Nexus 7 Popularity Will Drive Gains For Nvidia [View article]
Thanks for the comment. One day price movements are fairly unpredictable. Lots of people are nervous about semiconductor stocks, although other names in the sector seem to be performing better. In any event, I like to think of it as a buying opportunity!
J.C. Penney: Still Looking For A Bottom? [View article]
I've been talking about these issues for a while, and they are real problems. The reason why cash is so low is that JCP is having trouble moving inventory. The company can free up cash if it cuts the inventory to more appropriate levels given the lower level of sales and streamlining of the assortments (and management says it plans to do this). But they appear to have over-ordered and so it may take a few more quarters to get inventory down to where it should be.
United Continental: Goldman's Sell Rating Unwarranted [View article]
I think the main reason JetBlue-Virgin America makes sense is because VA is sub-critical mass. It's not a deal that JetBlue has to do, but it's worth considering at the right price.
Buying Frontier, by contrast, would suggest desperation on JetBlue's part. Frontier's network is now centered on a single hub in Denver, where it is the #3 player in a very competitive market. United and Southwest are there to stay, and I think JetBlue would have difficulty turning a consistent profit in Denver. There's not enough O/D traffic in Denver for JetBlue's model, in my opinion.
United Continental: Goldman's Sell Rating Unwarranted [View article]
Thanks for the comment. I'm not too worried about QE. More monetary easing will help the economy and probably increase revenue, but also push fuel prices up, while tighter monetary policy could cause the economy to stall but would push oil prices lower.
At the end of the day, I think airlines are naturally hedged against that sort of problem. The way that the airline industry has always killed itself is through overexpansion. We're not seeing that right now, which is why airlines (finally) seem like a good investment opportunity.
United Continental: Goldman's Sell Rating Unwarranted [View article]
Probably true, although there are still some smaller players out there that could potentially merge with each other or with bigger carriers. I personally think that JetBlue (concentrated on the east coast) and Virgin America (concentrated on the west coast) ought to merge. They have a common aircraft type, and similar focus on providing a higher level of customer service than most competitors today.
United Continental: Goldman's Sell Rating Unwarranted [View article]
Thanks for the comments. This is all true to some extent. But I think that United will get all of its work groups integrated in the next year or so and has been making steady (although slow) progress on that front over the past year. If at the end of the next year there is still no progress, that would be cause for concern. Otherwise, your comments simply suggest that United has a lot of upside left from the merger, which implies significant future earnings growth.
United Continental: Goldman's Sell Rating Unwarranted [View article]
I am quite aware of that. You could say the same thing about US Airways though, and it hasn't noticeably hurt them. The vast majority of the benefits comes from redeploying the aircraft, which they can already do.
J.C. Penney: Still Looking For A Bottom? [View article]
I don't think your comment is entirely fair. Ron Johnson is changing the vast majority of the merchandise at J.C. Penney; he's not trying to sell old wine in new bottles.
On the other hand, you are right that JCP may not have hit bottom yet. But the stock has already dropped by more than half, as I mentioned in the article, and so if you think the company will eventually turn itself around, the price is starting to look more appealing. But after all, I don't think it's worth the risk until the company shows some signs of improvement.
Sounds good. By the way, I agree that the 5 year earnings projections are ridiculously arbitrary... particularly for airline stocks. I do expect LCC to post good numbers and reasonably strong guidance this month. But I think HA is going to blow Q3 estimates out of the water with their guidance, particularly after seeing the very strong June traffic results this morning.
Apple Poised For Continued Growth, But Not Because Of iPad Mini [View article]
I'm sure they'll find something to upgrade on the next iPad. After all, I doubt many people felt they needed a "retina" display at this time last year... In the short-medium term, I'm not worried about the iPad getting stale.
Apple Poised For Continued Growth, But Not Because Of iPad Mini [View article]
Perhaps to some extent. But I think Apple is deliberately keeping the two products separate; it allows them to sell more devices! The iPad has less functionality than any Mac product would, but it allows Apple to sell at a much lower price point and really make it a mass market device.
Thanks for the reply. Best of luck to you as well.
Just one comment on the PEG: if you are going to count this year's growth over last year, then you should use last the P/E based on last year's adjusted earnings (which is over 20). Otherwise you're double counting the current year in both the earnings and growth column...
Thanks for the detailed comment. I had already seen your comment on the other article when I wrote this. As for the technical analysis, I'm simply not a big believer in the technical stuff. I have a couple of tools that I look at, but I'd say it accounts for less than 10% of my decision making. If technical trading was foolproof, everybody would be doing it (and thereby negate the effect). That said, having a trailing stop does sound like a good idea to lock in profits.
I think it's definitely sensible to sell only a portion of your shares at this point, especially since you're playing with "house money" off the recent run.
As for the fundamental points: 1) in practice the effect of a 45 cent move in jet fuel prices would be smaller, which is why I assumed constant revenue. Cutting capacity only really helps offset fuel increases by firming up ticket prices.
2/3) I basically agree, assuming relatively stable fuel earnings will be above $3, maybe as high as $4.
4) I think the current price is reasonable and there is still upside as long as conditions stay reasonably strong. On the other hand, the company still has a pretty weak balance sheet, and it will take several years to fix that. Furthermore, LCC has a full valuation allowance on its deferred tax assets from prior year losses; as a result the company has an effective tax rate of 0. If the company maintains its profitability for the next few years, it will have to start paying taxes again, which will immediately lower income by almost 40%.
5) I don't see how you get to a .05 PEG for LCC. Based on current year P/E of 4, that implies an 80% growth rate. 10-15% growth is probably a best case scenario. Furthermore, as noted above, EPS will drop by almost 40% when the tax valuation allowance is reversed (or used up). By contrast, Hawaiian is growing ASMs in the teens on annual basis, and could very easily see 20% annual earnings growth over the next 5 years. Meanwhile, it trades at the same P/E of 4, and that already includes tax liability. I also think Hawaiian's balance sheet is somewhat better.
Apple Poised For Continued Growth, But Not Because Of iPad Mini [View article]
Interesting. I doubt that many hotels will follow in providing free iPhones/iPads for their guests. On the other hand, it's clear that Apple is the undisputed tech leader, insofar as it's always an Apple product used for a scheme like this.
Nexus 7 Popularity Will Drive Gains For Nvidia [View article]
Nexus 7 Popularity Will Drive Gains For Nvidia [View article]
J.C. Penney: Still Looking For A Bottom? [View article]
United Continental: Goldman's Sell Rating Unwarranted [View article]
Buying Frontier, by contrast, would suggest desperation on JetBlue's part. Frontier's network is now centered on a single hub in Denver, where it is the #3 player in a very competitive market. United and Southwest are there to stay, and I think JetBlue would have difficulty turning a consistent profit in Denver. There's not enough O/D traffic in Denver for JetBlue's model, in my opinion.
United Continental: Goldman's Sell Rating Unwarranted [View article]
At the end of the day, I think airlines are naturally hedged against that sort of problem. The way that the airline industry has always killed itself is through overexpansion. We're not seeing that right now, which is why airlines (finally) seem like a good investment opportunity.
United Continental: Goldman's Sell Rating Unwarranted [View article]
United Continental: Goldman's Sell Rating Unwarranted [View article]
United Continental: Goldman's Sell Rating Unwarranted [View article]
J.C. Penney: Still Looking For A Bottom? [View article]
On the other hand, you are right that JCP may not have hit bottom yet. But the stock has already dropped by more than half, as I mentioned in the article, and so if you think the company will eventually turn itself around, the price is starting to look more appealing. But after all, I don't think it's worth the risk until the company shows some signs of improvement.
Time To Take Profits In US Airways [View article]
Apple Poised For Continued Growth, But Not Because Of iPad Mini [View article]
Apple Poised For Continued Growth, But Not Because Of iPad Mini [View article]
Time To Take Profits In US Airways [View article]
Just one comment on the PEG: if you are going to count this year's growth over last year, then you should use last the P/E based on last year's adjusted earnings (which is over 20). Otherwise you're double counting the current year in both the earnings and growth column...
Time To Take Profits In US Airways [View article]
I think it's definitely sensible to sell only a portion of your shares at this point, especially since you're playing with "house money" off the recent run.
As for the fundamental points: 1) in practice the effect of a 45 cent move in jet fuel prices would be smaller, which is why I assumed constant revenue. Cutting capacity only really helps offset fuel increases by firming up ticket prices.
2/3) I basically agree, assuming relatively stable fuel earnings will be above $3, maybe as high as $4.
4) I think the current price is reasonable and there is still upside as long as conditions stay reasonably strong. On the other hand, the company still has a pretty weak balance sheet, and it will take several years to fix that. Furthermore, LCC has a full valuation allowance on its deferred tax assets from prior year losses; as a result the company has an effective tax rate of 0. If the company maintains its profitability for the next few years, it will have to start paying taxes again, which will immediately lower income by almost 40%.
5) I don't see how you get to a .05 PEG for LCC. Based on current year P/E of 4, that implies an 80% growth rate. 10-15% growth is probably a best case scenario. Furthermore, as noted above, EPS will drop by almost 40% when the tax valuation allowance is reversed (or used up). By contrast, Hawaiian is growing ASMs in the teens on annual basis, and could very easily see 20% annual earnings growth over the next 5 years. Meanwhile, it trades at the same P/E of 4, and that already includes tax liability. I also think Hawaiian's balance sheet is somewhat better.
Apple Poised For Continued Growth, But Not Because Of iPad Mini [View article]