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Apple’s secret weapon
Improved annual forecast amid strong quarterly reporting
Lululemon Athletica raised its revenue guidance for the current fiscal year following better-than-expected third fiscal quarter earnings. Revenue jumped 30% year-on-year to $ 1.45 billion, including 28% growth in North America and 40% in other countries. The figure was better than the market forecast of $ 1.4 billion. Like-for-like sales in the last quarter increased by 27% yoy. Lululemon opened 18 new stores last quarter, bringing the number to 552. Adjusted profit for the fiscal quarter ended October 31 rose to $ 1.62 per share from $ 1.16 per share in the comparable period a year earlier. The market was expecting a net profit of $ 1.40 per share.
A new strain of coronavirus infection may become a new risk factor
In the first three days of last week, American indices traded without significant changes. Markets were closed Thursday for Thanksgiving. On Friday, a wave of significant sales swept around the world due to the fact that a new strain of coronavirus infection was discovered in South Africa, which scientists already call the most dangerous in comparison with other Covid analogues. The strain has a large number of mutations, some of which are of concern, according to the WHO. The organization also said that current PCR tests can detect this strain of coronavirus, which is called Omicron. To date, no cases of the new COVID-19 variant have been reported in the United States. American indices closed with a decline last week. Thus, the S&P 500 lost 2.2%, the Nasdaq 100 fell 3.3%, the capitalization of the Russel 2000 index of medium and small capitalization decreased by 4.2%.
BuzzFeed
BuzzFeed, founded in 2006, is one of the leading digital media platforms. The company is known for bringing popular memes and entertainment content to life, as well as official journalism. BuzzFeed began its business by offering entertainment content to its customers, but over time, BuzzFeed began to develop in the field of video content and professional journalism. In 2012, journalist Ben Smith joined the BuzzFeed team to create and develop a new direction of news. Ben was nominated for a Pulitzer Prize a few years later. By the way, the Pulitzer Prize is one of the most prestigious US awards in the field of literature, journalism, music and theater. In 2020, Mark Skoufs took over as Editor-in-Chief of BuzzFeed News and also successfully entered the Pulitzer Prize nomination the following year.
In the early years, BuzzFeed built its business around a native advertising strategy, in which paid ads appeared on the page in a format that matched the style of the main content. However, after several years of its activity, the platform faced the threat of competition from social networks, which began to change their rules of the game. To maintain the required level of competition, the company has changed its approach to advertising in favor of more innovative technologies, focusing on e-commerce and content licensing.
According to BuzzFeed, the company’s revenue grew more than 50% in the second quarter of 2021 compared to the same period a year earlier. The growth of the indicator became possible due to the improvement of marketing policy and business scaling. Advertising revenue grew 79% in the second quarter of this year to $ 47.8 million. The second quarter of 2020 was the worst quarter for advertising during the COVID-19 pandemic, but we see market activity showing an impressive recovery this year. It is important that the company shares our views and in 2020 BuzzFeed acquired rival company HuffPost and we consider this deal to be beneficial for the overall business in the mid-term.
In November 2016, BuzzFeed held its final investment round, during which it raised $ 200 million and was valued at $ 1.7 billion.In June, it became known that the company intends to enter the public market through the SPAC mechanism of the merger with the 890 5th Avenue Partners under the ticker ENFA. Following the merger, the new public company will trade under the ticker BZFD. The public listing transaction is expected to close in Q4 of this year or Q1 2021. According to market rumors, the transaction may take place at the level of $ 1.5-2 billion.
High competition in the media market can be singled out among the main risks, however, we understand that the company has firmly established its position in the market. We believe that going public will allow the company to raise funds for more aggressive marketing activities or even M&A deals. The company has good fundamental prerequisites, since by the end of 2021 the management predicts revenue growth to $ 521 million compared to $ 321 million in 2020. At the end of 2022, the figure may even be $ 624 million, which corresponds to 20% growth year-on-year. The company expects revenues to exceed $ 1 billion by 2024. Looking back, we can see how Buzzfeed has grown in market position. Over the past 15 years, the company has shown impressive results. Thanks to its successful activities in the M&A market, the company manages not only to increase its market share, but also to demonstrate impressive results. We believe that going public will provide an opportunity for BuzzFeed to grow its business further.
Raising Netflix Fair Value Amid Strong Reporting
Netflix posted strong Q3 results. In July-September, the number of subscribers to paid services increased by 4.4 million – to 213.6 million, which is much better than both the management’s forecast of 3.5 million and our expectations of 3.63 million. Nevertheless, the results did not become for us a big surprise, since we assumed that the Covid factor and the seasonally favorable period could provide significant support for the growth of the subscriber base. The strong growth in subscribers was driven in part by an increase of 2.2 million subscribers in the Asia-Pacific region and 1.8 million in the EMEA region, which includes Europe, the Middle East and Africa. The new Squid Game is Netflix’s most watched TV series. It was viewed by 142 million subscribers in the first four weeks after its release. The Squid Game ranks first in popularity in the service in 94 countries, including the United States.
Markets continued to storm highs
At the end of last week, the capitalization of the S&P 500 increased by 0.3%, while the Nasdaq 100 rose by 2.3% and ended the week at historic highs. Investors continued to evaluate the companies’ reports for the third quarter, as well as a new portion of statistical data. The number of Americans who applied for unemployment benefits for the first time last week fell by 1,000 to 268,000, according to a report from the US Department of Labor. This is the lowest level since March 2020. A week earlier, the number of requests was 269 thousand, and not 267 thousand, as previously reported. Analysts polled by Bloomberg, on average, expected the number of applications to decrease to 260 thousand from the previously announced level of the previous week.
Noom
The Noom digital platform, founded in 2008, invites its clients to change their behavioral habits to achieve their wellness goals. Although the first challenge the developers focused on was weight loss, the platform is currently helping to treat anxiety, hypertension, and even diabetes. Within the framework of the application, the client can be offered coaching based on psychological motivation, as well as recommendations on nutrition and physical activity. Noom is one of the most downloaded health apps in the world for both Android and iOS. The app is the first virtual healthcare provider to be certified by the CDC, including a diabetes prevention program. Noom relies on a three-factor model that intertwines psychology, technology, and coaching throughout the entire user experience. Noom’s mission is to ensure that Noomers, that is, Noom customers around the world, can look after their health.
Noom works like this. After the user has downloaded the application and answered a series of questions, the platform’s patented algorithm creates a unique therapeutic plan for the client and appoints a supervising specialist. The dietary plan uses a unique system based on a traffic light analogy. Red light means stop, yellow light warns, and green light allows action. All foods are divided into red, yellow and green categories based on their calorie content. The visual system provides immediate feedback to help users make more informed meal decisions. Noom has won high nominations in the Best Employer category by various publishers for many years, for example, in 2019, the company entered the Top 100 Jobs by Glassdoor and was ranked 54th in the Fortune Best Jobs. In 2020, Noom’s CEO was named Entrepreneur of the Year by Ernst & Young. In 2021, Noom was named one of CNET’s Best Weight Loss Programs.
Noom has a customer base of 45 million users. In 2017, the company’s revenue amounted to $ 12 million. In 2018, Noom managed to increase the figure 5 times to $ 61 million.At the end of 2019, the company’s revenue increased to $ 237 million, and already in 2020 the figure reached $ 400 million. In May 2021, Noom officially achieved unicorn status, completing $ 540 million in fundraising in Round F. The company was valued at $ 3.7 billion. The company’s top investors include names such as Serena Ventures, Silver Lake and Sequoia Capital. Starting in 2020, Noom has been exploring opportunities to enter the IPO market. Noom has yet to file an S-1 form, but the company is known to have hired specialists from Goldman Sachs to oversee and advise on the initial listing process. It is likely that Noom could conduct an IPO in early 2022 with an estimated valuation of $ 6-10 billion.
Among the main risks, we see high competition in the sector, and there are applications that are more cost-effective, but they do not have a scientific and medical consulting base. An important factor in supporting Noom’s business is that during the pandemic, many people gained weight due to inactivity as they were at home. The CDC estimates that over 40% of American adults are obese. In the United States alone, the obesity treatment market is valued at $ 75 billion and is growing at a rate of 4% annually. Noom has attracted the attention of many investors due to its rapid growth and its ability to generate bottom line. The presence of health consultants sets the company apart from the competition. The company can use the funds raised during the IPO for scaling its business, marketing activities and geographic expansion.
Target publishes strong quarterly results
Target, which owns the second-largest chain of discount stores in the United States, increased its net profit in the third fiscal quarter by 48% and revenue by 13%. Target’s quarterly revenue rose to $ 25.65 billion from $ 22.63 billion a year earlier. The consensus forecast of analysts for this indicator was $ 24.61 billion. Growth in comparable sales of Target in the last quarter was 12.7% (forecast was 8.2%). Online sales increased by 29%. Net income for the quarter ended October 30 was $ 1.49 billion, up from $ 1.01 billion in the same period last year. Earnings per share increased to $ 3.04 from $ 2.01. Profit excluding one-off factors was $ 3.03 per share, beating the market average forecast of $ 2.82 per share.
Investors impressed by the growth of revenue of the cloud segment of Google
Alphabet, the holding company of Google, has published good results for the third quarter. The company’s quarterly revenue increased to $ 65.12 billion from $ 46.17 billion a year earlier. Google’s advertising revenues jumped 43% last quarter, to $ 53.1 billion. In particular, the search service earned $ 37.9 billion on advertising, 44% more than a year earlier. YouTube ad revenues grew 43% to $ 7.21 billion. This figure, however, was below the average forecast of experts surveyed by Bloomberg at $ 7.5 billion. Changes to privacy settings for Apple devices had a modest impact on YouTube’s revenue. Google services revenue as a whole rose 41% to $ 59.88 billion, Google Cloud revenue jumped 45% to $ 4.99 billion, also worse than Wall Street’s average forecast of $ 5.04 billion.