Seeking Alpha

Nitin Gulati

View as an RSS Feed
View Nitin Gulati's Comments BY TICKER:
Latest  |  Highest rated
  • Netflix Will Move Hard After Earnings: Here's How I'd Trade It [View article]
    Netflix has for the past 14 qtrs moved an average of 14.5% equating to 6.72 std deviation moves. Historically ATM straddle in Netflix has priced 7.29 std deviation move in NFLX prior to earnings release but this time options market is implying 5.50 std deviation move only. So a straddle which is priced cheaper than its historical average, cheaper than actual move the stock experiences- under the market circumstances where momentum reversal has hit such names the hardest. Is it priced cheap for a reason.

    http://seekingalpha.co...
    Apr 16 09:33 AM | 1 Like Like |Link to Comment
  • Amazon - What Is Changing The Decade-Old Rhetoric? [View article]
    Gary

    Trust me it will. History repeats itself and outcomes at times can get pretty nasty
    Apr 2 07:34 PM | Likes Like |Link to Comment
  • The 'Truman Show' Market: Market Valuation And Hedging Strategies [View article]
    While I appreciate the effort you put in to write this article but all the matrices you are using are essentially relying on one thing - mean reversion of profit margins. Secondly you are applying mean reversion in isolation. What is your explanation for high equity risk premium . Shouldn't it mean revert as well. What do you explain about the structural economic shifts that have taken place in our economy over the last two decades. Why is market cap/gdp been rising since 40's.
    Apr 2 09:12 AM | 1 Like Like |Link to Comment
  • Amazon - What Is Changing The Decade-Old Rhetoric? [View article]
    Exactly that's what my point has been .

    People are so emotionally involved with these stocks that they just ignore the basic facts. What people are not recognizing is the fact that I have allowed significant revenue growth, enabled expansion of operating margins but still couldn't get to valuation levels they expected me to be at. That's the reason I added table with matrix of revenue growth and operating margins for readers to put it into context.
    Same was the case with my valuation on Netflix.
    Apr 2 09:05 AM | 1 Like Like |Link to Comment
  • Amazon - What Is Changing The Decade-Old Rhetoric? [View article]
    I have factored in all the statement you made into my valuation. Revenue growth of 15 percent over the next 5 years, taking its revenue to $150.0 billion , a whopping 15 percent market share of the total retail market in United States, allowed expansion of operating margins. What else do you think I should include.. can't escape out of basic rules of math
    Apr 1 12:52 PM | 1 Like Like |Link to Comment
  • Amazon - What Is Changing The Decade-Old Rhetoric? [View article]
    I am in no way shape or reform underestimating Bezo's business acumen but highlighting the fact that competitive threats have grown for Amazon as the whole industry is now rushing towards online retailing. You stated that Amazon can not be valued like any other stock - Do you mean rules of math should not apply to Amazon and should to the rest of the universe.

    Stock lost 65 percent of its value during 08 crisis. What if economy experiences any shock which we have not expected yet.
    Apr 1 12:02 PM | 1 Like Like |Link to Comment
  • Amazon - What Is Changing The Decade-Old Rhetoric? [View article]
    Aniks

    Every other retailer is entering into online arena, low price offering was the thread Amazon hung on to so far but as competition expands, Amazon will loose its edge despite expanding its distribution capabilities. You are right Amazon Web Services, Streaming services are other Amazon's other business but price wars in cloud space will depress its margins, content production , increased licensing costs

    Despite these head winds , I have allowed my valuation model for a slight expansion of margins and still couldn't justify its price.

    Apr 1 11:54 AM | Likes Like |Link to Comment
  • Amazon - What Is Changing The Decade-Old Rhetoric? [View article]
    Ewohar

    You are right my valuation analysis factors in the growth in revenue, operating income, slight expansion in operating margins. Revenue growth story for amazon is starting to fade away and margins will soon take the limelight. I might be wrong in the short term but I am pretty sure stock price will converge to value in the long term.
    Apr 1 11:46 AM | Likes Like |Link to Comment
  • Amazon - What Is Changing The Decade-Old Rhetoric? [View article]
    Miguel

    I looked up the Wall street estimates from Morning Star as well as referred to Yahoo finance but as far as growth projections go I used my own estimates of growth in operating income, revenue growth rate of 15.0 percent for the next 5 years based on my analysis on the size of retail market in US.

    You can disagree with my assumptions , use your own assumptions to the model but basic math and the valuation outcome most likely will remain the same.
    Apr 1 11:44 AM | Likes Like |Link to Comment
  • Amazon - What Is Changing The Decade-Old Rhetoric? [View article]
    Phil

    I have allowed slight expansion in operating margins ( approximately 30 basis points) from its current levels. I looked up the Wall street estimates from Morning Star as well as referred to Yahoo finance but as far as growth projections go I used my own estimates of growth in operating income. Used annual revenue growth rate of 15.0 percent for the next 5 years and then it gradually slows down to 2.75% ( current 10 yr as a proxy of economic growth). Even with these assumptions, operating income needs to grow by almost 3 billion dollars in the next 10 years and marginal return on capital need to match 34%. At current market price, operating income needs to grow by $22 billion dollars and will need additional $16 billion dollar of incremental investment.
    You can disagree with my assumptions , your valuation style can be different from mine but can you overlook the basic math
    Apr 1 11:40 AM | Likes Like |Link to Comment
  • Amazon - What Is Changing The Decade-Old Rhetoric? [View article]
    I am pretty sure I am on the firing line of a lot of people who are in love with Amazon's stock. I love the company and do not doubt their ability to grow but can just can not overlook the rules of basic math. I don't intend to short the stock right away wanted to gauge its fair valuation and determine what story will replace the revenue growth story. For Amazon,as revenue growth story starts to fade way, operating margins remain the key issue.
    Apr 1 11:25 AM | Likes Like |Link to Comment
  • Contango Takes A Breather [View article]
    This was brought up in the risk management conference last week as well. With realized volatility for SPX pretty much in dumps since the beginning of last year, VIX already is pricey for the type of movements we have been seeing. Indeed the contango curve is flattening but interestingly skew is getting a bid up. Looks like participants have hedged after the rough ride they went through in 08 ,
    Mar 27 04:48 PM | 1 Like Like |Link to Comment
  • Right Time To Challenge Google's Growth Multiple [View article]
    $550 is price at which there are zero growth expectations.
    Mar 26 11:51 AM | 2 Likes Like |Link to Comment
  • Right Time To Challenge Google's Growth Multiple [View article]
    I think Google's stock got ahead of itself just like other tech stocks such as Facebook , Twitter. I am surprised by the fact that market has given Google so much time even though they have missed their revenues estimates quiet a lot. Since 2005, Google has long run volatility of 31% , which means $360 worth of risk ( on a one std deviation move) . What that essentially means is investors can growth as pure bonus if google exhibits that much volatility.
    Mar 26 11:33 AM | 2 Likes Like |Link to Comment
  • Netflix: Fair Value $128/Share, 67% Downside - Primed To Plunge [View article]
    The biggest fact is that NFLX is over-valued by 67 percent. My fair value estimate is $128/ share. Due to higher reinvestment requirements till 2020 , Netlfix will need to raise additional 1.5 billion dollars either by equity financing or by raising debt. I have used the most optimistic estimates for future growth, factored in a price increase and still couldn't come with price close to current trading price. Would be more than happy to share my valuation model with you if you are interested
    Mar 25 02:07 PM | Likes Like |Link to Comment
COMMENTS STATS
239 Comments
135 Likes