I’m really scratching my head as to why the stock is down.
The stock is down because the market has lost confidence in the management team’s ability to forecast. I warned you of this exact risk last year - and the results are pretty much as I expected.
From last April - I wrote. Then there is always the case that the company slips up along the way; surely that would cause a big contraction in the PE and as well as the EPS. If EPS came in at $4.00 and the PE was compressed to an a 17 level (which is what the market average is) the stock would be at $68.
(These are pre-split numbers - the stock is trading today at $68 (split adjusted).
It is hard to catch falling knives when your hands are heavily bandaged (the left, AMBA; the right, BOFI). Nevertheless, even at 74 I am reasonably athletic and I got some SKX with my left foot. Not sure if I caught it or was impaled with it, $30.97 in DW’s IRA and some $31.67 Nov calls in mine. I’m always too early. Bought 4 times on BOFI, have two of those in the black now (last I looked). AMBA, I’m hopeful I should live so long
The stock is down because the market has lost confidence in the management team’s ability to forecast.
and
(These are pre-split numbers - the stock is trading today at $68 (split adjusted).
tecmo,
First, how do you get $68? It was a 3:1 split so the adjusted price would be over $90.
As for the first statement, I’ve wondered if they missed their own forecast or only analysts’ overly optimistic forecasts. I didn’t dig too far, but all I saw was that it was analysts’ forecasts…and not missed by all that much depending on whether or not you factor in one-time expenses. Do you know if they actually missed their own forecast?
What I have noticed with these stock “corrections” is that when the bad news happens there is not a V bottom right away. I think it has been prudent to wait until the dust settles. The spike down to 29.96 that just happened is not the end IMO. I would look to the April 22 gap at $27.32 and see if that holds.
I’m way heavy into SKX. I just added to my position @ $29.90. I think the current price is driven by algorithms and fear which feed off of each other thereby exacerbating the situation. It’s JMO, but I think this company is deeply undervalued right now.
I guess to degree it really depends on what the future hold. If indeed this is accompany that as some have suggested is a passing fad with decreasing foot traffic in stores and just not as cool as Nike then we could see this as a recurring problem and indeed todays price could be the best price we ever see.
On the other hand if this growth rate continues and improves and even though it never reaches the coolness of Nike it still serves a function as a dependable stylish shoe for practical people with an expanding use in the china and other worldwide markets then todays price will seem cheap.
“Hi Mikey, it was at $32 in after hours. I wouldn’t probably add at $46 but I would certainly add at $32 if I didn’t have such a large position already. But that’s JMO”
Saul, I guess I have a question for you. It is something I battle with a lot when a price seems high but a higher price is expected/hoped for.
At $46 you had around %20 exposure to SKX. It is a high conviction stock and one in which you felt was cheap. IF this is the case why do you feel that you would not add at 46. Aside from the obvious that you personally already had enough.
If the belief is that it was cheap and headed higher then should 46 not have been a great entry especially if after earnings it shot past 46 and if you were of the belief that 46 was expensive would you not have lessened your exposure to SKX as at that point it would not be high conviction and there would have been more interesting places to put your money.
This is a dilemma I faced with SKX and actually filled my final allotment at 46 in the belief that $46 was cheap. I face this dilemma all the time and would appreciate some insight from Saul and others.
Just for reference…
VFC, owner of the Vans shoe brand, reported today: Vans® brand revenues, which represented the highest of any VF brand in the first quarter, were up 20 percent with strong, double-digit growth across all geographies, as well as in the brand’s wholesale and direct-to-consumer channels. Revenues in the Americas region were up at a low-teen percentage rate in the quarter, up more than 20 percent in Europe and more than 40 percent in the Asia Pacific region. Global direct-to-consumer revenues for the Vans® brand were up 19 percent in the quarter.
Note: Vans has a similar price-point as Skechers and is sold similarly; company-owned stores, wholesale and DTC. They entered China in 2008 and have consistently posted double-digit growth, with Asia being phenomenal. Different demographic. Still…the potential is there.
Here’s how it works. Say last year your company had 100 million in sales in euros. Say the euro was at $1.30, so that translated to $130 million in dollars. This year they did great and grew their European sales to 120 million euros, but the euro is only worth $1.10, so it only translates to $132 in dollars and hardly looks like any gain, where at last years rate the same 120 million euros would have been $156 million, up $26 million. They say they had a loss in foreign exchange translation.
Next year, if the euro stays at the same lower level of $1.10, and they increase their euro sales by 20 million again to 140 million, that will translate to $154 million, up $22 million from this year. You’ll be able to see the gain and there won’t be any currency translation loss because there was no change in translation from this year.
This should be clear, but if not, please read it again.
Best,
Saul
I am quite familiar with how it works as I do sales forecasts in Asia for an MNC so I am dealing with FX issues all the time and how it effects the sales regardless if you sell in local currency or USD. Either way, it causes similar pressures.
But if the USD gets stronger and you miss due to that, you have lower earnings that you will be building your next year (or quarter) forecast on at the new FX rate. It is harder to grow at the same rate as the stronger dollar causes your goods to be more expensive overseas. You can cut prices to increase revenue but lose margin. But the reality is that it is not a one time event as it sets a new baseline to move forward. Don’t expect the growth to return at previous levels unless the USD goes back to weaker
Saul, I guess I have a question for you. It is something I battle with a lot when a price seems high but a higher price is expected/hoped for.
At $46 you had around %20 exposure to SKX. It is a high conviction stock and one in which you felt was cheap. IF this is the case why do you feel that you would not add at 46. Aside from the obvious that you personally already had enough… I would appreciate some insight from Saul and others. Craig
Hi Craig, You asked this question after earnings were released and added an element of uncertainty. They missed revenue estimates for the quarter (although revenue WAS up 27%), they had higher inventories, they talked on the conference call about kind of not quite doing as well as they would have wanted in the quarter. I light of that I would no longer have expected $46, but would have looked for a drop maybe to $42. But that’s just me. A drop to $29.50 where it got today, however, was just way out of proportion (my opinion, again) and I bought some myself at $29.88. But don’t just follow my lead. You have to decide what’s right for you.
Thank you Saul. Yes Nike’s growth is slower but it is a bigger company.
SKX is a smaller, rapidly growing company. IS this the beginning of people moving away from SKX to the next fad. Yes it is only 1 qtr of slower growth
usha
(These are pre-split numbers - the stock is trading today at $68 (split adjusted).
tecmo,
First, how do you get $68? It was a 3:1 split so the adjusted price would be over $90.
The way I got a similar number was to bring up SKX in Google Finance and click on the YTD option in the graph. That currently shows a price of 31.15 and +11.93 (64.77%) for that time period.
This sounds like regrets in hindsight.
If you thought that it was a good buy at $46 then you should re-visit why it was and reassure yourself. It is hard for me to phantom that any thesis for buying 2 days ago would change 1 or 2 days later. If you are more in the trading frame of mind then that is another story. You took a bet that they will announce earnings satisfactory to the market but that turned out to be a losing bet. It could have gone the other way. There is simply no way to know no matter how many stories you tell yourself.
If this business is in a growth regime then I buy for the longer term. Business do turn but looking at it daily, you will never know if anything really change beside seeing the stock price change. To really know what is going on, you would have to observe it over at least several quarters or longer if you really think that there is something good that would go on for the longer period.
tj
Actually it doesn’t! Two companies are making approximately the same amount PER SHARE (43-45 cents).
You are correct - I was thinking you were referring to the the absolute profit levels. Agreed once normalized it is a straight $/c question.
A
They are in basically the same business. One was selling at $94 in after hours, the other at $32 in after hours. Which would you rather have? Duh…
One was SKX, one was UA.
But they are not in the same business. Sketchers is an athletic shoe company, a business that is basically dominated by Nike and Addidas, and UA just entered and growing fast. May be Sketchers sales was hit due to UA’s growth. Also, profit margins on apparel are much higher than shoes.
