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ZNCapital

 
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  • Seadrill: Price Capitulation Is Near [View article]
    I agree with Jstein's comment. A dividend cut may be in the company's best interest. To start, it seems like the market is already discounting management's statement that the company can maintain its dividend, so I don't believe a cut will have that drastic of an affect of the stock.

    Fundamentally, conserving some cash on the balance sheet can be beneficial to SDRL if the industry continues to experience softness. Having extra dry powder can allow SDRL to purchase some quality assets that some less well capitalized companies may be forced to sell at distressed prices. Additionally, even if SDRL cuts its dividend in half, a 7.5% to 4% (given a rebound in share price) yielding stock is still attractive, especially considering the decreased dividend payments will be more sustainable.
    Sep 30 01:11 PM | 3 Likes Like |Link to Comment
  • Despite Large Revenue Growth Splunk Is Overvalued [View article]
    We just wanted to quickly point out that according to the company's recent prospectus, (page 3 in the link below) SPLK granted 5,846,035 RSU's between Nov. 1 2013 and Jan. 22, 2014. Assuming an average share price of $70 (using the price as of our publication) the company incurred a total expense related SOLELY to these RSU's of approximately $409 million (minus the amount the company estimates will be forfeited). For some perspective, the company's high end revenue guidance for the entire FY (ending Jan. 14) is $293 million.

    As we mentioned in the article, because of GAAP accounting, only a fraction of that estimated $400 million will be reflected in the company's Q4 income statement. However, we urge everyone to take a look at the "unrecognized expense" relating to options and RSU's in next month's financial statements.

    We continue to be shocked at how much SPLK is paying their employees, and the indifference Wall Street seems to have to excessive compensation at the future detriment of shareholders.

    http://1.usa.gov/M3FwUS
    Jan 24 09:21 AM | Likes Like |Link to Comment
  • Despite Large Revenue Growth Splunk Is Overvalued [View article]
    Paul Rogers,

    To respond to your point, we do not believe we are placing too much emphasis on the competitors. Our thesis does not rest on the fact that competitors will catch up to SPLK. Our main point is that given the current valuation, Splunk is priced as if they are going to dominate the industry for years to come, while reversing the trend of declining fundamentals. We believe that the company is overvalued based solely on fundamentals, however we point to the competitors as one possible risk that we do not believe is priced into the stock.

    In fact, we give Splunk credit for being the first mover in this high growth industry. It is clear that smaller start ups and established tech giants alike are playing catch up to Splunk's product. However, at a fully diluted market cap of around $10bn at this point, we think that all that and more is priced into the stock. Especially given the fact that the company does not seem to be focused on growing shareholder value through increased earnings.
    Jan 14 03:32 PM | Likes Like |Link to Comment
  • Despite Large Revenue Growth Splunk Is Overvalued [View article]
    Volte-Face Investments,

    We agree with your point that companies like SPLK can get stuck because their model revolves around saving their customers money. This is furthered by the fact that there are plenty of other companies out there (see our discussion on competitors) that are offering similar services for fractions of the cost.

    Your point about the finite world problem fits in well with Deja Vu's comment above and it strikes at the heart of our concern for the sustainability of SPLK's growth rate and their long-term profitability. Since they have already acquired many of the larger customers, they have to expend additional resources "defending their turf" and finding smaller customers that will bring in less revenue.
    Jan 10 07:43 PM | Likes Like |Link to Comment
  • Despite Large Revenue Growth Splunk Is Overvalued [View article]
    Deja Vu,

    Thank you for your helpful comment. In fact, Management discussed that even as more larger orders come in, the average order that they receive (including the outlier million dollar plus orders) is still in the $30,000 to $40,000 range. So your math is spot on.

    Additionally, your comment that 200 of the Fortune 500 companies use SPLK is slightly outdated. Management disclosed those numbers in their 2Q call, which means they almost certainly increased by then. We think this furthers your argument.
    Jan 10 07:33 PM | 1 Like Like |Link to Comment
  • Despite Large Revenue Growth Splunk Is Overvalued [View article]
    Craig,

    Thanks for your comment. We didn't assume further dilution in order to stress our point by being conservative. You're absolutely right that further dilution should be expected.
    Jan 9 09:27 PM | Likes Like |Link to Comment
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