Communications

Verizon

Verizon Jonathan Poland

Verizon Communications Inc. (VZ) is a leading telecommunications company based in the United States. Verizon is one of the largest providers of wireless communication services, broadband internet, and entertainment services in the country. The company was formed in 2000 through the merger of Bell Atlantic Corp. and GTE Corp., both of which were former regional Bell operating companies (RBOCs). The company is headquartered in New York City.

Verizon operates through two main segments: Verizon Consumer and Verizon Business. The Consumer segment provides wireless and wireline services, including data, voice, and video communication services, as well as device sales and connected devices like wearables and smart home devices. The Business segment, on the other hand, offers wireless and wireline services to enterprises, governments, and wholesale customers, including services like Internet of Things (IoT), cloud, security, and managed network services.

Verizon has been a major player in the rollout of 5G technology, investing heavily in infrastructure and spectrum to expand its 5G network across the United States. The company has also been involved in several acquisitions to expand its service offerings and improve its technological capabilities, such as its acquisitions of AOL in 2015, Yahoo in 2017 (which together formed Oath, later renamed Verizon Media), and video conferencing platform BlueJeans in 2020. In 2021, Verizon announced the sale of Verizon Media to private equity firm Apollo Global Management for $5 billion.

as of April 18, 2023
The growth has been slow on the top line, but the company has squeezed a lot of profit out on the bottom line by keeping its operating costs pretty level for the last decade. This has helped it book over $175 billion in total net income since 2013. It generates a staggering $1.16 million per employee in top line revenue and over $180,000 in profit, after tax. To do it, however, Verizon had to increase its long-term debt from $89 billion to over $143 billion – not an insignificant amount. So, despite retained earnings skyrocketing from just under $2 billion in 2013 to over $82 billion currently, that hasn’t translated into any additional market value. The only silver lining is that on all of its debt, now totally $181 billion, Verizon only pays around $3.6 billion in interest expenses. Bottom line: debt isn’t good no matter how cheaply it is acquired.

Gaia, Inc.

Gaia, Inc. Jonathan Poland

Gaia, Inc. (GAIA) runs a digital subscription service for video content and an online community that serves an underserved audience in the United States, Canada, Australia, and beyond. The company’s digital content library contains roughly 10,000 titles in Spanish, German, and French, all of which are available to subscribers on internet-connected devices. In addition to this, the company offers a range of specialized channels that cover various topics, such as the Yoga channel, which provides access to yoga and other movement-based classes, the Transformation channel, which offers content related to personal development, spiritual growth, and consciousness, the Alternative Healing channel, which features content focused on nutrition, holistic healing, and alternative medicines, and the Seeking Truth channel, which brings in category-leading experts in the alternative media world, including speakers, authors, and other professionals. Gaia, Inc. also manages the gaia.com and gaiamtv.com websites. The company supplements its own content with content from long-term licensing agreements.

as of February 17, 2023

Maybe it’s because I’ve been going down the UFO rabbit hole recently, but GAIA popped up on my radar and even though it’s a super small cap and I do not own any of the stock, it’s an interesting player in the content game. 86% gross margins and priced at just 75% of revenue makes it attractive. The content is a little alternative with a focus on spirituality and ancient myths, but that stuff could become more main stream. Only time will tell.

Lumen Technologies

Lumen Technologies Jonathan Poland

Lumen Technologies, Inc. (LUMN) is a facilities-based technology and communications company that provides a variety of integrated products and services under the Lumen, Quantum Fiber, and CenturyLink brands to customers in the US and around the world. The company is divided into two segments, Business and Mass Markets, and offers cloud services, IT solutions, unified communication and collaboration solutions, colocation and data center services, content delivery services, managed security services, IP and data services, fiber infrastructure services, private line services, traditional time division multiplexing voice services, synchronous optical network-based Ethernet, legacy data hosting services, and conferencing services.

as of February 8, 2023

Pivoting is hard and while the company still generates a great deal of profit, and a revised allocation strategy will help it be flexible and spur growth, it carries $26 billion of debt. More importantly, the board eliminated the annual dividend and authorized a two-year $1.5 billion share buy back program instead. The short term price flux won’t matter as long as the company can pay down debt and boost EPS. By the end of 2023, Lumen’s shares outstanding should be down to 900 million with net income at $1.4 billion. Furthermore, Lumen’s gross margin is 56%, return on equity sits at 17% and the net margin is at 11%. These are all more than respectable numbers for a company in a transition phase.

AMC Networks

AMC Networks Jonathan Poland

AMC Networks (AMCX) is an entertainment firm that manages and runs a collection of video entertainment products and a platform that are offered to viewers, distributors and advertisers globally and domestically. The firm operates through two divisions: Domestic Operations and International and Other. Domestic Operations handles various national programming networks, like AMC, WE tv, BBC AMERICA, IFC, and SundanceTV. It also provides streaming services including Acorn TV, Shudder, Sundance Now, ALLBLK, HIDIVE and AMC+ among others. The division also operates a film distribution business under the name IFC Films.

as of February 8, 2023

AMC Networks reaches over 350 million subscribers in more than 125 countries. With that level of attention it will be around for years to come. In terms of financial performance, AMC Networks has seen steady growth. In the last 12 months, the company reported revenue of $2.94 billion and net income of $289 million. It also has a book value of $23.33 per share and earns an incredible 25% return on equity. The company has total cash in excess of $790 million and total debt of $2.98 billion, which is not ideal but far from detrimental. The price-earnings ratio is also incredibly low at just 2.34 and it generates over $1.6 million per employee. Should be priced above book value, at the very least.

Nextdoor Holdings

Nextdoor Holdings Jonathan Poland

Nextdoor Holdings (KIND) is a social networking platform for local communities. The platform allows residents of a neighborhood to connect and communicate with each other, share information about local events, and exchange recommendations for local services. The platform is designed to be a private and secure online community for each neighborhood, accessible only to verified residents. Nextdoor was founded in 2008 and is headquartered in San Francisco, California. In 2021, the company became a public company through a merger with SPAC Social Capital Hedosophia Holdings Corp. V and began trading on the New York Stock Exchange under the ticker symbol “KIND.”

as of February 7, 2023

Nextdoor spends way too much on research and development. That expense alone is 68% of gross profit, which stands at 83%. In other words, Nextdoor needs new management because it should be profitable. Market capitalization around $900 million, with a net cash position approaching $550 million, investors are really paying just $250 million for the entire business. That is roughly 1.1 times annual revenue or 0.40 times tangible book value. Someone is going to figure this one out and there’s plenty of runway before the company does.

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