Akram's Razor

Akram's Razor
Contributor since: 2010
This is one of the greatest misconceptions around this name. They have "validation data" that shows the code they wrote to recongize x lane marking has been working for x million miles w said oem. This is very different then what you think it is. And frankly little old subaru has been doing this for years and their cars have been full aeb and stopping on a dime, and they did this all in house. Might also want to look into daimler 6d vision tech which dates back to mid 90's. Mobileye does mono 2d forward facing only. Stereo tech and radar to 'sense' is pretty advanced here so if u think they havent been training cars to 'see' you got another thing coming. A lot of interesting stuff going on here. This is not some pure IP play. Well positioned no doubt, but huge misunderstanding about what it does and what is going on in space for sure.
Google Asic's been investing long/short in SOIC's since you were probably in elementary school. The perception that this is a software play is comical. You need code to enable the hardware to achieve sensory perception. U can do this many ways and one is to make a low power specilaty purpose chip. If nobody else was capable of writing these algos that would be one thing, but reality is that is not the case.
Admittedly this is one of the more amusing analysis i have ever seen. Half a trillion mkt cap by 2035? $90 bil in revenue? You do realize they simply ship an ASIC into tier 1's. The asp in 2035 for that type of chip will be $5-10. So they will need to sell 9-18 billion units that yr to hit ur target. Thats in the ballpark of 750x the addressable mkt your are forecasting out for then.
As for compeition, they sell a mono only focused asic. Judging by comments, articles, and what not nobody seems to really understand exactly what that means.
Their is nobody in chip land pushing a mono asic total solution to tier 1's. So thinking of traditional automotive chip suppliers as competitors even with recent adas chip announcements is wrong way to go about it. The competition is whoever is doing custom algo development in house. This can be mono only, mono fused with radar, stereo only, stereo fused with radar, and several other levels of fusion related work that requires custom development. The real competitor in these scenarios is the tier 1's with the in house engineers doing this work, and not their adas silicon supplier.
If i buy pet food from the grocery store, and then set up a website to sell it online at 50% below what I paid for it I will have amazing revenue growth . I will also eventually go bankrupt. The market view on rocket fuel is its dumb tech posing as smart tech, which explains the p/s multiple. This has been a generally adopted view of almost every 'ad tec'h biz to go public in last two years except criteo. View is they just spend crazy dollars to generate money losing rev growth and hence can't scale. That is the entire issue here and your article takes it pretty lightly. Essentially the market view is that the model is broken. When thats the case stocks only hard floor is zero. Shares dont need triple digit revenue growth to turn around but rather convincing evidence that they can generate free cash flow from their model.
I'd say the transct comp print and early read on same store sales far overshadows the operational headwinds at this point. Been waiting nearly 2 yr for this to start going in other direction, and at this valuation thats all that matters. Wouldn't be surprised to see this stock start to meaningfully move up in the immediate term and start trading closer to $185 for a while. Potential inflection point here.
One of the more interesting posts I have come across on SA. I'm long this stock as i bottom fished my way into it a few months ago as i've been watching them struggle for the past year or so, but you definitely make a compelling case that the App may make things worse and not better. Also, having frequented panera, I found your take on their 'problems' to be quite convincing. Cashiers are not the bottleneck, congestion around the pickup area is clearly a problem, food prep time is definitely their biggest obstacle, and layout is clearly not optimized. But being outside of the states have not really had a chance to measure turnaround time since the app launched. Is it now notably slower?
As for share price....bar has been really low here and balance sheet flexibility for capital return is also high(this mkt loves rewarding those one off moves still)....lotta levers that can be pulled to go w a still somewhat depressed relative valuation for a very solid brand. But what you've raised definitely has me thinking on a lower cieling for the share price. Maybe closer to 200 vs $240
Is it a conincidence that this stocks pain coincided with their foray into phones? I think not! Phone rumors start late 2013. Stock peaked just about then and sold off. Rebounded somewhat into the launch cycle, and then back down again on realized failure of the whole which to be honest was fairly predictable from the start. In the grand scheme of things that writedown is not really significant, but from a company execution strategy that is an outright public flop. Which ironically has mattered more to the stock than the money losing nature of the much bigger core biz.
Psalerno,
You of all people should know if i show up on your sectors door not a good sign:) I was on shale 2 yrs ago for this reason and did a boat load of work just didnt like the timing. So other than a few expirments like carbo ceramics and poseidon concepts as well as a little chesapeake i stayed away. Now i think its inevitable that this group has a major blowup.
This debacle has been several years in the making. I would not own any shale producers here. Capital abundance has been the story here, and that is what is going to literally change overnight in the space because of the mkt derisking. So, i would be less concerned with whose still 'operationally profitable' at $80 a barrell as that is not the story in shale. Without cheaper capital and rising energy prices the ability to offset depletion rates disappears. I'd focus on whose most likely to go bust in 12-18 months vs who looks 'best positioned' to weather the storm. Then once the washout happens you come back in as the bust will sow the seeds for the next rise in prices. There is very little in the energy complex that is anything more than a short-term beta bounce trade, but the us refiners were definitely one of them though not nearly as appealing as before. News flow here is going to be miserable for at least the next 12 months.
I am going to have to respectfully disagree. The investing game is structured towards the long side. Thus identifying fraud and or highly deceptive practices from management within a publicly listed organization does at times require the flexibility afforded by anonymity. These managment teams that are hiding something, over promoting to exit stock while the market lets them or commiting blatant fraud are not stupid. You can't just call them up and say hey i am short or start asking probing questions without raising the type of suspicion that allows them to further conceal what they are doing. A red flag is a red flag, but then you need to dig afterwards to confirm whether there is something there. I assure you the SEC is not up to the challenge. What public fraud or major scandal have they picked up on before a short seller?
And outside of outright fraud proving a thesis short requires lobbying those long to start paying attention, and with so much money on the long side structured to be passively long that is not easy. I mean at the end of the day i can tell you from expereince that some short thesis simply boil down to getting some knucklehead at fidelity or trowe to read the work done on a stock and conclude...'damn, he's right xyz investment bank dumped a lemming on me here and i better get out before i am stuck holding this garbage 60% lower'. But with dozens of investment banks publishing "indep research" and the distirbution channels they have of sales guys calling desks every day saying buy this stock and the puff pr's managment puts out as well as the often scripted conference calls...getting heard is hard damn work. Thus not allowing the source to be removed and the content to stand alone is key otherwise the first reaction of all these people is to shoot you down. Don't you ever wonder why when some big short report comes out on a stock why that same day half a dozen analysts come out and defend it immiediately? They don't even bother doing the work because frankly their first priority is not looking bad and they know they have the names of their investment banks as well as an army of sales people capable of accomplishing that. Its backfire....reflex....not research! Like i can't thing of a single big short scenario where the sell-side responded with...'we are looking into this, and considering how far off this opinion is from ours...it will take some time for us to respond'. Sino forest, enron, lehman, and any big story where all the same. They all attacked the messenger immediately and in some cases those are well respected messengers.Look at my experiences with cvlt and mlnx....not only did the sell side refuse to ask questions they kept raising targets and defensing into mounting evidence of issues. Then one day they cut their price targets in half after the stock has collapsed. Believe me its not easy.
And then what about when you wan to go after a very ridiculously priced stock of a good company? You have an army of people who have positive brand association that have invested on that account who feel like you are trying to literally fleece them by spreading lies. I went through this a lot on SA with Whole Foods and LuluLemon. Great brands with stocks i clearly identified as about to run into trouble. These are situations were the sell-side actually is best positioned to point out the stuff that will bring the stock down, and the great ones do get it. But the incentive here for them is even worse because this is the easiest stuff to sell day in and day out to investors. It takes a brave sole to come out and say "i know you love shopping at whole foods, and its a fantasticly run company but comps are slowing and set to slow more and the stock is going to rerate 40%". And that is before you deal with the guys who tell you i want to own this biz for forever because frankly they have 500 positions and a zillion to manage and simply cant stay on top of all of this and are happy collecting the fees they get from long only money continually flowing in.
So yeah shorting is tough. Some of the most overvalued companies shorts pick on tend to be great stories with amazing brand equity. Overtime they develop cult like shareholder bases. Frauds tend to have the most cunning managment teams at the helm who have a very vested interest in discrediting the accuser.And businesses that are about to fail for competitive/execution issues tend to be quite battleground areas where the people in charge are working to spin that this is not going to happen because frankly it is their job to prevent it from happening even if it is already happening.
Suffice to say shorting is tough, and that is before you get into the macro and policy side of things were contractions are concerned bad things that must be avoided at all costs despite them being natural and healthy.
Short Sellers are Doing God's Work and the SEC's...given a break:)
You might want to dig a bit deeper into the soic space to understand why mass market end demand at the product level(gopro, wearables, security cams) actually turns into disaster for the little chip guy who was killing it when it was a niche. Amba ipo'd when it did(and at the price it did) because of major fear of competition from the usual suspects. So far it seems they were a bit too conservative as the market remains too small to be a priority and the likes of brcm have been distracted with other issues. For those of us who have traded the guts of dvd players, the ipod, cell phones, cameras, cable boxes, fpd's, and navigation devices...'meat on the bone' doesn't exactly make a case. I can tell you in the last 15 years not a single company like amba has been acquired till after the stock collapsed and there were multiple competitors(brcm being the most usual suspect stateside...plenty of others out of asia) in the game.
It's a small soic largely driven by one hot consumer gadget. This film has been played 100x and always ends the same. One thing for sure its not a retirement portfolio stock.As for short/long in the immediate term, Ashraf was early on his timing as the valuation for those who have traded past versions of amba was nowhere near egregious and the competition was still way out. I tend to like to wait till at least broadcom has a chip out there that is being tested vs speculating on when they enter.
I think Buffet is the ultimate example for how a money manager should operate, and maybe the worst possible person to cite with respect to individual investors. Most people invest with the aim of upgrading their life style, paying for their kids college, buying a new home, retiring far earlier etc. Buffet has never operated that way. He's in it for the game. He loves it. That's why at 81 years old he was like Doc Brown with the flux capacitor in the bathroom thinking about bank of america stock. What 81 yr old is actually thinking about buying a distressed bank stock because he is getting steal of a deal terms? Things also worked out for him timing wise as his career coinicded perfectly with the birth of MNC America. Not saying if buffet was 30 today he wouldn't still be buffet, but the opportunities are a lot more complicated than buying sugar water and razor blades. Being able to buy nice solid cash cow businesses in whole is a huge edge he now exploits with the cash reserves he build up early on. But make no mistake buffet is opportunistic. He was selling plenty of dividend darling to raise cash to buy the likes of bac and goldman which were slashing dividends. These investments with warrants and terms only he can demand don't make it into the buy and hold crowd arguments when they cite him. Reality is he is exceptional at raising cash at the right time, and he is able to do that because when he was investing more like a hedgie he was taking 50% of profits and thus positioning himself in a way that would allow him to be as patient as he desired when it came to pulling the trigger for the rest of his natural life.
It's hard to criticze someone like Chuck as he's been at this for a long time, and is such a stand up guy when it comes to respecting others opinions and engaging in an open debate. However, there were a lot of things that bothered me about this article, and to be frank that I found quite surprising coming from a seasoned veteran. You can't make a macro case and cite how well dividend stocks have done since the crash without talking policy. Markets are not a vacuum, and to throw charts on a screen and pretend that there was not an epic intervention in markets to facilitate a rapid reflate of asset prices is misleading at best.
Also, i would strongly disagree with the statement that stocks not recovering for 'forever or a long time' is a misconception. There are a boat load of dividend champions who went bankrupt over the last hundred years. Excessive leverage, technological disruption, reg changes, and countless other factors can be cited for what caused their extinctions. And when it comes to people and money time is a factor. If a crash hits me at the end of my peak earnings and obliterates my savings; I simply don't have the luxury of remaining invested for the next cycle or if i'm lucky enough the biggest federal intervention in market history. And this is putting it mildly because human nature is such that most people get caught by the warm fuzzy feeling of someone writing an article saying don't worry about a crash or a correction. Then when one comes by virtue of having believed such nonsense they panic because they positioned in a fearless manner.
The market is essentially about picking pockets of suckers, weak nerved individuals, excessivelly exhuberant people, and every other human extreme you can think of. If everyone was rational, there would be few opportunities to make money. Thus, advising people to worry about nothing is in my humble opinion bad advice. Always worry, and worry a lot more when you have a market like this one with the stimulus we have seen since march 2009. I stopped paying much attention to macro news about 15 months ago because it frankly got predictable, and i could get the sense nobody really cared much any more about any real economic/market risk jolts. That's obviously a great time to be long blue chips or if you do a lot of shorting like me make sure you pick the right pockets to focus on. I now have started to dial back into my macro news flow/old favourite prognosticators because i think this benign environment is coming to an end. It's hitting these points that define investing success. A minority of individuals actually end up holding a stock for 10-15 years. This was more normal back when people had 30 yr careers at companies, but in todays global corporate world the income cover for such horizons doesn't exist. You need to get lucky cycle wise or else you are screwed. And since leaving that much to luck is a bad idea, I prefer remaining paranoid at all times. That's about the only thing that works at all times. Otherwise i think you always need to analyze a multitude of factors whenever you buy a stock, and that there is no equation to it. Yes, owning coke is not going to keep you up at night, but when everyone starts to think that you should maybe start burning a candle.
2014 is not quite as frothy?
Interesting that this is basically a macro take article on investing and no mention whatsoever of the extreme policy environment. 0% rates for year 5 and a fed balance sheet north of a couple trillion + negative rates in europe and extreme policy measures in japan are things one should not get complacent about. A normal cyclical dip in the economy here won't feel 'normal' considering what's left in the tank policy wise. There is always a tradeoff in policy, and that's what you got holding bluechips post 2008. Though i do like how hindsight is 20/20 here and nobody is including any financial companies in there list of bluechip holdings. Wasn't GE the ultimate blue chip before the crash? What about Citi? Merril? Lehman?
Bottom line is everyone that is so confident here about buying the next dip has zero clue about what happens to stocks when rates everywhere take off. Policy makers where supposed to be there to help smooth out the cycles in the economy and not to inflate assets. In their quest to pursue the latter they no longer have adequate resources for the former.
Lulu -30% kors +40%....doesn't get better than that
As a long-term google bull despite my extensive short-bent I would normally shoot something like this down. However, I think at this juncture you are right. Risk/reward wise it is now unattractive, and more compelling as a short. That being said there are a lot more compelling shorts out there, but in 100bil+ tech land you definitely need to consider shifting to an underweight here. At least until they show us they have developed an actual android...
Nice one. I can assure you Grandma will never see a bubble. I do wonder from a job standpoint what type of person would want to be fed chair after bernanke. The whole thing seems like a lose lose proposition. Unwinding the balance sheet is the tricky part of QE, and while i doubt she will even do that, the risk of having to would make me seriously consider taking such a job. Furthermore, if the economy runs into trouble, all she has to work with is the dulled knife bernanke left behind in the form of qe. It will be like treating an evolving strain with a now virtually ineffective antibody.
What's her upside?
I have been following snapchat from infancy, and I get why it is hot. But i can assure you fb will be happy they rejected this offer. I have always believed this company is one sexual child predator disaster away from the fbi shutting them down. Anyonymity is great, but when you create the optimal environment for porn peddling what can go wrong will. And based on the news last few days the first major scar has started. What makes fb boring is also what makes it a viable long term business...identity control and content regulation.
If you had put 75ml into this company and your cost basis was closer $8 you'd want 12.50 too. Will be interesting to see of demand rights kick in on dec 1 and they start selling. Point is the structure of the deal was enough to stay away regardless of 'the business'. Chegg's original model that they raised substantial capital on has not worked....they need another 200mil to be able to navigate the transition...and that is not the type of investment risk/reward scenarios vc's pony up for. Basically, without an ipo raising the capital needed would have been difficult to impossible.
Nope. Completely useless as far as making money goes, but i expected that. In all honesty, I wrote 99% of this nearly a month ago, I just didn't see the value in putting it out pre-ipo and making floating this thing anymore difficult than it probably was. Original title was "Please Spare us this Ipo"
The gross service revenue number on margins is not the margin number. As for the slight variance of 1% i'm guessing it rounding. The lack of guidance on service revenue remains quite interesting.
Is that what this was about? Or where they looking at Web 2.0 and what model could be adopted to cash in on the mania. Not that there is anything wrong with that. Because if they were trying to revolutionize something, they would have dumped renting the books and focused on the services a while ago...but when ur investors are 150ml in...you can't focus on revolution....you need to get them their money back before you are bankrupt.
In reality, its been the opposite. The renting of textbooks at a massive loss has given them users, and they have been now trying to cross sell them services. And since you clearly didn't read the piece..."not sure about the exact numbers"....in total nonprint text book renting revenue is less than 20%. That includes selling leads, slipping red bulls in textbooks, ebooks, and homework help. So, the actual services to students that is subscription revenue is single digits. Point is from a revenue base since there are nothing but massive losses here.....you bought a textbook renter....otherwise you'd have paid close to what they paid to buy cramster or notehall or anything else along those lines....which btw wont get you to $50mil
And that generates how much revenue a quarter?
Also, to be frank, if I was a VC in this deal I would be kissing his feet. He has saved these guys from a catastrophic loss by orchestrating a soft landing here. Business model challenges and institutional sales distribution client disregard aside (how many of you beleived in this deal?), he has over the past 24 months managed to to make the moves needed to get to a float.
No the author is clueless about everything. Nice first time commenter btw. Also, this is not a review site for college textbook services. It is an investing website. If you care to contribute on why renting print textbooks will be a highly profitable business at some point, I am all ears.
Thanks. But backing out depc expense when ur core biz is renting a highly depreciating asset doesnt jive... right? The cash flow is more than incinerated every year by purchases of new books, and sadly they are not making money selling these things off. Though from an efficient market standpoint....the ipo just gave them the kind of capital they need to play this game for a considerbal while longer
Done my homework. He's a sharp cat.
They have an excellent CEO. Other than that nothing i would want to invest in. NFLX DVD made money and put blockbuster and hollywood video out of business. Chegg is not going to put amazon out of business or the campus bookstore losing what they lose renting books. Scalability does not exist in the textbook rental business, and they have proven it. FB and Twtr are the definition of scalable platforms.