Twitter and Snapchat! A Valuation.

Dear Reader,


Here I am going to review the prospects of Twitter and Snap Inc, the maker of the Snapchat application. After Facebook these are arguably the most popular social networking tools listed on an exchange.

Twitter's shares fell by nearly 20% on Thursday due to a miss on its third quarter earnings report. Snap Inc.'s shares also fell by around 10% intraday on the past Wednesday, although Snap Inc. beat on earnings.

Basically, I think both Twitter and Snap are undervalued at current levels. Facebook Inc. is valued at 536.04 billion USD by public markets. Yes, I know Facebook has probably reached about 2.5 billion monthly active users by now, while Twitter and Snapchat have each less than 300 million monthly active users.

But still, Twitter and Snapchat look like the only viable competitors to Facebook in the long term. If the stock market is right and Facebook is worth 536.04 billion USD than Twitter and Snapchat are undervalued.

I would say Twitter's intrinsic worth is around 30 billion USD an around 30% upside from the current value of 23.42 bln. USD of Twitter.  Snap's intrinsic worth is around 30 billion USD also, an upside of more than 50% from its current valuation of 19.25 billion USD.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Is Microsoft Overvalued?

Dear Reader,

Microsoft's current market capitalization amounts to 1.05 trillion USD - a staggering amount which is circa 5% of the production of the entire United States of America for a year, or shortly said USD GDP per year.

Is Microsoft overvalued?  Yes. I think Microsoft should be worth somewhere around 700 billion USD. Microsoft is trading at Price/Sales ratio of 8.34, Price/Book ratio of 10.26 and Price/Earnings of 27.16. According to my opinion, by all these measures Microsoft is significantly overvalued.

Currently, we are at the peak of the current economic cycle. Microsoft is at peak profits and revenue in the short to mid term, at least. When the global economy enters a recession Microsoft's revenue and profits will fall sharply as they did post Dot Com boom in 2001. The market is currently pricing that Microsoft will continue to grow revenue and profits by something like 15-20% a year, which is simply not possible if Microsoft does not enter and disrupt many new industries. Yes, I know Microsoft is in second place in cloud services after Amazon, but still the current environment is exceptionally positive for technology companies and simply unsustainable. It will not last.

The same arguments are valid for all other big five technology companies - Apple, Google, Amazon and Facebook. Only Apple has a more reasonable valuation, and no, this is not only because it is a hardware company. But still big 5 technology companies are overvalued.

In my opinion, the intrinsic value of Microsoft for the next 2-4 years is around 700 billion USD.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Russian Stocks!

Dear Reader,

The Moscow Exchange MOEX Russia Index has doubled in value since during the last five years.

Still, the major Russian stocks look undervalued measured by their Price/Earnings ratio. For 2017, 2018 and up till the 3rd quarter of 2019 the Price/Earnings ratio of the stocks in the Moscow Exchange MOEX Russia Index was 7.8, 8.5 and 6.1 which is tiny compared to the Standard and Poor's Index trailing 12 months Price/Earnings ratio of 22.81 as of 11 October 2019.

Why are Russian stocks so cheap? One of the main reasons is the price of oil. The price of Brent oil reached 136 and Crude oil reached 164 USD in 2008 and in 2007 the Russian economy grew by more than 7%.

Then Gazprom was valued at more than 200 bln. USD. Now Gazprom valuation is close to 90 bln. USD. Sberbank, the largest bank in Russia, is one of the largest banks in Europe in terms of market capitalization. The Russian stock exchange market is dominated by oil and gas, resource companies, banks and retailers.

The Russian stock market is predominantly driven by the price of oil and USD/RUB and EUR/RUB exchange rates. After the annexation of Crimea the Russian economy slipped into a recession and stocks tanked. Due to the sharp depreciation of the Russian Ruble from around 30 Rubles for a dollar to around 64 USD today the Russian economy lost steam and the Russian consumer was hurt. However, since 2015 Russian stocks have staged a remarkable recovery.

These are part of the reasons why Russian stocks are so cheap by international and even emerging markets standards. Personally, I think the price of oil is prone to rise in the near future due to its susceptability to geopolitical conflict. Yes, Russia, Saudi Arabia and the USA are pumping record amounts of oil, but the consumer is not so weak as the price of oil implies. Even if a global recession ensues, the price of oil could rise sharply due to geopolitial pressure. As evidence by the recent drone attack on the largest oil fields in the world in Saudi Arabia, asymmetric war is here to stay. And frankly said, I do not think the geopolitical risk premia is fully incorporated into the price of oil.

So all said, major liquid Russian stocks remain strong value plays for the long term investor. What is more, the dividend yield of Moscow Exchange MOEX Russia Index as of Q3 2019 was 6.7%

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Tesla Valuation 6th October 2019

Dear Reader,


Here I am going to refresh my attempt to value Tesla, Inc. the electric automobile manufacturer.

Currently Tesla is valued by the market at 43.25 bln. USD and trades at 231.43 USD per share. Is this valuation justified? No. I think Tesla is currently worth somewhere about 25 bln. USD or circa 40% below its current valuation.

Why? Because Tesla has not shown it can be a profitable company. If you take tesla Net Income results for 2015, 2016, 2017 and 2018 it turns out Tesla has lost the staggering amount of circa 4.5 billion USD for these four years. In 2018 Tesla had a net loss of 976.01 mln. USD. At best Tesla could be a niche producer of a niche product like electric automobiles. So there is some value in Tesla currently. In  the next 2-3 years I do not think Tesla's stock price could go down to zero. Tesla's production technology has some value. So according to my calculations Tesla is worth circa 135 USD per share in the next 2-3 years.

There is always the opportunity that a technological breakthrough can be achieved and producing electric cars can become a profitable business. What is more, if Tesla can achieve enough economies of scale by raising production of its electric automobiles Tesla could still reach profitability. So I do think there is still value in Tesla. I think Tesla is worth about 25 billion USD currently.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost and posts on social networks(Twitter, LinkedIn etc.) are the author's and they in no way express the opinion or official position of the company where I am working currently!

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich