Do you think market is bearish on the weak sales G, or something else? I think it's hugely positive news that management is ending unprofitable products. Negatives I see are repurchases are down and debt issuance is up.
1) Stock based comp is very high and eats a lot of the repurchase impact. Something to ponder.
2) As they are giving back capital in the form of buybacks, you are inherently forced to underwrite the business (given that it is not feasible to buy back the whole company). If it does not inflect in the next 12-18 months, the buybacks will not matter imo.
Thanks for the comments - yes agreed stock based comp is not immaterial. Theoretically it dampens the effect but practically the company adding incremental buying volume should more than offset the issuances unless all of the SBC is being immediately unloaded. The earnings presented are inclusive of SBC so they're going to be GAAP profitable in the next 12-18 months unless the business completely deteriorates
On 2) the business you're underwriting in this case is 80% this pile of cash and 20% the actual operating business just looking at where valuation lies. Looking at the investments being in bank deposits and cash equivalent investments, it's a pretty narrow valuation range
Congratulations!
Thanks!
Do you think market is bearish on the weak sales G, or something else? I think it's hugely positive news that management is ending unprofitable products. Negatives I see are repurchases are down and debt issuance is up.
Founder CEO owns ~20% of the company and bought 6.5M shares last year.
Thanks for the write-up. A couple of comments:
1) Stock based comp is very high and eats a lot of the repurchase impact. Something to ponder.
2) As they are giving back capital in the form of buybacks, you are inherently forced to underwrite the business (given that it is not feasible to buy back the whole company). If it does not inflect in the next 12-18 months, the buybacks will not matter imo.
Thanks for the comments - yes agreed stock based comp is not immaterial. Theoretically it dampens the effect but practically the company adding incremental buying volume should more than offset the issuances unless all of the SBC is being immediately unloaded. The earnings presented are inclusive of SBC so they're going to be GAAP profitable in the next 12-18 months unless the business completely deteriorates
On 2) the business you're underwriting in this case is 80% this pile of cash and 20% the actual operating business just looking at where valuation lies. Looking at the investments being in bank deposits and cash equivalent investments, it's a pretty narrow valuation range