Hedgeye highlights three key points from YELP's rough quarter courtesy of our Internet & Media analyst Hesham Shaaban.
Takeaway: Try as they may, central planners can't stop global stock markets from crashing.
"What happens when the baseline belief of central-market-planning breaks?" Hedgeye CEO Keith McCullough asked in a note to subscribers this morning.
Good question. Here's the answer:
"Breaking bad, the belief system is here. Japan says “negative yields” (and they got them – 10yr JGB -0.04% now). But the BOJ didn’t get Down Yen, Up Nikkei – they got Up Yen, Crashing Nikkei! (Nikkei -5.4% overnight, -22.8% since July)"
Despite the BOJ's best efforts, the Nikkei continues to crash.
Then came the mother of all short squeezes on hedge fund crowd long the Yen.
Over in Europe, the Italian stock market looks dreadful. Central planners at the ECB haven't been able to do anything about it. Sorry Draghi.
"If you thought the central planning experiment in the US and Japan went bad, look at what Draghi is doing to the banks in Europe – Italy’s stock market is down another -1.5% this am taking it’s crash (since July) to -32.8% (if the SPX crashed that % it would be at 1436 fyi)"
Even Germany is crashing from its peak.
The point here? The Fed, ECB and BOJ can't arrest economic gravity. Growth is slowing and it has been despite central bankers' best efforts.
So while Old Wall media continues to talk about China and oil, we're sticking with our process. That's kept our subscribers out of a lot of trouble here at home and abroad.
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Takeaway: RH secures anchor space at SF Pier 70. KATE lapping 2015 quality of sale initiatives -- one of many tailwinds in 2016.
RH - RH Secures Lease on Historic Landmark Building at San Francisco’s Pier 70
Typical RH maneuver in its backyard of SF. Taking a Flagship spot in a new redevelopment, while being one of the first retailers to sign on the dotted line. Leads to below market rents, in an up and coming retail space. That allows the landlords to attract the right type of cotenants around RH as the anchor.
KATE - Running Flash Sale. Same Time As Last Year.
Promotional cadence planned flat in 2016 after 2015 quality of sale initiatives at both wholly owned and wholesale distribution in the US. One of the many tailwinds for the brand as we enter FY16.
NKE - Nike hosting All-Star sneaker events in 4 cities this year where it promises new releases and surprise drops
Another demonstration of the content owner, upstaging its traditional wholesale partners when connecting with consumers.
NKE/FL - The footwear business could be entirely software-based in 15-20 years
AMZN - AWS announces Cross-Platform 3D Game Engine Integrated with AWS cloud &Twitch
KORS - Marc Jacobs announces new accessory strategy and price restructuring -- moving leather towards 70% of sales, exceeding Michael Kors' 68.4%
ULTA - Jessica Alba's Honest Beauty line teams up with Ulta to expand nationwide distribution
SKX - Sketchers to extend contract with US marathoner Meb Keflezighi
Burberry - Fashion shows becoming marketing tool as Burberry will move to a see-now/buy-now collection model -- will no longer unveil clothes six months before they are available in stores
FL - FL trying to create buzz with 2016 World Sneaker Championship partnership -- will sell winning design in stores later this year
LULU - Athletic apparel retailer Yogasmoga, a fast-growing LULU rival, to open first NYC location
SBH - Sally Beauty Holdings has big ambitions for more stores and new services as it hits 5,000-store milestone
Leading Thinker on Generations Who Coined the Term ‘Millennials’ Joins Forces with Independent Research Firm
FOR IMMEDIATE RELEASE
STAMFORD, Conn., February 9, 2016 -- Hedgeye Risk Management, a leading independent provider of investment research and online financial media firm, announced today that renowned historian, economist, and demographer Neil Howe has joined the company as Managing Director to lead Demography sector research. Howe is regarded as a leading authority on generations and social change in America, an acclaimed bestselling author, and highly sought-after speaker.
“We are incredibly excited to welcome someone of Neil’s caliber to our growing team,” said Hedgeye CEO Keith McCullough. “He is a world-class thinker and our country’s leading authority on today’s generations. His demographic insight will augment our existing research and help our customers identify the most significant, secular trends in the U.S., abroad, and their investing implications.”
Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Their first book, Generations, was called “the most stimulating book on American history that I have ever read” by Vice President Al Gore, who sent a copy to every member of Congress. Newt Gingrich called it “an intellectual tour de force.” The Boston Globe wrote of their book, The Fourth Turning, “If Howe and Strauss are right, they will take their place among the great American prophets.”
Howe and Strauss originally coined the term “Millennial Generation” in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS’ 60 Minutes.
"I'm thrilled to be working with the Hedgeye team,” said Howe. “Everyone I’ve met here is smart, superbly informed, and—most importantly—unafraid to make non-consensus calls and stick by them. Over the next several years, asset managers the world over will desperately need a no-BS source of unbiased insights. I look forward to helping Hedgeye fill that need."
Previously, with American businessman and philanthropist Peter “Pete” Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform. He later co-authored The Graying of the Great Powers with Richard Jackson, a seminal work in the emerging field of “political demography.”
Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C.
He received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.
Neil Howe Talks 2016 GOP Field ON Real Conversations
Click image to watch.
ABOUT HEDGEYE RISK MANAGEMENT
Hedgeye Risk Management is an independent investment research and online financial media firm. Focused exclusively on generating and delivering actionable investment ideas in a proven buy-side process, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts, all with buy-side experience, covering Macro, Financials, Energy, Healthcare, Retail, Gaming, Lodging & Leisure (GLL), Restaurants, Industrials, Consumer Staples, Internet & Media, Housing, and Materials.
CONTACT: Dan Holland
Takeaway: YELP is still chasing consensus estimates while its model continues to unravel. Apparently it hasn't learned much from its mistakes in 2015.
- 4Q15 = LOCAL DETERIORATING: This is now YELP's fourth consecutive miss on Local Advertising revenue. YELP produced decelerating new account growth of 22%, which is lower than the rate that it has onboarded sales reps in any quarter in 2015. Further, YELP’s attrition rate accelerated again in 4Q15, which suggests that its CPC ad product isn’t really improving its client’s ROI. Note that YELP has been selling CPC for well over a year and is now over 60% of revenue, so if CPC had the ROI that mgmt claimed, then we would have noticed it by now. The one bright spot from the quarter was accelerating revenue growth in its Eat24 business, but the transactions segment is almost too small to matter (10% of revenue).
- GOOD LUCK GUYS: YELP issued 2016 revenue guidance slightly above consensus at the midpoint ($693M vs. $688M), which translates to ~34% revenue growth (net Brand Ad revenues). YELP didn’t provide segment-specific guidance, so we’re not sure how mgmt plans to get there, or if it has an idea, but it’s more than a tall order. Post 4Q results, YELP now needs accelerating new account growth on historically low attrition rates to hit consensus Local Ad revenue estimates. That is also assuming accelerating salesforce productivity since its guided revenue growth is exceeding its saleforce growth target (20%-30%). The wildcard is its Google AdSense ads; we're waiting for the 10-K for additional color.
- SCAPEGOAT: YELP announced that its CFO, Rob Krolik, will be leaving the company after it finds a replacement, or by year end. We’re not sure if YELP is trying to use Krolik as the scapecoat, or if he’s jumping off the bus before the wheels fall off, but a new CFO won’t change much. The problem is the business model, which can’t be fixed unless mgmt is willing to take a hard landing (down revenues). YELP’s attrition can be attributed to poor ROI (note below); the easiest way to fix that is by introducing lower-tiered ad packages. But the risk there is that it would need that many more brand new customers to offset its attrition (e.g. at half the price, it needs twice as much new account growth).
Let us know if you have questions, or would like to discuss in more detail.
YELP: Grand Tales of ROI
02/13/15 01:34 PM EST
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