Investors Are Missing Apple's China Opportunity [View article]
$AAPL & carriers are clearing out inventory to prep for the launch of iPhone 5S. AT&T offered me a free iPhone 5 w/ new 2 YR plan ($199 savings) for my 4S yesterday.
Danger Zone For This Week: Amazon.com [View article]
Hi Michael - on a stock like Amazon, you have to build a long term discounted cash flow model, as tradition valuation methods like xEBITDA or xEPS do not work due to the current financial numbers.
The problem is that this requires lots of assumptions that are highly impactful to the valuation, so you can make a model that moves all over the place with variables that move a little (highly sensitive), and this is why targets are all over the place. This should lead analysts to place a heavy discount rate on future EPS/CF (vs. a GOOG or AAPL for example), but they seem to do the opposite and allow for larger multiples (lower Discounts) to support the current price. That is why I am short the stock, as those chickens will come home to roost.
You know my model pretty well, and it has been accurate. I see AMZN becoming profitable this year and seeing reasonably sharp earnings growth for a few years, but not to the levels analysts see. My DCF places fair value at $141 (43% drop from where we closed yesterday).
Now you could say, well that's 43x CY14 EPS estimate ($3.25 consensus) and seems to high, but that would be AMZN growing EPS from ~ $1 in CY13 to over $3 in CY14 and if they do that, my model shows $5 for CY15 based on AWS and 3P growth (60% Y/Y EPS increase).
Bottom line, the $141 target assumes good growth, AMZN turning profitable, and EPS growing from $0 in 2012, to $5 by CY15.
BTW, the terminal value is 61% of my target price which shows you per usual, short term does not have as much impact as the long term. Theoretically, that is why analysts love a good investment story that shows long-term potential.
Volterra: Great Value With Short-Term Catalysts [View article]
Valuable insights - I completely agree .. stay away from VLTR stock, it is a value trap as you note. Their advantages are gone, products costs are way too high and growth will be a huge issue for them going forward for a number for a number of reasons.
Amazon Keeps Spending More As Its Customers Spend Less [View article]
Analysts lowered estimates again this week. September brought down 9% (from 11c to 10c - this penny was moved into Q4), and CY14 brought down to $3.25. CY14 gets dropped a little each week as I predicted.
My CY13 model for AMZN is currently at $0.89 vs. $1.32 for analysts. The disconnect is largely in Q4, which analysts will have to bring down.
I have $0.18, $0.14, $0.05, $0.52 Analyst consensus: $0.18, $0.07, $0.10, $0.97
Amazon - The Mystifying Estimates For The Quarter Just Ahead [View article]
dimsum .. at least Gary admits this a momentum bubble fueled by a charismatic CEO and the FED - not fundamentals. Kudos for Gary for recognizing the pattern and making money on the ride up.
You on the other hand look at 15 years of clear financial trends in the wrong direction and think they can flip a switch and make more than walmart whenever they want ... good luck with that. Just admit you got lucky with the FED and street pumping the balloon on this one while you waited for outsized profits that have yet to arrive (and won't).
This Is Why Netflix Will Go Bankrupt [View article]
510432 - The question is not whether NFLX will go bankrupt (it is obvious they will not), but "what are they worth?" NFLX is way overvalued right now, but remain a good company with good growth prospects and investors will own it no matter the price due to that. You cannot short a company like NFLX in a raging liquid bull market (it only drives the price up further), because it is impossible to find the top.
Like last time, you can make a lot money shorting after the peak is well established (more than 15% drop off the top).
This Is Why Netflix Will Go Bankrupt [View article]
510432 - you are way off. In Q1 net cash spent on streaming content was up 58.5% Y/Y ($582.2M vs. $367.3M). In FY12 Q4 it was up 50.8%.
Total CY12 net cash spent for streaming content was $1.753B vs. $0.856B in CY11 vs. $0.238B in 2010. (you have to net the content additions and content change in liabilities lines in the cash flow statement).
That is a 259% increase in 2011, and a 105% increase in 2012, and so far a 51% increase in 2013. Not even close to the 20% you claim.
Amazon - The Mystifying Estimates For The Quarter Just Ahead [View article]
Not only is the 92c in Q4 impossible under almost any circumstance, the current 57c in 2014 Q1 is even more outrageous ... I will bet you that will be brought down to 15-20c once we enter 2014.
Amazon - The Mystifying Estimates For The Quarter Just Ahead [View article]
Yes - my model has AMZN beating these ridiculously low estimates in Q2 (7c) and missing Q3 slightly (11c), but missing by a mile in Q4 as analysts simply pushed out Q2/3 into Q4 basically. It seems obvious that they will bring down Q4 over the next 8 months as quietly as possible under the cover of beats in Q2 and Q3.
My model changes with gas cost and on-line sales trend data (and retail sales), so we will see as we get closer.
This Is Why Netflix Will Go Bankrupt [View article]
Buffet Jr - that is what happens when the risk-free rate is zero. Growth and risk assets are bid up in the fight for alpha to irrational levels (check out my writing on AMZN - a great company that has no chance to ever live up to its price expectation) ... this is also happening right now in NFLX. Do not get on the wrong side of this hysteria right now.
My math shows AMZN much more overvalued than NFLX, and with much less chance of hitting the numbers needed to support the stock once the music stops .. and it will stop.
This Is Why Netflix Will Go Bankrupt [View article]
Buffet Jr. - you are comparing apples to oranges on growth. You are comparing total company growth (weighed down by shrinking DVD Biz) with streaming content costs. You need to compare only streaming growth with streaming content costs (and streaming opex & O/H). If you do that analysis you will find that while streaming is losing money today (with neg FCF), it can turn positive quite quickly with the current growth in subs (40% Y/Y) - w/in 3-4 Q's. While I think NFLX is overvalued at $240 ($180 was more realistic based on the current trajectory), they will not go bankrupt, and may not even need more debt.
If the sub growth slows, the stock will suffer big time, but until then it is going to ride.
Tepper stays bullish. Confounding gnomes who whispered the hedge fund honcho was turning cautious on stocks, David Tepper tells the CNBC crew the wave of liquidity that turned him bullish in the first place is getting even bigger. Fed tapering? So what, he says. The U.S. budget deficit over the next 6 months will only be $100B, while the Fed is scheduled to buy about $500B. That's $400B coming out of the bond market and going to investors who can buy more fixed-income, more real estate, more stocks. SPY erases losses and gets back to flat premarket. [View news story]
Paulo - we are looking more and more like Roma near the end of the empire. Amazing how history repeats itself. It took 300 years of bad economic/social policy to destroy Rome, this time it will happen much faster with essentially the same policies (we are already over 50 years in).
The US is now ranked 19th in the world in regards to economic freedom (from # 2 in 2000).
Amazon Keeps Spending More As Its Customers Spend Less [View article]
Curious,
The point was that AMZN has consistently grown the customer base by 20-25% Y/Y, but this is the first time we are seeing declines in the avg spend per customer. So, they have always had the impact of 20-25% new customers that you think would spend less than the existing - but that never dragged down the avg spend before.
My conclusion in the article is that since the have hit a soft saturation point, where the new users are less lucrative than the previous new users once they passed ~ 150M active accounts. Once this trend hits in retail, it usually doesn't go back.
So, if avg spend per customer drops 2% Y/Y going forward, they need to continue to grow active accounts by 22% Y/Y to maintain the important 20% growth level. I believe this will be very difficult as the law of large numbers will start to impact user growth soon.
Investors Are Missing Apple's China Opportunity [View article]
Danger Zone For This Week: Amazon.com [View article]
Danger Zone For This Week: Amazon.com [View article]
Danger Zone For This Week: Amazon.com [View article]
The problem is that this requires lots of assumptions that are highly impactful to the valuation, so you can make a model that moves all over the place with variables that move a little (highly sensitive), and this is why targets are all over the place. This should lead analysts to place a heavy discount rate on future EPS/CF (vs. a GOOG or AAPL for example), but they seem to do the opposite and allow for larger multiples (lower Discounts) to support the current price. That is why I am short the stock, as those chickens will come home to roost.
You know my model pretty well, and it has been accurate. I see AMZN becoming profitable this year and seeing reasonably sharp earnings growth for a few years, but not to the levels analysts see. My DCF places fair value at $141 (43% drop from where we closed yesterday).
Now you could say, well that's 43x CY14 EPS estimate ($3.25 consensus) and seems to high, but that would be AMZN growing EPS from ~ $1 in CY13 to over $3 in CY14 and if they do that, my model shows $5 for CY15 based on AWS and 3P growth (60% Y/Y EPS increase).
Bottom line, the $141 target assumes good growth, AMZN turning profitable, and EPS growing from $0 in 2012, to $5 by CY15.
BTW, the terminal value is 61% of my target price which shows you per usual, short term does not have as much impact as the long term. Theoretically, that is why analysts love a good investment story that shows long-term potential.
Volterra: Great Value With Short-Term Catalysts [View article]
Amazon Keeps Spending More As Its Customers Spend Less [View article]
My CY13 model for AMZN is currently at $0.89 vs. $1.32 for analysts. The disconnect is largely in Q4, which analysts will have to bring down.
I have $0.18, $0.14, $0.05, $0.52
Analyst consensus: $0.18, $0.07, $0.10, $0.97
Amazon - The Mystifying Estimates For The Quarter Just Ahead [View article]
You on the other hand look at 15 years of clear financial trends in the wrong direction and think they can flip a switch and make more than walmart whenever they want ... good luck with that. Just admit you got lucky with the FED and street pumping the balloon on this one while you waited for outsized profits that have yet to arrive (and won't).
This Is Why Netflix Will Go Bankrupt [View article]
Like last time, you can make a lot money shorting after the peak is well established (more than 15% drop off the top).
This Is Why Netflix Will Go Bankrupt [View article]
Total CY12 net cash spent for streaming content was $1.753B vs. $0.856B in CY11 vs. $0.238B in 2010. (you have to net the content additions and content change in liabilities lines in the cash flow statement).
That is a 259% increase in 2011, and a 105% increase in 2012, and so far a 51% increase in 2013. Not even close to the 20% you claim.
Amazon - The Mystifying Estimates For The Quarter Just Ahead [View article]
Amazon - The Mystifying Estimates For The Quarter Just Ahead [View article]
My model changes with gas cost and on-line sales trend data (and retail sales), so we will see as we get closer.
This Is Why Netflix Will Go Bankrupt [View article]
My math shows AMZN much more overvalued than NFLX, and with much less chance of hitting the numbers needed to support the stock once the music stops .. and it will stop.
This Is Why Netflix Will Go Bankrupt [View article]
If the sub growth slows, the stock will suffer big time, but until then it is going to ride.
Tepper stays bullish. Confounding gnomes who whispered the hedge fund honcho was turning cautious on stocks, David Tepper tells the CNBC crew the wave of liquidity that turned him bullish in the first place is getting even bigger. Fed tapering? So what, he says. The U.S. budget deficit over the next 6 months will only be $100B, while the Fed is scheduled to buy about $500B. That's $400B coming out of the bond market and going to investors who can buy more fixed-income, more real estate, more stocks. SPY erases losses and gets back to flat premarket. [View news story]
The US is now ranked 19th in the world in regards to economic freedom (from # 2 in 2000).
Amazon Keeps Spending More As Its Customers Spend Less [View article]
The point was that AMZN has consistently grown the customer base by 20-25% Y/Y, but this is the first time we are seeing declines in the avg spend per customer. So, they have always had the impact of 20-25% new customers that you think would spend less than the existing - but that never dragged down the avg spend before.
My conclusion in the article is that since the have hit a soft saturation point, where the new users are less lucrative than the previous new users once they passed ~ 150M active accounts. Once this trend hits in retail, it usually doesn't go back.
So, if avg spend per customer drops 2% Y/Y going forward, they need to continue to grow active accounts by 22% Y/Y to maintain the important 20% growth level. I believe this will be very difficult as the law of large numbers will start to impact user growth soon.