Архив метки: Wall Street

Robinhood aims at IPO as the fintech startup seeks CFO

Now valued at $5.6 billion, zero-fee stock trading app and cryptocurrency exchange Robinhood is starting preparations to go public. Just a year and a half ago, it was still largely under the radar. But then it raised a $110 million Series C at a $1.3 billion valuation in April 2017 and then just a year later scored a $363 million Series D, both led by Russian firm DST Global. Combined with the growth of its premium subscription for trading on margin called Robinhood Gold, the startup now has the firepower and revenue to make a viable Wall Street debut.
Today during Robinhood CEO Baiju Bhatt’s talk at TechCrunch Disrupt SF, he revealed that his company is on the path to an IPO and has begun its search for a chief financial officer. It’s also undergoing constant audits from the SEC, FINRA and its security team to make sure everything is kosher and locked up tight.
The CFO hire could help the five-year-old Silicon Valley startup pitch itself as the cheaper youthful alternative to E*Trade and traditional stock brokers. They’d also have to convince potential investors that even though cryptocurrency prices are in a downturn, allowing people to trade them for cheaper than competitors like Coinbase is a powerful user acquisition funnel.

Robinhood now has 5 million customers tracking, buying and selling stocks, options, ETFs, American depositary slips receipts of international companies and cryptos like Bitcoin and Ethereum. That’s twice as many customers as its incumbent competitor E*Trade despite it having 4,000 employees compared to Robinhood’s 250.
The startup has raised a total of $539 million to date from prestigious investors like Andreessen Horowitz, Kleiner Perkins, Sequoia and Google’s Capital G, allowing it to rapidly roll out products before its rivals can react. This rapid rise in valuation can go to some founders’ heads, or crush them under the pressure, but Bhatt cited “friendship” with his co-CEO Vlad Tenev as what keeps him sane.
The startup has three main monetization streams. First, it earns interest on money users keep in their Robinhood account. Second, it sells order flow to stock exchanges that want more liquidity for their traders. And it sells Robinhood Gold subscriptions which range from $10 per month for $2,000 in extra buying power to $200 per month for $50,000 in margin trading, with a 5 percent APR charged for borrowing over that. Gold was growing its subscriber count at 17 percent per month earlier this year, showing the potential of giving trades away for free and then charging for extra services.

But Robinhood is also encountering renewed competition as both startups and incumbents wise up. European banking app Revolut is building a commission-free stock trading, and Y Combinator startup Titan just launched its app that lets you buy into a  managed portfolio of top stocks. Finance giant JP Morgan now gives customers 100 free trades in hopes of not being undercut by Robinhood.
Over on the crypto side, Coinbase continues to grow in popularity despite its 1.4 percent to 4 percent fees on trades. It’s rapidly expanding its product offering and the two fintech startups are destined to keep clashing. Robinhood may also be suffering from the crypto downturn, which is likely dissuading the mainstream public from dumping cash into tokens after seeing people lose fortunes as Bitcoin and Ethereum’s prices tumbled this year.
There’s also the persistent risk of a security breach that could tank Robinhood’s brand. Meanwhile, the startup uses both human and third-party software-based systems to moderate its crypto chat rooms to make sure pump and dump schemes aren’t running rampant. Bhatt says he’s proud of making cryptocurrency more accessible, though he didn’t say he felt responsible for prices plummeting, which could mean many of Robinhood Crypto’s users have lost money.

Fundamentally, Robinhood is using software to make the common but expensive behavior of stock trading much cheaper and more accessible to a wider audience. Traditional banks and brokers have big costs for offices and branches, trading execs and TV commercials. Robinhood has managed to replace much of that with a lean engineering team and viral app that grows itself. Once it finds its CFO, that could give it an efficiency and growth rate that has Wall Street seeing green.

Robinhood aims at IPO as the fintech startup seeks CFO

Snapchat shrinks by 3M users to 188M despite strong Q2

The Stories War has officially killed Snapchat’s growth, leading to its first user count decline ever. In Q2 2018 earnings today, Snapchat’s daily active users number shrank 1.5 percent to 188 million this quarter, down from 191 million and positive 2.9 percent user growth last quarter.
Snapchat did beat earnings expectations with $262.3 million in revenue and a loss of $0.14 while Wall Street estimated an EPS loss of $0.17 with $249.8 million in revenue. Snap’s net loss decreased by 20 percent year-over-year, so it only destroyed $353 million this quarter compared to $385 million last quarter. Snap will have some extra cash to extend its runway despite its still-massive losses thanks to a $250 million investment from Saudi Prince Al-Waleed Talal in exchange for a 2.3 percent stake in the company.

Snapchat gets $250M investment from Saudi prince for 2.3%

Despite its user count shrinking for the first time since its launch in 2011, the improvement to revenue (up 44 percent year-over-year) and reduced losses led Wall Street to give Snap’s shares an immediate 11 percent pop in after-hours trading. But after dodging multiple questions about how it would improve revenues and when its optimized Android app would arrive, shares fell back to just below the day’s closing price of $13.12.
Snapchat is coming off a disastrous Q1 earnings with its slowest-ever user growth rate that led to a 24 percent plunge in its share price in May. But the company has been highly volatile, seeing a 37 percent boost in its share price after surprisingly positive Q4 2017 earnings. Now it’s proving that Facebook isn’t the only social network with growth troubles.

In hopes of distracting from the shrinking DAUs, Snapchat shared a monthly active user count for the first time: 100 million monthly active users in the U.S. and Canada. Snap says this is the highest it’s ever been, yet the reveal highlights that teens are as addicted to daily Snapchat use as they once were. DAUs are a much more accurate way of measuring engagement and ad revenue potential, as opening a single notification and never returning can still register someone as an MAU.
CEO Evan Spiegel blamed the DAU shrinkage on “a slightly lower frequency of use among our user base due to the disruption caused by our redesign.” But since, he believes “we have now addressed the biggest frustrations we’ve heard” so he’s optimistic about future growth. On the other hand, he credits the redesign as producing an 8 percent increase in retention among users older than 35, demonstrating the new design is more obvious and well labeled.
During the earnings call, Snap’s new CFO Tim Stone mentioned that it’s interested in monetizing every part of the app, including “communication.” That could foreshadow more ads in the messaging inbox beyond the sponsored lenses users can play with to send augmented reality Snaps to friends. Snap is also hoping that after a decline in ad prices as it moved to self-serve auctions, ad prices and revenue will climb.
One big bright point for Snap was that its average revenue per user in the Rest Of World region grew 65 percent just this quarter to reach $0.96. Figuring out how to monetize these developing countries where buying power is lower will be key to the company’s outlook. Snap says it’s still working to re-engineer its Android app to boost performance and reduce churn, since that’s where most of its new users are coming in.

The quarter saw Snapchat escape much of the scrutiny facing other social networks regarding fake news and election interference. But it clearly still has issues with security, as Snapchat accidentally leaked its own source code, which was archived by someone who then posted it to GitHub today, though it was eventually taken down.
Snapchat started running un-skippable ads in its Shows that could be a big money maker if extended to Stories. It began experimenting with e-commerce in earnest, allowing brands to sell things people can buy without leaving the app. It also opened self-serve buying of its augmented reality lens ads that people not only post, but play with for extended periods of time. And it launched its privacy-safe Snap Kit developer platform in hopes that alliances and referral traffic would help revive its user growth.
But problematically, its competitors like Instagram Stories continued to surge, with it now having 400 million daily Stories users and WhatsApp Status now having 450 million. Combined, Facebook has over 1.1 billion daily (duplicated) Stories users across its family of apps. That reach could make it tough for Snap to compete for ad dollars. And with its user count actually decreasing, that could make for a grim future for the teen sensation.

Snapchat shrinks by 3M users to 188M despite strong Q2

Apple nears a $1 trillion market cap as it clears another quarter ahead of expectations

Apple is inching closer and closer to becoming a $1 trillion company today after posting third-quarter results that beat what analysts were expecting and bumping the stock another few percentage points — which, by Apple standards, is tens of billions of dollars.
The company’s stock is up around 2.5 percent this afternoon after the report, which at a prior market close with a market cap of around $935 billion, is adding nearly another $20-plus billion to its market cap. A few quarters ago we were talking about how Apple was in shooting distance of that $1 trillion mark, but now it seems more and more like Apple will actually hit it. Apple is headed into its most important few quarters as we hit the back half of the year, with its usual new lineup of iPhones and other products and its accompanying critical holiday quarter.
Here’s a quick breakdown of the numbers:
Revenue: $53.3 billion, up 17 percent year-over-year compared to analyst expectations of $52.34 billion.
Earnings: $2.34 per share compared to analyst estimates of $2.18 per share.
iPhones: 41.3 million, up 1 percent year-over-year though revenue on the iPhone line was up 20 percent year-over-year. Analysts expected 41.79 million iPhones sold.
iPhone average selling price: $724
iPads: 11.55 million, up 1 percent year-over-year but ahead of analyst expectations of 10.3 million.
Macs: 3.7 million, down 13 percent year-over-year and behind analyst expectations.
Services: $9.6 billion, up 31 percent year-over-year.
Other products: $3.7 billion, up 37 percent year-over-year.

So in all, the shipment numbers were hit or miss at a granular level, but at the same time the iPhone is generating a lot more revenue than it did last year — implying that there might be a shifting mix toward more expensive iPhones. Apple’s strategy to figure out if it could unlock a more premium tier in consumer demand, then, may be panning out and helping once again drive the company’s growth. It’s then padding out the rest of that with growth in services and other products like it has in the past few quarters as Apple heads into the end of the year.
In the past year or so, Apple’s stock has continued to rise even though there may have been some dampened expectations for its latest super-premium iPhone, the iPhone X. Its shares are up more than 20 percent in the past year, and in the second quarter the company announced that it would return an additional $100 billion to investors in a new capital return program, which at the time also sparked a considerable jump in its stock. Apple hasn’t delivered a product that has entirely changed the market calculus like it did when it first started rolling out larger iPhones, but its strategy of incremental improvements and maneuvering in Wall Street continues to provide it some momentum as it heads toward $1 trillion.

Apple nears a $1 trillion market cap as it clears another quarter ahead of expectations

Netflix is falling off a cliff

Netflix didn’t add as many subscribers as expected by a bunch of people on Wall Street who, on a quarterly basis, govern whether or not it’ll be more valuable than Comcast — and that is probably a bad thing, as it’s one of the primary indicators of its future potential for said finance folk.
While it’s still adding subscribers (a lot of them), it fell below the forecasts it set for itself during the second quarter. That’s shaved off more than $10 billion in its market capitalization this afternoon. This comes amid a spending spree by the company, which is looking to create a ton of original content in order to attract a wider audience and lock them into that Netflix ecosystem. That could include shows like GLOW, Jessica Jones, 3% or even feature films. But it’s still a tricky situation because it needs to be able to convert shows from that kind of crazy spend schedule into actual subscribers.
Here’s the main chart for its subscription growth.:

So it’s basically down across the board compared to what it set for itself. And here’s the stock chart:

CEOs and executives will normally say they’re focused on delivering long-term value to shareholders, or some variation of that wording, but Netflix is a company that’s been on an absolute tear over the course of the past year. It’s more than doubled in value, overtaking said previously mentioned cable company and signaling that it, too, could be a media consumption empire that will take a decade to unseat like its predecessor. (Though, to be sure, Comcast is going to bundle in Netflix, so this whole situation is kind of weird.)
Of course, all of this is certainly not great for the company. The obvious case is that Netflix has to attract a good amount of talent, and that means offering generous compensation packages — which can include a lot of stock as part of it. But Netflix is also a company that looks to raise a lot of debt to fund the aforementioned spending spree in order to pick up additional subscribers. That’s going to require some assurance that it’ll be a pretty valuable company in the future (and still around, of course), so it may make those negotiations a little more difficult.
Everything else was pretty much in-line, but in the end, it’s that subscriber number that didn’t go as well as planned.

Netflix is falling off a cliff

Facebook beats in Q1 and boosts daily user growth to 1.45B amidst backlash

Amongst massive criticism over data privacy, Facebook showed the resiliency of its advertising machine by beating Wall Street’s $11.41 billion revenue estimate in its Q1 2018 earnings report by raking in $11.97 billion in revenue with $1.69 EPS compared to the $1.35 estimate.
Facebook added 48 million daily active users to hit 1.449 billion, up 3.42 percent to revive Facebook’s growth after slower 2.18 percent growth last quarter. But Facebook only added 70 million monthly active users to reach 2.196 billion, a 3.14 percent growth rate that was a little slower than last quarter’s 3.39 percent growth. Both daily and monthly users are up 13 percent year-over-year, showing Facebook’s troubles haven’t paralyzed its growth.
This was perhaps the most tumultuous quarter since Facebook went public. Facebook faced intense criticism regarding the Cambridge Analytica scandal and its data privacy practices, leading a massive pull-back of developer capabilities as Zuckerberg headed to testify before Congress. Last quarter saw Facebook’s first-ever decline in users in a market, with a 700,000 user drop in the U.S. & Canada market following changes to promote well-being that reduced the prevalence of viral videos.

Facebook was able to revive its U.S. & Canada user growth this quarter, perking back up to 185 million, from 184 million last quarter — though that’s just a return to where it was in Q3 2017. Monthly active user count in the market went from 239 to 241 million. That shows that while people might disagree with Facebook’s approach to privacy, they aren’t about to give up their News Feeds.
Demonstrating Facebook’s declining web presence, mobile made up $10.7 billion, or 91 percent of all ad revenue, up from 89 percent last quarter. Facebook reached $4.98 billion in profit, up from a weak $4.26 billion last quarter. Average Revenue Per User reached $5.53, up 30 percent year-over-year thanks to strong gains this quarter in Europe and Asia-Pacific. Facebook’s headcount has swelled 48 percent year-over-year as it’s now half-way to its promise of doubling its security and content moderation staff from 10,000 to 20,000 in 2018.

The recent scandals have put a lot of downward pressure on its share price, but apparently the company thinks it’s a good buy. It’s increased the amount authorized under a share repurchase program by an additional $9 billion, on top of an original $6 billion plan, of which it’s spent $4 billion. It’s partly to offset big stock distributions for employees, but CFO David Wehner also said it was “opportunistic,” aka related to Facebook perceiving its price as too low. Wall Street apparently liked the earnings report as shares are up over 4.38 percent to $166.68 in after-hours trading.
The question is whether the new ads transparency requirements, developer platform crackdown and Facebook’s quest to make using it healthier will show up in next quarter’s earnings. These changes could deter advertisers, give users less functionality to play with and remove low-quality viral content that might make users feel bad but keeps them scrolling.
CEO Mark Zuckerberg wrote that, “Despite facing important challenges, our community and business are off to a strong start in 2018. We are taking a broader view of our responsibility and investing to make sure our services are used for good. But we also need to keep building new tools to help people connect, strengthen our communities, and bring the world closer together.” We’ll get to hear more from him at 2pm Pacific during the earnings call, so stay tuned here.
Updates from the earnings call:
Zuckerberg said that Internet.org has now helped almost 100 million people connect to the internet, up from 40 million in November 2016.
Zuckerberg said 200 million people are now in “meaningful Groups,” up from 100 million last year, though Facebook has a long way to its 1 billion goal.
WhatsApp Status has pulled away as the most popular of Facebook’s Snapchat Stories clones. It was at 300 million daily users, equal to Instagram Stories, last time Facebook provided a stat.
Since users are moving from feed reading to Stories watching, Facebook says it needs to make Stories ads as good as feed ads to protect its core revenue stream.
Facebook CFO David Wehner warned that GDPR may cause Facebook’s European user count to be flat or shrink in Q2, and that it may have a minor impact on ad revenue.
Zuckerberg says one of his biggest regrets is that Facebook didn’t get to shape the mobile ecosystem because the company was still small when iOS and Android launched. That’s why Zuckerberg is adamant about Facebook having a major role in the future of virtual reality and augmented reality, which he sees as computing platforms of the future.

Facebook warns GDPR could flatten or reduce European user count

Facebook’s Internet.org has connected almost 100M to the “Internet”

Facebook beats in Q1 and boosts daily user growth to 1.45B amidst backlash