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Top 10 Questions for Twitter

Takeaway: Our top questions for Twitter's management ahead of their highly-anticipated IPO.

This note was originally published October 30, 2013 at 11:53 in Macro

Top 10 Questions for Twitter  - twa

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?
 

Bonus Question:  What keeps you up at night? 

 

 

Daryl G. Jones

Director of Research

 


HOW BAD IS RESTAURANT EARNINGS SEASON?

The 3Q13 earnings season has largely been highlighted by disappointing results across the board in the restaurant industry.  The Casual Dining EPS Beat/Miss Index is currently running at 33% and the Quick Service EPS Beat/Miss index is running at 43%, both of which are very low percentages, historically.

 

  • The Hedgeye Casual Dining EPS Beat/Miss Index has only been below 50% in 1 of the past 26 quarters – 3Q08. 
  • The Hedgeye Quick Service EPS Beat/Miss Index has only been below 50% in 3 of the past 26 quarters – 1Q07, 2Q08 and 3Q08.

 

HOW BAD IS RESTAURANT EARNINGS SEASON? - CD EPS

  

HOW BAD IS RESTAURANT EARNINGS SEASON? - QSR EPS

  

 

It is interesting to note that, despite poor earnings, the Bloomberg Full Service Casual Dining Index has outperformed the S&P 500 by +2.6%, +4.9% and +18.3% over the past week, past three months and year-to-date, respectively.  On the other hand, the Bloomberg QSR Index has underperformed the S&P 500 by -0.4% and -1.3% over the past week and past three months, respectively, and has outperformed by the S&P 500 by +11.8% year-to-date.

 

This outperformance has come amidst a sluggish top line environment.  Although sales trends continue to slow on a 2-year basis, we suspect they will begin to accelerate in 4Q13 and continue into 1Q14.  In our opinion, lower gas prices year-over-year will support this stronger sales environment.

 

 

 

HOW BAD IS RESTAURANT EARNINGS SEASON? - SRS

 

HOW BAD IS RESTAURANT EARNINGS SEASON? - gas prices

 

 

As always, there will be winners and losers in each respective segment, as some companies are better positioned to benefit from an improving top line environment than others.

 

In the QSR space, we continue to like SBUX, YUM, KKD, CMG & JACK on the long side and PNRA & MCD on the short side.

 

In the Casual Dining space, we continue like EAT, CAKE & DRI on the long side and RRGBBLMN & RT on the short side.

 

 

 

 

 

Howard Penney

Managing Director

 


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

 


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$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.


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


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