Brian Nelson

Chipmakers Face Weaker Demand; Texas Instruments, Lattice Semi, and Altera Cut Fourth-Quarter Guidance

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On Thursday, Texas Instruments (TXN) updated its business outlook for the fourth quarter of 2011, and the revisions weren’t good. The chip maker reduced its top-line revenue guidance to $3.19 – $3.33 billion compared with the previous range of $3.26 – $3.54 billion and cut its EPS guidance for the quarter to $0.21 – $0.25 from $0.28 – $0.36 per share. Despite the reduced expectations in the quarter, we are sticking with our fair value estimate for Texas Instruments, as we believe such a disappointment will only be temporary. Texas Instruments noted that its revisions were prompted by broadly lower demand across a wide range of markets, customers and products, except for wireless applications processors—particularly its OMAP 4 processor, which … Read more

Fusion-iO May Have the Technology of the Future But Expectations Are Incredible

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Fusion-iO (FIO) just came public a few months ago, without much fanfare. The company isn’t a sexy social media darling alas LinkedIn (LNKD) or Facebook, but it does help fuel the profitability behind them. When cloud computing as a sector heated up, the stock rallied to over $40. However, after the end of its lock-up period and another secondary offering, shares have fallen back below $30. While we like the technology behind the company, we think the stock is priced for perfection. There’s a great possibility that tremendous profitability lies ahead, especially with a growth in the amount of data received and used in analytics that will continue for years, if not decades to come. Nevertheless, given the risks associated … Read more

Dollar General Posts Excellent Fiscal Third-Quarter Results; Holiday Sales Expected to Remain Strong

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On Monday, Dollar General (DG) reported solid fiscal third-quarter results and raised its fiscal 2011 earnings guidance range. Though we liked the performance, we think the firm’s shares remain fairly valued at this time. The firm’s total revenue increased 11.5% on the heels of same-store sales expansion of 6.3%, which represented its third consecutive quarter of accelerated growth (and up 2.1 percentage points from the year-ago period). The company noted strength in lower-margin consumable sales, with particular expansion in candy and snacks, perishables, packaged foods, health and pet supplies. Total merchandise inventories, at cost, only increased 5% on a per-store basis, reflecting decent inventory management.  Dollar General’s operating profit jumped 13% as its operating margin nudged up modestly in the … Read more

Lululemon’s Third Quarter Shows Continued Brand Strength

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After a large sell off before the open following its report, investors would assume that Lululemon (LULU) really choked and completely missed the quarter. However, as we all know, the market isn’t always rational, and after taking some time to digest the news, it realized the third quarter wasn’t that bad at all. In fact, the stock is right where it was at Wednesday’s close, after the shares rallied around 12% the same day they got hammered. Revenue “miss” and margin compression caused immediate dump, but there were some positives The headline came out Thursday morning, and it wasn’t exactly what we all expected. For a company that continually crushes estimates, Lululemon’s near meaningless $5 million miss caused panic, in addition to gross margins that … Read more

AMR Files for Bankruptcy, as Expected

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As expected, AMR Corp (AMR), the parent of American Airlines filed for bankruptcy protection Tuesday. We had been expecting the demise of the carrier as we outlined to our subscribers in our Best Ideas Newsletter. We encourage investors to not dabble in the firm’s shares after the filing today, as it is extremely likely that the shares will be cancelled (meaning current holders get nothing).  It turns out we got an answer to our rhetorical question, “Is AMR’s Equity Practically Worthless,” sooner than we had expected. View our May call on AMR’s demise here. The firm flashed a 1 on our Valuentum Buying Index in May – July, which is the lowest possible ranking on our stock-picking scale. During bankruptcy, AMR … Read more

Earnings Ahead: Lululemon – We Don’t Expect an Implosion

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Since Valuentum identified Netflix (NFLX) as a high flyer with a ridiculous valuation over the summer–and identified the valuation of AMR Corp (AMR), the parent of American Airlines, as practically worthless–we’ve been searching for other good put candidates for our Best Ideas portfolio, which continues to outpace the S&P by nearly 2000 basis points so far this year. We admittedly missed out on Green Mountain Coffee Roasters (GMCR), though we thought the name was anything but safe, and we have steered far away from Under Armour (UA) and LinkedIn (LNKD) on the long side. This brings us to another high flyer, Lululemon (LULU). When you consider both the price action and high short interest over the last several weeks, it looks like many investors are bearish on … Read more

Deere Reports Fantastic Fourth-Quarter Results; Outlook Even More Impressive

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Farm-equipment maker Deere & Company (DE) reported strong fiscal fourth-quarter results Wednesday that revealed the continued health of the US farmer and demonstrated higher equipment shipment volumes and improved pricing. We’re comfortable with our long-term projections and are maintaining our $82 fair value estimate on the firm.  Worldwide net sales advanced 20% in its fiscal fourth quarter, as the firm reaped the benefits of rolling out new products and strength outside of the US and Canada, where net sales were up 31% in the quarter. Equipment net sales in the US and Canada jumped 14% during the period. Both paces of growth were lower than the growth experienced for the full year, however. Revenue jumped 18% in its Agriculture & … Read more

Mixed Bag Yet Again in Collective Brands’ Third Quarter

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One of Valuentum’s best ideas, Collective Brands (PSS) reported quarterly results on Monday after the close. Results, as has been the case for the last several quarters, were mixed. Payless domestic continued to shut down less profitable stores, which helped contribute to the segment’s 5% sales skid. Same store sales also fell 4.5% domestically, reflecting the slow economic recovery and Payless’ ties to low-end consumers. Internationally sales weren’t very good either. Sales only increased by 1.1%, and same stores sales actually fell in Canada. Operating profit in the segment fell by 55%. At the same time, it’s good to see sales growth at any Payless location. PLG Wholesale Blowing Away Expectations While the Payless business remains challenged, or frankly, bad, … Read more

LinkedIn’s Shares Hit Five-Month Low

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We provide the theses behind our valuation calls on LinkedIn (LNKD) and Netflix (NFLX), the latter falling significantly in recent months, as predicted by our July note below (when Netflix was trading above $250 per share; it’s now under $70). We expect LinkedIn’s shares to continue to converge to our $55 fair value estimate in coming months (it’s trading around $70 per share). << LinkedIn Valuation: Completely Absurd, Significantly Overvalued << Netflix Valuation: Completely Absurd, Significantly Overvalued