A lot more earnings came in this week. The big one was Twitter (TWTR) of course which I had explained I was considering buying. Even that day, not only did I have no idea what would happen but even less what I “wanted” to happen:
Still thinking about buying $TWTR so not sure what I'm hoping for tonight? BadEarnings = Good Entry Point? Depends why I guess
— IntelligentSpec (@intelligentspec) July 29, 2014
In the end, Twitter shot up after very strong numbers. I’ll write more about this without a doubt:) Am I still a potential buyer? Time will tell… That being said, I’m still a believer in Twitter so it remains a possibility:) Back to my long & short picks, it was a fairly quiet week despite markets being crushed. My portfolio’s return remains in the +30% range so I’m not complaining.
You can also see my long & short trades here:
Today, I’m making my 20th long & short stock pick of the year!! It’s between 2 players that dominate their “sector”. The big difference though is that one player is in an industry that is fairly mature and makes decent profits while the other isn’t quite as convincing. You’d think Pandora was growing a lot faster than PCLN and it is.. but the difference is shrinking rather quickly don’t you think? Here are the numbers:
PE Next Year
Sales 5Y Avg Growth
EPS 5Y Avg Growth
|PCLN||Priceline Group Inc/The||1245.9||32.89||19.43||7.18||29.13||4.68||137.97||1.26||133.4||28.95||37.44|
|P||Pandora Media Inc||24.54||N/A||47.84||-7.74||132.52||4.09||2.51||1.82||3.54||N/A||N/A|
Priceline has been a stock star for a decade now and when you look at its chart, you can see how much of a value it is. I do think Priceline will continue to face competition but has such a strong brand that it will continue to display steady growth and is a good pick at these levels.
Next earnings release: August 11th 2014
It’s not a secret, I think Pandora is in a very tough spot. It has a great business, a great product but faces massive competition from the likes of Google (GOOG), Amazon (AMZN), Apple (AAPL), Spotify, etc. Many of those players are willing to operate at a loss for the medium to long term as a way to keep customers in their ecosystem. As those ecosystems expand to connected homes and smart cars, it’ll be an increasingly challenging environment. Margins will remain very small for Pandora and I just don’t think it can currently justify its valuation. If it can reach Netflix style of size, that might work out well but I’d say it’s unlikely at the moment and thus Pandora looks very expensive at these levels.
Next earnings release: October 24th 2014