(AMZN) Archives - Page 93 of 101 - Mad Hedge Fund Trader

The Cloud for Dummies

If you've been living under a rock the past few years, the cloud phenomenon hasn't passed you by and you still have time to cash in.

You want to hitch your wagon to cloud-based investments in any way, shape or form.

Microsoft's (MSFT) pivot to its Azure enterprise business has sent its stock skyward, and it is poised to rake in more than $100 billion in cloud revenue over the next 10 years.

Microsoft's share of the cloud market rose from 10% to 13% and is catching up to Amazon Web Services (AWS).

Amazon leads the cloud industry it created, and the 49% growth in cloud sales from the 42% in Q3 2017 is a welcome sign that Amazon is not tripping up.

It still maintains more than 30% of the cloud market. Microsoft would need to gain a lot of ground to even come close to this jewel of a business.

Amazon (AMZN) relies on AWS to underpin the rest of its businesses and that is why AWS contributes 73% to Amazon's total operating income.

Total revenue for just the AWS division is an annual $5.5 billion business and would operate as a healthy stand-alone tech company if need be.

Cloud revenue is even starting to account for a noticeable share of Apple's (AAPL) earnings, which has previously bet the ranch on hardware products.

The future is about the cloud.

These days, the average investor probably hears about the cloud a dozen times a day. If you work in Silicon Valley you can triple that figure.

So, before we get deep into the weeds with this letter on cloud services, cloud fundamentals, cloud plays, and cloud Trade Alerts, let's get into the basics of what the cloud actually is.

Think of this as a cloud primer.

It's important to understand the cloud, both its strengths and limitations. Giant companies that have it figured out, such as Salesforce (CRM) and Zscaler (ZS), are some of the fastest growing companies in the world.

Understand the cloud and you will readily identify its bottlenecks and bulges that can lead to extreme investment opportunities. And that's where I come in.

Cloud storage refers to the online space where you can store data. It resides across multiple remote servers housed inside massive data centers all over the country, some as large as football fields, often in rural areas where land, labor, and electricity are cheap.

They are built using virtualization technology, which means that storage space spans across many different servers and multiple locations. If this sounds crazy remember that the original Department of Defense packet switching design was intended to make the system atomic bomb proof.

As a user you can access any single server at any one time anywhere in the world. These servers are owned, maintained and operated by giant third-party companies such as Amazon, Microsoft, and Alphabet (GOOGL), which may or may not charge a fee for using them.

The most important features of cloud storage are:

1) It is a service provided by an external provider.

2) All data is stored outside your computer residing inside an in-house network.

3) A simple Internet connection will allow you to access your data at anytime from anywhere.

4) Because of all these features, sharing data with others is vastly easier, and you can even work with multiple people online at the same time, making it the perfect, collaborative vehicle for our globalized world.

Once you start using the cloud to store a company's data, the benefits are many.

No Maintenance

Many companies, regardless of their size, prefer to store data inside in-house servers and data centers.

However, these require constant 24-hour-a-day maintenance, so the company has to employ a large in-house IT staff to manage them - a costly proposition.

Thanks to cloud storage, businesses can save costs on maintenance since their servers are now the headache of third-party providers.

Instead, they can focus resources on the core aspects of their business where they can add the most value, without worrying about managing IT staff of prima donnas.

Greater Flexibility

Today's employees want to have a better work/life balance and this goal can be best achieved through letting them telecommute. Increasingly, workers are bending their jobs to fit their lifestyles, and that is certainly the case here at Mad Hedge Fund Trader.

How else can I send off a Trade Alert while hanging from the face of a Swiss Alp?

Cloud storage services, such as Google Drive, offer exactly this kind of flexibility for employees. According to a recent survey, 79% of respondents already work outside of their office some of the time, while another 60% would switch jobs if offered this flexibility.

With data stored online, it's easy for employees to log into a cloud portal, work on the data they need to, and then log off when they're done. This way a single project can be worked on by a global team, the work handed off from time zone to time zone until it's done.

It also makes them work more efficiently, saving money for penny-pinching entrepreneurs.

Better Collaboration and Communication

In today's business environment, it's common practice for employees to collaborate and communicate with co-workers located around the world.

For example, they may have to work on the same client proposal together or provide feedback on training documents. Cloud-based tools from DocuSign, Dropbox, and Google Drive make collaboration and document management a piece of cake.

These products, which all offer free entry-level versions, allow users to access the latest versions of any document, so they can stay on top of real-time changes, which can help businesses to better manage work flow, regardless of geographical location.

Data Protection

Another important reason to move to the cloud is for better protection of your data, especially in the event of a natural disaster. Hurricane Sandy wreaked havoc on local data centers in New York City, forcing many websites to shut down their operations for days.

The cloud simply routes traffic around problem areas as if, yes, they have just been destroyed by a nuclear attack.

It's best to move data to the cloud, to avoid such disruptions because there your data will be stored in multiple locations.

This redundancy makes it so that even if one area is affected, your operations don't have to capitulate, and data remains accessible no matter what happens. It's a system called deduplication.

Lower Overhead

The cloud can save businesses a lot of money.

By outsourcing data storage to cloud providers, businesses save on capital and maintenance costs, money that in turn can be used to expand the business. Setting up an in-house data center requires tens of thousands of dollars in investment, and that's not to mention the maintenance costs it carries.

Plus, considering the security, reduced lag, up-time and controlled environments that providers such as Amazon's AWS have, creating an in-house data center seems about as contemporary as a buggy whip, a corset, or a Model T.

_________________________________________________________________________________________________

Quote of the Day

"Life is not fair; get used to it," said founder of Microsoft Bill Gates.

June 27, 2018

Tech Letter

Mad Hedge Technology Letter
June 27, 2018
Fiat Lux

Featured Trade:
(DON'T NAP ON ROKU)
(MSFT), (ROKU), (AMZN), (AAPL), (CBS), (DIS), (NFLX), (TWTR), (SQ), (FB)

Don't Nap on Roku

Tech Letter

Unique assets stand the test of time.

In an era of unprecedented disruption, unique assets' strength begets strength.

This is one of the big reasons the vaunted FANG group has carved out power gains in the business landscape bestowed with a largesse dwarfing any other sector.

As the FANGs trot out to imminent profitability by supercharging massive scale, the emerging tech environment gives food for thought.

These up-and-coming companies fight tooth and nail to elevate themselves to FANG status because of the ease of operating in a duopoly or an outright monopoly.

Microsoft (MSFT) is the closest substitute to an outright FANG. In many ways CEO Satya Nadella has positioned himself better than Facebook (FB) and Apple.

The Mad Hedge Technology Letter has pounced on the newest kids on the block offering subscribers buy, sell or hold recommendations zoning in on the best first and second tier companies in tech land.

The top echelon of the second tier is led by no other than Jack Dorsey and both of his companies, Square (SQ) and Twitter (TWTR), offer idiosyncratic services that cannot be found elsewhere.

I have devoted stories to Dorsey gushing about his ability to build a company and rightly so.

Another solid second tier tech company bringing uniqueness to the table is Roku (ROKU), which I have talked about in glowing terms before when I wrote, "How Roku is Winning the Streaming Wars."

To read the archived story, please click here.

Roku is a cluster of in-house, manufactured, online streaming devices offering OTT (over-the-top) content in the form of channels on its proprietary platform.

The word Roku means six in Japanese and it was chosen because Roku was the sixth company established by founder and CEO Anthony Wood commencing in 2002.

Cord-cutting has been a much-covered topic in my newsletters and this generational shift in consumer behavior benefits Roku the most.

In 2017, 25% of televisions purchased were Roku TVs. According to several reports, more than half of all streaming players purchased last year were Roku players.

This would explain how Roku has shifted its income streams from the physical box itself to selling ads and licensing agreements.

Yes, Roku earns the lion's share of its profits similar to the rogue ad seller Facebook.

Roku does not actually sell anything physical except the box you need to operate Roku, which earned Roku a fixed $30 per unit.

The box serves as the gateway to its platform where it sells ads. Migrating to higher caliber digital businesses like selling ads will stunt the hardware revenue part of its business.

That is all part of the plan.

A new survey conducted regarding fresh cord-cutters demonstrated that out of 2,000 cord-cutters questioned, 70% already had a Roku player and felt no need to pay for cable TV anymore.

Second on the list was Amazon Fire TV at 34%, and Apple TV (AAPL) came in third at 10%.

The dominant position has forced content creators to pander toward Roku TV's platform because third-party content creators do not want to miss out on a huge swath of cord-cutter millennials who are entering into their peak spending years and spend most of their time parked on Roku's platform.

Surveys have shown that millennials do not need a million different streaming services.

They only choose one or two for main functionality, and in most cases, these are Netflix (NFLX) and Amazon (AMZN).

Roku allows both these services to be integrated onto its platform. Cord-cutters can supplement their Netflix and Amazon Prime Video binge with a few more a la carte channels to their preference depending on points of interest.

In general, this is how millennials are setting up their entertainment routine, and all roads don't lead through Rome, but Roku.

If the massive scale continues at this pace, 2020 could be the year profitability explodes through the roof.

The next 18 months should give way to parabolic spikes, followed by consolidation to higher lows in the share price.

When I recommended this stock, its shares were trading at a tad above $32 on April 18, 2018, and immediately spiked to $47 on June 20, 2018.

The tariff sell-off hit most second tier tech companies flush in the mouth. The 5% and occasional 7% intraday sell-offs churn the stomach like Mumbai street food during the height of the Indian summer.

That is part and parcel of dipping your toe into these rising stars.

The move ups are parabolic, but the sell-offs make your hair fall out.

Well, glue your locks back onto your scalp, because we have reached another entry point.

Roku is now trading back down in the low $40 range, and I would bet my retirement fund that Roku will end the year above $50.

This unique company is expected to grow its subscriber base by at least 20% annually, and in five years total subscribers will eclipse 45 million users.

Reinforcing its industry leadership, traditional media companies such as Disney and CBS do not have built-in streaming viewership that comes close to touching Roku.

This has forced these traditional media giants to push their content through Roku or lose a huge amount of the 18 to 34 age bracket for which advertisers yearn.

These traditional players are armed with robust ad budgets, and a good bulk of it is allocated to Roku among others.

For each additional a la carte channel users sign up for on Roku, the company earns a sales commission.

As a tidal wave of niche streaming channels plan to hit the market, the first place they will look to is Roku's platform and this trend will only become stronger with time.

A prominent example was Sling TV, which showed up at Roku's front door first before circling around the rest of the neighborhood.

The runway for Roku's three main businesses of video ads, display ads, and licensing with streaming partners, is long and robust.

The one caveat is the fierce competition from Amazon Fire TV, which puts its in-house content on Amazon front and center when you start the experience.

Roku has head and shoulders above the biggest library of content, and the Amazon effect could scare traditional media for licensing content to Amazon.

We have seen the trend of major players removing their content from streamers because of the inherent conflict of interests licensing content to them while they are developing an in-house business.

It makes no sense to voluntarily offer an advantage to competition.

Roku has no plans to initiate its own in-house original content, and this is the main reason that Amazon and Netflix will lose out on Disney (DIS), CBS (CBS), NBC, and Fox content going forward.

These traditional players categorize Roku as a partner and not a foe.

To get into bed with the traditional media giants means digital ads and lots of them. In terms of a user experience, the absence of ads on Netflix and Amazon is a huge positive for the consumer experience.

But traditional players have the option of bundling ads and content together on Roku making Roku even more of a diamond in the rough.

In short, nobody offers the type of supreme aggregator experience, deep penetration of cord-cutting viewership, and the best streaming content on one graphic interface like Roku.

It is truly an innovative company, and it is in the driver's seat to this magnificent growth story.

It's hard to argue with CEO Anthony Wood when he says that Roku is the future of TV.

He might be right.

If Roku keeps pushing the envelope enhancing its product, it will be front and center as a potential takeover target by a bigger tech company.

Either way, the scarcity value of these types of assets will drive its share prices to the moon, just avoid the nasty sell-offs.

_________________________________________________________________________________________________

Quote of the Day

"Google's not a real company. It's a house of cards," - said former CEO of Microsoft Steve Ballmer.

June 26, 2018

Tech Letter

Mad Hedge Technology Letter
June 26, 2018
Fiat Lux

Featured Trade:
(THE CHIP DILEMMA)
(MU), (NFLX), (AMZN), (NVDA), (AMD), (RHT)

The Chip Dilemma

Tech Letter

The hawks are circling around 2019 chip guidance and that is bad news for chip equities.

Perusing through recent earnings reports, it's not a surprise that investors are uncertain whether tech can bail the rest of the equity market out of this slow macro malaise.

The deterioration in the macro climate has given added dependence to the tech vanguard with investors piling into large cap tech as a flight to quality ensues.

It helps when the tech sector is at the heart of every and any future business.

Names such as Amazon (AMZN) and Netflix (NFLX) are so far above their 50-day and 100-day moving averages that investors will take this mild sell-off as a healthy sign of consolidation.

This also means that traders will pin down Netflix's and Amazon's 50-day and 100-day moving averages as the line in the sand for technical support.

The equity weakness underscores that not all tech names are created equal, and firms without moats have been the leakiest.

Red Hat, the up-and-coming enterprise cloud company, became the scapegoat for mid-cap cloud companies triggering a massive sell-off dipping 14.23% instigated by weak guidance.

It was one of the first cloud snafus for a few quarters fueling an intense risk off surge in cloud and chip names.

It seems not a day goes by where the administration does not announce another provocative countermeasure to the tit-for-tat trade skirmish being played out at the highest levels of government.

Analysts have been trigger-happy as the few bears out there are incentivized to be the first one to call the peak of the chip market.

Careers are made and lost with these bold calls.

As bad as the Red Hat (RHT) miss was to the tech narrative, Micron (MU) made a big splash on its quarterly earnings report boding well for large cap tech names.

Micron beat estimates and surprised on the upside on guidance.

Micron was the first recommendation of the Mad Hedge Technology Letter at a cheap $41.

To read the first article of the Mad Hedge Fund Technology Letter about Micron, please click here.

The stock rocketed to more than $60 at the end of March and the end of May, each time dragged down by big picture headwinds.

Micron is a great long-term hold and the volatility in the stock is not for everyone.

If you want to avoid mind-numbing volatility, then stay away from chip stocks as the boom-bust nature of this sector has created a paranoia bias among analysts generating stock downgrades.

Cloud stocks are succinct, zeroing in on the few growth metrics that matter.

The guesswork involved in chip stocks is the perfect formula that leads to downgrades, because the silicon is distributed to other companies for end products of which are hard to keep tabs.

Hence, the chips industry has experienced a tidal wave of wrong analysts calls that unfairly taint chip stocks and the price action that follows.

Micron's data center cloud revenue, a huge driver of DRAM chips, were up 33% QOQ.

The cornerstone of Micron's business and the reinvestment into cloud products has made this stock best of breed in the chip sector and a top 3 chip stock of the Mad Hedge Technology Letter.

The only other stocks that compare with this outstanding growth story and that are at the cutting edge of innovation are hands down Nvidia (NVDA) and Advanced Micro Devices (AMD) in that order.

Next year's profit margins are the next conundrum for the chip industry.

The huge sums of money required to stay ahead of competition could crush profitability.

Pricing is currently stable but stagnant.

The additional marginal costs could be the reason for investors to flee.

More specifically DRAM pricing for 2019 is under the microscope and soft numbers could spell doom for a company that extracts 71% of its revenue from DRAM chips.

All these negative whispers come at a time where DRAM chips are lifting Micron shares to the heavens. And if there was no international friction, the share price would be substantially higher than it is today.

As of today, the chip industry is still grappling with DRAM supply shortages causing costs per unit to spike.

When you consider that DRAM demand is so healthy that China is once again investigating large cap chip companies, investors should be jumping for joy.

These probes are unfounded and are brought about because DRAM pricing is one of the main inputs to setting up data centers and self-driving technology among other businesses.

If China is forced to pay exorbitant prices for groundbreaking chips that can only be found at American and Korean companies, it makes producing every digital end product costlier. infuriating Chinese management.

SK Hynix, Samsung, and Micron comprise more than 90% of the DRAM market, to which Chinese companies need unfettered access.

DRAM chips, unlike other hardware components, are traded on a transparent public market and the probe highlights the building anxiety if Chinese companies are priced out of this sector.

China views the price spike phenomenon in chips as entirely favoring foreign companies that lap up the DRAM profits like money falling from the sky.

Micron carves out half its sales from China, but it is untouchable because loads of chips are required to fuel its global technological supremacy initiative, which is being chipped at by the administration.

CEO of Micron Sanjay Mehrotra has continued to brush off the China threat because he knows Chinese firms cannot fabricate its products.

If this ever happened, kiss the preferential DRAM pricing goodbye, because China would flood the market with substitutes, which has happened to various end markets in the digital and non-digital ecosphere.

The investigation could end in some sort of monetary slap on the wrist and could be payback for blasting a massive hole in Chinese telecommunications hardware conglomerate ZTE's business model.

The administration's heavy-handed response to ban Chinese investment in technology is a long-term victory for Micron, SK Hynix, and Samsung, which have the DRAM market cornered.

These three companies will corner the market even more going forward thanks to help from Washington, widening each moat.

China is not short on funds; it is short on technological expertise because a generation of copy and paste youth cannot compete with the best and brightest minds in Silicon Valley.

Not only can it not compete, it cannot lure the best and brightest to the mainland capitulating local innovation standards.

Its only hope was to pay premium prices for emerging American technology and now that spigot has been turned off.

Technology is in its infancy and is in the early innings of a stunning growth trajectory with a one-way ticket to singularity.

There will be zigs and larger zags on the way. If you thought the Chinese could just ignore Micron and buy from the Koreans, you were wrong.

The relentless demand for DRAM chips is wilder than a British soccer hooligan. Cutting off access to one massive avenue of DRAM chips would be a death knell for any scalable production process that relies on heavy shipments of DRAM chips.

Although markets have been haywire lately, these developments are incredibly bullish, unless China can suddenly produce high-quality chips, which won't be anytime soon.

For the short term, try to pick up the best chip names at yearly lows as tech will not stay suppressed forever.

If you want to scale down the risk, park your funds in the best cloud tech names to weather the storm.

_________________________________________________________________________________________________

Quote of the Day

"We've had three big ideas at Amazon that we've stuck with for 18 years, and they're the reason we're successful: Put the customer first. Invent. And be patient," - said founder and CEO of Amazon Jeff Bezos.

June 25, 2018

Diary, Newsletter

Global Market Comments
June 25, 2018
Fiat Lux

Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, OR IS THIS A 1999 REPLAY?),
(AAPL), (FB), (NFLX), (AMZN), (GE), (WBT),
(JOIN ME ON THE QUEEN MARY 2 FOR MY JULY 11, 2018 SEMINAR AT SEA),
(JUNE 20 BIWEEKLY STRATEGY WEBINAR Q&A),
(SQ), (PANW), (FEYE), (FB), (LRCX), (BABA), (MOMO), (IQ), (BIDU), (AMD), (MSFT), (EDIT), (NTLA), Bitcoin, (FXE), (SPY), (SPX)

The Market Outlook for the Week Ahead, or is this a 1999 Replay?

Diary, Newsletter, Research

Another week, another trade war.

The stock market did not take well the administration's escalation of international tensions by threatening to increase Chinese imports subject to punitive duties from $50 billion to $250 billion.

Today, it got much worse with our government now targeting French luxury goods, including wine, handbags, and Roquefort cheese.

Please! Anything but the Roquefort cheese!

In the meantime technicians are getting increasingly nervous about the market concentration. Take out the top-performing 15 stocks, such as big tech and Boeing (BA) and we are already in a bear market. Some 60% of S&P 500 stocks are below their 200-day moving averages and in solid downtrends.

One manager told me that a year from now we will be kicking ourselves for not selling, for all the signs to get out of Dodge were there.

In the meantime, I am hearing an alternative theory about technology stocks. The earnings growth is so prolific that they could continue to melt up for the rest of 2018. Indeed, Amazon (AMZN), Facebook (FB), Netflix (NFLX), and Salesforce (CRM) all hit new all-time highs this week.

Tech stocks are melting up because of blowout earnings expected in a month. After all, in this industry great quarters are followed by more great quarters.

By my calculation the shares prices of technology stocks have to double to bring their market capitalization of only 26% in line with their 50% share of the S&P 500 total earnings.

By the way, California now accounts for 19% of the U.S. population, 21% of U.S. GDP, but a staggering 35% of corporate profits, with two of four FANGs just spitting distance from my office.

Holy smokes! Are we seeing a replay of 1999, the notorious dot-com bubble top?

I hope not. Tech earnings multiples now average 25X compared to 100X back in the day. But this analysis does neatly fit in with my prediction that stocks top in the May-September 2019 time frame.

Last week also saw the shares of General Electric (GE) tossed on the ashcan of history, and the stock was taken out of the Dow Average, to be replaced by sedentary drug store Walgreens (WBA).

That's what a decade of lousy management gets you, which has vaporized a half trillion dollars of market capitalization since 2000. Back then, GE was the largest market cap company in the world, the equivalent of Apple (AAPL) today.

During this same time Apple created $900 billion in new market cap, the shares rocketing from $2.50 to $195. What a trade! Long Apple, short (GE) for 18 years.

As for Apple, it is unique among the FANGs in having the biggest exposure to China. It employs 1 million there, sells more iPhones in the Middle Kingdom than in the U.S., and is crucial to the company's long-term growth plans. The rest of the FANGs have virtually NO China exposure.

This realization caused me to stop out of my position in Apple shares for a loss during its $12 plunge off its all-time high at $195. That brought my 2018 year-to-date performance down to 24.91% and my 8 1/2 year return to 301.38%.

Fortunately, aggressive longs in Amazon, Salesforce, Microsoft, and the iShares Nasdaq Biotechnology ETF (IBB) still have me up +4.54% in June, my 12^th consecutive positive month.

This coming week will be all about the May real estate and housing data, which we already know will be hotter than a pistol.

On Monday, June 25, at 10:00 AM, May New Home Sales are out.

On Tuesday, June 26, at 9:00 AM, the S&P CoreLogic Case-Shiller National Home Price Index for April is released. May Consumer Confidence is out at 10:00 AM.

On Wednesday, June 27, at 8:30 AM, May Durable Goods is published. May Pending Home Sales are out at 10:00 AM.

Thursday, June 28, leads with the Weekly Jobless Claims at 8:30 AM EST, which saw a fall of 3,000 last week to 218,000. Also announced is another read on US Q1 GDP. The last report came in at a moderate 2.2%.

On Friday, June 29, at 9:45 AM EST, we get the May Chicago Purchasing Managers Index. Then the Baker Hughes Rig Count is announced at 1:00 PM EST.

As for me, I will be headed to Los Angeles for my one beach weekend this year. Got to keep those body surfing skills finely tuned, and I'll have a chance to work on my tan before going to sea for a week in July.

In California it's all about the tan.

Good Luck and Good Trading.

June 25, 2018

Tech Letter

Mad Hedge Technology Letter
June 25, 2018
Fiat Lux

Featured Trade:
(IT'S NOT HEAVEN FOR ALL CLOUD STOCKS)
(ORCL), (MSFT), (AMZN), (CRM), (GOOGL)

It's Not Heaven for All Cloud Stocks

Tech Letter

The year of the Cloud takes no prisoners.

Cloud stocks have been on a tear resiliently combating the leaky macro environment.

Many of my cloud recommendations have been outright winners such as Salesforce (CRM).

However, there are some unfortunate losers I must dredge up for the masses.

Oracle (ORCL) announced quarterly earnings and it was a real head-scratcher.

I have been banging on the table to ditch this legacy tech company since the inception of the Mad Hedge Technology Letter.

It was the April 10, 2018 tech letter where I prodded readers to stay away from this stock like the black plague.

At the time, the stock was trading at $45, click here to revisit the story "Why I'm Passing on Oracle."

The first quarter was disappointing and abysmal guidance of 1% to 3% for annual total revenue topped off a generally underwhelming cloud forecast.

Investors spotlight one part of the business requiring the utmost care and nurturing - its cloud business.

The second quarter was Oracle's chance to revive itself demonstrating to investors it is serious about its cloud direction.

What did management do?

They announced a screeching halt to the reporting of cloud revenue and it would avoid reporting on specific segments going forward.

Undoubtedly, something is wrong behind the scenes.

To withdraw financial transparency is indicative of Oracle's failure to pivot to the cloud and this has been my No. 1 gripe with Oracle.

It is simply getting pummeled by the competition of Amazon (AMZN), Alphabet (GOOGL), and Microsoft (MSFT).

Stuck with an aging legacy business focused on database software, transformation has been elusive.

To erect a giant cloak around its cloud business means that growth is far worse than initially thought to the point where it is better to sweep it under the carpet.

Instead of taking a direct hit on the chin, management decided to wriggle itself out of the accountability of bad cloud numbers.

A glaringly bad cloud business should be the cue for management to kitchen sink the whole quarter and start afresh from a lower base.

The preference to shroud itself with opaqueness is bad management. Period.

Instead of turning over a new leaf, Oracle could be penalized on future earnings reports for the way it reports financials for the simple reason it confuses analysts.

Wars were fought for less.

Bad management runs bad companies. The stock has floundered while other cloud stocks have propelled to new heights - another canary in the coal mine.

Amazon and Netflix are two examples of tech growth stocks that have celebrated all-time highs.

Even rogue ad seller Facebook broke to all-time highs lately.

The champagne is flowing for the top-level tech companies.

As expected, Oracle was punished heavily upon this news with the stock down almost 8% intraday to $42.70, and it sits throttled at $43.60 as I write this.

Diverting attention from the cloud will mire this stock in the malaise it deserves. Shielding its investors from the only numbers that really matter will give analysts a great reason to label this dinosaur stock with sell ratings.

Analysts are usually horrific stock predictors, but they will be able to wash their hands of this beleaguered stock.

Even if the stock goes up, analysts will still be geared toward sell ratings.

Oracle reported a $1.7 billion in total cloud revenue last quarter, a disappointing 9% increase QOQ.

Oracle's cloud revenue is only up 25% YOY.

For an up and coming cloud business, the minimum threshold to please investors is 20% QOQ, and the 9% QOQ expansion will do nothing to get investors excited.

The deceleration of growth is frightening for investors to stomach and Oracle's admission the cloud business is uncompetitive will detract many potential buyers from dipping in at these levels.

In short, Oracle is not growing much. There is no reason to buy this stock.

I always divert subscribers into the most innovative tech stocks because they are most in demand from investors.

Innovative inertia has reverberated through the corridors at its massive complex in Redwood City, California.

A major shake out in product development and business strategy is vital for Oracle clawing back to relevance.

This is the fourth sequential quarter with unhealthy guidance.

Much of the weakness comes from Amazon siphoning business out of Oracle.

Completed surveys suggest the conversion to AWS has one clear loser and that is Oracle.

Cloud vendors are now ramping up their smorgasbord of cloud offerings attracting more business.

The second and third cloud players, Alphabet and Microsoft, have been particularly active in M&A, attempting to make a run at AWS for pole position.

It is most likely that Oracle's capital spending will dip from $2 billion in 2017 to $1.8 billion in 2018.

Considering Salesforce spent $6.5 billion on MuleSoft, a software company integrating applications, an annual $1.8 billion capital expenditure outlay is a pittance and shows that Oracle is functioning at a pitiful scale.

Oracle won't be able to make any noteworthy transactions with such a miniscule budget.

Without enhancing its cloud offerings, Oracle will fall further behind the vanguard exacerbating cloud deceleration.

Oracle pinpointed data center expansion as the targeted cloud segment after which they would chase. Oracle will quadruple two data centers in the next two years.

One of the data centers will be placed in China collaborating with Tencent Holdings Limited to satisfy government rules requiring outsiders partnering with local companies.

Saudi Arabia is locked in for a data center, desperate to attract more tech ingenuity to the kingdom.

Saudi Arabia's iconic state-owned oil giant will form an "Aramco-Google partnership focused on national cloud services and other technology opportunities."

It will be interesting going forward to analyze the stoutness of the data center commentary considering foes such as Alphabet are boosting spending.

Alphabet quarterly spend tripled to $7.56 billion QOQ including the $2.4 billion snag of New York's Chelsea Market skyscraper Google will spin into new offices.

Alphabet has splurged on $30 billion on digital infrastructure alone in the past three years.

That bump up in infrastructure spending is to support the spike in computer power needed for the surging growth across Alphabet's ecosystem.

Apparently, Oracle is not experiencing the same surge.

If investors start to question global growth, investors will migrate into the top-grade names and the marginal names such as Oracle will be taken behind the woodshed and beaten into submission.

Oracle is much more of a sell the rally than buy the dip stock fueled by its growth deceleration challenges.

_________________________________________________________________________________________________

Quote of the Day

"If you don't have a mobile strategy, you're in deep turd," - said Nvidia CEO Jensen Huang.

June 21, 2018

Diary, Newsletter

Global Market Comments
June 21, 2018
Fiat Lux

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