Tuesday, April 27, 2010

4/27/10 Midafternoon Report: If Greece is now junk, what does that make Haiti?

The market is down today as Standard and Poor's downgraded Portugal to a principality and Greek to junk and not the the kind in a trunk that most investors love, but good old fashioned junk.  It was the first time since the advent of the Euro that a European country has lost its investment grade status and Money McBags would be concerned if the rating cut hadn't coming from an agency who missed something called the subprime mortgage meltdown which only caused the biggest financial collapse in 80 years.  The real fear is that the EU can not handle this situation and it spreads throughout Europe like the bubonic plague in the 1600s or black jeans in the last half of the 20th century.  Consider the market spooked as it was looking for a reason to consolidate down anyway and now we have it.

In the US, consumer confidence rose to its highest level since Lehman Brothers collapsed and the highest level since the pet rock fad (because seriously, if people were willing to throw money away on fucking rocks, they must have been hella confident that things were going ok).  The consumer confidence index came in at 57.9 beating even the highest of forecasts after getting those forecasts in a camel clutch and having them submit.  People are generally starting to feel better and the fact that most Americans don't read the news and have no idea that Europe is teetering on the brink of bankruptcy while their own government printed more money than humanly possible to count (again, the "too big to count" strategy) can only help the blissful ignorance.  In other macro news, the Case-Shiller index showed that home prices were up from a year ago but declined on adjusted basis by .1% sequentially.  This still beat analyst guesses though prices are basically stagnant which is better than them dropping but is still a long way from a recovery.  And grabbing most headlines today were Goldman Sachs executives and Fabulous Fab Tourre who never saw shitty CDOs they couldn't pawn off on investors, testifying in front of congress about their alleged fraudulent behavior.  After hours of questions and answers, all we learned is that Senators don't have a fucking clue about the financial system and Senator Claire McCaskill, to quote another great Fabulous Fab, "Girl you know it's true, ooo, ooo, ooo."  Today's hearings accomplished nothing other than letting some rich assturds (the Senators) grandstand and belittle the richer assturds (GS executives).  Excuse me while Money McBags yawns through this part of the saga.  The fact is GS did some shady shit as did the whole fucking financial system so unless GS gets more than a slap on the wrist, nothing is going to change.  Money McBags is close buying long dated out of the money puts on MCO because when the smoke clears from this cock off, the rating agencies are going to be the musician to the regulators' very rusty trombone.

In stock news, Ford reported their 4th consecutive profitable quarter and earned $.46 per share which easily blew by analyst guesses of $.31.  In the Q, Ford outsold GM for the first time in 50 years and gained 2.7% market share thanks to the Toyota recall and vibrating seat warmers.  The stock is getting clobbered though as it had a huge run up and they still sell Fords.

In small cap news CRUS put up a huge quarter and Money McBags is an owner of CRUS and has talked about it many times on When Genius Prevailed.  He first alerted all of you to the company on 1/12/10, told you all he was buying on 1/28/10, and it is now up 75%+ which is enough to take Hayley Atwell out for a nice dinner of tea and my crumpets.  CRUS's Q was way better than Money McBags was expecting though and their guidance pissed all over Money McBags' estimates as if it suffered from bladder incontinence and had just downed a two liter of Mountain Dew and a box of Franzia.  For the Q, CRUS earned $.16 non-GAAP and Money McBags was expecting $.11 with their revenue coming in ~15% stronger than they had indicated.  They said all segments were pretty much up, but energy rebouned to $22MM up from $14MM last year and back to where it was before the economy bent over and starting catching pitches from pitchers with low hanging FICOs.  Guidance is for $78MM-$84MM in revenue for next Q (Fiscal Q1) with 55% margins and ~$26MM non-gaap operating expenses.  With ~65MM shares and enough NOLs to make Wesley Snipes salivate and thus not pay taxes for real, that gets to an eps estimate of ~$.29 if Money McBags is doing the math correctly (and it has been suggested that the correct way to do math is with a reverse cowboy).  CRUS didn't give detailed full year guidance as visibility in to Qs 3 and 4 is low (though hopefully not lower than Stevie Wonder's visibility in trying to see a shooting star without a telescope) but they gave full year revenue growth guidance of 30%.  Of course, guidance for fiscal Q1 already puts them at that 30% revenue growth and it is unlikely that the next 3 quarters will be flat with last year given the audio growth and return of the energy business.  Plus, they said none of their new products figured in to their backlog and thus there could be some upside if some of the new applications start taking off.  So how the fuck should we value this company?  As said previously, Heather Vandeven is hot, but as also said previously, Money McBags had an ~$.85 eps for CRUS for this upcoming fiscal year with ~$.19 coming next Q.   So we could assume they will be inline with Money McBags estimates for the rest of the year and gross up his previous $.85 with the $.10 beat in Q1 their gudiance implies and thus get a $.95 fiscal year eps estimate.  Alternatively, we can take Q1 estimates as a baseline, say they get an uptick in September's Q like usual, and the other Qs will all come in the same as Q1 guidance.  So 3 Qs at $.29 and one slightly higher gets us to $1.20.  Either way, just call earnings somewhere between $1.00 and $1.20 per share and given that, the company is still fairly cheap trading at 10x to 12x fiscal 2011 with $2 of cash on the balance sheet (of course some of that cash is going out the door because on the call they said they were buying a building to relocate their headquarters and it's not clear what real estate in Austin is going for these days).  The point is, this company just grew revenue 87% and the trends are still in their favor as their 35% customer which is AAPL is still selling the fuck out of some iPhones.  So hopefully you all bought with Money McBags, and if you didn't, the stock should consolidate down a bit over the next few days and it is still relatively cheap, so you'll get another chance.  Throw a 15x multiple on $1.00 of earnings and you get a $15 stock and that seems to be a fair low end price.


Jerod said...

I managed to get into CRUS a few weeks ago, thanks for the good call! Real-estate in Austin didn't suffer as much from the housing declines, 15th fastest growing city in US in 2009. Also, a lot of the techie companies that have shit in Austin have it close to downtown, so it shouldn't be totally unreasonable to their bottom line. (Just moved outta Austin [and away from it's RICK)] :(

Money McBags said...


Money McBags is glad he could spread some love by getting you in to CRUS and hopes you spread that love back to the performance artists at your local Rick's Cabaret or similar establishment.

As for CRUS buying a building for their new headquarters, it should be a benefit to the bottom line as they said their rent was a high portion of their operating expense. Thus owning should be cheaper on an net income basis.

That said, Money McBags has liked this company to some degree because they have a nice cash cushion and his comment was that the cash cushion will dwindle a bit depending on how much they are spending on a new office building.

Either way, it shouldn't be too relevant as long as they aren't buying a gold plated building with stripper poles in every room and bidets that shoot Dom (though if they are, Money McBags would hope IR would invite him down to do some research).

Anyway, keep comging to When Genius Prevailed and tell a friend or 10k because Money McBags needs to get some more eyeballs to make this devolution complete.

Bottoms Up,

Money McBags