What Happened To Apple?

Apple Inc., as usual, released a new product for 2013. Actually this year there were two products released. Almost everybody expected the 5S to be made known, but there were rumors that a new and cheaper version of iPhone will be also released so that they will have a better leverage in competing with Samsung and others in this business.

The new iPhone 5S, top of the line model, looks identically with iPhone 5, but it’s got a better camera, a faster processor and Apple added a fingerprint scanner for a faster unlock. For this model customers will have to pay (just as for the last iPhone 5, when it was released) $650, or $199 with contract. They are keeping the same pricing strategy as before. While a new model is released, the price for the older models drops with $100.

The second model released this year is iPhone 5C. Well…this phone is nothing of what we were expecting. It is not a cheaper version for the customers to buy, but most probably it is a cheaper model of the iPhone 5 for Apple Inc. to build. It has practically the same functions as the model released last year, but it is made of plastic and comes in different colors (green, yellow, blue, pink and white). The price for the iPhone 5C it is $550, or $99 with contract.

Apple’s strategy for this year is like always, to maintain the costs and raise their profits. The fact that they did not get on the market a cheaper version of iPhone might be a bet than could cost them some money, but we should wait for the sale results before throwing the rock.

AAPL, Daily

Chart: AAPL, Daily

From the technical point of view, the price of Apple’s stocks was in an uptrend from July. After a short consolidation, today’s opening was with a negative gap that brought the price all the way back to 465$ from 500$ per share. It seems that the new releases did not get the investors trust and confidence. At this point we can say that this drop could be only a corrective move for the prior trend and a retest of the Double Bottom’s base line.

If the price will close, on a daily basis, under 466$ per share, there is a big possibility for the down move to continue all the way to a 0.618 Fibonacci retrace, at 436.67$. On the other hand a bounce from here could end up by covering the gap, or why not trigger a rally that would hit the Double Bottom’s target at 550$ per share.

 

Microsoft Takes Risks By Buying Nokia

Microsoft Takes Risks By Buying Nokia

Lately the world was witness to a lot of excitement coming from the technology sector which is changing at a rapid pace. After we have become accustomed whit Yahoo’s impressive purchaces, Google acquired Motorola as a hardware partner and now Microsoft is buying Nokia’s devices and services devision, patent licences, design patents and a lot of employees (32000), all for $7.18 billion. As the Windows Phones’ market is dominated by Nokia, Microsoft may have made a smart decision. Giving the troubing performance of both Nokia and Microsoft in the mobile phones’ industry, the two giants joining their forces may lead to an improved performance in the forseeable future.

In a realistic scenario, both companies are expected to underperform for a while, fact reflected by the decline in the price of shares during the last period. If Nokia is hoping for reinvention and Microsoft is planning to increase its profits in the mobile-device market, starting with the first quarter of 2014 when the process of the acquisition will be completed, we may witness even more bold initiatives coming from the old allies (as they had a partnership in 2010). For now, Nokia is considered a less attractive business which doesn’t appeal investors anymore, being left in Microsoft’s hands (which also is betting on a highly riscant card game).

 

Three Stocks You Should Keep An Eye On For Next Month

Three Stocks You Should Keep An Eye On For Next Month

Browsing my ‘to watch’ list for some interesting opportunities, I have found three stocks that you might also find interesting.

First stock is BIDU (Baidu Inc.). From the first days of July the price of this company started an uptrend and in less than three months it has gained 75%, raising 67$. From the beginning of August the price started to draw a Rising Wedge. Today the price rallied to a new high, above 154$, but dropped pretty fast back to 150$ per share. If the day will close around the current level we can say that the breakout above the upper line was a false one. Taking into consideration also the negative divergence from the 28 days RSI we could say that a drop might occur.

The confirmation will be a drop and a close under the lower line of the pattern. In this case the price target for the Wedge is situated at 116.78 dollars.

baidu rising wedge

Chart: BIDU, Daily

Second in my list is Google Inc. which seems to be in a pretty stable up trend. After 845$ level was breached the price started to consolidate and seem to have drawn a reversal pattern. The Head and Shoulders is not yet complete. The base of the pattern is at 846$ per share, but the second shoulder is not yet finalized.

If the price of the shares will drop under 879$, the local support, then the probability for the shares to complete the H&S will rise. If the price will then fall under the pattern’s base line it might go all the way to 770$ per share.

google head and shoulders
Chart: GOOG, Daily

My last, but not least, stock for you is J P Morgan. The chart of this stock it is beautiful from the technical point of view. After the price has broken the uptrend line, came back and retested it, forming this way the right shoulder for the Head and Shoulders pattern. The base line of this pattern is at a round level, 50$. A daily close under this support will confirm the pattern.

The first target for a drop would be the key support level at 46$ per share. The full target of the price pattern sits at 43$ per share, meaning a 14% drop.

jp morgan head and shoulders

Chart: JPM, Daily

The charts look incredible and the current signals could be confirmed in the near future. But each trader should take the ideas and personalize them. Use their personal trading style, their own money management and position management to get as much profit out of these setups as they can.

 

Is Tesla’s Engine Still Going?

Is Tesla’s Engine Still Going

In May, this year, Tesla Motors got a boost of power and the price of its stocks started to rise at an alert pace. In less than 5 months the stocks gained 230%. Today it has reached another high at 189.69, getting one step closer to reaching 200$ per share.

The engine that pushed the price that far from the April levels gives now some bad signals. The trend continued to rise fast, but the volumes started to drop. Dropping volumes on a move usually means that the move might turn around in the near future. Another signal would be the negative divergence that appeared on the 28 days RSI.

is tesla motors still going

Chart: TSLA, Daily

We are expecting the price to keep on rising, targeting 200$ per share or even slightly above. This growth could be followed by a drop back to 160$ per share, an ex-resistance. The fall could occur right before or during the earning reports period.

Tesla Motors is expected to report an estimated earnings of 0.12$ per share. If it will surprise the markets like it did in the second quarter, than our setup could be invalidated and the price might break 200 level. On the other hand not meeting these expectations we might see a steeper drop.

 

Twitter Inc. Chirps Louder Now

Twitter Inc. Chirps Louder Now

Worldwide is known the fact that Twitter Inc. has filled in its IPO offering up 472,613,753 shares of stock in this initial release. Under these circumstances, Twitter had to reveal its revenues which for 2012 were $316.9 million and in the first half of 2013 they have already earned $253.6 million. The company is having 218.3 million monthly active users which have created over 300 billion tweets so far. As it concerns the IPO, Twitter is expecting to raise $1 billion.

JOBS (Jumpstart Our Business Startups) Act made possible the Twitter IPO as it allows companies with less than $1 billion in revenue to file for an IPO. JOBS Act is design to encourage funding of United States small businesses. The company will list as “TWTR” and news about this event already alerted investors. On the other side, the situation could look like a double-edged sword as the listing of the company has both advantages and disadvantages. On the one hand the company is raising more money for investments and is getting cheaper access to capital, increasing its popularity. On the other hand, it exposes its financial and business information, risks that money won’t be raised and also risks that influential users may consider other investments more relevant and thus will lose its credibility as a safe investment.

As it concerns Twitter’s main rival in the social media field, Facebook is considered to be a strong competitor. Even if the two companies have their own advantages which are offered to the customers, it is expected to see the two giants always being compared and correlated. One aspect is clear, Twitter is still developing and it needs more time and a smart strategy in order to survive in the market.

Twitter is expected to begin trading later this year and speculations have started to appear. Thus, SunTrust Robinson Humphrey (a full-service corporate and investment banking arm of SunTrust Banks, Inc) already set a price target of $50. Given the fact that the company seems to start with the right foot, by the end of the year, investing in Twitter may be considered the best choice for an investment.

 

What’s Happening With Google?

What’s Happening With Google

Recently, the media unveiled the fact that Google Inc. is among the most valuable companies in the world with its shares rising 14 percent to a record $1,011.41 per share. The boost in the price of shares was also sustained by the third-quarter revenue which cumulated $11.92 billion.

Investors are excited about the evolution of the company, believing that the upward trend will be maintained for at least the foreseeable future. Despite the fact that the search provider giant is making considerable investments and important changes within the services and products offered to its customers, it is believed that further investments in this company are a safe choice.

One of the worrying investments of Google is Motorola Inc. (purchased for $12 billion) which now is bringing only 8% of the company’s revenue. Motorola’s revenues are smaller compared with the time before being incorporated in Google and now is still swinging between being a smart or an unprofitable investment.

In search of decreasing its prices, since the beginning of the year, Google Inc. has been promoting an advertising service called enhanced campaigns, highlighting the advantages of investing in wireless devices. Obviously, everybody now is watching Google Inc. and is closing tracking the company’s cost per click.

To project a better image, Google is seriously investing time and resources in fighting cyberattacks. As part of the company’s Google Ideas initiative, it is offering free protection for websites against the so-called “distributed denial-of-service”. Moreover, it is being launched a digital attack map to show real-time cyberattacks around the world. As an extension to all these innovations, Google is working on a new browser aimed to offer a safe way to navigate the internet, protecting the user from surveillance and filtering.

Tesla Motors A Good Opportunity To Hunt For A Long

If you don’t remember our last analysis on Tesla Motors , here you have an update. The price of this stock got pretty close to the 200.00$ per share, but did not touch it. After a rejection the sellers managed to push the price back to a key support at 158.50 dollars per share.

tesla motors good long opportunity

Chart: TSLA, Daily

In the current state we can see a Hammer, candlestick pattern, which was formed on some higher volume, false breaking the support. If the price will break the 170$ level, we could see a rally back to the latest top or even to 200$ per share.

On the other hand we should not exclude the possibility of a longer correction move. If on a daily basis, the price will close under 158$ per share a Head and Shoulders pattern would be confirmed. The targets for this pattern are situated at 140.00$ per share and at 123.00$ per share. If the full target of the H&S will be hit, would mean a loss of 22.37% of the current price.

Our preferred scenario is still on the up side, taking into consideration the current trend. The trade setup includes a buying level at 170$, Stop at 153$ and a Take Profit at 200$ per share. Better signals could come after the companies earning report will be released. Until then keep an eye on the price action and the volume patterns.

 

Should We Invest In Twitter’s IPO ? Future Hit Or Disappointment ?

Should We Invest In Twitter’s IPO

The only reason for which you could not hear about Twitter’s IPO would be that you have been on the Moon for the last couple of months, Twitter will have its debut on the stock market’s stage today and is going to be the most expected initial public offering since Facebook’s rocky debut last year. The company set an initial price range of 17$ to 20$ per share which was raised this week to 23$ to 25$, settling for 26$ a share on late Wednesday. This latest price makes the micro-blogging company’s IPO worth 1.82 billion dollars, the second biggest debut for an Internet company after Facebook’s.

twitter ipo launch

After the raised price range at the beginning of this week and among the euphoria which surrounded Twitter’s IPO, some investors started to question if we are not witnessing a Facebook deja-vu and to expect a close way below the IPO price at the end of its first trading day. Before giving an answer to the investors’ worries, let’s make a parallel between Facebook and Twitter pre-IPO events. In the week leading up to the initial public offering, Facebook set an IPO price range of high $20s to mid $30s which was turned into $28 to $35 price range and closing the pricing IPO at 38$ per share.

Is this sounding pretty familiar? It sounds like it because it really is a resemblance of the events prior to their trading debut and as I mentioned above Twitter have had a similar path. The micro blogging company settle for a final price of 26 dollars a share after raising its IPO range this week from 17$-20$ to 23$-25$ per share.

Moreover, Topeka Capital put Twitter on a buy rating with a 2014 year-target of 54$ and RBC Capital’s Mark Mahaney gave the stock a pre-IPO rating of outperform, or buy, with a $33 price target, arguing that Twitter has become an Internet utility. Also, like Facebook, Twitter’s IPO is making its appearance amid a wave of social media and Internet IPOs. The major interest in Twitter’s IPO is largely based, like Facebook’s launch in May 2012, on expectations of a high-growing business potential, especially in the mobile market.

After all, Twitter is walking in Facebook’s shoes and at the moment prior to the IPO is yet to make a profit, reporting for the first nine months of 2013, a lossof $133.9 million, up from $70.7 million in the year-earlier period. On the other hand, the company posted revenues for the first nine months of this year of $422.2 million — up from $204.7 million in the same period last year.
Taking into account all these similarities, the big question is whether Twitter will share the fate of his “older brother” in its trading debut because that high-profile IPO turned into a sore disappointment for the investors when the stock closed with just a fractional gain on its first day of trading. Facebook shares slid below their $38 IPO price, hitting a 17.60$ bottom in September 2012, and stayed below the IPO price until this summer, when its second-quarter report in late July showed strong growth in mobile ads and sparked strong trading that has since pushed the stock above the $50 mark.

Recent history is a very good guide in helping us to get a glimpse into how Twitter’s first trading day could go and as Colin Cieszynski, a market analyst at CMC Markets Canada, says:“Analysis of previous technology and social media IPOs with high public profiles over the last ten years shows that, while shares have tended to get off to a strong start (even Facebook briefly traded above its IPO price on the first day), initial gains are not usually sustainable”.

So, should we expect a similar turn of events today as well? I wouldn’t jump so fast on this bandwagon of negative expectations regarding the performance of Twitter’s stocks in its first day and let me explain you why by starting my analysis from the manner I think the market will discount the stocks’ price in the near short-term.

In my opinion, there are two major factors that will have the greatest influence in the evolution of the shares’ price for now.

The present global economic outlook is the first one. Right now, the American stock market indices, Dow Jones Industrial Average and S&P 500, are at record levels. This situation is taking place after the momentum of investors sentiment shifted towards a more positive one after the US government managed to bring to an end the debt limit issue. So, even though the United States economic
indicators have shown lately a slow-down in economic growth, the investors are confident about the near future. Europe doesn’t look so bad anymore after the economic recovery seemed to have gained some momentum in the last months. European stock market indices as DAX30 or Europe Stoxx 50 are at record levels as well as the American ones.

The second one regards the basis on which investors may price Twitter’s stocks in the IPO day and in the short-term.

investazor number of twitter mothly active users

Source: http://www.statista.com/topics/737/twitter/chart/1520/number-of-monthly-active-twitter-users/

This basis of pricing would consist of fundamental analysis and market sentiment. Regarding the former, October was the busiest month for U.S.-listed IPOs since 2007, and 2013 is on track to be the best year in terms of deals and ollars raised since 2007. Moreover, Twitter’s 232 million monthly active users its growing revenue and its key place in the conversation about many public events brought a more than doubled revenue of $422 million for the nine months ended Sept. 30. Twitter is seen as ahead of rivals on mobile devices, source of more than 70% of its revenue in the third quarter.

It would appear as Twitter has the wind in its sails for its debut, but losses are growing almost as fast as revenue and user growth is slowing. The number of monthly active users grew 6% in the third quarter, compared with the second quarter, down from 7% in the second quarter and 10% in the first quarter.

Nevertheless, after revising the fundamental part I think the big picture points towards a slightly bullish perspective in the short term. However, I do not think the fundamental part is enough to have a clear idea about how the market will price Twitter in its trading debut because the company needs time to prove if it can improve its key metrics and achieve its revenues objectives in the
following period, let’s say next six months.

Consequently, my strong belief is that the market sentiment will have a greater impact on the pricing than the fundamental analysis. The hype created around the IPO was the biggest one after Facebook’s and overall I think there is a positive sentiment towards Twitter’s initial public offering of today and I expect a strong start, marking a high of 32$ as towards the finish line of the day I expect to see a retreat, closing near the IPO price, around 26$. Furthermore, in the next weeks I see Twitter trading in a price range of 23$-32$, putting it in a moderately bullish perspective.

 

The Netflix Saga, Part 2: Fundamental And Technical Analysis

Going from the business model to the key growth drivers

If in the first part we took the business model blocks piece by piece and we analyze how these make Netflix click, now it’s time to see the key growth drivers which are behind the company profitability and future prospects. These key growth drivers can be found in Netflix annual report and I am going to analyze them one by one. Also, the source of the financial numbers that I have used throughout this article is Netflix 2013 third quarter financial statements.

1. Investment In Streaming Content

As you can read in their annual report, Netflix rationale behind investing in streaming content is explained in the next virtuous cycle:

inv in stream content

In order to differentiate itself from the competition and to gain more market share, Netflix heavily invests in streaming content. Through this strategy, the company aims to keep its customers delighted and to boost both subscribers and revenue growth.

Now let’s see how investing in streaming content really turns into more customer acquisition and revenue growth and how profitable is customer acquisition relative to the revenue growth?

inv in stream content table

Comparing the results from last year first nine months to this year’s, we can observe that while additions of new streaming content spending increased by 9.54%, total streaming paid members surged by 38% and total streaming revenues saw a 40% advance. So, for every additional dollar invested in new streaming content Netflix brought in 4 subscribers more, which is a very good conversion rate and indicates that Netflix strategy, is showing great results.

2. Continuous Service Improvements

The second key growth driver rationale behind investing in improving online infrastructure is conveyed in the following cycle.

inv in service improv

Netflix efforts of improving its service are mainly directed at enhancing member’s retention and the company specifically does it by refining the user experience (i.e. minimizing loading and buffering times).

Now the question is how investing in improving user interfaces and delivery infrastructure quality turns into more customer retention and how profitable is customer retention relative to the revenue growth?

cont serv improv excel

Technology and development spending rose with 14% during the period in discussion. Taking into account the numbers from above, for every additional dollar invested in improving user interfaces and delivery infrastructure, Netflix gains 3 new customers and earns 3 dollars in total streaming revenues. This conversion rate is decent and it gives us an image of how costly is international expansion strategy because Netflix not only invests in improving user interfaces, but also in setting up new online infrastructure outside United States.

3. Overall Adoption And Growth Of Internet TV

In their annual report, Netflix notice that “domestically, cable and satellite pay TV subscribers numbers have stagnated, while DVR penetration has continued to climb”. This aspect shows that consumers want more control and freedom in choosing what, when, where and how they watch movies or TV series. Moreover, that is exactly what Netflix aims to deliver to its customers. So, this trend could go in its favor, a claim which, for the moment, is backed up by the following statistics.

Traffic Sources Mashable

A new report released by Canadian Internet monitoring firm Sandvine indicates Netflix and YouTube dominate over half of downstream Internet traffic in North America. Downstream traffic refers to data that is received by a computer or network. Namely, this includes receiving e-mail messages, downloading files, or simply visiting web pages. Basically, more than half of the US internet users visit YouTube and Netflix web sites. From this point of view, Netflix sort of crashes its direct competitors; Hulu and Amazon Prime, which have a mere 1.29%, respectively 1.61% of downstream Internet traffic and also tells us that YouTube have great potential to challenge Netflix in the near future.

4. Future Of  The Consumer Electronic Ecosystem: “Internet On Every Screen”

By making Netflix accessible on a broad spectrum of devices, the company will enhance the value it delivers to the customers and also position itself for a continued growth as Internet delivery of content becomes more popular.

int users

a Estimate. b Per 100 inhabitants. Source: Wikipedia via International Telecommunications Union

If we take a look at the global trend of internet penetration we can notice a cristal clear continuous growth in internet users numbers by region. Europe is leading the way by having a 76% rate of internet users at this moment. This is good news for Netflix as the company recently made its debut in some countries from Europe (UK, Ireland and Nordic countries) and international paid members more than doubled compared with the same period last year.

stats

Source: Wikipedia via InternetWorldStats

As the above image suggests, Central and West Europe have a major long-term business potential for Netflix as the the internet users rate is above 60%, which is the currently rate in US. So, the company could have a thriving future if they manage to capitalize on this “European business opportunity” and I will this subject on the following paragraph.

5. International Market Expansion

As you can read in their annual report, Netflix rationale behind investing in streaming content and marketing is explained by the next virtuous cycle:

inter mark expansion

Now let’s take a look at the financial part and ask ourselves how international investment in streaming content and marketing really turns into more international members and revenue growth and how profitable is an increased international market share relative to the revenue growth?

int mark expansion excel

If we are to compare additions of new streaming content and marketing spending to the international streaming paid members and international market share numbers we can infer that for every additional dollar invested in new streaming content, Netflix gained 12 new international subscribers and earned 17 dollars in international streaming revenues. Also, for every additional dollar invested in marketing, the company brought in 29 new international subscribers and gained 41 dollars in international streaming revenues. So, on average for every additional dollar invested in new streaming content and marketing, Netflix acquired 20 new international subscribers and generated 29 dollars in international streaming revenues. These are pretty profitable statistics and signals that international market expansion is the catalyst factor for Netflix future growth.

Also, the international subscribers market share accounts for more and more of Netflix total streaming members. It went from 13% at the end of September 2012 to 21% at the end of September 2013, which is a 58% growth. Hence, Netflix silver lining is international expansion and the potential is still huge and in my opinion this is the key factor which we should pay attention at to gauge the growth of its business.

Comparative Analysis

After we analyzed the key growth drivers and how are these translated in numbers and dollars, now I will make a comparative analysis. I decided to compare Netflix with one of the “hottest” internet stocks at the moment rather than with its direct competition because there wouldn’t have been basically no competition, since Netflix is by far the leader of music&video stores industry, aspect proven by the key financial statistics.

comp analysis

For my analysis I chose Amazon (Amazon Prime is a direct competitor for Netflix), Facebook, Twitter (the stock which is in the spotlights right now) and Linked In. The objective is trying to observe whether Netflix is over evaluated and if this is the case which would be the causes?

When talking about earnings per share indicator (serves as an indicator of a company’s profitability), which is the portion of a company’s profit allocated to each outstanding share of common stock, Netflix has the best reading of all five stocks with a value of 1.20$. But, an important aspect of EPS that’s often ignored is the capital that is required to generate the net income. Two companies could generate the same EPS number, but one could do so with less equity (investment) – that company would be more efficient at using its capital to generate income and, all other things being equal would be a “better” company.

This fact leads us to another fundamental indicator which I took into consideration, namely ROE (return on equity), which measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. From this point of view, Netflix has the second best ROE, behind Facebook’s and at distance in regard to the other three internet companies, making a strong case for a very good profitability rate.

Operating margin is important because it gives us an idea of how much a company makes (before interest and taxes) on each dollar of sales, so the higher the margin, the better. In this regard Facebook emerges again as the leader with a 33.52% margin whether Netflix is ranked third with a 4% rate. So, one of the challenges in the future for Netflix is to reduce the costs.

Price-Earnings Ratio is a valuation ratio of a company’s current share price compared to its per-share earnings and in general and I chose this indicator because it’s usually more useful to compare the P/E ratios of one company to other companies in the same industry or to the market in general. A high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. Amazon is by far the company from which investors are really expecting higher earnings growth in the future as its PER is 1336.67 and the sheer interpretation is that an investor is willing to pay $1336.67 for $1 of current earnings!!! Netflix is kind of in the “equilibrium” area with a PER of 291.63.

Medium-Long Term Prospects

As a conclusive sentence, I sense that in internet stocks is priced quite a decent amount of future growth expectations, especially Amazon, but overall I think Netflix is one of the least over evaluated internet stocks of the moment. What I meant to say is that future growth expectations are priced as well in Netflix stocks, but not in an exaggerated manner taking into account the potential I have outlined in the first part of the article (key drivers growth).

From a medium-long term perspective (6 to 24 months), I think Netflix has real future growth prospects and this growth I see it in relation with a solid international expansion. So, I reckon Netflix is going to have a bullish path and it will go for the 400$ level until the end of June 2014, consolidating this position by the end of 2014.

Technical Analysis And Short-Term Prospects

Technical analysis and short-term prospects

From a technical perspective, Netflix is currently riding an ascending trend which however shoes signs of weakness and a possible reversal. Decreasing volumes levels is the first factor that should gives us an warning signal, but the most powerful reversal signal comes from a bearish candle sticks formation called Shooting Star which usually announces the end of the ascending trend and the beginning of the decline. This scenario will be confirmed by a closing under the support line from 324$ on a daily timeframe. From there, possible price targets are given by the round level of 300$ and by Fibonacci retracement levels (0.382 and 0.5) at 277$, respectively 242$.

From a short-term perspective (next three months), I reckon Netflix will have a sideways movement with a descending tendency, but I don’t think it will break under the support area until February.

Why Should Apple And Twitter Stocks Be In Your Portfolio?

Why Should Apple And Twitter Stocks Be In Your Portfolio

Twitter and Apple were in the spotlight last week with the social media company rallying to the best level in a month and the smartphone manufacturer which hit the highest point in a year. The timeline of the events which led to these moves for Apple is the following:

On Wednesday, 4th of December, Apple announced the acquisition of Topsy for 200 million dollars, a company that analyzes Twitter data by allowing users to analyze millions of Twitter posts, helping them figure out trends, identify influential Twitter users and measure the effectiveness of campaigns on the social network. According to The Wall Street Journal, Topsy is one of Twitter Inc. partners that have access to all tweets since 2006.So why did Apple buy Topsy? Or, let me put it this way, why would Apple ever be interested in Twitter’s data? Because social media is kind of THE thing at the moment, could be one answer.

AppleTwitter

Remaining the top U.S. smartphone manufacturer in the October quarter, in a market where 149 million people in the U.S. own smartphones and according to comScore with a market share of nearly 41% bring me to a second answer. In a more challenging mobile and social world in which Apple’s stake is threatened by its competitors, the smartphone manufacturer made a smart move adapting to the social media business ecosystem of our days.
Who is the winner of this deal? Both of them, Apple by integrating Twitter within its own software which in turn could be used to boost Apple’s own social networking strategy and Twitter by enhancing its image of a growth company and proving it is on right path towards the profits every investor expects from the social media company.

Thursday, 5th of December, was that kind of day when you buy on the rumor and sell on the news. Following a Wall Street Journal report late Wednesday that citing an anonymous source familiar with the matter, said Apple signed a deal for Chinese telecom giant China Mobile to carry the iPhone beginning in mid-December, Apple reached a 52-week-high on Thursday as the iPhone maker’s shares rose $10.17 to $575.14.

“We are still negotiating with Apple, but for now we have nothing new to announce,” China Mobile spokeswoman Rainie Lei said, declining to elaborate. Apple also declined comment. After all, there was no deal yet and Apple ended the day with a gain of $2.90 a share, closing at $567.90.

Why it is so important that Apple make this deal? China Mobile is the world’s largest mobile-phone carrier in terms of subscribers, with more than 700 million. The move would make Apple’s latest iPhone models available to a network that has more than 700 million mobile-phone subscribers which translates into big business for the Silicon Valley-based company.

This deal is seen so important by the markets so that on Tuesday, 3rd of December, UBS analyst Steven Milunovich raised his rating on Apple to buy from neutral, and lifted his price target on the company’s stock to $650 a share “in anticipation of China Mobile” getting the iPhone. Milunovich said the Chinese government should soon issue licenses for 4G networks, leading to China Mobile adding support for the iPhone in mid-to-late December.

The interesting fact is that two days after the rating change on Apple from neutral to buy, China’s Ministry of Industry and Information Technology issued 4G licenses to China Mobile, China Unicom and China Telecom in a widely expected move. So, this China Mobile’s 4G TD-LTE license thing paves the way for offering iPhones as Apple’s latest models support the standard and also increases the chance for a deal between the two giants.

The Wall Street Journal article from late Wednesday also mentioned that the rollout of iPhones by the world’s largest mobile carrier by users is expected to start around the time of China Mobile conference in the city of Guangzhou, which takes place on December 18. Again, these are just rumors, but I can’t stop from wonder myself.

Could be China’s Ministry of Industry and Information Technology decision to issue 4G licenses for the Chinese telecom giants with two weeks before is made an official announcement regarding the deal between Apple and China mobile just a coincidence? I don’t know, but what I do know is that Apple is not dead and buried and it still has the potential to grow its business, the deal with China Mobile being just one opportunity to do that. To continue on this note, Black Friday numbers showed that the iPad was the winner of the day.

black friday breakdown

According to the market research firm InfoScout, at Wal-Mart and Target Stores the iPad Mini 16GB and iPad Air 16GB were the top sellers, various iPad products representing 18% of Target’s sales and the iPad Mini alone accounting for 6.5% of Wal-Mart’s sales on Black Friday.

Online, a research conducted by price-comparison site PriceGrabber.com also showed iPad Air and iPad Mini were the top searched items of the weekend since Thanksgiving.

All these numbers show how dominant Apple still is in the smartphone and tablets industry and prove that those who were singing the demise of this tech giant were so wrong. So, in this context, a China Mobile deal could be the thing Apple needs in order to return to the highs of 2012.

As a conclusion, Apple is gathering momentum and is a Buy for the next three to six months for a couple of reasons. From a historically-macro perspective, December is the second best month of the year for stocks and Apple should perform in line with the stock market indices which hold a 26% gain since the beginning of the year. Of course, this is not a must as the probability of tapering increased in the recent period, but the market’s reaction regarding the improving state of the American economy suggests that it takes into account a tapering, but only to take place next year, most probably in March. The other two reasons refer to holyday season spending euphoria and, of course, the possibility of the China Mobile deal, which seems quite probable to happen on 18th of December.

The timeline of the events for Twitter is the following:

On Thursday, 5th of December, Twitter product manager Abhishek Shrivastava, announced in a blog post a new feature, called “tailored audiences,” which would help advertisers find and send ad messages to “existing and potential customers” on the social network. How does this feature work? The following example from the Twitter product manager’s blog, where has been made the announcement, is aimed at understanding how the feature blends in Twitter’s micro-blogging service:

“Let’s say a hotel brand wants to advertise a promotion on Twitter and they’d prefer to show their ad to travel enthusiasts who have recently visited their website. To get the special offer to those people who are also on Twitter, the hotel brand may share with us browser-related information (browser cookie ID) through an ads partner. We can then match that information to Twitter accounts in order to show the matched users a Promoted Tweet with the travel deal. The end result is a highly relevant and useful message for the user.”

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Twitter shares rallied more than 5% on the announcement and touched 46.30$, the best level since the day after the IPO, as the new feature brings hope that San Francisco-based company will explore new ways to cash in on its huge user base of more than 230 million.

But Twitter’s “tailored audiences” new feature could spark privacy worries, which is why the company said users can opt out by unchecking the box next to “promoted content” in their privacy settings. Twitter would then “not match their account to information shared by our ads partners for tailoring ads.”

Friday, 6th of October, was a day with mixed “feelings” for Twitter. First, we found out that “cashtags” turn tweets into dollars. Celebrities and brands are letting consumers buy products or donate to their charities simply by adding a hashtag like #buy to their tweets.

But how can a simple hashtag lead to a transaction? Chirpify , a company launched last year, lets consumers sign up on its website and once customers enter their personal and credit-card information, when campaigns like Eminem’s or Lady Gaga’s launch, they can tweet, Facebook or Instagram a specified hashtag and buy items instantly.

The fact is while the tweet-to-buy concept is in its infancy, it is “a growing trend” and some companies and consumers are no doubt intrigued by this concept, but the opinions are shared. The pro’s are talking about the easiness of the service, whereas the con’s mention the privacy issues which will arrive and that it won’t work for a lot of consumers as they will be reticent in sharing their personal information so that they could buy something through a hashtag.

The controversial news of the day was the publication of the letters between The Securities and Exchange Commission and Twitter in which SEC regulators ask the company to explain its unusual patent system in the weeks leading up to its initial public offering.

To cut the story short, “In such event (one of its inventors does leave for another company and uses its patented technology to compete with Twitter), we may be limited in our ability to assert a patent right against another company, and instead would need to rely on trade secret protection or the contractual obligation of the inventor to us not to disclose or use our confidential information,” the company said.

The thing is that investors are seeing Twitter’s policy as giving engineers too much saying on patents and I think this patent controversy could be a long-term headache for Twitter if they will not take action soon. As a reaction to this news, Twitter’ shares lost 0.80$ and closed the day at 44.95$, 5 cents shy of 45$.

As a conclusion, I reassert what I said before the IPO, putting Twitter in a moderately bullish perspective and also seeing it as a Buy and Hold stock for the six to nine months. I’m saying this because Twitter is a young company with very good growth prospects so, if you’re looking for growth, go ahead and chase Twitter. Of course, fundamentally speaking, there are losses expected in 2013 and 2014 by most analysts. But, the key metrics of interest here is the 22% and 21% sequential revenue growth shown in the most recent quarters. This is a quite fast growth and it is what investors like and are betting on.