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James Sands

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  • Facebook: Finding A Bottom Down 20% [View article]
    Thanks for the reply Justin.
    Apr 2 03:29 PM | Likes Like |Link to Comment
  • E-Commerce China Dangdang Faces An Uphill Climb In China's Highly Competitive E-Commerce Market [View article]
    eager,

    Thanks for the added comments. Dangdang does do more than just books. However, books/media, the core driver of the company, represented about 65% of revenue in Q4 2013 and is down from about 75% in early 2011. General merchandise grew 16% year-over-year in Q4 and reflected the slowest growth segment. This compares to 25% year-over-year growth in Q4 2012.

    Plus many of Dangdang's general merchandise products: "general merchandise, including: beauty and personal care products; home and lifestyle products; baby, children and maternity products; electronics; apparel and accessories; and footwear, handbags and luggage" -

    are also offered by Vipshop: "We offer a curated selection of apparel, fashion goods, cosmetics, home goods and lifestyle products from popular domestic and international brands", exceptions being electronics.

    You are correct on the ability for there to be many e-commerce companies in China. We will have to see how much more value Dangdang can generate outside of its books/media segment moving forward.

    Thanks,
    James
    Apr 2 03:21 PM | Likes Like |Link to Comment
  • E-Commerce China Dangdang Faces An Uphill Climb In China's Highly Competitive E-Commerce Market [View article]
    Thanks for insights Big Pimpin.

    The e-commerce market in China is going to be very interesting to see evolve over the long-term.

    James
    Apr 2 02:32 PM | 1 Like Like |Link to Comment
  • E-Commerce China Dangdang Faces An Uphill Climb In China's Highly Competitive E-Commerce Market [View article]
    yborcat,

    The intent of the article is not to assume that Dangdang will not provide a return for investors, nor to discriminate. Big Pimpin's comment below is a good comment which adds more information considering an opposing outcome. The Chinese economy is going to continue grow and discretionary spending will continue rise. However, when considering growth rates, Dangdang is lagging its peers. And it is lagging its peers at a lesser revenue scale. Its peers are growing to significant levels and to think that Dangdang is not losing out on opportunities from a market perspective is dangerous.

    The company did not evolve as JD.com has, nor did the company evolve as Vipshop has. The company has added its marketplaces segment which is a very competitive area. The "rises with all tides" theory is fine and the company may indeed rise, but the intent of the article is to focus on the best company to invest in.

    I would not buy shares in Dangdang, Vipshop, Alibaba, and JD.com all together. I would look to select the company that provides the best opportunity. In my opinion it isn't Dangdang, again Big Pimpin would disagree with me, that's great, it allows me to consider that information and add another question to my thesis.

    It would be great to hear some of your points as to the strengths of Dangdang.

    I am always open to hear why my thesis could be off-base or why a contrary thesis could be stronger.

    Thanks,
    James
    Apr 2 02:31 PM | 1 Like Like |Link to Comment
  • E-Commerce China Dangdang Faces An Uphill Climb In China's Highly Competitive E-Commerce Market [View article]
    Thanks for the comment js,

    DANG as the next VIPS will remain to be seen.
    Apr 2 12:25 PM | 1 Like Like |Link to Comment
  • Facebook: Finding A Bottom Down 20% [View article]
    Justin/Bill,

    When looking at both Google and Facebook, there are interesting comparisons.

    For instance, Google in 2004 did $3.2 billion in revenue with a 13% profit margin. EV was at $51 billion, P/E ratio at year-end was 132, EV/sales was 16, and P/B was 18. In 2005 these numbers changed to $6.1 billion in revenue, 24% profit margin, $114 billion EV, P/E ratio 83, EV/sales 10, and P/B at 5.

    Facebook in 2012 did $5.1 billion in revenue with a 1% profit margin, EV at $50 billion, P/E ratio at 2,660, EV/sales at 10, and P/B at 5. In 2013 these numbers changed to $7.9 billion in revenue, 19% profit margin, $127 billion EV, P/E of 91, EV/sales at 16, and P/B at 9.

    From 2005 on Google has grown revenue by an average of 33% per year. This is after averaging 140% per year from 2002 to 2004. From 2009 to 2012, Facebook has averaged 78% per year revenue growth. Assuming they generate around 24% of this growth rate over the next 8 years to be in-line with Google's performance (19% per year), we would get around $32 billion in revenue by 2021 for Facebook.

    The problem with assuming a consistent lower rate of 19% for Facebook is that the company has done something that Google did not do, it has accelerated growth in a non-recession environment. This is one reason why average growth rates for the next 5 years have become higher.

    I must admit that I did not foresee Google's growth trajectory in 2005. Interestingly, between 2005 and 2012, Google averaged a 8% per year return for investors. Adding 2013 boosts this average return to 13% per year. While solid returns over this time period, Google's EV near $125 billion in 2005 suggested an early premium, just as Facebook's value does today.

    I am not going to attempt to assume I know what growth rates Facebook will attain in the next decade. But I do know that the company is off to a similar start as Google was back in 2004. The future success will be dependent on a variety of factors of which mobile is going to continue to play a significant role. When we talk about mobile advertising now and into the years ahead we will basically be talking about Google and Facebook.

    If Facebook is partially as successful in developing a secondary revenue stream from WhatsApp as they have been regarding mobile, then this will significantly change their growth trend. After Google went public, it was not until 2008 that the company consistently traded under a P/E of 50, five years. At today's price, this may occur in Facebook's 3rd or 4th year.

    Facebook offers revenue growth, income growth, and cash flow growth, very rare for newer companies today.
    Apr 1 06:16 PM | 1 Like Like |Link to Comment
  • What Can We Learn From Weibo's Updated IPO Prospectus? [View article]
    Correct, my mistake on pages 14 & 16 (too many line items read over the past 3 days in a row).

    On page F-7, this is probably true, but should not be the case.

    Thanks,
    James
    Apr 1 12:07 PM | Likes Like |Link to Comment
  • Facebook Is Being Frivolous With Its Money [View article]
    George,

    Facebook generated nearly $3 billion in free cash flow in 2013. This may be part of the confidence to make such bold acquisitions. What we will begin to learn during the next call is what the tangible impacts will be from a cost and expense standpoint moving forward. We have to assume that these deals will impact margins and estimates, moving forward from here is what will be key.

    I would contend that WhatsApp is definitely a social product and therefore fits into Facebook's company nicely. We just don't have a clear idea regarding monetization. This was an accusation against Facebook with their mobile strategies to some extent in 2012 too, and Facebook was able to prove the naysayers wrong big time there. Scale of users is what is driving these companies, Facebook is the only company which is posing as a rival to Google for mobile advertising so paying for users seems like the winning edge perhaps.

    Google dominates search, Facebook dominates social. Both are driven solely on advertising revenue. WhatsApp is an opportunity to diversify revenue. Just as search will not go a away, neither will social. Facebook was smart to buy WhatsApp and they will buy more social businesses. They will pay a premium to fend off Google and others because they are the social leader. Google is the search leader and will defend this area much more vigorously than pursue social strategies.

    What investors need to consider is the acquisition-related impacts to costs and expenses and cash flows. We'll get more transparency here soon.

    Thanks,
    James
    Apr 1 11:25 AM | 2 Likes Like |Link to Comment
  • What Can We Learn From Weibo's Updated IPO Prospectus? [View article]
    Why is there a discrepancy with Stock-Based Compensation throughout the draft prospectus?

    For instance, on page 14, note 2 a table lists the stock-based compensation for the three year period. These numbers differ from the reconciliation of net loss to adjusted net loss and adjusted EBITDA on page 16. These numbers also differ from the statement of cash flows on page F7.

    Thanks,
    James
    Apr 1 10:41 AM | Likes Like |Link to Comment
  • LinkedIn Will Grind Lower In The Coming 9 Months [View article]
    Thanks Phil,

    I will consider an article on LinkedIn.

    I have watched similar videos regarding the real estate speculation. China is a very challenging environment for investors, entrepreneurs, and businesses alike. The country's discretionary spending and Internet consumption is definitely increasing at significant rates and this is why technology companies are benefiting tremendously. So while the real estate market may be more speculative, domestic consumption is tangibly evolving.

    But risks of any bubble or retraction will impact all sectors so many things to consider on that note.

    Good luck as well.

    James
    Mar 30 05:01 PM | 1 Like Like |Link to Comment
  • LinkedIn Will Grind Lower In The Coming 9 Months [View article]
    Thanks for the reply Phil,

    When we think of the opportunity, Baidu is going to do over $10 billion in revenue, JD.com is going to do over $17 billion in revenue, Alibaba is probably near $10 billion this year, Vipshop is doing near $4 billion..etc. These companies are going to continue grow as the entire technology sector grows robustly in China. Lower Internet/mobile penetration will grow closer to western levels over time. These companies will all be competitive long-term for employment. And I didn't mention Tencent, the largest tech company as I'm not aware of their revenues, but it would be larger than any of these companies listed.

    My opinion is that China is going to rival the rest of the world with technology and this seems like a great place for LinkedIn to be from an employment standpoint.

    The only public jobs-focused company in China that I know of is 51Job Inc. (JOBS). This company is more like a Monster on the web and also does print job-related services. Their revenue estimates are near $350 million. So this is why LinkedIn is smart going in now to China as I see it.

    Thanks for the term clarification. I own LinkedIn, I have owned since the IPO day and averaged a few times, overall about a 60% total return. I am scrutinizing the company's prospects at these levels because the company is at a level where future growth is no guarantee based on today's value. Arguably many prospects are priced in, but the opportunities are very interesting.

    Thanks again,

    James
    Mar 30 01:33 PM | 2 Likes Like |Link to Comment
  • LinkedIn Will Grind Lower In The Coming 9 Months [View article]
    "Why China Won't Help"

    There are many technology-based companies in China. Many of these Chinese companies need U.S. GAAP and SEC filing employees with experience. JD.com is a great example of a company coming public who has disclosed that they have hired U.S. employees to fulfill identified material weaknesses in their company.

    LinkedIn is most likely going to be the connection for these needs moving forward. Anyone who says China is a labor economy solely is missing a lot of fascinating technology developments in this country.

    FYI....Mexico graduates more engineers than the U.S. to date. This is why we are experiencing major near shoring and redistribution of supply chains to Mexico on a massive scale.

    I would not underestimate LinkedIn's potential in China, especially for U.S./Europe-based Chinese graduate students, of which I believe there are many.

    LinkedIn management does not expect this investment to have a material impact say this year or next year, but long-term it is a very smart move and should add value.

    Thanks,
    James
    Mar 30 11:41 AM | 1 Like Like |Link to Comment
  • Alibaba May Be The Amazon Killer [View article]
    Robert,

    Thanks for the article. We need to see Alibaba's F-1 to get a sense of their revenues outside of China/Asia, and what their plans are for expanding to western/other geographies.

    If they are going to be a China growth play, similar to most other Chinese-based companies, then it would make sense to probably own Amazon, eBay, and Alibaba moving forward for long-term investors.

    JD.com is a great example of a company bent on dominating the growing Chinese discretionary spending economy. When they hit the market, they may be at a significant discount to Amazon from an EV perspective.

    I see many of these Chinese companies growing as the Chinese economy grows and not making much progress in other geographies outside of Asia. It gets really complicated serving Western culture preferences and Chinese culture preferences with government rules in place.

    My strategy long-term is to consider the best Chinese growth plays as well as the best other geography growth plays in unison.

    Thanks,
    James
    Mar 30 11:35 AM | 1 Like Like |Link to Comment
  • Trinity Industries: A Top Performer For The Cyclical Rail Manufacturing Industry [View article]
    Newbie9,

    Thanks for the comments. I would agree with your statement regarding GMT generally. My personal feeling is that a company like Trinity offers much more balance, as well as more diversity for future economic cycles than all the other peers, whether manufacturers or a pure-play lessor.

    However, GMT is the largest lessor and I don't think that many of the Class I rail operators or regional, short-haul rail operators are necessarily going to go out and buy a ton of tank cars. Union Pacific is not going to buy tank cars and they utilize many tank cars through their customer services. BNSF utilizes Trinity, GATX, and Union Tank Car tank cars as do most rail operators.

    I believe that lease rates increasing would be passed on to customers, demand is still strong for oil-based commodities so this looks to be fine for the short-term.

    Thanks,
    James
    Mar 29 07:44 PM | Likes Like |Link to Comment
  • An Analysis Of Sina Weibo's IPO Prospectus [View article]
    Your last paragraph speaks to the risk disclosure pertaining to losing out on cost synergies by staying as a wholly owned subsidiary of Sina.

    However, from a growth perspective, I think Weibo is obviously the most valuable part of Sina's businesses. And with Alibaba potentially owning around 35%, I would think that Weibo would be a lucrative acquisition target. I don't remember the specific risks associated with structures precluding acquisitions, but if I'm not mistaken, they are there.

    I have been attempting to model Twitter's cash flow generation for this year and it looks like they are going to still lose a lot of money. I think it will be most interesting comparing growth, capex and margin improvement between Twitter and Weibo.

    Thanks,
    James
    Mar 28 09:19 PM | Likes Like |Link to Comment
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