ADS - Alliance Data Systems

[vince]

New CFO basically said he was proud of the tender. Bah.

Their guidance doesn't include rate drops (though market expects two), so setup for another bad surprise. Bah.

What matters longterm is whether or not they bring value to their clients, and judging by wins in recent years and commentary from their customers it seems like they do.

We're basically at around 4x2020guidance, but it's such a bummer that these guys didn't reset expectations at the last quarterly call. Ed had a huge credibility problem, and these guys aren't exactly having a great start.

I really don't give a shit about whether EPS hits 15 or 20 or 25, I need to know their model works longterm, and who'd really take what they say at face value now? (I did and have sit on a large loss).

Hate to reiterate what they say, but 4x2020 earnings plus growth and plus 30 pct ROE is silly. Would probably be valued higher if they shed 40 pct of biz (like old Apparel vintages), but nobody believes these people, and CC didn't give much confidence. Probably time to looking at liquidation value to find a floor.

Oh Yeah, and ValueAct jumped ship.

Haven't had a chance to look yet, how do you know valueact sold out?

[frank87]

New CFO basically said he was proud of the tender. Bah.

Their guidance doesn't include rate drops (though market expects two), so setup for another bad surprise. Bah.

What matters longterm is whether or not they bring value to their clients, and judging by wins in recent years and commentary from their customers it seems like they do.

We're basically at around 4x2020guidance, but it's such a bummer that these guys didn't reset expectations at the last quarterly call. Ed had a huge credibility problem, and these guys aren't exactly having a great start.

I really don't give a shit about whether EPS hits 15 or 20 or 25, I need to know their model works longterm, and who'd really take what they say at face value now? (I did and have sit on a large loss).

Hate to reiterate what they say, but 4x2020 earnings plus growth and plus 30 pct ROE is silly. Would probably be valued higher if they shed 40 pct of biz (like old Apparel vintages), but nobody believes these people, and CC didn't give much confidence. Probably time to looking at liquidation value to find a floor.

Oh Yeah, and ValueAct jumped ship.

Haven't had a chance to look yet, how do you know valueact sold out?

They didn't. One of their PMs stepped down from the board. They converted a portion of their shares to convertible prefs some time ago, whose only value comes from their convertibility back into common shares.

[vince]

New CFO basically said he was proud of the tender. Bah.

Their guidance doesn't include rate drops (though market expects two), so setup for another bad surprise. Bah.

What matters longterm is whether or not they bring value to their clients, and judging by wins in recent years and commentary from their customers it seems like they do.

We're basically at around 4x2020guidance, but it's such a bummer that these guys didn't reset expectations at the last quarterly call. Ed had a huge credibility problem, and these guys aren't exactly having a great start.

I really don't give a shit about whether EPS hits 15 or 20 or 25, I need to know their model works longterm, and who'd really take what they say at face value now? (I did and have sit on a large loss).

Hate to reiterate what they say, but 4x2020 earnings plus growth and plus 30 pct ROE is silly. Would probably be valued higher if they shed 40 pct of biz (like old Apparel vintages), but nobody believes these people, and CC didn't give much confidence. Probably time to looking at liquidation value to find a floor.

Oh Yeah, and ValueAct jumped ship.

Haven't had a chance to look yet, how do you know valueact sold out?

They didn't. One of their PMs stepped down from the board. They converted a portion of their shares to convertible prefs some time ago, whose only value comes from their convertibility back into common shares.

yes I remember the conversion, thank you

[kab60]

They didn't, but they quit the board. And management gave a BS explanation. Another hit at their credibility. Wonder if Eds overoptimisn in part stemmed from Melissa or they just have poor visibility which is somewhat worrying considering their emphasis on data.

Now, negativity aside, I actually didn't think results were bad. And nothing so far indicates their value proposition has worsened. They recently signed Lands End (laugh if you want) who finally seems to be on the right track, and apparently they expect a big signing next year as well.

[deseretalts]

Arlington has increased their position 30+% since beginning of the year. Its was their second biggest position before today.

[RVP]

Just my two cents:

Guidance/ management credibility is secondary to one's own understanding of the operational drivers and prospects of the business franchise. In the same vein, trading activities by other funds - while certainly entertaining - shouldn't really dictate decision making. If you can't make an independent assessment of the business's long-term value, perhaps it belongs in the too hard pile.

[undervalued]

Is the market considering this as a company about to die? ROE at 20+ and it's trading at 4x2020 estimates. @kab I too am sitting at large loss. Is market thinking ADS won't be there in 5 years or sooner?

[Spekulatius]

Is the market considering this as a company about to die? ROE at 20+ and it's trading at 4x2020 estimates. @kab I too am sitting at large loss. Is market thinking ADS won't be there in 5 years or sooner?

Mr Market believes the real earnings are closer to GAAP earnings. The “core” earnings that ADS is promoting are certainly BS.

[peridotcapital]

Is the market considering this as a company about to die? ROE at 20+ and it's trading at 4x2020 estimates. @kab I too am sitting at large loss. Is market thinking ADS won't be there in 5 years or sooner?

Mr Market believes the real earnings are closer to GAAP earnings. The “core” earnings that ADS is promoting are certainly BS.

The analyst community keeps asking them to scrap "core EPS" so they can be compared with credit card peers like SYF and DFS on an apples to apples basis. For whatever reason, they refuse. If GAAP EPS was actually going to be $20 next year I doubt it would trade at 5x today.

If only they could actually hit their numbers for a change. Unfortunately, they seem to be delusional about the underlying growth rate of the card business. On the call today, when asked, they claimed that investors should expect the normalized long-term revenue growth rate to be "high single digits." How on earth can this business grow at 4x the rate of GDP? It's not like private label credit cards are a secular growth story...

[Spekulatius]

Is the market considering this as a company about to die? ROE at 20+ and it's trading at 4x2020 estimates. @kab I too am sitting at large loss. Is market thinking ADS won't be there in 5 years or sooner?

Mr Market believes the real earnings are closer to GAAP earnings. The “core” earnings that ADS is promoting are certainly BS.

I have last quarters earnings at around $3.5/share adding back the cost of debt extinguishment. Their earnings are collapsing so no idea what they will make in the future. Even at this point, I don’t think it’s necessarily cheaper than DFS for example, considering the risk and the uncertainly with ADS.

The analyst community keeps asking them to scrap "core EPS" so they can be compared with credit card peers like SYF and DFS on an apples to apples basis. For whatever reason, they refuse. If GAAP EPS was actually going to be $20 next year I doubt it would trade at 5x today.

If only they could actually hit their numbers for a change. Unfortunately, they seem to be delusional about the underlying growth rate of the card business. On the call today, when asked, they claimed that investors should expect the normalized long-term revenue growth rate to be "high single digits." How on earth can this business grow at 4x the rate of GDP? It's not like private label credit cards are a secular growth story...