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thanks for the well-articulated article on an intriguing name here.

I haven't dug into the details, but noticed it had Y03-05, and Y14-16, 2 periods that it achieved a relatively healthy economics/margin, but both time faded in about 2-3 years.

this is a competitive space, and hard to build a durable moat that results in long term superior economics. would like to hear if you think this time is different (from the last two), if so how?

Siyu LI

Under the Hood

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Firstly, I am grateful for your interaction and support.

In my opinion, the current business model is different from the old business model before the new CEO arrived. In fact, business results during the pandemic were acceptable. An omnichannel approach and, furthermore, a Multi-generational customer base have contributed to a beyond product strategy. That, together with a brilliant CEO, could be a driver that indicates that this time is different.

When analysts talk about “brands” as competitive advantage, maybe we have an exaggerated vision. Personally speaking, branding is the weakest competitive advantage. Despite all this, I think we can forecast a 5% CAGR on sales and a 10-12% FCF yield over a 5-year investment horizon.

The main risk I see here is market sentiment. This type of stock is better to buy when a high asymmetry exists (high upside/low downside). Sincerely, I don't know if the market is discounting everything to the current price (9x FCF is an irrational valuation for a business of 14–15x). Perhaps the market thinks, "That's a teddy bear company that is trading at 9x fairly. The best has already happened". So, it's difficult to predict future performance if we keep all this in mind.

I don't own any BBW stock right now.

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