Stronger Markets, FB Recap, NVDA W/O Arm, Rocket Biz Is Booming And More
Here’s the transcript from this week’s Trading With Cody Live Q&A chat.
Q. Will Cody send out the alerts when he actually buys like before or should we just be doing what he says he intends? Why would he tell us his trade after and not when he does it?
A. I do my best to send out Trade Alerts anytime I make a new move, but dealing with Covid at my home this past week, dealing with Amaris being in the hospital the week before….I’m doing my best but I’ve had to make some adjustments in the writing style in telling you all what I plan to do ahead of time in case I don’t get the time to write up the Trade Alert in the midst of this turmoil at my home the past two weeks and other occasional times. Thank you for understanding.
Q. Cody, are you doing more trimming into the strength we’ve had this week? Thanks.
A. Not trimming anything in the personal account so far but I have trimmed some recent gainers in the hedge fund. Mostly letting things ride for now.
Q. Cody, thoughts on FB? It went from a trillion dollar to a half trillion dollar entity. Doesn’t seem like many of the talking heads support buying down 50%. Seems they will still print money. Thanks.
A. Yes, I’ve mentioned lately often that I am a buyer of FB around and especially below $200 levels. Still kicking off big cash, probably still growing and still is the leading VR Revolution platform. Plenty of risk that FB and Insta lose marketshare in coming years though.
Q. Hi Cody, hope you & your family get better soon. How would you rate NVDA now that the ARM acquisition fell through?
A. Ooh, good question as the ARM acquisition was part of my long-term bullishness on NVDA from the current levels. Without it, I’m concerned that NVDA’s quite overvalued. Trading at over 15x next year’s sales estimates of $40 billion on 17% topline growth, down from 30% topline growth with 60% gross margins. Assuming 15% topline growth for the next five years would get NVDA to $80 billion in sales, $48 billion or so in gross profits. Take out another $10-12 billion in operating expenses and that’d be $26-28 billion in profits. Throw a 20x multiple on that and you’d have a stock worth less than it’s current market cap. I’ve owned NVDA personally since a split-adjusted $7 per share when I sent out the original Trade Alert on this buy back about five years ago and I have had a nice run in it since I launched the hedge fund and bought it in there over three years ago. So I’ll hold onto most of the NVDA shares I own, but I’m not looking to add to it anytime soon.
Q. Cody, has your view on ASTR changed after their recent first successful SAT deployment this week?
A. Yes, a little bit. Certainly gives me pause but I still don’t think this company is a good investment and I still have a small short on it in the hedge fund as a hedge against my space longs.
Q. Cody, with BKSY looking like a good investment at 10$, what has changed fundamentally that it should not be a much better one at 1.60?
A. The company has guided lower almost every quarter they’ve reported since coming public.
Q. Hi Cody, hope your family is doing OK. I have questions about KD. It seems to be a low margin, low growth and non-profitable name. Why is it in your buy list? At $12ish, is it a good price to start my first tranche? What’s your rating on this?
A. The company is likely to let a bunch of unprofitable contracts expire and/or negotiated into profitable contract levels as they renew in coming months and over the next two years. I expect this stock could get back to trading at 0.8 to 1x sales in three or four years if they can get these contracts profitable. Revenue would probably be closer to $15 billion vs this year’s $18 billion. So maybe a $12 billion market cap would be reasonable, up from today’s $2.5 billion market cap. On the other hand, this stock could just languish here for two years if the business doesn’t start turning more profitable.
Q. Hi Cody, hope your family is OK. Can you tell us your take on the SaaS software stock $TWLO? This one has come down 70%. Is it something you would consider, or are there others like it you prefer? Thanks.
A. I like TWLO the company a lot and let’s take a fresh look at the company right now to see if its valuation is reasonable… $27 billion valuation, trading at over 5x next year’s sales estimates assuming 30% topline growth this year, down from 35% last year. 50% gross margins aren’t that great in this business. So let’s do the math — assuming 20% topline growth for the next five years would get TWLO to $13 billion in revenue at 50% gross margins, that’d be $6.5 billion in gross profit. Take another $3.5 or so worth of operating expenses and that’s $2 billion in profits in five years. Put a 20x multiple or so on that and you’d have a $40 billion market cap. That’s a 60% gain from today’s levels or about 10% annualized. The company could end up doing better than these back of envelope numbers indicate though. It’s not a bad stock here but not a no brainer either.
Q. Cody did you ever do more work on BKKT? I believe you said you were intrigued because you were impressed with the CEO.
A. I’ve asked my team to set up a call with the CEO so I can vet him further.
Q. Take a look at PUBM if you like sometime. It looks relatively cheap and has decent growth. Hope everyone in your family stays healthy.
A. Looks interesting. Will do some more work. Thank you.
Q. Cody, I’m interested in your thoughts on SLNH. Is it on your radar?
A. It’s a tiny $150 million market cap company that came public back at the top of the dot com bubble in 2000 and is still down 90% from those highs. This is the kind of chart that 90% of the SPACs and other recent IPOs from 2020/2021 will end up looking like in 20 years.
Ok folks, I have an appointment to get tested for Covid in a few minutes from now. I have to run. Thank you all for the kind words, well-wishes, positive vibes, prayers, etc.
