TRID Downgraded - Get ready to buy more
Remember the TRID fundamentals:
$3.50 in cash now puts this company at $2.50 stock.
With a forward consensus of $1 EPS, that's a 2.5 P/E. Yep, you read that right.
Meanwhile, after GNSS got bought out, UBS put a valuation of $10 on the stock if the price were the same as GNSS. But they pointed out that TRID has better technology.
Normally, I'd be laughing at an analyst who downgrades at the bottom. But I think he makes a good point. He has done the research and - by God - Vizio is outselling the high-end makers in the US. Time to panic!
Actually, the analyst downgraded with the following points -
1. Sales could be $10M lower than estimated (a 3% drop)
2. Lack of TRID penetration into low-end market
Note that he still expects continued strong slaes from TRID.
Note also that the analyst is focusing only on the US market.
Nevertheless, the analyst makes a good point: low end LCD TVs are growing faster than high end and TRID is missing out on the low-end market. With such a price sensitive item, you would expect low-end TVs to be selling faster. That's fundamental basic economics.
But the point about TRID missing out on the low-end is valid. Only so many TVs can be sold and consumers want cheap TVs - so any low-end TV sold is 1 less high end TV. That's less business for TRID.
And that's the critical assumption: that TRID will sit back for 18 months or more and not do anything about the low-end market opportunity. He may be right. He may be wrong. But some things to keep in mind:
1. TRID stock price is based on EPS - as long as they reach EPS growth targets, they will rise.
2. TRID can go to the low-end anytime - but the opposite is not true. Lexus moved downstream pretty easily. If sales start to dry up, TRID can snatch market share pretty fast.
3. TRID has a 2.5 P/E
4. TRID has a clear floor of $6
One thing remains true - the LCD TV market is a strong market and TRID remains the dominant player. With a new CEO, hopefully they will have the ability to address the low-end market concerns.
$3.50 in cash now puts this company at $2.50 stock.
With a forward consensus of $1 EPS, that's a 2.5 P/E. Yep, you read that right.
Meanwhile, after GNSS got bought out, UBS put a valuation of $10 on the stock if the price were the same as GNSS. But they pointed out that TRID has better technology.
Normally, I'd be laughing at an analyst who downgrades at the bottom. But I think he makes a good point. He has done the research and - by God - Vizio is outselling the high-end makers in the US. Time to panic!
Actually, the analyst downgraded with the following points -
1. Sales could be $10M lower than estimated (a 3% drop)
2. Lack of TRID penetration into low-end market
Note that he still expects continued strong slaes from TRID.
Note also that the analyst is focusing only on the US market.
Nevertheless, the analyst makes a good point: low end LCD TVs are growing faster than high end and TRID is missing out on the low-end market. With such a price sensitive item, you would expect low-end TVs to be selling faster. That's fundamental basic economics.
But the point about TRID missing out on the low-end is valid. Only so many TVs can be sold and consumers want cheap TVs - so any low-end TV sold is 1 less high end TV. That's less business for TRID.
And that's the critical assumption: that TRID will sit back for 18 months or more and not do anything about the low-end market opportunity. He may be right. He may be wrong. But some things to keep in mind:
1. TRID stock price is based on EPS - as long as they reach EPS growth targets, they will rise.
2. TRID can go to the low-end anytime - but the opposite is not true. Lexus moved downstream pretty easily. If sales start to dry up, TRID can snatch market share pretty fast.
3. TRID has a 2.5 P/E
4. TRID has a clear floor of $6
One thing remains true - the LCD TV market is a strong market and TRID remains the dominant player. With a new CEO, hopefully they will have the ability to address the low-end market concerns.
posted by Andrew at
8:57 AM
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