eToys Inc. (ETYS) Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : eToys Inc. (ETYS)

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Cirruslvr who wrote (755)	10/29/1999 6:13:00 AM
From: Harley Davidson	Read Replies (1) of 1330

Inthe interest of full disclosure, I am short ETYS...why? 1- There current market cap is 8 Billion compared to Hasbro 3.9 Billion 2- They are soon to have 109 million shares released into the market that were previously restricted (mostly from the Baby Center acquisition) making there market cap 16 billion. 3- A 16 Billion dollar market cap is absurd.... because.. 4- The Baby Center was acquired for almost 200 million in stck. The tangible asset value was 500 THOUSAND. Thats mostly where the "non-cash charges" are coming from. Amortization of 10 million a quarter for the 200 million in goodwill from this acquisition. Thats the shortest amortization period for goodwill I have ever seen. I think the company would have been better served to sell the stock to raise the funds necessary to carry the business to profitability rather than strap itself with another new E-commerce web site. 5- The IPO proceeds (cash in the bank) at the end of the first quarter was 176 million. They lost 32 million the second quarter, they have inventory to purchase (not 100% fundable by A/P) and a hell of an expensive ad campaign going on. The estimated E-commerce Christmas toy sales this year are 250 million of which ETYS is forcasted to get 46% of. Thats about 115 million in sales. The gross margin is less than 20% for the first quarter but I'll use 20% assuming they will have better utilization of their fixed asset base. Add these sales to the 20-25 million in sales that quarter one and two suggest for three and you have 140 million. 20% of this is 28 million gross profit. They lost 32 million on 13 million sales in Q2 so there operating costs must have been about 35 million. Add at least another 15 million for adv, etc for Q3 and you have a net loss of 22 million. 176 - 32 -22 = 122 less investment in operational growth (inventory and the like) and you have about 100 million in cash left. ETYS would have lost about 100 million in the year. It will be a long time until the next christmas season. With a 35-50 million dollar operating cost base and a 20% margin they must have 175-250 million in sales a quarter to break even. That is twice what they expected to sell this Christmas season. To make a short story long....I think they run out of cash before they are profitable. 6- This company can not sustain a 16 billion dollar market cap. Hasbro's P/E is 15.... ETYS will have to generate over 250 million in net profit to support there market cap at a P/E thats 4 times Hasbro's. Not going to happen...... 7- Look at AMZN.... sales double... losses increase. The market under estimates the extent of the competition of brick & mortor stores and other E-commercre stores. And I think the market under estimates the cost of the infrastructure necessary to sustain the distribution levels required for a company to reach profitability. like i said... I'm short.... see you in the 30's within 6 months Regards, BuddyR (Wall Street Stand...check it out)

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next