Wednesday, February 10, 2016

Zynga: Don't Fear Q4 Earnings Release

  • Zynga plunges prior to the release of Q4 earnings.
  • The stock trades at valuations reminiscent of Glu Mobile prior to the recent post-earnings rally.
  • At this valuation, Zynga doesn't need any catalysts for a rally; however, a couple of new games provide the opportunity for a big hit at last.

The market is spooked by some of the large selloffs after stocks report weak Q4 numbers or provide tepid forward guidance. The key though is to understand where the stock comes from heading into the earnings release.

Read the full article on Seeking Alpha. 

Disclosure: Long ZNGA. Please review the disclaimer page for more details. 

Tuesday, February 9, 2016

Occidental Will Survive, For Now

  • Occidental continues to hold up well due to a strong balance sheet.
  • The company still needs to work on improving cash flows to ensure the dividend can survive the current oil price slump.
  • The stock has more downside risk with cash flows in the current negative position.

With the cutting of the dividend by ConocoPhillips (NYSE:COP), all of the major oil companies are under extra scrutiny now. Dividends that were previously unquestioned will now need cash flows to justify paying them going forward.

Read the full article at Seeking Alpha. 

Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Sunday, February 7, 2016

Glu Mobile - QuizUp Potential

Along with the Q4 release was news that Glu Mobile (GLUU) purchased game developer Plain Vanilla Corp. The company paid $7.5 million in a convertible note for a minority stake in the maker of the game QuizUp. The deal apparently gives Glu the opportunity to purchase the company in the next 15 months at a pre-agreed price.

The deal involves Glu Mobile helping Plain Vanilla develop a QuizUp television program for NBC Universal. Also, Glu is going to help Plain Vanilla monetize the mobile game that isn't being done currently.

Based on the revenue generated by fellow trivia game Trivia Crack, QuizUp has tons of potential for generating sizable revenues. Currently, Trivia Crack makes roughly $50,000 on a daily basis with the iPhone in the U.S. Of course, Trivia Crack has slightly higher download rankings so these numbers might not be achievable.


Based on recent history, Glu Mobile is relatively successful in turning these deals for small game developers into home runs.

Disclosure: Long GLUU. Please review the disclaimer page for more details. 

Freeport-McMoRan: Keep Paying Attention To Copper

Not too surprisingly, Freeport-McMoRan (FCX) has rallied while oil keeps plunging. Too many investors confuse the stock for the oil operations, but the company is still primarily focused on copper. The company will not only survive, but thrive if copper prices stay above $2/lb.

At the current price of roughly $2.10/lb, Freeport-McMoRan should be free cash flow positive. As I highlighted in my last Seeking Alpha article, the risks of bankruptcy were largely overblown.

Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Saturday, February 6, 2016

Occidental: Still Producing Too Much Oil

Though oil continues plunging, the oil giants continue producing more. For Q4, Occidental Petroleum (OXY) had roughly flat production.

The worst part is that OXY plans to grow production by 2% to 4% in 2016. The stock has held up somewhat strong, but the inability to turn off the spigot remains troubling.

Disclosure: No positions mentioned. Please review the disclaimer page for more details.