It has been a very tumultuous week in the sense of Stock Markets, not from overall perspective but individual stocks I am following. This blog is defined as my individual one but you can consider it as the one of my business - South Archer Investing & Consulting when I write about Markets.
Twitter released 3Q earnings last Thursday, which was pretty promising: Revenue & EPS all beat the estimates and Monthly Average Users slightly increased Quarter-over-Quarter. In addition, almost all operating metrics were improved. Given massive negative views from analysts who are following it, the result was definitely a pleasant surprise. Though most of the analysts are still taking a very cautious approach, no one downplayed it. Obviously, possible turnaround is widely recognized in the investing community. Presumably, money will flow into it significantly if its Q4 result shows sustained improvements. As Chief Investment Officer of my advisory firm, I tweeted that South Archer Investing & Consulting initiated coverage, set 3-month target price at $30 and a Buy rating. The closing price today is $18.02. Why I assigned such a huge premium is that I am confident that several potential acquirers will recognize Twitter's legitimacy as a social media platform with infinite room of growth. Within three months, these acquirers will realize that they must own this promising business or it will grow into a real threat. Google, Facebook have to seriously work out their bidding process, or it would be too late to react. However, Twitter's shareholders may opt to keep it independently if that will bring in much more Return on Investment. In general, Twitter's performance in this week has brought a lot of hopes for the investors.
Zillow reported another successful quarter and outlook was lift as well. There aren't many analysts following it, at least, I didn't read many recommendations from Wall Street research firms. However, Given its leadership in this tremendous real estate sector, I always speculate it to be one of the next investing lotteries. I assigned its 3-month target price at $39 and a Buy rating. In addition, I also set its 10-year target price at $2,000. If Netflix can jump up 100 times in 14 years, so can Zillow.
When I was pursuing my MBA at University of Illinois at Chicago from 1998 to 1999, I lived in an apartment on South Archer Ave. Prior to that, I had prepared to get a graduate degree in Finance at Illinois flagship campus in Urbana-Champaign. As far as you can perceive, my academic interest during those years was in Finance. Instead of working on some part-time jobs after classes at UIC, I intensively traded stocks through a Datek online account by dialing America Online modem. Flipping hot Internet stocks, such as Amazon, Ebay, Yahoo, CMGI and America Online itself every day in the small living room in that apartment, I applied theories learned from the classes of Corporate Finance and Investment. With $20,000 capital, I did make extra money, which helped me drive around the country during Christmas break, Spring break and Summer break. I remember that the lecturer of our Corporate Finance class used to be a bond trader at Chicago Board of Exchange and the professor of Investment class had been the head research of a mutual fund for Illinois State, so we learned pretty decent practical knowledge from them. Though I had obtained a lot of concepts in Economics in my young ages academically and professionally, the knowledge I captured during that period of time in Chicago applied to US stock markets the most. To memorize the joy I had in that small apartment, I registered my one-man investment company with the name of South Archer. As I shared, my goal is to make it a tens-millions dollars hedge fund with the initial capital of one million from the compensation of my demolished property in suburban Beijing, but Chinese government has never paid me after they reached an agreement with my father for a much reduced amount several years ago. It is still an unsettled issue today and I am still waiting for this initial capital for fulfilling my plan. Other than seriously trading the stocks, I am building South Archer to be a boutique stocks' advisory firm. In this week, I published my rating guideline similar to the traditions on Wall Street: Strong Buy, Buy, Hold, Sell, Clearance. The last one is my own creation, which stands for On Sale and Short Selling. Rather than 12-month price target, I use 3-month to predict price movement in near term. For some high growth stocks, I call Investing Lotteries, I also assign a 10-year price target for each, which generally indicates dozens times higher than its current price level. For example, I predict Zillow's price to achieve $2,000 per share in 10 years, which bumps more than 50 times up.
Facebook released another strong quarterly financial report the same as many of the previous quarters. However, to stick to their ridiculous conservatism, outlook was given unfavorably. The price dropped to $120 level. In each decade, investors enjoy exponential growth on a dozen of stocks, such as Microsoft, America Online, Amazon, Netflix, etc. Facebook definitely falls into this category. However, in my opinion, its stock performance has been the most mediocre amongst these lotteries. I insist it driven by Mark Zuckerberg's own agenda, which doesn't have other shareholders' interests put on the top. Ironically, after I blamed him on Twitter yesterday, his alma mater suspended the rest of the season of their men's soccer team. I don't know whether it is a retaliation on me. If so, I will go after Sheryl Sandberg next. This is a joke. Anyway, I think Facebook's stock price should be close to $360 now if we compare it to others in its same league historically. My recommendation on it is Strong Buy with a 3- month price target at $150 and a 10-year at $1,800. Almost every major Wall Street research outfit maintains the rating of Buy. Obviously, every analyst considers the pullback being a buying opportunity.
Gopro had a catastrophic 3rd quarter, revenue and earning per share gravely missed the targets. My immediate reaction was Armageddon or Apocalypse, whatever you exaggerate for this action camera pioneer. Last night, I assigned Clearance on it with a 3-month price target to nothing, which calls short-selling. However, I did read more disclosures today that the disastrous quarterly result was driven by the issues of productions, which were at the side of supply. Demand on its products is still pretty strong. No matter what is the real driver, I give this stock up. South Archer no longer follows it even I have never officially started the coverage.
Well, it is the end of the weekdays and the darkness prior to the dawn on weekend. I will forget everything related to my daytime job and professional interests for the next two days, only focus on watching sports and movies.
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