Bes Stocks To Buy 2014, Best Stocks For 2014: 8/17/14

Friday, August 22, 2014

Can YouTubeâ€™s Subscription Music Service Compete With Spotify, Pandora, and the Rest?

Google's (NASDAQ: GOOG ) (NASDAQ: GOOGL ) YouTube brand has been a dominant force in online video and has become a major player in the music industry by functioning as essentially a modern version of MTV. Pretty much every music video ever made is available on the service for free, and now the company appears ready to leverage that content to launch a subscription music service.

The new offering, called YouTube Music Key, has been rumored for months. Google won't confirm its existence (though YouTube's CEO has talked about it in the past), but the blog Android Police posted a number of screenshots earlier this week showing how it would work. YTMK would, the pictures suggest, cost $9.99 a month and it would include access to the site's 20-million-song catalog, roughly the same size as that of soon-to-be competitors Spotify and Rdio. YTMK would also offer playlists and a collection of material the pictures of the app refer to as "concerts, covers, and remixes."

The move may make sense for YouTube but it puts the company in a crowded space where the established leaders Spotify and Pandora Media (NYSE: P ) actually lose more money with each new subscriber they add. The streaming music market also includes Amazon (NASDAQ: AMZN ) , which has its limited but free for Amazon Prime members service Amazon Prime Music, and Apple (NASDAQ: AAPL ) , which offers the free iTunes Radio as well as recent acquisition Beats Music, a paid service which sells for $9.99 a month.

The YTMK app will allow users to play music on their mobile phones, according to the screenshots, "with or without video, in the background, or with your screen off" -- all things that the single-tasking YouTube apps could not previously do. Subscribers will also be able to play music via "YouTube Mix," which works similarly to radio stations on other streaming services.

YouTube has become a major player in the music industry and it has the leverage to make deals for unique content, along with its deep catalog, but whether customers want yet another paid music service is a huge question.

Why is YouTube doing this?
YouTube CEO Susan Wojcicki has only held her job since February, but she made it very clear in an interview earlier this month with Re/Code that monetizing beyond traditional ads is important to her. That's an interesting perspective for an executive whose previous position was serving as senior vice president of advertising for Google.

Music is a really important part of the YouTube experience. Subscription allows us to make that experience richer in a bunch of different ways. Right now, YouTube is ad-supported, and if you look at most media, you'll see that it's ad-supported and subscription-based: Newspapers, magazines, cable TV. So there are places where subscription makes sense, because you're able to offer things to some users that you otherwise just couldn't offer.

Those comments beg the question, what exactly will YTMK offer that customers can't find on other music services? YouTube has access to a ton of music -- including a huge number of emerging artists, an area where Pandora and Spotify have struggled, but it's unlikely that a lot of people are going to pony up $9.99 a month to hear bands and singers they don't know. Special concerts and bonus content also seem like a weak draw. YTMK will reportedly let people watch YouTube's music content without ads. That might lure in some of the brand's heaviest existing users, but most people won't pay $9.99 a month just to not watch an ad every now and then.

YTMK is something YouTube can deliver and its position of strength with the music labels should give it access to some unique content, but getting customers to not only sign up but switch from one of the many competing services makes its prospects highly doubtful.

Why do Pandora and Spotify struggle?
The challenge for anyone entering the streaming music market is actually making money. Amazon is not looking to turn a profit on Prime Music -- the goal of the service is to keep customers paying for the Prime delivery service -- but for everyone else, the goal is driving revenue. Spotify and Pandora may be industry leaders, but they have not figured out how to build their businesses into profitability.

As Pandora and Spotify have grown in popularity they actually lose more money. Both companies significantly raised their revenue in 2013 while also growing their losses, as detailed on the chart below.

More people are signed up, more money is coming in, and losses keep growing. It's not a question of scale. Pandora and Spotify can't grow their way into making money.

A report published by Generator Research last year concluded that the streaming business in its current state was "inherently unprofitable" and that "no current music subscription service -- including marquee brands like Pandora, Spotify, and Rhapsody -- can ever be profitable, even if they execute perfectly."

The numbers back that up and it certainly makes you wonder why YouTube would enter a space where the top players lose money.

Is YouTube making a mistake?
YTMK seems like a very challenging play because it will be hard to get people to sign up and because if they do, that may lead to higher losses. YouTube, however, does have some advantages Spotify, Pandora, and the others (aside from Apple) don't. The company already has a huge infrastructure that supports over a billion users a month in a very profitable ad-supported business. Adding a subscription service on top of that is much less costly than building and maintaining one solely to support a paid streaming service.

YouTube also has leverage with the major music labels that Spotify and Pandora do not. While neither company shares the details of its deals with record labels, Spotify CEO Daniel Ek once said that his company paid 70% of its income back to the music industry. That's a very thin margin to operate on and leaves little room for profit.

YouTube, like Apple, might be able to negotiate better deals, but with artists already complaining about their piece of the pie, the label agreements won't be that much better.

With YTMK YouTube is entering a crowded space where customer acquisition is likely to be difficult and the upside appears to be minimal at best. That seems like a poor choice for a new CEO and an odd way to grow YouTube.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Tuesday, August 19, 2014

5 Worst Sectors to Avoid This Week

Popular Posts: 7 Biotechnology Stocks to Buy NowHottest Healthcare Stocks Now – INO CNC WCG MNKDHottest Healthcare Stocks Now – INO VRX EXAS AGN Recent Posts: Hottest Healthcare Stocks Now – PRGO HLS NVO HGR Biggest Movers in Basic Materials Stocks Now – AXLL SSD SSL BBL Hottest Technology Stocks Now – UIS ARRS CSOD MDSO View All Posts 5 Worst Sectors to Avoid This Week

According to the Portfolio Grader database this week, the reit, water utilities, independent power and renewable electricity producers, metals and mining and energy services sectors are at the bottom.

The reit sector is trailing behind others this week, with 79% of its stocks (125 out of 159) rated a “sell”. Out of the reit stocks, Hatteras Financial (), DDR Corp. () and Health Care REIT, Inc. () are near the bottom with F’s. Hatteras Financial is the worst performer in this sector, with a 26.6% decline in the last 12 months.

The water utilities sector is dragging, with 67% of its stocks (4 out of 6) rated a “sell”. With an overall grade of D, Companhia de Saneamento Basico do Estado de Sao Paulo SABESP Sponsored ADR (), SJW Corp. () and Aqua America, Inc. () are weighing down the sector. The worst performer in this sector is Companhia de Saneamento Basico do Estado de Sao Paulo SABESP Sponsored ADR, which saw its price sink 80.5% in the last 12 months.

With 67% of its stocks (6 out of 9) rated “sell,” the independent power and renewable electricity producers sector is struggling this week. TransAlta Corporation (), Empresa Nacional de Electricidad S.A. Sponsored ADR () and Calpine Corporation () are all currently earning F’s. TransAlta Corporation is the worst stock in its sector, with the company’s share price falling 40.1% in the last 12 months.

The metals and mining sector looks weak, with 66% of its stocks (61 out of 92) rated a “sell”. Newmont Mining Corporation (), Gold Fields Limited Sponsored ADR () and Schnitzer Steel Industries, Inc. Class A () are pushing the sector down with F grades. Gold Fields Limited Sponsored ADR is performing worst overall in the sector, with a 73.7% decline over the last 12 months.

The energy services sector is lagging this week with 60% of its stocks (38 out of 63) rated a “sell”. McDermott International, Inc. (), ION Geophysical Corporation () and Tidewater () are dragging down the sector overall, each earning a low grade of F. Overall, ION Geophysical Corporation is the poorest performer in this sector. Its share price has dropped 28.3% in the last 12 months.

Louis Navellier’s proprietary Portfolio Grader stock ranking system assesses roughly 5,000 companies every week based on a number of fundamental and quantitative measures. Stocks are given a letter grade based on their results — with A being “strong buy,” and F being “strong sell.” Explore the tool here.

Monday, August 18, 2014

Verizon may continue to Grow

Verizon Communications (VZ) is a provider of communications, information and entertainment products and services to consumers, businesses and governmental agencies. Verizon Wireless has a huge competitive moat in the U.S. wireless business, investing billions of dollars in spectrum and its network, something that's nearly impossible for competitors to replicate.

Going By the Numbers

Revenues increased by 4.8% since the same quarter one year prior. Earnings per share have got a boost since there is a revenue growth of the company. The gross profit margin for this company is rather high; currently it is at 63.69%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 12.80% is above that of the industry average. The gross profit margin for VZ is rather high; currently it is at 63.69%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 12.80% is above that of the industry average.

The company has demonstrated a pattern of positive earnings per share growth over the past two years. During this year increased its bottom line by earning $4.00 versus $0.31 in the prior year. Verizon's $130 billion deal to take over of all of Verizon Wireless is helping lift its profit. The largest US cellphone carrier completed its acquisition of the 45 per cent stake in its wireless division from British mobile phone carrier Vodafone Group PLC in February.

Verizon generates more than $20 billion in free cash flow annually. It distributed nearly $6 billion in dividends to shareholders last year, and has been upping its payout annually for years.

Growth Expected

Verizon is taking all the right steps to strike more deals with its partners. The deal with Netflix (NFLX) is a step in the right direction. Verizon is already renowned for its better speed and performance and the Netflix deal just confirms this belief.

Verizon is seeing robust growth in wireless contracts and residential broadband Internet. In eight of the last nine quarters, the wireless communications giant has posted double digit growth in net income. Also, because Verizon now has full ownership of Verizon Wireless after purchasing the remaining 45% stake from Vodafone (VOD) it should be able to boost its sales going forward on the back of integration synergies.

Verizon is making consistent investments in its network and platforms to support its products and services. The telecom giant is looking to deliver high network quality and reliability to offer a rich customer experience.

FiOS is driving Verizon's growth in Wireline segment

FiOS is the high-speed broadband connection based on a fiber optic network. Verizon recently introduced its FiOS Quantum service, which can provide Internet download speeds ranging from 50 Mbps to 500 Mbps. FiOS achieved a year-over-year revenue growth of 15.5% in Q1 2014, which was driven by customer additions and FiOS Quantum penetration.

4G adoption and new plans are helping wireless revenue growth at Verizon

Verizon continues to benefit from the faster adoption of high-speed 4G networks by customers, such that about 73% of the total data traffic of the Verizon network is carried through its 4G LTE network. Plus, 64% of the smartphones on the Verizon network were on 4G as of Q1 2014. Also, Verizon has come up with new plans to reduce its churn rate even further. It introduced the EDGE plan last year, which is an installment plan for customers who want to upgrade their devices faster or who don't want to pay the upfront cost of their devices.

Plans Ahead

On May 21, 2014, Verizon announced that it is expanding its Healthcare Enabled Services to five additional data centers, and offering a broader range of cloud and data center infrastructure services. According to Verizon, the expansion will enable the healthcare industry to meet the federal Health Insurance Portability and Accountability Act requirements for safeguarding electronic protected health information (ePHI). The Company also said that healthcare organizations can now securely store their ePHI in the Company's data centres located in Richardson, Texas; Santa Clara, California; Englewood, Colorado; Carteret, New Jersey and Elmsford, New York.

To End

Verizon is making solid investments in the business to upgrade its network and provide better services to customers. Verizon's fundamentals are strong, and the company can continue increasing its dividend in the future.

Since Verizon is generating a huge amount of cash flow and is also adding a good number of subscribers for its services, it should be able to increase its dividend going forward.

VZ is the biggest telecom company in the U.S. in terms of its market cap, which currently stands at above $200 billion. Verizon has maintained healthy revenues and revenue growth for the last decade.

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