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.
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.
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.
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 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.
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.
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.