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New Constructs’ David Trainer and RJ O’Brien’s John Brady break down the earnings results for Starbucks, Expedia and Zynga.
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Bring -- David trainer he's the CEO of new constructs when you get a company like Expedia David.
That is showing some real growth and strikes here along with other companies that have reported more than 70% of S&P companies reporting have beat estimates.
You still feel that the world is going to be flat at least the equity world for the rest of the year we just -- -- pretty flat trading why even with the Fed pouring in on that government trade.
I think the Fed is pushing with the streaming a look at the Fed more is disaster insurance they're gonna make sure that the market doesn't collapse they can create growth where there isn't any and most economists around the world forecasting growth in the -- 2% -- -- that historically has not been associated with the booming equity market and by the way we are again looking at a -- Expedia stock at 36 dollars after hours that's a significant.
Increase David you say that most stocks however have pretty much met their highs of we're just going to be treading water for the rest here if so where -- we put our money.
I think -- to be selective I think stock picking is going to be much tougher in the years ahead it's been pretty easy removes the last ten years as the stock market is generally gone up.
So you -- really have to due diligence get -- to look behind the numbers not just trust the reported earnings numbers like most people focus on.
OK and John Brady again we're waiting on Amazon and Starbucks -- -- some of these names have a lot of people are excited about.
In fact Starbucks is out right this second let's see how the caffeine that worked its -- -- company out.
Well on its fair share forty cents -- the street expecting 39 cents revenue right in line 3.2 billion street expecting 3.2 billion but here's very distinct.
Starbucks is going to accelerate its growth through the opening of approximately 1000 net -- -- globally and I know when -- interview recently with their CEO talked about the growth more than 500 stores now open in China target of 15100.
But they are the stock right now is down 4% on this but again just in line on the revenue 3.2 billion -- -- Want to check one thing Green Mountain Coffee Roasters because one of the things that's that Howard Schultz did say.
John Brady in our interview -- our exclusive interview just a couple of weeks ago was that he would continue.
To have that relationship.
With security cup business with Green mountain but also start their own one cup single cup business with the for -- -- Right now the closing trade for each Green mountain GM CR was 4875.
Their down slightly to 4742.
For the bid.
The ask is more around 48 dollars what do you think.
Well my question -- -- I think another store within Starbucks specifically is what's the coffee business is the fact that Starbucks has already locked in more than six months.
What the coffee future prices forward.
And thus it monetary policy remains easy -- it should and commodities continue to grind a little bit higher be the recipient of easy money.
Howard Schultz at Starbucks according locked in a lot of their coffee prices for the year which is only gonna eight earnings through Q2 Q for.
But David -- just -- perfect example of what you were talking about we had.
Pretty good news on several fronts by the like coffee prices are down 17%.
Year -- -- so that's a significant savings on the part of Starbucks.
They can contribute that directly to the bottom line -- they just had by the way new deal -- Disney they're we're gonna see new Starbucks opened up at Disney theme parks and yet look at what's happening the stock after hours it looks like all of these gains he's big gains based company reporting its.
Have already been worked into the numbers.
That's right I think Starbucks is one of the stocks I would call priced for perfection and when they don't to perfection stock is nowhere to go but down.
The current valuation implies the company's gonna grow it's profits for 15%.
Compound and and -- for over ten years so I don't know of many companies in the history of the world have done that well and I don't really feel like Starbucks has any special competitive advantage.
Beyond the brand.
That's -- allowed to grow you know like a tech company or something like that so I think investors are gonna be much better suited moving towards stocks that are really fairly value.
OK so you actually like educational stocks we what was want to give that investors an idea of what the guidance saying it's gonna be flat for most trading.
For the rest of the year actually likes Netflix strayer ITT.
Apple you feel are real opportunities why education in particular.
Education stocks when you look through to our model which takes -- -- all financial information.
Are looking really expected because people don't realize that these companies have returns on invested capital.
Upwards of fifty -- a 100%.
Which means for every dollar you put in their business to put they're giving back a full dollar -- and they're priced as if their profits are gonna per really declined by 3040%.
David stay with us we -- to go to -- Zynga a stock that effort here at ten dollars a share is now trading.
Below that premier a couple of months ago its earnings around what do they say.
That's right this the second time they've reported as a public company earnings per share coming in and this is the non-GAAP share 86 cents street expecting five cents revenue increasing -- 321.
Million.
Vs what the street was expecting 317 point 25 million David.
OK and -- get this stock is very often look to is an example of what might happen with FaceBook.
David are you -- all intrigued by either.
FaceBook or its spin -- -- -- good -- is so closely united we've what FaceBook is going to be doing.
And I think some of these Zynga and FaceBook partner interest in place we don't covered either yet they don't have an adequate amount of financial from -- -- to cover them but I would warn investors a lot of these IPO's.
Tend to be highly overpriced and very expensive because they're popular stocks and they sell these stocks at times when the -- highest -- so.
Does that body weight to that point -- date they did sell sixteen -- -- CEO mark -- sold about sixteen and a half million shares when it was up about.
Fifteen dollars a share and you saw drop as a result of that insiders sold about 43 million shares.
Just about a month ago.
And we should also mention OK so -- it is making a profit for people who say we deal when profits well -- is making a profit six cents a share.
It of course is ECB there on both the top and the bottom line but again heavily dependent John Brady if you can still hear me -- -- it's get a -- in the -- but heavily dependent.
On the Zynga on FaceBook rather and and you know what -- FaceBook at some point jumps the shark -- can't be done.
It's doing so well it's got massive momentum but then what happens for a company like -- Well I I think they'll throw the baby out about what you're exactly right -- I mean given the leadership that FaceBook and apple another high beta names.
Within this -- if there is a little bit of -- downturn you're right -- for example would what perhaps bear the brunt of a heavy sell off.
I'm not looking at the numbers your facility that we I think -- Zynga.
Some of these analysts were looking for specifically is how much market share are they winning and specifically what our advertising revenues doing.
Those those are very important numbers with the overall gross margin of the business.
Would would I would certainly encourage people investors to look at those numbers the fourth.
