netflix earnings

NFLX Crushes Subscriber Growth Estimates Again and Continues Focus On International Content

Netflix earnings announcements have proved to be the gift that keeps on giving as they continually smash already high estimates for subscriber growth — both domestically and in important international markets  — and the company pursues its quest to take over the world of streaming video entertainment. The streaming service added 5.46 million international subscribers and 1.96 U.S. subscribers on consensus estimates of 4.9 and 1.45 respectively.

We analyzed the call using an earnings transcript sentiment report from Sentieo (get the full report here). As in previous earnings calls, Netflix management discussed its continuing focus on original international content throughout yesterday’s earnings call, particularly mentioning Brazil (one of the important BRIC markets for large scale subscriber growth).

The report also provided the top keywords that have come up in the Netflix transcripts historically, which you can see below:

Transcript sentiment netflix
Top Keywords – Netflix Transcript

With mentions of “Brazilian” and “Portuguese,”  it was easy to guess Netflix’s future content plans. This is also Netflix’s first discussion of M&A in a long time, which is significant for a company that has not historically been acquisitive. They’ve also discussed key original content across different international markets: Dark (Germany), Casa De Papel (Spain) and Luke Cage (US).

To pull your own Transcript Sentiment reports for Netflix and any other ticker, sign up for a free trial of Sentieo here.

crypto interest rates Sentieo

From Crypto to Interest Rates: A Sentiment Analysis of Q1 2018 Earnings Calls

Today we’ve published our second Sentiment Analysis Report, which summarizes last quarter’s top keyword searches and provides detailed sentiment analysis across all industries. We used Sentieo’s brand new Transcript Sentiment Analysis feature to analyze earnings call transcripts and discover which topics companies discussed the most last quarter, versus the same quarter in 2017. (See our previous report here).

We also compared the sentiment of management and analyst sections of transcripts, and graphed these data points so you can easily see trends or discrepancies between the two. We publish these reports every quarter, so you can stay updated on information that could impact your investment decisions this year. Here are some interesting themes that came up in our research:

 

Sentiment Analysis

Management versus investor sentiment is diverging.

Our sentiment analysis on transcripts shows that a decoupling is taking hold between the language from company management and market participants. Management continues to be upbeat during earning calls and presentations, while sell-side analysts and investors are taking a more cautious stance. To learn more, download the full, free report.

 

Keyword Mentions

Two substantial highlights from the various themes we cover in this report are related to cryptocurrency and Trump.

While mentions of crypto have continued to ramp up, two companies in particular had a surge in references: IBM and Overstock.com.

IBM, with its Watson program and early involvement in the emerging fintech scene, is a recurring leader in the category. What’s new is that as concepts are maturing, bigger and more influential ecosystem players are now making moves: IBM recently revealed that it has been meeting with executives from commodities trading platforms, large corporations, and perhaps most importantly, central banks, to explore cryptocurrencies and blockchain in their operating models. (CoinDesk)

Overstock.com also made the headlines as possibly the first $1bn+ listed company dipping into crypto funding with an ICO (Initial Coin Offering). The stock fell sharply year to date (-40%), in part in reaction to the Securities and Exchange Commission starting an investigation on Overstock.com’s subsidiary that did the ICO. (Investopedia)

With this report, we are starting down the path of quantifying linguistic data. This report is a real use case of the exciting new features we recently released, like our Transcript Sentiment Report function, which is part of Sentieo Document Search.

Below is a sneak peek of the report: a sample page about the information technology sector.

To learn more about the companies, industries, and regions where crypto and other themes are being most discussed, download the full report, which covers this sector and many more. To find out more about how to run your own sentiment analysis with Sentieo, sign up here for a free trial.

 

Sentieo Announces $6M in First Institutional Round of Funding Led by Clocktower Ventures and Long Focus Capital

SAN FRANCISCO, March 27, 2018 – Sentieo, the next-generation financial research platform, today announced $6 million in funding led by Clocktower Ventures and Long Focus Capital. They are joined by angel investors including former Thomson Financial CEO David Flaschen, StockTwits Founder Howard Lindzon, Adobe CPO Scott Belsky, Moat President Aniq Rahman, and several top executives from leading investment managers. The funding follows a year of exponential growth for Sentieo, where the company tripled its client base and more than doubled its employee count. Building on this momentum, Sentieo will use the new capital to expand its platform offerings and accelerate global growth.

“As former financial analysts ourselves, Sentieo was born out of a very personal need for better tools to aid investment decision-making and Alpha generation,” said Alap Shah, CEO and cofounder of Sentieo.

“We applied our own experience to create a unique, multidimensional solution that provides clients with the powerful and intuitive tools that they need. This latest round of funding positions Sentieo to continue building out the platform, while further accelerating growth.”

Read the full press release here.

Analyzing Promotional Activity in the Sportswear Industry with Alternative Data ($NKE, $UA, $ADS:GR)

The global sports industry is huge, estimated to be around $1.3 trillion. Within sports, the sportswear market is a great place for investors looking at strong brands in a large and growing market.

Recently, the sportswear industry has seen a rise in promotions and discounting activity, as have other segments of the retail industry. A combination of factors such as a decline in tourist spending, slowing foot traffic and a negative consumer spending environment has affected the majority of companies in the space, limiting their growth potential and pricing power. These headwinds, together with the companies’ aggressive expansion plans and excess inventories (as is the case for Under Armour and, in part, Nike), has triggered a rise in promotional activity by many players.

In order to understand the current status of inventories in the industry and to verify the balance between supply and demand, it’s necessary to understand how promotional activity is evolving.

Sentieo’s Mosaic product allows investors to get a clearer idea of how promotional activity is evolving in the sportswear and athletic footwear markets by looking at alternative data, giving analysts a view into the current sources of pressure on gross margin.

Using Twitter Mentions, we can build queries to track the number of mentions of any word or combination of words. Twitter is one of the most important social media networks for businesses, and every brand and third-party retailer in the sportswear and athletic footwear industry promotes on the platform. Let’s go directly into the chart below to see how Nike’s promotional activity has evolved over the past three years.

Sentieo nike promotional activity

The chart shows the 30-day moving average for the number of Twitter mentions for promotional activity, including phrases such as “Nike discount,” “Nike 30% off,” “Nike clearance,” and so on. We can see that promotional activity was particularly intense between 2015 and 2016, but declined substantially in more recent times. It has been very slow since the beginning of 2018, reaching a four-year low.

Now that we have an idea of how Nike’s promotional activity has trended, let’s look at Adidas. Adidas is Nike’s main competitor, and its successful expansion strategy for the past few years has diminished Nike’s market share and created more opportunity for other smaller competitors. It has limited the American giant’s growth both internationally and in the domestic market. As we can see in the chart below, Adidas’ discounting mentions were lower during the high-growth phase between 2015 and 2016, while Nike was facing strong competitive pressures and engaged in more aggressive promotion. The situation has changed in the recent past, with Adidas’ promotional activity increasing significantly in 2017 and remaining a bit higher than it was in 2015/2016.

Sentieo Adidas

The data clearly shows that the situation has reversed in comparison to last year, and the Adidas brand, for one reason or another, has shown an increase in promotional activity, while Nike has moved in the opposite direction.

Let’s look at another interesting name in the industry: Under Armour. Under Armor has enjoyed years of aggressive expansion with revenue growth rates around 27%-32%, some of which can be attributed to the increasing popularity of its endorser, basketball star Stephen Curry. However, the growth rate plummeted from 21.8% in 2016 to just a bit above 3% in 2017.

Sentieo Under Armour

 

Under Armour’s aggressive expansion plans backfired and a strong imbalance between supply and demand generated a steep increase in inventory levels, which reached 23.3% of revenue at the end of 2017, compared with 19.7% in 2015 and 17.4% in 2014. It shouldn’t be a surprise that promotional activity skyrocketed in the second half of 2017, which was a necessary response to the alarming rate of inventory build-up. The chart below shows that mentions of promotional activity reached a historical high in December 2017.

Sentieo Under Armour promotions

Sentieo’s alternative datasets have allowed us a unique view into key industry dynamics like promotional activity, one of the primary drivers of margin pressure in the sportswear industry.

Investors and analysts should take these insights into account when they assess the attractiveness of the aforementioned stocks; datasets like Twitter mentions can definitely shed light on the probable direction of margins.

While we were looking at promotions, we looked at alternative data to forecast Nike’s next quarter using Google Search Trends data. Google Trends tends to lag Nike’s revenue growth by about a quarter and recent trends seem to indicate that they make not make the growth target for next quarter. It’s still early, however, and the most recent month of data has not fully come in yet.

Nike Sentieo

Search of the Month: Retail Same Store Sales Breakdown

This is the second in our Search of the Month series. Check out the first article here! E-mail us at hello@sentieo.com with powerful searches that you think should be featured.

If you’ve ever tried finding details of revenue growth drivers for companies in the restaurant or retail space, you may have found it difficult. That’s because this information is not broken down in GAAP metrics or other standardized financial reporting, but it tends to be discussed in quarterly earnings calls.

Normally, an analyst would need to listen to the call or dig through the transcript looking for these numbers, but using Sentieo they can find it with a simple search and save it for later use.

There are components to retail sales growth that are typically discussed on earnings calls:

(1) Opening more stores and (2) comparable store sales, which breaks down into:

a. Selling more at existing stores (more transactions)

b. Increased pricing per unit (higher average ticket size)

We opened up DocSearch and entered the following query: transactions NEAR10 OR(increase decrease). This brings up references to increasing or decreasing transaction volume along with synonyms. We used NEAR10 because the word transaction might be before or after the indicator of change and might not be right next to it.

We narrowed down our search to mentions within earnings call transcripts:

Sentieo

Then we also filtered down by sector:

Sentieo

We got some interesting results. We found Floor and Decor Holdings (FND), whose team had their Q4 2017 earnings call a couple weeks ago.

Sentieo

Their call included the following mentions of transaction growth:

Sentieo

The quote above tells the following:

  • Comparable store sales increased 16.2%
  • Comp increase was driven largely by transaction growth (more transactions)
  • Transactions increased for the year
  • Average ticket size increased for the year (Prices increased)

It would have been difficult to have found this information outside of Sentieo, but we found it in seconds, with just a few clicks.

The Habit restaurant chain reported earnings on 2/28, and provided even more detail:

The comparable store sales decline of 1% was broken down into a transaction (traffic) decrease of 3% and an average transaction amount increase of 2%.

Searches like these can help you quickly isolate the important information you need and incorporate it into your research without spending extra time poring through documents.

Advanced User? Try These Queries for More Focused Results

If you’re an advanced Sentieo user, you can make this query even more precise by removing synonyms of increase and decrease that could produce false positives for this search. Normally, you would use quotes (“increase”) to search for exactly those words and exclude synonyms, however, this would also exclude stemming, which is helpful for this case. Stemming allows you to not only search for a specific keyword, but also to find the variations of the stem of the keyword. Using our example above, let’s say we want to search all variations of the word increase, such as increased, increasing, increases, but not improve, higher, or growth. To include these words, we’ll need to put carets in front of the main stem keyword instead of putting quotation marks around it (^^increase). These will turn off synonyms but leave on stemming.

The final search would be: transactions NEAR10 OR(^^increase ^^decrease)

Sentieo notebook conferences

Sentieo’s Guide to Conference Season

As earnings season winds down, equity analysts start thinking about investment bank conferences and upcoming meetings with management. While the largest concentration of conferences happens in July and September, conference season happens year-round, so we thought now would be a good time to share our guide.

As conference season begins, you’ve got a lot on your mind. You and your team are getting ready to catch a flight, prepping for multiple days of back-to-back meetings. You want to be as prepared as possible, to ensure that you get the most out of your time away.

As former analysts, we’ve been in your shoes, so we put together a quick guide to help you out.


Get Mobile

When you’re on the road, your mobile device is your best friend. Don’t miss anything while you’re gone; use a mobile cloud software that allows you to review documents and financials while traveling — anywhere, anytime.

Reference financial data and prior conference transcripts on your tablet and phone during meetings with management, so your questions are sharp and you get the most out of your meetings.

With mobile access, you won’t fall behind if you’re away from an onsite data terminal. (And try not to forget your phone charger at home).

 

Prep Your Questions

Prepare and store your questions for conference meetings within a system that you can access while you’re in the meeting room, ideally from your mobile device. You’ll need a mobile app that stores any notes made by you or your team.

As the meetings occur, keep organized and also take notes within your mobile app. Tag them by ticker, topic, or your own keywords for easy retrieval after the trip.

Use note templates to have your questions ready and make sure you capture all the necessary information. Check out this example in Sentieo:

Go to your Sentieo Notebook, and choose your pre-made note template.

Sentieo template notes

 

Add your notes for the meeting, and save with the appropriate tickers and tags, for easy retrieval when you get back to the office.

 

Here are some topics you may want to ask questions about:

  • Emerging competitors 
  • Competitive positioning
  • Organic growth
  • Key drivers of standard and one time costs
  • Capital allocation
  • Capex
  • M&A
  • Dividends
  • Buyback
  • Problem areas/weaknesses the company is facing
  • Plans for raising capital

 

Collaborate with your team in real-time, whether or not they are at the conference, to ensure that you maximize the value of your meetings.

Add images from presentations that haven’t yet been released publicly directly in your notes so you don’t lose them.

 

Listen Carefully and Read Management’s Body Language

Management presentations will typically seem optimistic, but look for clues and ask tough questions to get to key nuggets of information. Try to scope out and take notes on indicators such as:

  • Management speaker confidence
  • Openness about risks (generally thought of as a sign of genuine enthusiasm)
  • Covering one’s neck (i.e. subconsciously seeking to protect a vulnerable part of their body) is a sign of discomfort, as is adjusting a tie, loosening a collar, or rubbing the forehead.
  • Executives who are uncomfortable with what they are saying often use “distancing language,” changing pronouns from “I” and “we” to “the company.”

Some other things to look out for in management presentations:

  • Comments on liquidity: trends in cash flow (or lack there-of) on balance sheet
  • Use of credit lines (are they too dependent on these?)
  • Press activity (press releases, PR firm hiring, poaching talented executives, new product announcements, focus on research and development, or R&D)

 

Network

When there’s downtime, talk to people from other teams and make friends. Your conversations could spark an idea, or you could make a valuable connection.

 

Investment Bank Conferences in 2018:

We compiled a list of webpages with the dates for investment bank conferences, below for your reference. There are a few large banks (Goldman Sachs, Morgan Stanley) and smaller firms that do not have lists, but this should help you make sure you don’t miss any upcoming conferences.

 

Keep organized, and enjoy conference season!

 

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Sentieo Named 2018 HFM Best Fintech Provider to Hedge Funds

HFM Award SentieoLast night at the Yale Club in New York, Sentieo was presented with the 2018 HFM U.S. Hedge Fund Technology Award for Best Fintech Provider to Hedge Funds. Arib Rahman, VP of Product at Sentieo, proudly accepted the award for the team.

According to HFM, the HFM US Hedge Fund Technology Awards recognize IT and software providers serving the hedge fund sector that have shown exceptional customer service and innovative product development over the past year. Sentieo has demonstrated excellence in the following:

  • Customer acquisition and satisfaction
  • Revenue growth
  • Brand development
  • New product development
  • New thinking and innovation

Alap Shah, the CEO of Sentieo and a former equity investor himself, stated: “We’re honored to be awarded by HFM and are excited to continue delivering a comprehensive product for equity investors that includes easy document search, alternative data, collaboration, and many other cutting edge features that they want and need —in order to be efficient and ultimately more successful.”

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Sentieo Earnings Guide Part 2: Using Alternative Data to Predict This Week’s Earnings Announcements

Note: The content of this post references an opinion and / or is presented for product demonstration purposes. It is provided for information purposes only. It does not constitute, nor is it intended to be investment advice. Seek a duly licensed professional for investment advice.

As earnings season continues into another exciting week, the Sentieo team has been making their predictions about earnings using alternative data from Sentieo Mosaic. The team accurately predicted the Netflix, Snapchat, Twitter, Skechers, and GrubHub beats, and in Part 2 of our guide, we will be sharing our thoughts on Trupanion (TRUP) and Hubspot (HUBS).

Our Methodology: Why Does This Data Predict Earnings?

In the graphs below, we are presenting Quarterly YoY growth in Google Trends, Website Visits (Alexa Panel), and Twitter Mentions. In all cases, we have compared the data against quarterly revenue growth. Alternative datasets like these are offered in the Sentieo platform and can provide an edge in analyzing consumer-facing businesses, as they often have a high correlation with revenue growth and are available ahead of traditional financial metrics for the period. As consumer behavior shifts more and more towards digital, indicators like these have become more predictive of tech and consumer company results. Below each chart is a link to the interactive version of the graph.

About Hubspot (from Sentieo’s Equity Data Terminal)

Hubspot

Prediction: $HUBS – 2/13 AMC – Beat and Raise

Sentieo

Interactive Chart

Consensus revenue growth expectations (dotted black line) are calling for revenue growth decelerations for Q4 (ending 12/31) and Q1 (ending 3/31). The Sentieo Index (blue), however, is showing a slight acceleration in Q4 and is showing a continued acceleration based on quarter-to-date data for Q1. This suggests a potential beat-and-raise for HUBS this afternoon.

About Trupanion (from Sentieo’s Equity Data Terminal)

Trupanion

Prediction: $TRUP – 2/13 AMC – Beat

trupanion

Interactive Chart

YoY Google Trends (green) has shown a decent correlation to Revenue Growth (black) over past twelve quarters while Twitter Mentions (blue) has correlated a little bit better over more recent quarters. Consensus expects revenue to see a large deceleration for Q4 (dotted black line).

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Sentieo Earnings Guide Part 1: Using Alternative Data to Predict This Week’s Earnings Announcements

Note: The content of this post references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

With earnings season in full force, the Sentieo team has been making their predictions about the earnings announcements from major companies, using alternative data from Sentieo Mosaic. The team successfully predicted the Netflix and Snapchat beats, and in this report we will disclose our thoughts on TWTR, SKX, SODA, and GRUB.

Why does this data predict earnings?

In the charts below, we are presenting Quarterly YoY growth in Google Trends, Website Visits (Alexa Panel), and Twitter Mentions. In all cases, we have compared the data against quarterly revenue growth. Alternative datasets like these are offered in the Sentieo platform and can provide an edge in analyzing consumer-facing businesses, as they often have a high correlation with revenue growth and are available ahead of traditional financial metrics for the period. As consumer behavior shifts more and more towards digital, indicators like these have become more predictive of tech and consumer company results.

Below each chart is a link to an interactive version of the graph.

Twitter ($TWTR) – 2/8 Pre-Mkt – Revenue Beat

twitter1

Interactive Chart

After years of struggles, Twitter finally seems to be taking the steps it needs to come into the modern era and properly engage and monetize its massively unique user base and content. By increasing character limits, improving navigation, driving more usage through better notifications and alerts, and by focusing more on video, Twitter is growing DAUs and revenues again. The stock has surged recently but there appears to be much more upside. Website Visits to twitter.com  (Total Visits = red line) have shown a strong relationship to TWTR’s revenue growth (black line) historically. The website visits data is pointing to a meaningful acceleration for FQ1 (12/31) while Street estimates are not.

Skecher’s ($SKX) – 2/8 Pre-Mkt – Revenue Beat

Sentieo Skechers

Interactive Chart

Google Trends searches for Skechers (green line) and Website Visits to skechers.com (red line) have accurately signaled major inflections in $SKX’s revenue growth (black line). The Google Trends data, which has the best correlation, is calling for a huge acceleration in FQ1 (12/31). However, the FQ2 (3/31) Google Trends data (based on 4 weeks of data) is signaling a very large deceleration.

When you peel back the onion, you see that this is a tale of two geographies. The international business has driven all of the recent growth acceleration, while the U.S. seems to be off to a bad start in FQ2 (see below).

Interactive Chart

If we overlay international wholesale revs, we can see that the Street is way too low on the international business:

Interactive Chart

While the U.S. side is off to a tough start to 2018, we think the biggest point of surprise on the print will be the massive reacceleration in international during FQ1, and the likely improved FQ2 guidance for international.

Overall, we expect a beat on the upcoming earnings call as laid out in detail in our recent blog post.

GrubHub ($GRUB) – 2/8 (9AM CT) – Revenue Match/Beat and Raise

grub

Interactive Chart

$GRUB’s YoY Website Visits (Alexa Panel- red line) have shown a strong relationship with revenue growth (black line). The website visits data has also moved in the same direction as revenue growth and agrees with consensus expectations for an acceleration for the 12/31 quarter. So far in the next quarter, the data is continuing to accelerate with consensus revenue estimates expecting a deceleration, signaling a potential change in guidance coming on the call.

SodaStream ($SODA) – 2/14 (Pre-Mkt) – Revenue Beat and Raise

sodastream

Interactive Chart

YoY Google Trends searches for Sodastream (green line) have moved in the same direction as revenue growth (black line) during each of the last 6 quarters. Google Trends and Consensus Revenue are in line for FQ1 (12/31) but are massively diverging for FQ2; this suggests a likely beat and raise for the quarter.

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Is Skechers (SKX) Management Guidance Too Conservative?

Skechers USA (SKX) is a lifestyle and performance footwear brand that was founded in 1992. We looked at Skechers’ recent performance using Sentieo Mosaic to assess how they will perform on their next earnings call on Thursday of this week.

SKX started off with a strong rally in October that included an earnings beat and raised guidance. However, Skechers still hasn’t gotten the deserved love from the market yet.

SKX trades lower than its peers, both in the shoe segment and in the athleisure industry, trading at just 9.5x full-year EV/EBITDA, quite a low multiple compared to its closest peers. The chart below plots 2018 CY EV/EBITDA vs. 2018 CY Revenue Growth, showing that Skechers is not getting the multiple it deserves based on revenue growth.

Skechers Revenue Growth vs Multiples

The Street seems to doubt Skechers’ profitability since margins have been a bit volatile in the past. It seems that the market has only started to recognize Skechers’ growth recently, after seeing the better-than-expected operating margins last quarter. Skechers operates in a segment of the footwear market that doesn’t give the company the pricing power and margin stability of a market leader like Nike.

In any case, as the most recent earnings release showed, the Street didn’t properly forecast Skechers’ operating margins. Analysts questioned the company’s ability to deliver necessary operating leverage while the domestic market was showing signs of uncertainty. Operating margins were roughly a 20% beat over analyst estimates, and only part of the better-than-expected EPS was a result of a more favorable tax rate.

The strong rally during the past few months was bolstered by the buzz around Trump’s tax reform and the positive effects that a lower tax rate would potentially have on Skechers’ bottom-line. However, it seems that the market has failed to keep up with the pace of Skechers’ improving fundamentals.

The black line in the chart below shows the YoY revenue growth, with the solid part showing and actuals and the dotted part showing analysts’ expectations. The Sentieo Index (which includes alternative data sets such as Google Trends and Twitter) demonstrates Skechers growth potential (dashed blue line), while Wall Street has very low expectations for revenue in the next few years, forecasting a significant deceleration (again, dotted portion of the black line). Analysts haven’t adjusted their expectations enough, and it’s likely that a big revenue beat is coming both in Q4 and in the following quarters.

Sentieo Index vs Revenue YoY

Wall Street continues to be skeptical about Skechers’ acceleration, despite underestimating Skechers’ revenue growth for four consecutive quarters and getting the margin picture completely wrong. Analysts also don’t seem to understand that Skechers’ management is offering particularly conservative guidance numbers, and has been mentioning better-than-expected results for a while.

In Q2, the management offered the following guidance:

Management Guidance – Q2

Both revenue and EPS were far above those levels, surpassing the higher end of the management’s guidance.

Something similar occurred in Q2, when revenue growth definitely surpassed the upper end of the management’s guidance. In the excerpt below, management highlights that the results were well above their own expectations:

Skechers Transcript – Sales

Perhaps management wants to set expectations low, or perhaps they have actually underestimated the sales acceleration. In any case, it’s probable that they have undervalued the potential growth in Q4 just as they did for the previous two quarters.

With sales guidance for Q4 at $860 to $885 million, the implied Y/Y growth rate would be between 12.5% and 16%, basically just in line with Q3’s growth rate even if we use the higher end of the guidance range.

The Sentieo index tells us something different. Since management has provided its guidance, the index has significantly accelerated, showing a strong confidence in Skechers. The guidance for Q4 was provided just before an inflection point of strong acceleration, shown by the Sentieo index dotted line below:

Sentieo Index and Guidance

 

We’ll be tuning into the earnings call on Thursday to see if Skechers has underestimated their performance again. To continue tracking SKX, and to study other tickers using our alternative dataset tools, sign up for a free trial with Sentieo.

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