Uber Is Coming

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It’s that time again. With the rarity of such events, this is surely one to watch.

Ride-hailing giant Uber is expected to conduct its Initial Public Offering (IPO) this Friday – May 10th.

The company’s valuation is predicted to reach nearly $90 billion, with share price ranges likely to be between $44 and $50 per share. This would make it one of the biggest IPOs ever and surely in recent years, since Alibaba raised just over $25 billion in 2014 at $68 per share, shooting their valuation up in the range of $170 billion at the time.

As always, Trading 212 will be sure to offer Uber for both CFD and Invest accounts as soon as possible, once its debut on Wall Street is a fact.

 

Risk warning: Investments can fall and rise. Your capital may be at risk.

Explaining How Star Wars and Avengers Impact Disney’s Stock Performance

Explaining How Star Wars and Avengers Impact Disney’s Stock Performance

The Force Awakens and Age of Ultron are expected to easily break the one billion barrier

With Avengers: Age of Ultron coming out last week and the high expectations for the sequel to the original trilogy – Star Wars: The Force Awakens, traders are wondering how their success, or lack of it, will impact the stock price of one of the entertainment giants – Walt Disney Co.

Avengers is looking to make between $1-1.5 bln in revenue, the the bar is set higher for the Force Awakens, despite some negative feelings created by the last three installments in the franchise. Some even expect the movie to surpass the current record holder Avatar, that has grossed approximately $2.7 bln.

The sums themselves aren’t actually that big when you compare them with the overall company performance. 75% of Disney’s revenue comes from its media division, where the ESPN network and ABC are the main cash cows. But the remaining 25% are what drive emotion trading.

Not only Star Wars (purchased with the acquisition of Lucasfilm for $4 bln in 2012), but the Marvel Universe and other hits like Frozen and Pixar’s Big Hero Six, bring in some serious cash. Even more importantly, they provide revenue streams for many more years to come (for more on the method of creating films at a set price and managing the duds among them you can read here). These come from three main sources:

Amusement parks and rides – the potential for creating something that attracts families to visit theme parks and immerse themselves in the atmosphere of a movie, interact with its heroes is what makes the difference between spending hundreds to thousands on a family trip and tickets.

Merchandise – Toys are a high margin business, but the challenge there is to find a scalable line that has enough appeal to warrant mass production. George Lucas’ famous deal to keep ownership of Star Wars toys before the first movie came out, is one of the main sources of his personal wealth

Cross media products – With more channels popping up where spinoffs and “by-products” can be promoted, this revenue stream has increased its importance. 3D animated cartoons over Cartoon Network and now NETFLIX, as well as TV series like The Flash, Green Arrow and Daredevil are turning into steadier and more predictable products. They can even boost the previous two sources.

While expectations for this part of the business are, let’s say optimistic, things aren’t so rosy for the rest. The media business is facing some new threats from the development of cable tv distribution and how it’s sold to customers, mainly in the US. With TV packages sold in bundles the consumers pay a certain amount in order to get the most desired content, but they get the feeling of overspending for channels that don’t necessarily watch.

For operators this is a good deal, as there are still clients that expand their viewership and get exposed to more advertising. But in an age of on-demand viewing the math isn’t adding up.

Verizon, another company available in Trading 212, recently announced an “unbundling” of how they will be selling viewing packages, responding to consumer pressure. Disney are currently suing them to stall this development, as they pitch their whole media package to advertisers and create content that can be used (and recycled) across multiple platforms, but it seems like the tide has turned.

The main impact of movies, and especially such a large universe like Star Wars, is that it promises to attract the money of an extremely large audience who will be making purchases based on emotion. Buying based on emotion is what sells for larger margins and looks good on a balance sheet. It has its risks though – the first hint of disappointment among fans of either movie might limit the force’s impact on trader’s sentiment. But come December 18th, we sense a strong presence of moviegoers.

Can a Company Really Have Negative Value?

Can a Company Really Have Negative Value 1

Can a Company Really Have Negative Value 1

The strange situation Yahoo have found themselves in

It lost the battle with Google over which search engine will power the Internet in the last decade or so, but Yahoo is still on the map. Thanks to some shrewd investing and tooth and nail efforts they still have a share in the search market and have some nice mini-growth areas like fantasy football, Yahoo finance and Yahoo answers.

Combined with the appointment of Marissa Mayer as CEO – a superstar from Google, intimately aware of how they built their success – Yahoo was supposed to be a serious and direct opponent that pushed Larry Page and Sergey Brin’s company. Things definitely didn’t unfold that way.

Almost all new campaigns and product launches have been either lackluster or plain failures. Save for the share in Alibaba and Yahoo Japan, the company has seen a steady decline of overall user numbers.

At the same time, the early entry in Alibaba has proven to be an excellent bit of business. Former CEO Jerry Yang believed in the project and invested $1 billion in it through his connection with Jack Ma whom he knew from their time together in the Chinese Ministry of Trade. Last week that share was spun off in a separate company (saving $10 billion in taxes), prompting the share price to jump 8%.

But the underlying current of doubt quickly resurfaced and all the upside was erased and even reversed with the price currently around $44 – 7% lower than last Tuesday.

Why did prices still go down after something universally accepted as positive happened? It’s for the same reason that last year Yahoo’s core business was valued at around -$13 billion by some analysts.

We’ll have to delve deeper into the technical side to explain this. First of all, this isn’t about the share price – that one can’t go below zero. It concerns the value of the company itself and can be explained with a bit of strange math – the stakes the mother company has in Yahoo Japan and the recently spun-off one in Alibaba combined, were worth more than the two put together with the main business of Yahoo. And this is a fact even though the latter brings in profits at the moment.

So the whole is less than its separate parts? The answer is yes and the explanation for this is that the final third of the Yahoo business is surrounded by uncertainty, leading many people to believe that the current profits are nothing but a temporary blip before it starts losing money. In this scenario the profits from the first two would have to be used to cover those losses – diminishing their overall impact and ultimately leading to less of a gain for shareholders.

Can a Company Really Have Negative Value 2
Yahoo CEO Marissa Mayer

All this is an excellent example of what market participants value more. It’s not numbers and facts – it’s how they are perceived. The two things can become very different when it comes to predicting how and where a company is headed, both in fundamental and in technical terms. There is no other area where the adage “past results are no guarantee of future performance” is more true.

It’s also a valuable example of what many of the companies in the stocks section in Trading 212 PRO actually are – they are never just a brand, or a single product or service. In the modern-day economy, diversification is the bare minimum needed to survive – in order to thrive you have to do it well. Although they ultimately lost out to Apple and partially Samsung, we always remember Nokia, who is still a very good example of a company that has changed its core business several times across many decades.

So what is the effect of someone branding the core business of a company that still has profits, as having negative value? Short answer – it builds up pressure.

This pressure is aimed at the CEO and warrants results and improvements, as the future of the company doesn’t look good and has been that way for some time. If things do turn around, then the success will be quite impressive, because it will mean some serious competitors have been overcome. The share price will most likely follow suit and skyrocket, but if they don’t, then we might see shares get as close to negative as they can get.

Our next article will be available tomorrow at 4:00pm – “The Coming Week 9-13.2.15”

The Richest Man in Europe Looks Over an Empire Made of Fabric

The Richest Man in Europe Looks Over an Empire Made of Fabric

The Richest Man in Europe Looks Over an Empire Made of Fabric

Amancio Ortega is the third richest person in the world, but is probably the most secretive billionaire

With Inditex becoming available for trading in Trading 212 PRO, we take a look at the company and the man behind it – Amancio Ortega. His wealth is estimated at around $57.5 billion making him the richest person in Europe and the third richest in the world. With brands like Zara, Massimo Dutti, Bershka and Pull & Bear among others, it’s not entirely surprising that he’s achieved such a stature.

Continue reading “The Richest Man in Europe Looks Over an Empire Made of Fabric” »