Trimble Navigation's high-margin geospatial business and its precision navigation systems for farm use have slumped as the dollar has pressured commodities markets. But the company continues to grow in building information modeling (BIM) software and in mobile solutions for truckers and other fleets and work forces. Management is seeking to improve profitability, and heavy investment in new features make its precision location software more indispensable. As technology continues to advance rapidly, will Trimble be a beneficiary of improved hardware and cloud-based data systems, or will its customers retrench? Can it continue to make acquisitions, or must it focus inward to improve margins?
We described in Part 1 how Cree, Inc. ramped up its headcount in its LED fabrication operation during the major up-cycle that occurred from 2006 through 2010. Although fewer bodies have been added since then, there's "only" been a 10% reduction in corporate headcount since the all-time peak in fiscal 2014, and LED sales are now back to where they were before fiscal 2010.
Although Cree has changed course to emphasize lighting fixtures, the company still suffers from low gross margins and excessive operating expense relative to sales. It also pays out a generous stock comp package even though its stock has underperformed Acuity, a pure-LED comparable that has treated its shareholders to the above average returns one might expect when being a leader in such a rapidly growing category.
In this podcast, we recap the operations discussion from part 1 (including thoughts about how our model has been changing over time), document how well the rest of the industry is doing, talk about the nature of excess Chinese capacity that was accumulated to accommodate flat screen TV manufacturing back in 2010-2011, and provide some color on what it's been like to participate in the commercial, residential, and overseas markets for LED lighting.
Having heard parts 1 and 2, we think you will now have the building blocks to ask the right questions and properly think through whether Cree's breakthrough SC5 technology might separate high power LEDs from those made by commodity LED fabricators, mirroring what happened coming out of the cycle downturn nearly a decade ago. Importantly, you will want to consider whether Cree, Inc. can continue to grow in line with industry leaders on the lighting fixture side and if downstream margins might improve.
Shares of Cree, Inc. are trading at about the same price as they fetched a decade ago, but at this point in time demand for LEDs for use in commercial lighting applications is very robust. Other companies involved in this area have enjoyed a warm reception from investors, in stark contrast to Cree. In this stock research podcast, we explore in detail what is happening in the realm of commercial lighting design and construction, and how Cree’s strategy has positioned this innovative company for the future. As with many other episodes, we revel in the contrarian nature of the present moment, which we feel can reward those who choose to carefully examine the components of this company’s financial statement reporting and evaluate corporate strategy in a thoughtful and considered way.
Besides having a unique technology, cyrolipolysis, Zeltiq may be able to effectively use this revolutionary platform to address needs beyond the original intention to selectively reduce fat in a non-surgical way. In 2017, it plans to use CoolSculpting to treat grade 2 cellulite and acne. Grade 2 cellulite affects a large portion of women, while some other devices target grades 3 or higher, which are characterized by unsightly manifestations like cottage cheese thighs. By 2018, management hopes to introduce CoolSculpting to treat acne. In this stock research podcast, we discuss the research of Dr. Rox Anderson of the Harvard Medical School, who delves into the history of acne treatments. Powdered dry ice and acetone pastes were prevalent in the 1940s and 1950s, but were pushed aside by antibiotics and retinoids. A tightly controlled approach to cyrolipolysis may improve outcomes and address worries of antibiotic resistance and fetal retinoid syndrome. Using one platform to treat three conditions would present a unique competitive advantage to Zeltiq, should it succeed.
Zeltiq has single handedly created a new market for reducing fat that targets the moderately overweight segment. It has become the fastest growing aesthetic treatment, which was already notable for the tremendous demand for neuromodulators like Botox and hyaluronic acid fillers like Restylane and Juvaderm. In Part 1 of this podcast, we explore how Zeltiq's high margin consumables and systems have permitted the company to break through the barriers that often restrain new aesthetic products. We also discuss why cyrolipolysis, an affordable and non-surgical procedure, is popular with a new group of women and also men who are approaching practitioners for help in sculpting difficult areas of their bodies that they can't control with dieting or exercise alone.
With the launch of its Roomba 980 vacuum in September 2015, iRobot has added cameras, sensors, and Wi-Fi connectivity. CEO Colin Angle explains why he feels a roving sensor platform aboard the Roomba places iRobot in a unique position to grab leadership in the connected home of the future, and why fixed-point sensor arrangements such as Nest and Dropcam have suddenly fallen from favor. In an analyst day presentation in New York City, CEO Angle unveiled a new corporate strategy that relies on home connectivity as an engine of differentiation and growth. In this podcast, we discuss how the company’s new empirical approach to marketing may convert millions of skeptics into evangelistic promoters of robotic vacuums, explore a disruptive opportunity to capture share in lawn mowers and related services, and explain why management is deemphasizing defense and remote presence robots
Out of the blue we've heard from some smart people interested in this obscure molecular diagnostics company. Yet it seems few really know what's going on in this space. All the focus is on the FDA clearance of Luminex's new platform, Aries, which was designed to appeal to hospitals that might otherwise send out complex molecular tests to academic centers or big labs. In this podcast, Bill Baker, CFA, reveals how despite murky corporate-level profit patterns and excitement about Aries, a quietly building strength in high-margin royalties, assays, and consumables separates Luminex from the rest of the pack. He shares his insight from years of following a number of molecular diagnostic firms, and debunks misconceptions of where profitability really originates at competitors that would be affected by the launch of Aries. Next week, Bill travels to attend the Association for Molecular Pathology annual meeting in Austin, TX.
In 1965 Gordon Moore, co-founder of Intel, made an astounding prediction that transistor density on chips would double roughly every two years. But few know that at the same time he warned chip fabricators would hit a wall when the geometries involved became as small as atoms or particles themselves. IN this podcast, Bill Baker, CFA, describes how this nimble provider of precision power equipment has bucked a morose trend in the semiconductor industry and gained market share among a field of barely profitable competitors. He also explains why industrial power equipment markets are being targeted by the management of Advanced Energy.
When Synaptics' stock price withered from over $100 per share this summer to the mid-60s, according to Bloomberg a state-backed buyer from China offered to pay $110 per share for the company, and was rebuffed. What did China see in Synaptics that institutional investors in the U.S. may have missed in this company? In this podcast, Bill Baker, CFA, tears apart the pieces of the company hidden behind opaque segment reporting and discusses the unique competitive advantages held by Synaptics.
In Myriad's analyst day in NYC on September 14, 2015, management discussed the outlook for several new growth drivers, and it addressed challenges faced in its legacy BRCA1/2 hereditary cancer genetic testing franchise. We explore what's new, the ins and outs of each opportunity, and delve into the intricacies of companion diagnostics.
Monotype Imaging is regarded as having a unique and somewhat bullet-proof franchise, being a "toll collector" when companies use fonts anywhere from on a laser printer to cloud-based publishing in mobile ads. But why has there been margin erosion and deceleration of growth? We explore what's under the hood in this episode...