Avid develops the software used to make the majority of Hollywood movies, TV shows, and other high-end film/TV productions. In professional high-end markets, they are the #1 leader. Yet this company manages to lose money.
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writeups – shorts
Canada Lithium (CLQ.TO): Why I’d avoid this stock
It boils down to this: I think the company is lying about its project’s economics.
Tesla (TSLA) earnings update
Regarding Tesla’s earnings press release (SEC filing), here is what I see:
- “We also expect to be near breakeven on cash flow from operations.” This is music to my ears. Because Elon Musk is always overly optimistic, this means that Tesla will have slightly negative cash flow from operations. Add in capex and this means that Tesla will definitely be unprofitable. I am guessing that ramping up to 5000 cars a quarter instead of 4500 will still mean that Tesla is unprofitable.
- Tesla expects to reach full production in the next year. 20,000 cars next year with 4,500 in the next quarter. I’m not sure that their explanation for the shortfall (4500 versus 5000) makes a lot of sense: “[We] gave the manufacturing team the first week of the year off to celebrate their accomplishments during 2012“. I don’t know much about car manufacturing but they will idle expensive tooling equipment because the workers wanted to celebrate? And wouldn’t you want to celebrate before New Year’s before rather than after?
- “In the first quarter of 2013, we expect to generate slightly positive net income, on a non-GAAP basis.” Companies typically inflate non-GAAP earnings by adding in stock-based compensation. Shareholder dilution is still an expense, though Tesla’s management is smart in using stock-based compensation to raise money. I think that analysts are intelligent enough to smell BS in non-GAAP earnings… I believe that this is stuff that they deal with a lot. Institutional investors may exit the stock because of this. They might stick around if there is hope in the future (Model X???)… with mining companies overvaluation tends to last a lot longer because it legitimately takes several years to build most mines so it takes several years for investors to realize that they’ve been duped.
- The other way non-GAAP earnings can be inflated is by recognizing expenses that are “one-time”. Of course, I’m sure that analysts have figured out that companies recognize “one-time” expenses year after year after year. Basically… for Tesla to say that they will be non-GAAP profitable is a joke. If you polish a turd it’s still a turd.
- Sometimes non-GAAP earnings are helpful if there are arcane accounting rules that cause earnings to be weird (and these definitely exist). If this were the case, I’m sure that Tesla’s promotional management would explain the accounting intricacies for everybody. This does not seem to be the case.
In general, the press release was written to be misleading.
- “Achieved 20,000 annualized production rate”: Tesla is saying that they will deliver 4,500 cars in the next quarter versus 5,000.
- “First profit now expected Q1 2013 versus prior guidance of late 2013”: What profit? Tesla will be GAAP unprofitable in the next quarter.
*Disclosure: Short Tesla via the common stock and the puts. The puts are probably a better idea… I’ve been bought-in on the common before and it stinks.
Gold Resources (GORO): I am mostly wrong on this one
Originally, I thought that Gold Resources was a scam because they did not try to prove to investors that they had a real deposit/mine. They have no proven and probable reserves according to SEC guidelines. There is so much scumbaggery in the mining sector that I automatically assumed that they were lying. But… I think that they really do have a profitable mine. It’s likely that the management team at Gold Resources felt that it was an unnecessary use of money to put out the necessary technical reports. Hindsight vindicates this view as the stock price is/was high, the mine was financed, etc.
JCP update
JCP released its earnings for Q3 2012 and they are really bad. Comparable store sales have continued their dramatic decline:
Q1 2012: -18.9%
Q2 2012: -21.7%
Q3 2012: -26.1% Continue reading
Tesla (TSLA) short thesis
The short Tesla trade is extremely crowded. 60%+ of the float is sold short and the borrow was over 90% at one point.
I believe the main reason to short Tesla is because it has historically lost a huge amount of money every year. For every dollar in revenue, it has had at least a dollar of GAAP losses. The valuation is also ridiculous. The market cap is roughly $3B for a company that has less than $300M in book value ($62M as of June 30 2012, which is before the latest secondary offering).
KB Home (KBH) short thesis
Homebuilder shares have been rallying strongly and there may be a short squeeze happening in KBH. 53.70% of the float is sold short according to Yahoo Finance. It may be possible to make a small profit by shorting into the squeeze.
KBH is GAAP unprofitable and has negative cash flow from operations. Either way you look at it, it is unprofitable. It seems clearly overpriced as it has a price/book ratio of 2.85.
