Is this the next big IPO?

This is probably the next big IPO. Xiaomi technology is founded by Lei Jun, which  is China`s Steve Jobs. Along with Alibaba`s Jack Ma, he is also the face of China Inc. His company Xiaomi is expanding overseas.

Xiaomi Inc was founded in 2010 and is a privately owned Chinese electronic company headquartered in Beijing. The company develops, and sells smartphones, mobile apps, and customer electronics. Products they run is MiPhone, MiBox, MiTalk, MiHome launcher, Duokan Reader, MiCloud and MiTV. Lei Jun founded the company together with Hong Feng, Zhou Guangping, Li Wanqiang, Huang Jiangji, Lin Bin, Liu De and Wang Chuan.

Xiaomi sold more smartphones in China than Apple Inc and Samsung Electronics Co! But it is worth saying that Xiaomi has a low-cost business model. They run Google`s Android mobile OS, and has become the world`s fifth largest smart phone maker behind Samsung, Apple, Lenovi and Huawai.

They are a low-cost company and belive that when it costs you $200 to make a product, you should sell it for $600. Innovation is not a luxury item. Innovation is for everyone. That`s Xiaomi`s thoughts.

The company is looking to expand into Brazil and Mexico, and has moved beyond China to sell their products in India and Indonesia. India is the world`s second largest cellphone market after China.

Xiaomi needed money for their expansion, and borrowed $1 billion from 29 different banks for a three-year loan.

The lead bankers on the loan are Goldman Sachs Group Inc, Credit Suisse Group SA, Deutsche Bank AG, J.P Morgan Chase & Co, Bank of Tokyo-Mitsubishi UFJ, Banco do Brasil, Morgan Stanley, ICBC Asia and a subsidiary Chinese lender of Industrial & Commercial Bank of China Ltd. Xiaomi is borrowing at attractive terms and the bankers are charging them 2,325% points over London interbank offered rate for the loan it is borrowing in two tranches. Normally, company’s similar to Xiaomi are charged 2,5% points over Libor.

Xiaomi raised a fourth round of funding in August 2013, and that valued the company at $10 billion, and that is more than double its June 2012 valuation of $4 billion. The $1 billion loan now is their first overseas.

Investment banks see business opportunities with Chinese technology companies in the future. Many investors belive we are in a tech bubble, but lenders feel more comfortable now with the technology industry than they did only a few years ago.

The reason why we had a tech bubble in 2000 was that many of the companies listed on Nasdaq didn`t have income. Xiaomi sold about 18 million phones in the past year, and it is forecasting sales of 60 million units in 2014. Bubble? I would rather say; possibly the next big IPO!

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

 

 

Leave a comment

Filed under Stocks

Is this the end of QE?

Two things are important right now. Earnings and the Fed. 80% of the S&P companies that have reported earnings have beaten estimates, according to Bloomberg. The catalyst for last week`s 4% rally was the reported earnings, and will continue to be the catalyst this week for any move in the market.

Todays FOMC Statement and Fed Funds rate decision will also play a big role in the market this week. Interest rate is very important in the stock market, and the big question for investors now is when the Fed will start to raise the interest rates. Any hint or insight will likely stir the markets.

Fed Chair Janet Yellen is worried about the low inflation, and the inflation gauge has fallen short of the Fed`s 2% target. The risk of deflation may weight against raising interest rates too soon.

Prices as measured by the personal consumption expenditures index rose 1,5% from a year earlier in August, and oil prices is something Fed has no control over. As you may know, the oil prices has dropped over 20% so far this year.

Many investors expect the Fed to end its third round of asset purchases today, while others say the central bank should consider a delay in ending QE in light of the falling inflation. It is possible for the Fed to reduce the monthly purchases by $10 billion and leave the final $5 billion reduction for December.

The Fed will still hold a record $4,48 trillion balance sheet accumulated during QE 3 despite an end of QE today. That will limit the supply of securities and keep the yield lower as their borrowing cost is limited.

Market volatility and sign of slowing global growth will make the Fed to act with caution, and it`s expected to see the interest rate to near zero for a «considerable time» after bond buying ends. Fed`s benchmark rate has remained at zero to 0,25% since December 2008, but it is expected to see the rate to increase in mid-2015.

FOMC`s next meeting is in December.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Leave a comment

Filed under Quantitative Easing

Investors expectations for Facebook is high

Facebook will report earnings for its 3rd quarter of the year after the closing bell today. They smashed the earnings estimates in July and the stock jumped 6,5% higher. The stock continues to rally after that, but have surged 14% in the past two weeks.

facebook logo

Last quarter Facebook reported earnings of 42 cents per share, while Wall Street was forecasting 33 cents. Everyone was surprised, but what now? Over the past year Wall Street has sandbagged its estimates 5 quarter in a row, and Estimize is more bullish on Facebook`s bottom line now, expecting the social media king`s EPS to beat the Street by 5 cents per share. Wall Street has left its earnings consensus flat.

It`s expected to see the company to grow by 57% at the top and 80% at the bottom line. A 57% YoY revenue increase would be down slightly. Average over the past year is 64%. An 80% EPS gain YoY is also below the average of 124%. Their growth is expected to break. $3 billion a quarter in sales makes it unprecedented to grow fast.

In the company`s previous earnings release Facebook reported 1,32 billion monthly users, and 1,07 billion monthly users on mobile. A huge number, but Zuckerberg have a plan to keep the profit piling g up.

They will increase the value of advertisements by improving data tracking, and with help from Atlas, Facebook will try to compete with Google, which is the master of data tracking and serving targeted advertisements which is gold for marketers worldwide.

Mark Zuckerberg want to offer best in the class mobile experience. At the beginning he was worried that the app was too difficult to manage. He was worried that the app was clunky on mobile, and trying to do too many things at once. So far it looks like his plan is paying off as Facebook is making a killing on mobile advertisements.

They will also try to expand the user base by connecting more people to the internet across the globe. When Zuckerberg outlined his goal to connect the world to the internet last summer, only 2,7 billion (1/3 population of the planet) had access to the internet. So far, they have done a great job to sign up new members as they have over 1 billion monthly users.

It`s easy to see why investors are so bullish on Facebook. The only point of concern might be that Facebook has performed so well over the past year that expectations have gotten ahead of themselves.

Facebook is up 47,4% YTD. Will they beat the Street this time?

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Leave a comment

Filed under Stocks

Earnings from Social Media stocks this week

This week is a big week for social media stocks. It all starts today, and we will be getting earnings release from Twitter (TWTR) after the bell today. Twitter kicks off the week for social media earnings today, followed by Facebook tomorrow.

twitter chart

(Picture: Twitter chart)

Twitter haven`t met analysts expectations on MAU`s (monthly active users) growth lately. With 271 million MAU`s they are focusing on product improvements to increase the amount of time users spend on their platform.

They launched their brand new Audio Cards this quarter which enables music and podcasts to be played directly on Twitter via Soundcloud.

The company has underperformed the Nasdaq and Facebook (FB), as analysts is disappointed at Twitters growth prospects and engagement levels. So far, they have posted strong sales growth but with disappointing earnings.

Analysts expect strong results from the social media giant after the bell today, and this brings up the big question; Is this a good time to invest in the tweeting giant?

It is expected to se a report revenue of $360 million, and if that is the fact, it will represent about 100% increase in sales vs same time last year.

It`s not easy to value early stage growth companies like Twitter, but investors will focus on earnings and revenue after the bell today. Some people are negative and expect EPS of $-0,27. Other say $0,01.

Last quarter, the stock gained 22% because revenue was $312 million compared to analysts estimate of $282 million. Some say the surge in performance last time was attributed to increased engagement and user activity because of the FIFA World Cup, and analysts belive that Twitter will not be able to follow with a similar performance.

Analysts I have talked to are forecasting earnings of 3 cents per share. Twitter has a great track record of beating the Street`s EPS consensus. Will they beat Wall Street this time?

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Leave a comment

Filed under Stocks

Transportation Stocks are Outperforming the DOW

Timing can improve your investment results and Charles Dow knew that better than anyone else 100 years ago. Some say that timing is everything, but it isn`t. Timing is interpretation. To watch the swings of the stock market are more important than ever for protecting your hard-earned investments.

Some investors are negative and some are positive. Positive investors say that the economy is good, but how do we know that? The strong rally lately is being led higher by economically sensitive groups like transports. I like to watch the Dow Jones Transportation Average Index (DJTA), which is closely watched to confirm the state of the U.S economy.

Chart

As you can see from the chart above, the transports take what the industrials make, and that simply confirm the trend of the Dow Jones Industrial Average (DJIA). DJIA will follow DJTA. In other words; if the DJTA is declining while the DOW is climbing, it may signal economic weakness ahead.

What you see in the transportation industry affects almost all other industries covered in the DJI. Wal-Mart and Home Depot (on the DJI) rely on transportation shipments to stock their stores. Also Coca-Cola, IBM and Caterpillar use transportation. Transportation providers can bid for higher contract prices, making their own outlook more positive and causing the DJT to rally. At the same time, the anticipated outlook of the transportation industry`s customers is reflected in its stock prices and the performance of the DJI follows DJT.

It may be a divergence in the two indices and if you see that signal, you know that the demand for transport is falling, which means the nationwide demand for goods is declining too. A bad sign. It didn`t look good at the beginning of September this year, but it turned up again 15 days later.

Airlines and railroads outperform the broader market and continue to expand revenue. In the last five days, the transportation stocks are up 6,24%, while S&P 500 is up only the half. Transportation stocks will continue to move higher as the energy price remain low. Dow Jones Transportation Average is up +15,18% YTD.

The best performer on the list so far in 2014 is Delta Air lines (DAL), which is up +41,57% YTD, followd by Alaska Air Group (ALK), up 37,14%. Avis Budget Group (CAR) is up +31,10% YTD, while FedEx Corp (FDX) is up only +13,40% YTD.

The economy continue to improve and a good indicator is, among others, the strong third-quarter earnings from Caterpillar yesterday. Caterpillar reported better than expected results in the third quarter and lifted its profits outlook for the year to $6,50 a share, up 5,5%.

Some popular ETF funds is iShares Dow Jones Transportation Average Fund (IYT), which represents the most popular way to track the transport sector. The fund manager have invested in a small basket of 21 securities, and this fund is heavily exposed to the railroad industry.

SPDR S&P Transportation ETF (XTN) is another one, with 39 securities in the basket. This fund is heavily exposed to trucking and airlines. The fund has been a good performer since they started the rally in November 2012.

Guggenheim Shipping ETF (SEA) is the worst performing ETF on the list. The fund tracks 27 shipping company stocks with high degree of risk.

If you want to check where the economy and the DJI stands, make sure to check the DJT as well. If the DJI is up while the DJT is down, you know that something is wrong, but right now, DJT is up about 16% YTD, while DJI is up about 1% YTD.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

 

Leave a comment

Filed under Stock market