per share. Man did we catch hell when the stock traded under $100 per share and even more hell when it briefly traded below $90. We stuck with it and advised all who purchased that newsletter to do so as well. I wouldn't add to any position now though, as solid as UPS is, Amazon is lurking, and competing with Amazon is very hard to do, ask Walmart.

Boeing (BA)

It is really hard to convince new investors, hell many investor to be truthful, to buy and buy aggressively when things are bad. I get it, it goes against everything life has taught us. Usually when things are good we go for more and when things are bad we stay away. That mindset will not serve you well in investing.

Source: Boeing

Boeing report it's quarterly earnings and investors received the hard numbers that followed the tragedy of the Ethiopian Airlines crash and the grounding of the 737 Max planes worldwide. Boeing took a $5 billion charge to revenue, money they used to compensate airlines for the cost of the 737 Max groundings.

What this ordeal has brought to Boeing is a harder look from regulators. With this type of public scrutiny Boeing will need to go above and beyond this issue to satisfy regulators around the world. This type of oversight isn't a bad thing, it should force Boeing to come out of this a better company than they were on October 29, 2018.

Twitter (TWTR)

Twitter reporting mixed earnings this week. The company grew revenue by 18% y/y beating estimates by $12.9 million, but earnings per share of $0.05 missed estimates by $0.14. Advertising revenue of $727 million increased by 21% y/y.

Revenue and EPS Source: Twitter

When I think of social media 20 years from now I still see Twitter. Maybe not as the leader in social media platforms, but I think they are still around. Think about the last big issue/scandal that you heard about. Your news station, whether on TV or digital quoted reactions from...? Not Facebook, not SnapChat, not Pinterest, and not TikTok. If you want to get the pulse of something, Elon Musk smoking weed, a YouTuber's eating disorder, a celebrity cheating scandal, you get that from Twitter. Twitter is a buy on the pull backs.

T-Mobile (TMUS) & Sprint (S)

It does appear the DOJ has approved the merger of these two companies, but there are state regulators still fighting the merger.

Here is another wild speculative thought. In several years many mobile phone buyers will not use Sprint, T-Mobile, AT&T, or Verizon. I believer there is a day in the not so distant future when Apple, Google, and maybe even Facebook and Amazon will provide wireless service to you for "free" which means access to your information in exchange for a level of free wireless service.

It's not as crazy at it sounds, Google already offers Google Fi for customers who purchase Google phones directly from the company, there is a charge, but the ideal that big tech is already carving out a space for itself should scare mobile carriers.

I imagine in the future, when you pick up your iPhone from the Apple store it will already be connected to the Apple Network.

The current tech revolution has made wired lines into homes obsolete. I did a quick check of people I'm in regular contact with to see if they have a phone line going into their homes, and no one did. Some had multiple cell phones, one they use specifically for work, but no one had a phone line in their home. All that to say I think the next tech revolution makes T-Mobile, Sprint, AT&T, and Verizon obsolete to wireless users.

Hit the Wrap it Up Music

For this week UPS is something to be cautious of. It jumped 14% in three days, I don't think it has the legs to keep running at this pace, also it's one Amazon press release about its delivery service from giving back that 14%.

When it comes to Boeing buy when others are in a panic, there are some tough times ahead for Boeing, but I would advise not trying to time this. Get it if you can, tuck it under your pillow, look at it in 24 to 36 months from now, you should be sitting on a nice pile of profits then.

Twitter is trending in the right direction with its monthly active users. These price levels don't scream bargain, but it is worth looking into on a pull back. T-Mobile and Sprint are an avoid. I think technology reshapes the wireless industry in the near future.

This is where I leave you, with some thoughts on UPS and its Amazon problem, a hope for a better future for Boeing, and some wild speculation on Twitter and the wireless industry. Thanks again for checking out In Focus.


What is The Seville Report

The Seville Report is our attempt to bring world class investment research to people who feel world class investment research isn't available to them. We also want to demystify the stock market for people who wouldn't normally think of putting their money in the stock market. Our research comes quarterly via our newsletter, The Seville Report. We use the website and this blog to share thoughts and ideas about the markets and different companies.

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