The Market 2022

Devilmaycare

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Okay I re-analyzed VIAC.

Most of its fundamentals are strong but there are a few concerns.

ROIC (return on invested capital) at 6.61%. I typically want to see a company's ROIC >10%.

Revenue growth estimates range from flat to growth.

The other concern is their net debt at nearly $13B. To put that in perspective, their market cap is $20.4B. So I am getting an Enterprise Value ranging from $33-35B depending on when you pull the debt figure.

The debt poses some problems for analysis as you are also buying the debt. Despite the debt, they are easily able to cover interest payments and have a good current ratio.

Revenue is projected using a combo of analysts estimates and revenue growth rate projections. I project cashflows out 5 years based on their average percentage of revenue over the past 5 years.

Based on my projections and assuming you expect a return of 10% a year, you should be willing to pay $42.06 a share which means the current price is heavily discounted at $31.25. However, that does not factor in the debt that you are also buying.

If you are really conservative, you can subtract the net debt from the present value of future cash flows. This would be like having the debt paid off before you buy the company. In this scenario, I calculated a purchase price of $20.21 which means you should wait for the price to drop another 35%!

What probably makes the most sense is to spread that debt repayment over a few years since the debt is used to grow the company and create cash flows. That gives you a price somewhere between $20 and $42 depending on how you feel about the debt.

I think, VIAC starts looking really attractive sub $30 and I think the crash of NFLX will depress sentiment on the segment and depress prices in the short term. This makes me think that $25 would be realistic and a good target in the current market environment. I personally like VIAC's positioning and well rounded offerings with Paramount+, CBS, Nick/MTV, Showtime, and Pluto.

I also think it's likely we see further consolidation within the segment. NFLX, Disney, and soon to be Warner Discovery seem to be the leaders. VIAC's Paramount is the next best with Comcast's Peacock and others behind. And you can't forget about AMZN and AAPL.

If you're looking long, I don't think Paramount+ survives. I think They'll be one of the casualties when the streaming wars shake out the weaker players. At the end of the day I think we'll end up with the big four, NFLX, Disney+, HBO+, and Amazon Prime with Apple+ being a wild card since they have the money to keep doing it as long as they want. For the rest of the streaming services I think they're going to have to merge or license their content. We're already starting to see it with the subscriber numbers and people playing the one month here, one month there game. The smaller players are going to have trouble surviving with that.
 
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If you're looking long, I don't think Paramount+ survives. I think They'll be one of the casualties when the streaming wars shake out the weaker players. At the end of the day I think we'll end up with the big four, NFLX, Disney+, HBO+, and Amazon Prime with Apple+ being a wild card since they have the money to keep doing it as long as they want. For the rest of the streaming services I think they're going to have to merge or license their content. We're already starting to see it with the subscriber numbers and people playing the one month here, one month there game. The smaller players are going to have trouble surviving with that.

I would agree long term, but VIAC has mounted a strong offering by merging with CBS and has some really popular and wide-ranging content, that is a tier above Comcast IMO, but below the leaders. That's one reason why I would need a heavy discount to jump in. I also own T which means I'll be getting the Warner Discovery spin-off so I'm not hot to get another player in the segment unless it's really cheap.
 

BigRedRage

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Elon is part of what scares me with TSLA. There's been some rumblings for a bit now that he might step down as CEO since they're at a good point and turn his focus to Starlink and SpaceX. I really don't know what will happen to the stock if that happens. I think we'll at least see a big dip and then maybe a rebound over a little bit of time.

And yes, TSLA is out ahead in tech right now. It's actually why I'm big on them and LCID. From my DD both are way ahead of everyone else in the tech department and they both have potential revenue streams outside of their cars. That's also why I haven't been as big on the ICE auto makers going electric. They're buying most of their stuff from other companies. That's good to get going but not as much for the long term. What I'm sort of hoping is that LCID start providing battery and motor tech to them in addition to selling their own cars. Their battery management and junk is awesome. Battle tested too in Formula-E since they've been the sole provider for the league.
I highly doubt Elon steps down from TSLA. They are far more than cars and he still has big plans IMO
 

elindholm

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Okay I re-analyzed VIAC.

Most of its fundamentals are strong but there are a few concerns.

ROIC (return on invested capital) at 6.61%. I typically want to see a company's ROIC >10%.

Revenue growth estimates range from flat to single digit negative growth.

The other concern is their net debt at nearly $13B. To put that in perspective, their market cap is $20.4B. So I am getting an Enterprise Value ranging from $33-35B depending on when you pull the debt figure....
Thanks for all of this. I didn't realize that their debt is still so high. When the stock ballooned last year, they issued some more, which of course precipitated the drop, but I thought that the whole idea was to get their debt situation less ugly.
 
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TROW analysis temporarily removed.

I was double checking my numbers and was getting some wildly different Free Cash Flow numbers from other sites. I've never had problems with Market Watch in the past.
 
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dscher

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Looks like I'm going to open a new position in TROW this week. It's been on my watchlist for a while and it has recently fallen 29% and is near its 52 week low.

Pristine financial statements.

- Revenue growth of nearly 9% a year over the last 5 years, consistently increasing every year. Analysts expect revenue growth of over 12% a year for the next 5 years. Net income and Free Cash Flow are extremely consistent and increasing every year.

- Net profit margins of 37-40%

- ROIC over 30%

- no debt.

- dividend of 2.71%. 35 consecutive years of raising dividends. Dividend is safe and is only 36% of Net Income and 37% of Free cash flows.

I was conservative with my revenue projections using the average of the last 5 years 8.9% vs the 12%+ that analysts expect over the next 5 years.

Even with the conservative projections I calculated a stock price of $211.33 or $226.75 when you factor in net cash they are holding. The current price is $159. This means you could purchase at $211 and should expect a return of 10% a year if everything goes right. At $159 you are getting a large 32-42% discount/margin of safety and it implies an annual return of about 13% a year.

What are the headwinds for TROW? The growth of passive investing from the likes of Vanguard and iShares is a threat. TROW is largely an active manager which is out of favor, but they are on the lower end when it comes to fees with expenses compared to active managers. They stay away from bloated advisory class shares with large front end loads and their annual expenses are reasonable. In my opinion, they are one of the better performing fund families. I liked them a lot before I got into ETFs. They also recently launched ETF versions of some of their popular funds.

It's also fair to point out the last 5 years of performance I analyzed is from a bull market. How will they fair in a bear market?

It seems their recent price drop is due to a 2.4% decrease in Assets Under Management (AUM) for November, disclosed in November. They had been steadily increasing AUM prior of course as the market has been going up.

Is now the best time to buy? Who knows. It may keep going down, but I think they will be a solid addition to my portfolio. I'll likely open a small position and look to add if it keeps falling.
Might be heading to 120ish area..

Just a TA perspective :thumbup:
 
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We have some REAL momentum to the downside... Throw out oversold/overbought and predicting bottoms. Things get downright nutty with this kinda correlation and fear.

Remain patient and wait for the babies being thrown out with the bath water.
 

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