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Timothy Phillips  

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  • Netflix - Just How Much Growth Is Required To Justify Today's Valuation? [View article]
    TWTR and YELP are the two most overvalued stocks in the market by far, especially on P/S basis (never mind frwd EPS) - way in the stratosphere vs. the most optimistic growth scenarios. While NFLX is overvalued, the downside is far less than TWTR & YELP if there is a hiccup in the market.
    Jan 9, 2014. 08:41 AM | Likes Like |Link to Comment
  • Apple Does Something Amazing [View article]
    Sure Ashraf, but by ARM spending the effort to license and develop the core on Intel's advanced tech tells me there may be more to it. It could be a one-off, but this is not typical of how ARM has worked in the past.
    Oct 31, 2013. 09:55 AM | Likes Like |Link to Comment
  • Apple Does Something Amazing [View article]
    Arnold - no rumor - this is fact from a press release by Altera.

    http://yhoo.it/17zfHDd

    Big news for ARM, and a big capitulation from Intel.
    Oct 31, 2013. 08:52 AM | 1 Like Like |Link to Comment
  • Amazon And The 'Profitless Business Model' Fallacy [View article]
    Paulo - I think of the "investing" mantra in a different way. All of the opex expansion (depreciation and expenses) and shipping expenses are the result of growth (and not the other way around - that they spend to get the growth).

    The growth is driven by low prices (vs. cost) - in other words, they sell below total cost (they lost $574M TTM on product sales), and cover that loss with working capital increases from pushing out payables and gains from Prime+Gift Cards.

    That is how they "invest".... in aggregate they price below cost for growth. The model has worked so far, but they are at the limit on the working capital game (payables are at a limit, and inventory turns is becoming a beast) and Interest expense is getting to be an issue.

    Now -here is where the analysts are wrong. Because the opex/shipping is a result of the growth (can't slow unless growth slows), which is driven by below cost pricing, the moment they raise prices to generate earnings, the entire game stops - growth will end and the valuation will collapse.
    Oct 29, 2013. 08:28 AM | 2 Likes Like |Link to Comment
  • Amazon: Bigger, But Certainly Not Better [View article]
    Bill - you spent most of the article articulating Amazon's terrible numbers and ratios, and then you ignored all of them in your valuation and priced based on P/S. If profits, cash flow and balance sheet don't matter in the valuation, why discuss them?

    There is a reason why those number matter - and your debt ratio chart shows it - AMZN has to finance itself through liabilities because it burns cash selling products (if you remove delta working capital from FCF over the last 12 months, AMZN has burned $572M selling products). They will need to go back to markets soon for additional cash due to this.
    Oct 28, 2013. 07:58 AM | 2 Likes Like |Link to Comment
  • Amazon And The 'Profitless Business Model' Fallacy [View article]
    Nickbritt - the evidence of your theory is right in the balance sheet. Amazon Inventory days has had a steady climb from 33 days (11.1 turns) in 2010 to 46 days (7.9 turns) currently. The spreading out of warehouses and ever increasing amount of items they carry is making them very inefficient vs. when they had a decent profit last (2010).

    Much has changed since 2010 to not allow AMZN to return to 4% operating margin - fulfillment/warehouse costs, gas has doubled (shipping cost per unit is way up), massive Tech & Content expense, etc...

    If you track Amazon costs, they all grow faster than revenue - there is very, very little fixed. If they haven't hit scale by now ($74B in revs) they won't. Hard to imagine there is some magical revenue number out there that makes costs begin to scale slower than revenue.
    Oct 27, 2013. 10:00 PM | 7 Likes Like |Link to Comment
  • Accounting Change Stands To Inflate Amazon's Reported Revenues [View article]
    Harry - when a stock has no earnings there is no upper or lower bound to the price. A stock with no earnings is like leaf falling from a tree - the breeze controls its path, and you have no idea where it will end up, but you can be assured there will violent changes in its path along the way.
    Oct 25, 2013. 07:43 AM | 2 Likes Like |Link to Comment
  • Apple Does Something Amazing [View article]
    Great article Ashraf - a better to look at power in a digital system is:

    P = (Cg * n) * F * V^2

    where:
    - Cg = total gate capacitance (output C of previous gate + input C of current gate)
    - n = total number of gates in architecture
    - F = clock Frequency
    - V = Bias Voltage

    So, the number of gates in the architecture and the gate capacitance of the core technology have as large of an impact at the Freq.
    Oct 22, 2013. 12:57 PM | Likes Like |Link to Comment
  • The New Kindle Fire Is Not Selling Well [View article]
    Michael - I am at 16.36M with my model (assuming no e-book change in accounting).

    Because of e-book maybe we should quote GM$ forecast. I am at $4.6B GM$, and $0.19B FCF.
    Oct 19, 2013. 03:49 PM | Likes Like |Link to Comment
  • 2 Reasons Why Amazon.com Will Again Miss Revenue Estimates [View article]
    I actually have something positive to update on AMZM ... gas prices have really dropped off the last 2 weeks of the quarter, and I just updated my model with the data. Gas ended up down 3.1% Y/Y (and down 0.5% Q/Q), which lowers AMZN ground shipping cost, and thus increases margins from my expectations. Net result:

    EPS increases by 2c from my alters my prediction above to ($0.11) vs. consensus of ($0.09) .. still a miss by 2c.
    Oct 1, 2013. 06:56 AM | Likes Like |Link to Comment
  • Amazon: When The Music Stops [View article]
    Bill - here is a great example. AMZN is currently moving business from 3P to 1P due to e-book AAPL case. This will increase revenue by a factor of 8 on those e-book sales - could be billions of $ impact on sales, but GM% will drop conversely such that GM$ are the same. Yet - you would value them much higher post this accounting change based on P/S. You are incentivizing them to ignore the bottom line to go after revenue - this doesn't make any sense, and it is exactly what they have done.
    Sep 30, 2013. 04:21 PM | 2 Likes Like |Link to Comment
  • Amazon: When The Music Stops [View article]
    PSalerno - I agree that AMZN is valued on P/S, but my point is that it won;t much longer as the investments have proven a loser (analysts move to P/S when earnings are sacrificed for growth over the short haul, not long haul - because in the long haul someone will start to grow faster and grab those investors away)

    AMZN ROIC on all of the "investments" have moved from 21% 6Q's ago to 1.5% now. They have been investing for more than 3 years, and the ROI keeps shrinking. It should have had a positive impact by now ... but yet, they can;t make any cash flow on what they spent (and this return includes cash from pushing out payables - return on actual invested capital would be negative w/o it).
    Sep 30, 2013. 12:47 PM | 2 Likes Like |Link to Comment
  • Amazon: When The Music Stops [View article]
    Bill - why does AMZN deserve a different P/S valuation than WMT(4x) or BBY (5x)? You didn't do a good job convincing of P/S being the correct metric: "This metric just seems better" ?.. P/S is fine if you believe a company earnings/CF are temporary being held down due to expansion, acquisition, etc.. but there is no proof (in fact you point to the opposite - penny pinching) that earnings will ever be there.

    The problem with a straight P/S on an unprofitable company is that you can have a huge valuation right up until the day the company goes BK. AMZN could drop prices 20% today in order to juice revenue further. In your model, you would raise your price target, while the company would run out of money in less than 2 Q's. If you are going to use P/S you should at least value less than WMT or BBY as they are profitable ...
    Sep 30, 2013. 08:02 AM | 6 Likes Like |Link to Comment
  • 2 Reasons Why Amazon.com Will Again Miss Revenue Estimates [View article]
    And let's keep in mind that Apple sells more than 5x more tablets than AMZN in spite of making fat profits on the device vs. no profits for AMZN. Amazon basically gives them away, and barely has market share.

    So, if their plan was to take no profits over the past 2.5 years to be the market leader by now - that strategy / execution is not working well. Most would call that a huge failure.
    Sep 25, 2013. 09:59 AM | Likes Like |Link to Comment
  • 2 Reasons Why Amazon.com Will Again Miss Revenue Estimates [View article]
    Hi Paulo - my model is currently pumping out the following based on comscore, channeladvisor, retail sales, gas prices, etc...

    (this does not account for any revenue recognition change from 3P to 1P):
    - Product sales (direct e-commerce): 15.0% Y/Y(lowest ever by 300bps)
    - 3P retail: 27.6% Y/Y
    - AWS/dig: 58.0% Y/Y

    Total = $16.36B (18.5% Y/Y) vs. consensus of 21.4% Y/Y
    EPS = ($0.13) vs. consensus of ($0.09).

    So, my model which is usually pretty accurate has them missing revs by a bunch (290bps or $400M), and missing EPS by 4c.

    Ironically, the big lowering of 1P sales due to comscore US data actually raised EPS as overall margins are higher (they lose money on 1P as I have shown in my articles).

    My fear is they headline well with the revenue recognition change, and beat on revs due to this even margins will get crushed. This could be the fuel to top off the parabolic launch to $350+
    Sep 22, 2013. 07:42 PM | 2 Likes Like |Link to Comment
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