To anyone who already hates this business this post is not for you, we already know you’re happy the stock price is sinking (mostly because you won’t shut up about it haha!)
To anyone invested, there is no need to panic at the recent earnings. In the new buffetology, it describes in great detail many of buffets fashion plays. A sector wide industry recession (which I believe personally is happening right now for sportswear), is one of the best times to make an investment.
This is because we are thinking long term here. This is not Wall Street Bets. We can handle a short term drop in revenue, we are more concerned with where they will be in 10 years time. The business will recover revenue, as all great businesses do. It’s written right there in the last 15 years of financial data.
Valuation: Even if they do only achieve $9 in earnings this year (which I don’t believe they will, I think they are setting the bar deliberately low), buying at $90 gets you a 10% earnings yield. Much better rate than current bonds. So no stress here.
Finally: The last time the market valued businesses this much based on their revenues rather than their earnings, it was 1999……..
Best wishes to all.