Michael Burry Stock Pick Down 20% - I'm buying more
I doubled down on this Michael Burry stock pick today as the valuation has fallen 20% on an earnings report. I think the market is too short-sighted and results in 2023 and beyond will continue to improve. The stock is priced like it is going to go bankrupt, and I think that is further from the truth.
The stock is down 20% today on earnings
Cash from operations was the highest it has been in all of 2022
Free cash flow was generated and cash added to the balance sheet
Management is forecasting a dramatic return to free cash flow in 2023 as the turnaround plan is well underway
Additional asset sale of $184 million in Q1 2023
$300-500 million of working capital tailwinds in 2023 will benefit the balance sheet substantially
Corporate headcount has been slashed by 400 and we will see a $60 million run-rate benefit with $50 million starting in 2023
Lower shipping costs will be a major tailwind for margins and revenues in 2023
Capex will be lower in 2023 from 2022, which will further drive free cash flows
With revenues flat to 2022, a dramatic decrease in inventory promotions, continued working capital monetization, corporate cost cutting and a major asset sale in Q1 2023, 2023 is setting up to be a cash generative year
There is enough cash on the balance sheet to take out all near-term maturities. If my forecasts for 2023 are directionally correct, there is minimal risk of bankruptcy, despite the market implying differently
The company continues to hold substantial real estate and could continue to execute sale leasebacks to de-lever further
Michael Burry continues to hold the name, making it one of his largest publicly owned positions.
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