Today - Saturday, September 20, 2014
- Though plenty of ink has been spilled over Facebook's (NASDAQ:FB) competitive threats over the last year, eMarketer estimates the average U.S. Facebook user now spends 39 minutes/day on its site and apps - up from 38 in 2013 and 35 in 2012. The figures exclude Instagram, whose user base has a large U.S. component, and also WhatsApp.
- In spite of the usage growth, Facebook's share of U.S. social media time has fallen to 33.3% from a 2011 peak of 40%. Likewise, its share of U.S. digital time spent has slipped to 6% from 6.5%. On the other hand, with digital continuing to grab media share, Facebook's share of total media time spent has grown to 2.8% from 2.2%.
- Meanwhile, with Facebook's ad sales having soared over the last two years thanks to an all-out monetization push (especially on mobile), eMarketer estimates the company now has a 9.7% share of U.S. digital ad spend, 370 bps above its digital time share. By contrast, all other social networks claim just a 3.9% share of U.S. digital ad spend, in spite of having an 11.9% share of time spent.
- Likewise, Pandora (NYSE:P) is estimated to have only a 1.4% digital ad spend share vs. a 7.1% share of time spent. With the company spending aggressively to grow its ad salesforce, that gap could narrow in the coming years.
- As is the case for many of its peers, the U.S. remains crucial to Facebook's top and bottom lines: North America still accounted for 44% of Q2 revenue, even though it was responsible for only 15% of MAUs.
- Previous: Pew's U.S. Facebook survey data
- Computer experts inside Home Depot (NYSE:HD) had warned for years that they might be easy prey for hackers, the NY Times says.
- Former members of HD's cybersecurity team say the company was slow to respond to early threats and only belatedly took action, that it relied on outdated software to protect its network and scanned systems irregularly, and that some members of its security team left after managers dismissed their concerns.
- Nailed badly this summer over worries about its long-term care unit, Genworth (NYSE:GNW) - whose share price about doubled in 2013 - is offering investors another buying opportunity, writes Jonathan Laing in Barron's. Q2 results this year showed a drop in operating profit from LTC to $6M from $46M a year earlier, and surging claim losses has the company reviewing the adequacy of its reserves.
- The results of the review - and whether the company will need to take a reserve charge - are expected at this quarter's end. A further sting: It was less than a year ago management had done a "deep dive" into LTC reserves and given the "all clear" to analysts.
- Even a massive and unlikely reserve charge of $1B would only cut Genworth's book value per share just a couple of dollars from the current $31.37 (vs. Friday's closing stock price of $13.19), says Laing. The actual charge, he says, is likely to be closer to an easily covered $200M. He expects the gap to book value to begin closing in the coming years.
- The company isn't sitting still in LTC either, says Laing, noting premium increases nearly nationwide and the tightening of policy terms - basically eliminating lifetime benefits in favor of maximum benefit periods of 3-5 years. The big issue, of course, are those legacy policies (sold from 1974-2001) where lapse rates have been 1% or less vs. the 5-5% expected, and investment returns of 5.5% are less than 6.75% expected. Genworth will do good to break even on these, but their number should shrink to 123K over the next decade from 331K today based on mortality statistics.
- "Starting next year," writes Jack Hough in Barron's, "BofA (NYSE:BAC) investors will get a glimpse of two things they haven't seen in years: a fairly clean income statement and a decent dividend." Litigation costs are set to nail the bank again this quarter, but then will begin to quickly clear away, leaving investors to focus on the bank's operations. Earnings per share - an estimated $0.75 this year - could hit $2 in 2017, and the annual dividend ($0.20 now) could rise to $0.55.
- CEO Brian Moynihan notes core pretax profit in four of BofA's five units was $8.5B in Q2, up from $6.8B two years ago. Business #5 is mortgages, and that provided a $4.5B loss thanks to now rapidly fading legacy issues. Litigation costs make most of the headlines, but there's also non-litigation expenses like modifying some loans and foreclosing on others. These costs dropped to $1.4B last quarter from $2.3B a year earlier, and are expected to fall to $500M in 2015.
- Upgrading BofA to a Buy earlier this month, Goldman - looking past litigation and other one-time items - says the bank has had the largest reduction in earnings volatility of any of its peers in recent years and the stablest trading revenues since 2013. The beacon is Wells Fargo - earnings stability and a higher dividend has that stock trading at a premium 1.7x book value. BofA is at 0.8x, and as its steadier earnings begin to become clearer, that valuation discount should narrow.
- Bank of America is also underowned, says Goldman, noting its weighting in mutual funds relative to its weighting in the S&P 500 is the second lowest among 25 large financials (the lowest is Berkshire Hathaway).
- Deutsche Bank analysts say they came away encouraged after hosting a series of one-on-one meetings with top energy companies; despite recent negative sentiment on the group, it paints an optimistic outlook for oil service companies, which see continued strength in the overall spending outlook from customers, even with the move down in commodity prices.
- Among the firm's top Buy-rated stocks in the group is Schlumberger (NYSE:SLB), down 12.5% since July 1; despite a slowdown from Libya, Iraq and Russia, the DB team likes the outlook for Latin America, with a recent contract win in Brazil in wireline and better pricing in its drilling contract, and eyeing start-up work in Mexico.
- DB also likes Hercules Offshore (NASDAQ:HERO), which has cratered 63% YTD; the company expects slow going in the Gulf of Mexico until the end of this year’s hurricane season, but opportunities look much brighter in 2015.
- Rounding out the firm's favorites: BHI, BAS, EXH, FET, PES.