저자: Kevin · 외국인
요약 보기
Kevin은 2021년 2월 마진 축소를 위해 Tattooed Chef 등을 매도했다고 설명하며, 광고비 급증 대비 낮은 수익성(2021 순이익 250~500만달러 전망)과 높은 PER(약 75배)을 근거로 Tattooed Chef 재매수를 보류한다고 밝힘. 장기적으로 회사 가치가 $30~40 수준까지 갈 수 있다고 보지만 현재 $60 수준은 과도하다는 입장. 대신 Tesla, Square 등 다른 종목 선호.
다듬은 글
Hello everyone, it's me, Kevin. Let's talk about Tattooed Chef, a vertically integrated plant- based meat producer with huge growth potential. In this video, I'll explain why the hell I sold those stocks. So, this actually goes back to February 16th, which is right before all this panic and crash that we saw in the market.
And the easiest thing to do is show you where Tattoo Chef is stuck. Look at this. This is my Weeble. He literally sells, I mean, look at this Snowflake. I mean 40 shares, but still, Snowflake, February 16, sold. Tattooed Chef, here, sold 4,000 shares on February 16 at a price of 2,459 per share. Tattooed Chef shares began selling on February 16 to free up a significant portion of the margin.
I was a little worried about some of the things I was seeing in the market and sent out a mass notification to sell about $1.6 million worth of stock . And it wasn't necessarily stocks that I didn't believe in. For example, I sold Xping. I sold Xping, a company I completely believe in, for six or, sorry, $45 and 600 shares worth.
Why should I sell Xping? The main goal I had right before this market crash and I didn't know that the market crash would happen in about 3 days or start in 3 days. My main goal was to lower my margin. I'm sitting at 30%. This is too much. If and when the market crashes, I don't want to go into it with 30%.
So I sold probably somewhere around 1.6 million shares. 1.5 million shares is a lot of shares. That's a lot of stocks I sold. And Tattoo Chef was one of them. I got CHF tattooed in three places. I have about, uh, at today's price, I have about $20,000 in M1 Finance, probably somewhere around $25,000, uh, before.
Uh, Chase was probably worth about $55,000 before. It's now about $41,000. And then I had a sell order for about $100,000 back in February when I sold it. So I thought, okay, we sold a lot. We obviously survived this crash. Since then, we've had this recovery and we've had Tattoo Chef profits growing, and I had concerns that potentially, as we get out of COVID and the pandemic, frozen products will be a little harder to sell.
Personally, I eat Tattooed Chef products. I, uh, ordered it a few times. And look, he's good. That's not what I'm jumping for. Yes. You know, it's not like, "Oh my God, give me some of that brown bread from The Cheesecake Factory." When you sit down, you think, " Oh my God, I have to eat this." You know, that's normal.
How does it taste. This is plant food. They have things I love. They have things that say, "Yeah, I probably won't order that again." But that's the point. You have a choice, right? That's why I really like this company. And I thought, “Okay, when reporting day comes, let’s see how their profits go.
And until there are any warning signs, I will buy back Tattoo Chef shares." It was my plan to buy back the Tattooed Chef stock because I had previously, uh, done some analysis that showed that I thought these stocks, uh, would be worth a lot more in the future. Well, everything has changed a bit . And in this video, I'll explain three specific reasons why I sell Tattooed Chef.
Uh, in particular, and this is also related to current market prices. Okay, the number one reason has to do with advertising and profits. So let's break this down in more detail. This is a bit complicated. So the easiest way to start breaking this down is to play you something from the income statement .
So let's open the income statement. Okay, I listened to the entire earnings report. It's actually someone re-uploaded the earnings report. So thank you for finding fitness finance with Alex. Uh , thanks for the re- upload. But I was listening to it live when it happened. I took notes on all of this and listened to it live.
Uh, and that was the part that I wrote down as a big question mark, and then I listened to the whole earnings report again, and I started putting some of the dots together, and I'll explain that summary to you after I play it for about a minute. Let's lose. Um , but I think you were talking about an advertising strategy, and I'm wondering if you've been actively using it in 2021, and what the response has been?
What conclusions have you drawn from what you have seen so far? I'll pass it on to Sarah. Greetings. So, you know, with Tattoo Chef, we didn't have any marketing until January 2021. And in our first phase, we really focused on banner advertising and just collecting the data we needed to refocus and strategically allocate our marketing dollars.
Um, we're going to present and launch our commercials in March, which will be broadcast digitally and connected to connected TV. But right now we're still collecting data because we want to be really specific and strategic in our allocation of funds. What happened was that Tattoo Chef hired a marketing firm to make Tattooed Chef, the brand, the product, really known in the marketplace, so that when people come into Target, they feel, feel the emotion that the ad evokes: "Oh, I saw that on TV." I want to buy this.
And that's good. In fact, they just said something really, really good. They said, "Hey, we haven't actually advertised since January, or we haven't started advertising Tattoo Chef since January." And remember, this is actually very important because Tattoo Chef is a new product. The company has been in existence for almost 20 years.
And that's because they import their vegetables and their produce from Italy. And, uh, they're putting out a lot of private label products where they're basically saying, "Oh, Kirkland, you need frozen pizza. No problem. We'll make you a frozen pizza, and they, you know, let Costco put their label on it, and so on .
I don't know if it's exactly Costco, but that's roughly what the company was before it was renamed, because it was a different company before. And you can watch my latest video about it and see their whole story. But, essentially, they make a lot of private brands. Now they say, “ Well, why are we doing all this under a private label for other people?” We have imported vegetables and products.
We have the equipment. Let's create our own private brand." So, the PRA Tattoo Chef brand is a completely new brand. They have performed very well over the last 6 months, increasing sales of their products from virtually nothing to actually increasing sales of the Tattooed Chef brand.” And I'm a little concerned about where a large portion of these sales are potentially coming from.
First of all, I want to say that when, and this is very important, when you analyze a company, it's very important if you look at annual figures, like, for example, something grew by 300% or something else, you have to understand: where did it start? Did it start from zero or one and then grow to three?
Right? It's something like a Tesla. Look, if you're going to produce 500,000 cars, are you going to grow to, you know, a million cars annually? This is 100% growth. This is a huge indicator for production. 100% growth. A huge, huge number. But, you know, if you go back to the early days of Tesla and see that they went from 80,000 cars to 160,000.
Well, you know, that's a doubling, right? But you could look and say they went from 42 to 160. That's a 4-fold increase. That's 300%. This is great. Landscape designers are back. Oh, this is driving me crazy . But so what. So, a 300% increase is obviously a 4-fold increase. But anyway, why does it matter?
Why am I saying this? This matters because we have to be careful. This is a new brand. That's what's so important here. This is a new brand that is on sale. And when a company is sold, what happens? The company becomes very, very popular, potentially for a shorter period of time, because everyone is interested in the shares.
Everyone is interested in Spax. They are the most popular thing on the stock market since sliced bread. People love Spacks. So you get a lot of attention to Spack, attention to the promotions from people who like the promotions, they buy the product. The problem is that we have n't yet tested this growth among, I think, the average consumer in response to their advertising.
Why? Because they didn't do any advertising. Perfectly. They have product placement. They are at Sam's. Maybe they have them, I don't know, maybe they have them at Costco. They are definitely at Target. I know that. This is great. They have the connections to get into the stores. This is great. But I get excited when I hear, " Okay, we're going to start our advertising campaign." And I have no idea if they are well advertised.
I think their food is okay. You know, I really liked some of them , but I have no idea how effective their advertising would be. This is completely unknown. And don't get me wrong, I generally like food. I would...I would recommend this food to people. Again, some products I would recommend more than others, but I have some doubts about Tattooed Chef, I'm betting on the ad company's ability to not only spend their money right, they're talking about digital advertising, they're talking about connected TV advertising.
I mean, okay, look, companies have to advertise. Actually, if you'll go over, let's go over to Deote for a minute. Uh, if we go to Deote, the report they put together, uh, on marketing budgets by industry, the biggest marketer by industry is the consumer goods segment. So, here I am doing fundamental analysis on this company, you know, three or four months ago, and I think these numbers look terrible.
And I didn't even realize at the time that one of the reasons the numbers potentially looked so terrible was because the company was getting all this free advertising through Spackw World. Well, now we need to invest a large advertising budget. And that worries me a little more . That's because I looked at some of their profits before.
I'm like: you know, wait a minute, there's real growth potential here. This margin could really grow. Oh, but now I understand, wait a minute, wait a minute, wait a minute. We have n't even started spending money yet. Okay, okay, good. But I mean, who cares? Like, if the grade is great, who cares, right?
Well, here it is worth looking at some numbers. I'm not going to watch it now, I made a 30- minute video about it yesterday in my private course, the link to which, if you don't know about it, is below. I have a program on stocks and the psychology of money, and I teach fundamental analysis, my way of doing fundamental analysis.
You don't have to agree with my opinion on fundamental analysis, but at the very least you'll probably want to pay attention to me, like you don't even have to like me, but at least pay attention to some of the arguments. And if you're staying in stocks, I encourage you to do so . I think the stock will go up in the future.
I'm going to explain why I sold in a moment . Uh, and all these reasons combine. So pay attention to some things. Okay, these are actual numbers. Again , I'm not going to go into detail. These are the actual numbers here. Uh , then I made some adjustments because the way they reported the numbers was disastrous.
It was very, very confusing. For example, they reported, uh, operating expenses of $7.8 million. And look at the earnings conference, even they said we know the numbers this month or this quarter are catastrophic because of what happened with Spacking, and that, uh, they said they contributed about $3.4 million in stock-based compensation.
So I gave up on these 3.4. They will continue to pay their legal fees for being a public company. That's why I didn't correct them. I excluded stock-based compensation to understand what their operating expenses were and whether they would be profitable. And if I exclude that benefit and/or, excuse me, this stock-based compensation expense, and I exclude their $41 million income tax benefit that essentially resulted from the change from an S corporation, excuse me, an S corporation to a CC corporation, they got this big increased tax base that allowed them to take a massive write-off.
Good for them. Hey, you know, they took, they took a quarter that could have essentially been a losing quarter because if you didn't exclude, uh , stock-based compensation, they would have lost money in that quarter. And that income tax benefit was really, really good at keeping them in the green, and significantly in the green.
But if we adjust for both of those things, stock-based compensation and, uh, the tax benefit that they got from the transition, I think they probably had a quarter of about 4 cents in earnings per share, which is actually pretty good because they were estimated to have only made 3 cents per share. So, that's good.
That's all good. Uh, and we won't go into all that here, but that's where some of my concerns come from. So, their forecast for 2021 is 222 million in the report. They also predict that they will be able to get a 20 to 25% margin, uh, on the product. They do not include advertising in their margin; This is a separate line item included in operating expenses.
They add advertising for the product and SGNA, which is normal. Many companies do this. Some people list the cost of goods sold, some list it here . You can do whatever we need; you just have to know these things. So okay, okay. I like a conservative approach, so I choose 20%, uh, that would mean that this company is generating somewhere around 44 million in gross profit.
Uh, then the company is forecasting that their earnings before, uh, interest, taxes, and advertising depreciation will be between $8 million and $10 million on 44 million . That bothered me a little bit , because then I could do a reverse analysis and say, “Wait a minute. This means you expect to spend $36 million, which means you expect to double your operating expenses in 2021.
You are about to double your expenses, but you are nowhere near doubling your income. Maybe your income will increase by 40% . This is your forecast. So, double the advertising or double all the operating expenses because of all this crazy advertising you're going to do to get a 40% increase in revenue." Now it's possible that with food, people come in, see the ad, and like the product.
Okay, it's possible... Look, if you're being advertised Docu Sign, if you're being advertised Docu Sign, a SAS company, and you think, "I'll try this Docu Sign." And you say, "Oh, [ __ ], this is a great product. You don't need to promote it anymore. That's it." You know, you say, "Sign me." I use Docyign for everything.
I agree. This is just nonsense. Uh, you don't need to advertise it anymore, for example, the churn rate is very, very low. This is not about food. People's tastes in food change. You need to continue to promote it. Food is notorious for being one of the least profitable industries in existence. And that doesn't mean Tattoo Chef won't fly to the moon.
I think the stock...I think the company is great. I want people to make money by investing in Tattoo Chef. And I'm going to get to the point of why I should n't buy back the stock then after I sold, you know, for over $100,000 before this market crash. Uh , which I obviously sent out all the notifications about.
I had a big spreadsheet with all the sales I made to reduce my margin and I explained it. Uh, but anyway, so, uh, let's go back to this table. What else is happening? What do we see? Well, going back to this table, we've got these huge expenses and not necessarily huge revenue, and these are their projections.
Now, maybe they'll have 10 million in Ibit, which, uh, they suggested, but if they have those numbers, then they're really only bringing something, uh, somewhere, well, they actually predicted it. I don't even need to calculate it. They said they predicted we would have between 2.5 and 5 million in net profit.
So, although I came up with a conservative approach with a margin of 20%, given that they are now at about 16%, and and, and so they now have 16% of their gross profit margin. And their proposition is, hey, when we get more products, we can increase that margin. Okay, I can agree with that . You have more products.
I know you put your research and development into this, but you can get products to the shelves quickly. Well, okay. You might be able to increase your margin to 20-25%. This is great. Maybe 25% will eventually change the rules of the game. But they are forecasting a net profit of $2.5 million to $5 million for 2021.
This is very little. This is 2.25%. If I take the top, big number, 2.5%, uh, that's $5 million in net income from 222. That's very, very small. According to my projections when I first analyzed this company, I thought they would be able to increase net income by at least 5% in 2024. Well, now I'm going to reduce that and just use 4%.
But not only that, I also thought their operating costs would decrease with scale, but I completely failed to notice that this was not the case, and I can call it my fault. I don't care . Blame me. Everything is fine. Uh, I completely missed that. Wait a minute. Their big advertising boom will come in 2021.
Maybe the ad will be truly successful and this company will thrive. Okay, it's quite possible. It's quite possible. And then you know what? I, Kevin, was wrong. This is absolutely normal. But if we increase net income by 4% in 2024, what does that mean ? Well, that means we have 27 cents of earnings per share.
Uh , and they'll obviously have a lot more stock in the future. We are only using 73 million shares right now, but that is exactly what we are going to use for our forecast. This puts this company at a 75x earnings/ earnings multiple on this forecast. You could call that a low forecast, right? Perhaps 30% compound growth is too little.
Maybe if they advertise wildly they will have more growth. But wait a minute, the company itself is offering this in its first year, essentially as a startup, because they are a startup. Although Tattoo Chef has been around for 20 years, the Tattoo Chef brand is one that most people don't know about unless you're in it.
Most people don't know about Tattoo Chef yet. So in the first year they will double their operating expenses to get 40% growth. I think 30% growth for the coming years is reasonable. Who knows? Maybe they can double, you know, maybe. And it's not that I...Look, I don't have a Bloomberg terminal connected right now.
I will try to show a moment with also does not predict more than 500 million in 2024. This doesn't mean they are right. And that doesn't mean I'm right. I'm just saying it's about 30%. These are the numbers I use. Want to play with other numbers? More power to you. I appreciate you watching this. Uh, you know, we're talking about numbers in a boring spreadsheet here, and it's like we're arguing, "Oh, we should use 40% compounding." You know, like, I think we're all on the same page.
Like, we all want to know what's going on here, right? So for me, at a forward P /E ratio of 75, my friends, I'd buy Square . I would rather buy Square, which, according to my numbers and my analysis, has a forward P/E of 75. I would rather invest in Square, because you know what's happening at Square, friends?
Square comes out and says, "Hey, we have Title, a music streaming service." We are going to monetize every song on this platform with NFTs. Pour the dough. " Folks, I'm not going to get too carried away when I can focus on the stocks I'm more convinced about." What am I more convinced of? Square is playing, uh, Cash App, playing on Bitcoin recovery for companies coming out with banking, credit cards and potentially NFTTS at a price of 70, you know, I think it's 72 times forward earnings for 2025, you know, given what we're paying, uh, right now.
Or paying, uh , a forward P/E of 75 for a food company that I know has low margins, that has unproven advertising. Uh, it's unverified. They just started working in January. Uh , and potentially, well, I know she's in a low- margin industry, but potentially she just has to keep advertising to keep those customers coming back and coming back and coming back.
It's not the same thing that you advertise, uh, you know, Tesla, where once you get your first Tesla, you get your car. And the coolest thing about Tesla is that they don't even advertise, right? It's like I'd rather have my money there in a way. So I don't, uh, want to..." I, listen, I think Tattoo Chef, if I were picking a food company, I would definitely buy that, not Very Good Food Company, which I held for about two weeks and sold.
They had really, really good production numbers. You know, maybe they can achieve really, really large production, uh, with some of the new partnerships and factories that they're planning to open. I'm glad for this for a very good, uh, you know, butcher, a very good butcher. Uh , but uh, yeah, I mean, look at this.
I'm making a crazy prediction here, but if they hit 20 million in revenue, they're selling at a price that's 22 times revenue. Tattooed Chef for 22 million in 2021, that's 7.8 times revenue, that's what they're selling for. Beyond Meat is on sale for just 5.65. Regarding these revenue figures, I actually get a better deal with Beyond Meat.
Listen, Tattoo Chef, if they could maintain the growth they had when I first invested in them without ... If the new company were to start a new advertising campaign, I think the margins could be squeezed. They could increase their profit margin on the product. They could reduce their costs as a share of the company's operations, but that's too much of a risk for me.
And so, given that, I would be much better off investing in some of my other companies, and I'm definitely not going to put the margin to add to Tattooed Chef at this point. This is just my opinion. And that doesn't mean the stocks are bad. It just means I think I have a better opportunity elsewhere.
That's all. Especially at today's prices , or, I would say, at Monday and Tuesday's prices. That was the last time I bought. No, it was Tuesday, it was the last day I bought. Er, Tesla, Nphase, Etsy, right? These are some of the ones I bought, obviously. Uh, even these purchases are going really well right now.
Uh, but you know, I'm not a short-term player. You know I'm a very long-term player, unless I...I swing trade, that's a different thing. But usually it concerns a very small part of my portfolio, which also shows very good results. But, uh, for this company, if I'm going to open a long position, I'd rather open a long position in something else.
I currently have about $18,600 in M1 Finance that I will sell. Uh , M1 Finance shares fell yesterday, and I haven't sold them yet . And I also have about $40,000 at JP Morgan. Honestly, I do n't know if I can sell my $41,000 in Tattoo Chef to JP Morgan because all my shares there are frozen. Uh, because they basically freeze your account and say, " Okay, great.
We'll give you a margin loan, but it doesn't work if you want to trade actively." I'm like, "I don't want to trade actively." Just leave it there.' And they're like, 'Okay, great.' So, I'm not sure I can get that $40,000 out of there , but I'm not worried about that. I'm going to leave it there. I'm going to leave that $40,000 there.
I'm going to sell my M1 Finance. They're not going to be a part of my pie anymore. But it's not a breakup. Like, if I was worried, I wouldn't be worried about this company. Like, I don't think the value of this company is going to go down. It's definitely not worth less than $20 a share. Uh, I think this company has the potential to be, you know, a $30-$40 stock.
Do I think it's still a $60 stock? No. Is it a $30-$40 stock in the future? Yeah, maybe. Maybe. Uh, but in the meantime, you know, what will Tesla or Square be worth when that time comes? That's my perspective. Uh, too low. margin, food commercials, new commercials. Listen, they might have impressed their rivals, they might not.
I don't know. So my thoughts... Thank you so much for watching. I hope you found this informative. If so, share it, subscribe, and see you next time, friends.
Comments 0