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Mad Hedge Fund Trader

The FinTech Company You've Never Heard of

Tech Letter

Here’s a company for you involved in technology’s tectonic shift towards FinTech in 2019.

They aren’t new, but you’ve probably never heard of them.

It’s Fiserv Inc. (FISV) which sells financial technology and can include customers such as banks, credit unions, securities broker-dealers, leasing, and finance companies.

An inflection point is occurring within the global business and that is financial technology and the rapid integration of it.

Financial institutions are building products around this concept and Fiserv has a head start on the others with more than 30 years of experience in aiding banks, thrifts, and credit unions, managing cash and processing payments, loans, and account services.

The Wisconsin-based company constructed an unstoppable machine leveraging its time-honored relationships and expertise to bring banking to all the screens that pervade daily life.

“Innovation, Integration and Scale” has been the motto that has served this company well for so long.

The company cut its teeth in the trenches helping banks move money long before it became the next big thing.

Five years ago, under the leadership of CEO Jeff Yabuki, there was a corporate flashpoint with upper management realizing they needed to evolve or die.

Yabuki anticipated a near future fueled by mobile wallets and changing consumer expectations - an always-on, never-off connected world.

An environment where consumers want what they want when they want it.

There has been no letup in this trend.

Silicon Valley companies were always the 800-pound gorilla in the room and Fiserv didn’t want to become sideswiped by them.

And in 2014, at the Money 20/20 conference in Las Vegas, Yabuki set out his vision that continues to prevail today.

The financial services industry had become obsessed with point-of-sale transactions.

And at $200 billion in annual domestic sales, it was a business that resonated to all corners of the FinTech world.

It was sensical to persuade consumers to use branded credit or debit cards to pay for stuff in stores and online.

At the time, that was bread-and-butter banking.

To the banks' chagrin, Silicon Valley has gotten in on the act with the likes of Apple (AAPL), Alphabet (GOOGL), PayPal (PYPL), Square (SQ) firing warning shots.

They formulated products of their own, whipped up the necessary scale and maximized the reverberating network effects.

Yabuki urged financiers at the conference to double down on what they did best while looking to grab low-hanging fruits in the short-term.

The business beyond point-of-sale was theirs waiting on a decorative platter – the opportunity was a $55 billion behemoth consisting of consumer-to-consumer, business-to-business and consumer-to-business transactions.

Embracing FinTech translated into massive speed advantages, stauncher security-laced products while offering traditional bank customers higher quality service at their convenience.

Fiserv erected a platform to help financial institutions focus on payments beyond POS called Network for Our World.

The goal of this NOW Network was to help customers' flow of money by paying bills and getting paid.

These entrepreneurs are looking for more efficient ways to collect money owed - they are a lucrative addressable audience for bankers.

The Fiserv sales pitch is working wonders according to the data. The company has 12,000 clients worldwide, with 85 million online banking end-users.

It has rolled out innovative products for payments, processing, risk and compliance, customer service and optimization.

The company has become ever so profitable with a 3-year EPS growth rate of just 15%, but in the last quarter, this metric surged to 23% and projected to rise.

Fiserv also dabbled with some M&A hauling in debit-based assets of Elan Financial Services.

The stellar acquisition, with annual revenue of over $170 million, extends Fiserv’s leadership in payments, broadens client reach and scale, and provides new solutions to enhance the value proposition of the existing 3,000 debit solutions clients.

The deal also gave Fiserv ownership of Money Pass, the second largest surcharge-free ATM network in the U.S., with over 33,000 in-network ATMs.

They also added other major pieces with the purchase of First Data Corp (FDC).

The maneuver is strategically solid, and Fiserv will benefit from a parlay of idiosyncratic opportunities from the combined synergies.

Fiserv will be able to refer First Data's merchant-acquiring services to the banks it currently works with.

I predict cost savings of $1 billion from the deal and potential upside from platform rationalization, which has not yet been included in synergies.

There will be significant upside potential from interest expense savings given refinancing FDC's debt at investment-grade.

Dipping your toe into this name before its multiple inevitable expands is a good long-term strategy.

Profitability is increasing while management has made moves that will fatten its top line business from the 5% internal growth today.

All these growth levers will push up revenues in the upcoming quarters - Fiserv happens to be the right company in the right industry at the perfect time in the technology cycle.

The stock is up over 1,000% in 10 years.

In February 2009, the stock was meddling around $8 and the $83 it trades at today demonstrates the potency of FinTech and the strength in their underlying business model.

I would wait for a sell-off to get into this one, but it’s a keeper.

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2019/02/GOOG-feb5.png 566 974 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-02-05 01:06:222019-02-05 01:12:18The FinTech Company You've Never Heard of
Mad Hedge Fund Trader

February 5, 2019 - Quote of the Day

Tech Letter

“If you don't jump on the new, you don't survive.” – Said CEO of Microsoft Satya Nadella

https://www.madhedgefundtrader.com/wp-content/uploads/2018/12/Satya-Nadela.png 358 254 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-02-05 01:05:002019-02-04 16:16:38February 5, 2019 - Quote of the Day
Mad Hedge Fund Trader

February 4, 2019

Tech Letter

Mad Hedge Technology Letter
February 4, 2019
Fiat Lux

Featured Trade:

(WHY AMAZON IS TAKING OVER THE WORLD),
(AMZN)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-02-04 01:07:002019-02-04 07:27:29February 4, 2019
Mad Hedge Fund Trader

Why Amazon is Taking Over the World

Tech Letter

Amazon, being the best publicly traded company in America, has more than one way to skin a cat.

That is what I took away during the mixed bag of an earnings call.

The road forward for most companies are defined by one maybe two unforgiving directions that the company has no choice but to migrate down through no fault of their own due to market forces.

Amazon operates in a different universe and the breadth of optionality for Amazon is breathtaking.

They have chosen to try to spike their future core business which has traditionally proven to pay dividends within three years or less.

Investors have always allowed Amazon to revert back to the reinvestment blueprint for added profitability - profits should reaccelerate once more in 2020.

Take into consideration that 2018 was a “light” year in Amazon’s reinvestment cycle in which Amazon only grew its fulfillment and shipping square footage by 15% and its headcount by 14%.

Amazon has used this playbook before. The warehouse efficiencies that benefited margins in 2018 was a direct result of massive capital expenditures into robot technology in the preceding years before that.

Amazon guided weakly on top line growth because of several regulation quagmires in India.

The Indian government began banning foreign online retailers from selling products from marketplace vendors that they have an equity stake in, leading Amazon to shelf items from its Indian site including its popular Echo speakers.

The $72.38 billion translating into 20% YOY fourth quarter revenue growth was its weakest since 2015.

They still have some work to do with physical stores, mostly Whole Foods, which saw a dip of 3% YOY in revenue.

Investors shouldn’t worry too much about this because Amazon can quickly switch back and ramp up revenue expansion when need be.

India is what China was 15 years ago and will morph into its own consumer supergiant with a population to service Amazon sales in the future.

Even with these headwinds that could frustrate operating margins and top-line revenue, Amazon still has some robust drivers in its portfolio in the form of cloud division Amazon Web Services (AWS) that grew 45% YOY and its advertising business which will perpetuate 50% YOY growth trajectory going forward.

Some other highlights were outperformance in voice tech with Amazon CEO Jeff Bezos gloating that “Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year.”

In hindsight, the report wasn’t bad considering Q4 is the quarter Amazon usually diverges the most with expectations because of the sky-high expectations of the Christmas season.

Digital advertising is already a $12 billion-plus annual business and earned Amazon over $3 billion last quarter.

These lucrative businesses give Amazon more leeway into combatting headwinds that slow down its e-commerce engine.

The e-commerce side of business changes rapidly causing capital to be earmarked for reinvestment as others catch up to its latest iteration of Amazon.com.

That being said, operating income margins are still over 4% and for the business model Amazon is trotting out, it is still a healthy number.

Not only that, AWS’ margins still remain intact at a robust 29%.

Consumers will agree with you admitting they can visibly notice the e-commerce platform improving over time.

The mixed results dinged shares 4% and I would classify this as a positive down day considering that from peak to trough, Amazon gained 35% after the December sell-off.

If these earnings came out in December, I would not have been shocked with a 15% haircut, but this speaks volumes to how tech shares have been resilient.

And tech earnings, for the most part, have been encouraging relative to expectations.

The change in rules has bred uncertainty in its Indian operation and management will wait for the dust to settle to carve out a plan ahead, but this is small potatoes in the larger picture because of the cash cow that is rich western countries.

To sum things up, Amazon’s services and e-commerce platform is still humming along, but growth is tapering off just a tad.

Amazon plans to juice up their business model by reinvesting into their model extracting the bounty in the years ahead.

The lead up to this will be a broad-based harvest resulting in stock price acceleration.

Do not forget we just went through a global growth scare, and I still believe that if the overall market will rise, the tech sector will need to participate with the bigger names carrying a substantial load.

An even more positive signal are the likes of Facebook, Apple, and Netflix buoying nicely, boding well for short-term price action.

This all means that Amazon should be a buy on the dip company with its long-term growth story more attractive than any other tech name, and by a wide margin.

Margins could come down temporarily in the spring and summer offering weakness for investors to buy into.

Amazon is truly a multi-dimensional beast that uses its capital wisely to create red hot businesses that never existed before.

Such is the magnitude of innovation at Amazon to the point that I would argue that Amazon is the most innovative American company today, period.

I sit on the edge of my seat to see what Amazon does next and you should too.

The easiest way to play this is to buy and hold shares for the long term on any major ephemeral stock offloading because they dominate like any other company in their field in relative terms.

Amazon will be back above 2,000 later in 2019 or early 2020.

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2019/02/Amazon-margins-jan4.png 604 977 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-02-04 01:06:342019-02-04 07:19:26Why Amazon is Taking Over the World
Mad Hedge Fund Trader

February 4, 2019 - Quote of the Day

Tech Letter

“One of the huge mistakes people make is that they try to force an interest on themselves. You don’t choose your passion; your passion chooses you.” – Said CEO of Amazon Jeff Bezos

https://www.madhedgefundtrader.com/wp-content/uploads/2018/09/Bezos-quote-of-the-day.jpg 364 220 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-02-04 01:05:252019-02-04 07:18:11February 4, 2019 - Quote of the Day
Mad Hedge Fund Trader

January 31, 2019

Tech Letter

Mad Hedge Technology Letter
January 31, 2019
Fiat Lux

Featured Trade:

(APPLE SEIZES VICTORY FROM THE JAWS OF DEFEAT),
(AAPL)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-01-31 02:07:162019-07-09 04:52:15January 31, 2019
Mad Hedge Fund Trader

Apple Seizes Victory from the Jaws of Defeat

Diary, Newsletter, Research, Tech Letter

After an almost 40% swan dive, Apple has found solid footing at these levels for the time being. 40% seems to be the magic number. Declines ALWAYS end at 40% with Apple.

About time!

It’s been an erratic last few months for the company that Steve Jobs built and this last earnings report will go a long way to somewhat stabilize the short-term share price.

The miniscule earnings beat telegraphs to investors that the bad news has been sucked out.

That is what Tim Cook wants the investor community to think.

But is he right?

I would argue that the bad news is over for the short-term but could rear its ugly head again later – it all rides on China’s shoulders.

Let’s take a look at the numbers.

Chinese revenue was down 27% YOY locking in $13.17 billion in quarterly revenue compared to $17.96 billion the prior year.

There is no two ways about this – it’s an awful number and a hurtful manifestation of the Chinese economy decelerating.

The unrelenting pressure of the geopolitical trade war has handcuffed Beijing’s drive to deleverage its balance sheet and steer its economy to a more consumption-supportive model.

China is lamentably back to its traditional ways - the old economy - infusing $2.2 trillion into its balance sheet along with cutting the reserve ratio for state banks hoping to incite economic growth.

Positive short-term catalyst but negative long-term consequences.

This is why I urged Apple lovers to stay away from this stock earlier because of the uncertainty of its current strategic position.

It makes no sense to place an indirect on the current Washington administration navigating a China soft landing.

As it stands, most of Apple’s supply chain is in China and moving it out will be done in piecemeal which is happening behind the scenes and will cause massive job loss in China further hurting the Chinese economy.

The ratcheting up of tensions signals the untenable end of American tech supply chains in China and no new foreign investment will pour into China.

Maybe even never.

I wholeheartedly blame CEO of Apple Tim Cook for not foreseeing this development.

That is what he is paid to do.

Then there is the issue of iPhone sales in China.

Chinese citizens aren’t buying iPhones because of three reasons.

The cohort of wealthy Chinese who can afford a $1,000 iPhone might think twice if they want to be seen outside with a product from a country that is becoming adversarial. Apple has incurred hard-to-quantify brand damage to its once pristine brand in a land that once worshipped the company.

The refresh cycle has elongated because Apple manufactures great smartphones and iPhone holders are waiting it out on the sidelines two or even three iterations down the road to upgrade because that is when they can unearth the relative value of the product.

Lastly, local Chinese smartphone markers have greatly enhanced their products because of a function of time and borrowed Western technology. It is now possible to buy a smartphone that offers around 80% of performance and functionality of an iPhone but for less than half the price.

The customers on the fence who once viewed iPhones as a must-buy are now migrating to the local Chinese competitor because they are a relatively good deal.

I can surmise that these three headwinds are just beginning and will become more entrenched over time.

If the trade war becomes worse, the brand damage will accelerate. iPhones are becoming incrementally better which will delay new iPhone upgrades unless something revolutionary comes out that requires customers to upgrade to be a part of the new technology.

And sadly, Chinese competition is catching up quicker than Apple can innovate and that will not stop.

However, the silver lining is that the worst-case scenario won’t happen in the next quarter and the market won’t get wind of this until the second half of the year.

Instead of a meaningful sell-off because of this earnings report, Cook chose to front-run the weakness by reporting the hideous performance at the beginning of January.

Cook knew he needed to come clean with the negative news and the reformulated projections that were re-laid a few weeks ago were the same ones that Apple barely beat by one cent on the bottom line by posting EPS of $4.18 and marginally on the top line by $420 million.

I am in no way saying that this was a great earnings report – it wasn’t.

Apple mainly delivered on the mediocrity that they discussed a few weeks ago lowering the bar to the point where it would be a failure of epic proportions if Apple couldn’t beat significantly revised down earnings.

Then the outlook for the next quarter wasn’t as bad as people thought, but that doesn’t mean it was good.

When you start playing the game of not as bad as the market thought – it is a slippery slope to head down and halfway to the CEO getting sacked down the road.

I mentioned before that the macro headwinds came 2 years too early for Cook and pegging 60% of company revenue to a smartphone which has trended towards mass commoditization is a bad bet.

Cook has been painstakingly slow rewriting Apple as a service company which is his current get-out-of-jail-free card dangling in front of him like a juicy carrot.

iPhone gross margin is now 34.3% which is lower than the other Apple products whose margins are 38%.

Their flagship product isn’t as profitable on a per-unit basis as it once was highlighting the necessity for refreshing the product lines with not just new iterations but game-changing products.

The type of products that Steve Jobs used to mushroom popularity would suffice.

Gross margins will continue to come down as the smartphone market is saturated and customers won’t buy iPhones now unless they receive a drastic price reduction.

The result is that Apple no longer publishes iPhone unit sales to conceal the worst number for their most important and volume-heavy product.

A little too late if you tell me and irresponsible to investor transparency if you ask me.

Apple Pay, Apple Music, and iCloud storage eclipsed $10.9 billion demonstrating a 19% YOY increase.

This shows that this company still has strengths, but don’t forget that services are still less than 15% of total revenue even though they are the fastest growth part of their portfolio.

Cook isn’t doing enough to supercharge the content and services at Apple.

The top line number was $84.3 billion, a 5% YOY decline in revenue – a YOY decline hasn’t happened in 18 years and this is deeply troublesome.

Let me explain why Cook is the center of the problem.

The underlying issue is Cook doesn’t know what product should be next for Apple.

Apple dabbled with the Apple TV which didn’t pan out.

Then the autonomous vehicle unit just closed down sacking 200 employees.

And the content side of it hasn’t been developed fast enough relative to the slowing down of iPhone sales which is why you can blame Cook for being reactive instead of proactive.

It’s not like he can claim that his head was in the sand and couldn’t take note of what Netflix was doing and had gotten into that original content game sooner.

The hesitation is exactly what worries me with Cook. Cook is a great operations guy and can take an existing product, beef up margins, shave down expenses, streamline execution and boost top and bottom line profits.

Cook is being painfully exposed now that he is out of his comfort zone and must aggressively move in a direction that doesn’t have a red carpet laid out for him.

Even though the pre-earnings red flag raised many questions, Cook only satisfied these red flags on a short-term basis and Apple still needs to reconfigure its product roadmap for the long term.

If Cook plans to milk more out of the iPhone story, Apple becomes a sell the rallies stock, but the market will give the benefit of the doubt to Apple for a quarter or so.

The 800-pound gorilla in the room is the Chinese economy which could go into a hard landing if the stimulus fails to deliver economic respite or if the trade war tensions are exacerbated.

At the bare minimum, the waterfall of downgrades should be over for the time being, but this will come to the fore in a quarter or so when Apple will need to shine light on its plans moving forward.

I wouldn’t bet the ranch on Cook being innovative.

It looks like Apple will start to trade in a range.

It’s hard to believe any bad news superseding what came out at the beginning of this month in the short-term, but at the same time, there are no idiosyncratic catalysts to cause this stock to bullishly break out.

We are at an inflection point in Cook’s career and he is finding out that it's not as easy to be Apple as it used to, and mammoth decisions are on the horizon that must be addressed or possibly become the next IBM.

If you ask me, I’ve been calling on Apple to replace Cook for a while with Jack Dorsey as the signal caller, I still believe this is the only way to stay in the heavyweight division of tech titans five years from now.

Such is the competitive nature of the tech landscape these days.

 

 

 

THE NEXT IBM?

https://www.madhedgefundtrader.com/wp-content/uploads/2019/01/iPhones.png 593 675 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-01-31 02:06:082019-07-09 04:40:50Apple Seizes Victory from the Jaws of Defeat
Mad Hedge Fund Trader

January 30, 2019

Tech Letter

Mad Hedge Technology Letter
January 30, 2019
Fiat Lux

Featured Trade:

(IS THE BOTTOM IN FOR FACEBOOK?),
(FB)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-01-30 08:07:282019-07-09 04:52:30January 30, 2019
Mad Hedge Fund Trader

Is the Bottom in for Facebook?

Tech Letter

As much as I malign Facebook (FB) CEO and Founder Mark Zuckerberg, the risk-reward for Facebook’s earnings that come out after Wednesday’s close favor the upside.

Let me explain.

I have been bearish on this name for quite a while and I have been rewarded in spades.

From the Cambridge Analytica leak to firing the heads of Instagram and WhatsApp, last year was a year to forget and the stock was crushed.

This time, it’s a little different.

I believe the saturated business model has largely been priced in to the stock and the company is transitioning to a more lucrative side of the business with other levers they can pull.

Facebook can’t move mountains to raise the needle in the number of users in the western developed world.

The rich western world is Facebook’s profit engine with average revenue per user remarkably higher than its emerging user audience.

The company will change tact and seek to increase average revenue per user because of decelerating usership.

Emerging markets are the last bastion of growth for its user base, but unfortunately, this source of new users cannot be lucratively monetized like its staunch North America and Western European cash cows.

The lion's share of new users are from countries including India, Indonesia and Philippines where advertisers focus more on TV, print and physical advertising.

Expect Facebook to announce slowing user growth in the low single digits.

This likely won’t be a surprise to markets along with more rumblings about the average age of user increasing as Generation Z flees the platform.

The silver lining in this development is that Generation Z is fleeing Facebook and migrating to Instagram which is also owned by Facebook and a hyper-growth engine.

Even with the younger generation deleting Facebook in droves, Facebook still has a base of over 2 billion and every one of these customers use one of Facebook’s four services every day.

That is partly why it is attractive to digital advertisers and Facebook culls 98% of total revenue from ads.

If you forgot about last quarters earnings, Facebook handily beat EPS forecasts by 30 cents and barely missed on the top line, and that was in the face of disturbing ructions of a full-on regulation tech lash.

The first stage of negative regulation and the fallout have effectively been absorbed by the market and the second stage isn’t visible on the horizon as of today.

That day will eventually come but not before they come out with earnings later today, and not where near-term guidance will be materially affected.

If you read Mark Zuckerberg’s New York Times op-ed, he still believes that any road bump can be parsed over with marketing gibberish, and I would agree that the next stage of regulation that could damage the company is far away enough that this stall tactic will work for this particular earnings report.

However, this myopic and dangerous strategy must be managed quarter to quarter. There will be a time when the market needs to hear how Facebook will actually fix the model if a new wave of tech fury erupts.

The firm is safe now as the general trend for more robust regulation has started muted at the beginning of 2019 with congress and the administration busy with a closed government and political infighting bordering insanity.

This type of national news jumps to the forefront and pushes back the possible timeline for enforced regulation especially when 800,000 government workers were broadsided and couldn’t put food on the table or pay their rent.

To follow up on the political front, management is sure to take last year’s midterm election success and milk it for all its worth.

There were no disastrous scandals, recounts, or platform manipulation that could potentially do harm to the stock.

Facebook will tout this as a sign that its controls are starting to reap dividends and concrete evidence that they have shaped up since the Russian interference compromised the business model during last presidential election.

In late 2018, Facebook forecasted expenses to grow 40%-50% in 2019.

The headline expense number was set astronomically high in order for management to easily beat forecasts and announce that today.

Since management has categorized many material problems as marketing fixes, they have normalized doing the bare minimum as a stopgap measure masquerading as a real, full blown fix.

The one insight that keeps slamming me straight in the face like a gale force wind is that Zuckerberg likes his money which means he needs the stock to go up.

That would be the pitiful reason he offers these half-baked excuses as legitimate fixes because he understands that comprehensive solutions would be too costly damaging future earnings.

He also needs the stock to go up because many of the new faces at Facebook are compensated by stock because of a lack of cash on hand.

What is a meaningful catalyst to take Facebook higher?

The firings of the heads of WhatsApp and Instagram paved the way for the transition to 2019 where Facebook will monetize these other two services as well as integrating the back-end with Facebook.

This is viewed as the holy grail of Facebook growth and Zuckerberg incessantly refuted this would ever happen.

Well, the cat is out of the bag now.

In integrating the back-end of these three services, Facebook will extract a deeper insight into the behavior of their usership with a 360 degree view of their daily habits.

This deeper understanding of behavior will allow them to harvest the data in a way that is more valuable to digital ad buyers.

Facebook plans to compensate the lack of user growth for higher quality ads, and in turn they will be able to charge the ad buyers more per ad.

This strategy is a high risk, high reward maneuver because the company will intrude more into the personal data of their users than ever before.

On a business level, Zuckerberg has few options left up his sleeve and is predictably migrating towards the low hanging fruit as well as his best option today.

There is not much juice he can squeeze out of dinosaur Facebook anymore and margins will come down from now on.

However, WhatsApp and Instagram are fertile pastures for Zuck to wield his ad-hawking expertise.

Readers might forget that there are no ads on WhatsApp yet and its virgin provenance has been left largely unchanged from the beginning offering Zuck a golden project to mold his paws on.

If the CEO of Facebook goes into details about Facebook’s plan to ramp up these two social media platforms, the stock has a good chance to react positively.

The bar has been set quite low and Facebook has targeted this earnings report as an inflection point in the company’s history as they begin to pull alternative levers available to them.

This is a short-term prognosis in an otherwise murky future for the company.

Challenges are endless and part of the ceaseless issues involves Facebook not adding any real value as a technology platform or not possessing any ground-breaking technology or proprietary software.

Facebook is the used car salesman of the tech world and they are doing everything they can to stay relevant.

If Facebook does sell off after the WhatsApp and Instagram integration announcement, it is safe to deduce that Facebook is out of bullets and the stock becomes a sell on the rallies company until they can do something to stem the blood flow.

 

ZUCK IS GOING IN FOR THE KILL

https://www.madhedgefundtrader.com/wp-content/uploads/2019/01/Mark-Zuckerberg.png 608 697 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-01-30 08:06:162019-07-09 04:52:37Is the Bottom in for Facebook?
Mad Hedge Fund Trader

January 30, 2019 - Quote of the Day

Tech Letter

“We all have shortcomings.” – Said Chief Operating Officer of Facebook Sheryl Sandberg

https://www.madhedgefundtrader.com/wp-content/uploads/2019/01/Sheryl-Sandberg.png 310 308 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2019-01-30 08:05:052019-07-09 04:52:46January 30, 2019 - Quote of the Day
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