Friday 06/17/2011 – Momentum Stocks $KKD (TDC)

New 52w highs with positive sales growth:
CBOU JVA ONTY CASY BGS KKD GNC PEET TDC PFL

Biggest Daily gainers with positive sales growth:
NCT CBOU JVA GENE BWS ICGE BGS VVTV CENT UAL

The top 10 “growthiest” companies are:
ONTY GENE UAL JVA ICGE CASY TDC VVTV PFL KKD

The two charts that interest me the most are TDC and VVTV. TDC is a player in the emerging trend of “Big Data” and is competing against ORCL in that space. In the past 3 months TDC is up 15% while ORCL is only up 2.08%, TDC is up 7.2x more.

The other company VVTV operates the ShopNBC television channel where they sell jewelry, watches, cosmetics, laptops, etc. According to Yahoo, this company has had an operating loss for the past 3 years, since 2009, but the losses have narrowed from -$88.4M to -$15.4M. Profitability *may* be right around the corner. It competes against other players in the “home shopping” space like QVC (which is private) and HSNI, Home Shopping Network Inc. HSNI appears to be doing better financially as it has had an operating profit and positive net income in 4 of the last 4 quarters. However, in the last 3 months VVTV stock has increased 20.6% vs HSNI ‘s paltry 0.28% gain, VVTV is up 73.5x more. Massive over-performance against its peer.

Of these 2 companies I find TDC to be a way more attractive investment opportunity because “Big Data” is an emerging trend and there is the very real possibility that an ORCL or an IBM, a HPQ, or even a DELL could buy this “little” $9.4B company. I will listen to the conference call tomorrow and plot out its revenues, earnings, and shares outstanding & run it threw my check-list. Suffice is to say, when we can get a nice rally going in the broad market ($SPXEW S&P500 Equal Weighted) this is definitely a “go to” stock that will be on my watch list.

Notes from TDC’s Q1 – 5/5/11 Press Release:
“Teradata is off to a strong start in 2011 with first quarter revenue growth of 18%,” said Mike Koehler, president and chief executive officer of Teradata. “Corporations are faced with the challenge of managing and extracting value from data that continues to grow exponentially. In addition, the new data elements coming from sources such as web interactions, social media, mobile computing, and sensors are providing new opportunities for businesses to innovate and compete with analytics. This is placing extreme requirements on data warehouses to scale and mange complexity like we have never seen before – which is where Teradata excels

Balance Sheet –
$778M in cash & short-term investments
$300M in total debt + $300M for Aster (debt) – $280M (debt) repaid
“On Jan. 21 2011, Teradata completed its acquisition of Aprimo and funded the purchase by using $200M of net cash and by drawing-down the full $300M borrowing capacity from the Company’s existing revolving credit facility.”
“Subsequent to the end of the Q1, Teradata completed its acquisition of Aster Data Systems, Inc (Aster Data) on 4/5/2011. Teradata funded the purchase of Aster Data by utilizing funds from a new $300M long-term loan facility, which is not reflected in the Teradata’s balance sheet as of March 31, 2011.”

“Also subsequent to March 31, 2011, the Company repaid $280M of the $300M previously drawn on the revolving credit facility largely from cash collected from accounts receivables in April”

“Due to Teradata’s increased expectation for full-year revenue growth , the company now expects it will be able to more than absorb the anticipated $0.03 of EPS dilution from the acquisition of Aster Data and there is increasing its prior 2011 non-GAAP EPS guidance.”


Here is are some beautiful looking price charts:

Valutations:
Growth Rate = 12.63%
Price/Sales = 4.79x ; Price/(Sales/Growth Rate) = 3.79 (the math is 4.79/(12.63/10))
P/E = 32.25x ; PEG ratio = 2.55 (the math is 32.25/12.63)

This company is not growing at the 15% yearly clip that is my minimum growth rate for an investment; however, because of TDC’s attractiveness as an acquisition target and because it is a player in the “Big Data” trend, I will overlook this small problem. Plus business could improve in the future when it gets done integrating its 2 recent acquisitions.

P/S at 4.79x is reasonable, the 32 PE is likewise reasonable (for a tech stock), but the 2.55 PEG makes it look too expensive. I am guessing that the PEG is so high because the market expects very good news from TDC in the coming months. In any case, as long as valuations stay the same (i.e. don’t contract) and the sales & earnings grow, the stock will go higher. So “too high / too expensive” valuations are not a major concern for me. Also I am not saying here that TDC is growing faster than or is cheaper than ORCL. ORCL is a much better company in terms of financial performance. However, financials are backwards looking and can tell you only of what has already happened. The technicals on the other hand paint a clear story, in the stock market TDC is outperforming ORCL, and the broad market as a whole.

TDC is set to report earnings on 08/04/2011 BMO
ORCL is set to report earnings on 06/23/2011 AMC

Notes from the Q1 Conference Call

  • Mike Koehler, Teradata’s CEO
  • Steve Chapman, Teradata’s Chief Financial Officer
  • Darryl McDonald, Teradata’s Executive Vice President of Applications, Business Development and CMO
  • Our increased focus and investments in R&D, Consulting Services, partnerships and sales territories are helping Teradata to accelerate revenue growth and increase new account wins. New customer wins in the first quarter were the highest ever recorded during the past 10 years.
  • In addition to the 4 key growth initiatives we have been executing the past 3 years, we have now added 2 strategic platforms for future growth with our recent acquisitions: Aster Data for unstructured big data and Aprimo for integrated marketing management and applications.
  • Turning to the region results. The Americas revenue was up 22% over a strong Q1 in 2010, when revenues grew 23%. The Americas also had a record Q1 for data warehouse new customer wins. Wins included some of the largest companies in financial services, healthcare, retail and travel
  • United Airlines is replacing a large competitor’s ((could this be ORCL?)) data warehouse with Teradata to improve real-time customer interactions and enhance revenue management.
  • Upgrade and expansion activities in the Americas were particularly strong in Q1. Wal-Mart, one of our longtime, valued customers is implementing their next-generation integrated data warehouse with Teradata. Wal-Mart is partnering with Teradata to strengthen its analytic capabilities and also help meet sustainability goals, with a 50% reduction in floor space and a 40% reduction in energy consumption from our latest data warehouse technology.
  • Best Buy is upgrading their Teradata system to better measure store operations and profitability. More than 40,000 Best Buy users interact with their Teradata system, processing about 2 million queries everyday.
  • In the government sector, the United States Postal Service added dual-active capability to its integrated Teradata warehouse for their mission-critical applications. And the U.S. Navy is expanding their Teradata environment to help provide integrated insights around aircraft maintenance, flight and usage information.
  • Other expansions in the Americas included, Boeing, Discover, Ford and WellPoint in the U.S. and BBVA [Banco Bilbao Vizcaya Argentaria] Bancover over in Mexico. The Europe, Middle East and Africa region also had a good Q1, with revenue growing 18% over prior year to $125 million and up 15% in constant currency.
  • In EMEA and also on a global basis, we are experiencing good growth and financial services as marketing, compliance, risk and customer initiatives continue to fuel demand for Teradata. Expansions and upgrades in EMEA included DHL, which is integrating country-level data marts in to its growing integrated data warehouse, providing more accurate and up-to-date cost and profitability information.
  • One of the largest automobile manufacturers ((could this be Ford?)) replaced several data marts with Teradata to improve performance, reduce costs, while increasing overall IT efficiency. In the past year, they have consolidated marketing, sales, services and procurement data, and data marts. And going forward, they will be expanding into the quality and warranty areas.
  • Migros Turk, the largest retailer in Turkey, is upgrading their Teradata system to measure store profitability and more effectively adjust cost structures. Migros additionally uses Teradata for customer marketing. Other expansions and upgrades in EMEA included: Air France, Barclays, Belgacom, Nordia Group and Telenor.
  • [Re: Japan Earthquake] We did not experience any material impact to our business in the quarter. But it’s a little too early to tell if there could be an impact longer-term.
  • New customer wins in APJ included: U Co-op Federation, Japan’s second largest retail consumer cooperative, which is integrating customer information across the enterprise and improving its analytics for better customer service and profit; PT Bank Chinatrust in Indonesia and also a leading bank in Hong Kong.
  • We also saw some key communication industry expansions in the quarter. KDDI, which is Japan’s second largest telecommunications company and became a Teradata EDW customer 2 years ago, is now adding a Teradata Extreme Data Appliance to execute new and complex analytics, along with SAS on their Hadoop weblog data from mobile devices. This will enable KDDI to track and predict customer behaviors and improve their service.
  • And at SmarTone Mobile Communications, Hong Kong’s leading mobile operator, they expanded their EDW as a result of the increases in customer usage of mobile computing devices and to support their objective of providing the best network service. Other upgrades included Chinatrust Commercial Bank, Coca-Cola West Japan, Commonwealth Bank of Australia, 7card service, Shanghai Stock Exchange and Westbank Bank.
  • Looking to the future, the explosion of data will continue. IDC says this explosive growth means that by 2020, our digital universe will be 44x as big as it was in 2009. Whether data grows by 44x or 22x by 2020, it’s a lot of data that corporations will need to manage and extract value from.

22.22%     vs     22.22%
44.43%     vs     51.85%
66.65%     vs     91.35%

God is just a euphemism for the unavoidable, the undesirable, and the inexplicable. Death is unavoidable, existing for no apparent reason or purpose is undesirable, and why anything exist at all is inexplicable. That is what we mean when we say God, from one Atheist’s point of view anyways.

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