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Michael Fu

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  • Is Inorganic Growth What's Really Driving Amazon's Sales? [View article]
    Hi Tim, sorry I should clarify. I use non-GAAP EPS for my P/E calculations (versus GAAP EPS that you are referring to that is sourced from Yahoo). You are correct though, if you look at GAAP EPS, then the multiples are much higher.

    The reason I use non-GAAP EPS is b/c its what wall street analysts will use and what institutional funds (the real volume buyers/sellers) will buy and trade off of. there's a whole different topic of using GAAP vs. non-GAAP (but in theory, as long as the market cap and stock price reflects the fully diluted shares including company's stock options, then it's apples-to-apples when you use non-GAAP, which most of the time is to account for stock comp as well as non-recurring items).

    All of my articles I will use non-GAAP b/c again, I want to view it from the large institutional buyers (view it from the bulls perspective). if i can still argue against AMZN using best case scenario, then it makes my case stronger as I also take into consideration the other side (bull side).

    regardless, even on a non-GAAP basis, the P/E multiples are obviously very high. The one thing to be careful of (and the reason i'm only short a small amount on AMZN), is that investors need to not get too focused on just P/E multiples (it doesnt tell the whole story). for example, if you look at Revenue multiple, its 1.9x 2012 sales, which are not crazy expensive (compared to say salesforce trades at 7x sales, qihu trades at 10x sales).

    and the reason i mention to both look at AMZN 2012 sales multiples of 1.9x, along with their 2012 non-GAAP P/E of 170x, is that the reason there's such a big difference is because their net income margin (for the EPS part of P/E) is just 1% for 2012. if their net income margin goes to 4% (which they've had in the past and other retailers like WMT also have 4% margins), then note the P/E all of a sudden drops to 42x P/E.

    anyways, things to keep in mind. even though i'm short this trade (b/c of other factors in addition to high P/E), i'm always looking to see it from the other side's perspective and processing new info (b/c it can change my thesis). best of luck.
    Jan 17 01:48 PM | Likes Like |Link to Comment
  • Is Inorganic Growth What's Really Driving Amazon's Sales? [View article]
    i agree. i dont think bezos is necessarily trying to intentionally hide anything, but its in his best interest as CEO to view his company in the most positive light.

    but it's up to us as investors to do the homework and see if there's any potential downside/risks not being properly priced into AMZN.

    another thing to think about is that bezos recently has been pushing to value amazon based on free cash flow instead of net income. while that's usually fair (cash is king), just remember the amortization costs (from past acquisitions, some acq. in 100% stock) and depreciation costs of past fulfillment center buildouts/new int'l market expansions, then does not get "penalized" going forward. again, it makes it even harder to track how well AMZN's inorganic growth spending from the past (of acquisitions and int'l market expansions) is performing going forward from an ROI perspective. depreciation and amortization expenses are required by GAAP accounting for a reason (forces you to apply an "opportunity cost" going forward to your past spending sprees).
    Jan 16 11:34 PM | Likes Like |Link to Comment
  • Is Inorganic Growth What's Really Driving Amazon's Sales? [View article]
    good suggestion sir. only concern is that i'm even more levered on my trade (if AMZN bulls keep bidding this stock up, then my puts expire out of money and the calls I sold have unlimited downside as AMZN prices keep trading up). again, can't fight the market sometimes, so i'll just play it a littler safer with direct puts for a minimal amount.
    Jan 16 11:24 PM | Likes Like |Link to Comment
  • Is Inorganic Growth What's Really Driving Amazon's Sales? [View article]
    I agree china e-commerce is highly competitive. I also agree there is very low profits for e-commerce retailers (that carry inventory like an AMZN) because of the competition.

    there is profit in China however, for the marketplace platforms (like an EBay). these marketplace platforms just act as middlemen and collect a service fee and carry no inventory (Ebay's NI margin is +25-30% versus just 1-2% for AMZN).

    the Ebay equivalent in China is Taobao, which is also owned by Alibaba. (Taobao is their Ebay marketplace equivalent, TMall is their Amazon retailer equivalent, and Alipay is their Paypal equivalent). Basically Alibaba absolutely dominates e-commerce in China, which is probably why P/E firms (Alibaba's private currently) value them at $35 billion USD. Alibaba will prob look to go IPO very soon (but prob in HK vs. US markets).
    Jan 16 11:16 PM | Likes Like |Link to Comment
  • Amazon: Conflict Of Interest Rears Its Ugly Head [View article]
    here's the new AMZN article regarding their int'l business (not as dominant as in the U.S.):
    http://seekingalpha.co...
    Jan 16 08:59 PM | Likes Like |Link to Comment
  • Qihoo Vs. Baidu, Which Is The Better Play For China's Online Search? [View article]
    SG&A is selling, general & administrative expenses. basically it's sales & marketing and general corporate overhead costs.
    Jan 16 01:16 PM | Likes Like |Link to Comment
  • Qihoo Vs. Baidu, Which Is The Better Play For China's Online Search? [View article]
    BIDU did NOT go public through a reverse merger. Here is BIDU's IPO prospectus from 2005 filed directly on SEC's website:
    http://1.usa.gov/We3RWo.

    Please stop stating false information. you have been reported to SA.

    investors in Chinese ADRs already know about PCOAB/CSRC's on-going year long debate. you are not providing any new information and just repeating the same commentary that you've made in some of your past SA comments.

    if you're short BIDU or Chinese ADRs, that's fine and nothing wrong with that, but please try arguing your views with facts, not false information.
    Jan 16 01:06 PM | 5 Likes Like |Link to Comment
  • Qihoo Vs. Baidu, Which Is The Better Play For China's Online Search? [View article]
    first, a fact correction: the 126 companies delisted referenced in your comment refers specifically to the 159 reverse merger chinese companies. meaning the lesson is don't buy chinese reverse merger companies. I'm not debating that at all, in fact, I completely agree. but note that BIDU and QIHU (and alot of other chinese companies like SOEs bank of china, china unicom, china mobile, etc.) are not reverse merger companies. Please get your facts straight before making broad generalizations.

    second, I'm not sure how you could have possibly interpreted from my article that I was trying to lead anyone to the slaughter (i'm not recommending nor do I own either BIDU or QIHU). If anything, I specifically highlighted potential concerns to think about, particularly as it relates to understanding QIHU's business model and their recent headline around their supposed online search upside. but maybe you missed that point b/c you didn't really read my entire article and simply jumped to the comment section to vent your frustrations regarding everything china.

    third, what school exactly are we alums at and when did you graduate? you seem highly emotional, judgmental and quick to generalize, for whatever reason. there is a simple solution by the way, please just stop reading my articles.
    Jan 16 03:50 AM | 9 Likes Like |Link to Comment
  • Apple: Gross Margin Conundrum Explained [View article]
    i agree scott, tablet should continue to do well for apple, and hopefully offset potential slowdown in iphone business. also, i think their mac pcs should continue to take market share, given windows PC sales continue to decline (4.3% decline in Q42012 according to gartner). anyways, i'm still long AAPL and will be through earnings. depending on results Apple reports, I may need to readjust my price target expectations (if no margin issue/no iphone volume issue, then price target remains $650+, if margin/iphone issue is real, depending on magnitude, price target falls to anywhere from $500 - 600, if iPad sales/Mac sale exceed, add to price target). good luck everyone.
    Jan 16 01:08 AM | 1 Like Like |Link to Comment
  • The Cyclical And Secular Risks Of The PC Industry [View article]
    i think alot of these players in the PC industry (HPQ, DELL, STX, etc.) will trade positively to any news of PC demand coming back/rebounding (although recent PC sales showed decline again). so if DELL may go private, then it indicates at least somebody (PE firms) think there's value in PC business (70% of dell's business). Same thing if say MSFT reports next week and shows strong windows 8 sales (probably see some bump for all the PC guys as well). good luck.
    Jan 16 12:56 AM | Likes Like |Link to Comment
  • Qihoo Vs. Baidu, Which Is The Better Play For China's Online Search? [View article]
    a few bad eggs doesn't mean you write off an entire market/country. there's fraud even in the U.S. (worldcom, madoff, subprime mortgages). the world today is globally connected, most U.S. based MNCs (GE, MCD, GM, etc.) have significant operations in China. each country has its own unique risks (and potential reward). You can choose to hold 100% cash if you want 100% no risk exposure (and even that has risks, given all the money printing these days).
    Jan 16 12:45 AM | 4 Likes Like |Link to Comment
  • Qihoo Vs. Baidu, Which Is The Better Play For China's Online Search? [View article]
    anton, judging by your past comments posted in SA, it looks like you use to be bull on BIDU, but then recently switched to owning QIHU. that probably explains your comment this time. hopefully you did not miss out on BIDU's rebound and just recently bought QIHU and didn't participate in any of QIHU's recent rise. if so, that would be a pretty classic example of trading based on headline news. but hey, maybe QIHU keeps rising on headlines and momentum. up to you to trade your way. I just wanted to highlight some additional considerations for SA readers.
    Jan 15 08:07 PM | 6 Likes Like |Link to Comment
  • 2012 Global Handset Market Share Analysis [View article]
    i agree, i also like their net cash balance, which is closer to $3bn once you net out debt. also their 2.5% dividend yield (mgmt increased it 20% in Oct 2012, which is always a good sign). yes, capex spending will come down from $2.4 bn in 2011, down to $1.3 bn in 2013, as they finish off their previous investments in gorilla glass plant in Japan and LCD plant in China. good luck and let's hope GLW's stock starts to rebound this year (i agree if it rebounds, there is significant upside).
    Jan 15 05:04 AM | Likes Like |Link to Comment
  • 2012 Global Handset Market Share Analysis [View article]
    you are correct Jake, I took full year 2012 numbers.

    another thing to keep in mind though for GLW bulls, is that the 50/50 Joint Venture with Samsung is NOT consolidated. meaning, there is no revenue recognized on GLW income statement for the JV. instead, their share of income flows through in "earned equity interest income" further below in the income statement. the JV is all LCD glass (no gorilla glass), so if you were to add the sales from JV, it would show more of GLW's business is still LCD, and not as much as people think on gorilla glass (plus, gorilla glass profit margins are lower than LCD).

    anyways, not to discourage GLW bulls, I own GLW as well, but I own it primarily for LCD turnaround (which could be wrong). I don't put too much hype/value on the gorilla glass, given it's contribution is still fairly small to total revenue (including JV sales) and profits. I wish it was much bigger and maybe eventually it will be, but GLW is still primarily a LCD turnaround play.
    Jan 15 03:58 AM | Likes Like |Link to Comment
  • The Cyclical And Secular Risks Of The PC Industry [View article]
    i'm not sure where that other article is sourcing their information from (you'll need to ask that author), but for the data I quoted on STX, you can look it up directly from the company's latest 10-Q (http://1.usa.gov/XzWLgj) page 31, Enterprise has 6mm out of 58mm total units shipped (or 10%). assuming enterprise drives maybe sells at higher ASP (ave selling price), that's prob what gets that up to 13% on total revenue basis (btw, that 13% i quoted earlier is from latest S&P research I get from Jan 2013, but seems consistent with company's own filings). anyways, good luck.
    Jan 15 01:25 AM | Likes Like |Link to Comment
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