In today’s briefing:
- Microsoft’s Activision Acquisition Is a Stupendous Deal
- Microsoft – Thinking Through the ATVI Acquisition Further
- Silver’s Bullish Break
- Teladoc (TDOC US): Membership Add and Expanding Product Penetration to Drive 25–30% Top Line Growth
- U.S. Equity Strategy: Market Sending Mixed Signals; Stick With Value; Energy Stocks Highlighted
- Review of Current Short Ideas
- The Nightcap from SPAC Track
Microsoft’s Activision Acquisition Is a Stupendous Deal
- A blizzard of cost synergies we conservatively estimate at $500MM from lower distribution commissions, hosting costs, and cutting ATVI’s highly paid C-Suite.
- Multiple strategic benefits: Catalyzes Microsoft’s XCloud streaming game service and Game Pass subscription offering….potentially offers greater leverage for app store negotiations with Apple and Google.
- Accretive on valuation alone…MSFT is paying a 10% discount to ATVI’s 23x average forward PE from last few years. MSFT’s 11x forward P/S vs. ATVI’s 5.5x revalues ATVI’s revenues 2x.
Microsoft – Thinking Through the ATVI Acquisition Further
- Our initial thoughts on Microsoft’s bid for Activision Blizzard were on the sceptical side given various signs of trouble at the company.
- In contrast the majority of commentary on the deal has been somewhere between positive and euphoric though there are monopoly concerns from customers.
- Yet the more we examine the implications the less we like this deal for Microsoft.
Silver’s Bullish Break
- Silver’s rally through& close above $23.43 amounts to a bullish break which should open the way for a move to at least the 200 day moving average, currently at $24.63.
- The more important level from a medium term perspective is $25.40
- What is quite note-worthy is that the recent rally came on a day when the USD was higher
Teladoc (TDOC US): Membership Add and Expanding Product Penetration to Drive 25–30% Top Line Growth
- Teladoc Health, Inc. (TDOC US), the whole-person virtual care industry leader in scale, clinical breadth, and outcomes, reported 70% revenue CAGR over the last three years.
- The company expects 25% annual expansion in revenue per member, which together with 1–5% per year growth in membership will lead to 25–30% revenue CAGR during 2021–2024.
- Teladoc has a strong growth opportunity amid a large TAM of 298 million total insured lives in the U.S., of which the company has penetrated just 30%.
U.S. Equity Strategy: Market Sending Mixed Signals; Stick With Value; Energy Stocks Highlighted
- The market continues to send a mix of risk-on and risk-off signals, though most of the risk-on signals are centered around value Sectors.
- Value Sectors such as Energy, Financials, Manufacturing/Industrials, and Materials are currently our favorite areas for investment, and also Consumer Staples.
- Some of our big picture supports are being violated, including the Russell MicroCaps (IWC) which is breaking below $134 as the Russell 2000 (IWM) tests support at $207.50-$208.
Review of Current Short Ideas
- This presentation runs through six current short ideas presented on a Smartkarma webinar on 22nd December.
- These are: Atkore (ATKR), Danaher (DHR), Service Corp International (SCI), ABM Industries (ABM), Monro (MNRO), and Renewable Fuels (REGI).
- The presentation also summarizes Two Rivers’ short idea generation process.
The Nightcap from SPAC Track
- Social Capital Suvretta Holdings Corp. III (DNAC: no warrants, common +0.01%) & ProKidney
- Vishal Garg, founder and CEO of digital mortgage lender Better, [merging with Aurora Acquisition Corp. (AURC)] is staying on as CEO
- Shares of SoFi rallied as more than 16% in after-hours trading on Tuesday following news that the fintech cleared its final regulatory hurdle in becoming a bank.
Before it’s here, it’s on Smartkarma