“It was just explosive, humongous growth, and those numbers were very seductive to a lot of investors,” said John Zolidis, a restaurant-industry analyst and president of Quo Vadis Capital, which said it has never bought or sold Luckin stock.
“Tractor Supply was already a strong company with excellent fundamentals prior to the corona-crisis,” wrote Quo Vadis president John Zolidis. Quo Vadis rates Tractor Supply long.
“We believe it is reasonable to believe that secular shifts (less competition, more people moving to rural locations, superior economies in rural locations) together with new strategic initiatives (accelerated investment in digital) potentially reset Tractor Supply’s earnings power in a way not yet appreciated in consensus forecasts or the equity’s valuation.”
“Leaving aside the fraud, the figures that are available suggest that Luckin Coffee never had a viable business model,” Zolidis said, forecasting that the store closures will come as a result of losing access to capital. “The company grew too fast and acquired customers via promotional offers, without ever proving the economics.” In an April note, Zolidis said Luckin’s stores were “generating significant losses” and “do not appear to produce positive same-store sales.” He raised questions about whether the company could ever produce a profit.
Quo Vadis rates Luckin stock sell.
Despite the biggest disruption to life in a generation, it makes sense that stocks have barely declined. First, as we discussed last month, the market looks forward, and economies are already in the process of reopening. Second, the Federal Reserve is again backstopping the economy and flooding the market with liquidity. Similar efforts successfully saved the U.S. and global economy during the 2008-2009 housing and financial crisis. Most investors remember this. Third, investors are anticipating accelerated secular change, and bidding up the shares of large technology and other companies, which are perceived to benefit.
Quo Vadis called the expectations for Luckin’s performance “unrealistic.” Analysts there rate Luckin stock sell.
“The company has indicated that it ultimately expects to achieve unit level margins of 30% and to break-even at the corporate level by 3Q20,” wrote Quo Vadis in a note. “A $9 billion market capitalization for this unproven concept with an uncertain path to profitability is unjustified in our opinion.”
Was last week’s mid-week 20% rebound real? Unemployment is exploding. 100 Million Americans are entombed in their homes. Businesses are shuttered. A pandemic threatens widespread death and suffering if some forecasts are to be believed. The stock market staged a dramatic three-day jump. We are saddened by the job losses, business foreclosures, stress, and tragedy but remain optimistic from a clinical investment standpoint.
Columbia University Presentation March 5 2020 V3
Target’s muted statement on potential supply-chain delays “suggests that the ripples of disruption across all of retail are probably lower than some are expecting at the moment,” said John Zolidis, an analyst at Quo Vadis Capital.
Summary: Stocks needed an excuse to pull-back. The media storm and negative feedback loop around coronavirus have proven to be just the trick. Our view: Don’t change your investment strategy. The DJIA dropped 12% last week. The severity of the sell-off is due to three factors. First, stocks were extended following the recent resolution of uncertainty on trade disputes with China. Second, financial and other media have stoked fear by massively amplifying reporting and risk around the threat of coronavirus. Lastly, companies and industries are experiencing a real negative impact from reduced consumer spending, travel, and disrupted supply chains. Earnings will be lower than previous estimates.
SFM Presentation VALUEx Klosters 2020 v4