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Top 10 Questions for Twitter Management during IPO Roadshow

In advance of our Twitter black book call on November 6th (details to follow), we thought we'd circulate our top questions for Twitter management on their IPO roadshow.

 

The TWTR Top 10:

 

1.  How are you going to use the IPO proceeds? Can you outline how we should expect the proceeds to accelerate your growth?

 

2.  More than 77% of Twitter users are from outside the United States, but only 26% of your consolidated revenue comes from outside the United States -  Why is the yield on international users so much lower, and how will this trend over time? Are there structural impediments to revenue internationally?

 

 3.  Timeline views per monthly average user (MAU) declined sequentially by 1% in Q3 2013? Is this an indication of engagement declining, or is there another dynamic at work?

 

4.  How should we think about the market size for the total number of global users? Especially, vis-à-vis Facebook’s 1.15 billion monthly users as of Q2 2013?

 

5.  Generally speaking, why have some advertisers been early adopters and others taken longer to begin advertising on your platform? How do you show ROI to advertisers?

 

6.  How will the financial model look longer term?  As an example, Facebook currently has costs of sales that are 26% of Q2 2013 revenue and Twitter is at 36%.  Longer term, is there any reason that Twitter can’t have operating margins comparable to Facebook?

 

7.  Acquisitions have been an important part of your strategy historically, are there any areas in particular that you are focused, like analytics as an example?

 

8.  How do you view the competitive landscape? In particular, Google, LinkedIn, and Facebook appear to have low barriers to entry given their high user bases and, as we all know, before Facebook there was MySpace.

 

9.  According to a recent Gallup poll of people that have joined Twitter 36% said they don’t use the service and 7% have admitted to shutting down their account.  Meanwhile, only 7% of Facebook users don’t use their account and only 5% admitted to shutting down their account. What do you make of this poll and the implication on user engagement?  Along that line, how much time per week, or month, does the average user spend per month on the site?

 

10.  What are the most important metrics for the health of your business?

 

11.  What keeps you up at night? 

 

 

Daryl G. Jones

Director of Research

 


$LULU Taps Tara Poseley. Huh?

Takeaway: Lululemon's decision here strikes us as odd.

Hedgeye Retail Sector Head Brian McGough is scratching his head over a recent hire at Lululemon.

 

$LULU Taps Tara Poseley. Huh? - lulu5

  • Lululemon Athletic on Tuesday named Tara Poseley chief product officer."
  • "Poseley, who most recently was president of the multichannel, multicategory Kmart apparel business, will be responsible for merchandising, inventory, allocation and strategic planning. In her new role, Poseley will oversee Lululemon’s global design strategy, working with the senior vice presidents of women’s and men’s design...In her 25-year career, Poseley has run men’s, women’s, accessories, kid’s and intimate apparel businesses as an executive at Bebe Stores, Disney Stores North America and Design Within Reach."

Takeaway: This definitely strikes us as odd. LULU has the luxury of hiring only the best people -- but the former head of K-Mart's apparel business??? That's a head-scratcher. Disney and DWR definitely lend a lot of credibility. I know it sounds like we're nit-picking here…but perhaps that's because we were hoping that the next executive announcement would be for a new CEO. After all, Christina Day (who we happen to be a fan of) was, in effect, pushed out back in June, but still sits at the helm nearly 5-months later. Very odd.

 

Related video: Why We're Bullish on Restoration Hardware


Today 1pm EST: Call With NJOY CEO On E-Cigs

Today at 1pm EST we are hosting an expert call on electronic cigarettes with Craig Weiss, CEO of NJOY, titled "NJOY and Developing Trends in the E-Cig Industry." 

 

Please send any questions for Craig to and he will answer them following his prepared remarks.

 

We also want to note that Craig and NJOY were featured in an NYTimes article over the weekend.

 

 

CALL DETAILS

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 959896#
  • Materials: CLICK HERE 

 

KEY CALL TOPICS WILL INCLUDE

  • Industry trends and the developing landscape
  • NJOY's company profile and share of the category
  • The regulator outlook for e-cigs in the U.S. and internationally
  • What the future holds for e-cigs

 

ABOUT CRAIG WEISS, PRESIDENT AND CEO OF NJOY

Before joining NJOY in June 2010, Craig Weiss, a U.S. Registered Patent Attorney, practiced law, where he focused on the drafting and prosecution of patent applications for medical device, eCommerce and business method inventions. Weiss has three patents to his name, including two for medical devices. He was also the managing member of a hedge fund focused on intellectual property. Weiss earned his law degree from Arizona State University and his bachelor's degree from the University of Pennsylvania.

 

 

ABOUT NJOY 

NJOY is a private e-cig manufacturer, founded in 2006 and headquartered in Scottsdale, Arizona, with online sales and retail distribution in over 60,000 locations nationwide. NJOY has carved out a leading position in the category, offering a variety of rechargeable and disposable products in traditional tobacco and menthol varieties.  

 

In April 2010 the company announced that it received a $20MM investment from the private equity company Catterton Partners. In June 2013, a collection of investors, including Sean Parker (formally at Facebook), announced a $75MM investment in the company.


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[video] Keith's Macro Notebook 10/30: Japan, Spain, UST 10YR


Happy Dollar Debauchery Day!

Client Talking Points

JAPAN

Ahead of our central-planning Fed overlord doing his un-elected thing, in hopeful relief the U.S. Dollar rallied to another lower-high versus the Yen. Japanese stocks loved that. They closed up +1.2%, but just inside of 14571 Nikkei TRADE resistance as USD/YEN fails at 98.42 resistance. Keep your head up out there. This can all reverse within 24 hours. So just know where your mean reversion risks are.

SPAIN

Delivering alpha with a playbook Hedgeye GIP Model move triangulating Growth Inflation & Policy (Growth Stabilizing as Inflation Slows to -0.1% year-over-year CPI for October). This is the upside to a #StrongEuro. That’s why we call the Global Macro Theme for Q413 #EuroBulls.

UST 10YR

We're Breaking Bad as interest rates front-run Ben Bernanke’s impact on U.S. #GrowthSlowing. The last three U.S. economic data points for September/October all slowed (see Pending Homes, Retail Sales, and Consumer Confidence). There's no support now for the 10-year to 2.40% then 2.27%. In the unlikely event that Bernanke whispers anything about being rational on monetary policy (read "tapering"), the breakout line is 2.60%.

Asset Allocation

CASH 52% US EQUITIES 6%
INTL EQUITIES 20% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 22%

Top Long Ideas

Company Ticker Sector Duration
DAX

In line with our #EuroBulls Q4 theme, we’re long the German DAX via the etf EWG. With European fundamentals showing improvement off low levels, we expect outperformance from Germany, and in turn for the region’s largest economy to pull the rest of the region higher. ECB policy remains highly accommodative and prepared to aid any of its sovereign members to preserve the Union. Inflation remains moderate and fundamentals are positive: confidence readings and PMIs are up since June, with factory orders trending higher and retail sales inflecting to push the trade balance higher. Finally, the unemployment rate has held steady at the low level of 6.9%, all of which signals to us that Germany’s economic climate is ramping up.

WWW

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.

TROW

Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road

TWEET OF THE DAY

I'll probably take Commodities up from 0% after Bernanke speaks - need to hear from my overlord 1st @KeithMcCullough

QUOTE OF THE DAY

“It’s imperative that the Fed begins to taper.” -BlackRock's Larry Fink (after Fink begs the Fed not to taper)

STAT OF THE DAY

$17,000,000,000: Banks have agreed to fork over more than $17 billion in settlements with U.S. regulators so far in 2013. That's up from a little over $10 billion in 2012. And that doesn't include the $8 billion that JPMorgan Chase may get hit with soon.


Fanfare for the Common Man

This note was originally published at 8am on October 16, 2013 for Hedgeye subscribers.

“You know that the Englishman’s idea of a compromise is? He says, some people say there is a god. Some people say there is no god. The truth probably lies somewhere between these two statements.”

-William Butler Yeats

 

I would hardly call myself a classical music aficionado, but I do enjoy tuning Spotify into classical music while grinding away in the office.  One of my recent favorites, “Fanfare for the Common Man”, was written by American composer Aaron Copland for the Cincinnati Symphony Orchestra in 1942.  (Incidentally, the Chicago Blackhawks use this as a pre-game song as they enter the ice.)

 

Copland’s idea for the fanfare came from a speech by then Vice President of the United States, Henry Wallace.   He gave this speech at a time when Americans were debating wartime strategy and America’s role in the post-World War II order.  One of Wallace’s key points in the speech was that any post war peace should be such that it makes the common man better off for the long run.

 

This morning it seems our two great political parties, and their esteemed leadership, are coming together on a compromise to benefit the common man.  According to reports this morning from our contacts in Washington, the Senate deal that is on the table is to extend U.S. borrowing authority through February 7th and fund the government through January 15th 2014.

 

Thank goodness that these folks are looking out for the common man by cobbling together a deal that my 11 year old niece could have negotiated.  Despite the short term and non-materiality of this proposed agreement, it still has two hurdles – a) Ted Cruz, or another Senator, could filibuster and delay passage until next week and b) Speaker Boehner in the House could opt not to send the bill to the floor for an up / down vote.

 

There is one data point out this morning that gives me great confidence that the debt ceiling will be resolved orderly.  No, it’s not that credit default swaps are trading lower, that Libor is benign, or that gold has been selling off, but rather that the ultimate contrarian indicator, a ratings agency, Fitch specifically, placed the U.S. credit ratings on negative watch yesterday.

 

Back to the global macro grind . . .

 

A major call-out this morning is the Shanghai Composite which is down almost -2%.  This weakness is being driven by the property sector which is under pressure based on local news reports that longer term regulations could be in place soon for controlling property in China.

 

Being the price and market driven analysts we are, the move in Chinese equities this morning is certainly a red flag in our notebooks, but isn’t changing our more positive view on China.  In the Chart of the Day today, we highlight China Foreign Exchange Reserves, which have continued to build even as money has left other emerging markets in recent quarters.

 

Admittedly, though, China is hard to ignore as it compromises more than 30% of the world’s foreign currency reserves.  Japan is a not so close second at about 10%.  After that we have Saudi Arabia, Switzerland and Russia rounding out the top 5.

 

From the currency war perspective, there is certainly a bit of People’s Bank of China manipulation going on as exports were admittedly a little soft in September and the Chinese Yuan is eclipsing twenty year highs.   Of course no rational person could blame the PBOC for playing games with their reserves as the U.S. central bank continues to confuse the market with its intentions.  To taper, or not to taper, that is the question?

 

Sadly, if we can actually get the debt ceiling and government shutdown resolved in the next day or so, then all eyes will once again be fixated on the Fed.  We’d be remiss this morning if we didn’t at least highlight how ineffective the program of quantitative easing has been.  Hat tip to David Einhorn from Greenlight Capital for flagging this in his recent investor letter:

 

“In August, the San Francisco Fed published an economic research paper that estimated that the $600 billion spent on QE2 added a meager 0.13% to real GDP growth in late 2010 (about $20 billion) and that the benefit fades after two years. Given that, what practical difference does it make whether the Fed buys a monthly $85 billion or $75 billion or no additional securities at all for that matter?”

 

Buying any good, even say jelly doughnuts, as Einhorn highlights, has a more direct impact on economic activity than QE.  After all, that is actually how the real economy works.  We buy and sell goods and the velocity of money grows the economy naturally.

 

Interestingly, based on the math above, the Fed could actually be the worst investor in history.  Just imagine a $600 billion capital allocation that generates a 0.13% return! Even there my 11 year old niece could do much better.

 

Our immediate-term Risk Ranges are now:

 

UST 10yr yield 2.66-2.73%

SPX 1685-1725

VIX 15.21-17.63

USD 80.11-80.67

Brent 110.01-112.05

Gold 1265-1303

 

Keep your head up and stick on the ice,

 

Daryl G. Jones

Director of Research

 

Fanfare for the Common Man - China Reserves

 

Fanfare for the Common Man - z  vp 10 16


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