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Facebook, Apple and the march of the big guns (20 listed below)

August 10, 2020

 

1. Accenture/ACN  Buy @ $231  MV: $147bn  Employees: 492,000 Next figures: 24 September  Times recommended: 2  Price when first recommended: $219

Recent quote: “So in terms of delivery on our commitment to our shareholders, we delivered Q3 revenues in line with the range we provided only eight days after the global pandemic was declared, and we hit a new milestone of approximately 70pc in the new, a digital — which is digital, cloud and security. We delivered $11bn in new bookings, a 6pc increase over Q3 last year, which demonstrates the relevance of our services and our ability to sell in a remote everything world. We continue to invest in our business for the long-term, closing an additional $742m in strategic acquisitions for a total of $1.3bn year-to-date. We delivered operating margin expansion of 10 basis points and we continue to strengthen our balance sheet, closing the quarter with $6.4bn in cash.” Q3, 2 June 2020

2. Adobe Inc./ADBE  Buy @ $449  MV: $223bn  Employees: 22,634 Next figures: 15 September  Times recommended: 16  Price when first recommended: $175.64

Recent quote: “Adobe is the digital experiences company, with millions of global customers relying on our products every day to create the world’s content, automate critical document processes and engage with their customers digitally. Adobe’s leadership in three large and growing categories, creative cloud, document cloud and experience cloud, is driving our performance. We delivered $3.13bn in revenue in Q2, representing 14pc year-over-year growth. GAAP  [generally accepted accounting principles] earnings per share for the quarter were $2.27 and non-GAAP earnings per share were $2.45 [ probably excluding things like share option costs]. In our digital media business, we drove strong revenue growth in both creative cloud and document cloud in Q2. Net new digital media annualised recurring revenue or ARR was $443m and total digital media ARR exiting Q2 grew to $9.17bn.” Q3, 11 June 2020

3. Advanced Micro Devices/ AMD  Buy @ $84.5  MV: $102bn Employees: 11,400  Next figures: 15 October 2020  Times recommended: 6  Price when first recommended: $36.50

Recent quote: “Looking at the second quarter, revenue grew 26pc year over year to $1.93bn, driven by strong demand for our leadership server and client processors. We accelerated our server and mobile processor businesses significantly in the quarter, resulting in Ryzen and EPYC processor revenue more than doubling year over year. Importantly, we met our double-digit server processor market share goal as data centre products accounted for more than 20pc of our second-quarter revenue. Turning to our computing and graphics segment, second-quarter revenue increased 45pc year over year to $1.37bn as growth in Ryzen processor sales more than offset lower graphic sales.We delivered our highest client processor revenue in more than 12 years. Increased working and schooling from home due to COVID-19 resulted in a strong PC market in the quarter. Although we believe our growth was largely driven by our 11th straight quarter of market share gains. Desktop processor sales decreased sequentially as anticipated, while revenue and ASP [average selling prices] increased year over year as demand for our higher-end Ryzen processors drove a richer mix.

In mobile, we had record quarterly notebook processor unit shipments and revenue. Sales of our latest Ryzen 4000 Series processors grew significantly in the quarter, resulting in mobile revenue growing by a strong double-digit percentage sequentially and more than doubling from a year ago as both unit shipments and ASP increased significantly. Multiple third-party reviewers have consistently highlighted that our latest notebook processors deliver superior performance and longer battery life compared to the competition. As a result of this strong performance, I’m pleased to report that Ryzen 4000 processor revenue has ramped faster than any mobile processor in our history.” 29 July 2020

4. Alibaba/ BABA  Buy @ $252  MV: $710bn Employees: 117,600  Next figures: 13 August 2020  Times recommended: 8  Price when first recommended: $163.92

Recent quote: “We have finished an extraordinary quarter and delivered an outstanding fiscal year. Despite the impact of COVID-19 pandemic, Alibaba achieved a historical milestone of US$1 trillion in GMV [gross merchandise value] across our digital economy this fiscal year, a strategic goal that we set for ourselves five years ago. We, at Alibaba, have always been aiming for the stars while keeping our feet on the ground. The $1 trillion GMV milestone reflects the power of Alibaba’s digital economy as well as strong execution against a clear strategic vision.Our scale has now reached one-sixth of China’s total retail sales, which were about US$6 trillion last year. And we believe there is still tremendous potential for growth. Digital adoption and transformation in retail are accelerating due to the COVID-19 pandemic, reshaping consumer behaviour and enterprise operations.” 22 May 2020

5. Alphabet/ GOOGL  Buy @ $1497  MV: $1024bn Employees: 119,000  Next figures: 22 October 2020  Times recommended: 11  Price when first recommended: $985.19

Recent quote: “The macroeconomic environment caused by the pandemic created headwinds for our business. Our revenue declined on a reported basis and was flat year-over-year on a fixed FX [foreign exchange] basis. Like other companies, this quarter, we saw the early signs of stabilisation as users returned to commercial activity online. This is true across most of our advertising verticals and geographies. Of course, the economic climate remains fragile. One thing I’d like to call out is our continuing journey to invest in and grow new businesses. We delivered strong growth in our non-ads revenues, particularly from Cloud, Google Play, and YouTube subscriptions. This, in turn, is helping our partners, developers, and creators earn revenue and deliver valuable services to people. We are focused on the steps to build long-term value with these opportunities.” 31 July 2020

6. Amazon/ AMZN  Buy @ $3167  MV: $1615bn Employees: 798,000  Next figures: 22 October 2020  Times recommended: 24  Price when first recommended: $984

“Strong early demand in groceries and consumable products continued into Q2, while demand increased during the quarter in our other major product categories like hard lines and soft lines. At the same time, we continue to focus on stepped up employee safety, particularly in our fulfilment and logistics operations, to help ensure the safety and well-being of our employees and partners. In Q2, we incurred more than $4bn of COVID-related expenses, getting products to customers and keeping employees safe. The largest portion of these costs related to compensation for our frontline employees, including higher hourly wages through the end of May and a more than $500m thank you bonus in June.We also experienced productivity headwinds in our facilities. This included changes to over 150 of our processes to provide for social distancing as well as costs to onboard and train over 175,000 new employees, who were hired to meet the higher customer demand. This $4bn also included investments in personal protective equipment for employees and enhanced cleaning for our facilities. Our consolidated revenue and operating income significantly exceeded the top end of our guidance range.

Strong top line performance was driven by increased consumer demand, led by Prime members. We continued to see high Prime member engagement throughout the quarter. Prime members shop more often with larger basket sizes. Worldwide streaming video hours doubled year-over-year driven largely by Prime video.

We’re reaching more customers with our grocery offerings. Online grocery sales tripled year-over-year. Existing Prime member renewal rates improved, and the Prime member growth rate accelerated both in the U.S. and worldwide.

As we move toward peak in the second half of the year, we will ramp-up our space needs even further, and we’ll be adding significant fulfilment centre and transportation capacity in the second half of the year. Turning to AWS [Amazon Web Services, the cloud computing services business, which makes the bulk of total group profits]. This is now a $43bn annualised run rate business, up nearly $10bn in run rate in the last 12 months. Customer usage remains strong, although growth varied across industries as a result of the COVID-19 crisis.

Lastly, I’ll touch upon our Q3 guidance, which we provided as part of our earnings release. A few additional data points on this guidance. We expect to incur more than $2bn in COVID-related expenses in Q3 to help keep employees safe, including continued investment in social distancing, PP&E [property, plant & equipment] and testing. Costs are expected to be lower than in Q2 primarily due to better cost efficiency at the high demand levels we are seeing.”  31 July 2020

7. Apple/ AAPL  Buy @ $444  MV: $1948bn Employees: 137,000  Next figures: 29 October 2020  Times recommended: 17  Price when first recommended: $157.82

“Apple saw a quarter of historic results demonstrating the important role our products play in our customers’ lives. We set a June quarter record with revenue of $59.7bn, up 11pc from a year ago. Both products and services set June quarter records and grew double digits, and revenue grew in each of our geographic segments, reflecting the broad base of this success.

iPhone revenue grew two percent this quarter. In April, we expected year over year performance to worsen, but we saw better than expected demand in May and June. We attribute this increase in demand to several interactive causes, including a strong iPhone SE launch, continued economic stimulus, and potentially some benefit from shelter in place restrictions lifting around the world. We expected iPad and Mac growth to accelerate, and we saw very strong double-digit growth for these devices this quarter. This remarkable performance came in spite of supply constraints on both products.

Wearables growth decelerated as we expected, but still grew by strong double digits and set a revenue record for a non-holiday quarter. Building on powerful new features built into watchOS 7 and AirPods Pro announced this quarter, we are very excited about the many opportunities in front of us for this product category.

These strong results help drive our installed base of active devices to new all-time records across each of our product categories. Reflecting the deep integration of hardware, software, and services, services generated a June quarter record of $13.2bn, up 15pc year over year.

Advertising and AppleCare were impacted by the reduced level of economic activity and store closures to a degree that was in line with our expectations. Second, we had strong performance in our digital services with all-time revenue records in the App Store, Apple Music, video, and cloud services, as well as elevated engagement on iMessage, Siri, and FaceTime.

Everything we make, build or do is geared toward creating opportunities for others. The App Store is a great example. This quarter, a new study by independent economists at The Analysis Group found that the App Store facilitated more than half a trillion in commerce globally in 2019 alone.

Looking forward, we are profoundly optimistic about Apple’s future. ”  30 July 2020

8. Disney/ DIS  Buy @ $129  MV: $234bn Employees: 223,000  Next figures: 5 November 2020  Times recommended: 2  Price when first recommended: $140 (2nd time at $109.20)

“Since our last earnings call, we’ve begun a responsible phased reopening of our parks in Shanghai, Paris, Tokyo, and Orlando as well as our shopping and dining area, Downtown Disney in Anaheim.

We’re also pleased with the return of major live sports on ESPN [initially stood for entertainment and sports programming network, now sports focused], including the successful resumption of the NBA [national basketball association] and MLS [major league soccer] seasons within the Walt Disney World Bubble and restarts of the WNBA [women’s national basketball association] and MLB [major league baseball].

Another positive development to note has been the initial restarting of some of our television and film productions, both domestically and overseas. When I [60 year old Bob Chapek, who has been 26 years with Disney] became CEO in February, I emphasised that we will continue to pursue bold innovation, thoughtful risk-taking and the creative storytelling that is the lifeblood of The Walt Disney Company. And despite the challenges of the pandemic, we’ve managed to take deliberate and innovative steps in running our businesses. At the same time, we’ve also been very focused on advancing and growing our direct-to-consumer business, which we see as our top priority and key to the future of our company.

Last November, we successfully launched Disney+ [the video on demand business to which my daughter is an enthusiastic subscriber] domestically, and we’ve since rolled it out in a number of major international markets, including Western Europe, India, and Japan. I am also incredibly pleased to announce that, as of yesterday, we have surpassed 60.5 million paid subscribers globally, far exceeding our initial projections for the service. As our global sub numbers continue to grow, we’ve also exceeded our internal subscriber projections in every major market we’ve launched thus far. The tremendous success of Disney+ in less than a year clearly establishes us as a major force in the global direct-to-consumer space.We will continue our international expansion with the launch of Disney+ in the Nordics, Belgium, Luxembourg, and Portugal in September and in Latin America this November. And I’m happy to announce that we will also be rolling out Disney+ Hotstar on September 5 in Indonesia, one of the world’s most populous countries. By year-end, Disney+ will be available in nine of the top 10 economies in the world. When you look across our full portfolio of direct-to-consumer businesses at Disney+, Hulu and ESPN+, our combined global reach now exceeds an astounding 100m paid subscriptions.

This is a significant milestone and a reaffirmation of our strategy for growth. In fact, the incredible success we’ve achieved to date has made us even more confident about the future of our direct-to-consumer business and our ability to be more aggressive in our approach. Going forward, this confidence, coupled with the trends we’re seeing in the multichannel universe, will lead us to pursue even more innovative and bold initiatives as we continue to grow the business.

We’ve already demonstrated an aggressive approach to our content creation pipeline, accelerating the Disney+ debuts of Frozen 2, Pixar’s Onward and Star Wars: The Rise of Skywalker. Fast-tracking the debut of Broadway’s Hamilton to Disney+, which has been a huge success. By combining the best elements of live theatre, film, and streaming, we have given millions of viewers a whole new way to experience this iconic cultural phenomenon. And last week, Beyonce’s visual album, Black Is King, premiered on Disney+ to critical acclaim.

It’s being widely celebrated for its diverse cast, stunning artistry, and inspiring interpretation of the Black experience. Both Hamilton and Black Is King have clearly shown the power of the Disney+ platform for premiering world-class content. And there’s more great content coming to the service. Highlights include Disney live actions: The One and Only Ivan, which will stream exclusively on the service beginning August 21; and The Right Stuff, from National Geographic about NASA’s project Mercury, which is set to premiere this fall.

And millions of fans are anxiously awaiting the highly anticipated second season of The Mandalorian [a Star wars-related space western] in October. The blockbuster series was just honoured last week with an incredible 15 Emmy nominations, including Outstanding Drama Series, a first for a debut streaming service. It also bears noting that the Walt Disney company’s television, cable, studio productions, and streaming entities received an impressive 145 Primetime Emmy nominations. Ninety-two were for programming content produced by our entities, which really speaks to the power of our creative engines across the company. As I said earlier, we’ve been able to begin resuming some of our creative pipeline activities amid the pandemic, and we’re confident that when we can fully resume operations, we’ll be able to do so in a meaningful way with some of the best creative teams and most popular franchises in the industry.”  4 August 2020

9. Facebook/ FB  Buy @ $268  MV: $761bn Employees: 52,500  Next figures: 28 October 2020  Times recommended: 13  Price when first recommended: $191.78

“This was a strong quarter for us, especially compared to what we expected at the start. There are now more than 3.1bn people using our services every month to stay connected, and more than 180m businesses, who use our tools to connect with customers. We also had more than 9m active advertisers across our services as many shifted their business online.

The tech industry is an American success story. Products we build have changed the world for the better and improved people’s lives. Our industry is one of the ways that America shares its values with the world and one of the greatest economic and cultural exports of our country. Facebook is part of this story. We started with an idea to give people the power to share and connect, and we’ve built services that billions of people find useful. I’m proud that we’ve given a platform for people to make their voices heard, and given small businesses access to tools that only the largest players used to have.There’s such a fundamental difference between how the vast majority of people actually experience our services, and the impression you’d get if you just read much of the commentary about Facebook.

Imagine going through this pandemic two decades ago when the internet was nascent. Facebook didn’t even exist. Sheltering in place is incredibly disruptive now, but until recently it would have meant almost no connection with your friends and the broader economy. Most of the small businesses whose storefronts had to close would have gone under, and there wouldn’t have been another infrastructure like the internet that they could move quickly to in order to stay afloat.

People sharing their day to day experiences with friends, communicating in groups with people who share interests, watching entertaining content, and buying and selling things, this is how the vast majority of people use our services. Yet some seem to wrongly assume that most of the content on our services is about politics, news, misinformation, or hate. Let me be clear, it’s not. These make up a small part of the content on our services, although they are all things that people generally tell us they’d like to see even less of. We do not profit from misinformation or hate, we do not want this content on our platforms. People come to our services to connect with people they care about. That’s why people are using our services at record levels now, and enabling more of those meaningful social interactions is how we succeed.

Some also seem to wrongly assume that our business is dependent on a few large advertisers. While we value every single one of the businesses that use our platforms, the biggest part of our business is serving small businesses. Our advertising is one of the most effective tools that small businesses have to find customers, to grow their businesses, and to create jobs. And that’s why I am often troubled by the calls to go after internet advertising, especially during a time of such economic turmoil like we face today with COVID. It’s true that making it more difficult to target ads would affect the revenue of companies like Facebook. But the much bigger cost of such a move would be to reduce the effectiveness of the ads and opportunities for small businesses to grow. This would reduce opportunities for small businesses so much that it would probably be felt at a macroeconomic level. Is that really what policymakers want in the middle of a pandemic and recession? The right path, I believe, is regulation that keeps people’s data safe while allowing the benefits of this kind of personalised and relevant advertising.

WhatsApp Business now has 50m people using it and is growing quickly.

After seeing flat year-over-year revenue growth in the first few weeks of April, we saw a considerable recovery in May and June. Our total ad revenue for Q2 was $18.3bn, which is a 10pc year-over-year increase. This demonstrates not only our resilience as a company, but a wider trend that has been underway for some time, people are spending more and more time online, so businesses need to be online too. This was true long before the pandemic, but it is especially true now that people can’t always get together in person. In the United States before the crisis, 1 in 3 companies still did not have a website. Now more and more businesses realise they have to be online.

This month, in partnership with the World Bank and OECD, we published our first Global State of Small Business Report, based on a survey of more than 30,000 small business leaders across more than 50 countries. The data paints a sobering picture of the struggle businesses are facing, but it also points to the scale of the digital transformation we are witnessing. In the majority of countries, at least one-third of SMBs [small and medium sized businesses] reported earning a minimum of 25pc of their sales from digital channels in the previous 30 days.

The COVID-19 crisis is lasting longer than everyone hoped and expected. We are acutely aware of the responsibility we have to keep people connected during this turbulent time, and to help businesses weather the storm and transition to the digital economy.

In June, we estimate that approximately 2.5bn people used at least one of our services on a daily basis, and that approximately 3.1bn people used at least one of our services on a monthly basis. Note that these Q2 family metrics reflect new data from a recent user survey and certain methodology improvements.

Facebook itself continued to grow with daily active users reaching 1.79bn, up 12pc compared to last year. DAUs  [daily active users] represented approximately 66pc of the 2.7bn monthly active users in June. MAUs [monthly active users] grew by 287m or 12pc compared to last year.

On a user regional basis, ad revenue growth was strongest in US & Canada, Asia-Pacific, and Europe which grew 14pc, 11pc, and 9pc, respectively. Rest of World declined 6pc and was impacted by challenging macroeconomic conditions as well as foreign currency headwinds.

In Q2, the total number of ad impressions served across our services increased 40pc and the average price per ad decreased 21pc. Similar to last quarter, the growth in impressions was primarily driven by Facebook Mobile News Feed, due to product changes and increased engagement compared to last year. The decline in average price per ad was largely attributable to the economic impact of the pandemic, although we saw year-over-year pricing trends improve in the latter half of the quarter. Other revenue was $366m, up 40pc, driven primarily by sales of Oculus and Portal products.

We had our strongest hiring quarter ever in Q2, adding over 4,200 net new hires, primarily in technical functions. We ended the quarter with over 52,500 full-time employees, up 32pc year-over-year.”  30 July 2020

10. Intuit/ INTU  Buy @ $309  MV: $81bn Employees: 10,000  Next figures: 25 August 2020  Times recommended: 5  Price when first recommended: $210.50″Through the first part of the third quarter, we saw continuation of the great momentum we built during the first half of the year when revenue grew 14pc. At the same time, the impact of the pandemic on taxpayers and small businesses is real. The extension of the IRS tax filing deadline and local shelter-in-place directives negatively impacted performance beginning in mid-March. As a result, our total revenue declined 8pc in the quarter.

Despite limited visibility near-term, we are more inspired than ever to achieve our 2025 prosperity, reputation, and growth goals. As a reminder, our prosperity goals are to double household savings rate and improve the success rate of small businesses by 10 points better than benchmark for anyone on our platform. We will do so by becoming an AI-driven expert platform and doubling down on our five big bets. As we look into the future, we have resourced our big bets for acceleration. Let me share our progress on each of these bets. Big bet number one is foundational and is to accelerate innovation across our platform.

Big bet number two is all about connecting people to experts. While the largest problems our customers face is lack of confidence to do their own taxes and to manage their business, we’re connecting customers to experts on our platform to solve this problem with TurboTax Live and QuickBooks Live, allowing us to reach more customers, deepen engagement, and grow ARPC [average revenue per customer].

Our third big bet is to unlock smart money decisions for customers by connecting them to financial tools and partners that help put more money in their pockets. In its third season, we’re on track to nearly double active use for Turbo. This suggests customers are finding value from our recently-introduced innovations like mobile refund tracking and weekly credit score updates.

Our fourth big bet is to become the centre of small business growth by helping our customers sell in an omni-channel world, get paid fast, manage capital, and pay employees with confidence. We recently launched cash flow planner in QuickBooks Online. Managing cash flow is the biggest problem our customers face, one that is only magnified during this difficult period. Cash flow planner is an AI-powered interactive tool that looks at small businesses’ financial history to predict future money-in and money-out events, enabling a small business customer to forecast its cash needs more accurately.

Our fifth big bet is to disrupt the mid-market with QuickBooks Online Advanced, our online offering designed to address the needs of small business customers with 10 to 100 employees. We’ve developed this offering to help us increase retention of larger customers and attract new mid-market customers who are over-served by higher priced competitive offerings.

Now let me wrap up our big bets by circling back to bet number one, which is our foundational bet to revolutionise speed-to-benefit for our customers. Our goal is to deliver benefits to our customers instantly and to make the interactions with our offerings frictionless by accelerating the application of AI [artificial intelligence].

We expect this environment to act as an accelerant to the bets we’ve declared. First, we expect to see an accelerating shift to a virtual world. This aligns with our big bet to connect people to experts using technology to improve confidence. We intend to play offence during this downturn by investing in the largest opportunities for the future: our big bets. When we do our job well, we believe we will come out of this downturn stronger than ever before.

Second, the need for small businesses to increase their online presence and commerce will become more essential. This aligns with our big bet to be the centre of small business growth by providing tools and visibility for customers to better manage their cash flow. Finally, as we’ve seen in previous times of hardship, we expect consumers to put a high premium on offerings that can improve their financial health, which aligns with our bet to help consumers unlock smart money decisions.” 21 May 2020

11. Intuitive Surgical/ ISRG  Buy @ $685  MV: $81bn Employees: 7,326  Next figures: 15 October 2020  Times recommended: 11  Price when first recommended: $329.13″We ended Q2 2020 down 19pc compared with Q2 2019. The underlying driver for this decline has been the growth of COVID-19 in the communities that our customers serve. While we saw procedure declines in all categories, urology and thoracic procedures were relatively resilient, while gynaecology experienced the greatest decline. Rates of recovery from lowest by procedure type were more uniform.

We’ve seen hospitals with adequate supplies of staff, PPE [personal protective equipment] and physical resources return to above 90pc of pre-COVID procedure run rates over a few months period. Recovery above this number is dependent upon the intensity of COVID in the region, patient’s comfort to return to the hospital, availability of testing and patient outreach. As we stand here in July, we see the continued growth of COVID in some regions, both domestically and internationally, making future predictions on hospital capacity for surgery difficult.

With regard to capital placements, we installed 178 new systems in Q2 2020. This compares to 273 installs in Q2 2019 and 237 installs in Q1 2020. The new installs in Q2 2020 represent a clinical installed base growth of 9pc after accounting for trade-ins. While these numbers are lower than prior year and prior quarter, frankly they are greater than our expectation coming into the second quarter due to strong performance in Asia and some larger IDN [integrated delivery network of healthcare providers and facilities] placements in the U.S.

That said, we know the correlation between system utilisation in the form of procedure demand and capital availability at hospitals is a strong one. Hospitals will seek to absorb existing capacity before installing new capital. So on average globally, we expect a challenging near to midterm environment for future capital placements as COVID-19 wears on and hospital expenditures remain constrained. Because COVID is impacting locales differently, we see significant variability in procedure growth and new system placement interest by region.

The drivers of a sustained recovery in surgery will likely vary regionally and may be predicated on the extent and duration of COVID outbreaks, the availability of human, material and physical resources to concurrently treat both COVID and other disease, patient comfort in returning to care centres for diagnostics and treatment and, finally, the relative health of the broader economy and hospital finances.

We continue to invest in our high-priority programs, recognising that high-quality MIS [minimally invasive surgery] is likely more important in the coming years post-COVID, not less so.

Turning to instruments, beginning Q4 this year, we plan to introduce an updated set of select EndoWrist instruments for use with da Vinci X and Xi that will enable increased use beyond the current 10 years life span, part of our extended use program. Extended use will vary from two to eight additional uses per instrument and is the result of continuous and significant investment in the design and production of our instrument technologies that have resulted in improved quality and durability.

The long-term opportunity for our products and services is substantial, both in high acuity complex procedures and in shorter duration lower acuity cases, where customers are understandably more cost sensitive. Some EndoWrist instruments are used in every procedure, so our extended use program helps all customers and, in particular, those performing lower acuity cases, which are among the fastest-growing procedures.

As the program rolls out, I&A cost for customers performing lower acuity procedures will be highly competitive with non-robotic MIS approaches.

We continue to believe that we have a unique opportunity to expand the benefits of computer-aided surgery and acute interventions around the world, and we’ll continue to invest in the business for the long term. ” 21 July 2020

12. Meituan Dienping/ 3690  Buy @ HK$223  MV: HK$1278bn/ US$165bn Employees: 54,580  Next figures: 21 August 2020  Times recommended: 0  Price when first recommended: HK$222
Business: Meituan-Dianping is a Chinese shopping platform for locally found consumer products and retail services including entertainment, dining, delivery, travel and other services. The company is headquartered in Beijing and was founded in 2010 by Wang Xing. The company operates different apps and websites for different services. The Meituan site offers deals of the day by selling vouchers on local services and entertainment. By May 2014, the company had 5,000 employees. In 2015, Meituan merged with Dazhong Dianping and changed its name to “Meituan-Dianping”. dianping.com hosts consumer reviews of restaurants, similar to Yelp and TripAdvisor and also offers group buying similar to Groupon. Meituan-Dianping is one of the world’s largest online and on-demand delivery platforms. It had over 290m monthly active users and 600m registered users as of April 2018.”During the quarter, total revenue decreased by 12.6pc year-over-year to RMB16.8bn. Adjusted EBITDA barely broke even, decreasing by 91pc year-over-year. Adjusted net profit turned negative, coming in at a loss of RMB0.2bn for the quarter. Annual transaction user for our platform increased to 448.6m, up by 8.9pc year-over-year. Our annual active merchants increased to RMB6.1m, up by 5.0pc year-over-year. Average number of transactions, per transaction user increased to 26.2 times, up by 5.3pc year-over-year.Despite the obvious short term disruptions, I would like to underscore that our long-term strategy and targets have not changed. We have always maintained a long-term perspective when developing our business strategies and investing in our business growth. We remain focused on building a leading e-commerce platform for services in China.In the long run, we believe that this pandemic will help to better cultivate consumer habits that are related to online penetration, improve the operational efficiency of merchants and ultimately expedite the digitisation process of the entire local service industry.

Due to the impact of COVID-19, the GDV [gross delivery value] of our food delivery business decreased by 5.4pc year-over-year to RMB71.5bn, while the daily average number of food delivery transactions decreased by 18.2pc year-over-year to 15.1m in the first quarter.

In particular, this segment was hit the hardest from January the 20th to February the 20th. The food delivery industry recovered rapidly during March, the daily order volume returning to around 75pc of pre-pandemic level at the end of the quarter. In spite of the short-term negative impacts, we strongly believe that the outbreak of COVID-19 will play a positive role in the development of the industry over the long term. On the consumer side, this pandemic has further accelerated the observation of consumption behaviour in a positive way, helping to further advocate a portion of heavy users.

Under the mandatory home quarantine, our food delivery service has become extra important and convenient. With a potential number of consumers increasingly realising that food delivery could become their primary channel to receive daily news, the persistency good experience and diversified supply of our platform efficiently meet the demands of most people, especially, average order value increased by 14.4pc year-over-year in the quarter. We also saw increasing preference from consumers for more high ticket price categories during the pandemic due to the increasing adoption of food delivery input for more meals.

On the merchant side, the pandemic has further accelerated the digitisation process, especially for many branded restaurants that provide high-quality supply and were traditionally more focused on in-store dining than delivery services. In the first quarter, we witnessed a large number of premium restaurants, highly-rated restaurants, chain restaurants; Black Pearl listed restaurants as well as five-star hotel restaurants essentially build up their process for food delivery operations for the first time. Some of these high quality restaurants which used to ignore online operation or only generated a small portion of revenue from online orders, started to make food delivery their primary vehicle for business operations in the midst of the pandemics turmoil.

In fact, as of 31 March more than 50pc of the restaurant from our must eat list had opened food delivery operations compared to only 30pc in December 2019. The decision to open online food delivery operations, not only helped restaurants to navigate through the crisis, but also increased our platforms exposure to high quality supply over the long term. For many small and medium sized independent restaurants, food delivery came close to being their sole source of income during the pandemic. We expect more medium sized restaurants to continue to deepen their cooperation with food delivery platforms and to allocate more resources to online channels going forward.

According to our survey, in the last week of March over 70pc of restaurants had achieved a recovery of 60pc or more in terms of order volume, while the remaining 30pc had achieved recoveries exceeding their pre-pandemic order volume.

We have also continued to increase our investments in pushing the frontiers of delivery technology. In the first quarter, for example, we piloted the launch of automated delivery vehicles for the first time in Chaoyang District of Beijing. We plan to consistently invest in autonomous delivery technology over the coming years.

In the aftermath of the COVID-19 pandemic, we believe that the both consumers and restaurant will view good food delivery as an increasingly important channel, which will benefit the industry in the long run.

COVID-19 has severely impacted our in-store hotel and travel division and we estimate that our business will take a while to recover. We are very confident in the long run opportunities and transformations that this pandemic will bring. We believe that the pandemic will accelerate high sales expectations and encourage merchants to further enhance their online operations in the future. As a daily and local service platform, we’re committed to continue diversifying our product and service offerings as well as proving and optimising our digital infrastructure to help merchants to reach a vast group of target consumers, improve their online operation and better adapt their digital strategy.

We believe in the massive potential of our grocery retail business as well as our ability to leverage our leading position in the on demand delivery network to grow this division. We’ll continue to optimise our operations and improve the quality of our products and services. We will also continue to invest in both our marketplace and staff operated models. Fresh produce will be one of the categories that we’ll most prioritise, owing to its tremendous market size, high-transaction frequency and relevance to our core business strategy.We have also launched a separated operated brand known as Caidaquan to enable traditional farm markets to operate online more efficiently.

While the digitisation of the entire industry value chain is still at a very early stage we’ll continue to be an important promoter, leader and long term beneficiary of these underlying trends.” 25 May 2020

13. Microsoft/ MSFT  Buy @ $211  MV: $1619bn Employees: 163,000  Next figures: 22 October 2020  Times recommended: 14  Price when first recommended: $75.7″We delivered record results this fiscal year, powered by our commercial cloud which surpassed $50bn in revenue for the first time, up 36pc year over year. The last five months have made it very clear that digital tech intensity is key to business resilience.

Organisations that build their own digital capability will recover faster and emerge from this crisis stronger. We are seeing businesses accelerate the digitisation of every part of their operations from manufacturing to sales and customer service to reimagine how they meet customer needs from curb side pickup and contactless shopping in retail to telemedicine in healthcare. That’s why we are building the full modern technology stack powered by cloud and AI, and underpinned by security and compliance to help every organisation digitally transform.

Every organisation today needs a distributed computing fabric to run essential workloads. We are building Azure as the world’s computer to support them with data centre regions — more data centre regions than any other provider, including new regions as of this quarter in Italy, New Zealand, and Poland. We have always led in hybrid and we are accelerating our innovation to meet customers’ needs wherever they are. Azure Arc is the first control plane built for a multi-cloud, multi-edge world, and we are taking it further with Azure Arc-enabled Kubernetes.

All this innovation [detailed in the report but not shown here] is driving usage. In June alone, 13.5bn transactions were processed in Azure Cognitive Services, 2.5bn messages sent, 9m hours of speech transcribed.

From Bridgestone to UnitedHealth Group to EY [Ernst & Young Global], companies are relying on Azure AI [artificial intelligence] to innovate and better meet customer needs. Now to developer tools. The role of developers is more important than ever from emergency response to recovery to reimagining the world. We have the most used and loved developer tools to build any application for any platform.

New advanced security features in GitHub use semantic analysis to scan code for vulnerabilities and GitHub discussions help software communities collaborate outside of the code base. More than 3m organisations, including the majority of the Fortune 50 now use GitHub.

With Power Platform, anyone in an organisation can rapidly create an application, build a virtual agent, automate workflow, or analyse data. Citizen developers and business decision makers at companies like Schlumberger and T-Mobile are using Power Platform to address challenges created by COVID-19. Power BI is the clear leader in business intelligence in the cloud and is growing significantly faster than competition. Ninety six percent of the Fortune 500 now use Power BI to find insights in their data.

More broadly across the Power Platform, we are seeing accelerating usage. Power Apps monthly active users increased 170pc year over year. Power Automate is up 75pc, and in just six months, Power Virtual Agents have already surpassed 6.7m sessions. Just yesterday, we launched an end-to-end return to workplace solution in Power Platform that will help organisations like CBRE [Coldwell Banker Richard Ellis – the world’s largest real estate services organisation] keep employees safe and healthy when they go back to their office, and we continue to invest in robotic process automation.

The state of California is using GitHub and Azure DevOps to power 90pc of its digital COVID-19 response infrastructure. All the 5,000 engineers at Autodesk rely on GitHub to break down silos across the organisation. And at Etsy developers are using GitHub to deploy production — to production more than 50 times per day.

Microsoft Teams is helping people be together even when they are apart. It’s the only solution with meetings, call, chat, content, collaboration with Office, as well as, business process workflows in a secure, integrated user experience. We are reimagining every aspect of the meetings experience with new capabilities like Together Mode and the Dynamic stage to help people feel more connected and reduce cognitive load. We expanded the gallery view in Teams so that people can see and interact with up to 49 participants at a time and breakout rooms and live reactions will help people build social capital in a virtual world.

Deeper integration between Teams and Power Platform brings an integrated data platform, Microsoft Dataflex for easier, faster application creation and deployment, enabling a new category of enterprise grid apps and chatbots and Teams. Teams is rapidly becoming the communications backbone as customers accelerate moving voice to the cloud and we are expanding Teams beyond the workplace. Making it easy to add personal Teams account on mobile so you can stay connected with friends and family across work as well as your life. Teams users generated more than 5bn meeting minutes in a single day this quarter and we are seeing increased usage intensity across the platform as people communicate, collaborate, and co-author content in Teams.

It is simply a breakthrough quarter for gaming. We saw record engagement and monetisation led by strength on and off-console as people everywhere turned to gaming to connect, socialise, and play with others. Stepping back, we are expanding our opportunity to empower the world’s 2bn gamers to play wherever and whenever they want on any device. Xbox Game Pass has seen record subscriber growth across both console and PC, and now, includes content from more than 100 studios.

Our xCloud gaming service is already live in 15 countries. And just last week, we announced that we will bring xCloud to Xbox Game Pass so subscribers can stream games to a phone or a tablet and play along with nearly 100m Xbox live players around the world. In content, we are delivering differentiated first- and third-party content to attract and retain gamers. Xbox Series X launched this fall with the largest launch lineup for any console ever.

And Minecraft reached a new high of nearly 132m monthly active users during the quarter. In closing, we are expanding our opportunity and investing across the full modern technology stack. Over the next decade, technology spending as a percentage of GDP is projected to double. And we are well-positioned to participate in that growth by innovating and defining the key technologies that empower every person and every organisation on the planet to build more of their own tech intensity. ” 23 July 2020

14. Netflix/ NFLX  Buy @ $494  MV: $220bn  Employees: 8,600 Next figures due: 14 October Times recommended: 18  Price when first recommended: $174.13

“We live in uncertain times with restrictions on what we can do socially and many people are turning to entertainment for relaxation, connection, comfort and stimulation. In Q1 and Q2, we saw significant pull-forward of our underlying adoption leading to huge growth in the first half of this year (26m paid net adds vs. prior year of 12m). As a result, we expect less growth for the second half of 2020 compared to the prior year. As we navigate these turbulent circumstances, we’re focused on our members by continuing to improve the quality of our service and bringing new films and shows to people’s screens.

Ted Sarandos joined Netflix over 20 years ago, and we are thrilled to appoint him to be co-CEO with Reed. “Ted has been my partner for decades. This change makes formal what was already informal — that Ted and I share the leadership of Netflix,” says Hastings.

Ted will also continue to serve as chief content officer. In addition, Greg Peters has been appointed COO [chief operating officer] adding to his chief product officer role. “We want Greg to help us stay aligned and effective as we grow so quickly around the world,” said Hastings.

We added a Q2-record 10.1m paid memberships vs. 2.7m in last year’s Q2. The positive variance relative to our 7.5m forecast was due to better-than-forecast acquisition and retention. In the first half of this year, we’ve added 26m paid memberships, nearly on par with the 28m we achieved in all of 2019. However, as we expected (and can be seen in the graph below), growth is slowing as consumers get through the initial shock of Covid and social restrictions.

For the full year 2020, we’re still targeting a 16pc operating margin. We’re currently on track to exceed 16pc although F/X (and the relative strength of the US dollar) remains a wildcard. As always, our intention is to grow our annual operating margin year over year – we’re currently targeting 19pc for 2021.

As the world slowly re-opens, our main business priority is to restart our productions safely and in a manner consistent with local health and safety standards to ensure that our members can enjoy a diverse range of high quality new content. Given the significant differences between countries (e.g., incidence of new Covid-19 cases, availability of testing, government and industry regulations), there is no one-size-fits-all approach, and we’re adapting to local circumstances. Today, we’re slowly resuming productions in many parts of the world. We are furthest along in Asia Pacific (where we never fully shut down in Korea, for example) and are now shooting live action series like season 2 of our Japanese original, The Naked Director. In EMEA [Europe, the Middle East & Africa] , we are now back in production in many countries, including Germany, France, Spain, Poland, Italy, and the UK. While we recently resumed production on two films in California and two stop-motion animation projects in Oregon and expect some more of our US productions to get going this quarter, current infection trends create more uncertainty for our productions in the US. Parts of the world like India and some of Latin America are also more challenging and we are hoping to restart later in the year in these regions.

The pandemic and pauses in production are impacting our competitors and suppliers similarly. With our large library of thousands of titles and strong recommendations, we believe our member satisfaction will remain high.

All of the major entertainment companies like WarnerMedia, Disney and NBCUniversal are pushing their own streaming services and two of the most valuable companies in the world, Apple and Amazon, are growing their investment in premium content. In addition, TikTok’s growth is astounding, showing the fluidity of internet entertainment. Instead of worrying about all these competitors, we continue to stick to our strategy of trying to improve our service and content every quarter faster than our peers. Our continued strong growth is a testament to this approach and the size of the entertainment market. ” 16 July 2020

15. Nvidia/ NVDA  Buy @ $447 MV: $278bn  Employees: 13,775 Next figures due: 19 August  Times recommended:  17  Price when first recommended: $164.70

“I also want to acknowledge the incredible efforts of our colleagues here at NVIDIA. Despite many challenges, they have barely broken stride during one of the busiest periods in our history.We completed the acquisition of Mellanox on 27 April. Mellanox is now NVIDIA’s networking brand and business unit and will be reported as part of our data centre market platform, and Israel is now one of NVIDIA’s major technology centres. The new NVIDIA has a much larger footprint in data centre computing, end-to-end and full stack expertise in data centre architectures and tremendous scale to accelerate innovation. NVIDIA and Mellanox are a perfect combination and position us for the major forces shaping the IT industry today, data centre scale computing and AI.

From micro service cloud applications to machine learning and AI, accelerated computing and high performance networking are critical to modern data centres. Previously, a CPU [central processing unit] compute node was the unit of computing. Going forward, the new unit of computing is an entire data centre. The basic computing elements are now storage servers, CPU servers, and GPU [graphics processing unit] servers and are composed and orchestrated by hyperscale applications that are serving millions of users simultaneously. Connecting these computing elements together is the high performance Mellanox networking. This is the era of data centre scale computing and together, NVIDIA and Mellanox can architect end-to-end. Mellanox is an extraordinary company and I’m thrilled that we’re now one force to invent the future together.

Against the backdrop of the extraordinary events unfolding around the globe, we had a very strong quarter. Q1 revenue was $3.08bn, up 39pc year-on-year, down 1pc sequentially and slightly ahead of our outlook reflecting upside in our data centre and gaming platforms.

As the virus spread globally, much of the world started working and learning from home and gameplay surged. Globally, we have seen a 50pc rise in gaming hours played on our GeForce platform driven both by more people playing and more gameplay per user. With many retail outlets closed, demand for our products has shifted quite efficiently to e-tail channels globally. Gaming laptops revenue accelerated to its fastest year-on-year growth in six quarters. We are working with our OEMs [original equipment manufacturers], channel partners to meet the growing needs of the professionals and students engaged in working, learning, and playing at home.

Our RTX [a graphics rendering development platform] technology stands apart not only with our two-year lead in ray tracing, but with its use of AI to speed up and enhance games using the Tensor Core silicon on our RTX-class GPUs. We introduced the next version of our AI algorithm called deep learning super sampling. In real-time, DLSS 2.0 can fill the missing bits from every frame, doubling performance. It represents a major step function from the original and it can be trained on non-gaming specific images making it universal and easy to implement. The value and momentum of our RTx GPUs continue to grow.

Let me also touch on our game streaming service, GFN [GeForce Now] which exited beta this quarter. It gives gamers access to more than 650 games, with another 1,500 in line to get on-boarded. These include Epic Games’ Fortnite, which is the most played game on GFN and other popular titles such as Control, Destiny 2 and League of Legends with Cyberpunk joining in the fall. Since launching in February GFN has added 2m users around the world with both sign-ups and hours of game playing boosted by stay-at-home measures. GFN expands our market reach to the billions of gamers with underpowered devices. It is the most publisher-friendly, developer-friendly game streaming service with the greatest number of games and the only one that supports ray tracing.

Turning to Data Centre. Quarterly revenue was a record $1.14bn, up 80pc year-on-year and up 18pc sequentially, crossing the $1bn mark for the first time. Announced last week the A100 is the first Ampere architecture GPU. Although just announced, A100 is in full production, contributed meaningful to Q1 revenue and demand is strong. Overall data centre demand was solid throughout the quarter. It was also broad based across hyperscale and vertical industry customers as well as across workloads, including training, inference and high-performance computing. We continue to have solid visibility into Q2. The A100 offers the largest leap in performance to date over our eight generations of GPUs boosting performance by up to 20 times over its predecessor. It is exceptionally versatile, serving as a universal accelerator for the most important high performance workloads, including AI training and inference as well as data analytics, scientific computing and cloud graphics.

Our accelerated computing platform continues to gain momentum underscored by the tremendous success of GTC Digital, our annual GPU technology conference, which shifted this spring to an online format. More than 55,000 online developers in AI research registered for the online event, which includes hundreds of hours of free content from AI practitioners and industry experts who leverage NVIDIA’s platforms. Our ecosystem is now 1.8m developers strong. Times like these truly test a computing platform’s metal in the utility it brings to scientists racing for solutions. Researchers around the world are deploying our GPU computing platform in the fight against COVID-19. Scientists are combining AI simulation to detect changes in pneumonia cases, sequence the virus, and seek effective bio-molecular compounds for a vaccine or treatment. ” 21 May 2020

16. PayPal/ PYPL  Buy @ $198  MV: $235bn Employees: 23,200  Next figures: 15 October 2020  Times recommended: 17  Price when first recommended: $70.97″I’m pleased to say that PayPal just had its strongest quarter since becoming an independent public company 5 years ago. Our business has never been more relevant and important than it is today. In the midst of the COVID pandemic, we have seen substantial macro changes that we believe will have a lasting and profoundly positive impact on our business. The world has accelerated from physical to digital across multiple industries, including retail. Merchants are embracing a digital-first strategy and these trends have fuelled the rapid rise of digital payments. These are durable and meaningful tailwinds, and we are fortunate to have the scale, scope of services and brand reputation to capture the benefits of these trends and extend them to our customers. Consumer behaviour has shifted in a discontinuous manner, and PayPal clearly has a unique opportunity to accelerate its path to becoming an everyday essential service.

The strength that we saw across our business in April continued to gain momentum throughout Q2. Our transactions grew by 26pc to 3.7bn, consistently rivalling the volumes that we usually experience during the 5 days between Thanksgiving and Cyber Monday. Transactions on our PayPal checkout experiences remained especially strong, growing almost 40pc year-over-year. TPV [third party verification] grew at 30pc on an FX-neutral basis, with a record $222bn of processed volume in Q2. TPV accelerated throughout the quarter, and June marked our highest growth rate since our separation from eBay.

We added a record 21.3m new customers in the quarter, increasing nearly 140pc year-over-year. To put this in perspective, this quarter’s net new actives were greater than our total net new actives in 2016. Nearly 1.7m merchants signed up for PayPal in Q2, and Honey [Honey Science Corporation, the makers of a deal-finding browser add-on and mobile application acquired by PayPal for $4bn] net new actives were nearly 3x that of Q1. Importantly, we continue to see increased levels of engagement. Our 10-day adoption rate for our newest cohorts grew by 20pc to 30pc over last year. And across our PayPal base, our daily active users have accelerated by almost 40pc from last year. We ended Q2 with 346m active accounts and with over 26m merchant accounts. Given our momentum, I believe that we will add approximately 70m net new actives this year.

In the first half of 2020, the penetration of e-commerce as a percentage of retail sales outpaced prior external forecast by an astonishing 3 to 5 years. In this environment, the demand for our products and services has dramatically increased and unleashed multiple opportunities. We are focused on several key initiatives to fully leverage this unique moment in time. First and foremost is our push to accelerate in-store contactless payments. Both consumers and merchants are rapidly moving towards digital payments across their online and off-line experiences. This is an existential issue for merchants, who realised that reopening their retail stores depends on touchless forms of payments to keep both their employees and customers safe and healthy. There are numerous market research studies highlighting that consumers no longer want to handle cash or other forms of payments that require any physical touch at checkout. We are significantly investing to accelerate our presence in all forms of omnichannel commerce, from point-of-sale in-store to buy online and pick up in store, order ahead, pay at table and home delivery. In addition to iZettle contactless cards and integration with both Google Pay and Samsung Pay, we announced that our QR code functionality is now available across 28 countries for small and micro merchants. And we are working with leading retailers throughout the U.S. and Europe to aggressively roll out an integrated point-of-sale QR solution beginning this quarter with expansion planned throughout the year.

Our rapidly increasing scale makes us highly relevant to merchants of all sizes and provides us with large sets of data to offer customised services and solutions. Over the last few years, we have developed, acquired and grown a strong and diverse portfolio of capabilities that address many of the current needs of our merchants. These range from end-to-end digital payment processing to sophisticated risk management and shopping tools that ultimately help to drive increased sales and engagement so that our merchants can thrive in the era of digital commerce. And it’s the combination of these assets together that provides unique competitive differentiation for our enterprise merchants, channel partners and small business customers. Providing merchants with a comprehensive, consistent, simple and unified experience remains a guiding principle for us as we continue to add new products and services. And as is evident by the number of merchants signing up for PayPal, our integrated platform has never been more relevant or needed.

This is our time, and we intend to seize the moment. Our products and services have never been more important, and we are ready and well positioned to capture the opportunities that lie ahead of us. ” 29 July 2020

17. Salesforce.com/ CRM  Buy @ $200  MV: $181bn Employees: 52,000  Next figures: 25 August 2020  Times recommended: 5  Price when first recommended: $163″We’re developing the contact tracing app for Rhode Island, we saw we needed to deliver several products now to mitigate the spread of the virus and we needed to do it rapidly, not only for our public sector clients, but for our commercial clients as well. Customers are asking for automation to facilitate the return to work safely including the contact tracing, shift scheduling, workforce assessment, a command centre for the crisis, and this was the genesis of our work.com platform, which has rapidly become a significant part of our public sector pipeline and actually a meaningful part of our overall pipeline. We’ve been hugely surprised.

And while all of this was happening, we also delivered $4.87bn in revenue, up 30pc year-over-year. We delivered $1.86bn in operating cash flow. Now, that was down slightly year-over-year due to many of the actions that I just reviewed in response to the pandemic and as I mentioned earlier, we also provided some customers temporary financial flexibility. We also incurred some incremental business expenses such as the one-time commission guarantee for our sales team that I mentioned.

We expect these expenses to be largely, I would say, wholly encapsulated in the first quarter. We have great confidence that our investments — we already see it in our employees, our customers, our communities in the first quarter, well, they’re benefiting us. They’re benefiting us now in the short-term, the long-term with tremendous strength and tremendous growth and for the fiscal year 2021, we’re updating our guide of approximately $20bn representing 17pc projected growth year-over-year and we believe this guide is very appropriate given the current biological and economic environment worldwide.

Our ability to execute globally with speed through the adverse conditions of March and April gave us tremendous confidence we can operate successfully in any environment at any time. It was incredible. We demonstrated that we have the ability to innovate and meet rapidly changing customer demands and needs under any circumstance. And the last few months affirm the strengths we have in our amazing customer relationships and our ability to innovate at scale and operate across different industries and geographies, companies of all sizes and with Customer 360, well, it was clear to us, we have the most complete CRM product portfolio to enable digital transformation of any company.

I was excited to see in the quarter and for the seventh year in a row, IDC [International data Corporation] has ranked Salesforce as the number one CRM [customer relationship management software provider]. We gained more share in 2019 and we’re now seeing continuous improvement in our businesses, in our bookings, in our pipeline month-to-date, but we’ve been really surprised by our pipeline growth, it’s been incredible and our pipelines for the second quarter and the fiscal year are really strong.

I’ve been on more sales calls with more CEOs in the last two months than at any time in my career and there is universal agreement among them. Digital transformation, well, this isn’t a want to have, it’s a must have. Companies and organisations and governments around the world have a digital transformation imperative like never before and many are accelerating their plans for digital first, work from anywhere environment.

Fortune’s recent survey of Fortune 500 companies found three-quarters of CEOs believe this crisis is going to force their companies to accelerate their technological transformation. I mentioned Jeff McElfresh of AT&T. He is the first one who said that to me. He was the first one who got on the phone with me and said we’re going to accelerate our digital transformation at AT&T. And I believe that Salesforce has never been more relevant or more mission critical to more organisations. No one is better positioned than Salesforce to accelerate out of this crisis and bring customers into the new normal. ” 29 May 2020

18. Shopify/ SHOP  Buy @ $1052  MV: $125bn Employees: 5,000  Next figures: 3 November 2020  Times recommended: 17  Price when first recommended: $118.84″Over the past few months, we’ve seen the COVID-19 pandemic fundamentally shift the way businesses and consumers interact. It has catalysed e-commerce, introducing major changes in buyer behaviour and pulling forward what retail would look like in 2030 into 2020.

Many merchants were caught off guard, and we knew that Shopify needed to act fast to help them survive. So from late March through the second quarter, we dialled up our urgency to enable independent businesses to adapt and compete in this new reality. This urgency helped more merchants not just survive, but thrive in a period of major upheaval. I cannot recall a time in our history when we have shipped so many features in such a short period of time, helping so many merchants recover and many others reach new levels of success.

As a result, Q2 GMV [gross merchandise value] growth accelerated to its highest level since before our 2015 IPO, driving Shopify’s cumulative GMV to over $200bn. Stores selling on Shopify sold 1.5 times what they did in Q4 of last year, the seasonally strongest quarter of the year, and that number of stores is growing all the time.

In Q2, Shopify hosted its first virtual company event, Shopify Reunited, which attracted more than 50,000 viewers, far more than we would have been able to reach with our annual in-person event. Our new product and feature announcements span the online store, multi-channel capabilities, retail, shipping and finance, all geared toward helping merchants navigate and quickly adapt to a rapidly changing commerce landscape.

Our upcoming buy now pay later product, Shop Pay Instalments will let merchants give buyers more options by paying in instalments with no interest and no fees. Working through our partner, Affirm, we will offer a product that can help merchants to sell more by increasing cart size, and sales conversion rates. Shop Pay Instalments will be integrated into our accelerated checkout Shop Pay, which offers four times faster checkout and close to two times higher conversion than regular checkout options, providing a frictionless experience for merchants and their buyers. Since its launch, Shop Pay has facilitated cumulative GMV of more than $11bn.

Over 150m emails have now been sent through email campaigns since Shopify E-mail launch in Q1. Shopify Plus merchants experienced an exceptionally strong second quarter. More brands joined Shopify Plus this quarter than ever before as merchants from lower-level plans grow their sales and upgrade and more large brands seek to scale their businesses in an agile cost-effective manner. This is especially critical right now as digital commerce accelerates and an uncertain macroeconomic environment persists.

The versatility and dedication of our partners truly highlights the strength and quality of the Shopify ecosystem. Technology has democratised entrepreneurship and everyone’s ability to build a successful business. The acceleration of digital commerce has pushed this opportunity forward, an opportunity that Shopify has been building toward for over 15 years. With the ongoing COVID-19 pandemic, the continued uncertainty in our macroeconomic environment and the growing momentum in the fight for equality, Shopify’s role to level the playing field for all entrepreneurs has never been more clear.

Our mission has always been to make commerce better for everyone and Shopify is working harder than ever to pull entrepreneurs forward into the future that is emerging. ” 30 July 2020

19. Square/ SQ  Buy @ $148  MV: $64bn Employees: 3,835  Next figures: 4 November 2020  Times recommended: 12  Price when first recommended: $39.51″In June, cash app had more than 30m active customers transacting on our service.

And in July, we expect to achieve gross profit growth of more than 200pc year over year. We saw our customers increasingly use their cash card as their primary spending device. seven million people paid with their cash card in June, double compared to last year. We also saw an increase in people using direct deposit for recurring paychecks, strengthened by stimulus and unemployment checks and tax refunds.

As I mentioned earlier, our sellers have had to navigate an immense amount of uncertainty and challenges.

They’ve used our ecosystem to reach their customers in new ways. And in the second quarter, GPV [gross payments volume] from online channels was up more than 50pc year over year. One in three new online sellers on-boarded in the second quarter were entirely new to Square, and many of these sellers adopted other parts of our ecosystem, including in-person commerce.

We’re also seeing an increase in contactless payment as customers don’t want to use paper cash due to COVID risk. In March, one in 12 of our sellers were cashless. By the end of June, that shifted to one in four of our sellers operating cashless.

We launched on-demand delivery functionality, which enables sellers to take control of their fulfilment process by offering delivery to their customers directly from their websites. Our sellers gained the benefit of Square’s scale by retaining more of the economies compared to using a third-party delivery service. During the quarter, we facilitated Paycheck Protection Program loans, providing a financial lifeline to more than 80,000 small businesses around the country for a total of $873m in PPP loans. Through the program, we reached traditionally underserved sellers.

The average PPP loan through Square Capital was less than $11,000 or one-tenth the average small business administration loan.

There are three topics I’d like to cover today: first, a look at our performance in the second quarter, where trends for both cash app and seller improved each month during the quarter; second, an update on our business in July, where seller showed signs of stability and cash growth further improved; third, the compelling opportunity we see to invest in each of our ecosystems. Overall, in the second quarter, gross profit was $597m, up 28pc year over year or 32pc growth, excluding Caviar (a sold food delivery business). Net loss was $11m, and adjusted EBITDA was $98m.

For cash app, we saw strong growth with gross profit of $281m, increasing 167pc year over year as our teams continue to focus on network growth and driving engagement. As Jack mentioned, we saw an uplift in customer acquisition with more than 30m monthly transacting active customers in June. In the second quarter, these customers were transacting more than 15 times per month on average or every other day, which is up nearly 50pc from a year ago.

We saw customers join cash app for our ecosystem of products and features. In the second quarter, new cohorts of cash app customers had higher attach rates to products beyond peer-to-peer payments, such as cash card, Boost, direct deposit and bitcoin investing. This adoption has driven higher lifetime value. Customers who use two or more products generated two to three times the revenue of customers who only use peer to peer for our seller ecosystem.

Seller GPV trends improved sequentially each month from April through June. Three factors to call out here: First, we’ve invested in building out our omnichannel capabilities over the past two years and have seen sellers utilise our broader ecosystem, particularly in these dynamic times. Our online strategy includes a variety of channels that serve sellers of all types and sizes, connecting them with buyers through web and mobile.

In the second quarter, GPV from online channels was up more than 50pc year-over-year and made up more than 25pc of our Seller GPV, up from 14pc of Seller GPV a year ago. Second, while card-present volumes were down 38pc year over year in the quarter, we saw significant improvement in card-present volumes sequentially each month as certain states relaxed shelter-in-place restrictions. Third, our contactless hardware has empowered our sellers to adapt to social distancing measures and has been an important differentiator for our ecosystem. Beginning in mid-May, we offered promotional pricing on our hardware and saw a significant uplift in unit sales per Square Register and Square Terminal through the end of the quarter.

In our international markets, we saw strong GPV growth of 40pc year over year, which improved moderately compared to June.

Finally, we believe now is a compelling opportunity to invest in both of our ecosystems. Compared to the second quarter, we’re investing an incremental $100m in the third quarter across non-GAAP operating expenses for product development, sales and marketing, and general and administrative expenses. The significant majority of this investment will be on sales and marketing. As we have continued to be encouraged by recent acquisition trends and see a compelling opportunity to acquire new customers, we intend to closely track performance to be dynamic with our spend, including increasing spend if we see strong results.

Across both ecosystems, we have historically seen strong returns on our acquisition spend of at least three times within three years of acquiring a cohort. For cash app, we’ll look at new and creative marketing strategies to reach more customers and further engaging existing customers as we continue to rapidly scale the network. For seller, incremental investment will primarily focus on brand and ecosystem awareness marketing campaigns and adding to our sales and account management teams. In the second quarter, we saw strong trends in our acquisition as new seller cohorts generated higher gross profit in their first five 5 weeks post onboarding compared to new seller cohorts in the prior-year period.

We’re making a deliberate decision to invest given the recent momentum we’ve seen. This is a unique moment to reach new customers with our differentiated products, and we believe this approach will drive long-term, sustainable growth for Square. ” 6 August 2020

20. UnitedHealth/ UNH  Buy @ $316  MV: $299bn Employees: 325,000  Next figures: 20 October 2020  Times recommended: 1  Price when first recommended: $293″UnitedHealthcare and Optum have both experienced the effects of an unprecedented decline in healthcare services. Among early actions we undertook to help people were opening new enrolment periods so more people could be covered, waiving all consumer COVID-19 diagnostic and treatment costs, accelerating $2bn in needed funding to care providers, and providing over $1.5bn in direct consumer and customer assistance, including premium forgiveness and suspension of member cost sharing to help people manage their health conditions. These amounts are in addition to the $1bn in estimated rebates to be paid in coming periods.

As we speak with you today, care access patterns are nearing more normal levels, an encouraging sign for people’s health. We see the system operating just short of its normal baseline now, far above the lows experienced as the second quarter began. We currently expect care access patterns, while somewhat more volatile than in the past, to moderately exceed normal baselines in the second half as people seek previously deferred care, and a pandemic with high testing and treatment costs per affected consumer is expected to continue to run its course throughout 2020 and into 2021.

We are further advancing broad health equity initiatives tapping into our data, information and analytics capacities to guide scientific efforts to help eliminate longstanding health disparities. This is a course we have pursued for many years and are now even more intentional as we see underserved populations disproportionately impacted by this health crisis. We established an innovative community-based care model to provide COVID-19 testing, education and other necessary services to some of the highest risk and least served communities in the country. We are focusing on locations with high mortality along with local community challenges, including poverty, crowding, food insecurity, homelessness, and other existing social determinants of health. Our service includes special deployments in the underserved communities of Philadelphia, Los Angeles, and Orleans Parish, alongside many other similar communities we serve through our core Medicare and Medicaid programs.

The COVID-19 crisis has accelerated the adoption of new technologies and approaches to care. We’re serving people where they want to be served and more often in the home, which is becoming a preferred additional care setting, through new innovative digital offerings. At peak care system closure in April, UnitedHealthcare facilitated more than 4m digital care visits, the number of visits we enabled in January. We expect digital and home care to persist and expand in coming years. We are rapidly assembling our next generation comprehensive platform, leveraging the digital signalling and monitor capacities of Vivify, the market-leading engagement capabilities of Rally, our AI-enabled individual health record, the pharmacy e-commerce capabilities of OptumRx on community-based clinical resources, and importantly a proprietary, scalable direct to your own doctor’s telemedicine platform.

Second quarter earnings increased 22pc year-over-year.

During the second quarter, growth in sales of individual polices and Medicaid membership accelerated, the latter as states eased redetermination requirements to ensure sustainable coverage for people. We were also awarded contracts to serve Medicaid members in Kentucky in 2021, serve the Medicaid population in Indiana, and are pleased to continue serving in Philadelphia.

We are maintaining our full year earnings per share outlook in anticipation of the delivery of previously deferred and potentially even higher acuity care as well as continued costs to address COVID-19 in the second half of the year. We are encouraged by the rapid pacing of the reopening of care delivery systems and are proactively working to help people quickly obtain the care they need.” 15 July 2020

 

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