Jason Kaplan

Long/short equity, contrarian, medium-term horizon, long-term horizon
Jason Kaplan
Long/short equity, contrarian, medium-term horizon, long-term horizon
Contributor since: 2011
I agree part of the slowdown STX has experienced is due to the strong dollar and global economic woes (intel processors, windows licenses, and HDDs all priced in dollars globally. Intel has been raising prices to offset declining sales. There has been significant deflation in DRAM/NAND though still priced in dollars). If the dollar significantly weakens and tech sales pick up STX should rally quite a bit I suspect. However that is not the whole story. The LT decline in HDD usage will continue. Unfortunately, I don't see how $1B in non-HDD sales (growing double digits) on a $12B base of sales (the rest of which is declining double digits) will save this company in the longer-term.
Going long STX today is a bet that significant dollar weakness will occur and as a result global tech hardware sales will rebound significantly. Seems kinda risky to me, but best of luck to you all.
Again, I think "big picture" thinking like this will get investors into trouble, similar to what happened with MLPs. You point to EPS vs the dividend...what was EPS a year ago? How much is it down over the LTM? You can't just view one number myopically.
Revenues beat estimates but where still down what 18% YoY? It's on a negative trajectory. While I don't think this has to be the last hurrah for HDDs (maybe PC/hardware investment picks up again - possibly due to a weakening dollar), but that would just be a temporary phenomenon. The trend is clearly down for HDDs. THe company would need to get the topline burn down to low- mid-single digits for the stock to rally like that IMO.
SSD is making big inroads in PCs, particularly in laptops. Compare the decline in HDD units for client from both STX and WDC to the published declines in overall PC sales...big disparity.
A typical business PC being built today would likely have both. Many put the OS on a 64 or 128bg SSD and have a HDD for data. Though with more storage going to the cloud the HDD isn't necessary...nor is a 1TB drive. Prices for a 256GB SSD is quite reasonable today. In many instances that is all that is needed. Of course a 1TB SSD is still quite expensive. That has been the saving grace of HDDs in client to-date, but with all these new technologies, including 3D NAND, that isn't likely to be the case for more than another 1-3 years.
@doggie
Who is talking about shorting? I'm not advocating a short position. I said avoid.
The company has the cash flow to pay for the dividend right now. But a year ago the company was generating $2B/year in FCF. Now it's down to $1-$1.2B. See what's going on here?
lol yeah if they could afford it. It's never going to happen. Even still, MU is going to have a hard time making money. They are spending $5B+ in capex this year. Flash is way too competitive. It's a horrible business as well. Avoid all the storage guys IMO.
From EMC's last earnings call.
<A - David I. Goulden>: So, Steve, on the technology side, obviously flash has moved a long way. And we, in my
comment, referred to a number of announcements we're going to be making this quarter. Without revealing too much of
them, you'll certainly hear us talk about 2016 being the year where we really believe that all-flash systems should be
the standard for primary storage. So that will be a big shift from where the market was. And so talking more in hybrid
terms, we really think that the technology has advanced to the stage that with the latest 3D NAND technology and
things like 3.8-terabyte drives, which of course you need to architect your system to optimize to use something that big
and that fast, which is why we talked about the rearchitecting. We can really come to market with a complete family of
VNX, VMAX, XtremIO, DSSD, leveraging this latest technology and basically use all-flash all the time for primary
storage.
Now when it comes to the kind of data compression technology you were talking about, that really is application
dependent. One of the things that makes these systems price competitive, in fact, maybe even more so than a hybrid
system, is the fact that using flash you can use compression, dedupe, and other data efficiency technologies. Those
bring the effective price per gigabyte down to about the same or maybe a little bit less than the hybrid. So depending
upon your application, with the compression, you can get maybe a 2X factor. With dedupe, you can get a little higher.
And of course, you could also do instant snap copies and things which you can't do as effectively with disk.
You are completely ignoring the fundamentals, choosing instead to just focus on the dividend. May I remind you MLP investors did the same thing and look where they are right now. Review the deteriorating financials. Run some projections. You will see that dividend increases will soon be off the table and cuts will follow.
You need a little more cynicism in your investment review. Consider who is delivering the message. Is STX management going to tell you they are screwed? I don't think so. Like I said in the article (did anyone actually read it?), losing the client business to NAND is a big deal, despite the narrative management would like to tell. Your best hope now is a big weakening of the dollar across the board so PC/hardware sales can rebound. That should be your clue to exit. Don't get greedy...the party won't last long.
Gene Munster out with his quarterly bashing of PYPL. He thinks competition will only get tougher.
Research firm Piper Jaffray warned that PayPal continues to face increased competition, which may weigh on its results. Meanwhile, the company announced a change in its Chief Technology Officer. PIPER STICKS WITH SELL RATING: Other leading digital payment systems are becoming more competitive with PayPal's offering, according to well-known Piper Jaffray analyst Gene Munster. More financial and technology competitors - including Visa (V), MasrterCard (MA), Google (GOOG,GOOGL), Samsung and Apple (AAPL) - are offering "similar functionality" to PayPal, Munster believes. Moreover, Apple and and Samsung will begin accepting mobile Web payments in 2016, intruding on PayPal's core competency, and Facebook (FB) is looking to partner with multiple players in the space, Munster noted. The credit card networks are poised to launch online checkout systems, further increasing PayPal's competition, Munster warned. In the face of all this competition, PayPal's appeal to its customers is questionable, according to the analyst, who kept a $33 price target and Underweight rating on the shares. WHAT'S NOTABLE: PayPal announced that its CTO, James Barrese, would resign "to take time off." Barrese will be replaced, effective April 1, by Sri Shivananda, who led eBay's (EBAY) Global Platform and Infrastructure team, PayPal reported. Shivananda's team has worked closely with PayPal, the company noted. PRICE ACTION: In early trading, PayPal slipped about 1% to $33.30.
If you are in any of the banks your call is wrong. They've all been smoked. Can't claim victory for being down 34% from 2015 highs vs down 38%.
Welp, I sure hope the company is buying back shares now. The stock is getting murdered!!!
Can you imagine? The stock would go to $10 if it floated a plan to buy EBAY. First step, sell the core. Then dividend a lot of that cash to shareholders as a return of capital. Then figure out how to monetize the BABA and YAHOY stakes. Would BABA want to own a stake in YAHOY if it bought that and the BABA stake back from YHOO? I don't know. But first step is sell the core. No more attempted turnarounds.
You guys act like businesses don't face competitive threats every day. Of course they do. But PYPL has a leg up on all these competitors. They are all dwarfed in size by PYPL. The space is growing exponentially. PYPL will be a leader for many years to come. PYPL is growing faster than the rate of e-commerce (thanks to braintree I presume). I'd also recommend listening to the last earnings call. The CEO also had some interesting comments on competitors like visa checkout and mastercard checkout or whatever it is.
STX CEO comments on Toshiba from the last earnings call:
"So if you had to ask me though, where was my gauging of, would Toshiba be in the business in the next one year to three years today, versus where it was at six months or a year ago, I'm – I would feel I'm much more towards the end that they're not going to be in this business in the next one year to three years. Just because I just – I don't see how they
can be competitively, given where areal density is going and given where manufacturing is. And then, given some of their bigger corporate issues, I just can't imagine that that's where they want to spend their R&D expense or, frankly, their cash flow."
I saw this on a sell side note. Thought might be helpful in this discussion.
Braintree: Management noted that only those transactions where it bears risk are counted in TPV, which includes arrangements where PYPL has a processing relationship and is not just a gateway service provider. We believe gateway service revenues are recorded in Other Value Added Services.
So why is it moving up? The good quarter has nothing to do with it?
Who says it was for sale at a reasonable price then? And AXP is more desperate now. I'm not saying it is going to happen, but AXP needs something to turn it around.
Nice article. I wonder what the odds of someone like AXP taking a run at PayPal. They need a new growth engine. I know Dan is on the record saying the company should remain independent but he did come from AXP and it would make strategic sense. The price would have to be quite high though I assume.
So is there any thought of ACTG buying new patent portfolios anytime soon? How much longer can they continue to milk the current portfolio? Obviously issuing equity at these levels to buy new portfolios would be a mistake. Thanks.
MLNK CEO just sold 44k shares into the market at $2/share. That's not bullish. He needed the money? Ugly. He has 181k shares still.
My firm is invested in a PE fund that does this. Unfortunately this retail version of the strategy is unlikely to perform very well. Operating costs seem high. Financing isn't cheap. Policies aren't as seasoned as they should be for this strategy. Longevity a real risk. What trades below book value tends to stay below book value.
I have the product and it works great. But I wouldn't buy the stock. It's a melting ice cube. It will remain a niche product in a rapidly shrinking market. The stock does look really cheap right now, but it will always be a cheap stock...maybe less cheap sometimes. I think the company should just commit to returning 100% of its FCF each year to shareholders...I'd take it as a dividend. That would help the stock. Run the company like a biz that is in a terminal decline. Milk the cash flows and return them to the owners. It won't happen, but it's a thought.
Good thoughts. The market is very concerned about China, particularly the currency. The rate of decline of the country's forex reserves suggests the peg needs to move significantly higher...maybe depreciate by up to 30%? That could kill BABA's earnings in dollar terms.
Seagate always seems to preannounce if they miss their guidance. They did not this Q, which implies flat topline q-o-q.
The dividend is likely safe for the time being. It costs about $700M/year. The company should stop with the massive dividend increases and focus on buying back tons of stock at this level. It all depends on where its cash flow shakes out. Topline/margin pressures offset by cost cuts. Guidance will be key of course.
SSD in enterprise will become what it has become in the client: commoditized. Pricing will stink. Margins will fall. There are too many players out there. STX bought that controller technology and will have a good supply of NAND but they will principally compete on price.
Nice. Dividend will go up 10% with the March payment. It's definitely not your typical REIT, but I like it for patient LT investors. I'm reinvesting all the dividends.
lol love this comment.
You see a lot of empty billboards from poorly run companies, not Lamar. Contracts are short, from 1-12 months typically. Miles driven in the U.S. has never been higher.
Company just preannounced Q4. Revenue was up quarter on quarter it appears and the company generated sizable positive free cash flow - the first time since bankruptcy. The short has worked due to the news vacuum and the broader market sell-off...not clear it will continue to work. The company has levers it can pull to delever and reduce interest expense. We will see.
Give your broker a few days to sort it out.