Foundry Stock Review November 15, 2013

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November 15th, 2013


Seasons Greetings,

FSR Staff

Minimizing Tesla's Stock Whiplash

Why A Defined Strategy Can Limit Investor Jolt

FSR Staff

Here at Foundry Stock Review, we have a set investment horizon and criteria for profiling and selecting stocks that we feel are undervalued or overvalued. It would be very easy to pick a handful of trading sessions and hammer an opinion across by sighting the trading action of a given day or week or month. It is much more important to stay disciplined and true to your method whether you are a short term trader or long term investor. We are an intermediate term earnings focused newsletter, here to give investors our insights over the next 12 to 18 months. We have an established price target and time horizon for Tesla. We would like to share with you our stock profiles in our monthly investment newsletter by email on the 15th of every month. To request a free copy of our November newsletter contact us at foundrystockreview@live.com. Be sure to inquire about our 2014 subscription packages. If you are trading Tesla day to day, all we can say is good luck and grab some ice, as your neck may continue be sore from following the price action.

Happy Thanksgiving Everyone!

Remember to take this time to enjoy the company of family and friends. The market will always be there but moments like these only come a couple times a year so make the most of them!

FSR Staff

Genius Premium: Jobs vs Musk

What Will It Take for Elon Musk to Meet All-Time Expectations?

Many have compared Telsa's CEO Elon Musk to former Apple CEO Steve Jobs. Both men have been considered innovators, known for possessing superior intelligence,  savvy business acumen, and a rabid following devoutly loyal to their products. How do we put a value on these intangibles?

It may be instructive to see how the market assigns a "genius premium" by analyzing the performance of Apple stock during Steve Jobs second stint at the company from September 1997 until his passing in November 2011. During this 14 year span, Apple stock experienced a gain of about 6800% or 35% per year from a split adjusted price of $5.28 to $365.73.

Elon Musk has seen Tesla climb from its IPO in late June of 2010 from $23.83 to around $135 in early November 2013. This return of about 470% over the first three plus years as a public company has seen his stock charge ahead an average of about 70% per year. This meteroic rise in valuation has partially fueled commentators to draw comparisons between Elon and perhaps the greatest CEO and American company of all-time, Steve Jobs and Apple.

So the question going forward now becomes if there is a "genius premium" to place on Tesla what should it be? It may be difficult to compare cars to iPhones, Samsung to BMW, and car fires to Foxconn incidents but essentially on some level, these questions are worth asking. Was Jobs as valuable to Apple as Musk is to Tesla? Can Tesla achieve 35% annual stock returns for the next ten years years and trade at $1600 a share in 2023? If Musk can grow his capital intensive car companies share price half as quickly, should we expect 17% annual stock returns from Tesla for the next several years and a more dampened stock price of $214.65 in 2023? If competition picks up and Telsa grows share price only 10% per year, maybe the stock will only trade for $90 per share in ten years. A wide range of outcomes with big investor consequences.

Maybe the best takeaway from this exercise is to marvel at how well Jobs executed on his vision and how far Musk and Tesla have to go to fulfill their vision of bringing electric cars to the masses in an exponential way. Big goals, but maybe not unattainable goals for a man who has secured contracts from NASA to send rockets into outer space. 

Is Tesla trading in outer space? Check out our October premium monthly investment newsletter for free today and if you want our newsletter delivered to your inbox on the 15th of every month, check out our subscription packages.

Copyright © 2013 Foundry Stock Review, LLC All rights reserved.

Foundry Stock Review October 15th, 2013

Volume 1, Issue 1

An Ode to Elon

You can invest in Groupon or Pandora,
Or in new versions of our friend Tom at Myspace.
I'll take the guy calling the shots at Tesla,
When he's not sending ships into space.

Ask who will deliver the bottom line,
Do you trust Cook, or Ballmer, or Zuck?
Or do you want a guy whose net worth is heavy in Tesla,
If no one cared about the stock, I'm sure he'd still give a f###.

You can say other CEO's put shareholders first,
But ownership percentage is all I need to see.
For I will invest with Elon Musk for the future,
He is doing for electric cars, what the iPod did for Mp3.

Copyright © 2013 Foundry Stock Review, LLC All rights reserved.

Dunkin' Brands: Growth Expectations Too Sweet?

Growth Plans Overseas Set Ambitious Goal

Dunkin' Brands Group Inc. (DNKN) and its flagship Dunkin' Donuts coffee shops have grand ambitions for conquering the international landscape and North America outside of their highly concentrated Northeastern U.S presence. There are over 500 locations in New York City alone and several hundred in Massachusetts. The firm has a strong presence in the city hubs of the I-95 corridor from Boston to Philadelphia. There are about 7.500 Dunkin' Donuts stores in the U.S. and about 3,200 overseas. Many stoefronts are co-branded with Baskin Robbins ice cream shops, which is featured in 7,000 total locations across the globe.

The company has added Dunkin' Donuts franchises at a fast clip in the US and plans on effectively doubling locations in the US to 15,000 by around 2031. To achieve this goal the company has to open on average 500 stores state-side each year. The last three years has seen Dunkin' add 240 stores in 2011, 291 in 2012, and 357 of a projected 360 stores completed to date in 2013. International expansion has been tagged at 10,000 stores up from 3,000 but no time frame was provided in a late 2011 Businessweek article outlining the initiative. For the sake of projection purposes, to use the domestic 500 store per year build out, it 14 years until 2027 for Dunkin' to reach this goal.  A more tempered 300 overseas annual expansion rate would take 33 years or 2046 to complete.

The main driver of domestic growth for Dunkin' is California. The company will start building stores in full force by the year 2015 to include a goal of 1,000 locations in the Golden State. The main thrust internationally will include Shanghai, China with 100 locations by 2023 and India with 500 locations expected by 2026. The company has not found success in Canada or Japan and will count on building 150 stores in the UK to help its peripheral global expansion efforts set for new regions to include Brazil and Eastern Europe in the future.

Revenues for Dunkin' Brands have ranged from 8.8% growth from in 2011 to 4.8% in 2012 to projected 7.9% growth in 2013. 7.1% sales growth in 2014 is analysts current consensus estimate. Earnings growth is expected to come in around 16-17% in 2014. On the surface Dunkin's international expansion plans appear to be very ambitious at best and far fetched at worst in the next 15 years. At the very least, executing on the domestic expansion strategy may prove challenging at home, where Starbucks has a established foothold on the west coast.

Request a free copy of our investment newsletter Foundry Stock Review including price targets on Dunkin' Brands (DNKN) email us today at foundrystockreview@live.com for a limited time.

Dislosure

Foundry Stock Review and its contributors have no positions in Dunkin Brands' (DNKN) or Starbucks (SBUX) the securities mentioned in this blog as of 11/12/2013. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.

Disclaimer

Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results

Copyright © 2013 Foundry Stock Review, LLC All rights reserved.

A Letter from Tesla Investor to Twitter Investor

Dear Twitter Investor,

I write you pleading and warning you to be diligent. I write you with the credibility of having been in your shoes not that long ago. You see, I have been beholden to a company whose stock has traded like a rock star. But like several episodes of VH1's "Behind the Music" there is often a temptation for the higher highs to give you a feeling of invisibility- right before a fall from grace.


You may be giddy at this moment and feel like you can't lose after today's wonderful IPO.
In the coming months, I implore you to stay mindful that if the stock goes parabolic, it may come crashing to the ground. You own a stock not a dream, so don't let it become a nightmare.


My advice to you is to remain skeptical, read quarterly reports, pay attention to those who think the stock is overvalued. Develop sound arguments to combat these bears but allow yourself to change your mind. Re-evaluate your investment often. The market does everyday.


But above all, if the good times roll, take some profits.



Best of luck,

Tesla Investor

Copyright 2013 Foundry Stock Review All Rights Reserved.

Twitter IPO To Give Facebook a Face-lift

Euphoria over Competitors IPO will Boost King of Social Media

 

By FSR Staff

Is Twitter (TWTR) on the verge of offering investors a chance to ride the wave of social media exposure that they so desperately seek? Very likely, but what happens if retail investors get shut out of Twitter after it jumps several points tomorrow in the first day of trading? It may be time for investors to take a look at an old flame that shut them out of a similar frenzied IPO a year and a half ago, but has recently rediscovered its sex appeal: Facebook (FB)

With a market cap of $119 billion and latest quarterly revenues of $2 billion, Facebook's metrics may give Twitter investors some pause when gauging an appropriate multiple to apply to the czar of the hashtag. Facebook is the gold standard, had a post IPO swoon, and competes for the same online eyeball. Facebook is getting looks as it showed off $422 million in earnings in the latest quarter and has $9 billion in its coffers.

For the time being, Twitter appears to be pricing between $23 to $25 dollars, implying an initial valuation of $14 to $16 billion. This potential gusher of an IPO would land Twitter trading at around 31 to 34 times past year revenues with earnings of $-49 million last year and $-69 million for the first half of 2013. Facebook on the other hand brought in $6.11 billion in prior 12 month revenues and $554 million in earnings over the same 4 quarters. Facebook currently trades at 19.5 times trailing twelve months revenue.

If we were to price Twitter at Facebook's level 19.5 times revenue, a valuation of $9 billion for TWTR seems more realistic. It is very interesting that $9 billion happens to be the amount that Facebook has in bank. Twitter trading at a Facebook valuation leads us to $14 to $15 per share. But of course this assumes Twitter deserves a Facebook valuation. If it can raise $1.75 billion on Wednesday with the IPO, this is a start. But earnings growth? That is the next step. Twitter boasts over 200 million users. Facebook has over 1.2 billion users and 4 times as many mobile users as Twitter has in total.

Before summer of 2014, if Twitter struggles to show profits and the stock languishes, they may end up sending @Facebook a tweet "How do we deal with a struggling stock price?" #IPOfallout. For the time being, Mark Z. and company should smile and reply @Twitter "Good luck!" #beenthere.

After the hoopla fades this winter, Twitter's IPO should give Facebook a face-lift. The lesson here? Don't buy the hype, at least on the first day.

 

Enjoy our content? Get plugged into our premium monthly newsletter and request a free copy today foundrystockreview@live.com or visit  www.foundrystockreview.com for more details.

Dislosure

Foundry Stock Review and its contributors have no positions in Facebook (FB) or Twitter (TWTR) the security detailed in this blog as of 11/7/2013. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.

Disclaimer

Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results

Copyright © 2013 Foundry Stock Review, LLC All rights reserved.

 

 

   

Can Tesla Grow into its Earnings Multiple?

Tesla (TSLA) has been one of the most electric performers in 2013 and the company has a style and flair in its DNA that comes directly from its CEO Elon Musk. Many believe the sky is the limit for Tesla and some investors like to look out to earnings in 5 years to justify current valuations. But it is possible that along the road, the valuation of this company will hit some speed bumps?

We believe the answer is best demonstrated in a bullish forecast. If you project forward to 2018, Tesla will most likely have launched its Model E sedan in 2015 and will have sold this mainstream electric vehicle at a cost of $40,000 for about 3 years. If they sell 415,705 total vehicles in 2018 it would represent 80% production growth from 22,000 vehicles in 2013, 39,600 in 2014, 71,280 in 2015, 128,304 in 2016, 230,947 in 2017, 415,705 in 2018. If we use a sales mix of 20% Model S, 20% Model X, and 60% Model E production levels for S and X would come in at 83,141 each and model E at 249,423 cars, 5 years from now.

At these sales levels gross revenues would total $9.97 billion for Model E at $40K average selling price (ASP),  $8.31 billion for Model S at $100K ASP, and $7.06 billion for Model X at an estimated $85K ASP. This total revenue figure of $25.34 billion would peg gross margin somewhere around 17.2% assuming 25% margins for Models S and Model X, and 12% gross margin for Model E. If SG&A and R&D expense total 10% of sales we are looking at $2.5 billion in additional expense.  under this scenario,  $4.35 billion gross profit would be reduced by an estimated $2.5 billion in SG&A and R&D to arrive at $1.85 billion in EBIT. A 30% effective tax rate, leaves us with $1.29 billion in 2018 net earnings. In this example, we are assuming a current share count held constant at 121.5 million for $10.62 dollars in 2018 earnings per share. We are estimating that ZV credits will be phased out completely but advances in battery technology and production methods will make up for this to hold the line on gross margins.

At current prices of $168 per share, under this assumption, investors are paying 15.82 times 2018 earnings. If you believed Tesla could continue to grow 50% in 2019 and 2020 when it is approaching and eclipsing the 1 million vehicle production level, you may be willing to pay $500 or more per share down the road. However, to see the company move up 300% from here, a lot has to go right over a significant period of time.

To summarize, this growth projection may represent a high hurdle that Tesla can meet or exceed in the next 1 to 2 years.  However, it may be very challenging to pencil Tesla in for 80% production growth 3-5 years from now. At Foundry Stock Review, we focus on profiling stocks by projecting earnings in the next 12-18 months. Request a free copy of our premium newsletter at foundrystockreview@live.com or visit us at www.foundrystockreview.com for more details.

Disclosure

Foundry Stock Review and its contributors have no positions in Tesla (TSLA) the security detailed in this blog as of 11/4/2013. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.

Disclaimer

Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities.It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results.

Yahoo Keeps a Bigger Stake in its Crown Jewel

Why Restructuring the Alibaba Deal Makes Sense

FSR Staff

On October 15th, Yahoo (YHOO) reached terms to sell only 9.6% of its 24% ownership stake in Alibaba as part of the chinese e-commerce much anticipated IPO slated to arrive in the coming months.  Yahoo can sell the remaining shares after the IPO lockup period expires, usually a period of six months after the shares are listed on an exchange. In this arrangement, Yahoo is retaining 20% more shares than under the original agreement. A conservative valuation of Alibaba is $80 billion dollars, meaning Yahoo stands to gain somewhere around $20 billion from the filing of which $8 billion will be available to the company and $12 billion or 14.4% stake will remain under the Yahoo roof until lockup Ends.

This news is a positive sign that Yahoo is confident Alibaba will continue to grow at a fast clip and reach a higher market cap in the next year or so. Yahoo stands to benefit on the order of $480 million millions if the company can achieve a $100 billion market cap down the road. This assumes the company's IPO garners a $80 billion initial offering value and tacks on $20 billion over the next 6-12 months. If Yahoo sells out the remaining 14.4% stake entirely at $100 billion, it stands to receive another cash infusion north of $14 billion dollars which alone represents 40% of its current market cap of $35.35 billion.

Where do we see Yahoo headed in the next 12-18 months? To find out now, email us receive a free copy of our monthly newletter at FoundryStockReview@live.com.

Dislosure

Foundry Stock Review and its contributors have no positions in Yahoo (YHOO) the security detailed in this blog as of 11/01/2013. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.

Disclaimer
 

Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results.

Does Tesla Have the Charge to Hold Recent Gains?

FSR Staff

In our first issue of Foundry Stock Review on October 15th, 2013 we detailed Tesla Motors (TSLA) as a stock on cruise control for the first nine months of 2013, launching from $35 to $194 in record time. During the past month, some negative publicity on two car fires and valuation concerns have caused some skittish investors to head to the sidelines for a pit stop.

Our price target in the next 12 to 18 months for Tesla is considerably higher than current prices near $160. We will keep an eye on earnings to be presented on November 5th. However, we are focused on the next several quarters as there are sure to be some speed bumps, as the company has become high profile in a short period of time. Swings of 10% or more are to be expected short term, but with a one to two year time frame, we will stay focused beyond a single earnings report.

For our Tesla price target and one free copy of our monthly newsletter direct to your email contact us at FoundryStockReview@live.com for more details.






Dislosure

Foundry Stock Review and its contributors have no positions in Tesla (TSLA) the security detailed in this blog as of 10/31/2013. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.

Disclaimer

Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results.

Tesla Earnings Estimate for Q3

With Sharks Circling, Will Q3 Earnings Matter?

FSR Staff

On November 5th, we are looking for Tesla (TSLA) to report sales of 6,200 cars in the third quarter at an average selling price of $99,000 for gross revenue of $613.8 million. This is nearly 13% higher than Tesla's Q3 guidance of 5,500 cars and about 10% higher than Wall Street estimates of around $560 million in revenue. We see gross margins coming in at 23.5% and EPS zooming past current expectations of 11 to 12 cents per share. We project non-GAAP earnings of 25 cents/share for Q3. Gross margin is a tough figure to gauge. A half of percent change could change earnings by 3 cents per share in our model. We also estimate that about 9 cents a share or 37% of earnings will come from clean vehicle tax credits making the GAAP earnings number will come in closer to 16 cents a share for the third quarter. Despite the coverage earnings will receive, we are intermediate term investors with a price target and a timeframe that values the trend over the next year over the trade to make next week.

To reiterate, mindful of the overall promise of turbocharged growth, we would not be surprised if TSLA comes under pressure short term if earnings fail to beat by a wide margin. Future earnings guidance will also be key, and any hint of negativity in guidance, commentary, or concern raised in analyst Q&A could be used as a catalyst to pressure the stock. However, it is our view that the long term growth story for Tesla is intact and we have established at price target by early 2015 that we would like to share with you in our free newsletter.

Contact us at FoundryStockReview@live.com for more details.




Disclosure

Foundry Stock Review and its contributors have no positions in Tesla (TSLA) the security detailed in this blog as of 10/30/2013.  Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.

 

Disclaimer

Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results.