DescriptionBumble Inc. restructuring aims to boost operating leverage by reducing its headcount by 35% and enhancing subscription stickiness through feature upgrades. This move is expected to drive top-line growth alongside international expansion and improve bottom-line margins by 3% this year, thereby enhancing the Return on Invested Capital (ROIC).Key Growth Drivers:App Growth: Revamping Badoo and leveraging the potential of Fruitz.International Expansion: Targeting untapped markets in Europe, Asia, and Latin America.M&A: Enhancing user lifetime value and expanding the ecosystem.Given the company's recent efforts, I expect EPS to be significantly higher in the coming years, offering a strong margin of safety at today's valuation. OverviewBumble comprises three core apps: Bumble, Badoo, and Fruitz, with the recent acquisition of Geneva adding a fourth. Operating in the dating industry, Bumble provides a platform and services to match people together and foster long-term relationships.Currently, Bumble is primarily US-centric but is expanding into international markets for growth. The industry’s intellectual property is mostly held by Bumble and Match, with Match having a larger international presence. A key differentiator is Bumble’s focus on women, featuring options like the "first move," which helps maintain a more serious user base by reducing inappropriate behaviour.Bumble Inc. has undertaken a significant restructuring aimed at relaunching its app to optimise for higher, stickier subscriptions and streamline operations by reducing headcount by 35%. This led to the company no longer in Nancy Pelosi Stock Trades Tracker.These measures are expected to drive operating leverage starting in Q3 2024, focusing on top-line growth and improving bottom-line margins by 3% this year. This improvement stems from a leaner workforce and moderated marketing expenditures, setting the stage for higher returns on invested capital (ROIC) in the coming years.Below is a chart forecasting ROIC for the years ahead. Notably, during a recent investor call, Bumble's CEO mentioned a margin of safety to allow for any cost overruns or issues with the restructure, which fortunately hasn't been needed. Costs may actually be lower than forecasted, potentially resulting in higher earnings. The top tier which includes Goodwill (potentially useful for future tax write-offs), is trending positively. The bottom tier excludes goodwill within the invested capital segment, and presents a more attractive view of Bumble’s asset-light business model.Leadership TransitionFive months ago, Bumble welcomed a new CEO, Lidiane Jones, who brings a fresh perspective and strategic direction to the company. With her background in the lightweight technology sector, I see her slotting in as a good fit.Jones joined Salesforce in 2019, where she rapidly ascended to the role of Executive Vice President and General Manager of Digital Experiences. She played a crucial role in developing and managing Salesforce’s key product lines, including Genie which became one of the fastest growing organically built products in Saleforce’s history. In January 2023, Jones was appointed CEO of Slack Technologies. With the pressure from Congress Stock Trades Tracker, during her tenure, she focused on integrating Slack’s capabilities with Salesforce’s ecosystem. Her leadership led to significant growth in user engagement and satisfaction, reinforcing her ability to steer large-scale operations and drive substantial product improvements.App Relaunch FocusEnhanced Engagement for Women: Bumble continues to prioritise allowing women to make the first move, but now with an option to set a question for men to answer, making initial interactions more engaging. Streamlined Onboarding: Simplified steps encourage users to add more photos and improve their profiles, leading to higher engagement.Safety Improvements: Ongoing investments to enhance safety and reduce scam accounts.Subscription Tiers: Focus on improving subscription tiers, particularly Premium+, to offer greater differentiation and higher success rates with added features based on the price paid. While AI tools are not unique to Bumble, they can improve churn, LTV, and engagement on the app. The network effect is the barrier to entry. Capital AllocationBumble's capital allocation strategy includes share r

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1. Copa is the best airline in the world; Copa’s competitive advantage is durable due to the unique location of Panama City and the network effect of the hub-and-spoke model

2. Copa has had an eight-year streak of exceptionally bad luck; the next eight years are, in a base case, likely to be much better

3. Valuation is attractive – I can see 1-year upside of ~40% (10x 2025 EPS) and 5-year upside of 100% (15% BVPS compounding and 2x 2028 BVPS)

4. Risks abound, but they are manageable and compensated by upside cases

Part 1: Copa is the best airline in the world; Copa’s competitive advantage is durable due to the unique location of Panama City and the network effect of the hub and spoke model.

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While airlines are notoriously bad businesses (low barriers to entry, high competition, high capital intensity, cyclical demand), Copa has generated more value through the cycle than any other airline in the world:

*Methodological note: I adjust BVPS in each period up assuming dividends can be reinvested at 2x P/B. This is a realistic assumption in the sense that Copa is often trading near 2x P/B, and an investor can literally use a dividend to buy more book value. A 15% BVPS compounding is consistent, for example, with 19% ROE and 40% dividend payout ratio (19%*40%/2 + 19%*60% = 15%). This is, in fact, what I think Copa’s long-run financial algorithm is, and it implies 11% growth in revenues and book value through time, 19% ROE, and 40% payout ratio (or share repurchases).

I have selected the airlines in the above table somewhat randomly – I could have chosen dozens more. Few airlines have grown book value per share through the cycle. And a very small number have grown BVPS at an attractive rate >10% for over 15 years (Alaska Air and Copa are the only two I know of globally). Even the highly-esteemed Ryanair, with all its innovation and operational excellence, has through-cycle returns far inferior to Copa. Copa’s numbers evidence a great business.

So what accounts for Copa’s high returns?

• Copa operates from Tocumen International Airport, in Panama City, which was basically designed for (and in large part by) Copa. Copa accounts for 80% of Tocumen flights. Tocumen, compared to nearby hubs such as Bogota and San Salvador, has the benefit of friendly and stable government, central location between North and South America, good weather for flying, and sea level runways, which lowers the cost of jet fuel at takeoff.

• Quoting a 2016 VIC writeup, “at Tocumen, Copa aggregates fragmented traffic from multiple destinations, serving many city pairs that lack sufficient demand to justify point-to-point service. For example, 76% of the markets served by Copa have 20 or less passengers per day each way (PPDEW). On 73% of Copa’s flights, the number of passengers sharing the same final destination is less than 20.” This is a network effect advantage, and cannot be eroded by marginally adding capacity because one needs the whole network to be able to serve city pairs with thin demand.

• Panama has favorable labor laws, labor markets, and tax structure for Copa to operate at quite a low cost given service / product (low costs while offering full-service experience).

So we have strong evidence that Copa will continue to generate good returns:

• Copa’s history of high through-cycle book value compounding

• Conceptually compelling explanations for Copa’s competitive advantage

Alternatively, a VIC short pitch from 2021 argued that increasing ULCC competition and longer-range narrow-body planes would erode Copa’s competitive advantage. I believe this to be unlikely for several reasons:

• No hub is as well developed as Tocumen, and therefore no hub can serve thin routes efficiently as Copa

• No hub has the structural advantages of Tocumen as discussed above (friendly government, sea level, location, weather)

• ULCC competition is worthy of concern, but it’s also somewhat beneficial that Copa is increasingly the only full service carrier in the region; some passengers prefer a full service experience

• More often-than not, high return business stay as high return businesses

Lastly, I suggest that the results since the above-mentioned short write-up speak for themselves in that Copa has delivered outstanding operating margins, which are also superior vs. all peers:

Part 2: Copa has had an eight-year streak of exceptionally bad luck; the next eight years are, in a base case, likely to be much better:

Let’s review the past eight years for Copa:

• 2015: Copa lost > $400M trapped in Venezuela and devalued into worthless Bolivars

• 2015 / 2016: Copa suffered due to the deep recession in South America, especially in Brazil; Brazilian GDP fell ~7% over the two years, far worse than in the 2008/2009 financial crisis (when GDP was flat for 2009, but quite healthy in 2008 and 2010); Brazilian and Colombian currencies deteriorated

• 2018: Copa discovered and disclosed that they had been under-accruing depreciation on their fleet for over ten years and took a 1x charge of nearly $200M

• 2020: COVID shut down air travel; Copa assumed a dilutive equity raise (convertible debt) just at the bottom of the market and their stock price

I’m not saying that this sequence of challenges represents a once-in-100-years kind of adverse circumstances for an airline. However, this is a string of adverse events that should be considered bottom quartile type of conditions. Some of the conditions could have been avoided through better management (Venezuela cash and under-accruing of depreciation), and some were truly unpredictable (COVID).

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As a result of different periods with different conditions, we can see that Copa’s book value compounding can be separated into very different periods:

When conditions are unfavorable, Copa survives and muddles through. When conditions are favorable, Copa prints money. These periods, respectively, can last long periods and swing unpredictably. Importantly, however, these periods are self correcting through the capital cycle: if things get bad enough, they trigger financial stress amongst Copa’s over-levered peers, which results in bankruptcy (sometimes), lower capacity, and more favorable conditions. Furthermore, Copa has the financial strength and business model strength to emerge healthy from these challenging periods, as they did even through all the catastrophes of the 2014 - 2021. The largest single-year hit to their book equity came in 2015 and 2021 (both about -30%), and in both cases I found bankruptcy highly unlikely at the time.

I don’t feel brazen enough to predict either that the 2023 favorable conditions will persist, and nor that the 2015/2016/2020 woes will return. Rather, I model a middle ground, on which I find valuation attractive.

Part 3: Valuation is attractive I can see 1-year upside of ~40% and 5-year upside of 100%:

Considering valuation in two different ways, I am struck in both cases that valuation is attractive:

• Valuation is attractive on the basis that Copa trades at 2.0x P/B. If Copa continues to grow adjusted book value per share (with dividends reinvested) at 2x P/B, one’s book value will double in just five years, and one’s investment at 2x P/B today would be 1x 2028 book value. One’s investment will outperform in this scenario (Copa would likely trade over 2x P/B in five years under this scenario, meaning that one’s investment would double in five years)

• Valuation is attractive in that Copa trades for 6.0x 2023 EPS (which I assume has cyclically high margins) and 6.9x 2025 EPS (which I assume has normal margins of 16%). I think Copa will trade up to 10x 1-year forward earnings, implying upside to $140 by year-end

Description This submission is categorized under "LGF/A US", but also applies to "LGF/B US", increasing $ ADV and borrow. RECOMMENDATION: SHORT Lions Gate with 40-70% upside driven by 1) untenable leverage, 2) 25%+ misses on OIBDA (EBITDA equivalent), and 3) a failed spin process. DESCRIPTION: LGF consists of two businesses: (i) Studio (~2/3 of revenue) that produces, distributes, and licenses movies and TV shows and (ii) Starz (~1/3 of revenue), which is an on-demand TV offering that caters to niche audiences. short interest api stock value calculator Black Scholes Calculator THESIS 1: LGF has an untenable ~5-6x OIBDA leverage, a content library that doesn’t generate enough cash to de-lever, and accounting that disincents debt paydown. Investors will become frustrated by high and rising leverage, falling reported FCF, and a rising cost of debt LGF’s studio content has soured and new releases have underperformed (last 2 Rambos lost money, Saw is 2 movies past “Saw the Final Chapter”, the last Hunger Games was released 8 years ago and the newly released prequel is underperforming HSX.com expectations, the last Expendables underperformed, etc.). LGF’s new releases are financed with production loans that LGF now cannot afford to repay and have therefore ballooned to all-time highs (~300% above long-term median). While production loans are non-recourse, management will admit that LGF cannot default on its production loans (and never has) given LGF’s new releases / survival are reliant upon new production loan issuances. Moreover, LGF’s accounting disincents production loan repayment given production loan paydown is treated as a use of FCF, meaning repayment leads to reporting troubling negative FCF for a highly overlevered business. Additionally, LGF has sizable term loan + bond balances from overpaying for Starz and other poor managerial decisions. Therefore, LGF is stuck in a precarious situation in which they have elevated leverage, no path for repayment, and a deteriorating content slate, which will prove increasingly troubling for investors. THESIS 2: LGF will miss on OIBDA by 25%+, leading to a de-rating Desperate to lower leverage and show growth, management gave an overly aggressive guide for LTM 1Q23-LTM 1Q24. To hit the guide, LGF released titles across all of its remaining functional franchises including (i) John Wick, (ii) a John Wick spin TV show, (iii) Expendables, (iv) Saw, and (v) Hunger Games. A box office unit economics analysis indicates that new content releases alone will not be enough to hit the Studio guide. Therefore, to temporarily hit numbers, management was forced to aggressively license content by signing longer-term deals (revenue derived from licensing is recognized immediately irrespective of contract length, so signing a 5-year deal allows more revenue to be pulled forward and recognized than a 2-year deal). This pull-forward led LGF to print revenue / OIBDA numbers that cannot be sustained. Despite LGF’s unsustainable release slate and licensing, St is projecting MSD % revenue and mid-teens % OIBDA growth off the elevated LTM 1Q24 figures, setting LGF up for 20-30% OIBDA misses. As LGF misses, investors will become disappointed and leverage levels will rise, exacerbating investor frustration. THESIS 3: desperate for a permanent solution to its overleverage and declining content slate, management is attempting a spin that will asset strip at bondholders’ expense. Bondholders have picked up on this, formed a bond group to block the spin, and are succeeding. A failed spin will disappoint bulls, leading to a SoTP valuation that implies 40-60% downside Nancy Pelosi Stock Trades Tracker Congress Stock Trades Tracker To address overleverage and a declining content slate, management is turning to corporate actions to find a permanent solution. Management is attempting to strip the assets of value (the Studio) from LGF, leaving bondholders behind with only the low-quality assets (Starz). This will allow management to pursue a sale of the de-levered Studio post-spin and more value to be captured by Studio equity holders. However, this contemplated spin trips a change in control provision that states the bonds must be refi’d out if “all or substantially all” of the assets change hands given the Studio represents just about all or substantially all of LGF’s FMV. Management is attempting to argue that “all or substantially all” of the BOOK VALUE is not changing hands and so the change in control provision is not triggered, but this argument is a stretch. A bond group has formed to fight management on this and there are data points to indicate that they are winning (management has alluded to concessions, bonds are being repurchased in the pubic markets, the spin has been delayed 3x, etc.). If the bonds have to be refi’d out, the spin destroys shareholder value given the cost of debt for the bonds rises 3x+ from the current 5.5% coupon closer to the bonds’ current mid- to high-teens...

This poll, fielded January 12-15, 2010, is part of a continuing series of monthly surveys that solicit public opinion on the presidency and on a range of other political and social issues. A national sample of 1,083 adults was surveyed, including an oversample of African Americans. Respondents were asked whether they approved of the way Barack Obama was handling the presidency, the economy, health care, and the federal budget deficit, and whether they had a favorable opinion of President Obama. Respondents were queried on whether they thought the country was headed in the right direction, and whether they were confident that the Democratic Party and the Republican Party would make the right decisions for the country's future. Respondents were asked whether they approved of the way that Nancy Pelosi was handling her job as Speaker of the House, whether they approved of the way Harry Reid was handling his job as Majority Leader of the Senate, and what was the one most important problem they would like to see President Obama and the Congress deal with this year. Information was collected on whether respondents thought Obama had accomplished a lot during his presidency, whether he was keeping most of his major campaign promises, and who they thought was to blame for the country's economic situation. Respondents were queried on how they thought the United States campaign against terrorism was going, whether the federal government should investigate possible terrorist threats, even if that intrudes on personal privacy, and whether police and other authorities should or should not be permitted to use personal characteristics like religion, or ethnicity, or nationality in deciding who to search in security lines at airports or other locations. Respondents were asked whether they approved or disapproved of President Obama's decision to close the United States military prison in Guantanamo Bay, whether they support or oppose the proposed changes to the health care system, whether they preferred the public option, and whether they have health insurance. Respondents were queried on whether they thought the federal government should try to limit the size of the bonuses banks can pay to their top employees, whether they would support or oppose a special tax on bonuses over one million dollars, and whether they would support or oppose higher taxes targeted at banks that do a lot of trading in the stock market. Finally, respondents were asked whether Obama's presidency has helped or hurt race relations in the United States, whether they favor smaller government with fewer services, or larger government with more services, whether they favor or oppose legalizing the possession of small amounts of marijuana for personal and medical use, and whether they voted in the last presidential election. Demographic variables include sex, age, race, household income, education level, political party affiliation, political philosophy, political ideology, religious preference, and whether the respondent is a born-again Christian.