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Andrew Shapiro

 
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  • President Obama will propose a six year public works program to combat unemployment, with $50 billion of up-front spending on roads, rail and airport runways. The administration says it will work with Congress to fund the plan without adding to the deficit, perhaps by cutting subsidies on oil and gas exploration and production.  [View news story]
    Cutting payroll tax rates for BOTH employee and employer would IMMEDIATELY (not over 6-10 years) put needed cash every two weeks into the hands of workers and employers. When things get re-heated, ratchet back toward status quo.
    Sep 6 12:34 PM | 10 Likes Like |Link to Comment
  • Netflix CEO Reed Hastings Is Actually Right [View article]
    You are deluding yourself. The streaming business cannot presently survive on its own and either needs the cash flow of the dvd business or will have so issue millions of more shares in the streaming business to fund its expansion costs and skyrocketing streaming content costs obligations.
    Dec 25 03:58 PM | 8 Likes Like |Link to Comment
  • Netflix Adjusts Pricing: Renting Those Plastic Discs Just Became More Expensive [View article]
    Arguably the bulk of subscribers are legacy ones and view Netflix as a DVD service that offered streaming for a small incremental cost service so they took it. But now forced to choose. Many will choose DVD only and pay netflix $2/month LESS than what they were paying. And their usage of DVD's may increase since they won't be filling the gap with online streaming (from netflix at least)
    Jul 13 01:39 AM | 8 Likes Like |Link to Comment
  • Netflix Earnings Preview: More Smoke and Mirrors Ahead? [View article]
    Let's break down and analyze how the fantasyland projections thrown out by the sell side analyst bulls relate to the remarkable valuation they are forecasting for the business by simply using CURRENT valuations. At $245/share, with the dilution of the options, NFLX has a $13.5 BILLION valuation.

    Being generous, take more "conservative" GS estimated TRIPLING of NFLX [fully paying - not incremental $1-2/head family add-ons - more on that below] subscribers to 60 million in four years. That is $225 of EV per estimated many-years-down-the-road subscriber. Next Chung has operating margins expanding at an ACCELERATED pace to 20%, I guess based on assumption that the large fixed portion of netflix costs will remain fixed. So if I give her the absolutely ridiculous margin assumption of 20% (whereby she assumes content providers remain so incompetent as to renew again with a fixed, rather than variable charge for content; and pipeline providers also continue to charge a fixed charge) we divide by this 20% to obtain the revenues necessary to support the EV/subscriber = $1125 of imputed revenue. Remember this is per estimated 4-years-down-the-road 60-MM subscriber base. Now with that tripling of subscribers - these incremental subscribers are not multiple DVD/mnth plans but mostly streaming only plans at $8/month. I am being generous when I divide by a high avg monthly sub cost of $11/month and you get 102.3 months or 8.5 YEARS of revenue stream required from the overly estimated "4-years down the road subscriber" base. Note this is not on current subscriber base but AFTER the next four year's rapid estimated S curve growth gets Netflix, possibly to 60MM subscribers and with absolutely ridiculous assumption of expanded margin to 20%.

    achieving the 60MM subscriber number going to per person plans rather than per household requires using only $1-$2 /person add-on family charge and would more rapidly lower avg subscriber rev. content providers have gotten wise and are repricing upwards based on subscriber counts - while incremental gross profit MAY be generated, margin assumptions on all 60MM subscribers would have to be greatly dropped.

    If you lower the subscriber base or monthly avg subscription price or use a realistic op margin and the number of years required for the 'annuity' stream to not be disrupted goes up from 8.5 years substantially. For example, leaving the other ridiculous assumptions in place but dropping the margin down to present 12% levels bumps up the the duration required to 14.2 years. FOURTEEN YEARS.

    That is more than 4X the span of most of Netflix content contracts which presumably would reprice upwards several times (possibly longer than life expectancy of a large demographic of netflix users.)

    These sell-side buy recommendations with ridiculous price targets is pure pimping for the lead role in a secondary stock offering. Some things on Wall Street will never change. This is 1999 dot-com eyeball forecasting all over again. and like 1999 it won't end pretty. You don't want to be the last one holding these shares before the freefall to more rationale valuation levels.
    Apr 21 09:28 AM | 8 Likes Like |Link to Comment
  • Netflix's Business Model Isn't Sustainable [View article]
    Conference call' questions pre-screened, filtered and answers pre-scripted and no chance of real time follow-up is NOT Transparency nor Accessibility.

    I submitted questions for the Q4 "conference call" and they were not presented nor answered. This despite some 'questioners' having a 2nd round of questions 'presented' at the back end of the conf call.

    While the sizable decline in marketing spend was explained in this charade of a "conf call", that didn't address where/why sizable subscriber growth came from in the face of lower marketing spend. Is such subscriber growth sustainable with continued lower marketing expense and to what level must marketing expense return to sustain current level of subscriber growth?

    Bottom line - Netflix should have a conf call with live interaction and oppty for follow up like most other public companies following best practices. Even at a 'dog and pony' show, investor can ask unscripted questions and can point out or follow up when answer given aren't really answers.
    Apr 5 10:24 AM | 8 Likes Like |Link to Comment
  • Amazon catches upgrade as Street cheers Q3 growth pickup [View news story]
    Let's roll back the onion on the reported strong growth in revs and stop highlighting apples vs oranges

    1) "Accelerating growth - Q3 rev. growth of 24% topped Q2's 22%" is SEQUENTIAL analysis

    2) "Q3 GM rose 240 bps Y/Y to 27.7% " is ANNUAL analysis - are getting plenty of attention.

    Why no mention of the oddity of SEQUENTIAL gross margin dropping on this sizable SEQUENTIAL revenue growth.

    Now lets peel the onion. Sequential revenue growth is quite a bit due to Amazon's disclosed acctg policy/classification change moving some 3P to 1P. This has the effect of replacing 100% gross mgn NET revs with GROSS revs (with lower gross margins)

    Note also, that AMZN operating costs below what THEY define as cost of goods sold grew at much higher rate than sales and thus all the extra gross profit on higher sales was spent and the company remained unprofitable.

    Shouldn't diligent analysts be asking - Don't others like Netflix at least consider streaming content costs COGS?? If these content costs and fulfillment costs went away would revenues remain?

    If the market wants to ignore apples/apples comparison SA Market Currents editors don't need to do what CNBC 'Bubblevision' reporters often do - echo and multiply the cacophony.

    Just saying ...
    Oct 25 12:11 PM | 7 Likes Like |Link to Comment
  • The Fed's inability to cut interest rates below zero is the main reason the U.S. consumer isn't spending his way out of recession this time around, economist Robert Hall explained today at a Fed conference. In lieu, the Fed is using a variation on the same theme to make current purchasing cheaper than future: inflation-inflating QE.  [View news story]
    Why don't we repair bank balance sheets and relieve debt burdened consumers all at the same time by having fed use the same money to buy foreclosed houses, rent the them at lower rates to prior homeowners rather than throw this money at banks for them to speculate in stocks and hope higher equity prices will transfer into fixing what ails the economy secondarily?
    Nov 11 02:51 PM | 7 Likes Like |Link to Comment
  • Equal Energy: Merger Drama Could Lead To Upside [View article]
    I don't believe price weakness was a function of 'investors' selling out as much as merger arbs dumping when the current definitive deal on the table (Petroflow) was not going to obtain shareholder approval by the May 1 deadline.

    The subsequent price decline has been exacerbated by the fact that EQU lost all its Canadian research coverage and never obtained US sell-side coverage with a deal pending with little appreciation left in the stock price.

    Additionally, as long as EQU is subject to the Petroflow acquisition contract, the company stopped discussing the stock as an investment (IR). In fact EQU cancelled its participation at the Southwest IDEAS conference this past fall with the deal pending.

    Finally, until the agreement dies, the $0.20/share annual dividend remains halted as well.

    Once the Agreement dies on May 1st, Equal's board can and ought to take steps to again maximize shareholder value.
    Apr 16 09:53 PM | 6 Likes Like |Link to Comment
  • Equal Energy Is Not Being Treated Equally To Its Industry Peers [View article]
    First let me say this was a good article.

    In particular, I liked your inclusion of the chart that shows the Hunton has one of the lowest breakeven costs in unconventional plays in North America.

    Also, I appreciated seeing your comparable analysis using other energy companies than New Source Energy (NSLP) (the obvious and, by my account, most synergistic potential partner) result in valuations far in excess of the current EQU price and Montclair's new low-ball bid.

    I do want to correct or expand on a few statements in your article:

    1) You wrote: "has spudded five wells since early 2013 with a 100% success rate." I think the correct number of wells announced as drilled with a 100% success rate is six.

    Equal's Q1 release states: "Three wells spudded during first quarter, all were producing by mid-April; 100% drilling success rate, with all three wells performing at or above production type curve"
    http://bit.ly/1dpzhUb

    Equal's Q2 release states: "Three wells were drilled and completed during second quarter. All three are currently online and producing;
    Demonstrated 100% drilling success rate, with all three wells performing above the expected production type curve"
    http://bit.ly/1dpzhUd

    2) You wrote: "the liquids-rich Hunton formation in Oklahoma that has been helping Equal mint money since January 2013."

    While EQU has been a pure play on Equal's Hunton assets since January 2013 (actually November 2012,) it should be noted that Equal (as Enterra Energy Trust before its 2010 name change) purchased the first big bulk of the Hunton assets in Q1 of 2006 [for $221MM I might add - but that was a different era.]
    Enterra subsequently purchased additional Hunton assets, including buying out its JV partner, Petroflow's, interest out of bankruptcy.

    Enterra, now Equal Energy, has been creating cash from its Hunton operations since 2006, not 2013. The cash flow was just buried in losses and huge interest expense from over-leveraging Enterra's and then Equal's wide swath of assets that ranged from Canada and the US. The 2012 restructuring de-leveraged Equal and focussed it on this one unique play.

    I would like to also point out that Enterra's original purchase of Hunton assets was from affiliates of the same individuals who are Montclair Energy today. After their non-compete ran out, they returned to the Hunton and now, a few years later, have come banging on Equal's door, hoping to repurchase their former assets for a fraction of what they sold them for [not that 2006 pricing is a current reference point.] plus all of Equal's new vast water processing and disposal infrastructure, which has substantial value to any acquirer, especially one already in the Hunton.

    Again thanks for the article. I hope you have bought some shares so that you will continue to follow and write on this rapidly evolving situation.
    Aug 20 12:47 PM | 6 Likes Like |Link to Comment
  • Netflix: Don't Listen To Wall Street On This One [View article]
    very poor article that has so many errors and lack of support that I was pained on whether to even give the courtesy of a comment. I don't have time to rip this to shreds piece by piece. I am sure others won't need any help anyway.

    However, to say that NFLX would return to $300/share without recognizing the millions of additional shares that have been issued in the 70's and 80's means that the company would travel to an even higher valuation than its former ridiculous self.

    Earnings are not growing but are experiencing sever quarters of y/y declines and will only have a chance to grow after they crater this year.

    You completely ignore the BILLIONS in off balance sheet liabilities that have to be paid for at the same time Netflix' domestic market is hitting saturation and the int'l market growth is costing millions more to achieve.

    When you invest in something there ought to be a value to come out in the end. Absent a buyout (and I doubt its at this price), there is not $70/share coming back you long-term purchasers. If you want to gamble, go to vegas. At least you get a free drink and can take in a show.
    May 30 07:25 PM | 6 Likes Like |Link to Comment
  • Netflix Q1 Earnings: Beginning of the End [View article]
    derf - I read the letter quite carefully and know how amortization works very well. (hence why they will need and want to do a secondary financing long before earnings crater- which means soon) either the new content deals are going to be fixed or variable.

    Sell side analysts who want to do the secondary are setting the ridiculous stock price target not hastings. But they can't have it both ways. Hastings said they would control costs, then saturation runs up in the face of the virtuous circle and even if it doesn't then hasting's margin targets are FAR FAR lower than the analysts pimping this stock.

    And if analysts are right on costs being more of a fixed tool that provides operating leverage up - contrary to what the company is saying. Well that works against them on the shortfall of subscriber growth. -- Exactly to the point of my question. I wanted the company to make clear which is it and require the analysts to reform their ridiculousness or be on record projecting quite the contrary to what the company spoon feeds them. The company doesn't want to have to rein in these analysts because they are serving the company's desired purpose to do a secondary financing of new shares at as high a price as possible.

    They even manipulated the stock price doing a buyback this quarter.

    Can you explain or justify using $108MM to retire shares at this stage in NFLX growth and cash flow needs??
    Apr 26 01:20 PM | 6 Likes Like |Link to Comment
  • More support for tapping into the U.S. strategic oil reserve comes from Robert Reich, as "Americans are still trying to get out of the gravitational pull of the great recession." But he doesn't pin all the blame for rising prices on Middle East unrest: "Developing nations all over the world... are coming out of the recession much faster... so they are also putting pressure on oil prices."  [View news story]
    The reserve is for a material "shock" to prices. Price impacts from increased demand from world wide economies rebounding from recession should not trigger use of the reserve. Rise in price right now is more from speculators attaching a "risk" of shortage premium to price of oil. There isn't even a supply shortage at this time. Market forces should be allowed to play out and reallocation of purchasing and supply decisions should not be interfered with.
    Mar 7 11:32 AM | 6 Likes Like |Link to Comment
  • Still Think Internet Radio Is a Threat to Sirius XM? [View article]
    Liked your article but I don't think the book is fully written on the Comcast/Level 3/Netflix dispute and I am just getting up to speed on the SIRI vs internet radio bandwidth issue as a supplement to my interest in bandwidth risks to NFLX growth projections.

    If correct, your point on a vast defeat of net neutrality legislators is quite noteworthy. However, CMCSA / LVLT / NFLX battle involves two issues. Net Neutrality, which clearly has implications with SIRI v internet radio and Antitrust, which I don't think does, as internet radio offerings aren't running through the SIRI pipe and getting the surcharge.

    Antitrust - Arguments can be made (and will strengthen should NBCU deal goes through) against Comcast involving the same anti-trust and market power concerns adjudicated in U.S. v. Paramount Pictures, Inc.(1948) in which the Supreme Court decision forced movie studies like Warner Bros., United Artists, and Paramount Pictures (content provider) to divest vertically integrated holdings in theater chains (distribution) and led to policy desired increase in independent movie producers and more competition in the film industry.

    Net Neutrality - as a distributor, I think Comcast and other 'pipes' should have the right to charge more for those who suck up so much capacity to the point of creating surges requiring bigger "pipes" and investment in reserve capacity to provide stable service. But are we there yet? or are the caps greedily being proposed way too low and public and legislative outrage strengthens support for Net Neutrality?
    Dec 5 01:20 PM | 6 Likes Like |Link to Comment
  • Thursday: The Fed’s Got POMO Fever [View article]
    Your illustration of the scope of POMO relative the number of houses, and bad mortgages,etc. raises this point.

    Why don't we repair bank balance sheets and relieve debt burdened consumers all at the same time by having fed use the same money to buy foreclosed houses, rent the them at lower rates to prior homeowners rather than throw this money at banks for them to speculate in stocks and hope higher equity prices will transfer into fixing what ails the economy secondarily?
    Nov 11 02:45 PM | 6 Likes Like |Link to Comment
  • Atlanta Fed's Dennis Lockhart says the central bank needs to "do what it can to provide some certainty" to provide a firm footing for businesses to move forward with decisions and hiring. “The whole theme of uncertainty is really very prominent in the minds” of Fed officials, he says, and quantitative easing could help alleviate the problem.  [View news story]
    So he's acknowledging that dropping already low rates lower won't spur aggregate demand because at this point that's pushing on a string.

    Instead, the point is to get businesses to believe that current low rates are going to stay low - that will spur demand.

    I thank them for trying but still sounds like pushing on a string to me.
    Oct 15 10:17 AM | 6 Likes Like |Link to Comment
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