11/7/24 - $bird - More interested $7-8/shr
11/7/24 :: VROCKSTAR :: $BBIRD
More interested $7-8/shr
- mgmt is operating on their own time
- beyond M&A, it's hard to see how stock really moves higher in the 3-6 month timeframe, unless it catches some momentum in this whacky environment where rando-stuff-moon. but i'd not bet my dog's tennis ball on it
- basically mgmt "taking right" actions still e.g. store closing, gearing up for some interesting product launches/ marketing but it sounds like we get to see this all playing out in 2H25. that's an eternity to wait for a result that wasn't really a beat (inside guidance) and where guidance for 4Q/FY was taken lower. ewww, that doesn't work in this environment.
- while balance sheet remains net cash and we can decide how to handle leases (maybe i say it's not $50 but $25 mm of "debt") that still say puts us in a $50 mm net cash position. at the same time we burn 10-15 mm a quarter until someone buys the company or results start to inflect. rough. essentially by 4Q, we'll either be raising with a good story, or stock will have started to work a bit as FCF inflects positive (probably a '26 event at the earliest given my experience operating in reality)
- so what's the brand worth? 1x gross profit? 0.5x gross profit?
- really hard to say. i think you need to assume someone like
BIRK, 
CROX, 
ONON (even 
LULU) could buy these guys and cut a lot of the SG&A out on their bigger platform. this is why i think multiple of gross profit makes the most sense.
- at most i'd say 1x gross profit which if/when you assume buyers would want to see the new lineup in the market (bc the current portfolio is still not growing... so why complicate things for yourself), and take out all the net cash bc we burned it getting there, that's the stock as of y'day call it $10-11/shr or ~90 mm market cap.
- but if we need to wait, what's the right discount rate for something like this 25-30%? private equity style? so you're now at probably $7-8/shr today and it waffles up or down depending on how well these marketing/ launches go next year
TL;DR... the company's best option is to sell today at some modest premium. i think they've made it quite hard to do so in delaying this decision for years. now they need to swim. and the stock is on it's back heading into tax sell off season and where the ticker is too small cap for (real) institutions to get involved and what would an activist really accomplish in a founder-led situation like this on fire? unfortunately i think this thing is going lower and/or i'm uninterested unless we start entering the mid single digits, call it $7-8, minimally.
talk then. stay well.
V
More interested $7-8/shr
- mgmt is operating on their own time
- beyond M&A, it's hard to see how stock really moves higher in the 3-6 month timeframe, unless it catches some momentum in this whacky environment where rando-stuff-moon. but i'd not bet my dog's tennis ball on it
- basically mgmt "taking right" actions still e.g. store closing, gearing up for some interesting product launches/ marketing but it sounds like we get to see this all playing out in 2H25. that's an eternity to wait for a result that wasn't really a beat (inside guidance) and where guidance for 4Q/FY was taken lower. ewww, that doesn't work in this environment.
- while balance sheet remains net cash and we can decide how to handle leases (maybe i say it's not $50 but $25 mm of "debt") that still say puts us in a $50 mm net cash position. at the same time we burn 10-15 mm a quarter until someone buys the company or results start to inflect. rough. essentially by 4Q, we'll either be raising with a good story, or stock will have started to work a bit as FCF inflects positive (probably a '26 event at the earliest given my experience operating in reality)
- so what's the brand worth? 1x gross profit? 0.5x gross profit?
- really hard to say. i think you need to assume someone like
BIRK, CROX, ONON (even LULU) could buy these guys and cut a lot of the SG&A out on their bigger platform. this is why i think multiple of gross profit makes the most sense. - at most i'd say 1x gross profit which if/when you assume buyers would want to see the new lineup in the market (bc the current portfolio is still not growing... so why complicate things for yourself), and take out all the net cash bc we burned it getting there, that's the stock as of y'day call it $10-11/shr or ~90 mm market cap.
- but if we need to wait, what's the right discount rate for something like this 25-30%? private equity style? so you're now at probably $7-8/shr today and it waffles up or down depending on how well these marketing/ launches go next year
TL;DR... the company's best option is to sell today at some modest premium. i think they've made it quite hard to do so in delaying this decision for years. now they need to swim. and the stock is on it's back heading into tax sell off season and where the ticker is too small cap for (real) institutions to get involved and what would an activist really accomplish in a founder-led situation like this on fire? unfortunately i think this thing is going lower and/or i'm uninterested unless we start entering the mid single digits, call it $7-8, minimally.
talk then. stay well.
V
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