Looking for some new ideas…
Coming recession implies many business may have 30% drop in earnings and you would think corresponding drop in share price.
Its a buying opportunity if you get it right. But tricky to know when. Its a bit like market timing. Trying to catch the TRUE bottom.
Those holding cash are probably waiting for the right opportunity.
Of course economy goes up and down. You can wait for it, I am more looking for companies that have durable edge, on a reasonable valuation. Say for example we can assume Target has $6 durable earnings and is their current valuation cheap? Is target has structural challenges or can it continue to thrive for another 5 years with stable growth?
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I will keep adding as I come across ideas… Of course there will be separate thread on each name
TGT - Target
DG - Dollar General
BABA - Ali Baba
Let me add PayPal to this list. Even though I am so far very wrong on PYPL, I think the current sell-off is discounting lot more. I will add my thoughts in a separate thread. Also we have earnings in a day.
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The rally from October low for many stocks are pretty strong. For ex: PYPL moved almost 16% from my Oct 30th purchase. Also, now that the mandatory 30 days are over, I might sell some of my older lots and book some loss.
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Today paypal moved down from $58 to $56.5 and then CEO’s comment on CNBC lit fire, and the stock moved up and closed at $58.89, gaining $1.44. So, I listened to what the CEO has to say, key points are:
- 25% ecommerce runs through PYPL
- 25th company has innovation day
- We have done lot of acquisitions last few years and not enough focus, (meaning, expect some layoff and closing few things, etc) which wall-street loves
The key comment is We will shock the world That’s a pretty bold statement. Hope they can follow through.
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I am thinking of buying in. My thesis is if they can cut the fat they can get back to an EPS of above $4.00 YoY. They do not have to do much to get there since the EPS is now at $3.58. Their Headcount comes out on every Annual Report and so we should see if they cut it this Quarter. Here is what their Headcount looks like
Q420 Q421 Q422
23200 30900 29900
As you can see over covid it really ballooned I expect it to drop substantially but it may take a little more time since the New CEO just came in last quarter. This company is really cheap and they still have some great products like Venmo and Braintree. I have read on twitter that a lot of the brain trust left though because they were tired of the old CEO. It could take awhile for a turn around to be completed but at least the CEO recognizes the problem.
Andy
They changed their model, instead of focusing on user growth, shifted focus on profitable users. Growth stagnated. $4 EPS is very achievable, but that is not going to create momentum for the stock. They need to revive the growth. We will hear what are their plans around products and growth tomorrow.
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Clearly, it is not bold. Looks like PYPL wants to get into ad business except. They have customer receipts, so they know what the customer is buying and going to offer recommendation, discounts, etc. May be this helps their merchants and some customer. But not “shocking the world”.
Clearly, market is disappointed, the stock is down 5% So now the focus moves to earnings.
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hmmm… 2000 employees got their world shocked. PYPL announced 2000 layoff’s. Stock declined to $62 recovered to $64.45.
Wallstreet wants main street to be un-employed, bankrupt. Pathetic.
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You know they had to do it. They hired way to many during Covid.
Andy
I don’t know. The companies claiming they are right sizing, we need to hire where we are focusing, etc. No company is saying, we are pivoting and we need to retrain our employees.
I have benchmarked PYPL employee count is not necessarily out of whack with their size. I understand this layoff may be coming from some units either they are shutting down, or going to scale down, etc. Still… the US corporations care more about their executives, shareholders, but not about their employees.
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My sister in law worked for them last year and they were cutting her hours so she left. Looks like this has been coming for awhile.
Andy
Today Okta announced 400 layoff’s. From their press release,
McKinnon said the firm needed to be more “thoughtful” about where it was investing to achieve “long-term success.”
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