Big Tech continues to steamroll through the pandemic, and strong gains for some of the market’s most influential companies on Friday helped Wall Street close out its fourth straight winning month A sudden surge in Eastman Kodak Co.’s stock this week has turned a bunch of money-losing executive stock-option grants made in the past two years — including… Roku remains well-positioned to benefit from the cord-cutting trend, while the valuation of Roku stock is reasonable. BlackRock stock lost more than 34% – dropping from $499 at the end of 2019 to around $327 in late March – then spiked 76% to around $570 now. This implies it’s 14% higher than the start of the year. There were two clear reasons for this: The Covid-19 outbreak and economic slowdown meant that… The annual NASCAR weekend at Watkins Glen International typically draws 100,000 fans to the Twin Tiers, who spend millions of dollars in the region.
Big Tech continues to steamroll through the pandemic, and strong gains for some of the market’s most influential companies on Friday helped Wall Street close out its fourth straight winning month
Author: ABC News
Kodak’s stock surge turned executive options into huge potential payday
A sudden surge in Eastman Kodak Co.’s stock this week has turned a bunch of money-losing executive stock-option grants made in the past two years — including some made on Monday — into a sudden personal windfall for the company’s executive chairman.
This week, the company’s stock has risen to as high as $60 a share from around $2 last week. It is the latest company to capture investors’ attention as they scrabble to find winners in a volatile and often confounding market. Even companies in bankruptcy proceedings, such as Hertz Global Holdings Inc., have surged in value.
One of the largest winners from the rebound is Kodak Executive Chairman Jim Continenza, who stands to gain more than $95 million from the rebound if he exercises his options at current prices. Those paper gains would change depending on where the stock trades whenever he decides to sell his stake.
In a statement, a company spokesman said Continenza’s potential gains haven’t been realized and that Continenza, Kodak’s biggest individual shareholder, believes strongly in the company, has never sold a share of its stock and has no intention of doing so. As of late March, Continenza owned 5.8% of Kodak’s shares.
An expanded version of this report appears on WSJ.com.
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There Are Plenty of Reasons to Love Roku Stock Now
With cord-cutting showing continued strength amid the novel coronavirus and the recession, Roku (NASDAQ:ROKU) stock remains very well-positioned to benefit from that trend.
In the short- to medium-term, Roku’s financial results should also be lifted by the boycott of social media websites by some advertisers and the high ad spending to promote internet TV services, such as those of Disney (NYSE:DIS) and AT&T’s (NYSE:T) HBO.
According to a study by Roku, more than 30% of U.S. households do not subscribe to traditional pay TV services and another 25% are receiving less extensive services than previously. Nearly 50% of households in the latter category plan to eliminate their subscriptions within the next six months.
Some might say that we should be skeptical about the survey’s findings because it was conducted by Roku. But in general, the companies that provide traditional pay-TV services are reporting similar trends. For example, AT&T recently reported that its net total of premium video subscribers dropped by about 5%, or 886,000, in the second quarter versus the same period a year earlier.
Meanwhile, Comcast’s (NASDAQ:CMCSA) video residential subscriber total fell in the first quarter by a net 388,000 to 19.9 million. In Q1 of 2019, Comcast lost only 107,000 net residential video subscribers, indicating that the cord-cutting trend is greatly accelerating. And suggesting that the trend will accelerate even more in Q2, Comcast warned in April that its cable results would be further hurt by the poor U.S. economy.
Interestingly, Comcast cited the poor economy, not the lack of live sports, as the reason it expected its cable revenue to be weak going forward. And, according to Roku, less than 20% of cord cutters say they will return to paid TV when live sports return. So, it seems like the cord cutting trend is unlikely to slow greatly now that live sports have returned.
Among the gigantic companies now refusing to buy ads from Facebook (NASDAQ:FB) are Ford (NYSE:F), Clorox (NYSE:CLX), Verizon (NYSE:VZ), and Unilever (NYSE:UL). And several huge companies, including Starbucks (NASDAQ:SBUX), and Coca-Cola (NYSE:KO) have announced a hiatus on all social media ads.
After announcing boycotts of large social media websites, these huge companies will need to find ways to reach the many millions of young people who no longer watch TV on the traditional paid TV services. Roku is definitely an obvious candidate.
Roku stock should also benefit from huge increases in spending on ads by new streaming TV channels. According to a report by iSpot, online advertising spending tripled in 2019, exceeding $1 billion. Ad buys in the first quarter of 2020 also increased as the pandemic forced more people to stay home.
Since cord cutters are likely to be attracted to the new streaming services and many of them watch Roku, the latter company should be a big beneficiary of this surge.
Snap (NYSE:SNAP) has much in common with Roku; both platforms are good ways for advertisers to reach young people, and both platforms have largely avoided the political controversies that embroiled Facebook and Twitter (NYSE:TWTR).
Consequently, I believe that Snap’s better-than-expected Q2 results, including a 17% year-over-year increase in revenue, bodes well for Roku and suggests that those who are bearish on Roku’s ability to grow its ad business during the pandemic are incorrect.
Roku remains well-positioned to benefit from cord-cutting, and its results should also be boosted by the social media ad boycotts and increased spending on ads for new streaming channels. Trading at a reasonable trailing price-sales ratio of 14, Roku stock is worth buying at its current levels.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been Roku, oil stocks and Snap. You can reach him on StockTwits at @larryramer. As of this writing, he owned shares of Roku.
Author: By Larry Ramer, InvestorPlace Contributor
Why BlackRock’s Strong Stock Rally Isn’t Over Yet
The company logo above the entrance to the headquarters of the investment management corporation … [+] BlackRock on Park Avenue in Midtown Manhattan in New York, USA, 13 October 2015. BlackRock manages around 4.7 billion dollars. Photo: HANNES BREUSTEDT/dpa | usage worldwide (Photo by Hannes Breustedt/picture alliance via Getty Images)
BlackRock stock (NYSE: BLK) lost more than 34% – dropping from $499 at the end of 2019 to around $327 in late March – then spiked 76% to around $570 now. This implies it’s 14% higher than the start of the year.
There were two clear reasons for this: The Covid-19 outbreak and economic slowdown meant that market expectations for 2020 and the asset valuations in the securities markets dropped. This could negatively affect BlackRock revenues as it drives the majority of its revenues from investment advisory, administration fees, and securities lending revenue, which are charged as a percentage of Assets under Management (AuM). The multi-billion-dollar Fed stimulus provided a floor, and the stock recovery owes much to that.
But this isn’t the end of the story for BlackRock stock
Trefis estimates BlackRock’s valuation to be around $620 per share – about 10% above the current market price – based on an upcoming trigger and one risk factor explained below.
The trigger is an improved trajectory for BlackRock’s revenues over the second half of the year. We expect the company to report $15.1 billion in revenues for 2020 – around 4% more than the figure for 2019. Our forecast stems from our belief that the economy is likely to open up in Q3. Further, the rally in the securities market, after a multi-billion dollar fed stimulus in late March, has improved the asset valuations. This is beneficial for BlackRock as it charges its fees revenue as a percentage of Assets under Management (AuM), which constitutes a significant chunk of its top line. The company has also benefited from positive net-inflows – around $100 billion in the second quarter of the year, and the momentum is expected to continue in the coming months. Additionally, easing of lockdown restrictions in most of the world is likely to help consumer demand, benefiting the overall business scenario. Overall, we see the company reporting an EPS of around $29.30 for FY2020 – slightly higher than the year-ago period.
Thereafter, BlackRock’s revenues are expected to further grow to $16.1 billion in FY2021. This is likely to translate into higher adjusted net income, which coupled with lower expected share count due to stock repurchases, will lead to an EPS figure of $32.05 for FY2021.
Finally, how much should the market pay per dollar of BlackRock’s earnings? Well, to earn close to $32.05 per year from a bank, you’d have to deposit about $3500 in a savings account today, so about 110x the desired earnings. At BlackRock’s current share price of roughly $570, we are talking about a P/E multiple of around 18x. And we think a figure closer to 19x will be appropriate.
That said, asset management is a risky business right now. While growth looks possible, change in current market sentiment can hurt the near-term prospects. What’s behind that?
BlackRock is the world’s largest asset management firm, with Assets under Management of almost $7.4 trillion (as on 31st December 2019). The company’s business model is very sensitive toward movement in asset prices. While the broader markets are on a growth trajectory (up 45%) since the March 23 low, any further deterioration in the economic condition or a sudden uptick in coronavirus cases can reverse the momentum. This could hurt BlackRock’s revenues due to a drop in asset valuations driven by net market losses.
Something similar is visible across BlackRock’s peer – Morgan Stanley. Its asset and wealth management arms have seen an increase in Assets under Management (AuM) over the last two quarters, and we expect the bank’s AuM to grow in FY2020 as compared to the previous year. Overall, Morgan Stanley’s stock currently has a stock price of around $51 but looks slated for an EPS of around $5.02 in FY2021.
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Finger Lakes Region feels financial ripple effect of NASCAR pullout
- The annual NASCAR weekend at Watkins Glen Racetrack attracts up to 100,000 people to the region.
- The loss of the event this year could cost millions of dollars in merchant sales and tax revenues.
- Local businesses and tourism agencies are focusing on attracting visitors from closer distances with a variety of smaller events and activities.
Jim Guild recalls the first time Watkins Glen International hosted a NASCAR race.
Like many business owners, Guild, who owns Famous Brands, 412 N. Franklin St. in Watkins Glen, looks forward to race weekend every year, as thousands of fans flood the region and spend money while they are in town.
This year, that cash injection will be gone, as NASCAR decided to move the Go Bowling at The Glen event, scheduled for the weekend of Aug. 13 to 16, to the Daytona International Speedway road course in Florida.
The change was made due to COVID-19-related health regulations, NASCAR officials said.
The effect of that loss will go beyond what people might have spent during the actual race weekend itself, Guild said.
“The economic impact is huge. It’s a heck of an advertisement to have that race here,” he said. “The first year they had it in 1986, I talked to a guy who before the race didn’t even know what the Finger Lakes was. But he was up here (visiting) on the Tuesday after the race.”
The annual NASCAR race weekend typically attracts up to 100,000 people to Watkins Glen in August.
It’s the biggest event of the year at Watkins Glen International and one of the major events in New York state.
The NASCAR weekend also generates an estimated $50 million in revenue for the region, according to Schuyler County Administrator Timothy O’Hearn.
The loss of such a big attraction will also have a direct impact on the county’s finances, O’Hearn said.
“The loss of NASCAR plus the loss of state aid plus a drop in tourism, it’s been a perfect storm for us,” he said. “It’s impossible to replace the loss of NASCAR. It could result in 20% of our revenue, as much as $2 million, in direct sales tax loss. We’re most dependent on tourism and its impact on our economy.”
It isn’t just Schuyler County and Watkins Glen that will feel the pinch.
The City of Corning also relies on tourism as a major driver of its economy, thanks to attractions such as the Corning Museum of Glass and Rockwell Museum.
NASCAR weekend is a big contributor to that mix, and without it, merchants will lose out on a lot of potential business, said Coleen Fabrizi, executive director of Corning’s Gaffer District.
“Our hotels are among the hotels that sell out for NASCAR weekend,” Fabrizi said. “Many (fans) have fallen in love with our downtown. They take time to shop and dine locally.”
NASCAR provided economic benefits to multiple surrounding counties, as thousands of fans book hotel rooms, dine at restaurants and shop at businesses within a 50-mile radius of Watkins Glen Racetrack.
“NASCAR weekend traditionally generates a hotbed of activity here locally in Chemung County, with tremendous economic impact in the hospitality industry as well as through activity at the Elmira Corning Regional Airport, local restaurants, retailers, and other service industries,” said Kamala Keeley, president of the Chemung County Chamber of Commerce.
“Watkins Glen is one of the most popular locations for NASCAR and the races are a sellout event, generating significant sales tax and room tax,” Keeley said.
“Although we understand moving the race to Daytona this year was a necessary decision given the current circumstances, it’s no doubt our entire region will be missing that annual boost to local economies.”
The loss of NASCAR and its accompanying revenue stream creates challenges, but not insurmountable obstacles, local officials said.
For example, The Gaffer District is focusing on hyper local promotions, Fabrizi said.
“We don’t have the number of tourists coming to town that we typically have. That’s not going to change,” she said.
“We really need to make sure our downtown is set up so people can feel safe when they come downtown to spend money. If people don’t feel safe, whether they are tourists or residents, they aren’t going to come. We have to take full advantage of good weather while we have it.”
Related:After coronavirus halt, Finger Lakes tourist attractions eager to get visitors back on the road
Another big tourist draw in the Finger Lakes Region is its network of wineries.
The loss of NASCAR’s huge draw will be a blow, but wineries are already adjusting to life under the COVID-19 pandemic, and will continue to evolve as conditions change, said Brittany Gibson, executive director of the Seneca Lake Wine Trail.
“Wineries have found a way to get creative about their tasting experiences and in many ways, it’s even better than it ever has been. Visitors are loving the low-key, relaxed atmosphere and the ability to sit and enjoy their wines,” Gibson said.
“Wineries have also added cheese and charcuterie boards, light snacks, and in some instances, more substantial food pairings to go with their tastings,” she said. “All of this actually offers an improved experience than the ‘old’ model. We will continue to take this approach going forward — positivity and flexibility.”
The key word is “re-imagining,” said Michael Hardy, president of the Watkins Glen Area Chamber of Commerce, who started his new position in the middle of the pandemic.
“I hope to be one of the community leaders that try to help people re-imagine what can be done, and though it’s discouraging, I want to be optimistic,” he said.
“We’ve all been surprised with the number of people who have been coming from New York, Buffalo, Rochester. It’s not to the level (that NASCAR brings) but I know there will be a ripple effect. I’m still hopeful.”
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