CRTO faces currency headwinds from the Euro and the EBITDA guidance was only in-line to slightly below the Street. I like the company and the stock, but FUEL seems like a better setup heading into tomorrow's release IMO.
I agree with what you said, but the management team needed to sound more confident in its outlook and opportunities. It's fine to point out tough comparisons, but they're in a great growth sector with many opportunities. The CEO and COO needed to offset the tough comparison comments with an optimistic tone on their ability to capitalize on new business opportunities (either at existing accounts or with new customers). Moreover, they needed to highlight the recurring revenue potential once card readers are installed, which will provide a margin boost in subsequent periods. Earnings calls are partly marketing opportunities as many potential customers will listen to better understand the company and its outlook. Management failed horribly yesterday in my opinion.
That said, I think the stock is highly undervalued relative to peers in the sector given its combination of growth and profitability. Not saying its should trade at the same revenue multiple as faster growing peers, but at 6-7x it would be a $35-$40 stock. CYBR is trading at a mid teens multiple on revenues now for reference though I understand that's inflated by the lack of float. I think that's a fair target and the stock should be in the low $30s now.
Entire management team did a very poor job on the conference call. This stock should be trading in the $30s. Really sad and unfortunate.
from a 3rd party reporting service...i don't have an earnings transcript yet...
Finally, VDSI management also announced on the earnings call that the company's CFO plans to retire in the next 15 months. They've retained a search firm and expect the CFO to remain in his role until a replacement is in place.
CFO is retiring...he's 63 years old. He's also staying until they find a suitable replacement. No smoking gun here and probably a good thing if they can find a more dynamic person to lead the conference calls.
Agreed. Lot of variables to incorporate, but I appreciate you laying out the numbers. Should give comfort that the current stock prices leaves a margin of safety.
This valuation ignores FXCM paying down debt (either through asset sales, cash flow from operations and collections on customer balances) in the interim prior to a sale. In that case, a higher ratio of the sale proceeds would fall to FXCM shareholders. It seems like they are aggressively looking to sell non-core assets (Fastmatch being the first example) to pay down the LUK term loan and lower interest expense. Assuming that the core business continues to perform well and grow, the core valuation can expand to offset asset sales and potentially raise the total equity valuation and the value to FXCM shareholders.
The citi price target makes no sense to me unless the analyst assumed a permanent impairment to operations and consequently the total equity value. The existing debt (excludes LUK term loan) would be assumed by the buyer so that's of no consequence in this discussion. LUK is backing this company now and that provides huge strategic benefit too (unlike the GTAT comparisons that are made, which are false).
IMO, the current price provides a great margin of safety and it's conceivable that the stock settles in the $3-$4 range near term. I hope it's higher, but that seems appropriate to me.
Well said. The business update, in my view, dispels the short thesis. The company is operating well. The question now is what the ultimate value could be in a sale. The company has time to maximize that value now, so not sure why anyone would stay short.
This is a penetration story more so than an overall market growth story in my view though the overall market is still very healthy. Internet penetration still has a long ways to go and now the company has the capability to become more involved in the actual transaction through financing. The market has this dead wrong and this should be a $90-$100 stock minimum IMO.
I would agree with you on that. I personally believe that this is a cash flow story and should be valued as such. Assuming the company can retire the 2015 debt with cash on hand and generated from Q4 and Q1, I believe there is a lot of upside in this stock. If they have to do an equity exchange on the remainder, I would hope that they would at least pre-announce what should be good cash flow numbers and get the stock price up to a higher level to minimize dilution.
There will still be a fair bit of debt remaining, but the company has indicated that options to restructure that were improving as early as last October at a time when charter rates were significantly lower than what has been experienced in the past two months. With interest rates so low, and spreads potentially narrowing due to improving fundamentals, there could be a good opportunity to term out debt and reduce interest expense at lower levels to further improve profitability.
No problem. They do have $40mm in installment payments due on one additional vessel, but that's not the big issue here from a balance sheet perspective.
They indicated that the strong tanker market back in Q4 was already giving them flexibility to restructure debt. That obviously has only improved in the past couple of months.
The company should pre-announce their results and buy back stock ($200mm at least). They have more than enough cash now (and funding commitments from JD) to grow their business.
Your debt balance is too high unless I'm missing something. When they last reported, they indicated that the total debt and capital lease obligations outstanding was $956mm. Are you adding in the present value of operating leases too, if any? The company also had over $100mm in cash though that went down when they paid down some debt (but obviously they should have positive cash flow from operations in Q4 and even stronger levels in Q1 2015).
"In October 2014, Frontline reduced the outstanding under the convertible bond loan with maturity in April 2015 from $190 million to $149.2 million through buy back and debt/equity swap. Following this, and the termination of the three charter parties for Front Commerce, Front Comanche and Front Opalia in November 2014 total debt and capital lease obligations are approximately $956 million."
They probably would love to get the stock to the high single digits so they could raise more equity and pay down the remainder of the 2015 debt due. I think the stock is undervalued too, but I'm puzzled that the sell side analysts are still projecting such a depressed valuation for this company despite dramatically improving cash flow.
I think we have to be careful assuming current elevated rates remain throughout the year, but that's certainly your prerogative. The actual non-gaap eps will be different as it will include depreciation, but suffice it to say, the sell side estimates are woefully stale. What ultimately matters is cash flow and current rates offer a great opportunity to delever the balance sheet and the stock price should rise disproportionately.
The key question will be what they do to address the debt maturing in April. I hope the current uplift in the market enables them to retire the debt vs. doing a swap or equity deal. Perhaps they could also raise some bank debt to pay it off, but that might be difficult with the existing covenants.