let's keep in mind this is infrastructure that can be applied in the future, for example the next RDR/GTA will have the online backbone in place.
also, per interview GTAO has yet to stop growing. GTAV came in NPD #4 for august, presumably most of these were next gen.
Being forced to cater to the overwhelming popularity of a product is a problem that personally I don't mind having
1) when was the last time company has missed annual guidance? I'm not worried
2) traditionally, convertible bonds can be converted into stock when they are in the money (which they are) by the bond holder. Company (TTWO) can also redeem the convertible bonds (those which have not been converted) for a premium and retire the shares outstanding (shares outstanding account for all convertible debt, so even if they are converted to stock and not redeemed it will not lead to dilution). Redemption will lower shares outstanding.
Given these bonds were issued in much more unfavorable financial conditions (prior to the overwhelming success of GTAV), I am speculating that the company can retire much of the debt in a fiscally responsible manner, and perhaps going forward the company can have more favorable debt terms (i.e. no more convertible debt) if it's credit rating has improved
I don't even bother reading Paul Tassi's articles anymore. He is simply an ATVI fanboy and a closet TTWO bear. I think he completely lost me when he penned an article about "Fast and Furious" being a threat to "Grand Theft Auto". Coincidence ATVI owns the rights to "Fast and Furious"? I think not. I'm not holding my breath. IGN game "Fast and Furious 3" a 2.5 and summed it up as a "A furious wreck".
yes, we can only go off of what mgmt has said, but this has been overwhelmingly positive.
From mrq cc....
"Active user base continues to grow with average monthly active users for calendar 2015 to-date up more than 40% versus calendar 2014."
from the IGN interview, Imran Sarwar game tidbits such as...
"GTA Online which has exceeded our expectations..... The community we’ve been able to foster is massive, growing each day"
Regarding killing PS3/X360, it clearly looks technical, atleast from Sarwar's inteview. The old machines just can't handle the open world.
Also, GTAV coming in NPD#4 2 years after launch, i doubt many of these are ps3/360. I think if Rockstar viewed the loss of legacy gen as a threat, they would have postponed killing support as they have clearly done for some time per IGN article.
had a moment to look at the pricing announcements....
the 2018 convertibles can theoretically account for ~11.6 mm of the short interest given these bonds will convert to stock as long as we remain above $21.52 per share.
the 2016 convertibles can theoretically account for ~11.5 mm of the short interest given these bonds will convert to stock as long as we remain above $19.09 per share.
~23.1 mm shares can/have/will be issued as these are now deep in the money. if the shorts are simply arbitraging via convertible bonds, theoretically they are covered as these bonds are going to get converted into stock or redeemed at a premium.
regardless, all of these shares have been fully accounted for in the diluted count when the bonds were issued. if they are converted nothing will happen. if they are redeemed diluted count will go down.
How many shares get issued with the convertible debt? I would imagine a good chunk of short interest can be attributed to convertible arbitrage.
Hopefully moving forward, TTWO can issue more favorable debt
coming from a guy that has been bearish since the IPO and have been vocal on this board since $40+, I try and look at this a little more objectively.
1) it's a real business
2) it is profitable.
Regarding balance sheet, quick ratio over 1, current ratio over 1, no need to worry in the short term. Book value 229 mm (roughly half the market cap).
MRQ, trading at less than 1.5X TTM sales, trading under 20X earnings guidance, with growth initiatives in TX/AZ.
Consumer reports claims LOCO as the #2 "taste champ" in the chicken category, ahead of Church's, KFC (YUM), Zaxby's, and Bojangle's (BOJA).
The shorts have won, but unquestionably this is not going to zero. At some point it is a buy
at least at $12.50, considering low end of guidance of .67, the stock is finally trading at a decent 18 PE considering moderate growth.
I wouldn't jump in hear and try and catch a falling knife (particularly given macro concerns), but at some point growth in the Southwest/Texas could be realized (albeit slow growth). At some point it does become appealing.
I agree, at this point, it makes no sense selling being 70% off the 52 week highs, momentum players have definitely been shook out as many have finally realized this is a slow grower at best.
what about simply looking at guidance? 67 cents for 2015 puts us at a 2015 PE of 22. Given they lowered nearly every aspect of guidance (new store openings, EBITDA, same store sales), perhaps the drop becomes a little more justifiable?
clearly you're not up on the times, Los Angeles, where the vast majority of LOCO's are located, already passed measures to raise the minimum wage to $15
Trading at ~22 X this year's earnings guidance I think some growth is STILL unquestionably priced in.
Also, a little suspicious that they took down EVERY aspect of guidance (comparable store sales, new store openings, margins, and EBITDA) without changing EPS estimates. Is it really going to be made up by the G&A costs? Would explain the higher tax guidance.
Proof is in the pudding, lost 1/5 its value in a single day. I've been in this board since 40 with the same old story. Overhauled, approaching fair value and growth in the southwest could be real at some point, but I'm not going to try and catch a falling knife
LOCO is not fast casual. The company describes itself as QSR. This is fastfood, drive though, dollar menu, and all. A fast food name growing revenues in the low single digits.
What's the appeal
Inventories are raw materials (which ironically are having a hardtime being turned into finished goods) and not included in the quick ratio.
Factoring in 100% receivables collected the quick ratio is STILL extraordinarily low.
What exactly did they update on the call? Did they understate receivables or cash? This ia directly from the 10-Q "Cash equivalents at June 30, 2015 decreased by $744,000 to $215,000"
Did they over state liabilities?
Also per 10-Q, they've capped 77% of the revolving credit line, 100% of the term loan, and 46.3% of the Capital Expansion loan, and are paying 9% on the lines of credit.
Near term liquidity unquestionably looks tight. What exactly did they say on the call?
ended the quarter with $215,000 cash, accounts receivable 3.586 mm, current liabilities 12.6 mm, quick ratio of 0.3!
take a long term view, but the short term looks pretty dire. secondary? debt?
considering the track record of mgmt, i wouldn't hold my breath. production problems appear to be a perennial problem at this point, a problem exasperated by the lack of cash.
stocks off 7+% after hours, perhaps it reverses, but I would venture to say the street is not happy
Revenue growth fell off a cliff.
Regardless of bottom line efficiencies, single digit top line growth is a little scary considering just last quarter the company was posting nearly 20% growth, last year 16% growth.
With revenue missing by nearly 1 mm from analysts expectations, and earnings missing by 200%, this quarter clearly shocked many.
We have to ask if soda is in a secular decline regardless of the ingredients. The silver lining was kombucha, but competition appears to be getting the best of them.
This quarter is worrisome.