I saw another “strategist” on FinTV this morning trying to compare today’s market environment to 1995, claiming ChatGPT’s introduction was akin to the 1994 unveil of Netscape. Similar to late-1994 the NASDAQ has doubled over four year since its lows in 1990 and 2020. (2) And in late-1994, Fed Funds were at 5.5%, similar to today. The inflation rate in 1995 was 2.8%, also similar to today. But that’s where the similarities end. At the end of 1994 the S&P 500 was trading at 12x 1995 EPS. Versus 22x the 2024 estimate today.

I find myself agreeing with a good friend who observes that more and more announced commercial RE deals are hiding important terms below the surface, so as to maximize the headline valuation. $SLG’s 245 Park is a good example of this, as are recent data center deals. @StanphylCap (2) Look at $SLG’s LTM capex of $300M (consolidated only). That’s basically 100% of D&A, and 33% of annualized consolidated revenues! It’s also over 3% of gross PP&E. Makes a “4 cap” insane ($SLG trades at an implied 6 cap).

And with gross and operating margins higher than $TSLA, Mercedes doesn’t seem to be “disrupted”, does it? #ProfitableDinosaur (2)Toyota…? Nope. Their operating margin (9% last FY) is improving. $TSLA

Remember that $TSLA Megapack energy storage pump a few moths ago? Well GWh installed were up a lot sequentially(3.9 vs 2.5, Q/Q), but gross profits not so much($159M to $168M, Q/Q). Gross margins in that segment dropped to below 11%. (2) And $TSLA Automotive Gross Profit/Unit is back to 2019 levels. And that’s before the April price cuts.

Can someone explain the valuation discrepancy between cash-burning legacy data center operator $DLR,and it’s affiliated Singapore-listed REIT, $DCRU.SP…? DCRU owns the exact same type of data centers as its parent, yet is much cheaper. It trades at almost a 9 cap vs 5 for $DLR! (2) As for yield, $DLR yields 4.6% vs 8.0% for $DCRU.SP. Again these are the same type of global legacy data centers (DCRU is not just Asian DC’s) in both portfolios, so this is a direct comp. REIT investors, can you help me out here?

The $GE 4Q press release only has 18 pages of adjustments. Post-spin, 2023E guidance for “Adjusted EPS” of $1.60 to $2.00 is well below estimates($2.40). (2) And they cut the “Crown Jewel” (Aerospace) guidance for 2023 Segment Operating Profit from $6.0B to $5.3-5.7B.

The Astonishing Economics of the Tesla Megapack | It’s come to my attention that the $TSLA Faithful are beginning a new bull narrative(FSD and robots are so 2021-22), based on “Megapack” utility-scale battery storage. See this breathless article below: torquenews.com/14335/astonish… (2) The $TSLA bulls believe that demand for its Megapacks is 40 GW, and they are “sold out” for years. Tesla currently sells a 3.9MWh Megapack for $2.6-2.7M, or $680K per MWh. 40 GW would be $27B in future revenues. And “at a 50% gross margin, would be…”

What Does 2023 Have in Store for DigitalBridge? | This post on $DBRG is symptomatic of the Hopium being smoked in the data center space. Let’s dive in, shall we? 310value.substack.com/p/what-does-20… (2) Specifically, we will focus on the recent almost $11B purchase of data center company Switch by $DBRG, which has been a point of contention between the bulls and bears. The bulls believe it was an opportunistic purchase consistent with CEO’s aggressive roll-up strategy…

And $LYV is still going to earn less than a $1 this year!

https://twitter.com/Vinny_Daniel0/status/1592888083044761602

(2) And now the DoJ is apparently going to revisit the terms of its previous antitrust settlement with $LYV.

As the sell-side pretzel twists itself to cheer the $RUN 3Q (EBITDA was negative again), the “Morgan’s” let slip the reality. Here is JP Morgan forecasting continued losses as far as the eye can see. (2) And here Morgan Stanley says the quiet part out loud about $RUN’s continued absurd use of a 5% discount rate to calculate its made-up NPV metric. Even the Company admits that their cost of capital (6.5-7.5%) is above 5%, at this point.

$DLR 3Q Same Store Revenues down (5.0)%, and Same Store NOI down (7.2)%. Everything going in the wrong direction here. These numbers are worse than the office REIT’s! (2) Just brutal $DLR

2Q SBC at $COIN was $391M, or 48% of revenues. That’s some add-back to “Adjusted EBITDA”! (2) And $COIN guiding to $400M in 3Q SBC. Makes that $(500)M floor on annual “Adjusted EBITDA” loss kinda meaningless, doesn’t it?

Ok, it’s time for my quarterly review of the pro forma disaster of a financial science project called Sunrun ($RUN). Here is their 1Q cash flow statement: (2) $RUN The Company loves to present their own metrics like Customer Additions, Net Subscriber Value and Megawatts Installed. Profits and Cash Flow(for obvious reasons), not so much. Here is their Loss Statement:

$CVNA OMG (2) $CVNA burned $800M in cash BEFORE any inventory (and related payables) build. Wow.

Over 5 pts of $IBM total revenues from $KD. Less than 3% revenue growth without. Software revs up less than 4%, ex-KD. FCF only $1.2B. Financial engineering at its finest. (2) Also they once again recast (lower) 1Q 2021 Software Revenue (from $5,317M to $5,138M), which added another 3 pts of “growth” for Software this quarter, with the stroke of their magic $IBM accounting pen. Same old, same old.

A year ago, at $10 per share, $AMC had a total enterprise value of $11.0B ($4.7B market value + $6.3B in net liabilities, ex-leases). The 2022 EBITDA estimate then was $540M, or 20x next year’s EBITDA. Expensive, but not crazy. (2) Today at $29, $AMC has a TEV of $20.7B ($15.2B + $5.5B), or 33X the 2023 EBITDA estimate of $630M. That’s getting crazy, given it still means AMC will be unprofitable through 2025.

Those of you who follow fintech ($AFRM, $SOFI, $SQ, $UPST, etc) know how important Cross River Bank in NJ is to the entire industry. They are the actual bank that makes and securitizes most of the fintech-originated loans. (2) And some of you know that Cross River is under Congressional (and probably regulatory) scrutiny for a disproportionate amount of fraud in the PPP lending program.

Peloton’s New C.E.O. on the Tough Road Ahead ⁦@andrewrsorkin⁩ nytimes.com/2022/02/19/bus… (2) If this former CFO truly believes that the “monthly churn is less than one percent”, then $PTON shareholders are still going to be unpleasantly surprised going forward.

The $IBM “Free Cash Flow” Myth: Free Cash Flow is one of the few metrics that $IBM gives guidance for. In FY it was $10.8B after deducting proceeds from receivable sales($4.3B). (2) Here is $IBM’s actual future “guidance” from its recent Analyst Day. Note that they do not provide earnings guidance, “adjusted” or otherwise.

Keep in mind that this Chinese “company” claimed it sold $870M in new equity in December, but has released no details on the sale. Yet still trades on the NYSE with a $20B valuation. $GSX

https://twitter.com/Junheng_Li/status/1357458794683330560

(2) For those of you wondering about the veracity of the $GSX whistleblower complaint, I would note that the odd dates mentioned for the 2016 RYB audit(June 19-23, 2017) actually checks out with the $RYB F-1 filed in August, 2017(June 22, 2017).

A Little GameStop/Robinhood Perspective: A number of hedge funds got the $GME trade very wrong on a risk/reward basis(I know the feeling), and attracted the interest of smart retail investors. They spread the word via social media, and the stock skyrocketed. (2) The affected hedge funds were run over, but few noticed that other big hedge funds made as much, or more, than the retail investors. Ok, some lost big, some won big. Happens all the time. Then things got weird...