Adam Levine-Weinberg's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.com/user/983571/comments http://seekingalpha.com/article/1497402/comments?source=feed#comment-19951052 19951052
The real question for me is whether those targets are achievable (secondarily, whether the cost cuts will be partially offsetting further yield deterioration). If EPS is really going to $9 or $10 by FY15, FDX seems like a no-brainer buy.]]> Thu, 13 Jun 2013 15:37:45 -0400
The real question for me is whether those targets are achievable (secondarily, whether the cost cuts will be partially offsetting further yield deterioration). If EPS is really going to $9 or $10 by FY15, FDX seems like a no-brainer buy.]]> http://seekingalpha.com/article/1459731/comments?source=feed#comment-19700771 19700771 http://bit.ly/10U90IH. See p. 486.

There's also a handy-dandy chart on that page laying out estimated recovery scenarios. Even at $20 for US Airways/AAG, AMR shareholders would only get about $9 of value. That drops off quickly: if the new company is valued at $16/share (approximately $12 billion), AMR shares would be worth less than $3.

Adam]]> Thu, 06 Jun 2013 20:45:31 -0400 http://bit.ly/10U90IH. See p. 486.

There's also a handy-dandy chart on that page laying out estimated recovery scenarios. Even at $20 for US Airways/AAG, AMR shareholders would only get about $9 of value. That drops off quickly: if the new company is valued at $16/share (approximately $12 billion), AMR shares would be worth less than $3.

Adam]]> http://seekingalpha.com/instablog/4581471-sa-editor-samir-patel/1888571-dell-battle-royale-for-control-offers-surprisingly-interesting-risk-reward?source=feed#comment-19192101 19192101
The real problem with Dell from a strategic perspective is that PCs, servers, and enterprise services are basically commoditized businesses at this point. There are other areas that are potentially promising, but IBM, Oracle, HP, Cisco, etc. are already there as well, so there's no real assurance of success. The big difference between Dell and HP is that HP has the printing cash cow. I would value the printing business alone at about $25 billion.

As for the share count: I think this could be an atypical case. If you think the stub is worth less than $1.65 (the people who would be selling right away), you would be better off taking the Dell-Silver Lake offer. On the other hand, if Icahn convinces you that the stub is worth much more than $1.65, why take just one when you're being offered the opportunity to get 7.27 more at $1.65 each?

It would appear that Icahn needs to convince a majority of shareholders that the stub would be worth significantly more than $1.65 to win the proxy battle. Because of that setup, I could envision a lot of people taking the stock offer if Icahn's proposal is implemented.]]> Thu, 23 May 2013 23:37:05 -0400
The real problem with Dell from a strategic perspective is that PCs, servers, and enterprise services are basically commoditized businesses at this point. There are other areas that are potentially promising, but IBM, Oracle, HP, Cisco, etc. are already there as well, so there's no real assurance of success. The big difference between Dell and HP is that HP has the printing cash cow. I would value the printing business alone at about $25 billion.

As for the share count: I think this could be an atypical case. If you think the stub is worth less than $1.65 (the people who would be selling right away), you would be better off taking the Dell-Silver Lake offer. On the other hand, if Icahn convinces you that the stub is worth much more than $1.65, why take just one when you're being offered the opportunity to get 7.27 more at $1.65 each?

It would appear that Icahn needs to convince a majority of shareholders that the stub would be worth significantly more than $1.65 to win the proxy battle. Because of that setup, I could envision a lot of people taking the stock offer if Icahn's proposal is implemented.]]> http://seekingalpha.com/instablog/4581471-sa-editor-samir-patel/1888571-dell-battle-royale-for-control-offers-surprisingly-interesting-risk-reward?source=feed#comment-19189201 19189201
A lot of the delta here will depend on the added interest expense and the number of shareholders who opt for additional shares rather than cash. There are two reasons why I don't like the risk-reward here:

1) Following Icahn's numbers and plugging in the Dell management projection for $3 billion of operating income this year, the stub would have EPS of $0.51. However, Q1 non-GAAP operating income was $590 million, which makes $3 billion for the full year pretty challenging. I would say $2.5 billion is a likely figure, but not necessarily conservative. (After all it assumes sequential improvement at some point this year)

The $500 million reduction to operating income would lead to pretax EPS of $0.40 (i.e. Samir's projection), but this is a "likely" number, not a conservative figure. I would assume tax rate of 20%-25%, which would get you to $0.30-$0.32 after tax. Dell would be more leveraged than HP in this scenario, while having higher exposure to PCs, so I think it would deserve a multiple well below HP's 7X. $1.65 might be a fair valuation here, but I don't think it's especially conservative.

2) If every Dell shareholder opts for more stock rather than cash, this deal will function as an 8.27:1 stock split. Creating value depends on buying out a substantial proportion of Dell shareholders. I don't have a good sense of what constitutes today's shareholder base, but I wouldn't be surprised if people who love the stub stock are "selecting in", as Samir suggests here. With just 20% of shareholders opting for more stock, the share count goes to 4.4 billion. With 40%, it goes to 7 billion. This might save $200-$300 million in interest expense, but would drop EPS to the $0.20-$0.25 range. In that scenario, I think $1.65 could be a best-case valuation.

There could be upside if the company manages to cut more expenses than are included in the current management business plan. On the other hand there could be downside if interest rates are higher than Icahn's projections or if the PC business continues to deteriorate.

If I were a shareholder, I'd take the cash. But then again, that's why I'm not a shareholder; there are better opportunities in this market.

Adam]]> Thu, 23 May 2013 21:29:26 -0400
A lot of the delta here will depend on the added interest expense and the number of shareholders who opt for additional shares rather than cash. There are two reasons why I don't like the risk-reward here:

1) Following Icahn's numbers and plugging in the Dell management projection for $3 billion of operating income this year, the stub would have EPS of $0.51. However, Q1 non-GAAP operating income was $590 million, which makes $3 billion for the full year pretty challenging. I would say $2.5 billion is a likely figure, but not necessarily conservative. (After all it assumes sequential improvement at some point this year)

The $500 million reduction to operating income would lead to pretax EPS of $0.40 (i.e. Samir's projection), but this is a "likely" number, not a conservative figure. I would assume tax rate of 20%-25%, which would get you to $0.30-$0.32 after tax. Dell would be more leveraged than HP in this scenario, while having higher exposure to PCs, so I think it would deserve a multiple well below HP's 7X. $1.65 might be a fair valuation here, but I don't think it's especially conservative.

2) If every Dell shareholder opts for more stock rather than cash, this deal will function as an 8.27:1 stock split. Creating value depends on buying out a substantial proportion of Dell shareholders. I don't have a good sense of what constitutes today's shareholder base, but I wouldn't be surprised if people who love the stub stock are "selecting in", as Samir suggests here. With just 20% of shareholders opting for more stock, the share count goes to 4.4 billion. With 40%, it goes to 7 billion. This might save $200-$300 million in interest expense, but would drop EPS to the $0.20-$0.25 range. In that scenario, I think $1.65 could be a best-case valuation.

There could be upside if the company manages to cut more expenses than are included in the current management business plan. On the other hand there could be downside if interest rates are higher than Icahn's projections or if the PC business continues to deteriorate.

If I were a shareholder, I'd take the cash. But then again, that's why I'm not a shareholder; there are better opportunities in this market.

Adam]]> http://seekingalpha.com/article/1429601/comments?source=feed#comment-18780121 18780121
On the other hand, revenue growth appears more moderate because you're lumping all three segments together (DVD, domestic streaming, and int'l streaming). DVD revenues are declining, offsetting some of the growth in streaming.

If you just look at the domestic streaming business, revenue grew 26% YoY last quarter, while cost of revenue (which is primarily amortization of streaming content) grew 21%. So Netflix was able to leverage content expense in the domestic segment, which is more mature. This also suggests that there is no meaningful risk of bankruptcy.

For me, the short argument is just a question of valuation. After today's rally, NFLX has now surpassed a $14 billion diluted market cap. Even if the company fulfills all of the hopes and dreams of the bulls, I don't see any long-term upside. ]]> Mon, 13 May 2013 16:22:49 -0400
On the other hand, revenue growth appears more moderate because you're lumping all three segments together (DVD, domestic streaming, and int'l streaming). DVD revenues are declining, offsetting some of the growth in streaming.

If you just look at the domestic streaming business, revenue grew 26% YoY last quarter, while cost of revenue (which is primarily amortization of streaming content) grew 21%. So Netflix was able to leverage content expense in the domestic segment, which is more mature. This also suggests that there is no meaningful risk of bankruptcy.

For me, the short argument is just a question of valuation. After today's rally, NFLX has now surpassed a $14 billion diluted market cap. Even if the company fulfills all of the hopes and dreams of the bulls, I don't see any long-term upside. ]]> http://seekingalpha.com/article/1417501/comments?source=feed#comment-18710111 18710111 Sat, 11 May 2013 11:14:29 -0400 http://seekingalpha.com/article/1417501/comments?source=feed#comment-18641201 18641201
I think this stock is more likely to take off next year, if and when it demonstrates some success with Tegra 4i and GRID. Just my two cents.]]> Thu, 09 May 2013 15:36:48 -0400
I think this stock is more likely to take off next year, if and when it demonstrates some success with Tegra 4i and GRID. Just my two cents.]]> http://seekingalpha.com/article/1405771/comments?source=feed#comment-18505761 18505761
The fact that the share price has gone up over the period you analyze is driving your conclusion. I'm pretty sure that all of the "value" you have created is from buying back shares in the 2007-2010 period at an average price under $200. Obviously, a good share buyback is designed to buy shares when they are undervalued. But it's a little unfair to blame Apple's management for not buying back shares without also blaming everybody else who did not buy Apple shares before they went up.

If you assumed instead that Apple had returned cash through a dividend over your horizon, I think you would have a much more equivocal conclusion. And if you had just analyzed the last year, you would have found that Apple was wise to not buy back shares when they were trading at a significant premium to today's price. ]]> Mon, 06 May 2013 16:07:32 -0400
The fact that the share price has gone up over the period you analyze is driving your conclusion. I'm pretty sure that all of the "value" you have created is from buying back shares in the 2007-2010 period at an average price under $200. Obviously, a good share buyback is designed to buy shares when they are undervalued. But it's a little unfair to blame Apple's management for not buying back shares without also blaming everybody else who did not buy Apple shares before they went up.

If you assumed instead that Apple had returned cash through a dividend over your horizon, I think you would have a much more equivocal conclusion. And if you had just analyzed the last year, you would have found that Apple was wise to not buy back shares when they were trading at a significant premium to today's price. ]]> http://seekingalpha.com/article/1087751/comments?source=feed#comment-18466341 18466341
Very little of current production is marginal at $90 or even $80/bbl, and most oil producers have hedged a lot of their future production anyway. So I don't see any material change to oil production from a 10% or even 20% drop in prices. Obviously, if we had a late-2008 style collapse, that would be a different story.

I don't really buy the argument that monetary policy is driving oil prices long-term. Obviously big monetary shocks affect the commodities market, but ultimately high oil prices depress demand, leaving no one to take physical delivery. Theoretically, you could store the unwanted physical oil, but that's a lot more costly than storing gold, if your goal is just inflation/currency protection. If QE eventually leads to rapid inflation in the US that would presumably drive up the dollar price of oil, but I don't expect that to happen (as I've written previously on SA).]]> Sun, 05 May 2013 13:48:38 -0400
Very little of current production is marginal at $90 or even $80/bbl, and most oil producers have hedged a lot of their future production anyway. So I don't see any material change to oil production from a 10% or even 20% drop in prices. Obviously, if we had a late-2008 style collapse, that would be a different story.

I don't really buy the argument that monetary policy is driving oil prices long-term. Obviously big monetary shocks affect the commodities market, but ultimately high oil prices depress demand, leaving no one to take physical delivery. Theoretically, you could store the unwanted physical oil, but that's a lot more costly than storing gold, if your goal is just inflation/currency protection. If QE eventually leads to rapid inflation in the US that would presumably drive up the dollar price of oil, but I don't expect that to happen (as I've written previously on SA).]]> http://seekingalpha.com/article/1087751/comments?source=feed#comment-18447101 18447101
The oil futures market suggests that people expect oil prices to decline over the next several years. The real question seems to be when the bulk of the decline will occur.]]> Sat, 04 May 2013 16:05:33 -0400
The oil futures market suggests that people expect oil prices to decline over the next several years. The real question seems to be when the bulk of the decline will occur.]]> http://seekingalpha.com/article/1087751/comments?source=feed#comment-18407731 18407731 Fri, 03 May 2013 12:10:29 -0400 http://seekingalpha.com/article/1385601/comments?source=feed#comment-18284231 18284231
On the other hand, I think 6 million is definitely manageable in future quarters. This doesn't even count future BB10 smartphones, which the company has already confirmed for later this year. Those will probably include a lower-margin midrange phone for developing countries like India, Indonesia, etc. There are obviously huge markets there, although BlackBerry will be competing with much cheaper Android phones.]]> Tue, 30 Apr 2013 15:55:27 -0400
On the other hand, I think 6 million is definitely manageable in future quarters. This doesn't even count future BB10 smartphones, which the company has already confirmed for later this year. Those will probably include a lower-margin midrange phone for developing countries like India, Indonesia, etc. There are obviously huge markets there, although BlackBerry will be competing with much cheaper Android phones.]]> http://seekingalpha.com/article/1087751/comments?source=feed#comment-17736441 17736441 Wed, 17 Apr 2013 11:14:49 -0400 http://seekingalpha.com/article/1335121/comments?source=feed#comment-17501391 17501391
I actually think HP will beat estimates again, largely driven by strong printing margins (because of the weak yen).]]> Thu, 11 Apr 2013 13:30:22 -0400
I actually think HP will beat estimates again, largely driven by strong printing margins (because of the weak yen).]]> http://seekingalpha.com/article/1322631/comments?source=feed#comment-17399991 17399991 Tue, 09 Apr 2013 10:37:05 -0400 http://seekingalpha.com/article/1322631/comments?source=feed#comment-17285671 17285671 Fri, 05 Apr 2013 17:48:24 -0400 http://seekingalpha.com/article/1039821/comments?source=feed#comment-16699941 16699941
Obviously, HA took a beating in January/early February, but I had actually taken profits on half of my position when it was closing in on 7. I'm looking to expand that position again, and I do think it's a much better long-term investment than LCC/American, for reasons that I've elaborated elsewhere.]]> Sat, 23 Mar 2013 11:53:28 -0400
Obviously, HA took a beating in January/early February, but I had actually taken profits on half of my position when it was closing in on 7. I'm looking to expand that position again, and I do think it's a much better long-term investment than LCC/American, for reasons that I've elaborated elsewhere.]]> http://seekingalpha.com/article/1039821/comments?source=feed#comment-16682011 16682011
I've been bullish on airlines for two years, and have been long at least one airline stock for that entire period of time (and I went long LCC back when it was sub $5, but took profits too early; don't see how I could have an "inherent bias" against the stock). I am surprised at how fast sentiment has changed on airlines; I think some of the lower performing airlines (United and possibly also the new American) are due for a correction. On the other hand, I think Delta may have a little more room to go.

P.S. As mitchad1 said, I'm writing for Motley Fool now, but I still do check comments here from time to time.]]> Fri, 22 Mar 2013 19:39:58 -0400
I've been bullish on airlines for two years, and have been long at least one airline stock for that entire period of time (and I went long LCC back when it was sub $5, but took profits too early; don't see how I could have an "inherent bias" against the stock). I am surprised at how fast sentiment has changed on airlines; I think some of the lower performing airlines (United and possibly also the new American) are due for a correction. On the other hand, I think Delta may have a little more room to go.

P.S. As mitchad1 said, I'm writing for Motley Fool now, but I still do check comments here from time to time.]]> http://seekingalpha.com/article/1242351/comments?source=feed#comment-15763461 15763461
Second, while content costs are not related to subscriber numbers in the short term, I don't think that's the case in the long term. This whole internet VOD market is new, and so nobody really knows how much content is really worth. With Amazon Prime growing at an astronomical rate and other competitors entering the market, I think we will naturally see an upward bias on content prices. If NFLX is earning hefty streaming margins in a year or two because of a price hike, content owners will raise their ask when the rights come up for renewal.]]> Sun, 03 Mar 2013 11:11:33 -0500
Second, while content costs are not related to subscriber numbers in the short term, I don't think that's the case in the long term. This whole internet VOD market is new, and so nobody really knows how much content is really worth. With Amazon Prime growing at an astronomical rate and other competitors entering the market, I think we will naturally see an upward bias on content prices. If NFLX is earning hefty streaming margins in a year or two because of a price hike, content owners will raise their ask when the rights come up for renewal.]]> http://seekingalpha.com/article/1118981/comments?source=feed#comment-15608941 15608941
Just to break even, J.C. Penney needs sales growth off almost 30% (holding gross margin constant), or gross margin growth of 870 basis points (holding revenue constant). Thus, there will be another big loss this year, and J.C. Penney is running out of tricks to boost its cash (and cash is really $850 million because the company deferred payment to some of its vendors until after the quarter ended).

Bottom line: we will probably see some sort of mezzanine financing or new stock issuance this year, because the cash will be gone and you can't realistically make long term investments by borrowing against a revolving credit line.]]> Wed, 27 Feb 2013 20:48:43 -0500
Just to break even, J.C. Penney needs sales growth off almost 30% (holding gross margin constant), or gross margin growth of 870 basis points (holding revenue constant). Thus, there will be another big loss this year, and J.C. Penney is running out of tricks to boost its cash (and cash is really $850 million because the company deferred payment to some of its vendors until after the quarter ended).

Bottom line: we will probably see some sort of mezzanine financing or new stock issuance this year, because the cash will be gone and you can't realistically make long term investments by borrowing against a revolving credit line.]]> http://seekingalpha.com/article/1118981/comments?source=feed#comment-15598051 15598051
I think it's finally time to break out the B word (bankruptcy).]]> Wed, 27 Feb 2013 16:47:49 -0500
I think it's finally time to break out the B word (bankruptcy).]]> http://seekingalpha.com/article/1156191/comments?source=feed#comment-14616321 14616321
However, my point was more geared to the gross margin as a percentage of sales. While the high-end products would normally be high margin, OEMs always get favorable pricing. I think Apple could get VERY favorable pricing based on the volumes it will order. We'll see where gross margin goes this quarter and next, and that should provide a good sense of whether Apple is getting a big discount.]]> Tue, 05 Feb 2013 16:48:05 -0500
However, my point was more geared to the gross margin as a percentage of sales. While the high-end products would normally be high margin, OEMs always get favorable pricing. I think Apple could get VERY favorable pricing based on the volumes it will order. We'll see where gross margin goes this quarter and next, and that should provide a good sense of whether Apple is getting a big discount.]]> http://seekingalpha.com/article/1156191/comments?source=feed#comment-14583781 14583781
Also, you have to remember that Nvidia's Q4 probably covers Apple's December-February production. That lines up more with Apple's Q2 than Q1. So I'm not sure Apple's seasonality would show up in NVDA's results.]]> Tue, 05 Feb 2013 09:21:44 -0500
Also, you have to remember that Nvidia's Q4 probably covers Apple's December-February production. That lines up more with Apple's Q2 than Q1. So I'm not sure Apple's seasonality would show up in NVDA's results.]]> http://seekingalpha.com/article/1142591/comments?source=feed#comment-14357041 14357041
Also, it's not quite fair to compare capex to sales or fulfillment to sales, because Amazon is seeing a mix shift towards third-party sales, which are low revenue but 100% gross margin.]]> Wed, 30 Jan 2013 10:46:55 -0500
Also, it's not quite fair to compare capex to sales or fulfillment to sales, because Amazon is seeing a mix shift towards third-party sales, which are low revenue but 100% gross margin.]]> http://seekingalpha.com/article/1133181/comments?source=feed#comment-14226821 14226821 Sun, 27 Jan 2013 15:29:14 -0500 http://seekingalpha.com/article/1134041/comments?source=feed#comment-14224721 14224721
Netflix doesn't report churn any more, but it's clearly pretty significant. The larger the subscriber base, the more customers will leave every month, making it harder to generate high growth. With new competitors jumping in, and existing ones (i.e. Amazon) rapidly growing their offerings, I think Netflix's domestic streaming business will reach market saturation in the 40-45 million range.]]> Sun, 27 Jan 2013 14:21:05 -0500
Netflix doesn't report churn any more, but it's clearly pretty significant. The larger the subscriber base, the more customers will leave every month, making it harder to generate high growth. With new competitors jumping in, and existing ones (i.e. Amazon) rapidly growing their offerings, I think Netflix's domestic streaming business will reach market saturation in the 40-45 million range.]]> http://seekingalpha.com/article/1134041/comments?source=feed#comment-14200201 14200201
If you look back at the four quarters prior to the mid-2011 price increase, Netflix added 9.6 million domestic subscribers. So growth has already dropped off dramatically.

I think international growth will remain rapid, and is likely to surpass the domestic business eventually. However, I think profitability will be lower because of the additional complexity of operating in many different markets.]]> Sat, 26 Jan 2013 15:12:49 -0500
If you look back at the four quarters prior to the mid-2011 price increase, Netflix added 9.6 million domestic subscribers. So growth has already dropped off dramatically.

I think international growth will remain rapid, and is likely to surpass the domestic business eventually. However, I think profitability will be lower because of the additional complexity of operating in many different markets.]]> http://seekingalpha.com/article/1134041/comments?source=feed#comment-14196021 14196021
However, about 45 million shares have traded hands since the earnings report (roughly triple the number of shares short). Many of those will be high frequency traders, but that level of volume has given shorts an opportunity to get out (albeit at a big loss).]]> Sat, 26 Jan 2013 12:29:24 -0500
However, about 45 million shares have traded hands since the earnings report (roughly triple the number of shares short). Many of those will be high frequency traders, but that level of volume has given shorts an opportunity to get out (albeit at a big loss).]]> http://seekingalpha.com/article/1134041/comments?source=feed#comment-14195781 14195781
Also, I should note that NFLX was much more profitable in 2011 than it is today. In summer 2011, the company seemed to be on pace for EPS of $5. By contrast, most 2013 projections put EPS in the $1-$2 range.]]> Sat, 26 Jan 2013 12:21:31 -0500
Also, I should note that NFLX was much more profitable in 2011 than it is today. In summer 2011, the company seemed to be on pace for EPS of $5. By contrast, most 2013 projections put EPS in the $1-$2 range.]]> http://seekingalpha.com/article/1134041/comments?source=feed#comment-14189851 14189851 Sat, 26 Jan 2013 08:43:03 -0500