Even at $6, Snap’s stock still isn’t a bargain, Cramer warns: ‘It’s an ill-advised decision to buy’

Snap still isn't a bargain, even at $6, says Cramer

Snap still isn’t a bargain, even at $6, says Cramer   6:48 PM ET Fri, 30 Nov 2018 | 00:51

Snap Inc.’s stock price may have fallen to just over $6 a share — down about 70 percent from where the stock started publicly trading — but even this low price shouldn’t fool investors, CNBC’s Jim Cramer said Friday.

“Do not be tempted by Snap’s $6-and-change share price. It’s not a bargain,” he warned. “At more than five times next year’s sales [estimates], you could argue it’s actually fairly expensive. And, of course, there are some alarming long-term trends here.”

For Cramer, host of “Mad Money,” the most worrisome thing about the Snapchat parent is its cash generation. When Snap went public in early 2017 with nearly $1 billion on its balance sheet, that was the last thing investors were worried about, but lately, “Snap’s cash hoard has been slowly dwindling,” he said.

Since the second quarter of 2017, when Snap had $3.24 billion in cash, its cash balance has declined by double digits every quarter, falling to $1.4 billion as of its latest quarterly report.

Worse, the company’s cash from operating activities — what its core business earns, minus some major expenditures — has been shrinking by bigger and bigger amounts. And while some of that money is being invested in growth, most of it is funding the social media company’s day-to-day operations, Cramer said.

“As we’ve watched the company struggle and the stock go into freefall, I’ve started to wonder if Snap has enough money,” he said. “Just keeping the lights on at Snapchat is costing these guys a fortune. That’s not good.”

While Snap currently has no debt, a business that drains cash instead of generating it presents a “huge problem,” the “Mad Money” host continued.

The proximate cause, he explained, is that Snap spends a fortune on the cloud: with hundreds of millions of users uploading and downloading Snapchat content every day, the parent company has to pay for the digital space.

And even though Snap’s management laid out some lofty goals for the year ahead, namely turning a profit and stemming the company’s free cash flow losses, Snapchat’s total number of daily active users is now declining, Cramer warned.

“Snap’s growth is evaporating before our very eyes,” he said.

Add in Snap’s slowing revenue growth — up 44 percent in the latest quarter, down from 72 percent in the year prior and 285 percent at the IPO — and some high-level executive departures, and Snap’s future looks murky to Cramer.

“Until Snap gives us some reason to believe in a turnaround, it’s an ill-advised decision to buy the stock,” he concluded.

Shares of Snap ended Friday’s trading session up 1.72 percent at $6.51, dipping slightly in after-hours trading.

[“source=forbes]

Square adds to its small-business ecosystem with benefits like health insurance

Twitter CEO Jack Dorsey addresses students during a town hall at the Indian Institute of Technology (IIT) in New Delhi, India, November 12, 2018.

Anushree Fadnavis | Reuters
Twitter CEO Jack Dorsey addresses students during a town hall at the Indian Institute of Technology (IIT) in New Delhi, India, November 12, 2018.

Square is ramping up its bet on small businesses by offering big company benefits.

The fintech firm, run by Twitter CEO Jack Dorsey, announced on Wednesday it would give small businesses using its payroll platform the option to offer perks like health insurance and retirement savings to employees.

“It’s a new enhancement to the Square platform and a powerful solution that has historically been cost-prohibitive to small businesses,” Alyssa Henry, head of Square seller and developer business units, said on a call with reporters.

The San Francisco-based company partnered with only “technology-focused” firms — SimplyInsured, Guideline 401(k), Alice, and AP Intego. The available benefits range from health insurance, retirement savings, pre-tax spending, and workers’ compensation.

Businesses that use Square Payroll, a product that became available nationwide last month, can pick one or all of the benefit options for their employees. Those benefits will sync with Square Payroll and automate deductions and business contributions, which also helps with tax compliance, the company said.

The move came after a recent company survey showed that 42 percent of Square users listed “benefits” as the top new product request.

“That confirmed what we’ve been hearing anecdotally,” said Caroline Hollis, head of Square Payroll. “Offering access to benefits was the most difficult thing we hadn’t solved for in the space.”

Square has significantly expanded its small-business product suite since the company launched in 2009. It started with credit card processing and payment hardware but now includes payroll services, and loans through Square Capital. It also launched a payment installment option in October.

The company reported earnings last week that beat Wall Street’s expectations for the top and bottom line, but came up slightly short on fourth-quarter guidance. The stock has been on a tear this year, up more than 110 percent since January.

Square is also well-known in the payments sector for its popular Cash app, which CEO Jack Dorsey said customers are now using as a traditional bank in many cases.

“We do see people use the Cash App fundamentally as you would expect them to use a bank account,” Dorsey said on a the earnings call last week. “They store money with us, it’s accepted anywhere Visa is accepted. They can send and receive money from friends and family.

[“source=ndtv”]

PepsiCo steps up marketing investment on its ‘big brands’

Pepsi

PepsiCo has revealed that it would be increasing its advertising spend behind its “big brands”, such as Pepsi, Gatorade and DEW. This is with expectations of positive impact, said Hugh F. Johnston, vice chairman, CFO and executive VP at PepsiCo.

Johnston added that the brand’s strategy in the beverage business is focused on brand building.

The brand’s strategy in the beverage business is focused on brand building.

He added that it is also focused on innovation and execution in the marketplace. However, “like most advertising campaigns, that will take several quarters to fully realise the impact”, he explained.

“So we expect sequential improvement in each of the quarters, starting with Q1,” Johnston said.

According to Indra K. Nooyi, chairman and CEO of PepsiCo Inc, the company looks to step up investment spending in advertising, marketing, frontline workforce training, digital capability, data analytics and e-commerce. The move comes as its investment in e-commerce across multiple channels, from e-grocery, to direct to consumer, to pure play, helped drive exceptional growth in 2017, Nooyi said. As a result, PepsiCo’s e-commerce business is now approximately US$1 billion in annualised retail sales.

“We are leveraging big data and predictive analytics to sharpen real-time marketing messages, dynamic merchandising and tailored offers. And we’re increasingly collaborating with retail customers to make e-commerce a point of differentiation for PepsiCo,” she added.

The company also has “robust marketing innovation lined up for 2018”. This includes the launch of its Pepsi Generations campaign and the launch of Mountain Dew Ice, featured with Doritos Blaze at the Super Bowl. Other initiatives include the introduction of its new sparking water bubly, and further marketing support and packaging innovation. This comes as LIFEWTR enters its second year from launch.

“Furthermore, as a company, we will double down on new capabilities in areas such as e-commerce, digital and brand marketing to make us even more competitive,” Nooyi said.

Regarding its pricing strategy, PepsiCo expects its pricing to be competitive in the marketplace. However, pricing lower is not part of its strategy to gain market share.

[“Source-marketing-interactive”]

‘Multiple and intertwined risks’ cloud outlook for the Middle East and its neighbors, IMF says

Dubai, U.A.E.

Major oil producing countries in the Middle East and its neighbors might benefit from higher crude prices in 2019, according to the latest outlook from International Monetary Fund (IMF), but there are numerous uncertainties in the region.

The Fund’s latest regional economic outlook for the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region, published Tuesday, warns that “multiple and intertwined risks cloud the outlook of the MENAP region.”

“These include a faster-than-anticipated tightening of global financial conditions, escalating trade tensions that could affect global growth and hurt key MENAP trading partners, geopolitical strains, and spillovers from regional conflicts,” the report stated.

These risks could trigger a deterioration in financial market sentiment and greater financial market volatility, the Fund said, “aggravating the financing challenges for countries with high levels of debt or large refinancing needs.”

Oil producing countries in the Middle East have traditionally relied on oil exports as their source of government revenue. Volatility in oil markets amid imbalances in supply and demand have prompted a number of countries, particularly in the Gulf, to look to diversify their economies away from oil and to create more jobs in other sectors of the economy. In its latest summary on the MENAP region’s outlook, it encouraged countries to commit to further reforms.

“The outlook and the rising risks underscore the need to intensify efforts to raise growth to levels that generate enough jobs for the benefit of all,” the IMF said. “In this context, countries should expand access to finance, strengthen governance, improve education outcomes, and enhance labor market flexibility, particularly in the Gulf Cooperation Council (GCC).”

To ensure that future fiscal adjustment is as growth-friendly and equitable as possible, the Fund said countries need to both prioritize expenditure on “growth-enhancing and high-quality investment in human capital and physical infrastructure, while sustaining well-targeted social spending.” It also advocated a move to a more progressive tax structure to diversify the governments’ revenue bases.

Jihad Azour, director of the Middle East and Central Asia at the IMF, told CNBC on Tuesday that the MENAP report comes amid an uncertain global growth outlook.

“Global conditions are changing in terms of the risk metrics,” Azour told CNBC’s Dan Murphy. “Although we’re still enjoying a high level of growth, that growth is plateauing,” he added.

Oil prices

Despite the warnings from the IMF, growth prospects for both oil exporters and oil importers in the MENAP region appear resilient, albeit dented slightly by the recent re-imposition of U.S. sanctions on major oil producer Iran.

“Overall, despite a significantly weaker outlook for Iran given the re-imposition of sanctions, oil-exporting countries are projected to grow at 1.4 percent in 2018 and 2 percent in 2019,” the Fund said.

Meanwhile, among GCC countries — namely, Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman — growth is expected to recover to 2.4 percent in 2018 and 3 percent in 2019. “This is underpinned by a recovery in non-oil activity, supported by a slower pace of fiscal consolidation, and stronger oil production,” the Fund said.

Problematically, if oil prices continued to increase, as predicted by the Fund, that could weaken the resolve of oil exporters to continue reforms, while exacerbating pressures on oil importers.

That said, oil-importing countries in the MENAP region (which include Egypt, Lebanon, Morocco, Pakistan, Syria and Tunisia, among others) are expected to continue at a modest pace of 4.5 percent in 2018, before dropping back to 4 percent in 2019.

“However, growth is uneven, with about three-quarters of oil-importing countries expected to grow at less than 5 percent over the medium term, too low to address the region’s employment challenges and developmental needs,” the IMF said. “Higher oil prices are also offsetting some of the underlying improvements in external and fiscal balances.”

[“source=forbes]