Tech Slide in Week of Upbeat Earnings Underscores Growing Unease

(Bloomberg) — Better earnings equals higher share prices, or so goes the customary thinking. For technology stocks during this reporting season, it’s the exact opposite.

Companies from Alphabet Inc. to Microsoft Corp. announced quarterly results that beat analyst estimates by a combined 7.7 percent, more than any other industry group in the S&P 500 Index. Yet their stocks posted the worst first-day reaction, falling an average 1.8 percent.

As tech megacaps from Facebook Inc. to Amazon.com Inc. and Google parent Alphabet reported earnings, the Nasdaq 100 Index ended a three-week streak of gains. The gauge finished the five-day period with a 0.2 percent loss and dropped 0.7 percent from a record-high Wednesday.

“Look at some of the businesses, whether it’s Apple or Google, their revenue and profit growth is staggering,” said Marshall Front, who manages $800 million at Front Barnett Associates in Chicago as chairman. “But over-concentration can lead to too much volatility on the downside.”

The S&P 500 slipped less than 0.1 percent over the five days. The Dow Jones Industrial Average gained 1.2 percent as robust results from Boeing Co., Verizon Communications Inc. and Caterpillar Inc. were rewarded with weekly share gains exceeding 7 percent.

The disconnect highlights the challenge for high-fliers such as Apple Inc. and Nvidia Corp. still due to announce results and poses a risk for a sector that has been whipsawed by price swings since June. Good profits aren’t proving to be enough for investors who have already held a record-high percentage of tech stocks in their portfolios.

Bank of America Corp. strategist Savita Subramanian flagged the potential for lackluster returns earlier this month, warning that the bar had been set higher for tech companies after investors crowded into stocks with the highest growth potential.

“Positioning risk may be an overhang to performance despite solid fundamentals,” she wrote in a July 7 research note.

And too much love can prove perilous when momentum reverses. In June, after investors had flocked to tech stocks anticipating faster earnings growth in a move that pushed the Nasdaq 100 Index to rise twice as fast as the S&P 500, they rushed for the exit all at once, sparking the worst selloff since 2008 relative to the rest of the market.

The vulnerability was on display again Thursday as tech stocks bore the brunt of a selloff triggered by a note from JPMorgan Chase & Co. quant strategist Marko Kolanovic that cautioned investors about the risks of record-low volatility in the equity market.

In another sign that folks are on edge, about $2.5 billion was pulled out of the largest exchange-traded fund tracking the Nasdaq 100 over the week, the most since 2007.

While tech stocks as a whole are trading at valuations similar to the broader market, anxiety is growing over prices for the industry’s leaders. The five biggest American companies by market capitalization, all involving Internet or software, have rallied an average of 32 percent since December, accounting for almost one third of the S&P 500’s advance in 2017.

The cohort, also known as FAAMG, fetched a price-to-earnings ratio of 62, almost triple the S&P 500. Apple, the largest, is due to announce results Tuesday and analysts predicted an 11 percent increase in profit.

“The earnings reports, however strong, don’t boost the sentiment toward tech stocks when valuations are this rich,” said Ilya Feygin, senior strategist at WallachBeth Capital. “There is scope for a pullback in the sector.”

[“Source-bloombergquint”]

Mobile Shipments Again Growing, But is Plateau in Sight?

Smartphone Market Q2 2016 - Mobile Shipments Again Growing, But is Plateau in Sight?

Global smartphone shipment totals edged upward in the second quarter, says mobile, tablet and PC data research company Canalys in a recent report. But that growth is slower than before and could be headed for a plateau, he firm suggests.

Update – Smartphone Market Q2 2016

Canalys said that the worldwide smartphone market grew by almost a percent in Q2 of 2016 to reach over 330 million units. Samsung leads the pack with the highest number of shipments having sold over 80 million units. “The success of the Galaxy S7 together with a de-emphasis on the low end of its portfolio has led to a rise in handset ASP,” Canalys Senior Analyst Tim Coulling said. “Samsung’s VR move has proved a wise one, with Gear VR bundles helping boost flagship handset sales.”

Samsung shipment doubled that of Apple who shipped about 40 million iPhones in the second quarter. This is Apple’s second consecutive annual decline in shipments and the launch of the iPhone SE has not really turned the tide for the tech giant. “Shipments in intended growth markets, such as China and India, saw little improvement as the price of the device kept it out of reach of the mass market, which typically sees strong shipments,” said Canalys Analyst Rushabh Doshi. “Consumers instead opted for local vendors, whose build quality and specifications are a better value alternative.”

Following closely in third place is Huawei. According to Canalys, the Chinese multinational networking and telecommunications equipment and services company, has had an excellent start to 2016 having shipped about 31 million phones. The company has a huge market in China and continued growth in Europe, the Middle East and Africa. “Huawei has had an excellent start to 2016, with its leadership position in China helping the global picture,” said Coulling. “Despite this strong start, it will need to continue breaking shipment records and improve its position in the U.S. if it is to surpass its annual shipment target of 140 million units.”

Could the stagnating shipment numbers be a sign of having reached a plateau like the one reached by the PC market? If that’s the case, then small business owners as well as marketers that have concentrated on web based and mobile based marketing might soon have to make a shift to another platform should it emerge.

But what might the next big platform be?

Smartphone Assembly Photo via Shutterstock

[“source-smallbiztrends”]

Rohan Gilkes of Wet Shave Club: Growing a $4K Investment into $350K Business

Wet Shave Club0Small Business Trends: Maybe you can give us a little bit of your personal background.

Rohan Gilkes: I’ve been an accountant before I started building businesses online. I felt the urge to control my own life more and find a way to work for myself. I started hanging around blogs so I could learn about Internet marketing and that’s kind of how I got into trying to build businesses online.

Small Business Trends: How did you get started with Wet Shave Club?

Rohan Gilkes: Wet Shave Club was started by someone else about six months before we heard about the business. I was on the Reddit hang around, and saw a thread where this guy wanted to sell it. He had been doing it for some time, and he had gotten it up to about $300.00 per month, and he wanted to sell it because it really was not kind of paying off based on the effort he was putting into it.

So I ended up purchasing Wet Shave Club for $4,000.

Small Business Trends: So you opened a little less than a year ago. You spent $4,000 to acquire the domain and some of the customers — the few customers that he had basically. Where are you today with it?

Rohan Gilkes: We’re going to end this month, which really would be the end of our first year, at around $350,000 in revenue and a little bit over 1,500 customers.

Small Business Trends: That’s really cool. What were some of the important things you had to do at the very beginning to get potential customers on board?

Rohan Gilkes: The first thing we did was take a look at how the website was branded, and redesigned it to make it friendlier and speak more clearly to the customer. And also we redesigned the box as well, expanded the product line just a bit and raised prices. We raised prices by almost three times.

Small Business Trends: Wow … how long did it take for the subscription numbers to start moving up and up and up?

Rohan Gilkes: Another two months or so, because traffic was still low. But we had increased our conversion rates almost by double, so we were in a good position where all we had to do was figure out how to drive as much traffic as possible to the website.

Small Business Trends: What were your conversion rates at the beginning?

Rohan Gilkes: We started very close to 1.5 percent conversions and we ended up just a little bit over three percent conversions. So for every 100 people that come to the website, we can expect three of them to sign up now for our service, which is kind of where you want to be for a regular eCommerce store. And it’s very good for a subscription box because the subscription box offer requires that customer to sign up on a recurring basis.

Small Business Trends: So let’s talk a little bit about one or two of the things that you did to get the traffic up.

Rohan Gilkes: Our main focus was to find the people in the wet shaving community with the biggest followings and get a box of our new branded products in their hand. So if you were some person that led a forum or had a couple thousand Instagram followers or a couple thousand YouTube subscribers and talked about wet shaving we just sent you a box. And so that box may cost us like $10.00, but then based on all the people that would see it and people that trust this person’s recommendations, we were then able to get a boost in subscribers right away.

We then turned to regular social media folks — people that we could start a conversation with and get our brand out there. We ran contests where in order to enter the contest, you would have to tweet about us or you would have to send a message on Instagram or email. So basically we were able to leverage people that were interested in wet shaving and have them share our experience with their friends and their communities.

Small Business Trends: What role did your blog play in getting that traffic up?

Rohan Gilkes: We would post manufacturers’ videos of people that were in the box. We would post reviews of our box as well, and we would post on social media. But people would have to come back to our blog to watch it.

And while there on our blog, a pop up would offer them a five percent discount or something in exchange for their emails. And so we gathered, over time, thousands of emails of people that even if they did not sign up right away, we could re-market to them over and over again.

Small Business Trends: Where are you at today with your traffic?

Rohan Gilkes: We’re probably at about 1,000 visitors per day now, which is great for a small, niche site like ours. And we were able to convert people at a pretty high clip, and people stay on for a long time. And because we have recurring revenue, we can also have a higher customer acquisition cost. So like for a one-time sale on a store, you can’t afford to lose money on the sale. But for us, we could almost lose money on the first box, and make that back in month two and month three and month four and month five and so on.

That allowed us to go into Facebook advertising and go into AdWords and re-targeting and actually spend some money to acquire customers after we did all of this other free stuff.

Small Business Trends: Talk a little bit about what you do to keep them subscribed, and the role of customer service in keeping your customers happy.

Rohan Gilkes: Especially with subscription box services, you look at the value of the business based on how long you can keep that customer and how long you can keep that customer times how much money you can make per period.

We pay special attention to creating a community around our products. So instead of just getting a box every month, we want to create a community. What we did, first in the customer services side, we have an online chat. If you have any problems, you come to the website to chat instantly. We decided against telephones because it introduces a few more difficulties. So we went with online chat and we’re able to solve problems the customers have on the website.

On the community side, we started a Facebook private group for our customers called The Wet Shave Lounge. It’s almost like a VIP focus group where we will post new products before they’re released. We’ll get feedback on past boxes, see the scents that people like and don’t like, and really get to know our members as well as we can which allows us to build deeper relationships and have folks stay with us much longer.

[“source-smallbiztrends”]

After Big Investment, Has Tumblr Stopped Growing?

Has Tumblr, the social blogging site Yahoo acquired for what was reported to be $1.1 billion last year, stopped growing? The social blogging network reached 47.49 active users in May 2013, the month the sale was announced, reports Forbes. The news source is now saying the sale to Yahoo was closer to $990 million.

Yahoo acquired Tumblr looking to add some “cool” to its audience since Tumblr’s users are typically younger. At the time of the sale, both companies touted Tumblr as the fastest growing media network on the Web.

Since the sale, though, growth has remained fairly flat, only once spiking close to the 50 million user mark in July, Forbes reports. The analysis is based on comScore data of both desktop and mobile users, according to Forbes.

Tumblr has disputed Forbes’ read of a plateau in user growth. In a recent email responding to the comScore data, a spokeswoman explained:

“Comscore does not fully capture mobile traffic, as it does not include in-app traffic (and that number you reference also only accounts for US). For Tumblr, 1 in 2 active users access Tumblr content through the mobile app. In addition, in the past year we’ve seen a 55% total engagement growth and on mobile this number is 251% growth.”

So are the stagnant numbers a sign that Tumblr has stopped growing? It depends on who you ask and what numbers they’re using.

For example, a GlobalWebIndex survey of 170,000 Internet users worldwide also reported by Forbes may tell a slightly different story. The number of people in the global survey who described themselves as active users of the site remained flat at 4 percent from the second through the fourth quarter of 2013. Nothing new there.

But the number of Internet users who said they had a Tumblr account jumped from six percent in the first quarter to 12 percent in the second quarter of 2013. That number dropped to 11 percent in the third quarter, but rose again to 13 percent to finish the year.

So comScore numbers may not tell the whole story since they obviously leave some users out. Also, other numbers suggest that, whether they are all active or not, the number of Tumblr users seems to still be growing.

Image: Tumbler

[“source-smallbiztrends”]