Tech Stocks – Square is Set to Soar this Year
This year has been good to Square Inc. over the first week of trading. While the stock is still trading well off from its all-time high of $99.01 reached in September, its seen a significant rally since January 3 and could be set to soar. In all, Square’s share price has gained around 27 percent, jumping from lows of $52 to its current share price of $65.93.
A key catalyst in the stock’s recovery was the appointment of a new chief financial officer.
Previously, CFO Sarah Friar was seen as a driver of both growth and stability. Friar was a longtime Goldman Sachs analyst and left Square for the CEO position at social media startup, Nextdoor.
Square’s share price plummeted on the news in early October and has seen little recover since.
“Her leadership in many ways has been more instrumental to Square’s emergence as a true payments disrupter and impressive growth story than CEO, Jack Dorsey’s,” said Suntrust analyst Andrew Jeffrey on the news of her departure.
On January 3, the company announced the appointment of Amrita Ahuja as the replacement CFO after a quarter long search.
Ahuja has been with Activision Blizzard for eight years, and has most recently served as the CFO of the company’s Blizzard Entertainment unit.
“In Amrita, we have found an amazing, multidimensional business leader,” said Square founder Jack Dorsey in a statement last Thursday. “Amrita brings the ability to consider and balance opportunities across our entire business, and she will help strengthen our discipline as we invest, build, and scale.”
In addition to Activision Blizzard, Ahuja has worked with Fox Networks Group, the Walt Disney Company, and Morgan Stanley. The 39-year-old holds an M.B.A. from Harvard University.“I’m incredibly inspired by Square’s purpose as it has personal resonance for me,” said Amrita in a statement.
“My parents were the type of entrepreneurial business owners for whom Square was created. I believe Square is building the most innovative commerce ecosystem for sellers and consumers, and I am excited to help the company execute against this massive opportunity.”
Even amid a market downturn that has crippled tech stocks, Square is powering through.
The company started off with the purpose of providing a solution for small businesses to accept credit card payments, and has bubbled from that mission into other revenue channels as well.
Square now has a popular peer-to-peer lending platform rivaling PayPal’s, and has developed its simple payment solution into a full ecosystem for small businesses.
Most recently, the company announced a further advancement of this ecosystem in the form of in-app payment processing.
“With the introduction of in-app mobile payments to the Square platform, developers now have a complete, omnichannel payments solution for all their payment needs,” said Carl Perry, Developer Lead at Square in a press release. “From software to hardware to services, Square offers a complete payments experience all in one cohesive open platform.”
Even after rising by 27 percent, there is still an argument to be made that Square is trading at a discount.
It’s still over 30 percent off from the consensus estimate of $84, and as large market headwinds evaporate and the company recovers from its shift in leadership, more upside should be imminent.
Tech Stocks – Blackberry Poised to Profit from Smart Device Vulnerability
Blackberry Ltd. has an answer for security concerns in the Internet of Things sector, and it could be just the catalyst the company needs.
The Internet of Things, or IoT, is a buzzword of yesteryear. According to data from Google Trends, searches for the term peaked in late 2016.
Does this mean that this is another fad that hasn’t come into fruition? Not at all! More devices than ever are entering the market. While the hype surrounding smart devices, wireless connectivity and automation in everyday life has been dying down, many companies are still betting on an increasingly connected world.
According to a report by Gartner Inc., 20.4 billion IoT enabled devices are expected to be in use by next year, and most will be in the form of consumer electronics.
“Aside from automotive systems, the applications that will be most in use by consumers will be smart TVs and digital set-top boxes, while smart electric meters and commercial security cameras will be most in use by businesses,” said Peter Middleton, research director at Gartner.
With more and more devices around our homes becoming connected, this also opens consumers up to a greater possibility for security breaches, according to experts. Moreover, any security breaches can make or break a company’s product line.
“Because they secure sensitive, personally identifiable information, a company is a fiduciary of that information. That means they have a fiduciary responsibility to safeguard that information,” said Darren Guccione, who is the CEO password manager Keeper Security. “Failure to do so, especially for a small to medium-sized business can be catastrophic.”
According to Guccione, a small to medium consumer-facing IoT company that experiences a data breach can expect to be out of business in around six months. This clearly represents a bottom-line problem for larger companies as well, as any data breaches will bring negative press, returns, and possibly litigation as well.
BlackBerry Limited is poised to profit from the current vulnerabilities of the IoT sector across virtually all devices. As most savvy investors know, the mobile device maker has long since transitioned into a company focused on cyber security, and makes most of its revenue from licensing out its intellectual property.
According to a study commissioned by the company, as many as 80 percent of American, Canadian, and British consumers don’t trust the security of their IoT enabled devices.
2019 will be the year consumers will begin to vote with their wallets and seek out products that promise a higher level of security and data privacy. IoT device manufacturers can address security and privacy concerns head-on and stand out in the cluttered IoT space by bringing to market ultra-secure products that consumers, retailers, and enterprises want to buy and use.
– Alex Thurber, SVP and General Manager of Mobility Solutions at BlackBerry
Blackberry is currently trading at $7.52, which is on the lower end of the stock’s five-year range.
Due to the company’s presence at CES 2019 and the market’s current focus on security and privacy, now may be the perfect time to get in before the Internet of Things and a wider array of licensing agreements sends Blackberry stock higher.
Tech Stocks – The Cloud Leaves Oracle Down
Tech giant Oracle posted estimate-beating earnings, but disappointing revenue, sending the stock plunging in after-hours trading. A large factor in the revenue miss is the company’s lackluster performance in the competitive cloud market.
The revenue miss ($9.19 billion reported vs. $9.28 billion expected) comes after the company had already decreased guidance in June, the same time the company announced decreased transparency in its cloud segment.
Adding to the negative market perception, this marks revenue misses for two of Oracle’s last four quarters. Co-CEO Safra Catz also released negative guidance for the company’s November earnings date.
Oracle stock fell roughly five percent on the news in after hours Monday.
Oracle’s revenue miss can be almost entirely attributed to the shortcomings of the company’s cloud-based revenue. With the new reporting structure, however, analysts are unable to determine exactly which areas are dragging behind.
While cloud services and licensing revenue was expected to be at $6.68 billion for the second quarter, it was reported at just $6.61 billion. Meanwhile, competitors Salesforce, Amazon, and SAP are reporting huge growth in their cloud-based revenue.
“Oracle’s move to the cloud is taking longer than expected, is consistent with what we have heard from the channel, and with reduced disclosures, we have lesser visibility into the company’s progress,” wrote Keybanc analyst in a post-earnings report, citing the company’s new reporting structure, which has been criticized for the lack of transparency it offers analysts and investors.
Rather than reporting software-as-a-service, platform-as-a-service and infrastructure-as-a-service revenue separately, the company began lumping the figures together into what they call cloud services and license support revenue. For many analysts, this shows a lack of transparency into key figures in a very competitive market.
A Change In Earnings
However, Oracle reported estimate-beating earnings of 71 cents per share, surpassing Wall Street estimates of 69 cents, and representing a 14.5 percent gain. While this seems like great news for investors, there is more to the story.
The higher-than expected bottom line is due in part to Oracle’s extensive stock buybacks over the past quarter. Rather than evidence of performance, it is simply a result of accounting. Investors should anticipate more buybacks in the future and understand that earnings beats are priced in with buybacks.
“We think our stock is an unbelievable buy, so we are buying it back,” said Catz in the after earnings conference call. “At these prices, with our growing cash flows, with our earnings growing like they are, it seems like an amazing deal to buy our stock. So we’re putting our money where our mouth is, frankly.”
In the post-earnings conference call, Oracle leadership announced another $12 billion was approved to be spent on buybacks in the coming quarter.
Investors can view this as a company betting on itself, but should be well aware of the various headwinds and strong competition Oracle faces in the cloud computing market.