Interactive Media & Services Play - BUY Recommendation!
The major indices are mixed at midday following an active overnight session in financial markets. The news that the FDA advised to temporarily halt the use of Johnson & Johnson's (JNJ) one-shot COVID vaccine triggered a selloff in risk assets and reopening stocks, in particular, while giving a boost to the tech sector and other "stay-at-home" names.
While the decision could cause delays in the U.S. vaccine push, this morning's losses have been limited and with the U.S. case numbers still being encouragingly low in most states, the economic recovery could still remain on track.
Stock Pick Summary:
With our portfolio bouncing back sharply as we expected, we are ready to capitalize further. Today, we jump on a prolific social media stock. While it trades at a high forward P/E to our liking, we do not want to ignore the strong long term growth opportunity in store. A decline in advertising budgets during the COVID lockdown caused it to incur losses and a revenue dip.
However, subsequently it pulled off a revenue growth of 55%. We expect it to be able to grow both its revenue and earnings by over 40% annually as it looks to further integrate shopping into the platform thereby enabling an e-commerce push. As the number of monthly active users and the average revenue per user grow over time, it will enable it to further bolster its cash flows. It is sitting on nearly $2 billion of cash, that could enable to pursue strategic acquisitions in future.
With an asset-light business model and a strong potential to accelerate cash flows, we are ready to welcome this stock in our portfolio for the long term!
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