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Update: RadioShack Seeking Emergency Financing To Stave Off Bankruptcy
- RadioShack is reportedly in talks with a large shareholder regarding a rescue financing package.
- This confirms my opinion that RadioShack will be facing severe liquidity issues in the near future.
- A new financing deal wasn't anticipated, but it also only fixes one of RadioShack's problems that I mentioned in my previous article.
Update: Best Buy's Profits Soar
- Best Buy's earnings disappointed the market, but adjusted profit soared.
- Revenue issues are related to weakness in the consumer electronics industry, a temporary situation.
- Best Buy is still highly profitable, and the stock is still undervalued.
The PC Can't Save Hewlett-Packard
- HP reported revenue growth during the third quarter with its PC segment growing by 12%.
- However, PCs contribute little to the bottom line, and 85% of HP's operating profit comes from printing and enterprise hardware.
- HP appears cheap, but if earnings contract in the long run, HP is a value trap.
What To Expect When Staples Reports Earnings
- Staples is set to report its second quarter earnings before the market opens on August 20.
- Comparable store sales are likely to continue to decline, and the company is closing hundreds of stores as demand for office supplies wanes.
- The commercial business should be much stronger, and look for online sales to grow.
Update: J.C. Penney's Comparable Store Sales Aren't Growing Fast Enough
- Shares of J.C. Penney surged on its second quarter earnings results.
- While gross margin increased, comparable store sales growth actually slowed down compared to the first quarter.
- J.C. Penney cannot return to profitability on just gross margin growth alone, a point I made in a previous article.
McDonald's Is Still A Fantastic Dividend Stock
- McDonald's is facing problems in both Asia and the United States.
- However, the company's problems appear fixable, and long-term dividend growth shouldn't be adversely affected.
- McDonald's is priced attractively for dividend investors, and the stock provides an ample margin of safety.
J.C. Penney Earnings Preview: Serious Growth Needed
- J.C. Penney is set to report its second quarter earnings after market close on August 14.
- There needs to be serious growth in both comparable store sales and gross margin to show that the turnaround is working.
- A lack of acceleration in these areas could lead to liquidity issues down the road.
Nvidia: Strong Earnings, Ample Growth Opportunities
- Nvidia reported strong Q2 earnings, with revenue and earnings growing in the double-digits.
- AMD's GPU issues have not affected Nvidia, with its GTX gaming GPUs growing by 10%.
- Growth opportunities including a growing PC market, the automotive market and the enterprise market should lead to strong earnings growth going forward.
Buying Chipotle Is Almost Certainly A Terrible Idea
- Chipotle Mexican Grill is a wonderful company with fantastic margins and growth prospects.
- However, the valuation has risen to nonsensical levels, and an investment at today's prices is unlikely to lead to satisfactory results.
- A few possible scenarios show that Chipotle is best avoided at these levels.
Best Buy: Severely Undervalued With 66% Upside
- Shares of Best Buy collapsed at the beginning of this year as optimism faded.
- This was a massive overreaction, and Best Buy is severely undervalued.
- Despite all of the pessimism, Best Buy is a profitable company with a strong balance sheet, and the future looks bright.
One Simple Reason Why AMD Can't Compete
- AMD is very good at creating hype, but at the same time it's been slashing its R&D spending.
- Intel vastly outspends AMD in R&D, and toward the end of last year Nvidia surpassed AMD as well.
- In the long-term, there is no way that AMD can remain competitive given these R&D spending gaps.
J.C. Penney's Turnaround Is Still A Long Shot
- J.C. Penney appears to be executing on its turnaround.
- However, the company returning to profitability any time soon is still a long shot.
- Huge interest payments will act as a barrier to profitability, and the company's guidance comes with serious caveats.
Microsoft's Xbox One Is Failing
- Microsoft introduced a version of its Xbox One video game console in June without the Kinect peripheral.
- This removed the price advantage that the PlayStation 4 had, but it has done little to close the sales gap.
- The Xbox One is still selling far worse than the competition, and it may be time for Microsoft to consider spinning off or selling the division.
Why Apple's iPad Is Floundering
- While Apple's iPhone continues to grow, sales of the iPad have declined for two straight quarters.
- Tablets are becoming a commodity, much like PCs, and the best that Apple can hope for in the long-term is a Mac-like market share.
- The iPhone representing more than half of Apple's revenue is the biggest risk facing the company.
AMD: Mullins APU Gets A Win, But Battery Life Is A Problem
- Advanced Micro Devices' low-power Mullins APU has its first design win, a $250 notebook from HP.
- The device has abysmal battery life, however, comparing poorly to devices powered by Intel's Bay Trail chips.
- If this turns out to be the norm for Mullins, AMD won't be competitive in either the low-end notebook market or the tablet market.
- Intel has been winning low-end notebook market share from AMD already, and Mullins doesn't appear to fix the problem for AMD.
Microsoft's Bing Is No Longer A Money Pit
- Microsoft's Bing search engine is expected to be profitable in fiscal 2016.
- Bing has lost billions since it was first launched, but has been gaining market share over the years.
- Profit growth from Bing could accelerate from the combination of higher market share and higher ad prices.
Update: RadioShack's Cash Crunch Confirmed By Moody's
- On July 30, Moody's issued a warning stating that RadioShack will face a serious cash crunch by November of 2015.
- This warning solidifies my opinion that RadioShack is going to go bankrupt.
- Moody's agrees with my original thesis that RadioShack cannot cut costs fast enough to survive collapsing comparable store sales.
RadioShack Really Is That Bad
- With RadioShack trading at a tiny fraction of sales and near book value, investors may be tempted to bet on a turnaround.
- Cost cutting is limited by a credit agreement that prevents RadioShack from closing more than 200 stores. Operating costs are now nearly half of the company's revenue.
- Sales are collapsing, and costs cannot be cut fast enough for RadioShack to avoid bankruptcy.
- Book value is plummeting, and the liquidation value is likely already negative due to large amounts of inventory. Equity investors will be wiped out in the event of bankruptcy.
- J.C. Penney Is Not The Next Best Buy
- Staples Is Taking The Battle To Amazon
- Best Buy Is Worth At Least $50 Per Share
- Microsoft Has Made A Smart Acquisition
- Nvidia: Value And Growth In One Inexpensive Package
- Cisco Has Entered The Bargain Bin
- Alcatel-Lucent Bonds Yielding 11%
- GE: One Step Closer To Dividend King
- Apple Is Priced For No Growth
- Best Buy Bonds Yielding 9%
- Ignore The Hate: Buy Microsoft!
- RadioShack Bonds Offer Extraordinary Yields
- Nvidia: 2 Ways To Buy This Bargain Stock For Even Less
- Navistar: Buy The Bonds, Not The Stock