麦格理-美股-互联网行业-2019年Q2美国大型互联网企业预览-2019.7.23-21页.pdf

Please refer to page 19 for important disclosures and analyst certification,or on our website July 2019 United States EQUITIES Stocks under our coverage Source:Macquarie Capital(USA),July 2019 Analysts Macquarie Capital(USA)Inc.Benjamin Schachter +1 212 231 0644 Ed Alter +1 212 231 1272 Angela Newell +1 212 231 6600 U.S.Large-Cap Internet 2Q19 Preview:Headlines Matter;Expect Much Attention on Mid-Cap Internet Names Key points Regulatory concerns may limit multiple expansion for large-cap Internet;we think investors most focused on mid-cap names in NT.We are most bullish on MTCH,FB,and ZG heading into the 2Q prints.Given the recent news on MTCH,there will clearly be significant attention around app economics this earnings season.Event Post EBAY,Internet earnings continue w/FB,GOOG,AMZN,and TWTR this week.The Bottom Line We are most bullish on MTCH,FB,and ZG heading into the 2Q prints.While we remain positive on AMZN,GOOG,IAC,and ANGI over the LT,we are less confident in the NT trends and guidance.We remain more cautious on AAPL and TWTR(EBAY already reported).Unfortunately,regardless of fundamentals,we do think that headline risk and regulatory concerns are going to limit multiple expansion for most of the large-cap Internet names.In recent discussions with investors(including many in Europe during a recent marketing trip),we see more interest in smaller and mid-cap names where business trends and long-term opportunities are attracting a lot of attention.We see focus from investors on MTCH,ANGI,IAC,and ZG.Given the recent news on MTCH,there will clearly be significant attention around app economics this earnings season.We expect MTCH to discuss in more detail its in-app Android payments and we hope(though dont expect)that GOOG and AAPL discuss how their app ecosystem rules and regulations may evolve.This issue is critically important for game companies and many others as well.While we really like the LT TAM opportunities for both ANGI and ZG,there is less visibility NT.For ANGI,mgmt.has stated that 19 is an investment year.We expect the 2H19 ramp to be challenging and think that if certain market areas demand more time and investment,mgmt.will focus on the LT.For ZG,the investor focus will remain Zillow Offers and we suspect that trends lines there remain positive.We are still concerned over the LT trajectory of the Premier Agent business,but think the stock will work in the NT if Zillow Offers continues to perform well and mgmt.executes well on building up the ancillary businesses.Finally,we note that we are concerned that the large-cap Internet names have something of an incentive to be cautious in their comments and tone,and not draw too much attention from politicians and regulators(we fear this may remain true throughout the U.S.election cycle).AMZNOutperform$2,100GOOGLOutperform$1,150FBOutperform$215MTCHOutperform$74ANGIOutperform$21IACOutperform$285ZGOutperform$54AAPLNeutral$190EBAYNeutral$42TWTRNeutral$39RatingTarget Macquarie Research U.S.Large-Cap Internet 23 July 2019 2 AMZN:Outperform Rating,US$2,100 Target Fig 1 AMZN Macquarie Estimates vs.Consensus Source:Company data,FactSet,Macquarie Capital(USA),July 2019 ($m except per share data)While Online Stores revs and Unit Growth are expected to reaccelerate in 2Q and a record number of new Prime members joining from Prime Day could help 2H revs,we are concerned about shipping costs heading into the back half of the year.Mgmt.stated that it expects to spend an incremental$800mm in 2Q for outbound shipping costs.We expect that number will rise each quarter going forward,as AMZN increases the number of items,zip codes,and countries eligible for one-day shipping.AMZN is clearly in an investment cycle,and while one-day shipping will not be cheap,we view this as a long-term positive.Expectations are for reacceleration in units/core Although Online Stores revenue growth has been decelerating along with Unit Growth,the expectation is for reacceleration in 2Q.AMZN expects 2Q19 revs to be$59.5-$63.5B,y/y growth of 13%-20%.Mmented in 1Q that it was already seeing good order trends,which was factored into the guide where the high-end would be a re-acceleration of growth.The overall optics around unit growth is not encouraging,but there are important factors working against the unit growth metric but in favour of AMZNs business overall.Unit growth includes the sales of single units of songs,videos,and books,but not subscription services like Amazon Music Unlimited,Kindle Unlimited,and Audible.Whole Foods is also not included in unit growth,as well as no contribution from advertising or AWS.New Prime members from Prime Day could help 2H19 revs Amazon signed up more new Prime members on July 15 than any previous day,and almost as many on July 16,making these two days the biggest ever for Prime member signups.This record increase could help 2H19 revs.We note that concerns around Prime saturation have been long held and yet AMZN continues to see record growth.We are concerned about shipping costs heading into 2H19 2Q guidance includes$800mm of incremental outbound shipping costs and will likely continue to ramp from there throughout the year as more capacity is added.The big news on the 1Q call was AMZN announcing it will be transitioning free two-day shipping for Prime members to free one-day shipping throughout the year.Mgmt.said the ultimate goal is to offer universal one-day shipping to all Prime members as two-day is today.Advertising still a bright spot in terms of margin We remain bullish on AMZNs advertising plans,and we see AMZN advertising as a must-have for virtually all 3P sellers as well as large brands.Mgmt.still views advertising as early and continues to see pick-up by both vendors,sellers,and authors.Mgmt.sees overall traffic to the website as a lever for advertising,also calling out international advertising growth as an aid to international operating margin in 1Q.However,while investors expect strong growth from advertising,the growth is slowing.2Q19E3Q19EMacquarieStreet%DiffVarMacquarieStreet%DiffVarNet Revenue$62,701$62,4730.4%$229$67,029$67,246-0.3%($216)QvQ Chg5.0%4.6%-6.9%7.6%-EPS(GAAP)$5.67$5.561.9%$0.11$6.13$6.65-7.9%($0.52)2019E2020EMacquarieStreet%DiffVarMacquarieStreet%DiffVarNet Revenue$273,737$275,222-0.5%($1,485)$315,423$323,474-2.5%($8,051)YvY Chg17.5%18.2%-15.2%17.5%-EPS(GAAP)$26.26$27.35-4.0%($1.09)$38.12$38.48-0.9%($0.36)Macquarie Research U.S.Large-Cap Internet 23 July 2019 3 Fulfillment automation improving We have completed tours at Amazon fulfillment centers across the U.S.,including in New Jersey,California,Houston,and Boston.After observing the entire process in detail(receiving dock,robotics,stow/pick/pack stations,ship process/proprietary SLAM machines),we believe that the robotics clearly give AMZN a competitive advantage.Amazon began deploying the robots in late 2013 after its purchase of the Kiva Systems robotic company in 2012 and now employs the robots in 30 of the fulfillment centers globally,mostly in the U.S.Today,Amazon announced two new Robotics fulfillment centers in Ohio.One-day shipping eligibility will be dictated by product and zip code based on AMZNs local fulfillment capabilities,and will increase in availability throughout the year and beyond as it retools the fulfillment network to meet demand,including international markets.We are reiterating our Outperform rating and$2,100 price target.AMZN reports 2Q19 earnings on Thursday,7/25,after the close.Fig 2 AMZN 2Q19E Key Metrics Summary Source:Company data,FactSet,Macquarie Capital(USA),July 2019 ($m except per share data)Fig 3 AMZN EV/EBITDA Valuation Trends Source:Company data,FactSet,Macquarie Capital(USA),July 2019 Income Statement2Q19E%RevsY/YQ/Q2Q18A%Revs1Q19A%RevsOnline Stores$30,42549%12%3%$27,16551%$29,49849%Retail Third-Seller Services$11,73919%21%5%$9,70218%$11,14119%Retail Subscription Services$4,6357%36%7%$3,4086%$4,3427%Physical Stores$4,3987%2%2%$4,3128%$4,3077%Other$2,8965%32%7%$2,1944%$2,7165%AWS Revenue$8,60814%41%12%$6,10512%$7,69613%Net Revenue$62,701100%19%5%$52,886$59,700100%Gross Profit$26,71642.6%20%4%$22,27342.1%$25,80443.2%EBIT(GAAP)$3,6075.8%21%-18%$2,9835.6%$4,4207.4%GAAP EPS$5.67-12%-20%$5.07-$7.09-Key Metrics2Q19E%RevsY/YQ/Q2Q18A%Revs1Q19A%RevsEBITDA(non-GAAP)$9,85316%21%-7%$8,16115%$10,54318%CapEx$3,8456%19%17%$3,2436%$3,2906%FCF(CFFO-Cap Ex)$6,82111%62%nm$4,2068%($1,444)-2%FCF per share$13.55-61%nm$8.41-($2.88)-Estimated%ChgActual15X20X25X30X35X40XJul-16Sep-16Nov-16Jan-17Mar-17May-17Jul-17Sep-17Nov-17Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19Jul-19AMZN FY1 EV/EBITDAPrior-Year AverageMacquarie Research U.S.Large-Cap Internet 23 July 2019 4 FB:Outperform Rating,US$215 Target Fig 4 FB Macquarie Estimates vs.Consensus Source:Company data,FactSet,Macquarie Capital(USA),July 2019 ($m except per share data)Core advertising and user metrics still key;still positive We expect that despite horrific headlines for almost two years,usage trends remain strong.FBs user metrics(whether on Facebook or Instagram)are still key for the health of the overall ecosystem,As long as users continue to find value in FB platforms,as demonstrated by the fact that FB has 2.7b MAUs and 2.1b DAUs,we think advertisers will continue to show up.Until we see users leave,we think FB will execute with appropriate and evolving business tools and models.Commentary around Libra unlikely to be meaningful The target launch for cryptocurrency Libra is in the first half of 2020.The biggest surprise with the unveil in June 2019 was that FB will not control Libra.Instead,FB will have the larger of a single vote or 1%of the total,equal to that of the other members of the Libra Association,which includes payments(i.e.Paypal,Visa)and tech(i.e.Booking,eBay,Lyft,Uber)companies,VCs,among other diverse organizations.We worry that regulatory pushback and consumer reticence may limit the appeal and acceptance.If it works,it could usher in a new currency that will truly revolutionize financial services,but even in that case,we are unclear how FB will directly benefit in a quantifiable manner and we certainly dont know how to model it today.We will watch the space carefully,but for now,we remain quite skeptical.Regulatory risk a key concern Zuckerberg acknowledges that tighter regulations may impact the business in the near-term,but believes that improving the overall regulatory framework for the internet and increasing the trustworthiness of the internet can have a much larger positive impact.Zuckerberg said it would be positive if more countries adopted regulation like GDPR as a common framework.In terms of guidance,FB expects larger ad-targeting headwinds in 2H due to the cumulative impact from GDPR and introducing the new browsing history deletion feature.Messenger monetization still unclear FB said its shift to focus development efforts on privacy and interoperability for the messaging platforms will result in deprioritizing resources on building out monetization for messaging.Messenger is monetizing somewhat through limited advertising today,but monetization will be less of a focus area in the NT.Instagram shopping FB recently announced that it was introducing a“Checkout on Instagram”function,which is currently in beta with 25 brands.While the current Shopping feature allows businesses to show a link to purchase tagged products in pictures,the new feature will allow users to not leave the app to complete their purchases.However,this feature is part of a long-term plan for Shopping,and will not be rolled out anytime soon.It is a project that has a“very,very long lead timeNot a one year thing,this is a five to 10-year project,”said Head of Instagram Mosseri.Potential upside from margins Mgmt.called out again in 1Q that they do not want costs growing at a much faster rate than revs for a long period of time.FB lowered its expense growth guidance to 37%-45%from 40%-50%excluding the FTC fine,but reiterated its LT outlook on investment in product,infrastructure,innovation,and safety and security and their potential margin impact.However,there could be potential upside from margins.1Q19E2Q19EMacquarieStreet%DiffVarMacquarieStreet%DiffVarRevenue$14,898$14,973-0.5%($75)$16,340$16,365-0.2%($25)QvQ Chg-11.9%-11.5%-9.7%9.3%-EPS(GAAP)$1.87$1.6116.3%$0.26$2.07$1.7518.3%$0.322019E2020EMacquarieStreet%DiffVarMacquarieStreet%DiffVarRevenue$68,805$68,990-0.3%($185)$83,361$83,458-0.1%($97)YvY Chg23.2%23.6%-21.2%21.0%-EPS(GAAP)$7.16$7.55-5.1%($0.39)$7.90$8.82-10.4%($0.92)Macquarie Research U.S.Large-Cap Internet 23 July 2019 5 We are reiterating our Outperform rating and$215 PT.FB reports 2Q19 earnings on Wednesday,7/24,after the close.Fig 5 FB 2Q19E Key Metrics Summary Source:Company data,FactSet,Macquarie Capital(USA),July 2019 ($m except per share data)Fig 6 FB P/E Valuation Trends Source:Company data,FactSet,Macquarie Capital(USA),July 2019 Estimated%ChgActualIncome Statement2Q19E%of RevsY/YQ/Q2Q18A%of Revs1Q19E%of RevsAdvertising revenue$16,33799%25%10%$13,03899%$14,91299%Payments and other fees$1781%-8%8%$1931%$1651%Total Revenue$16,516100%25%10%$13,231100%$15,077100%Cost of Revenue$3,09519%45%13%$2,14016%$2,72918%Gross Profit$13,42181.3%21%9%$11,09183.8%$12,34881.9%EBIT(Non-GAAP)$7,23343.8%3%67%$7,04953.3%$4,32728.7%Non-GAAP EPS$2.22-5%91%$2.11-$1.16-2Q19E%of RevsY/YQ/Q2Q18A%of Revs1Q19E%of RevsMAUs2,418-8%2%2,234-2,376-DAUs1,588-8%2%1,471-1,562-D&A$1,5149.2%46%12%$1,0347.8%$1,3559.0%EBITDA(non-GAAP)$8,74753.0%8%54%$8,08361.1%$5,68237.7%CapEx$4,32426.2%25%13%$3,45926.1%$3,83725.4%FCF(CFFO-Cap Ex)$8,13849.3%187%49%$2,84021.5%$5,47136.3%10X15X20X25X30X35X40XJul-16Sep-16Nov-16Jan-17Mar-17May-17Jul-17Sep-17Nov-17Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19Jul-19FB FY1 P/E(Non-GAAP)Prior-Year AverageMacquarie Research U.S.Large-Cap Internet 23 July 2019 6 GOOGL:Outperform Rating,US$1,150 Target Fig 7 GOOGL Macquarie Estimates vs.Consensus Source:Company data,FactSet,Macquarie Capital(USA),July 2019 ($m except per share data)Limited Visibility As usual the visibility into the core drivers of Googles financials remains limited.After a remarkable streak of FX adj.growth above 20%,growth slowed somewhat to 19%FX adj.for 1Q,with mgmt.not pointing to any specific change or comp driving the change in growth trends.The trend lines of slowing growth from 1Q continuing is concerning,and with limited visibility into to the core drivers of the model is difficult to have confidence in the growth trends re-accelerating.If FX adj.rev growth continues to decel,we would expect multiples to contract unless there are increased disclosures to appease investors.Regulatory issues at the forefront The regulatory headlines against big tech continue at a rapid pace,and while we believe that ultimately its the actual remedies that will drive the financial impact,these headlines are real and have already impacted the stocks.The DOJ is looking at AAPL and GOOG,while the FTC is reportedly focused on FB an