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Twitter Could Be Heading to New Highs But Is Still Exposed to Issues Plaguing the Industry

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Microblogging platform Twitter (NYSE:TWTR) outperformed the computer and technology market by a wide margin last month, gaining 21% compared to a 4% jump in the S&P 500. The stock went up 32% in the past year showing that Twitter’s stock may be heading to new heights.

Twitter’s stock has been performing well since reporting better than expected first quarter results . The company more than doubled analysts’ earnings estimates, while revenue exceeded those estimates for 1.5%  . Twitter stock gained 21% in April as its first-quarter earnings showed investors encouraging progress on both the company’s top and bottom lines.

April’s spike was powered by strong first-quarter earnings. The Q1 report showed that the user base grew compared to the prior quarter, although it is going down year over year and it is sluggish when compared to social networking peers like Facebook (NASDAQ: FB). But Twitter paired its improvement with rising revenue and falling costs so that operating income jumped to $94 million (making 12% of sales) from $75 million (11% of sales) a year ago.

CEO Jack Dorsey and his team are focused on improving the quality of interactions on the platform by eliminating the presence of hate and quickly responding to any issue related to harassment, safety and privacy.

Overall, Twitter earned praise from investors for showing that it can increase engagement while generating healthy operating profits and making its shareholders happy. Platform upgrades also make the experience better both for users and advertisers, boosting the platform’s value in the process. The company showed that its efforts to improve the user experience were starting to pay off as the company can be pleased with a healthy financial position.

Twitter made a number of product improvements in the first quarter, including the launch of a public prototype app with an initial focus on making Twitter more conversational. There is also a new Twitter camera to better capture and share what’s happening. It also took an even more proactive approach to deal with abuse and decrease its occurrence.

The key metric for Twitter is the +1.06%  user growth, as this is where it was mostly struggling. Twitter added 8 million new monetizable daily active users in its first quarter. That is the highest number of quarterly additions since early 2017.

Twitter’s revenue rose to $787 million from $665 million in the previous year quarter. It has exceeded analysts’ projection of $774 million. While we cannot characterize the first quarter as a game changer, results certainly support the case that the platform’s differentiated use case maintained its unique appeal for ad buyers. Improvements in Q1 emphasized proactive detection of rule violations and physical off- platform, safety. This was achieved by making it easier to report tweets that share personal information, helping Twitter remove 2.5 times more of this content since its launch.

Q1 revenue totaled $787 million, an increase of 18% year-over-year or 20% on a constant currency basis.  Advertising revenue amounted to $679 million, also an increase of 18% year-over-year or 20% on a constant currency basis. Total ad engagements increased 23% year-over-year. U.S. revenue totaled $432 million, an increase of 25% year-over-year. International revenue totaled $355 million, an increase of 11% year-over-year. Data licensing and other revenue totaled $107 million, an increase of 20% year-over-year.

Q1 costs and expenses totaled $693 million, and also increased by 18% year-over-year. This resulted in operating income being f $94 million. Q1 net income was $191 million, representing a net margin of 24% and diluted EPS of $0.25. Average monthly active users (MAU) were 330 million in the first quarter. In the same period last year it was 336 million but it increased from 321 million in the previous quarter. Average monetizable daily active users (mDAU) were 134 million for Q1, compared to 120 million in the same period of the previous year and compared to 126 million in the previous quarter.

For the second quarter, Twitter expects revenue to be in the range of $770 million to $830 million. Analysts estimate $818 million.  Operating income is expected to be in the range between $35 million and $70 million. Net cashflow is expected to increase from $243 million in FY2018 to $352 million. For FY 2019, GAAP operating expenses are expected to increase as the company will continue investing in growth and its top priorities: health, conversation, revenue product and sales, and platform.  Capital expenditures is estimated to fall in the range of  $550 million and $600 million.

Among possible reasons for concern, Twitter can also face privacy and societal issues like Facebook. Pinterest (NYSE: PINS) might have gone public just recently in April, but it has a significant advantage over them due to its ‘purely aspirational content’, leaving less room for challenges that have plagued the industry. Pinterest rolled out a blacklist of search terms late last year so that searches for specific keywords yield no results. An example is ‘vaccine’ which only yields a message that the topic violates community guidelines which prohibit ‘harmful medical information’ offering a link to the Mayo Clinic. This is just a temporary measure until a better solution is found but Pinterest generally is a ‘feel-good’ platform dealing with events like weddings, clothing, food, etc.

Although Pinterest’s 265 million monthly active users is a significantly smaller figure comparing to its social media competitors like Twitter’s 330 million monthly active users let alone Facebook’s 2.38 billion monthly users, The San Francisco-based company has seen its stock rise nearly 50% from its offering price since its IPO debut on April 18. But despite performing way better than Uber (NYSE: UBER) during its first days as a public company,  its stock price plunged 15% on May 15th as losses are nearly three times higher than expected in its first quarterly earnings report following its initial public offering. On the other hand, Twitter’s shareholders are happy and management has never been more confident in its strategy and value proposition. There is a great deal of opportunity to grow its audience further and deliver even more value for advertisers who want to launch something new or connect with what’s happening. Unlike Facebook, Twitter does not have an impending regulatory fee but it can still encounter similar privacy and currently trending society issues along its way. Twitter just needs to continue in the same direction so it can outshine its competition – keep innovating while preserving its bottom line.

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Earnings

Toyota’s News: Redesigned Corolla, New Investments and Partnerships

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Toyota Stock Market News

Toyota Motor Corporation (NYSE: TM) is managing something other automakers only dream of. The company is honouring its values while achieving sustainable growth for over a decade. The dependable Japanese giant continues to deliver on its promises as it prepares for an electric future.

A new sturdy yet sporty Corolla

On September 17th, the company announced a completely redesigned Corolla that now goes beyond just being a practical buying decision. The newly evolved Corolla has a sporty design, offering pleasurable driving and advanced safety equipment. Being built on Toyota New Global Architecture (TNGA), Corolla is ready to evolve to meet customers’ needs, according to Yasushi Ueda, chief engineer in charge of development.

Since its debut in 1966, this car is nothing less than adored by consumers all over the world and now, it will have its first hybrid version available to U.S. customers.

Hybrid strategy is actually paying off

Just like Honda Motor Co. (NYSE:HMC) with its 2020 CR-V Hybrid, Toyota is using its hybrid technology to position itself for future growth and transition to an all-electric future, despite the fact these energy saving vehicles do not qualify for government subsidies. But, this strategy is paying off as hybrid demand skyrocketed and the company proudly revealed in February that Lexus reached its 10 millionth vehicle sales milestone since its launch, with its 2018 sales performance achieving several ‘best-ever records’. And it is thanks to these figures that the Chinese government is also starting to see the potential of such vehicles so things can only get even better for Toyota. As the saying goes, persistence is the key to success and these two companies have been quite brave in sticking to HEVs.

New Investment – $391 Million Goes to Texas’ San Antonio Plant

This will be Toyota’s first expansion in nine years at the plant that produces its Tundra and Tacoma pickup trucks. It is the part of the company’s strategy to invest $13 billion in its U.S. operations over the period of five years, ending in 2021.

Future Investment – $243.29 million to Produce New Vehicle in Sao Paulo

Toyota is also about to get an even stronger presence in Brazil as it will hire 300 new employees at the Sorocaba Plant to start the production of a new vehicle.

Partnership

And let’s not forget the ground-breaking partnership of Japan’s leading automakers that was revealed in August as Toyota and Suzuki Motor Co. (OTC: SZKMF) announced they will collaborate on developing autonomous car technology. This deal is cementing the bond that the two automakers kicked-off in 2016. They might seem like an odd couple as Suzuki is a everything but a big player, yet its strong presence in India is only one of the things that will greatly benefit Toyota. Although Suzuki admitted defeat on the world’s biggest playgrounds, China and the U.S., it cracked the code for emerging markets. And this is exactly where future global sales growth is expected to come from.

Inventing a car that will run forever?

According to Bloomberg, Toyota aims to go far further than electric by teaming up with Sharp Corporation (OTC:SHCAY) and Japanese governmental organization NEDO that encourages the development of innovative technologies. Considering that Toyota is a company that has even used the economic crisis and recession to only come out stronger, it’s not unlikely that it is set to out do the impossible by mixing the most efficient batteries with solar panels. The company’s strong financial performance and track record show that if anyone can do it, it’s Toyota Motor Co.

 

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Nike Exceeds Wall Street Expectations With Q1 Earnings for FY2020

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Direct-to-consumer sales and digital momentum strategies did the trick for Nike

When Nike (NYSE:NKE) released its better-than-expected first quarter of the fiscal 2020 results late Tuesday. Naturally shares jumped more than 5% to reach $91.80. The reported revenue increased 7.2% year comparing to last year, achieving $10.7 billion, greater than the expected $10.44 billion. Net income soared more than 28%, making adjusted earnings per share $0.86, also smashing expectations of $0.70 per share.

Nike managed to achieve a turnaround

The biggest contributor to total sales was Nike’s North American segment that increased 4% comparing to last year. But China sales also continue to grow and by double digit percentages: 22% to be exact, topping $1.68 billion. Overall, these are fantastic news for investors. Especially since the company’s rare earnings miss for the final quarter of the previous fiscal year. The company attributed this to increased marketing costs and a higher tax rate. But highly anticipated new product launches and solid results for continuing lines, along with efforts to draw new customers to the Nike SNKRS app, did their magic.

Digital momentum is key

Digital movement is transforming and amplifying everything Nike does and in Q1, Nike Digital grew 42% on a currency neutral basis. This growth is driven by enhanced digital services and the international expansion of its app ecosystem. Moreover, The Nike app and SNKRS app are now both live in over 20 countries, with more expansion coming throughout the year.

There are literally no weak spots for investors

Arguably, there are no weak spots for prudent investors to dig in as far as this quarter’s report is concerned. The company is literally firing on all cylinders. The company’s management attributes these results to “the depth and balance of the company’s complete offense, building on the strengths of its foundational business drivers and capitalizing on the untapped dimensions of its portfolio”. Management has also dismissed any concerns that US-China trade conflicts could harm its operations, disclosing no impact has been seen up to date.

Nike showed it can even handle the increased tariffs

Earlier this year Nike joined over 200 other footwear companies urging President Trump not to increase tariffs on footwear imported from China, calling the move “catastrophic for our consumers, our companies, and the American economy as a whole.” But while those tariffs are certainly catastrophic for small players, Nike seems more than capable of mitigating the consequences of this added expense.

Poor macroeconomic conditions are only masking Nike’s true power

The company made it clear that its figures would have been even stronger had it not been for macroeconomic challenges which are manifesting through tariffs and foreign-exchange rates. They implied that the weakening economic climate is essentially masking Nike’s true strength. And in addition to children, women are also a big opportunity for the company that Nike will continue exploiting. This is why Nike expects better-than-planned growth in its higher-margin NIKE Direct channels and international segments and consequently, its full-year gross margin. One thing is for sure: Nike has turned itself into so much more than a ‘sneaker-company’.

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Apple Will Be Making Its MacBook Pros in the US

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With a newly granted “federal product exclusion,” enabling it to import some Mac Pro parts without paying tariffs, Apple (NASDAQ: AAPL) will be able to save enough money to make US assembly worthwhile. The company announced on Monday that it will manufacture the new version of its Mac Pro desktop computer in Austin, Texas. It’s also a big political win for Apple, since President Trump has for years called on the company to make more products in the US. Tim Cook clearly made a compelling case during his meetings with President Trump. Apple described the decision to keep Mac Pro production in Austin as part of its “commitment to US economic growth.”

Macroeconomic climate is not favourable

The September figures around the world are simply awful. The uncertainty brought on by intensifying trade wars, the outlook for the car industry and Brexit are paralyzing investors, with September seeing some of the worst performance since the financial crisis in 2009, leading many to worry about whether yet another crisis is upon us. On a brighter note, Apple’s stock went up 0.2% after Bloomberg reported that ten of its 15 requests for an exemption from tariffs on imports from China had been approved.

New investments

Apple previously disclosed plans to spend $350 billion in the U.S. by 2023, a figure that includes new and existing investments. Its Apple TV+ is set to launch on November 1, with stars like Oprah Winfrey bringing her famed book club streaming show to the company’s subscription service. Among documentaries that will be released, there will even be a multi-series about mental health, featuring no other than Prince Harry himself. Apple’s subscription service will cost only $4.99 a month and will be available in 100 countries and regions at launch. Also, customers who buy a new Apple device will also get a free year of Apple TV+.

Competitors

Netflix (NASDAQ: NFLX) is still the leader when it comes to U.S. streaming, along with Amazon Prime (NASDAQ:AMZN), AT&T’s HBO (NYSE: T) and upcoming Disney+ (NYSE:DIS), it is certain that competition will be intense. Netflix’s stock has been dropping since July, which was the first time the number of subscribers fell. Moreover, Netflix’s stock price has now officially wiped out any gains it’s made over the year so far and both Disney and Apple have a shot at beating Netflix at its own game.

Apple is still facing impending import duties and innovation difficulties

Let’s not forget that the company still faces import duties scheduled for Dec. 15 that could affect nearly all of its major products including iPhones, iPads, MacBooks and Apple Watches. And more importantly, it is thought by many as facing an innovation problem so it heavily relies on customer loyalty that will continue driving its sales. We’ll just have to wait for November 1st launch of Apple TV+ to see the impact of Apple’s new streaming subscription service.

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