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J Mintzmyer
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J Mintzmyer is a CFA candidate (testing Level 2) and investment enthusiast who utilizes Seeking Alpha to provide a free exchange of trading and investment ideas and to provide online visibility for his developing business. J is the Founder and President of Mintzmyer Investments LLC, a financial... More
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  • Is The Market Really This Broken!?

    I recently sent this blurb to a fellow SA Contributor and have kicked around the thoughts with a few friends of mine, and decided I should share with the SA community at-large:

    What do these back to back plunges of BBY and GME show us?

    Beyond the fact that many analysts have zero situation awareness (retail and electronics are weak--duh!) and the market is overenthusiastic, this sets up the entire earnings season at a precipice.

    Companies are reporting things that aren't really surprising (JCP, BBBY, SHLD, GME, BBY) and yet they are getting dismantled in trading.

    Will the same hold for the high-fliers like NFLX, LNKD, AMZN, TSLA, TWTR, FB? Not sure, but if they are held to similar standards as GME and BBY we will see drops of 20-40% for many of them. I'm currently short NFLX puts ($290 weeklies and $170 Jan14s) as a gamble on more of these fallouts.

    On BBY, I have an article in the pipeline covering this already, but the results are NOT surprising by any means.

    If you would have asked me yesterday, "J, how will BBY do?" I would have said something similar-- i.e. sales flat to small decline, profits down due to weak sector. There's 2 stocktalks from August that confirm exactly this as my view (so you can eliminate hindsight bias).

    However, what I did NOT expect (and hence why I didn't make a $10K+ killing on otm puts) was the markets reaction to this news. It's really "no shit Sherlock" type of news. A great trader needs to know both things: the info (close range) and how the market will react to it. With GME I nailed both, with BBY I only had 1 piece.

    If the market is reacting this crazy to obvious news from BBY, we are in for some wild shenanigans over the next few weeks/months.

    Best of luck in your postions!

    Disclosure: I am short NFLX, LNKD, TWTR, TSLA, ANGI.

    Additional disclosure: I have various puts on the aforementioned. I currently have no position in GME or BBY, but may enter one if the market pricing dynamics appear attractive.

    Tags: BBY, GME, Retail, Services
    Jan 16 1:13 PM | Link | 2 Comments
  • Why BBRY Made The Loss Announcement

    Note: This is purely speculative, which is why I am posting an Instablog and not writing a full article.

    I believe today's trading activity in $BBRY is completely irrational and misses the bigger point of what is really going on here. We know that Blackberry is trying to sell itself. Part of that process requires access to "the books." Most of the current information (i.e. this quarter's results), which is VERY important to buyout firms, and they are looking at, is non-public information.

    In order to act on non-public information, firms or individuals need to persuade the company to make information public. Blackberry made the extra effort today to make this information public.

    The entire reason that (I believe) Blackberry made this announcement was to clear the way for a few funds (or individuals) to purchase stock on the open market while having insider information. In this case, the insider information was 'bad news,' but it was still legally "insider info."

    Now that BBRY has plummeted even further, I expect massive buying from a few key parties (I have no idea who they might be) over the next 1-3 weeks.

    I have previously shared my firm belief in a $BBRY takeover for $15-$20 either late fall or early spring 2014. I recently sold all of my BBRY in the $10-$12 range and have staked my entire position 50% on cash and 50% in $12 March 14 calls. I will probably buy some $10 June 14 calls if the stock price persists next week.

    I expect that certain parties will begin increasing their share of BBRY stock prior to making their first bid. If the market continues to value $BBRY stock at these (single-digit) levels, the first bid might be as low as $12. Regardless, I still see a final close at $15-$20, if not higher.

    Please keep in mind this is 100% speculative. I do NOT recommend any positions based on these observations, or anything else for that matter. I just want to share my thoughts in a public forum while the news is fresh.

    Disclosure: I am long BBRY.

    Additional disclosure: I am long BBRY via $12 March 2014 calls. I may add to my position or alter my position in any way at any time.

    Tags: BBRY
    Sep 20 4:27 PM | Link | 30 Comments
  • My Napkin Calculation For A Netflix Bankruptcy

    I AM CURRENTLY SHORT 1W PUT OPTIONS ON NFLX. PLEASE KEEP THAT IN MIND, AND UTILIZE DUE DILIGENCE BEFORE INVESTING BASED ON MY CLAIMS.

    Background

    For a background basis- check out my original hypothesis last February. I missed the mark on revenues which has pushed my date for a liquidity crunch back a few months to a year. There's a chance I could be wrong again IF subscribers can grow fast enough.

    Numbers are based on an annualized basis from the Q3-12 letter to shareholders data.

    My recent article sums up the earnings miss and related events.

    The Napkin Calculation

    Please keep in mind this assumes 4 quarters at the annualized rate of Q3-12. It's very likely that revenue will increase slightly and that other expenditures will also increase. The question is whether or not revenue growth will outpace additional expenditures, especially international expansion.

    Revenue at $905M*4= 3620M in cash inflows

    Content liabilities are estimated at $2.1-$2.2B --> $2150M

    $1470M left.

    interest+g&a+marketing+techdev+fulfillment ($291.7*4=1167M)

    $303M left. (please note that fulfillment will likely slightly decrease due to less DVD traffic, marketing and G&A increases should more than comp)

    Subscription costs are difficult to breakdown... What is the cost of bandwith/servers/etc. What are the costs of tech support, and other related fees? The best method I can figure is to take the $602.1M in "subscription costs and subtract the $410.9M amortization of streaming content liabilities that is include in the operating cash flow statement. I am taking out the $410.9M since this figure would already be included in the upcoming $2.15B liability bomb.

    This leaves $191.2M per Q X 4 = $764.8M annually

    Netflix will burn $461.8M in cash in the next 12 months if revenues do not outpace related expenses!

    Netflix has $790M in cash and STI, but the next 12m will not be much better. Plus NFLX will be forced to stop buying new content which will drive subs away. Any way you slice it, going cash flow negative on a large scale will spell the end for NFLX.

    To avoid this end, they need to find $435M more revenue in the next 12m while holding expenses constant. Since it's impossible to hold these other expenses constant, I'll be extremely genererous and assume 50% growth. They need $870M.

    How Many Subscribers Do They Need?

    As DVD continues to go away, the revenue/sub continues to fall, although it appears to be stabilizing around $30/q--> $120y. Effectively they need 7.25M subs TODAY to breakeven, and that is WITHOUT counting DVD exits.

    Let's assume DVD exits are extremely slow- only 250k leave each qtr. Since it takes approx 1.5 streamers to replace the revenue of a DVD user, we need a qtrly gain of 375k subs just to break even.

    For the 7.25M mentioned above, assuming equal quarterly gains, and 0 gains today, they need approx 14.5M at the end of the year/4 qtrs = 3.625M subs + .375M from DVD = 4M each quarter.

    In Summary

    I'm being VERY generous to Netflix here, and they still need to gain 4M streamers each quarter for all 4 next quarters just to stay cash flow neutral.

    The past 4 quarters from Q4-11 to Q3-12, NFLX has added .1M, 2.83M, 1.28M, and 1.78M.

    Good luck!!

    Disclosure: I am short NFLX, AMZN.

    Oct 24 12:01 AM | Link | 3 Comments
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