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SUPERVALU Inc. Message Board

reitdude42 2 posts  |  Last Activity: Aug 25, 2014 9:38 AM Member since: May 1, 2009
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  • Reply to

    Nonsensical buyout posts

    by reitdude42 Aug 24, 2014 11:47 PM
    reitdude42 reitdude42 Aug 25, 2014 9:38 AM Flag

    Buying a company that trades at 128x forward earnings is not a smart acquisition...particularly if as your logic dictates that "its heyday is 5-10 years ahead."

    That's called dead money.

    FB traded at over 100x earnings around its IPO price of $38 and the market rewarded it with drop to $18. However, in two quarters it was able to monetize its mobile platform rewarding shareholders with revenue growth rates averaging over 80%.

    FB currently trades at a forward P/E of 37x...perhaps GOOG should buy them instead?!?

    Dominate news media? Sure...if you have an attention deficit disorder:

    $TWTR. Great investment in 5-10 years! #mktmhm11isamoron!

  • reitdude42 by reitdude42 Aug 24, 2014 11:47 PM Flag

    Not to be a downer to some of the posters hoping for a buyout by either AAPL or GOOG but here's a little finance 101 to quickly force you back to reality:

    AAPL trades at a forward P/E of ~14x or an implied cost of equity of 1/14= 7%
    GOOG trades at a forward P/E of ~19x or an implied cost of equity of 1/19 = 5%

    For either one of these companies to issue equity at these costs in order to hypothetically "purchase"...

    TWTR that trades at a forward P/E of ~128x (an 0.8% cost of equity)

    ...would be perhaps the dumbest, most dilutive corporate action in history! No AAPL or GOOG shareholder would ever ratify this transaction.

    It makes more hypothetical sense for TWTR to issue a ton of its equity at this inflated P/E in order to purchase another company much like FB has been doing with its recent purchases (Whatsapp, Oculus)....

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