Mike, congrats to the shorts. Mbly has truly performed like a dog. It's clearly been under distribution. Nobody really wants to buy the stock. At this point I'm hoping for a rally spurred by pre-earnings analysts pump, post-earnings rally as near-term the story appears intact, and support from the market as the key indexes have rallied well off their lows, above the 200day MA and start to retest their all time highs. I hope all boats float with the rising tide ... even dogs. It a sad investment thesis but that is the hype mbly was based on in the past and I hope for my sake we see again.
Mike, mbly is priced based on what people expect the company to be in 5 to 10 years. If any one has anything against the stock price, it can't simply be based on current P/S. The gross margins are currently extremely high. So the stock can be afforded a higher P/S as the revenue ramps up. I expect sales of ADAS to ramp as Europe has made AEB mandatory for the highest rating. A group of automakers in the US has vowed to make AEB standard. AEB standardization will go global. The only question is the competitive landscape, how it will affect mbly gross margins and what P/S to assign 5 to 10 years from now.
Mike, what gives you the confidence that this earnings report will be the one to sink mbly stock price? Sales for ADAS should be fairly predictable as design wins are determined well in advance. Once a car model is launched with the mbly solution, they will see months / years of steady revenue stream. On the last conference call, the company seemed fairly confident about hitting their numbers. I believe AEB has become mandatory for the highest rating for European NCAP so this should generate some of the revenue growth. I think the company will have no problem hitting their estimates for the next two quarters.
With the stock price down from its highs, some of the risk is taken out. There are many examples of stocks exhibiting high valuations for months and years. For example: amzn, nflx, tsla, etc. These stocks don't fall unless bad news comes out such as an earming miss. As I've mentioned, I really don't think an earnings miss is in the offering for at least the next two quarters.
That is exactly the problem. Analysts and investors play this game when the revenues are low and the growth rate is huge. They say oh, the company is growing like crazy. We don't know how large the company will grow. Let's assign it a sky high valuation. The problem is we are at the end of the bull market. That game only works well when there is froth in the market. People are talking about when is the interest rate hike - not the next QE.
The current P/S is 10. The industry average is 2. Even after 3 years from now, bases on Gartner estimate, the P/S will still be 5 with growth rates slowing down. The incumbents in the field are not going to lie down and let PSTG cannibalize their market share. EMC has its own flash storage solution (extremeIO?) that they'Re pushing. So is it logical for one to assume much upside to the stock?
Management waited too long to IPO. We are at the end of the bull market. High fluffy valuations were only possible when the market was at the peak of the froth. The nasdaq is well off its high. Companies like amba and mbly are seeing their valuations compress. Fair valuation for mature companies is a price to sales of 2. To justify a market cap of $3B, they will need to generate revenue of $1.5B at some point. That is 10 times their current revenue. Clearly the company is overvalued especially with the market on the downturn. By the time we reach the end of the 180 day lockout, the stock will be in the dumps. Sorry employees, watch your paper millions decay to chump change. Time to move on to the next startup.
* never quite finished CS degree at Harvard
* first startup went belly up
* next startup was photo sharing website
* then worked at CNET on photo sharing
* then started fitbit
Co-founder CTO was working also at CNET on photo sharing
It doesn't look like CEO has any extensive experience on running companies. Definitely no experience on running post startup stage companies.
In interviews after first earnings report, CEO looked extremely uncomfortable and inexperience. Did not answer questions well on future products. Or maybe there really isn't much in the pipeline
It doesn't look like the cofounders (CEO or CTO) have any technical background relevant to fitness bands. So where is the technical know how coming from? Or is there really nothing technically special or advantageous with fitbit?
How do you gain confidence that CEO will ensure this is not just a one hit wonder ... a flash in the pan?