Media

Are Hard-Hit Social-Media Stocks a Buy for Investors? – Morningstar.ca

Published

3 years ago

February 3, 2022

Design Social

Meta Platform’s (FB) mixed earnings results and stock slide is pulling down other social media shares, and in the process pushing them further into undervalued territory. Twitter (TWTR) , Snap (SNAP), and Pinterest (PINS) have each taken a hit Thursday along with a more than 25% dive in Meta, Facebook’s parent company.

However, these social media stocks are also deeply undervalued by Morningstar’s valuation metrics. Even before Thursdays sell off, Snap and Pinterest were in 5-star territory, the level considered the most under valued in our Star Rating system for stocks.

The revenue headwinds facing social media stocks are most likely short term, says Morningstar senior equity analyst Ali Mogharabi. “With that, their top-line growth will still be impressive (mainly PINS and SNAP).”

“FB is of course maturing and with already billions of users, a much higher rev growth deceleration is expected,” he says. “Even with margin pressure as it invests in new products (metaverse, etc.), 30-35% operating margin is impressive. And I think those margins can expand in 2023 when higher demand for ads in Reels drive up ad prices (as mentioned in the note), either stopping or maybe even reversing the slowdown in ad rev growth, which will also help margins.”

Michael Hodel, director of equity research, media & telecom at Morningstar, notes that one of the unknowns hamstringing these stocks is whether online time will increase at anything close to the same rate it has over the past couple years, especially in developed markets. “That at leaves FB and its peers looking to steadily increase ad effectiveness to help push ad prices higher. To me, this is the million dollar question: will data privacy policy changes at Apple, etc. or increased regulation offset any effort to improve ad formats and targeting mechanisms over time?”

Here are some highlights from Mogharabi’s recent commentary on Twitter, Snap and Pinterest. Mogharabi’s note take on Meta can be found here.

Twitter

“Twitter has captured the attention of nearly 200 million daily active users, including prominent celebrities and public figures worldwide. Its access to, and interactions around, real-time information and content create value for its users and for advertisers. While Twitter user growth has accelerated since 2018, a potential slowdown remains a concern. Slower user growth could make higher user monetization more difficult as advertisers may allocate a bit more toward other platforms such as Snap, which has a faster-growing user base. We do not believe that Twitter has carved out an economic moat.

Our fair value estimate is $58 per share, equivalent to 2021 enterprise value/adjusted EBITDA and enterprise value/sales ratios of 27 and 8, respectively. The ad market appears to have rebounded from the pandemic faster than we had expected, though we expect Twitter will continue to lag its peers in attracting direct response ad dollars. Top-of-the-funnel ad campaigns should continue to help, though, especially as live events such as sports return. We project modest growth in Twitter’s user base, due to the established presence of larger social networks such as Meta and Instagram and faster-growing ones such as Snapchat and Pinterest. As engagement improves, we think Twitter will be able to attract its fair share of ad dollars.”

Snap

“Snapchat, which has captured 265 million users to date, most of whom are between the ages of 18 and 24. We believe that Snap and its users benefit from a network effect among its customer base and is starting to attract the attention (and dollars) of advertisers with a growth trajectory toward nearly $3.8 billion in revenue. However, there is no guarantee that Snap will effectively monetize these users consistently. In turn, we are not yet convinced about the firm’s ability to generate excess returns on capital over the next decade. Ultimately, Snap’s competition, which includes wide-moat Facebook with 2.8 billion users, is overwhelming, in our view. In particular, Instagram, owned by Facebook, may emerge as a substitute for Snapchat. The larger ecosystems of Snap’s competitors may have also created somewhat of an exit barrier for their users, which we think could further limit the growth acceleration of Snapchat users. In addition, growth in new users, user engagement, and time spent on Snapchat may face a natural limit in the long run as customers only have so much time to give to various mobile app interactions each day. TikTok, a video-sharing firm with China’s ByteDance as its parent company, is another formidable competitor of Snap.

Our fair value estimate for Snap is $70 per share, which represents an enterprise value/sales multiple of 20 in 2022. We project tremendous revenue growth for Snap at a 10-year average rate of 30%. Within our discounted cash flow model’s initial 10-year projection, we have assumed that Snap will become profitable in 2023 and will improve its current operating loss to an operating margin of 40% by 2030. Snap’s revenue growth will be driven primarily by growth in the firm’s daily active users, or DAUs, user engagement, overall online advertising spending, more adoption of the augmented reality ad format, and an increasing allocation of online ad dollars toward mobile and social network ads, in addition to the firm’s more aggressive monetization of Snap Map, Communication (chat, minis, and games), and camera. We expect recovery from COVID-19 to further boost top-line growth.”

“Pinterest, an online product and idea discovery company, is focused on carving out a piece of the global digital advertising space. While we don’t expect Pinterest to displace online advertising behemoths Google and Meta or up-and-coming Amazon, we do expect it to attract a small pinch of digital ad spending, which we estimate is an addressable market of more than $600 billion.

Pinterest has a narrow economic moat and stable moat trend based on network effects and intangible assets (data), which we think can eventually drive the company to profitability and excess returns on invested capital. With more than 475 million average monthly users who access Pinterest with the intention of not only discovering ideas or products but also purchasing them immediately or in the future, we think the firm can attract more online ad dollars. In our view, Pinterest can attract various types of ad campaigns through the marketing funnel–from broad exposure or awareness to targeting and actual conversion. We think opportunities exist for the firm to gradually increase its share of the U.S. digital advertising market, as well as grow internationally (mainly in Europe) in terms of both users and ad dollars collected from this audience

We expect higher user growth in 2022 and beyond as the impact of the pandemic, which pulled user growth forward, will be lapped. We also expect the firm’s latest offerings that attract content creators and improve users’ shopping and purchasing experiences on the platform to drive user growth. In addition, we think some advertisers will come back after macro issues related to supply chain and labor shortage are resolved. Plus, as expected, Apple’s policies appear to have hit Pinterest less than some of its peers. Until then, however, we now assume a further decline in U.S. users and a deceleration in overall user growth for Pinterest during the remainder of (2021). In our view, narrow-moat Pinterest remains attractive. We also think after the return of consistent and stable user growth to the platform the firm may become an acquisition target again.”

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What to stream this weekend: ‘Civil War,’ Snow Patrol, ‘How to Die Alone,’ ‘Tulsa King’ and ‘Uglies’

Published

13 hours ago

September 13, 2024

Anne Joseph

Hallmark launching a streaming service with two new original series, and Bill Skarsgård out for revenge in “Boy Kills World” are some of the new television, films, music and games headed to a device near you.

Also among the streaming offerings worth your time as selected by The Associated Press’ entertainment journalists: Alex Garland’s “Civil War” starring Kirsten Dunst, Natasha Rothwell’s heartfelt comedy for Hulu called “How to Die Alone” and Sylvester Stallone’s second season of “Tulsa King” debuts.

NEW MOVIES TO STREAM SEPT. 9-15

— Alex Garland’s “Civil War” is finally making its debut on MAX on Friday. The film stars Kirsten Dunst as a veteran photojournalist covering a violent war that’s divided America; She reluctantly allows an aspiring photographer, played by Cailee Spaeny, to tag along as she, an editor (Stephen McKinley Henderson) and a reporter (Wagner Moura) make the dangerous journey to Washington, D.C., to interview the president (Nick Offerman), a blustery, rising despot who has given himself a third term, taken to attacking his citizens and shut himself off from the press. In my review, I called it a bellowing and haunting experience; Smart and thought-provoking with great performances. It’s well worth a watch.

— Joey King stars in Netflix’s adaptation of Scott Westerfeld’s “Uglies,” about a future society in which everyone is required to have beautifying cosmetic surgery at age 16. Streaming on Friday, McG directed the film, in which King’s character inadvertently finds herself in the midst of an uprising against the status quo. “Outer Banks” star Chase Stokes plays King’s best friend.

— Bill Skarsgård is out for revenge against the woman (Famke Janssen) who killed his family in “Boy Kills World,” coming to Hulu on Friday. Moritz Mohr directed the ultra-violent film, of which Variety critic Owen Gleiberman wrote: “It’s a depraved vision, yet I got caught up in its kick-ass revenge-horror pizzazz, its disreputable commitment to what it was doing.”

— AP Film Writer Lindsey Bahr

NEW MUSIC TO STREAM SEPT. 9-15

— The year was 2006. Snow Patrol, the Northern Irish-Scottish alternative rock band, released an album, “Eyes Open,” producing the biggest hit of their career: “Chasing Cars.” A lot has happened in the time since — three, soon to be four quality full-length albums, to be exact. On Friday, the band will release “The Forest Is the Path,” their first new album in seven years. Anthemic pop-rock is the name of the game across songs of love and loss, like “All,”“The Beginning” and “This Is the Sound Of Your Voice.”

— For fans of raucous guitar music, Jordan Peele’s 2022 sci-fi thriller, “NOPE,” provided a surprising, if tiny, thrill. One of the leads, Emerald “Em” Haywood portrayed by Keke Palmer, rocks a Jesus Lizard shirt. (Also featured through the film: Rage Against the Machine, Wipers, Mr Bungle, Butthole Surfers and Earth band shirts.) The Austin noise rock band are a less than obvious pick, having been signed to the legendary Touch and Go Records and having stopped releasing new albums in 1998. That changes on Friday the 13th, when “Rack” arrives. And for those curious: The Jesus Lizard’s intensity never went away.

— AP Music Writer Maria Sherman

NEW SHOWS TO STREAM SEPT. 9-15

— Hallmark launched a streaming service called Hallmark+ on Tuesday with two new original series, the scripted drama “The Chicken Sisters” and unscripted series “Celebrations with Lacey Chabert.” If you’re a Hallmark holiday movies fan, you know Chabert. She’s starred in more than 30 of their films and many are holiday themed. Off camera, Chabert has a passion for throwing parties and entertaining. In “Celebrations,” deserving people are surprised with a bash in their honor — planned with Chabert’s help. “The Chicken Sisters” stars Schuyler Fisk, Wendie Malick and Lea Thompson in a show about employees at rival chicken restaurants in a small town. The eight-episode series is based on a novel of the same name.

— Natasha Rothwell of “Insecure” and “The White Lotus” fame created and stars in a new heartfelt comedy for Hulu called “How to Die Alone.” She plays Mel, a broke, go-along-to-get-along, single, airport employee who, after a near-death experience, makes the conscious decision to take risks and pursue her dreams. Rothwell has been working on the series for the past eight years and described it to The AP as “the most vulnerable piece of art I’ve ever put into the world.” Like Mel, Rothwell had to learn to bet on herself to make the show she wanted to make. “In the Venn diagram of me and Mel, there’s significant overlap,” said Rothwell. It premieres Friday on Hulu.

— Shailene Woodley, DeWanda Wise and Betty Gilpin star in a new drama for Starz called “Three Women,” about entrepreneur Sloane, homemaker Lina and student Maggie who are each stepping into their power and making life-changing decisions. They’re interviewed by a writer named Gia (Woodley.) The series is based on a 2019 best-selling book of the same name by Lisa Taddeo. “Three Women” premieres Friday on Starz.

— Sylvester Stallone’s second season of “Tulsa King” debuts Sunday on Paramount+. Stallone plays Dwight Manfredi, a mafia boss who was recently released from prison after serving 25 years. He’s sent to Tulsa to set up a new crime syndicate. The series is created by Taylor Sheridan of “Yellowstone” fame.

— Alicia Rancilio

NEW VIDEO GAMES TO PLAY

— One thing about the title of Focus Entertainment’s Warhammer 40,000: Space Marine 2 — you know exactly what you’re in for. You are Demetrian Titus, a genetically enhanced brute sent into battle against the Tyranids, an insectoid species with an insatiable craving for human flesh. You have a rocket-powered suit of armor and an arsenal of ridiculous weapons like the “Chainsword,” the “Thunderhammer” and the “Melta Rifle,” so what could go wrong? Besides the squishy single-player mode, there are cooperative missions and six-vs.-six free-for-alls. You can suit up now on PlayStation 5, Xbox X/S or PC.

— Likewise, Wild Bastards isn’t exactly the kind of title that’s going to attract fans of, say, Animal Crossing. It’s another sci-fi shooter, but the protagonists are a gang of 13 varmints — aliens and androids included — who are on the run from the law. Each outlaw has a distinctive set of weapons and special powers: Sarge, for example, is a robot with horse genes, while Billy the Squid is … well, you get the idea. Australian studio Blue Manchu developed the 2019 cult hit Void Bastards, and this Wild-West-in-space spinoff has the same snarky humor and vibrant, neon-drenched cartoon look. Saddle up on PlayStation 5, Xbox X/S, Nintendo Switch or PC.

— Lou Kesten

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Trump could cash out his DJT stock within weeks. Here’s what happens if he sells

Published

3 weeks ago

August 23, 2024

Harry Miller

Former President Donald Trump is on the brink of a significant financial decision that could have far-reaching implications for both his personal wealth and the future of his fledgling social media company, Trump Media & Technology Group (TMTG). As the lockup period on his shares in TMTG, which owns Truth Social, nears its end, Trump could soon be free to sell his substantial stake in the company. However, the potential payday, which makes up a large portion of his net worth, comes with considerable risks for Trump and his supporters.

Trump’s stake in TMTG comprises nearly 59% of the company, amounting to 114,750,000 shares. As of now, this holding is valued at approximately $2.6 billion. These shares are currently under a lockup agreement, a common feature of initial public offerings (IPOs), designed to prevent company insiders from immediately selling their shares and potentially destabilizing the stock. The lockup, which began after TMTG’s merger with a special purpose acquisition company (SPAC), is set to expire on September 25, though it could end earlier if certain conditions are met.

Should Trump decide to sell his shares after the lockup expires, the market could respond in unpredictable ways. The sale of a substantial number of shares by a major stakeholder like Trump could flood the market, potentially driving down the stock price. Daniel Bradley, a finance professor at the University of South Florida, suggests that the market might react negatively to such a large sale, particularly if there aren’t enough buyers to absorb the supply. This could lead to a sharp decline in the stock’s value, impacting both Trump’s personal wealth and the company’s market standing.

Moreover, Trump’s involvement in Truth Social has been a key driver of investor interest. The platform, marketed as a free speech alternative to mainstream social media, has attracted a loyal user base largely due to Trump’s presence. If Trump were to sell his stake, it might signal a lack of confidence in the company, potentially shaking investor confidence and further depressing the stock price.

Trump’s decision is also influenced by his ongoing legal battles, which have already cost him over $100 million in legal fees. Selling his shares could provide a significant financial boost, helping him cover these mounting expenses. However, this move could also have political ramifications, especially as he continues his bid for the Republican nomination in the 2024 presidential race.

Trump Media’s success is closely tied to Trump’s political fortunes. The company’s stock has shown volatility in response to developments in the presidential race, with Trump’s chances of winning having a direct impact on the stock’s value. If Trump sells his stake, it could be interpreted as a lack of confidence in his own political future, potentially undermining both his campaign and the company’s prospects.

Truth Social, the flagship product of TMTG, has faced challenges in generating traffic and advertising revenue, especially compared to established social media giants like X (formerly Twitter) and Facebook. Despite this, the company’s valuation has remained high, fueled by investor speculation on Trump’s political future. If Trump remains in the race and manages to secure the presidency, the value of his shares could increase. Conversely, any missteps on the campaign trail could have the opposite effect, further destabilizing the stock.

As the lockup period comes to an end, Trump faces a critical decision that could shape the future of both his personal finances and Truth Social. Whether he chooses to hold onto his shares or cash out, the outcome will likely have significant consequences for the company, its investors, and Trump’s political aspirations.

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Arizona man accused of social media threats to Trump is arrested

Published

3 weeks ago

August 23, 2024

Harry Miller

Cochise County, AZ — Law enforcement officials in Arizona have apprehended Ronald Lee Syvrud, a 66-year-old resident of Cochise County, after a manhunt was launched following alleged death threats he made against former President Donald Trump. The threats reportedly surfaced in social media posts over the past two weeks, as Trump visited the US-Mexico border in Cochise County on Thursday.

Syvrud, who hails from Benson, Arizona, located about 50 miles southeast of Tucson, was captured by the Cochise County Sheriff’s Office on Thursday afternoon. The Sheriff’s Office confirmed his arrest, stating, “This subject has been taken into custody without incident.”

In addition to the alleged threats against Trump, Syvrud is wanted for multiple offences, including failure to register as a sex offender. He also faces several warrants in both Wisconsin and Arizona, including charges for driving under the influence and a felony hit-and-run.

The timing of the arrest coincided with Trump’s visit to Cochise County, where he toured the US-Mexico border. During his visit, Trump addressed the ongoing border issues and criticized his political rival, Democratic presidential nominee Kamala Harris, for what he described as lax immigration policies. When asked by reporters about the ongoing manhunt for Syvrud, Trump responded, “No, I have not heard that, but I am not that surprised and the reason is because I want to do things that are very bad for the bad guys.”

This incident marks the latest in a series of threats against political figures during the current election cycle. Just earlier this month, a 66-year-old Virginia man was arrested on suspicion of making death threats against Vice President Kamala Harris and other public officials.