QRTE - Valens Credit Report - 2024 04 02
Credit markets are materially overstating QRTE.A's credit risk with a YTW of 8.391% relative to an Intrinsic YTW of 6.771% and an Intrinsic CDS of 137bps. Furthermore, S&P is materially overstating QRTE.A's fundamental credit risk with its CCC+ credit rating six notches below Valens' XO- (equivalent to BB+) credit rating.Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Specifically, QRTE.A's metrics should generally drive management to focus on all three value drivers: margin expansion, asset efficiency, and top-line growth,
which should lead to Uniform ROA improvement and increased cash flows available for servicing debt obligations. Additionally, management has low change-in-control compensation relative to their annual compensation, indicating they may not be incentivized to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
Earnings Call Forensics™ of the firm's Q4 2023 earnings call (02/28/2024) highlights that management is confident they are revitalizing the customer experience and expanding their market presence through the introduction of new, high-quality inventory. They are also confident they are using e-mail channels to encourage further engagement and purchases from new customers, and that they expect to grow in the out years of Project Athens
Qurate Retail owns interests in subsidiaries and other companies which are primarily engaged in the video and online commerce industries. The company's principal businesses and assets include its consolidated subsidiaries: QVC, Inc., which curates and sells a variety of consumer products; HSN, Inc., which operates an e-commerce website, a mobile application, social pages and Shop By Remote technology; Cornerstone Brands, Inc., which consists of a portfolio of aspirational home and apparel brands; and Zulily, LLC, which is an online retailer providing merchandise including women's, children's and men's apparel and other products such as home, accessories and beauty products.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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