I recently leased an i7 in December and got an incredible deal. I initially wanted an i5, but they were not available at this dealership, so they offered me an i7 for the same price.
All stock investors have access to the same numbers. Whenever I get a flash of inspiration I ask myself, why aren't other people acting on this? At the racetrack I always have to know, why does the crowd have it wrong?
Just because the horse looks good, has a great jockey and trainer, did well in the morning workout and "my friend has a friend who has a friend who knows this guy" doesn't mean it will even place.
"These face-to-face meetings included multiple meetings with one of the market leaders in silicon carbide with whom we have been doing a significant automotive qualification of wafer level burn-in for well over two years."
Sounds like a bit more than just a near-term inventory adjustment. It may partly explain the disastrous decline in bookings and backlog, but perhaps the value proposition isn't quite there yet.
My man, Martin! In all of the years I've done this (ditto for you) the thing that has intrigued me the most is that you can have two very smart people, with the same set of books and facts yet two very different opinions, interpretations and/or concerns.
I appreciate your question, so I went back to my pal, who is somebody you know and I suspect, respect, as I do. Here's his response (and I use his because it's work, not mine):
"Well clearly ON sees the value proposition… SiC has been a bitch to ramp up - see WOLFs delays - so I think the delay is more a function of getting capacity ramped than a lack of cost effectiveness.
"Doing wafer level burn in is way more efficient than doing module level burn in - and the auto OEMs are all requiring burn in."
He goes on, summarizing..
Here is what we do know.
1. All auto OEMs are requiring burn in.
2. SIC demand is huge.
3. There is a short term EV inventory issue at legacy US OEMs.
4. SIC modules are a bitch to make.
He also fully understands the risk of his trade, adding...
"The valid bear case is over time, device quality could improve and manufacturers might not have to burn in as much - or for as long - but that is not now - the concern in 5 years."
BTW, he's the first to say he gets plenty wrong! But his conviction and research here are pretty strong, which is why I skipped red-flagging it. Obviously, as I mentioned in a comment above, I wish I had... then again, even if I had planned to I had other commitments and probably wouldn't have gotten to it until right about now or this weekend... and then I would've been beating up myself for not getting too it sooner. You that drill, I'm sure!!!
Always happy to hear the other side of a story, and to add to the conversation, here are a few more points.
1) It's not necessarily just an ON concentration story (and ON says they are cutting back on capex in 2024), but whether anyone else out there starts to step up. Should ON remain an 88% customer (as in Q1) then non-ON revenues will have been flat to down for the last 7 quarters.
2) Last quarter they promised shareholders up to 4 10%+ customers in FY2024, and while I assume they're walking that back with the guidance cut, it was not specifically addressed on the call.
3) If STM is the company they've been courting for over 2 years without getting them to commit, then that's likely a much worse sign that snagging a WOLF, which has been running into all sorts of issues (i admit to being a tad biased against anything CREE-related).
4) At their current run rate, they have over 3 quarters worth of inventory sitting around. If an STM steps up, that will look really smart, but large inventories in tech companies tend to end badly.
Anyways, thanks for the feedback and keep it up!!!
This is what makes a market - Opinions and a willingness to allocate. What does NOT make a market is reckless YOLOing on 0dte becasue your friend/neighbor is doing it.
Hi Herb, first of all really great post! It's a really sad truth sometimes that there's always a seller and a buyer, but that's how a market works. By the way, one question I hope you can answer. In the Kailash's screens for your red flag alerts, are you just looking for quantitative data or also qualitative? Thanks and best regards, Bernhard
They're quant. While their firm is quantamental, the screens are full quant - and as a result, should serve as a jumping off point to further research. I do wish I had written it Aerh up - would've made me look smart, but other things got in the way and my friend's counter view gave me pause, especially since he's neck-deep in the fundamentals of the company and broader industry, and I barely have my toes in.
Thanks, glad you enjoyed! The whole thing started with them asking me if their shortfall was a canary in the EV coal mine. I wanted to say yes, b/c the EV glut in the U.S. is very real and I'm a hybrid fan, even though I still. drive an ICE. In the short term it is an EV issue, but the q is where are we in the overall cycle? I thought that point was compelling.
I never heard of this stock, thank you. The balance between taking a long time line horizon on an investment verses the time value of money is personal, but still an educated fingers crossed dice roll. Nice piece on Last Call as well.
I recently leased an i7 in December and got an incredible deal. I initially wanted an i5, but they were not available at this dealership, so they offered me an i7 for the same price.
All stock investors have access to the same numbers. Whenever I get a flash of inspiration I ask myself, why aren't other people acting on this? At the racetrack I always have to know, why does the crowd have it wrong?
Just because the horse looks good, has a great jockey and trainer, did well in the morning workout and "my friend has a friend who has a friend who knows this guy" doesn't mean it will even place.
From their Q1 earnings release:
"These face-to-face meetings included multiple meetings with one of the market leaders in silicon carbide with whom we have been doing a significant automotive qualification of wafer level burn-in for well over two years."
Sounds like a bit more than just a near-term inventory adjustment. It may partly explain the disastrous decline in bookings and backlog, but perhaps the value proposition isn't quite there yet.
My man, Martin! In all of the years I've done this (ditto for you) the thing that has intrigued me the most is that you can have two very smart people, with the same set of books and facts yet two very different opinions, interpretations and/or concerns.
I appreciate your question, so I went back to my pal, who is somebody you know and I suspect, respect, as I do. Here's his response (and I use his because it's work, not mine):
"Well clearly ON sees the value proposition… SiC has been a bitch to ramp up - see WOLFs delays - so I think the delay is more a function of getting capacity ramped than a lack of cost effectiveness.
"Doing wafer level burn in is way more efficient than doing module level burn in - and the auto OEMs are all requiring burn in."
He goes on, summarizing..
Here is what we do know.
1. All auto OEMs are requiring burn in.
2. SIC demand is huge.
3. There is a short term EV inventory issue at legacy US OEMs.
4. SIC modules are a bitch to make.
He also fully understands the risk of his trade, adding...
"The valid bear case is over time, device quality could improve and manufacturers might not have to burn in as much - or for as long - but that is not now - the concern in 5 years."
BTW, he's the first to say he gets plenty wrong! But his conviction and research here are pretty strong, which is why I skipped red-flagging it. Obviously, as I mentioned in a comment above, I wish I had... then again, even if I had planned to I had other commitments and probably wouldn't have gotten to it until right about now or this weekend... and then I would've been beating up myself for not getting too it sooner. You that drill, I'm sure!!!
Hope that helps. Thanks for weighing in, Martin.
Always happy to hear the other side of a story, and to add to the conversation, here are a few more points.
1) It's not necessarily just an ON concentration story (and ON says they are cutting back on capex in 2024), but whether anyone else out there starts to step up. Should ON remain an 88% customer (as in Q1) then non-ON revenues will have been flat to down for the last 7 quarters.
2) Last quarter they promised shareholders up to 4 10%+ customers in FY2024, and while I assume they're walking that back with the guidance cut, it was not specifically addressed on the call.
3) If STM is the company they've been courting for over 2 years without getting them to commit, then that's likely a much worse sign that snagging a WOLF, which has been running into all sorts of issues (i admit to being a tad biased against anything CREE-related).
4) At their current run rate, they have over 3 quarters worth of inventory sitting around. If an STM steps up, that will look really smart, but large inventories in tech companies tend to end badly.
Anyways, thanks for the feedback and keep it up!!!
This is what makes a market - Opinions and a willingness to allocate. What does NOT make a market is reckless YOLOing on 0dte becasue your friend/neighbor is doing it.
Hi Herb, first of all really great post! It's a really sad truth sometimes that there's always a seller and a buyer, but that's how a market works. By the way, one question I hope you can answer. In the Kailash's screens for your red flag alerts, are you just looking for quantitative data or also qualitative? Thanks and best regards, Bernhard
They're quant. While their firm is quantamental, the screens are full quant - and as a result, should serve as a jumping off point to further research. I do wish I had written it Aerh up - would've made me look smart, but other things got in the way and my friend's counter view gave me pause, especially since he's neck-deep in the fundamentals of the company and broader industry, and I barely have my toes in.
Great interview on CNBC tonight
Thanks, glad you enjoyed! The whole thing started with them asking me if their shortfall was a canary in the EV coal mine. I wanted to say yes, b/c the EV glut in the U.S. is very real and I'm a hybrid fan, even though I still. drive an ICE. In the short term it is an EV issue, but the q is where are we in the overall cycle? I thought that point was compelling.
7X “2026” earnings? 🤦♂️
It over 8X 2024 REVENUE !!
But you got me to look! Thanks.
80% from top customer 👀
That'll likely diminish as new customers come on.
I never heard of this stock, thank you. The balance between taking a long time line horizon on an investment verses the time value of money is personal, but still an educated fingers crossed dice roll. Nice piece on Last Call as well.