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  • Abbott Split: A Good Company With Some Risk To Sell? [View article]
    Thanks for the comment. I agree with a lot of what you're saying and yeah, that is what I was suggesting in the article.
    Nov 8, 2011. 05:55 AM | Likes Like |Link to Comment
  • Abbott Split: A Good Company With Some Risk To Sell? [View article]
    I'll have to take a closer look at medtech. I agree there is a conglomerate discount. My guess however is that it's not huge on this particular company dude to investor niches. I believe both healthcare investors and dividend investors would like both parts. Do you have an estimate?
    Oct 28, 2011. 07:33 AM | Likes Like |Link to Comment
  • Abbott Split: A Good Company With Some Risk To Sell? [View article]
    Thanks! That's how I'm reading into for sure.
    Oct 28, 2011. 07:27 AM | Likes Like |Link to Comment
  • Abbott Split: A Good Company With Some Risk To Sell? [View article]
    Thank you for the compliment! I hope we both get some returns from this split!
    Oct 28, 2011. 07:25 AM | Likes Like |Link to Comment
  • This Decade's Most Profitable Short Opportunity [View article]
    I know saying anything but sell on CRM is very unpopular on this site but here it goes. No offense to the author. Great job and I respect the fact that you’re putting out articles.

    I’ll be the first to say I’m not an expert on Cloud Computing or SaaS. But I do like this company and I do like valuing this company because it’s similarities to an industry I do know. In a way I see this company like biotech because of its high rates of expenses in intangible assets (Though I would argue a lot of intangible assets CRM is investing in is human capital.) 12 percent of revenue is R&D and SG&A is 65 percent of revenue. These are a huge drain on the EPS of the company in the near and intermediate term. I would also say it looks similar in the fact that long-term subscriptions are signed and back loaded. ie revenue is fully appreciated only later.

    This company is shooting for long-term success at the expense of earnings today. Though I agree that their stock compensation accounting is aggressive, I’d argue some of the marketing and R&D expenses should actually be capitalized. (GAAP would look down on that but I do on my model) I’d also agrue that the P/E ratio would look a lot nicer if you did.

    Not a whole lot nicer but something more around 100 p/e. In fact I think Benioff is actually sexually attracted to a high P/E given the tendency of this company to always report small but positive earnings. (I digress!)

    I know you’re not saying P/E is not the best ratio to judge stocks like these but it was mentioned 9 times in the article. So in a way I do believe people who say short CRM are overly obsessed with that metric.

    I use a 10 year DCF. I also have a wide range of values I will attach to this stock price. Many industry experts compare cloud computing today to the internet in 1990 or the PC in the late 70s. To get industry growth rates I relied on experts who say that the long term growth rate of SaaS is growing at 30 percent. Cloud computing is looking at 30 percent growth rate.

    The technological barriers that CRM has created experts believe gives it around a two year leg up on competitors. It’s a force in the industry and is able to charge a premium to clients. It’s investment in advertising and sales force growth should benefit the company in the long term growth rates.

    I believe it will grow at or slightly above the industry growth rate.
    Using the low end of growth of FCF I believe ~18 percent CAGR over the next 10 year I get a value of about 85 dollars a share. Using the high end of ~35 percent I get a value of 160.

    My true belief of the value of the stock is $130. You cannot short it or buy it. Someone will buy this company if the stock price dips below 80 dollars per share (GOOG maybe.) Its brand is just too important in a rapidly growing market.
    Oct 21, 2011. 10:38 AM | Likes Like |Link to Comment
  • Genoptix: Magic Formula Stock or Magic Value Trap? [View article]
    Great Read Gaurav. I have been bullish on this company until they reported q2. The stock for sure got the blood bath it deserved.
    It's an interesting take about how they aren't adapting to changing environment. Although I have a higher price target, (using comparables and DCF averaged, with a very low growth rate) I for sure will think about the Company differently.
    Aug 23, 2010. 03:50 PM | Likes Like |Link to Comment
  • Cloud Computing: The Next Bubble? [View article]
    I had similar numbers when I ran it 6 months ago, but got around 110-115. I'm assuming that I'd get higher now after the last couple quarters' numbers beat my estimates. I know I had a higher 3.5 percent terminal growth rate, maybe my 1-5 year growth rates were higher too. Though as I said before these 5 year growth rates (longer depending on the client) are predictable because of the subscriptions being locked in. I might have predicted a few more added subscriptions as well.

    I'm currently long and have been for 3 years now and I keep getting people telling me I'm crazy because it's too expensive. Based on P/E, PEG , P/S, P/CF etc. My guess is that I'll sell it when Motley Fool's cap rating goes above 3.

    I'm going to shut up and trust you now because this sector isn't even close to my expertise. I only modeled the company for a class project, therefore your model could be much better.

    I have however always like this company based on a very intelligent CEO, a product that is the AAPL of it's industry. It's completely based on improving efficiency. Sales are the most important part of a business. Business are the customers and they tend to spend with less discretion. They are confident enough to hire during a recession taking advantage of the rich unemployed or fresh out of school talent pool. It's SF based around many great schools and tech talent. etc.

    Anyway, great research and thanks for the article! It was well thought out and I appreciate the response. I for sure gave it the thumbs up.
    Jul 26, 2010. 06:03 PM | 1 Like Like |Link to Comment
  • Cloud Computing: The Next Bubble? [View article]
    I think assumption about growth estimates aren't crazy. You can't use traditional short term stock valuations to value a company like CRM.

    It's a subscription based company which means that this company has fairly predictable revenue growth. These subscriptions typically are back loaded, and very large. EPS and revs will grow because the customers have already signed contracts that says they are going to pay.

    If you use a 10-15 DCF this company isn't crazy expensive. It's actually pretty cheap.

    PEG, P/S, EV/S, and even P/CF are all useless on a company like this.
    Jul 26, 2010. 05:15 PM | Likes Like |Link to Comment
  • This Week's Short Interest Developments: FSLR, TMOAF.PK, ILMN [View article]
    The article says "return to profit." ILMN has been turning a profit for all of 2009.
    Dec 7, 2009. 06:35 PM | Likes Like |Link to Comment
  • Illumina Dominating the Sequencing Market [View article]
    Your right! Totally forgot to put that and it would have been a great point!

    On Mar 04 09:18 PM scorp99cam wrote:

    > Don't forget that after the well timed secondary offering and the
    > stock slumped during the crash to $19 they announced a buyback that
    > was well timed too. The company raised funds without diluting shareholders
    > because of their timing.
    Mar 5, 2009. 10:15 AM | Likes Like |Link to Comment