even retrospectively differentiated retail is hard.
my painful lesson was a 2X in Tractor Supply rather than a 5X. why? because i already was biased that it was overvalued and looked for an excuse...which i found in a ton of negative employee reviews.
even following those with good track records is hard, because i am highly skeptical of durable consumer models in a hyper-competitive world. (even today, i am shocked at how few apple owners realize\care that several android phones are equal or better with a more flexible ecosystem.)
It is so hard. I felt academy had a really good and profitable model and were buying back 10% of the OS annually. But they can’t seem to figure out same store sales comps. They missed badly last week on this but the stock has been rallying because of the margin profile. Tough biz.
That's a good question. At the end of the day it's an expense for high quality talent in a very competitive human capital market. I do think it's excessive and would like to see them bring it down. However, I also like knowing employees are being compensated with ownership in the business and not just high cash pay. And as long as the company is willing to manage the dilution with using FCF to buyback the stock then I'm not too concerned about it. If dilution was running wild that would be a major concern to me.
Lastly, this level of SBC isn't anything new for them, in fact it's at its lowest level since IPO, and so I don't think the market is too concerned about it. The stock is getting hammered because revenue and expansion has been slowing significantly, competition is increasing, AI spending is compressing margins, it was overvalued to begin with, etc. If they can figure those things out over the next 18 months the stock will work just fine regardless of the % SBC to revenue, in my opinion.
I fully agree it is good when there is alignment of interest between management and shareholders. But 40% SBC of revenue... Gross margin last year was 67%. Then another 40% goes SBC and then other costs. When you make. 2.8B revenue and there is still no net profit, that is not good. And weighted average shares only increased so far. For me this is a major concern. As a shareholder you are paying for this crazy SBC. I think you are completely right about the company and the future increase in revenue, but I would prefer companies who put shareholders first. But I hope you will continue these great annual results!
As FCF has grown significantly, total shares outstanding have only increased by 3.7% over the past three years. I personally don’t think that’s anything to run away from. I’d rather see them decrease but that’s not the stage the business is in right now and that’s okay. Margins are being compressed because the company has been buying GPUs from Nvidia but according to the CFO at the Goldman tech conference two weeks ago, the company is done buying compute. I think we’ll see margins began to re-expand as a result.
Your points are correct but for the sake of the stock, it can be up 50% or down 50% over the next 18 months, but I don’t think the direction of the stock up or down will be driven by SBC.
Good looking family you got there. Congrats Matthew (and the Mrs off course)
Appreciate it!
even retrospectively differentiated retail is hard.
my painful lesson was a 2X in Tractor Supply rather than a 5X. why? because i already was biased that it was overvalued and looked for an excuse...which i found in a ton of negative employee reviews.
even following those with good track records is hard, because i am highly skeptical of durable consumer models in a hyper-competitive world. (even today, i am shocked at how few apple owners realize\care that several android phones are equal or better with a more flexible ecosystem.)
It is so hard. I felt academy had a really good and profitable model and were buying back 10% of the OS annually. But they can’t seem to figure out same store sales comps. They missed badly last week on this but the stock has been rallying because of the margin profile. Tough biz.
But hey, a 2x on TSCO isn’t bad!
yes, 2X got me to breakeven on all my retail misadventures!
Congrats on the grand arrival. On Snowflake, how do you look at their SBC of 40%+ from revenue?
That's a good question. At the end of the day it's an expense for high quality talent in a very competitive human capital market. I do think it's excessive and would like to see them bring it down. However, I also like knowing employees are being compensated with ownership in the business and not just high cash pay. And as long as the company is willing to manage the dilution with using FCF to buyback the stock then I'm not too concerned about it. If dilution was running wild that would be a major concern to me.
Lastly, this level of SBC isn't anything new for them, in fact it's at its lowest level since IPO, and so I don't think the market is too concerned about it. The stock is getting hammered because revenue and expansion has been slowing significantly, competition is increasing, AI spending is compressing margins, it was overvalued to begin with, etc. If they can figure those things out over the next 18 months the stock will work just fine regardless of the % SBC to revenue, in my opinion.
I fully agree it is good when there is alignment of interest between management and shareholders. But 40% SBC of revenue... Gross margin last year was 67%. Then another 40% goes SBC and then other costs. When you make. 2.8B revenue and there is still no net profit, that is not good. And weighted average shares only increased so far. For me this is a major concern. As a shareholder you are paying for this crazy SBC. I think you are completely right about the company and the future increase in revenue, but I would prefer companies who put shareholders first. But I hope you will continue these great annual results!
As FCF has grown significantly, total shares outstanding have only increased by 3.7% over the past three years. I personally don’t think that’s anything to run away from. I’d rather see them decrease but that’s not the stage the business is in right now and that’s okay. Margins are being compressed because the company has been buying GPUs from Nvidia but according to the CFO at the Goldman tech conference two weeks ago, the company is done buying compute. I think we’ll see margins began to re-expand as a result.
Your points are correct but for the sake of the stock, it can be up 50% or down 50% over the next 18 months, but I don’t think the direction of the stock up or down will be driven by SBC.
Thanks for the back and forth, I love it!
Thanks for the mention and congratulations on the new addition to your family 🎉
Appreciate it!!