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Faltering Friday – Earnings Season Hits a Rough Patch

I love earnings season!

So far, it's loving us as well as we have generally been on the right side over each report but the seas are turning ugly as we get into the meat of earnings season, with about 40% of the S&P 500 scheduled to report next week AND there will be a Fed Rate Decision AND there will be Non-Farm Payrolls next Friday which have flipped between 312,000 in Jan to 33,000 in Feb to 196,000 in March – so be ready for anything there as well...

This morning, we're going to see the advanced estimate of Q1 GDP and it's still a low bar of 2.1% expected and we should be able to clear that hurdle, despite the Government Shutdown that caused so much damage to Q4 and Q1.  

While we are waiting, we had big misses from Exxon (XOM) and Archer-Daniels (ADM) but XOM's miss was due to more CapEx spending, which we expected and we're wating on Chevron (CVX) who are in a bidding war with OXY now for APC, so I wouldn't touch them for fear they end up drastically overpaying in order to "win".

Sony (SNE) had very good numbers this morning but then ruined it by lowering guidance as the PS4 has run its course and they have nothing new planned for Christmas.  The company was a real bargain though at $46.50 ($58.5Bn) yesterday and, even this morning, you can sell the 2021 $45 puts for $5.50 to net in for $39.50 – I'm happy to add 10 of those to the Long-Term Portfolio to collect $5,500 while we watch them.

8:30 Update:  GDP was an even bigger beat than we thought, coming in at 3.2% so about 50% higher than the expectations of leading economorons but they'll ask the same idiots what they think next Q will be as well and no one is ever held accountable for these TERRIBLE predictions on CRITICAL data – amazing!

Government spending was up 2.4% and the export of LNG as well as 3Mb/d of oil we now export did a lot to support our balance of trade and accounted for much of the upside  What I don't like about the GDP number is a huge contribution from a massive build-up in Inventories of $128.4Bn because the assumption in GDP is that we wouldn't be making stuff if no one was going to buy it, so rising inventories are considered a plus but, SOMETIMES, rising inventores can be a sign of slowing sales – so taking it as a positive all the time can lead to some very poor decision-making.

Also, 3.2% is almost "too hot" and the Fed has their decision to make next week.  NO ONE expects them to hike rates and the political pressure from the White House is tremendous so probably no rate hike but the language may change or, a few weeks later, the Minutes may reveal some new hiking discussion because, if they don't take some kind of action soon – they run the risk of the markets overheating and then inflation could quickly follow – and that genie is very hard to put back in the bottle once it gets out (ask Argnetina, who are now near default this week). 

Speaking of inflation, and Exxon (CVX was about in-line), we are in the middle of an unprecedented increase in the price of Gasoline (/RB), which finally pulled back yesterday at our $2.15 line (which we called during our Live Trading Webinar on Wednesday) after 73 consecutive rising sessions.  This morning we're pulling all the way back to $2.10, which is good for gains of $2,100 per contract – a great way to wind up the week!

My big concern for next week is going to be the Dow – as we've had some disappointments there and the Dow, for better or ill, does tend to lead the other indexes and we're very dangerously close to making a triple top on the index with not enough gas to push us higher.  Another failure back at the 27,000 line on /YM could bring the whole rally into question and, as you can see from the chart below – it's a good 20% down from here to the next solid support level at 22,000.

Clearly earnings season has, so far, gone better than expected but now our expectations are higher going into the 2nd half with many, many reports coming at us hard and fast next week, including Apple (AAPL) next Tuesday.  Until then, we're not too worried about the weekend as the market has been pretty resiliant so far but we did press all our hedges last week, when we made our portfolio adjustments – so it's not like we'd go into the weekend unhedged with all this political uncertainty.

Oh, and Congress comes back next week – Trump has been very brave and defiant while they are out of town but we'll see what happens once he's no longer shouting at a room full of empty chairs.  

Have a greeat weekend, 

- Phil

 


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  1. Wow, GDP at 3.2%. That's a surprise… 


  2. Good night all…..


  3. Good Morning!

     

    Good Night Snow!  ;)


  4. INTC – Sold some Jan 50 puts.


  5. MJ stocks up this morning.  HEXO at all time high.

    Phil, are you familiar with CRLBF ?

    https://seekingalpha.com/article/4256056-cresco-labs-homemade-billions









  6. Good morning!  

    INTC/Albo – Tempting down here but I'd rather catch $45.

    HEXO/Albo – $5M in sales, $20M in losses, $1.5Bn valuation – amazing! 

    CRLBF is valued close to $2Bn at $13.13.  They are attractive because they are in pretty much every state where sales are legal and are aggressively moving to get into OH, MA, FL, NY and MD so people are projecting major growth as they hit the ground running with the new laws.  I like them because they do actually make a little money – only $4M but way better than losing $20M!  


  7. Closed out last 1/3 of /CL short at 63.15.


  8. I love this chart from the article above, New Age (owned by PSW Investments) will be in the Top 3 this year (assuming they don't grow) with about $15M in sales and, gasp!, profits too – probably well over $2M.  Does that mean we're worth Billions as well?  

    It's certainly an exciting sector and we're moving forward with our $100M (was $20M) MJ Fund in the fall so make sure Greg (admin at philstockworld dot com) knows if you are interested in getting in on that one.  You can see how small the US (blue) group still is – NOW is the time to get in on this!


  9. Congrats Albo – well-played.  

    $72.50 failed on Brent – not good! 

    Honey badger don't care:

    Finally profitable so back to 2 long for me, net now $2.655


  10. On /NGV19, that is. 


  11. F up 10% – finally!  

    • Avengers: Endgame is swinging for the fences, drawing an all-time record $60M in Thursday previews ahead of what should be an opening weekend for the ages.
    • The Disney (DIS +1.3%) film — the culmination of an 11-year, 22-film "Marvel Cinematic Universe" of connected movies — drew $169M on opening in 25 material international markets, which included single-day records in China, Australia, Philippines, Hong Kong, Taiwan, Thailand and Malaysia. It's drawn $305M on Wednesday and Thursday globally.
    • Fandango has reported that the film has become its all-time biggest pre-seller, topping Star Wars: The Force Awakens, Box Office Mojo notes. That return to the Star Wars universe, also made by Disney, had the previous Thursday record of $57M.
    • There now seem to be solid odds that the film will set domestic records for opening day (held by The Force Awakens with $119M) and opening weekend (held by immediate predecessor Avengers: Infinity War with $257.7M) — along with a number of other smaller records. Can it set a new domestic milestone at $300M?
    • Theater stocks are gaining as more buzz generates over Avengers:Endgame. While a gigantic opening weekend was already largely anticipated, the Marvel film's "A" Cinemascore and 96% rating on Rotten Tomatoes are both indications that the superhero mashup will have some legs for a while.
    • Marcus Corporation (NYSE:MCS) is up 3.1%, while AMC Entertainment (NYSE:AMC) and Cinemark (NYSE:CNK) are both 1.4% higher.
    • Avengers arrives with the U.S box office down 17% YTD through April 24.
    • Previously: AMC points to blowout numbers for Avengers (April 26)
    • Investors bid down IMAX (IMAX -1%) after taking in the company's Q1 earnings report.
    • While IMAX's revenue slipped from Q1 and came in below the consensus mark, the outlook for the full-year global box office was lifted to a low double-digit growth projection. Management notes the strong early performance of Avengers: Endgame and the backlog of upcoming tentpoles.
    • IMAX says its theater network consisted of 1,514 systems at the end of the quarter, of which 1,420 were in commercial multiplexes.
    • Even with today's share price decline. IMAX is up over 30% YTD.
    • Previously: IMAX beats by $0.01, misses on revenue (April 26)

    • Federal Reserve watchers don't agree with investors that the central bank will cut rates later this year, according to a Bloomberg survey of economists.
    • Respondents to the poll taken April 23-25 see the target range for the benchmark federal funds rate staying at 2.25%-2.5% through 2020; only two of the 39 economists polled expect a rate cut in 2019.
    • Pricing in interest rate futures, though, show investors put a 60% probability to a rate cut before 2019 ends.
    • Note that the survey took place before the Commerce Department released stronger-than-expected Q1 real GDP growth of 3.2%. That may reduce investors' expectations for a rate cut this year.
    • Neither did the economists expect a rate hike this year, according to the survey.
    • Key to the Fed's decision-making will be what inflation, which has been running stubbornly below its 2% target, does in coming months, said Ryan Sweet, head of monetary policy research at Moody's Analytics.
    • Previously: Q1 GDP growth a speedy 3.2% (April 26)
    • Amazon (NASDAQ:AMZN) will launch a high-fidelity music streaming service by the end of the year that will cost around $15/month, according to Music Business Worldwide.
    • The service would compete with TIDAL, which offers a Hi-Fi tier starting for $19.99 per month.
    • Amazon's discussions are still in the early stages with only one major label on board so far so details could change.
    • Speaking to reporters, the president says he's been on the horn with OPEC, and told the cartel he wants lower prices for crude.
    • Black gold was already lower on the session, and has dipped a few more cents since the headline crossed – now off 2% to $63.90 per barrel. USO -2%
    • April Consumer Sentiment 97.2 vs. 97.1 consensus and 96.9 prior.
    • Current economic conditions 112.3 vs. 114.2 consensus and  114.2 prior.
    • Index of consumer expectations 87.4 vs. 86.0 consensus and 85.8 prior.
    • SunTrust raises its Intel (INTC -9.4%) target from $53 to $56 and maintains a Hold rating after the earnings print that lowered the FY19 outlook.
    • The firm notes that Q2 guidance was far worse than expected on DCG and CCG trends, but the revised FY19 guide is only modestly lower and suggests an H2 improvement.
    • SunTrust thinks the DCG result is problematic for Nvidia (NVDA -6.9%), which gets 30% of its revenue from the data center.
    • Credit Suisse maintains an Outperform rating and $58 target saying that while Q1 and Q2 were worse than expected, but the thesis is still supported as data will drive accelerating compute TAM for all players with Intel remaining well positioned.
    • Concerns on 10nm yield/costs and positioning compared to AMD (AMD -1.6%) will continue to weigh on INTC's multiple until H2 estimates are met or exceeded, says the firm.
    • Jefferies chimes in that its field checks indicate AMD share gains will ramp in Q3 and sees Intel's issues as largely company-specific rather than an industry problem.
    • Previously: Intel -6% on cut 2019 guidance (April 25)
    • Previously: Intel updates 10nm progress on earnings call (April 25)
    • Amazon's potential shift to one-day shipping for Prime members isn't going unnoticed in the retail sector.
    • Target (NYSE:TGT) is down 6.17%, while Walmart (WMT -2%), Dollar General (DG -1.9%), Nordstrom (JWN -0.9%), Macy's (M -0.5%), Dollar Tree (DLTR -1.2%) and Ollie's Bargain Outlet Holdings (OLLI -0.7%) are also lower.
    • GlobalData Retail's Neil Saunders says the entire retail sector could feel pressure on shipping costs if one-day Prime shipping in the U.S. becomes a reality.
    • Previously: Amazon's core Prime getting one-day shipping – earnings call (April 25)
    • American Airlines Group (NASDAQ:AAL) is down 1.51% after the airline company lowers guidance due in part to the Boeing Max grounding and higher fuel costs.
    • "Although these aircraft represent a small portion of the company’s total fleet, its financial impact is disproportionate as most of the revenue from the cancellations is lost while the vast majority of the costs remain in place,' noted CFO Derek Kerr on the Max situation.
    • The company expects FY19 EPS of $4.00 to $6.00 vs. $5.50 to $7.00 prior and $5.65 consensus. Unit revenue is expected to rise 1% to 3% for the full year in an acceleration from the 0.5% pace in Q1.
    • Previously: American Airlines beats by $0.02, misses on revenue (April 26)
    • Legion Partners, Macellum Advisors and Ancora Advisors are out with a new letter highlighting ways of "modernizing Bed Bath & Beyond's (BBBY -1.6%) retail practices and delivering EPS growth to $5.00 per share.
    • Front and center in the group's wish list is replacing the CEO and fixing the merchandise over-assortment problem through a detailed SKU rationalization process. Naturally, implementing cost cutting measures is also part of the mix.
    • Shares of BBBY are down 9% over the last 52 weeks.

  12. Tesla falling through long term (2 years) support.  It is a miracle that this is still over $200 after that quarter. June 2020 $100/50 put spreads still pay almost 10 to 1 for a fun bankruptcy play. You can easily offset cost by selling very safe calls. They bet the company on the model 3 and lost. The Panasonic battery purchase agreement forces them to keep producing way more cars than they can sell. I know I’ve been a broken record on this for awhile, but it’s finally happening!


  13. TSLA/Palotay – I said $150 by next year – might happen sooner than that.  

    Breaking $240 breaks loan covenants and that can lead to cascading failures quickly.  

    Musk can't fix things anymore with some BS tweets.  

    This is not good:

    • Credit-card issuers are taking note after a measure of bad debt rose to its highest level in almost seven years, Bloomberg reports.
    • The charge-off rate, or the percentage of loans companies consider uncollectable,  rose to 3.82% in the first three months of 2019, its highest level since Q2 2012, according to data compiled by Bloomberg Intelligence.
    • In addition, Capital One Financial (COF +5.8%) CEO Richard Fairbank reports a "degradation" in credit quality for certain customers, as negative credit events that occurred during the financial crisis may now disappear from customers' credit-bureau reports.
    • At Capital One, the third-largest U.S. card issuer, its Q1 U.S. card charge-off rate increased to 5.04% from 4.64% at the end of 2018. Discover Financial Services (DFS +4.6%) reported Q1 charge-off rate of 3.5%, up from 3.23% in the previous quarter.
    • In response to the increase, Discover has been tightening credit policy by closing inactive accounts and slowing the number and size of credit-line increases for new and existing customers.
    • Charge-offs, though, are still close to historic lows, Bloomberg reports.
    • Previously: Alliance Data March card delinquency rate improves (April 12)
    • Other credit-card-related tickers: JPMSYFADSAXPCWFC

  14. April 4th:  Faltering Thursday – Tesla’s Big Miss Triggers One of our Great Market Fears

    For a very long time I've said that TSLA may be the trigger that takes down the market by forcing investors to re-think the ridiculous valuations they have been giving to these "tech" stocks on the assumption of miraculous future growth.  Our PSW Member Portfolios are now TSLA-free but our Hedge Fund still has short positions on the stock, which will open down about 10% this morning, back around the October lows…

    I'm not going to autopsy their delivery report – it's just what we thought it would be and you can open any paper and read that (yes, I said paper – I'm an old man!) but I will point out that you should notice the continuing pattern of qualifiers from TSLA that sound like the excuses of a child who turns in an incomplete project at school.  "It's this, it's that" – on and on with the excuses but how many times do we fall for this nonsense?  

    The big excuse in this report is that is was HARD shipping Model 3s to China and Europe but, just like when you interrogate an 8 year-old about their excuse – the facts don't add up.  Let's try to remember that TSLA bumped up their valuation by claiming they had orders and deposits for about 500,000 Model 3s yet, INCLUDING the 60,000 they shipped this quarter, TSLA has only delivered 221,517 to date.  If they REALLY have 500,000 deposits in North America – why are they shipping speculative sales to China and Europe?  

    Nasdaq 7,575 at the time, now 7,815 so up 5% since.  Not good for Uber either as it may dampen enthusiasm a bit.


  15. PETX being bought out.  That took a long time, and lower than I expected.  


  16. Phil/STT,

    any thoughts at the current price? The results were not that bad. something is holding it down.

    thanks and regards


  17. PETX/Pharm – Yeah, not sure why they are selling at that price.  Guess things aren't that good. 

    Nas turned up nicely.   

    STT/Pat – Like all the Banksters, fees are off but we're heading into a big round of IPOs, so it should pick up for the rest of the year.  Also, new CEO kitchen-sinked the Q so he'd have easy comps going forward.  Bottom line is they beat (low expectations) on earnings and revenues $1.24/share and let's say that's $5/year (more like $6.50 if things pick up) – it's still very reasonable at $67 (13.5x earnings) and, with the growth expected – they get downright cheap so we have a conservative bull call spread with $60 short puts in the LTP that breaks even at $66.78 – right where the stock is now. 

    STT Long Call 2021 15-JAN 60.00 CALL [STT @ $66.90 $-0.19] 20 1/30/2019 (630) $32,960 $16.48 $-3.88 $16.48     $12.60 - $-7,760 -23.5% $25,200
    STT Short Call 2021 15-JAN 80.00 CALL [STT @ $66.90 $-0.19] -20 1/30/2019 (630) $-14,000 $7.00 $-2.65     $4.35 - $5,300 37.9% $-8,700
    STT Short Put 2021 15-JAN 60.00 PUT [STT @ $66.90 $-0.19] -10 1/28/2019 (630) $-5,400 $5.40 $1.08     $6.48 - $-1,075 -19.9% $-6,475

    I thought the Dec selling was overdone and I wanted to jump in in Jan – just in case those earnings popped them but the new CEO is being super-conservative and writing things off.  Anytime I can buy a bank making $2.5Bn for $25Bn – I consider that a good use of my cash…

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 9,864 10,274 10,360 10,207 11,170 11,982 11,895 11,997 12,363 +4.0%
    Operating Profit $m 2,666 2,437 2,298 2,120 2,899 2,999 2,871     +2.4%
    Net Profit $m 2,050 2,022 1,980 2,143 2,177 2,599 2,446 2,490 2,681 +4.9%
    EPS Reported $ 4.43 4.53 4.47 4.97 5.92 6.32 5.89     +7.4%
    EPS Normalised $ 4.61 5.12 5.40 5.40 6.47 6.39 5.98 6.67 7.57 +6.8%
    EPS Growth % +13.4 +11.1 +5.4 -0.07 +19.9 -1.2 -13.3 +4.31 +13.5  
    PE Ratio x           10.5 11.2 10.1 8.86  
    PEG x           2.44 2.60 0.74 0.87
    Profitability

  18. Dollar down,  gold up, for today anyway, 

    Will be interesting to see if gold can form a bottom in here.

    Long some GLD and a few other names just in case.


  19. Phil, time to leg in another BCS leg for WPM? My current holdings

    +10 Jan 2020 17.5 / 25 BCS

    -10 Jun 22.5 calls

    How about adding Jan 2021 12.5 / 22.5 BCS for $6.28?


  20. TEUM – From Briefing:

     

    Pareteum initiation details — Outperform at Oppenheimer; tgt $7  (4.04 +0.15)

    Oppenheimer initiates TEUM with a Outperform and price target of $7. Pareteum has a software solution for enabling MVNOs, IOT and applications on one network/cloud. It offers operating support, billing systems and now intelligent network routing/transport. This has been attempted for the past 20 years with little success, but TEUM has made it possible by leveraging new technologies (smart/dual SIMs, cloud, LTE-Pro, improved WiFi and connector technologies, 5G), filling demand from dozens of new devices/applications for wireless connectivity, and using a partnership approach with MNOs. This is a B2B SaaS/Cloud company like Alibaba enablign the same OTT concept as Lyft/Airbnb/NFLX, the neutral IP transport platforms of EQIX/ AWS/CCOI on long-haul and GTT's SDWAN for last mile, but with a full-service SaaS. This is a large $40B TAM, with rapid growth and high barriers to entry.

     

    Looks interesting.  Bought some stock at $4.06 and covered 1/2 with Oct 5 calls for $1.05.  Big premium.


  21. Gold/Albo – Europe is still a huge mess, people should be buying gold to hedge that.  

    Italy's going to blow up, Brexit is still happening, whole EU may collapse over time – can't even imagine how you would unwind such a huge currency base. There's "only" $8.2Tn worth of gold in the World and there's about $30Tn in Euros – they can't all escape there!

    WPM/JMD – Speaking of gold (and silver)….  I wouldn't "add" another spread, that just gets messy.  You have 10 2020 $17.50s and they are $5.25 ($5,250) with a $25 cap ($7,500) and, rather than buying a new $10,000 spread for $6,280, you can roll the 10 2020 $17.50s to 20 2020 $15s at $8 ($16,000) for net $10,750 and then sell 15 2021 $22.50 calls for $3.40 ($5,100) and 5 $22.50 puts for $3.30 ($1,650) so the net cost of the roll is $4,000 and you have 20 of the 2021 $15s, 3/4 covered by the $22.50s ($15,000 spread) with 10 short 2020 $25 calls that will expire worthless or be rolled and then the short puts to balance them out.  Best case is WPM climbs slowly and you collect 2x what you would have collected at $22.50 rather than $25.

    TEUM/Albo – I have been trying to get my head around their business but it bothers me so I've stayed away.  The principles are older than I am and that's a concern as this is a go-go fast-moving business but maybe they have good people working there – hard to say.  My Dad was one of the great Systems Analysts of the 60s and 70s and he kept up, of course but, into his 60s (1990s) - it was an uphill battle running with what were effectively quarter to quarter changes in operating systems and databases.  It's really more of a young man's game.  

    TEUM has fueled growth with expensive acquisitions and they are bleeding cash ($13M last year on $32M in sales and – $5.5M last Q) and they have $29M in debt with only $6M in the bank.   The stock went up because they secured another $50M in credit but I'm not sure I want them going out and spending another $50M.  Even if they hit 2020 goals of $10M in profits – $4.10/share is still $450M now (40+x).

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 2019E 2020E CAGR / Avg
    Revenue $m 19.5 20.4 31.0 12.9 13.5 32.4 110.6 168.5 +10.8%
    Operating Profit $m -22.8 -16.2 -1.82 -19.4 -8.62 -14.6      
    Net Profit $m -25.5 -21.9 -5.01 -31.4 -12.5 -13.0 -5.36 10.7  
    EPS Reported $ -5.05 -3.70 -0.79 -4.67 -0.76 -0.20      
    EPS Normalised $ -4.79 -3.77 -0.77 -3.91 -0.73 -0.13 -0.033 0.11  
    EPS Growth %                  
    PE Ratio x           n/a n/a 35.4  
    PEG x           n/a n/a n/a
    Profitability


  22. Phil/F – I closed short calls on the dip.  Would sell calls now or wait.  What strike would you recommend selling?  Jan 21 10s?


  23. F/Fel – What's the matter, today's gains not enough for you?  We sold 60 of the 2021 $10 puts for $2.50 in the LTP back in Feb because net $7.50 was great with us for a 6,000-share entry.  Looks like we won't get to buy them cheap but we will get to keep the $15,000 – so I'm happy.   

    We bought 9,000 shares after doubling down at net $9.15 but we sold 75 2021 $7 calls for $2 around the same time as it dropped our basis so low that there was pretty much no way to lose and, of course, it's a dividend play.  So it depends what you're in it for.  

    The 2021 $10s are now $1.50 but F, at $10.42, is $41.5Bn and should make about $3.2Bn this year so they are still reasonably priced and, in 2017 they made $7.6Bn, $7.3Bn in 2015 and $4.6Bn in 2016 – so the potential is there to call $10.42 probably on the low end of the long-term value.  Still, why are you in the stock?  

    In our LTP, we paid net $52,350 for 9,000 shares so $5.816/share and, if we get called away at $7 (and above $10), we get back $52,500 and still have 1,500 free shares left (and $150 in cash) plus $1.20 in dividends on 9,000 shares ($10,800).  While it may be a little dull – we committed just one allocation block to make (assuming $10/share on 1,500) about $25,800 and now we get free dividends for life and we can sell 15 2023 $10 puts and calls for $3 and collect another $4,500 + $1,800 in dividends on $0 allocation.  It's not nothing – it's over 1% of the original portfolio's $500,000 base added to our returns forever after!  

    So, before I can say "sell calls now or wait" – I would need to know what the position is and what the intention is as, generally, we're not playing F to go through the roof, we're playing it because it pays a 7% dividend and is very unlikely to go BK, which means we can make outsized positions from it without too much worry.

    Wow, that was the day already?  

    Nas and S&P managed all-time highs into the close – crazy!  

    Have a great weekend everyone, 

    - Phil


  24. TEUM – There's this.

    Also, It looks to me that their LT Debt was only 342k as of 12/31. Do you have updated numbers ?  It's not for everyone, but looks interesting to me as a spec.

     

    The announcement caps a first quarter during which Pareteum grew its 36-month Contractual Revenue Backlog (36MCRB) of signed sales agreements to a new total of $938 million.   


  25. TEUM/Albo – I was looking at Yahoo, who may be wrong but not LT Debt, it's $10.3M in payables and $2.9M in "Other Current Liabilities" and $8.6M in "Other Liabilities" – that's all debt to me.  And their "Assets" are $91.7M in "Goodwill" and $39.6M in "Intangible Assets" – in other words, nothing really.  

    Of course, if they do $300M/yr in sales going forward (10x last year), that would wash away all their sins but this is a 138-person company – hard to imagine it but maybe they do have the magic beans….


  26. Phil, no rush, but at some point, can you share your experience with what happens to a stock price when it goes BK?  Tesla has  high debt, large supplier purchase agreements, falling demand, negative EBITA, and negative cash flow.  I don't have much experience with what happens when a company that has these kind of commitments, fails to raise additional capital, and goes bust.   Does the equity typically go to $0?  

    If everyone finally realizes Elon is an emperor with no clothes, and they miss payroll, or a supplier forces bankruptcy,  what should I expect as a base case for the stock price?  I know you have counseled against thinking this goes to $0.  If you could elaborate on your thinking I would appreciate it.  This is one of my largest positions, and I want to make sure I keep my emotions in check and set realistic targets.  Should I worry about Apple, AMZN, or someone else swooping in at $100, or $50 and buying it, debt and all?  I would think that the coming competition, Tesla legal liabilities, and huge debt load, would make most potential suitors wait until after BK. 

    Thanks!


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