Good report. Thanks for sharing.
Feels like it did when AbbVie came out with a competitor that was slightly inferior at the time. Brought prices down but didn't lose much market share. This company is pricing in 50% drop in pricing and 50% market share for HCV. I doubt it will be that bad.
nxn95132 - you aren't taking into account cash. Share price won't fall to $48 when there will be $30 of cash on hand in a year. $48 + $30 of cash is $78 and that would be a worst case. The flip side is that we could see it normalize at $10 billion of earnings, and a 15x PE and another $30 of cash on hand would put it substantially higher than it is today.
All I was saying is that it is pricing in a worst case scenario with HCV falling 75%.
Here's the math:
$14 billion non HCV drug revenue
$19 billion HCV revenue
Let's assume HCV revenue falls to $5 billion, everything else continues to grow. That is about $20 billion of revenue. With $13 billion less revenue, let's knock $11.5 billion off earnings. That means they'd still make $6 billion.
Now their market cap is $125 billion. The company had $25 billion of cash at the end of Q3 and probably has close to $30 billion of cash today, putting its market cap ex-cash at $95 billion. So if HCV falls apart for them, they are trading at a PE of 16. And that's a worst case as far as I can see. In the meantime, the stock can get cheaper, the company can continue to build cash or find M&A opportunities, and HCV revenue may not fall 75%. This company is pricing in a worst case scenario and it could be better than that.
Also, I'm guessing 2016 revenue is locked up already with contracts, so I'd expect another $15 billion of cash to come in this year. So by year end they'll be $80 billion market cap ex-cash and could be making closer to $8 billion if HCV doesn't crumble As everybody expects. Anyway, I'm a buyer at these prices tomorrow with expectations of at least a 30% gain within a year.
He will keep buying up to maybe $10 and then issue a tender offer for what he doesn't have at $15. Will shareholders go for it? The 52 week high is $38.
Beyond that, I would guess the royalty is only on the box office net and not gross? So theaters take about 50% and the studio gets roughly 50%. So maybe a few million at the most. But most licensees should see a boost?
How do you know this 80% number? And I assume you mean production costs AND promotional costs? The movie may not have made much but slowly the brand will be worth more as they introduce more movies. I'd look for a Strawberry Shortcake movie before another peanuts movie though. And now that Iconix has done it once they'll have a better idea how it will work in the future.
And I'm talking about 2018 bonds. Options are only predictive short term. The current pin is at $5. Where it is in a year depends a lot on the news.
The 2018 bonds are trading to 45 cents on the dollar,and probably rightly so. The company is not generating enough cash to cover the 2018's. But I think they can sell a brand and come up with the money. Sports Direct 9% stake is likely because he knows something is on the block, and will get them out of their debt bind. But nothing is certain until there is a sale.
My hope would be that Iconix spend all its cash on buying back the 2018's at a discount and then sell a brand to close out the 2016's. But I don't know how hard that would be to pull off.
I agree it doesn't look good based on where the 2018's are trading, but there are a couple clues that make me think it will survive... The 9% purchase by Sports Direct, and Cuneo's track record steering through similar situations. But I agree it could go either way.
Nomoredns, you're making all sorts of predictions. I don't think bankruptcy in February is a possibility. It could fall in half and it could double or more in a year. My guess is that their cash flow is strong enough to lock in some financing and in a worst case scenario they can sell a brand.
But even though I disagree with your prediction, February will be here soon enough and we can see if you're right. . Good luck to all.
When you protect for the downside, it limits your gains, too. There is no way to get the large gains and the protection from the downside.
I agree Cueno has been in the hot seat before with Marvel and figured it out. I hope he can do it again.
Options just increase your leverage. And I agree that you need to be careful if you don't know what you're doing. The most basic thing you can do is sell a $7.50 call. This can give you a little extra income if you're bullish, but don't know when it'll start moving. Your upside is limited to $7.50, and in the meantime you make a little money.
Not much new news. McCormick keeps selling. That keeps the price down (in addition to a weak overall market). If the company would take some cash and buy back shares, we'd go rocketing up. We'll see.
They need to solve their debt refinancing before addition acquisitions or share repurchasing.
The company is generating enough cash to lower their debt which is probably prudent right now.