BFLY

[David Randolph]

Any chance we can get a technical analysis on BFLY for the near-term? The fact that it closed below 1.20 yesterday has made me a little nervous, as I now see the next support around 1.10 and then the 50MA at 1.07. If it falls much further from current levels, I may be taking money elsewhere for the time being.

Thanks 

Hi nutsterrt, I thought you sold after seeing the market reaction to a bit weaker than expected revenue number for Q4 2006. But no, you're still holding and looking for technical advice.

So, let's see, technically the 50 and 200 days simple moving averages are rising, which shows the trend is positive. The 50 days stands at $1.07 and the 200 days at $1.02.

I don't know if the stock will go that low over the short term. If I were concerned with the short term I would have sold at $1.35 plus, because I clearly saw a retraction after those Q4 revenue numbers were released (as one can read above on this thread).

If I were a short term trader and had I sold, I would be buying back around current levels. Being a long term trader and a portfolio manager for 3 Stocks, I held, not paying much attention to the short term gyrations in the share price.

Since today is Sunday and I have more than usual time for these updates, I've listened to the BlueFly conference at Cowen. One really has to see this stock as a long term investment, because they're still so small in comparison to what they may become.

For example, I found out that only 3% of their revenues come from international costumers. This because their payment systems are inadequate. They'll introduce Pay Pal and Google check out in 2007, and probably this will help to drive up international sales (they refuse many international orders because they can't verify the credit card information).

I believe that over the very long term (say, 10 years), BFLY can be as big or even bigger than Amazon, because they sell fashion clothes and accessories (and also design home products, still just 2% of business, but that can grow immensely), and that is as big or even a bigger market than selling books and DVD's as Amazon does. And BFLY's gross margin is higher than others:



Amazon.com is a $15.74 B market cap company and BFLY is just $151 M.

I'm not in a rush to sell this business that I love. I'll keep holding it for the long term.

[nutsterrt]

Fantastic review of the company (applaud). I agree that I should have sold at 1.35, but hesitated to pull the trigger until it was clearly too late. I really don't see it going below the 50MA, so I plan to hold it until the next pop and will probably keep part of the position for the longer term, while taking more money off the table until I see the company become profitable. Hopefully February!?

Thanks again!
nutster

[nutsterrt]

Bullish inverted hammer with meeting lines today. Maybe the bleeding has stopped for now

[David Randolph]

Fantastic review of the company (applaud). I agree that I should have sold at 1.35, but hesitated to pull the trigger until it was clearly too late. I really don't see it going below the 50MA, so I plan to hold it until the next pop and will probably keep part of the position for the longer term, while taking more money off the table until I see the company become profitable. Hopefully February!?

Thanks again!
nutster

Thanks for the applause nutster

I'm not sure they will report a profit in Q4 anymore, because sales were a bit sluggish in December. Perhaps they will report a small 1 cent loss per share, we'll see.

Bullish inverted hammer with meeting lines today. Maybe the bleeding has stopped for now

I know it is extremely hard to take the eyes out of the short term price action. But that is highly unpredictable and, being unpredictable, it doesn't give people money over the long run.

May I recommend you a book?



Another advantage of owning an online retailer, for an investor, is that he can check the business everyday with just a few clicks: www.bluefly.com

One would have to visit the stores or the factories everyday to get the same information for a traditional business (and that's impossible).

So, transparency and visibility should earn a premium. Just a few long term thoughts.

I'll keep on holding BFLY, as its market potential is even bigger than Amazon's !

[Se7en]

I'm not sure they will report a profit in Q4 anymore, because sales were a bit sluggish in December. Perhaps they will report a small 1 cent loss per share, we'll see.

David, what was the company's guidance/estimate for Q4?
If sales 'slowed down' a little, is it possible that they will miss their earnings which could lead to a bad reaction of the market to it just like it did when the news of the slowing sales came out or am I 'overreacting' here?!
I almost never hold a stock through earnings, too many bad experiences with it, but I was willing to hold this one after reading your projections and fundamental analysis on BFLY, but now I have some doubts ... 

[David Randolph]

David, what was the company's guidance/estimate for Q4?

There isn't any, no analyst is covering the stock, as you can see here:

http://finance.yahoo.com/q/ae?s=BFLY

I made my own estimate a while ago on this thread (on the previous page, I guess), and I expected $0.0086 EPS for Q4, but with the not so strong revenue growth in December due to unfavorable weather conditions it may come in at ($0.01) instead. 

If sales 'slowed down' a little, is it possible that they will miss their earnings which could lead to a bad reaction of the market to it just like it did when the news of the slowing sales came out or am I 'overreacting' here?!

There aren't any estimates to miss. ($0.01) EPS will still be the best quarter in the company's history.

I almost never hold a stock through earnings, too many bad experiences with it, but I was willing to hold this one after reading your projections and fundamental analysis on BFLY, but now I have some doubts ...   

Well, I understand your doubts, but I'm holding BFLY for more than one quarter, I hope to hold it for years to come, because it is exactly the kind of business that I see benefiting the most from globalization and "internetization".

Good luck

[nutsterrt]

There aren't any estimates to miss. ($0.01) EPS will still be the best quarter in the company's history.

Boy, we aren't lucky enough to see THIS every day. Can't really go wrong unless it goes down from last quarter 

[David Randolph]

Another advantage of an online retailer, is that they can change their shop-window almost everyday with not much cost. Look at today's shop-window at www.bluefly.com

Revenues are growing about 30% a year, to $77 M in 2006. If the current growth rate continues, as I have little doubts that it will (unless management is able to spoil it all, but I don't think so), revenues will be $1.06 B in 2016.

I believe the net profit margin of BFLY, once it gets a bigger dimension, can be something above 10%. I believe this because the cost of running a website and a warehouse is much lower than the cost of having hundreds of brick and mortar stores to achieve the same sales level.

Say the profit margin will be 15% in 2016. Net Income would then be $159 M. Apply an average 16 times earnings multiple and get a market cap of $2.54 B.

BFLY's current market cap is $153 M.

Nobody knows the future, but the revenue trend of the past 8 years shows a 44% average annual increase. This trend will probably continue.

This makes me think: then why didn't the stock rose a lot for the past 8 years? Great question David. I guess it was because of dilution (which I don't expect in a meaningful way going forward). But I'll check this out for the following update.

I'll continue holding BFLY.

[nutsterrt]

Thanks for the update on the storefront window 

[lancefur]

I love these updates. Sorry to keep asking questions that are obvious to most people since they already know and I do not but..... why is the 50 MA crossing the 200 MA so important as to refer it to the Golden Cross? I also assume it has to cross it sharply? And then with the Signal moving in a downwards direction in the MACD, what does that usually mean? Short term issues?

Please also do not get me wrong, I love the concept of bluefly. My wife already loves bluefly too much (therefor my wallet doesn't) and I will have to do better on 3SOF just to afford all there stuff. lol

Thanks for the education.

[nutsterrt]

Sorry to keep asking questions that are obvious to most people since they already know and I do not but..... why is the 50 MA crossing the 200 MA so important as to refer it to the Golden Cross?

I'll let someone else take the MACD, but I can give you MY take on the "Golden Cross."

Judging the stock's future by day-to-day trading is pretty tough, as you probably already know. However, long-term indicators (i.e. moving averages) are an excellent tool in helping determine the future movement of a stock.

When a "shorter-term" moving average such as a 50 MA (though some would still consider 50 days to be somewhat long) crosses a REALLY long average like the 200 MA, it indicates recent and sustained upward movement, suggesting a more bullish outlook in the future. Of course, you should have heavy volume to go with it. As you can see from BFLY, it hasn't really been consistently heavy, with only a couple of spikes here and there. You can't (I don't believe, anyway) confirm a bullish trend without good volume.

The cross is also important because the 50 MA now becomes a key support level. Currently, it sits at 1.09, not far from today's close, so this could be interesting to watch.

Oh, and as far as I know, the cross doesn't have to be violent...just has to happen 

If one of the technical geniuses around here doesn't cover MACD or direct you to an existing explanation, I'll take a stab at that as well.

[lancefur]

I am loving this stuff more and more. Thanks for that explanation. It makes total and complete sense to me what that would be important.

[godofstock]

great company but with burning cash quartly, i don't know how this company can survive. Plus track record is no good........ ever since ipo, this is shit.....



High Risk, High Reward.....

no comment.......
I might daytrade the hell out of it.........

might pick up some shares on monday .....

[rickjust]

[quote author=godofstock link=topic=8208.msg85044#msg85044

High Risk, High Reward.....

no comment.......
I might daytrade the hell out of it.........

might pick up some shares on monday .....

[/quote]



hardly a candidate for day trading. no volitlity and moves 10 cents in a day, if that.
i doubt you could " daytrade the hell out of it"
good luck
maxi

[David Randolph]

nutsterrt gave a good explanation to why a bullish cross of the 50 days above the 200 days simple moving average is technically important.

As for the MACD:

«The Moving Average Convergence/Divergence indicator (MACD) is calculated by subtracting the value of a 0.075 (26-period) exponential moving average from a 0.15 (12-period) exponential moving average.  A 9-period dotted exponential moving average (the "signal line") is automatically displayed on top of the MACD indicator line.»

And MACD's interpretation:

«The basic MACD trading rule is to sell when the MACD falls below its 9-period signal line.  Similarly, a buy signal occurs when the MACD rises above its signal line.»

Please also do not get me wrong, I love the concept of bluefly. My wife already loves bluefly too much (therefor my wallet doesn't) and I will have to do better on 3SOF just to afford all there stuff. lol

She's buying? Cool

From the calculus I've been making, BFLY share price will grow about 30% a year for the next 10 years. But it can go to $1 before it runs to $1.60 this year. You need to understand this is an investment, not a trade.

If I were to trade the stock I would have sold with a 20% profit in the first day I bought it. But I could never hold it for the long term, and get an estimated 30% average annual profit, if I tried to sell it and buy back lower. Somewhere along the way I would definitely lose my position.

I'll keep holding BFLY on the Main Portfolio whatever happens. Unless the business quarterly performance starts disappointing, there's no reason to sell it.