“Whether in life or investing, never be on the wrong side of change.”
- Freebirds’s Econ Professor
My college economics professor would tell me, “Whether in life or investing, never be on the wrong side of change.” Like any good economics professor, he was full of platitudes. So it is probably not surprising that his other favorite was, “Timing is everything.”
Truism or not – it stuck with me. And looking back on the past decade, they couldn’t be more accurate.
My first job out of college was working for an investment consultant, running asset allocation studies for pension funds, and conducting due diligence on investment managers. If I were lucky, I would get to do an equity research project for one of our high-net-worth clients. I enjoyed the work, but the dream was to build a career in equity research – sell-side, buy-side – it didn’t matter.
About 3-years into that role, my boss put in his two weeks. He was the lead advisor with 80% of the firm’s clients and assets under advisement. The powers at be told me they were “the firm's clients” and “not to worry,” but I knew better – my time was up too.
Later that day, a UPS package addressed to Hedgeye Risk Management was mistakenly delivered to our office. As luck would have it, Mucker and company were moving into the same office park that I had been working in for years. The package was a coffee maker destined for the temporary space Hedgeye leased in our building while they built out Hedgeye HQ.
I had no idea what or who Hedgeye was at the time. I spent hours researching the company.
#Independent #WallStreet2.0 #OldWall #Accountability #Transparency #Trust #Platform
I was immediately sold on the vision. Hedgeye was clearly on the right side of change. And as it turned out, they were hiring! I applied, got the job, and the rest is history. That was just over 7 years ago.
Timing is everything. (I owe my career to a Keurig!)
Back to the Communications Macro Grind…
No group can appreciate the points on timing, change, and vision more than Twitter (TWTR) shareholders. Since its creation, Twitter has created enormous economic value with entire businesses built on the platform’s back. The user-base is passionate. The problem has been management’s failure to capture this value due to poor execution, and the stock price performance since the company went public in 2013 reflects it.
However, we believe we are at a turning point in the Twitter saga following activist involvement and a renewed commitment to monetization. Investments Twitter is making in ad-tech and alternative forms of monetization today can create significant value over the next 12-24 months. Meanwhile, COVID has accelerated user growth and engagement, further adding to the information network's value.
In January, we reiterated our long call when the stock was down on concerns over the Trump ban (Click Here for The Pitch). We argued that Trump leaving Twitter was a net positive for brand safety and wouldn't meaningfully impact user growth (the mobile app download data suggested user growth accelerated in January!).
We highlighted a favorable near-term catalyst set-up with upside to Q4 estimates on accelerating growth and an analyst day on 2/25. After-the-close yesterday, Twitter reported revenue growth +28% YoY (Advertising revenue +31% YoY) - above our estimate of 25% and well above the street at 17%.
We think this is just the beginning. We expect the multiple to re-rate higher as growth initiatives gain traction, getting us to a $100+ stock on a tail duration. We are particularly excited about Twitter’s move into social-audio with “Spaces” and its potential to drive engagement and grow their user-base.
If you would like to learn more about my research team's in-depth investing research please reach out to .
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 1.09-1.22% (bullish)
SPX 3 (bullish)
RUT 2179-2330 (bullish)
NASDAQ 13,363-14,225 (bullish)
Tech (XLK) 131.77-138.86 (bullish)
Energy (XLE) 38.55-45.12 (bullish)
Utilities (XLU) 61.82-63.85 (bearish)
Gold Miners (GDX) 33.46-35.82 (bearish)
Shanghai Comp 3 (bullish)
Nikkei 283 (bullish)
VIX 16.51-25.38 (bearish)
USD 89.76-91.40 (bearish)
Oil (WTI) 53.25-59.73 (bullish)
Gold 1 (bearish)
Silver 25.14-29.04 (bullish)
MSFT 238-248 (bullish)
AAPL 132-141 (bullish)
FB 258-274 (neutral)
NFLX 528-563 (bullish)
Make it a great one…
Andrew Freedman
Managing Director
Communications Sector Head
