Park City Capital @ParkCityCap 2h2 hours ago
@WaltHudson $RESN raised capital in June 2013 via a convertible note. #EarlyBirdGetsTheWorm
Mr. Terry Lingren
Chairman and CEO
Park City Capital, LLC is a private investment firm based in Dallas, TX. As you know from prior conversations, investment funds that we manage have acquired a 4.35%1 interest in Resonant Inc. (“RESN” or the “Company”) bringing our position to 300,000 shares of common stock. Based on publicly available data, it is our understanding that we are RESN’s fifth largest shareholder. We have acquired this stake over the past couple years, as we think the shares are significantly undervalued.
We are excited to learn about the outcome of Milestone Four with Skyworks, but we believe that the opportunity in front of the company is much larger than any one customer. Our research leads us to believe that 12 months from now, Resonant should be generating revenues from multiple customers and will likely have or be close to having a tunable filter prototype that could be truly disruptive.
Once at least one filter design is accepted, RESN will be the only pure play filter company. Given that the filter market is very large and growing extremely fast and institutional investors’ familiarity with companies like Skyworks (SWKS), Avago (AVGO) and Qorvo (QRVO), we believe the institutional investment community will quickly realize the potential upside and the stock will perform very well over the next six to 18 months.
We also would like to congratulate you on your strategy to execute a license business model, which should be extremely profitable. The market has rewarded other license strategies with very high multiples. We note that ARM Holdings currently trades at 37.3x 2015E EPS and 16.7x 2015E sales.
Table 1 shows that we think RESN could trade at approximately $84 per share over the next 12 months based on 8.0x 2017E sales.
Table 1: RESN Could Trade at $84 on Our 2017 Estimates
2013 2014E 2015E 2016E 2017E
Filters Shipped 13,150,000,000 19,760,000,
300,000 shares or 4.35% of class
Each of the Master Fund, Park City Adviser and Mr. Fox is referred to herein as a “Reporting Person” and collectively as the “Reporting Persons.” Each of the Reporting Persons is filing this Statement jointly. Neither the fact of this filing nor anything contained herein shall be deemed to be an admission by the Reporting Persons that they constitute a “group.”
Mr. Fox is the managing member of Park City Adviser and a director of the Master Fund. His principal occupation is hedge fund manager and investment adviser. He is a citizen of the United States of America.
Mark Cook is a director of the Master Fund, and his principal occupation is management of offshore corporations. Mr. Cook is a citizen of Australia, and his principal place of business is P.O. Box 61, Harbor Center, George Town, Grand Cayman, KY1-1102 Cayman Islands.
Third, Apple’s free-cash generation—what matters in the long run for paying dividends, buying back shares, and investing in new gadgets and services—easily exceeds its earnings. Only part of the difference is explained by stock compensation reducing earnings but not free cash. Apple whips through merchandise so quickly that it enjoys what’s called a negative cash-conversion cycle, meaning it collects money from customers faster than it pays suppliers. That’s rare. Wall Street expects Apple’s free cash flow to total $10.17 a share this fiscal year, or 19% more than its earnings.
Put it all together and Apple trades at an enterprise value—a measure that adjusts the stock market value for debt and cash holdings—of 10.1 times projected free cash flow for calendar 2015. That puts it on par with Hewlett-Packard (HPQ), and makes it 11% cheaper than Microsoft (MSFT). Companies like General Mills (GIS) and Procter & Gamble (PG), which investors flock to precisely for the ability to turn out steady cash, carry enterprise values closer to 25 times free cash flow.
That raises the question of whether Apple can continue to grow after the runaway success of the iPhone 6. It already enjoys about a 20% market share in smartphone units—and more than a 90% share in smartphone profits, in part because its average selling prices are more than double the industry average. That would seem to set Apple up for impossible comparisons starting around this Christmas, when it will lap the first full quarter of iPhone 6 sales. And yet, earnings estimates for more distant quarters have been rising. For example, Wall Street now predicts that Apple will earn $2.28 a share in the quarter a year from now, ending in March 2016. Five months ago, the estimate for that quarter was under $2.
ONE REASON THAT DISTANT estimates are pushing higher may be gathering confidence that the iPhone has more upside. Only 15% or so of the user base has upgraded to the 6 so far. If history repeats, Apple will launch a 6s model in the fall with a similar design and improved specs and software. Confidence may also be rising in the forthcoming Apple Watch, which bulls say could add 10% to fiscal-2016 revenue (“The Apple Watch Could Bring In $23 Billion Next Year,” Tech Trader, Feb. 16). If the watch is a hit, Apple Pay could be, too. Piper Jaffray Apple analyst Gene Munster thinks that Apple will launch a new Apple TV set-top box this fall with gaming and home-automation capabilities and perhaps bundled content to compete with cable. That could pave the way for a television. And Apple is reportedly gearing up to produce a car by 2020.
None of these alone will send the stock soaring. For example, an Apple car might sound exciting, but even adding Ford’s market value to Apple’s would lift shares just 9%—and Apple is surely not going to become Ford anytime soon. But together, the products and rumors suggest that the Appleverse is still expanding, as Apple finds new pain-in-the-neck activities it can make sleeker and easier with a combination of hardware and software.
As the numbers stand now, Wall Street forecasts a 32% earnings-per-share jump this fiscal year on the strength of the iPhone 6, followed by 7% and 6% increases in the two following years. A rise to $160 in a year would put the shares at 17 times forward earnings estimates, where the Standard & Poor’s 500 index trades today. Considering Apple’s understated earnings, its cash hoard, its avenues for growth, and its history of beating expectations, it’s time for the stock to carry at least a market valuation, if not a premium
February 21, 2015
Apple ’s success with bigger iPhone screens has helped expand its stock valuation. The shares have climbed to $129 from a split-adjusted $76 since we recommended them nearly a year ago (“For Apple, Bigger Is Surely Better,” March 24, 2014). They now go for 14.8 times projected earnings for the next four quarters, up from 12 times.
The last time Apple (ticker: AAPL) hit a major peak, at about $100 in September 2012, its shares had a slightly lower price-to-earnings ratio than now, and a more diversified business mix, with iPhones making up barely half of sales, versus closer to two-thirds now. The shares went on to tumble 40% in less than a year. Might Apple now be topping out again?
Unlikely. Look for the stock price to rise to $160 over the next year for a 25% return including dividends. Expect a big dividend hike when the company updates its capital-return program, likely in April. The current yield looks undersized at 1.5%.
Put product speculation aside for the moment, and consider a few things about the stock valuation. First, Apple sits on cash and investments worth $30 a share, up from $18 a share back in September 2012. Net of this cash, the shares are cheaper than they appear.
Second, Apple’s earnings are unusually clean. Management doesn’t point investors toward a spiffed-up measure of earnings that excludes things like the cost of issuing stock to employees, as many big tech firms do. The $8.53 a share that Wall Street predicts Apple will earn in its current fiscal year, through September, is calculated under generally accepted accounting principles, or GAAP. Contrast that with, say, Facebook, which is expected to report adjusted earnings of $1.96 a share this year, but GAAP earnings of only 96 cents. Or Google, projected to earn an adjusted $28.71 a share, but $23.11 under GAAP. Apples to apples, you know who shines.
Third, Apple’s free-cash generation—what matters in the long run for paying dividends, buying back shares
Here's hoping it comes at that time
RBC’s Michael Yee and team think AbbVie’s (ABBV) update on its hepatitis-C treatment today is good news for Gilead Sciences (GILD). They explain why:
We think AbbVie Viekira pak in 2015 will do around $2B WW and $1.5-1.7B USA. We think consensus Viekira is $2.8B WW so consensus may now go down. For 2016, AbbVie US share may decline as Merck (MRK) enters although OUS AbbVie will maintain share as Merck will take time to launch country-by-country….so total Viekira 2016 sales could decelerate… Our calculator says Gilead Sciences HCV will do $16.5B including $14B USA, and above consensus of $15B W – we think consensus “creeps” up a little bit.
Consensus is for $2.20 ....CNBC halftime analyst said they would beat by $.10 or $2.30 P/S
I think the beat will be more than $.10
Gilead continues higher after market
Jan 29 (Reuters) - The U.S. Food and Drug Administration on Thursday approved two fixed-dose HIV pills that combine protease inhibitors - one made by Bristol-Myers Squibb Co(BMY) and the other by Johnson & Johnson(JNJ) - both with a boosting agent produced by Gilead Sciences Inc.(GILD)
Bristol-Myers said its drug, Evotaz, is a once-daily pill containing Reyataz, also known as atazanavir, a protease inhibitor, with the booster cobicistat.
J&J's once-daily Prezcobix, combines protease inhibitor darunavir, or Prezista, with cobicistat.
The FDA approved both drugs for use in combination with other antiretroviral agents for the treatment of HIV-1 infection in adults.
Because patients infected with human immunodeficiency virus, which can cause AIDS, may over time become resistant to treatments, there is a need for a broad range of antiretroviral therapies. (Reporting By Deena Beasley. Editing by Andre Grenon)
The AbbVie news will turn out to be a bump in the road
"We see our patent filings following in lock step with the increasing pace of our RF filter development"
UBS says that China accounted for 36% of iphone shipments last qtr., compared to 24% for US.
Financial Times story
I think this quote is related to RESN...." And I think we have an opportunity now to leverage a proprietary temp comp process that will move us up from some of the traditional frequency bands that would be to remain to SAW or TC-SAW and move into areas that allow us to address an even greater set of end devices."
Although RESN has never mentioned how their design works this seems to hint how it works.