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Verizon is scheduled to announce earnings tomorrow. The carrier has been facing increasing competition from AT&T, T-Mobile and Sprint, all of whom have introduced new plans or cut prices in order to gain share in the increasingly saturated postpaid market. In our pre-earnings note we discuss what to expect from the company in the quarter as well as the full year.

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Comcast's Universal Studios Hollywood will host a new attraction based on its popular Fast and Furious film series. The theme park announced plans to add a 3-D, HD feature to the park's Studio Tour tram ride by summer 2015. While theme parks are just a small part of Comcastâ s business, they help promote other NBCUniversal properties and bring in stable cash flows. We expect theme park revenues to exceed $3 billion by the end of the decade.

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Medtronic Gets Relief In Edwards Patent Case, But Near-Term U.S. Outlook For CoreValve Looks Grim
  • by , 12 hours ago
  • tags: MDT BSX
  • Providing temporary relief to Medtronic (NYSE: MDT), a U.S. appeals court has postponed the preliminary injunction issued against the company in connection with its patent infringement court case with rival medical device maker Edwards Lifesciences (NYSE:EW). The injunction, which was earlier expected to take effect on April 23, would have prevented Medtronic from selling its CoreValve transcatheter aortic valve replacement (TAVR) device in the U.S., where it competes with Edwards’ SAPIEN device. Procedural technicalities and other legal matters concerning the injunction are to be re-examined by the Appellate court, but its ruling will have no impact on the judgment of the Federal District Court of Delaware, which found Medtronic guilty of patent infringement and stated that “Medtronic disregarded the law in infringing Edwards’ patent and boldly continued to thumb its nose at the law by continuing its conduct even after being found to be a willful infringer.” While the injunction will not allow Medtronic to sell or promote its CoreValve device in the U.S., both companies are engaged in discussions to ensure that patients do not suffer because of this ruling. Unlike the SAPIEN device, CoreValve is available (and FDA approved) for use in a wide range of sizes which makes it the only viable device in some aortic valve replacement patients. The Federal court also admitted in its ruling that there is a need for a mechanism to ensure availability of CoreValve to physicians and patients who urgently require this device and where Edwards’ SAPIEN is not an alternative. Medtronic faced a similar situation in Germany last year when a German court banned it from selling its CoreValve device in the country following a patent infringement issue with Edwards. This ruling was overturned a few months later by a higher court and Medtronic is likely hoping for a similar outcome in this case as well, though it seems unlikely. If the Federal ruling is upheld by the Appellate court, Medtronic is unlikely to see growth in the U.S. TAVR market for at least the next three years, when the patent in question is due to expire. It could maintain its small market share in the near term, if it can reach a suitable arrangement with Edwards for selective commercial presence in the country on grounds of public interest. We currently have a $59 price estimate for Medtronic, which is in line with the current market price.
    TZOO Logo
    Travelzoo Posts Disappointing Results On Search And Local Headwinds
  • by , 16 hours ago
  • Travelzoo’s (NASDAQ:TZOO) stock plunged nearly 10% on its disappointing first quarter results that were released Thursday, April 17. The company’s revenue decreased 5% over the year-ago period owing to a decline in search and local deals revenue. Search revenues slumped by over 25% to $4.8 million as the company’s investments into its new hotel booking platform had to be balanced by reducing the search marketing spend. On the other hand, local deals revenue decreased 21% to $6.9 million due to a decline in the number of deal vouchers sold. According to Travelzoo’s management, the voucher format is not suitable to many consumers as it is not a confirmed booking. At the beginning of the current quarter, Mike Stitt was appointed as the new president of Travelzoo Local in North America. Mr. Stitt helped Travelzoo launch local deals in 2010 and will now help it in developing new deal formats that better suit customers. A 6% year-on-year growth in travel-related revenue helped Travelzoo in partly absorbing the impact of lower Q1 search and local revenue. Travel generates more than 70% of the company’s sales. The growth in travel revenue, although positive, was lower than the double-digit growth achieved in each of the quarters last year. This can be attributed to lower Getaway sales in North America on account of a severe winter and reduced spending by online booking engines and international airlines. Based on the Q1 results, we have revised our price estimate for Travelzoo’s stock downward by 13% to $21.33 . The new estimate marks our valuation at a premium of about 20% to the stock’s market price. See our complete analysis of Travelzoo here Hotel Business To Benefit From The Launch Of New Booking Feature Travelzoo’s much anticipated hotel booking platform was finally launched for beta-testing in March. The company had been developing the platform since Q3 2012 with the aim of reducing the friction associated with bookings. The platform will allow users to book quickly and easily within Travelzoo’s websites and mobile products, thus also allowing suppliers to promote deals in a more flexible manner; e.g. loading a last minute rate for a hotel will become much easier compared to Travelzoo’s current solution, which redirects users to the hotel’s website. The feature will also help Travelzoo to take advantage of peak season demand. Hotel room rates are higher during peak seasons and Travelzoo only offered off-peak season deals before the platform was launched. Since revenue is recognized when the stay occurs and not when the booking occurs, the platform will start generating revenue in the second half of 2014. The company had already increased its headcount ahead of the platform’s launch and will now start allocating more resources towards subscriber marketing. We believe that Travelzoo’s entry in hotel bookings is a good long term strategy, as it opens up an additional revenue opportunity for the company. In our view, Travelzoo’s growth will accelerate as the platform grows its scale by attracting more subscribers and advertisers. Investments in building the platform will negatively impact the company’s margins in the short term. Travelzoo’s EBITDA margins fell by over 3% to 18.1% in 2013. It spent $800,000 on the platform in Q1 2014 and expects to incur incremental costs to the tune of $1,100,000 in Q2. We believe these expenditures restrict the scope for margin expansion. We have decreased our forecast for Travelzoo’s 2014 and 2015 EBITDA margins by 1% and 1.5% respectively, which drove a 10% downward revision in our price estimate for the company’s stock. Search Will Continue To Be Impacted By Low Mobile Monetization And Marketing Spend Travelzoo’s search products include SuperSearch, a pay-per-click travel search tool, and, a travel search engine that allows users to find the best prices on flights from different airlines and online travel agencies (OTAs). completed the first full quarter of its mobile site in Q4 last year. It processed about 750,000 searches in its first quarter of business. However, it does not have any mobile app. This led the average number of monthly searches on Fly to decline from 3.5 million in 2012 to 3.3 million in 2013. The number of monthly searches on SuperSearch also plummeted from 5.1 million to 4.1 million contemporaneously since the brand has neither a mobile app nor a mobile site. SuperSearch and Fly also suffered because the need to balance spending forced Travelzoo to decrease investments into search marketing. The company is currently focusing on driving profitable growth, which resulted in a revenue decline of about $1.5 million from SuperSearch in Q1. The company expects to witness a similar impact in Q2. It has stated that the hotel platform will be its key focus area in 2014, and therefore we think that it may not significantly invest in search marketing and building mobile search products to bolster growth. We have reduced our estimate for the number of search queries on SuperSearch and Fly, and also the average revenue per thousand searches for 2014. This translated into a 15% annual decline in search revenue. We expect growth to pick up next year as the expenditure on the hotel platform reduces and more financial resources are diverted towards search. See More at Trefis |  View Interactive Institutional Research (Powered by Trefis)
    UL Logo
    Currency Woes Could Lower Unilever's Sales Growth
  • by , 16 hours ago
  • tags: UL CL PG KMB
  • Unilever (NYSE:UL) will be announcing its results for Q1 FY 2014 on Thursday, April 24. The Anglo-Dutch consumer goods company ended 2013 with a robust 4.1% year-over-year increase in fourth quarter underlying sales (sales from continuing operations excluding acquisitions, disposals and currency movements). Emerging markets led the growth with a 8.4% increase in underlying sales. However, this growth rate was lower than that achieved in prior quarters due to currency devaluation in many developing countries that caused inflationary pressures, which in turn weighed on the demand. The unfavorable exchange rates had a negative impact on Unilever’s top-line as well which declined by 6% to €11.8 billion ($16.1 billion). We expect a similar impact on Q1 results since emerging market currencies are still on a low relative to the dollar. To better understand how currency depreciation impacts consumer staples firms in the long-run, read our article How Will A Prolonged Slowdown Affect FMCG Stocks? See our complete analysis of Unilever Home & Personal Care To Be Most Impacted By Currency Woes Unilever’s home and personal care categories together generate about 80% of its emerging market sales, and hence are most prone to volatility in these regions. Fueled by innovation, product launches, entry into new markets and overall market growth, home and personal care experienced strong growth in Q4 despite currency headwinds. While home care posted 6.5% year-over-year growth in underlying sales, personal care underlying sales rose by 7.3%. Driven by rising disposable incomes, emerging markets are expected to continue growing, albeit at a slower pace due to currency weakness and lack of economic reforms. Going forward, we expect this to cause some deceleration in home and personal care sales growth. However, we also believe that these businesses will grow faster than others as emerging markets growth is expected to outpace growth in the developed world. Will The Foods Division Regain Momentum? Unilever’s foods business has been suffering due to the sluggish performance of spreads, which generate close to 7% of the company’s total revenue. High promotional activity and pricing competition in developed economies were causing consumers to switch to private label spreads manufacturers. Additionally, health concerns over the presence of trans-fat in margarines (an important spreads category for Unilever) was leading consumers to shift back to butter and other healthier alternatives. Euromonitor expects retail volumes for margarines in the U.S. to decline annually by approximately 5% over the 2011–2016 timeframe. In the last few quarters, Unilever improved the taste profiles and naturalness of its products by incorporating consumer feedback. The company worked to efficiently market margarine as a healthier yet great tasting alternative to butter. It also divested many of its non-core brands such as Ragu sauce in order to increase its focus on spreads. This helped it to grow its market share in margarine in 11 of its top 14 markets in Q4 2013. The foods segment registered 1% year-over-year underlying sales growth in Q4 after increasing by only 0.1% in the first nine months of the year. We believe that Unilever’s market share in margarine, and also its market share in spreads, will continue to grow as the company ramps up its efforts to establish a stronger foothold in the market. However, driving market growth in the margarine category itself will be a challenge for the company. See More at Trefis |  View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    P Logo
    Pandora Earnings Preview: Profitability Will Continue To Improve
  • by , 17 hours ago
  • tags: P
  • Pandora Media (NYSE:P) will report its Q1 2014 results on April 24th. We want to remind investors that the company has changed its fiscal year to calendar year and that the results will indicate its performance for the three-month period ending March 31. Given the recently disclosed operating metrics, we expect strong revenue growth and an improvement in margins. Excluding the impact of seasonality, Pandora’s ad monetization is expected to go up, driven by the continued uptick in its mobile ad business. The company has a come a long way in terms of creating a sustainable business model. We expect Q1 results to reinforce this development. Our current price estimate for Pandora stands at $24, implying a discount of about 20% to the market price. See our complete analysis for Pandora Media Continued Market Share And Listener Hour Growth Pandora reports certain operating metrics on a monthly basis. The figures reported for the first three months of 2014 suggest that the company continued to gain share in the U.S. radio market. Even though there was a decline in the number of listener hours in February as compared to January, much of that can be attributed to seasonality. The Internet radio market share is a seasonally adjusted figure and gives a truer picture. Pandora grew its share both year over year and sequentially, ending March with 9.11% market share. While year-over-year growth in the number of listener hours was slightly less in February as compared to January, the figure picked up substantially in March amounting to 14%. This happened despite the active listener growth falling slightly which suggests higher engagement. Ad Monetization Will Continue To Improve, Seasonal Effect Will Be Visible We expect ad RPM levels (revenue per 1,000 listener hours) to be up compared to the first quarter of 2013. There may be some sequential decline due to seasonality as advertisers tend to divert disproportionate amount of their annual budgets to the fourth quarter. Pandora has done exceptionally well in ramping up its mobile ad business. Its mobile ad RPM has shot up from merely $17.88 in the first quarter of 2012 to $36 in the fourth quarter of 2014. Except for the seasonality effect observed in the first quarter of the year, the figure has seen an impressive year-over-year as well as sequential growth over the last 8 quarters. Pandora is improving its profitability, which has remained one of the biggest concerns around the company’s business. With royalty rates expected to rise each year, the company will focus on improving its ad targeting in order to command better pricing and selling more mobile inventory slots. Pandora states that its royalty rates have increased by 53% in the last five years and will go up by another 9% in 2015. Its subscription service under the name ‘Pandora One’ is also seeing some traction and the company recently raised the monthly pricing. The incremental profits from higher pricing, assuming that it doesn’t deter subscriber growth significantly, will further add to the bottom-line. Incremental Profits From Price Hike Pandora has raised the monthly price of its Pandora One service by $1 to $4.99, making it the first price revision since the service’s launch in 2009. However, this move will not impact Q1 2014 results but will have a moderate impact on the company’s full year performance. Subscriber ARPU (average revenue per user) will definitely go up meaningfully next year as most subscribers migrate to the new pricing structure.  The price increase will directly flow down to Pandora’s bottom line. Currently the company has about 3.3 million paying subscribers, which represents a small fraction of its overall user base. If the price increase of $1 were to be rolled out to all subscribers immediately, it will result in incremental revenues of close to $40 million. This will lead to cash flows jumping by a similar amount. This is a huge improvement considering that the operating cash flow was negative in 2013, according to our calculations. Going forward, these incremental revenues will see strong growth as we expect Pandora to continue gaining subscribers rapidly. See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
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    VeriSign Q1FY14 Preview: Double-Digit Revenue Growth To Continue, Tax Benefit Could Lift Bottom Line
  • by , 17 hours ago
  • tags: VRSN
  • VeriSign (NASDAQ:VRSN) is scheduled to report its Q1FY14 results Thursday, April 24. The company is the sole registrar for .com and .net domain names, commanding a 47% market share in 2013. VeriSign grew its registration base by 5% to 127 million domains in 2013. However, domain growth for the company continued to lag overall market growth by 3% in 2013. Despite slower growth in domain registrations compared to the overall market, VeriSign continued to grow its top line at double-digit pace, with revenues reaching $965 million in FY13. Q1FY13 revenues stood at $236.5 million approximately, growing 15% on a year-on-year basis. VeriSign has historically posted the highest revenue growth rate in its first quarter. However, gross margins are the lowest for the period. This indicates that the company invests during the Q1 period to boost revenue growth rate. Gross margins for Q1FY13 stood at 80%. Comparatively, the second, third and fourth quarters in FY13 posted gross margins of 80.5%, 80.5% and 81% respectively. For Q1FY14, we expect this revenue and margin trend to continue for VeriSign. The company’s top line should continue to see double-digit growth rate, despite a deceleration in domain base growth. We expect gross margins to remain close to 80% in Q1FY14, followed by an expansion in subsequent quarters. See our complete coverage of VeriSign Average Price Per Domain In Focus VeriSign’s domain base has seen a steady deceleration in growth due to migration of customers to other generic top-level domains (gTLDs) as well as country-code top-level domains (ccTLDs). Other gTLDs and ccTLDs offer greater flexibility for businesses in choosing a url of their choice, which is constrained by the huge size of the .com root zone. This reduced flexibility in choosing a url of their choice has resulted in businesses migrating to other gTLDs and ccTLDs in recent times. As a result, VeriSign’s market share in the global domain registration market has declined from 52% in 2008 to 47% in 2013. Despite the shrinking market share, VeriSign has been able to grow its revenues at double-digit pace. The reason for the strong growth in revenues is a shift in domain base growth for the company. Although the .com domain base is close to 7.5 times the domain base of the .net gTLD, growth rates for the .net domain have seen an increase in recent times. For now, VeriSign charges $7.85 for a .com domain and $6.18 for a .net domain registration. However, contractual obligations restrict VeriSign’s ability to hike its .com registration prices through November 2018 while it has the right to hike its .net domain price by 10% each year through June 2017. In the near term, the obligation on its .com registration pricing should restrict a strong increase in top line. However, faster growth in the higher priced .net domain should boost top line for VeriSign in the long term. Net Tax Benefit Could Lift Bottom Line During its Q4FY13 earnings call, VeriSign reported liquidating one of its domestic subsidiaries for tax benefit purposes by claiming a worthless stock deduction from its 2013 federal income tax return. The liquidation of its subsidiary resulted in a net tax benefit of $375 million, subject to IRS audit and adjustment, and has not been included yet in its prepared FY13 financial results. Last fiscal, the company reported a net tax benefit of $88 million and a net income level of approximately $545 million. A favorable tax claim from the liquidation could lift VeriSign’s bottom line significantly in FY14. On the flipside, the company’s tax burden for FY14 would be weighed down by its plans to repatriate approximately $700-$800 million of cash held by foreign subsidiaries. Repatriation of liquid assets is allowed to be repatriated along with capital appreciation after the payment of taxes due on them. This tax levied by foreign governments could offset the potential tax benefit resulting from the worthless stock deduction for VeriSign. See More at Trefis |  View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
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    Amazon Earnings Preview: Expect Impressive Growth Accompanied By Margin Expansion
  • by , 17 hours ago
  • tags: AMZN EBAY GRPN
  • Amazon (NASDAQ:AMZN) will release its Q1 2014 earnings on April 24. We expect the secular trend of continued consumers shift to Internet for shopping, Amazon’s superior delivery service and strong market position in cloud services to drive its first quarter results. Like other Internet companies, Amazon’s stock has also come down in the last two months. We believe this is more of a market correction following the initial exuberance rather than an indicator of a weak future growth. We expect revenue growth in Q1 2014 to be close to 20%, accompanied by margin expansion. The growth in the company’s international business was relatively weak in the fourth quarter of 2013 and it will be interesting to see how things play out this quarter. Here is what you should watch out for. Our price estimate for Amazon stands for $373, implying a premium of 15% to the market price.
    BSX Logo
    Boston Scientific Receives FDA Approval For Its Latest CRM Devices
  • by , 17 hours ago
  • tags: BSX MDT
  • Medical device maker Boston Scientific (NYSE:BSX) recently received FDA approval for its new advanced range of pacemakers and defibrillators. These devices include the Dynagen Mini and Inogen Mini ICDs (Implantable Cardioverter Defibrillators) as well as Dynagen X4 and Inogen X4 CRT-Ds (Cardiac Resynchronization Therapy-Defibrillators). The approval adds to the company’s long list of devices already available, including its innovative Subcutaneous-ICD (S-ICD). CRT-Ds and ICDs are a part of Boston Scientific’s Cardiac Rhythm Management (CRM) business, also referred to as the Pacemakers/Defibrillators division. This division generated about $1.9 billion in sales last year and currently contributes more than 26% of the company’s valuation, second only to the Interventional Cardiology division. In the past few years, sales in this division have declined in mid-to-high single digits owing to macroeconomic headwinds and increasing competition. However, they are gradually stabilizing as macroeconomic conditions improve and the company’s new products gain acceptance. We expect Boston Scientific’s growing product line and acceptance of new products to help in boosting CRM division sales and arresting the company’s declining share in the global CRM market. We currently have a price estimate of around $13 for Boston Scientific, which is slightly below the current market price.
    BIDU Logo
    Baidu To Witness Top Line Acceleration On Better Mobile Monetization And Recent Acquisitions
  • by , 17 hours ago
  • Baidu (NASDAQ:BIDU), the largest Internet search provider in China with  73% share of the search traffic, is slated to release its results for the first quarter of FY2014 Thursday, April 24. Until mid-2013, there were concerns surrounding the company’s mobile monetization capabilities and high dependence on the search business. However, Baidu grew organically as well as inorganically to overcome these problems. It worked towards building a better mobile ecosystem and diversifying into newer businesses. This helped it accelerate top line ($1.6 billion) growth to 50% in Q4 2013 from 42% in Q3. Baidu expects further acceleration in top line growth in Q1 2014. The company has provided guidance for revenue growth in the range of 55% to 60%. Baidu’s stock price nearly doubled in the back half of 2013 to $182. It has since fallen to about $160 in a down market. We have a price estimate of $175 for Baidu . We will update our model after the upcoming results. See our complete analysis of Baidu here Investments In Mobile To Improve Monetization But Also Weigh On Margins To tighten its grip over mobile search, Baidu invested in various parts of the mobile ecosystem last year. It introduced an integrated PC and mobile bidding system, which contributed to increased advertising on the mobile platform. A nationwide search engine marketing campaign with heightened focus on mobile was also undertaken by the company to bolster the adoption of its mobile products. Additionally, it acquired 91 Wireless Websoft in a $1.9 billion deal to strengthen its app distribution capabilities. 91 Wireless is the largest third-party app distribution company in China with over  40% market share. Baidu’s search app witnessed over 400 million activated users in Q4 compared to 330 million users in the prior quarter. The company also saw an improvement in mobile advertising rates (cost per click), which reached 60% of PC advertising rates from 55% in Q3. Owing to the increase in mobile traffic and monetization, the contribution of mobile to Baidu’s total revenues doubled in Q4 from 10% in Q2. While increasing monetization on Baidu’s mobile platform was one of the major drivers behind the solid revenue growth in Q4, aggressive investments in building mobile products weighed on the company’s profitability. Operating profits stood at $453 million, a 4% decline over the year-ago period. Baidu has more new products in its pipeline for mobile and therefore, it will continue to invest heavily this year on driving installations and usage of these mobile products. We do not expect to see absolute profit growth in 2014 due to these investments. However, EBITDA could grow due to amortization of certain intangibles resulting from the company’s recent acquisitions of Nuomi, PPS and 91 Wireless. Although we expect margins to remain depressed over the year, we think that Baidu is heading in the right direction by investing in these strategies. That’s because the revenues of China’s mobile search market are forecast to grow at a compounded rate of approximately 40% to reach $560 million by 2015. Further, the company needs to defend its share from emerging competitors such as Qihoo and Tencent. Acquisition Of Nuomi Has Enhanced Location Based Service Offerings Baidu acquired a 59% stake in Nuomi last year for $160 million. It bought out the remaining stake from Renren in January this year. Nuomi is increasingly becoming an important part of Baidu’s location based service offerings through Baidu Maps because Baidu is focused on providing a comprehensive experience to users from answering search queries to delivering services such as group buying and taxi and hotel bookings. Group buying transactions on Baidu Maps increased  60% sequentially in the fourth quarter. According to Dataotuan, Nuomi accounts for about  10% of the revenues of the local deals market in China. It has been facing huge losses since inception due to intense competition. However, the sector is seeing a consolidation. We expect Nuomi to become profitable after the industry is left with only a few players. Baidu Now Owns The Largest Online Video Platform In China The acquisition of PPS, an online video service, has strengthened Baidu’s position in the online video market. Baidu acquired PPS last year in May and merged it with its online mobile video platform, iQiyi, to become the largest online video platform in China with 358 million monthly users . We think that Baidu’s strategy for online video is a good long term bet. According to iResearch, the online video market in China will grow at a compounded rate of over 30% from $12.8 billion in 2013 to $36.6 billion by 2017. Competition From Qihoo Poses The Biggest Threat To Baidu Although Baidu is diversifying into newer businesses, we think that search is its core competency. The company needs to defend its search market share from Qihoo to maintain its growth trajectory.  Launched in August 2012, Qihoo has already gained more than  24% share of the search market as measured by page views. Its management is targeting a share of  35% for 2014 and  40% for 2015. Going forward, we expect Baidu to concede some of its share to Qihoo. See More at Trefis |  View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    SIRI Logo
    Sirius XM Earnings Preview: Subscriber Additions May Moderate
  • by , 17 hours ago
  • tags: SIRI P CBS
  • Sirius XM (NASDAQ:SIRI) will report its Q1 2014 earnings on April 24. The satellite radio company has grown its profits and cash flows at an impressive rate over the last few quarters, primarily due to strong subscriber additions. However, this quarter’s results might just be the beginning of the end of this brisk growth phase. While we expect margins to continue to increase, the net subscriber gain may come down due to lack of meaningful growth in gross subscriber additions. Additionally, the impact of the price increase that the company implemented in the beginning of the year is likely to be minimal due to different billing cycles for customers. Our assessment assumes that there will be no meaningful change in some of the metrics such as new vehicle conversion rate, penetration rate or churn percentage. Our current price estimate for the company stands at $3.45, implying a premium of about 10% to the market.
    AMTD Logo
    TD Ameritrade Earnings Preview: Increasing Trading Activity To Drive Quarter
  • by , 18 hours ago
  • tags: AMTD SCHW ETFC
  • TD Ameritrade (NYSE:AMTD) is scheduled to report its fiscal second quarter earnings on April 23. The brokerage’s revenues grew by over 15% year-on-year (y-o-y) in 2013. The top-line growth was mainly driven by a 29% y-o-y increase in revenues from investment product fees and a 28% increase in trading commissions in the calendar year 2013. Given that most expenses incurred by brokerages are fixed in nature, revenue growth contributes significantly to bottom-line growth, due to which the company posted healthier margins in 2013. According to our analysis, the company’s adjusted EBITDA margins for 2013 improved by over 3 percentage points to 45.5% compared to 2012. This figure could further improve for the quarter considering that there has been  growth in trading activity as also witnessed by other brokerages such as Charles Schwab (NYSE:SCHW) and E*TRADE Financial (NASDAQ:ETFC). We expect Ameritrade to deliver strong quarterly results based on the continued growth in trading volumes and improving EBITDA margins. We have a $33 price estimate for Ameritrade’s stock, which is slightly higher than the current market price.
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