Urban areas definitely embrace higher margin prepared foods. So you may have an important point here vis a vis long term expansion. However I do think more people will buy prepared foods if they are perceived as healthy/fresh/organic. That seems to be true at Trader Joe's in suburban locations anyway.
Many hands in the till worry me a bit more than their ability to expand at this point.
Amazon - What If Valuation Mattered? [View article]
Investors see the $4.6B as achievable and if it comes to pass the shares will probably trade with a higher than 15x multiple. Multiples are still a little fuzzy since everyone seems to come up with their own based on growth rates, competitive advantage, business model, interes rates, etc.
Amazon - What If Valuation Mattered? [View article]
I think we are maybe getting distracted from a two key things - first of all Amazon has built an enormous and powerful online retail channel. It's worth serious money, probably 20x on 3-4% of the revenue. They will continue to gain share in retail world wide based on what they have put together.
Secondly stocks are indeed an expectations/realty proposition. You make or lose money by exploiting this relationship. There is probably an expectation that margins will start to trend up (instead they are trending down) so the stock will probably not do much until it finds a price that doesn't reflect that expectation ($150?) or the company starts delivering more profitability with a path to more of the same.
Amazon - What If Valuation Mattered? [View article]
I think most investors appreciate the remarkable accomplishments Amazon has made, and continues to make. Amazon has taken a big bite out of a number of retail markets. The steady state margins in that business are known to be 3-4%. Not great but not zero either.
Amazon has a few other elements like digital goods and hosted services (which is also partially business process outsourcing) that will grow and can add to margins over time.
Like I said before institutional growth investors appreciate Amazon for their management team, strong execution and long-term success. So they own it. At the same time margins and valuation matters. Again the point is that we are probably at a point where either 1) margins need to start trending up, or 2) the stock will face some serious headwinds.
Other than moderating the revenue growth in my base case to account for more saturation in developing markets I'm content to stand by the base case and wait to see if the shares come into a more attractive price range.
Amazon - What If Valuation Mattered? [View article]
Numbers can definitely keep you out of some great stocks. Amazon has been "too expensive" for years but been a great stock. The same was (is?) true for CRM for many years. Going further back I remember trying to get investors to buy into Atria Software (ATSW) which was a fantastic company that was always "expensive." In their case they were worth it.
I think many long-term growth and technology investors view Amazon as a must-own and would need a big fundamental reason to not have a long position. I suspect many firms who "trade around" their positions trim at levels like this. However they also probably have slightly better information about upcoming company plans than many here on Seeking Alpha.
Amazon - What If Valuation Mattered? [View article]
Peter and Glenn I think are both in tune with my thoughts and the market penetration point is worth revisiting.
I do allow to some degree for the law of large numbers to reduce the rate of growth over time (to 15%) but even so the base case may be too optimistic. Some folks I know, including me, spend a very large portion of their discretionary "stuff" budget with Amazon already. In fact I don't think Amazon can get any more market share from me - revenues will fluctuate with my spending. To be fair I think developed economies and a kind of tech-savvy audience is only one segment.
Some developed economies (like Europe for example) are still early in the their adoption and use of Amazon. If they execute well internationally (I am not sure they have proven to be exceptionally good or bad so far in that area) then these growth numbers would be very doable.
I can't redo my models right now but the market penetration argument makes me incrementally less positive on the base case scenario and makes me inclined toward the stock only at the $150-$175 level. Of course there may be new developments at any time, Amazon keeps moving...
Amazon - What If Valuation Mattered? [View article]
I'm a little confused by the comments because they seem to be more about points of view which I respect but are not strictly related to what I have put together.
As I outline here there are several "prevailing winds" for Amazon, some of which expand margins, some of which don't. The company generated $4B of cash in the TTM and has reinvested all of it. I agree that there may be a time when investors become less patient with the long-term plan and that is why I put the valuation work together. I don't think the risk/reward looks compelling at $250 but I would at $150.
I do think that the company is at a key period where operating margin has to begin to trend back up to support the share price. I don't think it will be a "V" recovery but I think they may get it going back in the right direction.
I've read mostly every article and report on Amazon and I think we can all agree that the company keeps their cards fairly close to the vest which opens up lots of opportunity for strong opinions and different interpretations about "what's really going on."
We're only trying to do our part and shed a little more light and analysis on the topic.
I noticed SemiLEDS (LEDS) has really been popping. I had a glance at it and they have substantially negative *gross* margins. Lots of cash on the balance sheet although it's declining at a rapid clip.
Cinedigm Offers A Leveraged Way To Play Digital Films And Software [View article]
CIDM is a story that takes a little work to understand and follow. It also requires some patience at this point. But I think it's much closer to being recognized now. My guess is that in 2013 investors will discover this name. Look how well Netflix is doing with their content bet. House of Cards was a big bet and Cinedigm is in a position to have a large number of small winners as they grow into bigger ones.
Cinedigm Offers A Leveraged Way To Play Digital Films And Software [View article]
I didn't mean to convey that they strategy was to aggregate a low budget film portfolio. They really do have expertise and a well connected position to cherry pick the best content. However instead of doing 3 films at $3M each they are doing 18 at $500K each (to use some illustrative numbers). This puts an IRR of 20-30% in the highly likely portion of the curve but still gives them optionality and upside if they get films that take off.
Harris & Harris Group - A Nanotech VC For The Everyman [View article]
The systems from D-Wave are the stuff of breakthroughs and they remain controversial among scientific circles. The company has been making steady progress and once the 512 cubit systems develop a track record this company should be able to consider the public markets.
I can't say anything about the "universes" comment but I can say that being able to solve up to 512 simultaneous equations in one machine cycle is a big deal.
In many ways the stock itself *is* is an option on some of this albeit with an underlying book value and steady accumulation prospects. So I don't know that I'd want to put a timeframe on my investment using conventional options.
Outside of owning the common the option strategy I might look at is selling call options with premium near the stock price and putting some of that into further out calls. You could also add a leg with selling put options at or near NAV. I haven't looked at the options market around TINY or done the math but those are strategies I'd evaluate with an open eye toward others.
Fairway Market IPO Coverage [View article]
Many hands in the till worry me a bit more than their ability to expand at this point.
Fairway Market IPO Coverage [View article]
Amazon - What If Valuation Mattered? [View article]
Amazon - What If Valuation Mattered? [View article]
Secondly stocks are indeed an expectations/realty proposition. You make or lose money by exploiting this relationship. There is probably an expectation that margins will start to trend up (instead they are trending down) so the stock will probably not do much until it finds a price that doesn't reflect that expectation ($150?) or the company starts delivering more profitability with a path to more of the same.
Amazon - What If Valuation Mattered? [View article]
Amazon has a few other elements like digital goods and hosted services (which is also partially business process outsourcing) that will grow and can add to margins over time.
Like I said before institutional growth investors appreciate Amazon for their management team, strong execution and long-term success. So they own it. At the same time margins and valuation matters. Again the point is that we are probably at a point where either 1) margins need to start trending up, or 2) the stock will face some serious headwinds.
Other than moderating the revenue growth in my base case to account for more saturation in developing markets I'm content to stand by the base case and wait to see if the shares come into a more attractive price range.
Amazon - What If Valuation Mattered? [View article]
I think many long-term growth and technology investors view Amazon as a must-own and would need a big fundamental reason to not have a long position. I suspect many firms who "trade around" their positions trim at levels like this. However they also probably have slightly better information about upcoming company plans than many here on Seeking Alpha.
Amazon - What If Valuation Mattered? [View article]
I do allow to some degree for the law of large numbers to reduce the rate of growth over time (to 15%) but even so the base case may be too optimistic. Some folks I know, including me, spend a very large portion of their discretionary "stuff" budget with Amazon already. In fact I don't think Amazon can get any more market share from me - revenues will fluctuate with my spending. To be fair I think developed economies and a kind of tech-savvy audience is only one segment.
Some developed economies (like Europe for example) are still early in the their adoption and use of Amazon. If they execute well internationally (I am not sure they have proven to be exceptionally good or bad so far in that area) then these growth numbers would be very doable.
I can't redo my models right now but the market penetration argument makes me incrementally less positive on the base case scenario and makes me inclined toward the stock only at the $150-$175 level. Of course there may be new developments at any time, Amazon keeps moving...
Amazon - What If Valuation Mattered? [View article]
As I outline here there are several "prevailing winds" for Amazon, some of which expand margins, some of which don't. The company generated $4B of cash in the TTM and has reinvested all of it. I agree that there may be a time when investors become less patient with the long-term plan and that is why I put the valuation work together. I don't think the risk/reward looks compelling at $250 but I would at $150.
I do think that the company is at a key period where operating margin has to begin to trend back up to support the share price. I don't think it will be a "V" recovery but I think they may get it going back in the right direction.
I've read mostly every article and report on Amazon and I think we can all agree that the company keeps their cards fairly close to the vest which opens up lots of opportunity for strong opinions and different interpretations about "what's really going on."
We're only trying to do our part and shed a little more light and analysis on the topic.
Amazon - What If Valuation Mattered? [View article]
The LED Gold Rush [View article]
Gold rush indeed!
Cinedigm Closes $195 Million in Two New Credit Facilities to Refinance All Existing Phase 1 Senior Debt and Corporate Debt [View article]
http://seekingalpha.co...
Cinedigm Offers A Leveraged Way To Play Digital Films And Software [View article]
Thanks for your comment.
Cinedigm Offers A Leveraged Way To Play Digital Films And Software [View article]
Cinedigm Offers A Leveraged Way To Play Digital Films And Software [View article]
Harris & Harris Group - A Nanotech VC For The Everyman [View article]
I can't say anything about the "universes" comment but I can say that being able to solve up to 512 simultaneous equations in one machine cycle is a big deal.
In many ways the stock itself *is* is an option on some of this albeit with an underlying book value and steady accumulation prospects. So I don't know that I'd want to put a timeframe on my investment using conventional options.
Outside of owning the common the option strategy I might look at is selling call options with premium near the stock price and putting some of that into further out calls. You could also add a leg with selling put options at or near NAV. I haven't looked at the options market around TINY or done the math but those are strategies I'd evaluate with an open eye toward others.