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September 2016
#1

We have to agree with that, the stock has rallied over 100% from the lows in March and April..

Ambarella is scheduled to report FQ2 earnings after the closed on September 1. The stock has rallied over 100% off the lows in part due to excitement over the release of two key products my previous top customer GoPro. Without the GoPro products shipping, the market is bound to face disappointment over the guidance for FQ3.

Ambarella: Market Expects Too Much From FQ3 Guidance - Ambarella (NASDAQ:AMBA) | Seeking Alpha

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#2

A few good reminders why we are long in Skechers

Without a doubt, Skechers has had an incredible 3 years with sales projected to double this year from 2013 levels and earnings to be up nearly 6 fold from 2013 levels. That rate of growth is clearly unsustainable, but it does evidence the fact that Skechers is a completely transformed company from several years ago. We still think public perception is poor in Skechers and hence the steeply discounted valuation. Okay, so as we stand today, Skechers is selling at a massive discount to its competitors, but what is the forward-looking prognosis for the company?
The last 3 years of rapid sales and earnings growth and free cash flow have put Skechers on a very solid financial path. The company has spent $200 million to build out retail stores and build US and global distribution capabilities. Even with that, the company has $620 million in cash and $60 million of long-term debt. By year end, we project the company to have $750 million in cash and approximate annual free cash flow of $250 million per year. That's pretty amazing for a company with a market capitalization of only $3.7 billion.

Skechers Valuation: As Cheap As It Gets - Skechers USA Inc. (NYSE:SKX) | Seeking Alpha

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#3

Selloff on downgrade:

Morgan Stanley’s Jay Sole pointed out that the shift in consumer preference to pure fashion footwear is pushing Skechers USA Inc SKX 8.29% to adjust its assortment, leading to slower-than-anticipated sales growth and SG&A deleverage. Sole downgraded the rating on the company from Overweight to Equal Weight, while lowering the price target from $41 to $25... Skechers needs to spend more than earlier expected to add distribution capacity in Europe, South America, China and the United States. An additional $75–$100 million is required for corporate office space improvement. “We see no positive fashion catalysts until 1H17 and expect Street EPS estimates to fall over that time frame. However, with the stock trading at just 12.5x our new FY17 EPS estimate, we think some of this bad news is priced in,” Sole explained. The FY17 EPS estimate has been lowered from $2.25 to $1.85 to reflect order delay and increased SG&A.

Morgan Stanley On Skechers: 'Three Stripes, You're Out' | Benzinga

Bad news priced in, that seems an understatement to us.. And not all analysts are as negative as Morgan Stanley:

While there have been concerns surrounding the athletic apparel and footwear trend, Skechers USA Inc SKX 8.39% has more than a 20 percent growth opportunity over the next two years, Citi’s Scott T Chronert said in a report. He maintained a Buy rating on the company, while adding the stock to the SMID Value Creators Focus List. Although the athletic apparel and footwear trend seems to be “in the later innings,” Skechers’ global growth prospects remain intact, analyst Chronert commented. The company is likely to deliver a positive earnings inflection in H2, following a y/y decline in comps in Q2... Although there is risk related to Skechers’ Q3 results being impacted by “some lingering promotional activity,” this is already reflected in the company’s current valuation and trading patterns, the analyst noted. Overall Strength “We have increased confidence in Skechers’ international momentum, its strong balance sheet and clean inventories,” Chronert wrote. Since the company faces easier comps in H2, the recent pressure on shares “could prove to be an attractive entry point.”

Skechers U.S.A., Inc. (NYSE:SKX) - Skechers A Top Opportunity, Says Citi | Benzinga

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