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Technology

Rivian (RIVN), Still Has A Steep Climb

source

Rivian (RIVN) Good bit of a lifeline, and may get them cash following the R2 intro, which should get decent demand from a niche market. However, it’s not coming till 2026, and Tesla is itching to reduce prices of its Cybertruck (when it happens).

Unfortunately, the sales numbers are not likely to change the volume needed to get to any semblance of break even in the near future – the numbers are just too small.

At the last call Rivian’s management saw the current cash balance of $9.4B only lasting the business through the end of 2025. If they raise more cash following the R2 unveil I would use the upside as a chance to exit. 

and even though the new R2 vehicle will likely command a respectable, niche following, it will not come to market until 2026 per today’s announcement and I don’t expect the sales volume to be enough for the company’s downward trajectory to change. I recommend that investors sell the stock after today’s unveiling event.

Categories
Logistics and Transportation

Federal Express (FDX) Still A Hold, Wait For A Pullback.

source

Federal Express FDX $241 – Buy on declines, cyclical, improving margins, next three years expect at least 10-12% earnings growth, very reasonably priced at 14x earnings.

Yes, absolutely right on the patience part, this one gives medium returns, shouldn’t expect more than 10-12% a year +2% dividend yield, and with the 18% rise in the past year, some of it is already in the price. Revenue growth should improve 4-5% after a flat 2024. (Year ends in May)

Good news is there have been cost cutting moves, and emphasis on efficiency – the express business profits tend to be low, and it’s the ground services that’s really keeping the company profitable. Overall it makes only 7-8% operating profit compared to UPS’ 10-11%, but this will improve with execution of the “DRIVE” program which is its effort to improve efficiency. If they execute this well, there could be further upsides.

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Media

Bumble (BMBL) Q4-2023 Earnings Call Analysis: Challenges and Opportunities Ahead

sourcebumble

Bumble (BMBL) earnings call, Q4-2023

The Bad  

The US online dating market is likely approaching maturity with a lot of headwinds. Also their younger cohort does not have much spending capability – there has to be a ceiling there.

Product execution was not smooth – too many tiers,  friction due to confusion, and not enough differentiation between tiers. The relaunch should take a couple of quarters.

The Good

Focus on profitability, expecting up to 300 basis point operating margin improvement in 2024.

Product relaunch is under way under a seasoned product leader, with a focus on simplification and value differentiation.

The stock should remain sideways for a while. 

I had recommended buying Bumble (BMBL) at $13 as a 3-5 year long-term investment, targeting 13-15% annual gains.

This was an investment where I lost quite a bit, I bought at $22, and sold 75% at $16.

What went wrong? I overestimated growth prospects of 23-24% revenue growth in 2023-2025, instead, growth slowed down to 17-19%,  and the final nail was in Q3, when Bumble forecasted low teens growth for 2024, amidst an overall slowdown in online dating – still a lot higher than Match’s forecast of 7-8% growth, but no longer the growth story. 

Why buy now? – The stock is not too far from it’s all-time low of $12.29, post disappointing Q3 results and guidance. With a market cap of just $2.4Bn or 1.5X 2024 sales of $1.2Bn its a decent GARP (Growth At a Reasonable Price). Revenue should grow at 12-14% in the next 3-5 years, mostly abroad. I think the worst is priced in the stock and we’re getting a subscription based, sticky business (the flagship Bumble app is a ladies first, unique model, with about 2.8Mn paying users paying over $25 per month). GAAP profitability is still a few years away, though but margins are improving 100-150 basis points each year.

Founder Whitney Herd, resigned in Nov as CEO and moved to Chair, appointing former Slack CEO – Lidaine Jones as CEO, who has already expanded the team with key appointees since she started a month ago. There was some consternation about the founder relinquishing charge, but Jones should fill in her shoes well, I suspect execution is likely to get better given her tech/product background.

Bumble reports after the market today, there might be some volatility, it’s a small cap after all.

Buying some during the day, and then will take another call after earnings.

Categories
Crypto

Clean Spark (CLSK) Analysis: Navigating Volatility in Bitcoin Mining

source:cleanspark

Clean Spark (CLSK) Neutral, Volatile Bitcoin miner.

As a bitcoin miner, the volatility will be extreme, so first and foremost, one must have the stomach for it. And not just the stock price volatility, quarterly earnings will also be all over the place, without the ability to have a reasonable forecasting basis. Then you have special bitcoin strategies like HODL instead of sales, and then there is a halving bitcoin event, which again is a specialized area that I don’t follow. 

One aspect you could look at are energy expenses between bitcoin miner companies, compare CLSK to Marathon (MARA) and (RIOT) that could be a differentiating factor.

Given my aversion to crypto I can’t help you more – but there are several articles on Seeking Alpha that offer both sides and if you need copies I can send them to you.

Categories
Technology

Rivian (RIVN) Analysis: $11.30 – Avoid Until Signs of Stability Emerge

source:rivian

The situation is even worse than expected with only 57K vehicle production for 2024 – no growth, production cuts, workforce cuts, hardly breaking even at gross levels.

Here is the company’s outlook, which inspired no confidence.

“For 2024, we expect our total deliveries to be derived from our existing order bank as well as new orders generated during the year. Our full year targets rely on an improvement in order rate driven by our planned go-to-market strategies. The conversion of our existing order bank to sales can be impacted by several factors including delivery timing, location of order, monthly payments, and customer readiness. Our order bank has notably reduced over time as deliveries more than doubled in 2023 versus 2022, and we have incurred cancellations due to macro and customer factors.”

Conference call, filled with underwhelming guidance and management’s approach to addressing the current challenges, the business model was questioned – do they even need a new plant? The sheer magnitude of the projected shortfall and the apparent lack of more decisive action is also baffling.

There is a lot of risk in the current market environment, particularly given the required $5 billion investment in conjunction with the new Georgia plant to facilitate the production of Rivian’s mass-market R2 vehicles.

Categories
Semiconductors

Nvidia (NVDA) Update: Exceeding Expectations but Facing Margin Challenges

source:nvdia

Nvidia’s results exceeded expectations as usual, kind of becoming a habit! The previous quarter’s (Jan 2024) revenue beat by $1.6Bn and it guided Q1-FY25 (April 2024) revenue 10% or 2Bn higher to $22Bn.

Shares took off from $675 to $725. Everybody’s happy. 

Now comes the tough part.

Nvidia had a net profit margin of 55% = $12.2Bn in profits on $22Bn in sales. That is drug lord margin territory! Simply, they can charge whatever they want for the H100s, the new Grace Hopper, and the H200s that are coming down the pike. I’m confident that these margins will continue for at least a year untill competitors get their act together.

However, to assume that these margins will continue beyond that is difficult to swallow, and most of the street estimates for earnings are based on at least 52% in NPM, which if not achieved can be a huge disappointment.

So I modeled earnings at a 40% Net Profit Margin, which is similar to a big pharma company’s patented drug margin that also charges as much as the market can pay for it.

With that NPM, Earnings come down naturally; three years down the road in the 40% model, EPS is  $26 compared to the street estimate of $33. Assigning a P/E of 40, that gets us to $1,030 from today’s price of $725 or an annualized gain of 12%. And if the street is correct, we’re looking at 40*33 =$1,320 or an annualized gain of 22%.

The counter argument to the lower margin thesis is – Nvidia can lower prices and sell more, and at some point this is likely to happen – the overall growth doesn’t reduce – especially if you’re changing the whole paradigm of accelerated computing replacing the way data centers are built now.

At the moment, I’m not planning to add any more, my exposure to Nvidia is already very high, and the long-term thesis doesn’t change.

Categories
Fintech

Pagaya Technologies (PGY) Update: $1.34 – Accumulating Between $1.25 and $1.35

source:pagaya

Pagaya’s earnings call was a much happier experience and it did match expectations, with revenue and adjusted EBITDA being in line. 

The 2024 revenue forecast was in line with the $ 988 Mn V 1.04Bn expected; more importantly, this is more than 20% growth in revenue and volume. I expect the same growth from 2024 to 2025 as well since their new 2023 customers take two years to fully ramp up.

The biggest surprise was the adjusted EBITDA mid-point number of $170Mn for 2024. Pagaya had a run rate of $28Mn going into this quarter and I had modeled $123Mn for next year, a 20% gain, but this was more than excellent and a good sign that they are executing well. They are looking at GAAP levels of profitability from 2025-2026, the reverse split will be 12:1, and Q1-2024 reporting will be with the SEC under US GAAP standards. 

This was first recommended on 02/05, and if you need the details, let me know I can post it again.

Categories
Semiconductors

Nvidia (NVDA) Update: $715-$720 – Taking Profits While Maintaining Long-Term Outlook

source:nvdia

Nvidia (NVDA) $715-$720. Planning to take profits, and reduce position by about 10% this week.

Nvidia reports Q4-FY24 earnings after market tomorrow, 02/21 and expectations are high for an impressive beat and raise for FY2025. Nvidia has a January year-end.

Nvidia is the largest holding in my portfolio and I need to reduce it a bit to keep my risk rules and parameters intact. I also believe that expectations are a little too rich for my liking and anything less may be hammered, instead of the usual earnings pop there could be a selloff. Nonetheless, it remains a great investment over the long term and I wouldn’t sell more than 10-15% of my position. Just pure profit-taking and risk control.

Categories
Technology

Rivian (RIVN) Analysis: Navigating Challenges Ahead of Earnings Call

source:rivians

Rivian – (RIVN) $16.15 HOLD. Going to wait till 2/21 Earnings call to make a better judgment, too many conflicting signals to take a position.

Several weaknesses abound

Economies of scale – With about 57,,000 vehicles sold annually (double the previous year), it needs at least double that to break even or drastically increase prices, which is impossible, given that Tesla has decreased prices. 

Inventory appears to be piling up.

GM and Ford have called out weakening EV demand and slowed production.

Amazon didn’t pick up as much last year.

Highly capital intensive – the chances of dilution and/or debt piling up are high.

On the other hand…it’s not curtains yet..

Amazon has a goal of deploying 100,000 EV trucks by 2030, and this is a huge under penetrated market.

Seems as though their potential competition is also weak and fading away. Lordstown (another EV pickup) and Arrival (another ”last mile” EV delivery van) faltered. 

There is likely to be consolidation in this space amongst non Tesla start ups. Tesla itself faces difficulties and could buy up their competitors to fill out the gaps in their global lineup.

Reduction in Lithium input costs and other critical metals needed for the batteries, which made up a large share of the production costs and as these savings could start to show up in the manufacturing lines.

The valuation is not terrible, but I would like to see some progress against the current demand headwinds before taking a call.

Categories
Technology

Amazon (AMZN) Analysis: Valuation Insights and Growth Potential

Amazon (AMZN) $173, A little overpriced – Buy below $160 – 3 Year Price Target $210 -245, 12-14% annual return.

Yes, it has become a bit expensive like everything else, but a lot of positives and growth is trending higher for the next 3 years.

There is an important focus on profits, and renewed emphasis on costs. As a result, I can see them growing earnings in the mid thirties to about $7 a share by 2026, so assigning a multiple of 30 to 35 gets us to $210 to $245, with a midpoint of $230.

AWS growth resumed to 14%, and forecasted cloud end-user growth worldwide to around 20%. Plus AWS contracted obligations grew faster than sales – over 25% so that will show up in higher revenues down the road. AWS is currently at a run rate of over $100 Bn, and remains the market leader. If AI has to succeed, the cloud has to play an important role and vital role, you need that kind of processing power.

I also like Anthropic collaboration with Amazon for AI – that could be a big winner down the road.