This thursday, 02/06/2025, Peloton Interactive (PTON) will reports earnings. The stock lost almost 99% from its all-time high it hit in early 2021, still trades below its IPO price (29 US$ in 2019). Either the stock price will explode because the company delivers, or it'll get hammered because the company misses and continues to bleed cash. My most educated guesss ? I tend to believe the business model has sustainibility and can be operated with solid profit margins. I've initiated a small position again, won't kill me if this bet fails.
Peloton's figures come out today ... pre-market, suddenly a big upward spike. These company's shares where HOPE is the name of the game, no substantial earnings or no earnings at all, but potential for such, are supe-volatile. I'm ahead as of now, but maybe the shares will fall back below my entry price. Same with Walgreen's ... . Stay tuned.
Dan Shuart of Eagle Point Capital LLC has published a very bullish research paper on International Game Technology (IGT), closing price on 02/07/2025 was 16.63 US$. Source / URL : https://eaglepointcapital.substack.com/p/igt-cheap-with-multiple-catalysts Conclusion (the article is behind a paywall), I quote, "Free cash flow is likely to be depressed compared to “normal” for the next couple of years. Management has indicated that capex could run close to double the standard ~$175M - $200M due to the timing of upfront payments and increased capex as those contracts begin in the next few years. So perhaps the stock trades at 9 or 10x depressed/trough free cash flow instead of 5x or 6x for the next year or two, which doesn’t really bother me given how large the margin of safety is, especially considering the influx of cash coming from selling the gaming segment. The company does have a little stock comp, the JV accounting can be a little murky with the Italian consortium, and contract payments are lumpy, so valuing this business is imprecise. The nice part is, the old Buffett saying of “price is my due diligence”, or even better; “you don’t need a scale to know that a man is fat” applies here. I have not factored a valuation re-rating into my forward returns because I really don’t have to. Any valuation re-rating (which I think is likely) would provide additional upside, but we don’t need to rely on that for solid prospective returns. Increased value accruing to equity holders due to a lower leverage profile provides another cushion to returns that I haven’t factored in here. I would imagine the stock will be volatile in the coming months, and there is a good chance the stock sells off by a decent amount – who knows by how much – if the company does lose the Italy contract. Conversely there is probably a big pop in the share price if they win the contract. Either way could present an opportunity to accumulate stock at even more attractive risk-adjusted prices given what we know about the business’ earnings power. The bottom line is there is a significant cash inflow coming, the stock is priced to lose the Italian contract (and several more down the line), and not much has to go right to generate attractive returns. The stock is priced as a low-quality, dying business when in fact a pure-play lottery provider is a high-quality, predictable, entrenched and cash generative business model."
Update, a) I'm back in British American Tobacco shares - a bad decision to sell them it was, but it's a "Hindsight is 20/20" situation and b) if any of you ponder with the idea of following Robert Prechter and his investment ideas, DON'T. https://www.cxoadvisory.com/individual-gurus/robert-prechter/ I wrote this already, but it scares me he's still a regular in the financial press, often being introduced as a "star analyst" which he cleary is not.
... this time, I got lucky. Intel performed strongly on 02/11, I sold BATS shares and bought Intel shares. British American Tobacco today reported earnings for the fiscal year 2024. Weakening demand for classical cigarettes, and a cautious outlook by management have resulted in what is now an almost 10% loss relative to yesterday's closing price. Philip Morris International (PMI) very near its all-time high. The market leader gets a premiums by market participants, and surpassed analysts expectations. Result is of course a low dividend yield, but I expect rising dividends for the years ahead. If it is of interest to some readers : https://www.bat.com/media/press-rel...v-gYB5aQoHmd4GB7Bg_aem_k4rTVQcB9u2iD2jzks5lvA
Warren Buffett once said prior to Munger, he was a cigarette butts investor, meaning looking for cheap rundown stocks with a little kicks left. Munger convinced him to invest instead in great growth companies selling at a reasonable price. The rest is history. Are you sir, looking for and investing in cigarette butt companies?
@ironchef : neither & nor. As of now, I neglected my own advice and chased returns, hoping that momentum stocks would continue to rise / "show momentum". Walgreens looked so great, then came the lawsuit ... there's always uncertainty involved, but I hope my Intel (INTC) bet will regain my losses from the Walgreens (WBA). Problem is, I cannot evaluate the earnings prospects of single company as well as Buffett and his successors can - most of us can't - thus I probably will fail to beat the S&P 500 . But I want to continue with active management, because I simply love this game with real $$$.
META Price Action: Any time after 10-2024, it was obvious from PA and news it won't tank. Any entry after 10-2022 would be a great timing. Of course it is easy looking back, never easy at the time.