Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Are Apple, Tesla, and Bitcoin Entering Market Technical Excess Top Phase? - 18th May 21
Gold Watch Out as Price May Be Staging New Momentum Base In Preparation For A Big Move Upwards - 18th May 21
Why the Demand for US Real Estate Licenses May Soon Fall into a Sinkhole - 18th May 21
Semiconductor Equipment Maker ASML Is at the Center of the Global Chip Shortage - 18th May 21
Could This Be The Hottest Investment Sector For 2021? - 18th May 21
TESLA Tech Stock Bubble BURSTS! Stock Price Heading for CRASH to below $400 - 18th May 21
The Most Exciting Biotech Stock Of The Year? - 17th May 21
Gold Mining Stocks Fundamentals - 17th May 21
Junior Gold Miners Should be Rallying – What’s Holding Them Back? - 17th May 21
Stock Market - Should You Be In Cash Right Now? - 17th May 21
Learning the Financial Markets - 17th May 21
INVESTING IN HIGH RISK TECH STOCKS - ALL OR NOTHING - 16th May 21
Is Stock Market Selling Madness About Over? - 16th May 21
Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
Budgies Birds of Paradise Indoor Grape Vine Singing, Chirping and Flying Parakeets Fun 3D VR180 UK - 16th May 21
Wall Street Roiled by Hot Inflation Data: Is This REALLY “Transitory”? - 16th May 21
Inflation Going Stag - 16th May 21
CHIA Coins After 1st Week of Plotting 140 Plot 14tb Farm. Crunching the Numbers How to Win - 15th May 21
Tips to Create the Best Cross-Functional Teams - 15th May 21
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why This Tech Stocks Merger Means Huge Profits

Companies / Tech Stocks Mar 08, 2014 - 02:18 PM GMT

By: Money_Morning

Companies

Michael A. Robinson writes: My smartphone plays a vital role in my life.

And I’ll bet the same is true for you.

My two teenaged daughters are active in school, and have busy social lives. My wife is a successful professional. And with my own frenetic schedule – headlined by the work I do here for you – the text messages I send and receive using my Apple iPhone are often my only link to family and friends.


During the past week, for instance, I’ve texted my Mom in St. Augustine, Fla., friends in Denver, in Cabo San Lucas, Mexico, in Detroit and here in the Bay Area.

I use my phone as a data-storage device: It lets me access videos, movies … and my entire music collection.

And my iPhone has also established itself as an important work tool. I use it to track the stocks I’ve recommended, to follow the latest breaking news stories and watch the latest developments in such emerging trends as Cloud Computing, Big Data, the Internet of Everything and Miracle Materials.

The bottom line: My smartphone has become an integral piece of my everyday life.

Smart companies are looking for ways to capitalize on that fact – including one with a “killer app” that is threatening to stand the global telecommunications on its ear.

The company I’m talking about has been independently valued at $19 billion. But it’s been privately held, meaning there’s been no way to invest and capitalize.

That has all suddenly changed.

Thanks to a just-announced deal, this company has access to a whole new set of buyers, meaning it will be able to add to its 450,000-person subscriber ranks – in a big way. Combine all that growth with the belief that this company could radically alter the global telecom system and you have a recipe for big-time profits.

And today I’m going to show you how to cash in.

In fact, the stock I’m going to tell you about could double your money in as little as three years.

A Punchline With Dollar Signs

When Facebook Inc. (NasdaqGS: FB) recently announced it was buying the messaging service WhatsApp for $19 billion, it touched off an avalanche of controversy and criticism.

We saw comments from the usual market pundits and stock jockeys. But with WhatsApp – thanks to the unique name, and the immense purchase price – even the late night comedians stepped up.

This line from new “Late Night” host Seth Myers pretty much sums it all up:

“President Obama has announced that 4 million people have signed up for ObamaCare,” Myers deadpanned. “Obama says he wants to hit 7 million users by the end of March, at which point he’ll sell it to Facebook for $10 billion.”

The point of all these zingers was simple enough. To comedians – and the cable-channel stock jockeys – Facebook’s decision to spend $19 billion on a five-year-old startup with just 55 employees and 2013 revenue of around $20 million just seems, well, insane.

But as someone who’s been watching the tech sector, and who’s watched sector transitions like this one before, I’m going to make a prediction .

Two, in fact …

Facebook founder and CEO Mark Zuckerberg will have the last laugh here.

And if you follow my recommendation … so will you.

Let’s take a look to see why.

Killer Apps

Make no mistake: The WhatsApp deal offers enormous potential benefits for Facebook, which already derives something like 53% mobile ad sales.

And WhatsApp can become the straw that stirs the drink.

The startup has already become a key player the global mobile landscape. With WhatsApp pushing the boundaries of technology, apps are becoming high-tech cash machines.

To understand their value, look at two tech leaders – Apple Inc. (NasdaqGS: AAPL) and Google Inc. (NasdaqGS: GOOG).

In fiscal 2013, Apple had $10 billion in sales from its App Store. And Google, with its ubiquitous Android operating system, dominates the mobile market. Strategy Analytics said Android had a 79% market share last year. And after crunching the numbers, Forbes recently calculated that Google’s app store has enjoyed about 48 billion app downloads over the past several years.

The app market is huge. And apps play a critical role in the world’s high-tech ecosystem.

WhatsApp’s revenue stream model obviously doesn’t approach those of Apple or Google.

In fact, WhatsApp costs nothing for the first year of use and then is just $1 a year after that. But the potential of this platform for Facebook is simply stunning.

This acquisition could bring billions in new sales to Facebook in a very short period of time. If it just captured $1 a month per user in fees, ads and other services, Facebook would post around $5.4 billion in new sales on top of 2013 revenue of $7.8 billion – a 55% yearly increase.

No wonder Zuckerberg has been trying so hard to get into the messaging business. Just last year, he was spurned in a $3 billion bid to buy Snapchat, a messaging service popular with young users.

Running the Numbers

When you compare the price Zuckerberg paid for WhatsApp with the value of another popular mobile product, the acquisition really begins to make a lot more sense.

Twitter Inc. (NYSE: TWTR) is a micro-blogging service that has become a great source of breaking news. Just last Sunday, Twitter received enormous attention when Academy Awards host Ellen DeGeneres tweeted a photo of herself surrounded by several movie stars.

And yet, for all the attention Twitter gets, it still has a user base that’s still only half the size of the one controlled by WhatsApp. But at roughly $55 a share, Twitter has a market cap of $29 billion. In other words, the market says Twitter is 55% more valuable than WhatsApp – with only half the user base.

Fortunately, we have another recent major acquisition by which to model the Facebook-WhatsApp marriage.

Let’s take a look at the recent deal between Verizon Communications Inc. (NYSE: VZ) and Vodafone Group PLC (NasdaqGS ADR: VOD). The nation’s leading wireless carrier paid a whopping $130 billion to buy out Vodafone’s 45% interest in the Verizon wireless venture they owned together.

By that comparison, WhatsApp appears very cheap indeed. Verizon got roughly 97 million active monthly users, paying about $2,980 for each one. With WhatsApp, Facebook adds nearly half a billion new customers for about $42 dollar each.

And remember, Verizon has limited upsell beyond its monthly rates, data plans and roaming charges. But WhatsApp is a leading-edge firm in a new industry with unlimited potential.

In fact, WhatsApp founder Jan Koum plans to roll out a voice service in the next few months. He’s still leery of ads – despite their revenue potential – but Zuckerberg will almost certainly find a way to either host mobile ads or find corporate sponsors whose deep pockets can defray the cost of the user acquisition. And he will add new mobile services.

So there’s lots of upside on the revenue side.

On the flipside, WhatsApp doesn’t have a lot of expenses – it has only 55 employees. Tell me another business that could service more than 450 million dedicated users scattered over several continents with just 55 employees.

That’s actually the whole point of what makes mobile tech so profitable: You can “scale up” a business to a pretty hefty size – while maintaining a fairly small overhead.

This explains why Facebook’s stock is on a roll, rising 147% over the past year. The financials are great because the company is basically transitioning into a full-on mobile play.

The Next Phase

At the end of last year’s fourth quarter, Facebook had 1.2 billion active monthly users, up 16% from 2012. But active mobile users climbed 39% to 945 million, or 77% of its user base.

With a market cap of $172 billion, Facebook trades at roughly $67.50 a share. It has operating margins of 37% and an 11% return on assets (ROA). It has $11 billion in cash on hand and generated $2.85 billion in free cash flow (FCF) last year.

Over the past three years, Facebook has grown its earnings per share by 32%. At that rate, earnings and the stock itself could double in less than 2.5 years.

That would imply a price of about $140 a share before factoring in the lucrative potential of the WhatsApp deal.

Thus, Facebook ranks as a classic growth play. It’s a leader in the new field of social networking that has allied itself with the breakout firm in mobile messaging.

As I see it, tech investors have two choices with Facebook. They can give into the negative hype about this deal from the media and all those TV comedians.

Or they can take advantage of the huge upside and laugh all the way to the bank.

And laugh is what we’re going to do.

Source : http://strategictechinvestor.com/2014/03/forget-punch-lines-tech-merger-means-huge-profits/#deeplink

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in