Good, opinions like that keep MSFT undervalued. There is no growth needed for MSFT to be undervalued, a stable stream of cash flow will do just fine. Anyways there are areas of growth expected in the future as MSFT enters new areas in TV, games, smartphones, tablets, and search.
growth maybe, profits not so certain. Aren’t they pushing towards cloud computing these days as well?
Uh…If you want MSFT to get to your $35 target price, you better find some growth because dividends aren’t going to do that for awhile.
They’re pushing towards cloud computing, search, smartphones/tablets, and gaming/tv. Search is not profitable yet, but it’s not expected to be for a while with Google’s monopoly there. People just look at their efforts in those areas and say “Bah, they don’t make any money there”, but they are extremely serious about owning these areas as well, and thus in the future I do expect growth there. I think the Xbox division made losses for years before starting to turn a profit. You have to also remember that they have a mountain of cash, and they can constantly just buy up software firms with regularity. I think MSFT is going to be around for a long time. I’ve been impressed with the Windows Phone 7, better than Android.
Talks of stocks with minimal mentions on valuation? Is this a CFA board? RIMM: the stock is trading at $13/share on forecasted earnings of around $3~$4 in each of the following 2~3 years, a P/E of 4x. On an EV/EBITDA basis, valuation is even more absurd…at ONE TIME! At this valuation, I think the market is pricing in all Blackberries in stores to not sell and 10% of all existing blackberries to explode and kill their owners. How about this as a catalyst: “RIMM is not going to die in the next 3 years and P/E expands from 4x to 6x,” boom, 50% return. Disclosure: I’m not long RIMM.
go Palantir go!
The long RIMM/Short GRPN trade getting killed today.
RIMM around in 3 years? This bet intrigues me. I’d take even odds that they’re either out of business or get bought by a competitor at a nice discount from today’s price (let’s say below $5 a share). We can look at all the metrics you want, but in the end all that matters is RIMM doesn’t make products people want to buy anymore. Unless they come up with some truly innovative product they’re doomed. People even cringe at the name BlackBerry now. It’s lame. Game over.
. Lets just assume the maximum of your quoted take out price is announced at $5/share. That would imply a market cap of around $2.6 billion. RIMM has around $1.2 billion in net cash, so the net price you’re quoting is around $1.4 billion USD or roughly 0.3x current tangible book value. That sounds like a good bet given the potential upside vs potential downside. In all seriousness, do people actually look at the STOCK instead of the BUSINESS? Research in Motion SUCKS, I get it. Selling patents and operating assets for scrap value could probably get you back your $12.XX/share already.
Not if they drain that cash away on bad projects, then maybe you wouldn’t reach the 12/share. Plus, I believe for the year they have negative FCF.
ubermensch, you like microcaps right? Wanna take a look at SODI?
i like microcaps too…!!
@ Palantir, Yeah, the lower the number of analysts covering the stock the better. SODI seems to be sitting on treasuries and cash worth around 7.3 mil. With 2.27m in outstanding shares and 2m in liabilities it has $2.3/share in cash. Quantitatively the value seems good but I don’t like paying a price that seems to be historically high without a definite trend in earnings.
That would be a true statement for the North American Market. In emerging countries like India, RIM ships around 15% of the smartphones vs 2.6% for iPhones. In the major Indian cities you will find almost everyone carrying blackberries whether they are students or professionals - a trend that seems to be growing. Besides apples indifference to expanding in this region, the reason for Blackberry’s popularity stems from India’s lack of 3g capabilities which makes having an iPhone there near useless. Also, BBM is becoming an important social tool, a means to keep in touch with people you know. In fact, it seems to be a decisive factor for people who want to switch to a smartphone. With a middle class that’s growing in a country with 1.2b people I think RIM has plenty of opportunity. Keeping this is mind I think RIMM does have a future - maybe just not in North America.
Right, I didn’t mean to say it was a net-net (i think it used to be before), but if 2.30 is cash, then that means the firm’s future earnings are being valued at $0.92, and FCF/share is $0.37, which seems pretty cheap. Now, I don’t know anything about the business, and there is not an obvious catalyst.
It is cheap no doubt, but it seems slightly expensive relative to historical prices which makes me a little bit wary of buying it. At prices below 3 I would definitely be interested. Thanks for the rec though. Just a question, where do read about these companies?
I read it on seekingalpha I think. Are there any other good investment sites? Thinking about putting together an application for Value Investors Club, maybe after CFA is over…
you must be hoping the company pays a dividend…stock looks kinda like a cigar butt… go palantir go!
I think it’s too small for a div yet, but who knows, that could be a way. What are you buying?
@ubermensch - Android is crushing everyone globally. RIM’s gotten their ass kicked here by Apple, and overseas they’re getting crushed by Google. They’re done. This nifty little graph pretty much says it all. http://articles.businessinsider.com/2011-11-15/tech/30400572_1_smartphone-android-ios That said, I may lose the bet rather quickly if RIM actually finds a buyer in the next couple weeks. I can’t imagine a company willing to overpay by so much, but dumber things happen all the time.