Archive for the ‘Uncategorized’ Category
The Knives Are Out For GrubHub
My latest at Seeking Alpha discusses the uber-competitive food delivery space. It is a classic horror story? Who will survive in the end?
- GrubHub is facing tremendous competitive pressure from savvy new entrants.
- If the SF Bay Area is any indication, each market will be its own brutal battleground.
- Recent operational missteps will compound GrubHub’s growth woes.
- The biggest risk is GrubHub becoming a footnote – like Myspace or AltaVista.
Read the whole thing: GrubHub Competitors
Google’s Alpha ‘Bet’ On Transparency Is No Qwikster 2.0
I posted a new article to Seeking Alpha yesterday.
Summary:
- Alphabet provides transparency, focus, accountability and autonomy for the new CEOs.
- Google’s Alphabet corporate re-brand is no Netflix / Qwikster debacle.
- Expect that “what gets measured, gets managed” from a finance and strategy standpoint.
Disclosure: I am long GOOG.
GameStop Tanked: Winners and Losers
My latest post on Seeking Alpha is commentary on the current state of the video games business after seeing the carnage in GME’s stock when they issued earnings this week.
Summary:
GameStop is struggling with the transition to new consoles, new digital distribution and new sales competition from Amazon and others. They may have some solid years as sales of next generation consoles ramp but I expect digital to be the greatest long term existential threat. Nintendo is at risk of becoming irrelevant in the console business. Video Game publishers should perform very well as the next generation ramps up, but may have some sales challenges in the meantime.
Read the whole thing: GameStop Tanks
Take-Two’s Q4 should be a Monster $800 MilIion in Revenue
A couple of weeks ago, I outlined why I thought Take-Two (TTWO) is very a different company than a few years ago with significantly brighter prospects. The console video games business is all about cycles–product cycles, console cycles, consumer shopping cycles. Right now we are in the lollapalooza of video game cycles for TTWO – a new version of biggest hit coupled with next gen consoles during the critical Christmas shopping season. So how is it going so far for Take-Two?
By my estimates, spectacularly. In its earnings release in late October, revenue was projected to be $650 million – $700 million by TTWO, which has been low-balling estimates recently. Analysts are coming in at an average slightly above $700 mil (range: $668-$766 mil). I estimate revenue will be about $800 million and earnings will meaningful beat the current $1.06 per share projected by analysts.
You can read the full post at Seeking Alpha:
TTWO’s Q4 will be another Monster
Take-Two is a Buy – Could Double in next 12 Months
Last Thursday, Seeking Alpha published my bullish post on a recent stock position – Take-Two Interactive.
Summary: Take-Two (TTWO) is a changed company with growing operating leverage and a secular tailwind from new console launches. Grand Theft Auto V is one of the biggest franchises in all of entertainment. Take-Two continues to innovate, win awards and launch new franchises. The company is flush with cash and cash flow and is aggressively buying back stock. The stock is inexpensive and could easily double in 6-12 months as the market digests the shift in business prospects and profitability.
You can read the full post on Seeking Alpha:
Take-Two: Margins will Drive Upside
Disclosure: I own shares and call options in TTWO.
MegaMillions at $640M Is Still A Losing Bet
“May the odds be ever in your favor!” – This sinister line from the blockbuster movie The Hunger Games could easily be the ironic tag line of every lottery system in America. A lot of ink has been spilled about how bad of an investment a lottery ticket is. I would argue that it is a regressive tax on the numerically challenged and the statistically disabled. Megamillions helpfully points out how unlikely you are of winning.
However, I have an old friend that always bought the big PowerBall or MegaMillions tickets whenever the payout got above the odds of winning. MegaMillions is in the news this week with a current estimated Jackpot of $540 million. Given the odds of winning the jackpot are *only* 1 in 175 million – he must be buying tickets by the fistful. Plus, even if he doesn’t win the jackpot he can still win $250k, $10k, or even $2! I must admit a jackpot of half a billion is exciting any way you slice it. I decided to go digging to see if I should buy some tickets. So… are the odds really in your favor?
Nope. According to an awesome post written by Jeremy Elson of Microsoft Research, you must factor in taxes, the present value of the award AND the likelihood of other potential winners. His key insight is that when jackpot sizes rise beyond a couple hundred million, the pace of ticket buying goes super-linear – meaning it accelerates. To quote Jeremy:
“This means there is a point of diminishing return where the negative expectation due to ties outweighs the positive expectation due to having a larger jackpot. Taking this into account, it is unlikely that buying a lottery ticket is ever profitable in expectation, no matter how big the jackpot gets.”
In fact, Jeremy posits that the peak expected value of $0.693 per $1 ticket, including the value of non-jackpot prizes, happens when the jackpot reaches $420 million. The expected value then begins to decline again because you will most likely split the winnings with one or more winners.
Ok, so if it never makes sense to buy a MegaMillions ticket – who wins? At the end of Durango Bill’s insightful MegaMillions analysis, he lists the winners:
“1) Federal Government (Lottery winnings are taxable)
2) State Governments (Again lottery winnings are taxable)
3) State Governments (Direct share of lottery ticket sales)
4) Merchants that sell tickets (Paid by the lottery organizers)
5) Lottery companies (Hint: They are not doing all this for free)
6) Advertisers and promoters (Paid by the lottery companies)”
There is a footnote provided by Jeremy however… if you happen to have gambling winnings, the purchase of the lottery tickets are tax deductible against those winnings! So, don’t be surprised if you see Doyle Brunson or Phil Hellmuth at your local convenience store stocking up on lottery tickets.
When you buy a coffee today, don’t buy the lottery ticket – it ain’t worth it. Hmmm, it is less than your coffee – buy one ticket. You gotta be in it to win it, right?
Disclosure: I bought some tickets… Heck, why not?
7 Luxury Stocks to Sell or Short
Last week I posted a negative outlook on luxury good stocks on Seeking Alpha. Of course, timing is everything and these stocks promptly rose further! But if you didn’t see the article then, you have an opportunity now to sell at even higher prices!
During the 2008-09 financial crisis, luxury goods companies’ sales, profits and stock prices tanked. During the rebound they have grown dramatically, and many stocks are now above their pre-crisis highs. This situation will not last.
Here are seven vulnerable stocks: Estee Lauder (EL), Polo Ralph Lauren (RL), Tempur-Pedic (TPX), Coach (COH), Tiffany & Co (TIF), Nordstrom (JWN) and Lululemon (LULU).
The thesis hinges upon a continuing economic slowdown in the U.S. and Europe. A variety of factors will rein in spending among the wealthy while increasing costs at luxury goods companies:
1) Stock Market Volatility and Decline
2) The recent renewal in home price declines
3) Continued Economic and Political Uncertainty
4) Inevitable Increased Taxes
5) Higher Input Prices
With sales likely to slip, costs likely to rise and high PE and PS ratios, these luxury stocks are likely to fall over 30% from current prices.
You can read the full article on Seeking Alpha: Luxury Goods Vulnerable.
Berk Sure Has A Way 