Posts tagged GPS
The market was down today as retail sales disappointed (thanks to the weather, a little something called rampant unemployment, and everyone hoarding cash for the next generation of the fleshlight to be released), food prices continued to increase and spook investors as rising costs pushed 44MM more people in to poverty (though at least 13% of the increase in food costs was caused by Kirstie Alley‘s night out at Sizzler’s all you can eat bar), and Sports Illustrated’s latest Swimsuit issue hit the stands which caused investors’ dip buying trigger fingers to be otherwise occupied (oh wait, what’s that, it’s not 1970 and at the click of a mouse people can easily go to spankwire, meinmyplace, and goldmoney.com which all make the Swimsuit issue more irrelevant than valuation is for NFLX shareholders or Valentine’s Day is in Iran? Hmm. (And quick digression, but Money McBags hopes you all got his Valentine’s Day heart yesterday)).
The real news though continues to be the scent of inflation which is wafting through the air like the gentle bouquet of a carafe full of Chateau Lafite, only if that Chateau Lafite had been shit in by a homeless skunk who had eaten a week old Arbys roast beef sandwich and a pair of Tila Tequila‘s underwear. Money McBags has been harping on this for months now as you simply can’t perpetually stimulate the economy without pumping more money in to the system than Charlie Sheen at an AVN Awards show afterparty, and now inflation is starting to rear its ugly head.
As a result, companies are all warning about rising prices and more articles like this one about clothing prices to rise 10% are coming out daily as the media finally figures out that prices can get high off their money supply. Money McBags listens to a shit load of conference calls during earnings season (well technically he just reads the transcripts because the only thing more boring than listening to a CEO drone on about his/her business for an hour is Network TV) and ~90% of the companies he follows talked about rising costs and in turn raising prices. Holy Stagflation “Using the Wrong Stat” Man (the wrong stat being core inflation), maybe it’s time to make like Annabel Chong and load up on hard assets while everyone buys the rip.
And inflation is a global issues as UK consumer prices were up 4% to their highest in more than two years and double the Bank of England’s target as the country rushes to stock up on black jeans before the price of denim reaches cockposterous levels. Also, China’s inflation was up 5% on soaring food prices even though their version of the B(L)S (perhaps the phonetic BRS for them) recalculated the index to give less weight to food costs and more weight to housing costs because “Chinese food prices rising 50% in ten days” headlines were starting to look as bad for the country as Pedobear showing up to a Justin Beiber concert.
As commodities rise and cause rioting in Egypt, Jordan, Algeria, Iran, Bahrain, and casting couches across the world, one can only guess that Bernanke is playing for some kind of Kerr solution to occur (and if Money McBags were in charge, Miranda Kerr would be a frequent solution) and thus have time freeze before hyperinflation wreaks havoc like Silvio Berlusconi at a finishing school. It is certainly an interesting strategy, and not one Money McBags would have picked, but alas, Money McBags is a simple dick joke writer and not the unelected head of the becoming less free world.
As far as macro news in the US, retail sales rose .3% which was the smallest gain since a drop in June but witch doctors once again blamed the weather for the disappointing number as the weather is now becoming a bigger scapegoat than Waddell & Reed or Steve Bartman and will soon be blamed for other such atrocities such as kidnapping the Lindbergh baby, weakening the levees in New Orleans, and encouraging Chuck Klosterman to keep writing (that is if one considers what he does writing). In the details, building material and gardening outlets saw receipts down 2.9%, food service and drinking places saw receipts down .7%, clothing and clothing accessories stores saw receipts down .3%, and Lindsay Lohan‘s agent saw receipts down 69%.
In other macro news home builder sentiment remained shitacular as builders must compete with a glut of unsold properties, a shit ton of foreclosures, and stubbornly high unemployment causing fewer people to switch jobs than Manuel Uribe skips meals. The National Association of Home Builders/Wells Fargo Housing Market Index held steady at 16 from last month with readings above 50 indicating that more builders view sales conditions as good than poor and readings below 20 meaning more builders view sales conditions as fucking poor than really poor. And finally a report from the New York Federal Reserve showed a gauge of manufacturing in New York State climbed to 15.43 in February as the state produces more paper bags for Mets fans to put over their heads now that baseball season is getting close to starting.
In the market, The Gap was up ~6% after decent comps and after it was announced that Sears Chairman Eddie Lampert has taken a 5% stake in the company in his attempt to run another proud US brand in to the ground. Also, Fed Ex delivered a crappy quarter as a result of weather and rising fuel prices but the stock was up as investors focus on increased long-term shipping demand as emerging markets continue to emerge and the closing of local businesses ramps up e-commerce.
Finally, Barclay’s was up ~7% on better than expected results proving that even tougher regulations can be manipulated, Deutsche (bag) Borse bought the NYSE for $9.53B and a promise not to fire any of NYSE’s croupier’s, and SIRI reported a loss, though Money McBags was unable to hear the reason why as management was interrupted by a caller yelling BaBa Booey over the response.
In small cap stocks, SAAS traded down at the end of day on decent size volume for them on the same day Money McBags dropped 2.5k words on why he has such a crush on this stock that it causes him to be more tongue tied than Serene Branson. Also, GKNT got its geek on and shot up ~28% on a 53% jump in revenues. This is a weird little company and Money McBags actually spent a few hours looking in to it about a month ago and decided to punt on it because they are still burning cash and rely on hitting on trends to sell products (though they do have an audience that is potentially sticker than the floor of a bukkake movie set, so that is positive), Even with the huge Q the company still had negative EBITDA and earnings for the year, and a bunch of the jump up today had to be short covering, but Money McBags is intrigued because they have shown consistent topline growth. Definitely put this on a watch list for more work (and put this on a watch list for more jerk).
That said, Money McBags wanted to get to DGIT today as they obliterated estimates and jumped another 7% to close at a price ~$32.50 (and remember Money McBags told you to buy when it dropped under $16 on 8/30/10 after a bad Q and even took on some assclown in the comments section a few times showing everyone why Money McBags is the premier small cap analyst on the Street). After DGIT’s last Q, Money McBags advised readers to take some profits because the easy money had been made, but hopefully you didn’t take all of your profits because even more easy money is now being made.
As for the Q, revenue was up 32% but most importantly HD revenue was up 61% and that is the driver of this whole fucking business. They said HD is still only 11% of volume so there is more room for growth than in Sheyla Hershey’s old bra, especially as they grow internationally. EBITDA was up 47% to $38MM, GAAP net income was $.51 per share (though included a $.13 impairment write-down for Springbox, and Money McBags would like to spring in this box), and non-gaap net income was $.76 per share. Both their HD revenue and standard revenue beat Money McBags’ guesses as he had $29.5MM for HD and $38.5MM for standard and they killed it with $34.5MM for HD and $41.6MM for standard, so boo fucking ya.
So what do we do here as the company seems to be firing on all cylinders and the rumors of competition from Extreme Reach and Ascent Media are but a whisper. HD just grew 70% for the year so one question is what will it grow next year and another question is who is this girl and is she free for dinner? Anyway,after last Q Money McBags estimated HD could grow ~30% in 2011 and got an eps guess of ~$1.95 and an EBITDA guess of ~$125MM for the year, but shit that may be low. Lets assume HD grows 40%, their standard business grows 10% (~22% total top line growth), costs go up 15%, and the tax rate is 40% and we get to ~$2.23 in GAAP eps and the company is trading at only ~15x that right now but using a non-gaap number with stock comp we get to ~$2.50 per share. Not only that, but they have been running ~46% to 48% EBITDA margins so if we call it 47% (though it should scale as they continue to get leverage), and revenue ~$295MM, we get ~$140MM EBITDA.
The company has ~$73MM in net cash and a market value of ~$923MM, so an EV of ~$850MM and they are trading at only 6x that high end but reasonable EBITDA estimate. Shit, with that kind of growth they should trade closer to 8x and thus 30% upside to ~$42 is not unreasonable here. So if the stock trades down, consider adding a bit and if you still own some, hold on because this could be another solid year as they continue to have the killer app for HD ad delivery and as we saw, HD video is still at the inflection point.
The market jolted up on unemployment news this morning before remembering it had already gone up yesterday and thus quickly settled in like an environmentally friendly squatter in Al Gore’s mansion. The big macro news is that new claims for unemployment dropped to 454k or some number higher than that depending on how much the (No) Labor Department manipulates/readjusts numbers next week. Money McBags is not a betting man (unless there is money to be won or young ladies to impress) but he is willing to wager that next week we learn that new claims for this week should have actually been 459k. Anyway, claims were down by 21k, unless you use the number the (No) Labor Department released last week of 472k (not the 475k they redjusted it to this week) and in that case claims were down 18k (though when this week’s number gets manipulated up to ~459k, this week’s drop will go down in the books as only a 13k drop, but whatever). Regardless of what the number actually was, it likely beat analyst guesses of 460k which would be great if 450k+ new unemployment claims didn’t signal an economy less healthy than a Grilled Cheese Burger Melt topped with a spread of Crisco and Pam Anderson’s hepatitis.
To be frank (and if Money McBags is going to be frank, he only hopes it is the awesomely named Frank AllCock and not Frank Stallone), the high unemployment rate and the inability of the global economy to bounce out of this is more confusing to Money McBags than a condom is to Shawn Kemp or the definition of securities fraud is to SEC promoted Meaghan Chung. Money McBags understands there are unkowns, half-knowns, and can’t-knows in a dynamic global economy, but there are 15k+ PhDs of economics in just the US alone so either all of them are complete idiots or that degree is more worthless than the smallest Vietnamese dong. Seriously, how can we have all of these people who trained for years on this one specific topic not have any fucking answers?
For fucksake, a solar powered plane just flew for 26 consecutive hours and while Money McBags is not a heliologist (though he ardently studies Page 3 of The Sun), he is pretty sure for many of those hours the sun wasn’t even fucking out. So let me get this straight. The human race can build something that goes 28k feet in the air and flies around for 26 hours, powered by nothing but the sun and will continue to fly when there is no fucking sun, and yet we can’t figure out how to find jobs for 20MM people? WTF? Money McBags is officially announcing the death of the entire field of Economics until one of the 15k+ US PhDs can figure something the fuck out. What other discipline awards titles for studying theories that don’t work and coming up with hypotheses that can’t be proved? Just think about it. The profession of an economist is a more worthless calling than an Amish computer camp instructor or Heidi Montag‘s singing instructor. Anyway, the economy continues to struggle and economists continue to watch it melt as they are more helpless than a dyslexic trying to use a calculator set for reverse polish notation (as opposed to reverse polish cowboy).
In other US news, retailers announced same store sales and results were mixed despite discounts, warm weather, and a flurry of unconventional sales efforts including Sam’s Cub making small business loans, Office Depot selling items for a penny, and Hot Topic giving away free canwiches with every purchase of a Twilight t-shirt. The Gap led the disappointments with flat sales compared to guesses of up 3.4% as apparently the late 1990s are officially over.
Internationally, the IMF raised their growth forecast from none to none +1, or 4.2% to 4.6% for 2010, whichever you prefer best. They also warned that risks of a calamity have increased faster than the popularity of the high school girl who puts out first and that growth will slow at the end of this year and next year. To quote the release:
“In the near term, the main risk is an escalation of financial stress and contagion, prompted by rising concern over sovereign risk, this could lead to additional increases in funding costs and weaker bank balance sheets, and hence to tighter lending conditions, declining business and consumer confidence, and abrupt changes in exchange rates.”
So no biggie, right? Sign me up for the 4.6% revised upwards growth, nothing to see here. Unfortunately the IMF was not so positive on US growth prospects estimating that growth will fall short of 3% annually for at least the next five years and urged the US to raise taxes, cut spending, and give Alice Eve her own 24 hour cable channel.
Also internationally, the ECB and the Bank of England held rates at historic lows in order to allow already toxic banks to continue to not lend to people and Greece approved a pension overhaul which will raise the retirement age to 65 from birth, will calculate retirement benefits on average pay rather than highest pay, and will cut annual vacation days from 365 to 340.
In US stock news GPS has a bit more than a gap in their strategy (one may call it a hole more gaping than whatever is in the Octomom’s pants) as it is plunging like Lara Bingle’s neckline. As mentioned earlier, their same store sales disapointed with Old Navy posting flat comps, Banana Republic up 6% after a 20% down in the year ago quarter, and The Gap seeing same store sales drop 3% on top of a 10% down comp. Wow, that is so bad that not even Johnnie Cochran would have defended it. Finally, tax preparer HRB was down ~7% to a 9 year low due to the surprising resignation of their CEO who claims he is about to get a CEO job at a bigger company and HRB should just write-off the losses anyway.
In small cap stocks, news is light today as investors wait for earnings and try not to panic sell everything as they think about the challenges of the economy and the illiquidity of most of these names. LHCG had its second strong day in a row after getting clobbered last week on news that competitors AFAM and AMED were being investigated for false medicare claims. Money McBags broke them down for you last week and thinks it is an ok entry point right now if you need some healthcare exposure. They are in a growing market, offer a superior service, and are relatively cheap for their growth. Sure they don’t have control over the majorty of their pricing, sure they are a roll up story, and sure these companies have been dicier than a night in the Baghdad Hilton Suites, but people aren’t getting any younger or healthier and hospitals aren’t getting any bigger. So if you want a way to play the “we’re all getting old and sick and can’t pay for it” trend, this is a company to do that with and at a reasonable mulitple.