Marvel Entertainment (MVL) & JNPR
I like MVL but I can't include it on my target list.
MVL is the owner of comic books that have spawned movies like the X-
Men, Spiderman, the Hulk, and the Fantastic Four. Going forward, they plan on introducing more superhero movies and they should do well.
Most interesting is that until now, they haven't gotten the money from the blockbuster X-Men & Spidermen movies. They were paid a flat fee. The X-men rights reverted back to them and after the next Spiderman movie, it will too. So they stand to make huge money going forward.
And that's my problem. The potential is far in the future - at least a year away. I don't worry that they have enormous debt (these movies cost fortunes to make and they need to borrow that cash.) I worry that this is priced based on earnings 12~18 months away. I think $30 will look cheap in a year or so, but it feels expensive today and only hype and hot air is keeping it this high today. The market typically has the patience of a child and MVL needs a lot of patience. Perhaps that's why the short ratio is at a whopping 28%.
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JNPR is riding high as well. It's hard to know their latest financials given that they haven't released any due to the options overhang.
But this company is not growing and is not expected to grow. The last quarter they reported earnings was March, and that was 0% earnings growth. In their most recent quarter they reported 5% sales growth.
The only reason to buy JNPR is that they are smaller than a CSCO: at $2B in sales, a big win moves them further. But the opposite is also true: no big wins and they lag, which is what is happening. They will see growth renew next year as they ship to Verizon, but that will cover sales that are tapering off.
So while this may be close to the bottom for JNPR from a sales perspective, that isn't the point. They have the PE of a growing company and they are not growing.
In a sense, the first wave has come and gone, where large SPs moved to an IP centric core that favored JNPR. Now only smaller waves remain. Meanwhile, CSCO's competitive edge has grown.
MVL is the owner of comic books that have spawned movies like the X-
Men, Spiderman, the Hulk, and the Fantastic Four. Going forward, they plan on introducing more superhero movies and they should do well.
Most interesting is that until now, they haven't gotten the money from the blockbuster X-Men & Spidermen movies. They were paid a flat fee. The X-men rights reverted back to them and after the next Spiderman movie, it will too. So they stand to make huge money going forward.
And that's my problem. The potential is far in the future - at least a year away. I don't worry that they have enormous debt (these movies cost fortunes to make and they need to borrow that cash.) I worry that this is priced based on earnings 12~18 months away. I think $30 will look cheap in a year or so, but it feels expensive today and only hype and hot air is keeping it this high today. The market typically has the patience of a child and MVL needs a lot of patience. Perhaps that's why the short ratio is at a whopping 28%.
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JNPR is riding high as well. It's hard to know their latest financials given that they haven't released any due to the options overhang.
But this company is not growing and is not expected to grow. The last quarter they reported earnings was March, and that was 0% earnings growth. In their most recent quarter they reported 5% sales growth.
The only reason to buy JNPR is that they are smaller than a CSCO: at $2B in sales, a big win moves them further. But the opposite is also true: no big wins and they lag, which is what is happening. They will see growth renew next year as they ship to Verizon, but that will cover sales that are tapering off.
So while this may be close to the bottom for JNPR from a sales perspective, that isn't the point. They have the PE of a growing company and they are not growing.
In a sense, the first wave has come and gone, where large SPs moved to an IP centric core that favored JNPR. Now only smaller waves remain. Meanwhile, CSCO's competitive edge has grown.
posted by Andrew at
7:38 AM
2 Comments:
Two things: First, I strongly agree with JNPR loosing to CSCO and hence I think its a very good short candidate. Second, I am not very pleased with dropping volume of ILMN and its off about 5% from our buy price. Stop recommendation would be great!
ILMN
Look at thi schart for a second
http://finance.yahoo.com/q/bc?s=ILMN
Notice how it bounces 20% every quarterly report.
ILMN beat expectations by 100% last quarter. The previous quarter they beat by almost 400%. Can they exceed again? I think so, especially as they penetrate the big accounts.
The next quarter also closes before the Solexa acquisition, so that should add some ooomph.
Solexa does waterdown earnings and is overpriced to boot.
I think ILMN will sag to $34 and then bounce back hard
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