Weekly Internet Notes: Amazon, Facebook, LinkedIn, Groupon

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Internet companies have seen a tremendous valuation boost in recent quarters, which has encouraged them to step up their investments. Be it e-commerce or social networking, companies are trying to acquire as many customers as they can in addition to improving their monetization. Last week saw firms including Amazon, Facebook, LinkedIn and Groupon announcing steps with a similar strategy in mind. Here are some details.

Amazon

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Amazon (NASDAQ:AMZN) added to its financial muscle recently when it entered an agreement with Bank of America to secure a $2 billion credit facility to fund its operations. The facility is currently for a span of two years, but can be extended for up to three additional years. [1] The company mentioned that the funds will be used for capital expenditures, acquisitions and other corporate purposes.

In its latest push to expand grocery delivery, Amazon has partnered with the U.S. Postal Service to deliver meat, dairy, produce and other groceries to its customers in San Francisco. [2] The company has been experimenting with grocery delivery for a while, and also does it in Seattle and Los Angeles.

We estimate revenues of over $90 billion for Amazon in 2014, and non-GAAP diluted EPS of $1.91. We maintain a $348 price estimate for Amazon’s shares, roughly in-line with the market price.

Facebook

Facebook (NASDAQ:FB) has announced that it is now delivering 1 billion video views per day. [3] It also intends to start showing view counts, similar to youtube, on certain videos that are posted by pages and public figures. This will certainly stir up the interest among advertisers as video ads tend to be engaging. Youtube had 4 billion views per day in 2012, which suggests that although Facebook is far behind, it has grown significantly and has emerged as an attractive platform for video advertisers. [3]

We estimate revenues of around $12.5 billion for Facebook in 2014, and non-GAAP diluted EPS of $1.73. We maintain a $65.56 price estimate for Facebook’s shares, which is around 15% below the market price.

LinkedIn

In a quest to improve the user interface and security of accounts, LinkedIn (NASDAQ:LNKD) rolled out several updates last week. The company added new session management page that lets users see their active sessions along with locations and IP, thus improving account security. LinkedIn also increased the amount of detail in notification emails which are sent to users following security related changes to their accounts. Additionally, the company has retired a relatively old tool called InMaps. This tool lets users visualize their LinkedIn network.

We estimate revenues of around $2.2 billion for LinkedIn in 2014 and GAAP diluted EPS of $0.95. We maintain a $154 price estimate for LinkedIn’s shares, implying a discount of more than 30% to the market price.

Groupon

Last week Groupon (NASDAQ:GRPN) launched time-based deals, thus adding another option to its ever growing deals marketplace. [4] Customers can now buy these time-specific deals for restaurants and other similar establishments, and don’t have to present a voucher as they go there. While open-ended deals are popular, time bound deals will result in fewer expirations and more opportunities for strengthening the relationship between customer and restaurant owner. Over time, Groupon intends to expand this feature to other deal categories.

We estimate revenues of around $3.15 billion for Groupon in 2014 and GAAP diluted EPS of -$0.01. We maintain a $6.28 price estimate for Groupon’s shares, implying a discount of less than 10% to the market price.

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Notes:
  1. Amazon Lines Up $2 Billion Credit Facility, The Wall Street Journal, Sep 5 2014 []
  2. U.S. Mail Delivers Amazon Groceries in San Francisco, The Wall Street Journal, Sep 4 2014 []
  3. Facebook Highlights Its 1-Billion-Video-Views-Per-Day Reach By Adding View Counts, TechCrunch [] []
  4. Groupon Nips At Yelp and OpenTable With Time-Based Deals, TechCrunch, Sep 3 2014 []