AkhenOsiris
$ORCL
*Some CIOs expect to reduce spending on vendors such as Oracle to allocate more funds to GenAI investments."
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$ORCL
*Some CIOs expect to reduce spending on vendors such as Oracle to allocate more funds to GenAI investments."
$MSFT $AMZN $GOOGL $ORCL and other software names
Citi CIO Survey:
Microsoft remains the leading generative AI partner that CIOs are considering, significantly ahead of Amazon and Google.
Regarding funding for GenAI projects, 71% of CIOs anticipate securing new or additional funding (up slightly from 70% last quarter), while 29% believe the funding will come from existing resources. Some CIOs expect to reduce spending on vendors such as Oracle to allocate more funds to GenAI investments.
Organizations are projected to increase their GenAI spending by an average of 13% in the near term. However, it is still "early to identify clear winners," with the median percentage of use cases in the testing phase between 31-40% and in the production phase between 11-20%.
The survey reveals that "46% of respondents have seen GenAI projects negatively impact traditional IT budgets, with back-office and consulting projects as the top affected categories, and the median impact on traditional IT budgets between 7-9%."
Overall, Citi's 2Q CIO survey showed mixed results, with a slight deterioration in the IT budget environment, primarily due to Europe. However, US near-term IT budget growth expectations improved notably to 3% this quarter, up from 2.2% in the March quarter survey, and surpassing the historical average of 2.7%.
Cybersecurity remains the top investment priority for CIOs, followed by Data modernization/GenAI, though its importance has diminished compared to March, Citi noted.
This “may be a slightly negative read-through for MSFT, ESTC, SNOW, MDB, INFA, CFLT and TDC,” analysts highlighted.
Digital Transformation Projects also remain a top-three priority but have fallen in importance since March, potentially tied to enterprises refining their generative AI strategies. Robotics/Automation remains the fourth priority - AkhenOsiristweet
AkhenOsiris
$MSFT $AMZN $GOOGL $ORCL and other software names
Citi CIO Survey:
Microsoft remains the leading generative AI partner that CIOs are considering, significantly ahead of Amazon and Google.
Regarding funding for GenAI projects, 71% of CIOs anticipate securing new or additional funding (up slightly from 70% last quarter), while 29% believe the funding will come from existing resources. Some CIOs expect to reduce spending on vendors such as Oracle to allocate more funds to GenAI investments.
Organizations are projected to increase their GenAI spending by an average of 13% in the near term. However, it is still "early to identify clear winners," with the median percentage of use cases in the testing phase between 31-40% and in the production phase between 11-20%.
The survey reveals that "46% of respondents have seen GenAI projects negatively impact traditional IT budgets, with back-office and consulting projects as the top affected categories, and the median impact on traditional IT budgets between 7-9%."
Overall, Citi's 2Q CIO survey showed mixed results, with a slight deterioration in the IT budget environment, primarily due to Europe. However, US near-term IT budget growth expectations improved notably to 3% this quarter, up from 2.2% in the March quarter survey, and surpassing the historical average of 2.7%.
Cybersecurity remains the top investment priority for CIOs, followed by Data modernization/GenAI, though its importance has diminished compared to March, Citi noted.
This “may be a slightly negative read-through for MSFT, ESTC, SNOW, MDB, INFA, CFLT and TDC,” analysts highlighted.
Digital Transformation Projects also remain a top-three priority but have fallen in importance since March, potentially tied to enterprises refining their generative AI strategies. Robotics/Automation remains the fourth priority
tweet
$MSFT $AMZN $GOOGL $ORCL and other software names
Citi CIO Survey:
Microsoft remains the leading generative AI partner that CIOs are considering, significantly ahead of Amazon and Google.
Regarding funding for GenAI projects, 71% of CIOs anticipate securing new or additional funding (up slightly from 70% last quarter), while 29% believe the funding will come from existing resources. Some CIOs expect to reduce spending on vendors such as Oracle to allocate more funds to GenAI investments.
Organizations are projected to increase their GenAI spending by an average of 13% in the near term. However, it is still "early to identify clear winners," with the median percentage of use cases in the testing phase between 31-40% and in the production phase between 11-20%.
The survey reveals that "46% of respondents have seen GenAI projects negatively impact traditional IT budgets, with back-office and consulting projects as the top affected categories, and the median impact on traditional IT budgets between 7-9%."
Overall, Citi's 2Q CIO survey showed mixed results, with a slight deterioration in the IT budget environment, primarily due to Europe. However, US near-term IT budget growth expectations improved notably to 3% this quarter, up from 2.2% in the March quarter survey, and surpassing the historical average of 2.7%.
Cybersecurity remains the top investment priority for CIOs, followed by Data modernization/GenAI, though its importance has diminished compared to March, Citi noted.
This “may be a slightly negative read-through for MSFT, ESTC, SNOW, MDB, INFA, CFLT and TDC,” analysts highlighted.
Digital Transformation Projects also remain a top-three priority but have fallen in importance since March, potentially tied to enterprises refining their generative AI strategies. Robotics/Automation remains the fourth priority
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AkhenOsiris
$MSFT $AMZN
Sell-side CIO Survey Roundup:
Earlier this week Jefferies CIO survey (n=40) found Azure with a "slight preference" over AWS for overall cloud spend.
MS found Microsoft to be biggest beneficiary of GenAI spend "by far" vs Amazon and Google. MS also found public cloud workloads increasing at approx 20% cagr next 2 years.
Today Citi CIO survey finds Microsoft is "significantly ahead of Amazon and Google" for GenAI projects.
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$MSFT $AMZN
Sell-side CIO Survey Roundup:
Earlier this week Jefferies CIO survey (n=40) found Azure with a "slight preference" over AWS for overall cloud spend.
MS found Microsoft to be biggest beneficiary of GenAI spend "by far" vs Amazon and Google. MS also found public cloud workloads increasing at approx 20% cagr next 2 years.
Today Citi CIO survey finds Microsoft is "significantly ahead of Amazon and Google" for GenAI projects.
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Offshore
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AkhenOsiris
many sell-side on this boat @Crussian17
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many sell-side on this boat @Crussian17
While headline PPI was 0.22% m/m, the trade services (i.e. wholesale and retail margins) contributed 0.37% to the number. In other words, m/m PPI would have been firmly negative otherwise. Could hint at some margin expansion during earnings season. - Liz Young Thomastweet
Offshore
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iinvested
1Q'24 Palm Valley Capital Fund on $RGP, $DOX, $KELYA, $TBI, $CRI
https://t.co/wwLwZ2YSV8
More fund letters here:
https://t.co/HhAAZQRRKy https://t.co/0jakSbneAA
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1Q'24 Palm Valley Capital Fund on $RGP, $DOX, $KELYA, $TBI, $CRI
https://t.co/wwLwZ2YSV8
More fund letters here:
https://t.co/HhAAZQRRKy https://t.co/0jakSbneAA
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Offshore
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AkhenOsiris
Mag7 comin' at ya with a different look
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Mag7 comin' at ya with a different look
The best performing stock in the S&P 500 this year...
bilello.blog/newsletter - Charlie Bilellotweet
Offshore
Video
Dimitry Nakhla | Babylon Capital®
RT @elonmusk: I fully endorse President Trump and hope for his rapid recovery https://t.co/ZdxkF63EqF
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RT @elonmusk: I fully endorse President Trump and hope for his rapid recovery https://t.co/ZdxkF63EqF
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Offshore
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Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: A sober valuation analysis on $CRM 🧘🏽♂️
•NTM P/E Ratio: 23.30x
•3-Year Mean: 38.89x
•NTM FCF Yield: 5.18%
•3-Year Mean: 3.68%
As you can see, $CRM appears to be trading below fair value
Going forward, investors can expect to receive ~67% MORE in earnings per share & ~40% MORE in FCF per share🧠***
Before we get into valuation, let’s take a look at why $CRM is a good business
BALANCE SHEET✅
•Cash & Equivalents: $14.19B
•Long-Term Debt: $8.43B
$CRM has an excellent balance sheet, an A+ S&P Credit Rating & 352x FFO Interest Coverage Ratio
RETURN ON CAPITAL🆗
•2020: 1.2%
•2021: 0.9%
•2022: 0.8%
•2023: 2.5%
•2024: 8.2%
RETURN ON EQUITY🆗
•2020: 0.5%
•2021: 10.8%
•2022: 2.9%
•2023: 0.4%
•2024: 7.0%
$CRM return metrics are ok, although more recently trending in the right direction
REVENUES✅
•2014: $4.07B
•2024: $34.86B
•CAGR: 23.95%
FREE CASH FLOW✅
•2014: $576.36M
•2024: $9.49B
•CAGR: 32.34%
NORMALIZED EPS✅
•2014: $0.35
•2024: $8.22
•CAGR: 37.11%
SHARE BUYBACKS❌
•2014 Shares Outstanding: 597.61M
•LTM Shares Outstanding: 984.00M
By increasing its shares outstanding ~64%, $CRM diluted its EPS by ~39% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 75.5%
•LTM Operating Margins: 17.2%
•LTM Net Income Margins: 11.9%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~67% MORE in EPS & ~40% MORE FCF per share
Using Benjamin Graham’s 2G rule of thumb, $CRM has to grow earnings at an 11.65% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly more than the (11.65%) required growth rate:
2025E: $9.91 (20.5% YoY) *FY Jan
2026E: $11.05 (11.5% YoY)
2027E: $12.65 (14.5% YoY)
$CRM has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $CRM ends 2027 with $12.65 in EPS & see its CAGR potential assuming different multiples
25x P/E: $316.25💵 … ~12.5% CAGR
24x P/E: $303.60💵 … ~10.8% CAGR
23x P/E: $290.95💵 … ~9.1% CAGR
As you can see, we’d have to assume >24x earnings for $CRM to have double digit CAGR potential (a multiple justified by its growth rate & moat)
Today at $234.44💵 $CRM appears to be worthwhile consideration for investment especially when you assess the trajectory of the company’s FCF & Net Income margins (steadily trending higher with further room to expand)
To ensure some margin of safety, if there’s further weakness, it could be wise to piece into the position, for example:
Initiating ~50% of the position at ~$234💵 & adding a second tranche at ~$200💵 or at ~20x NTM earnings
#stocks #investing
___
𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.
𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.
𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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RT @DimitryNakhla: A sober valuation analysis on $CRM 🧘🏽♂️
•NTM P/E Ratio: 23.30x
•3-Year Mean: 38.89x
•NTM FCF Yield: 5.18%
•3-Year Mean: 3.68%
As you can see, $CRM appears to be trading below fair value
Going forward, investors can expect to receive ~67% MORE in earnings per share & ~40% MORE in FCF per share🧠***
Before we get into valuation, let’s take a look at why $CRM is a good business
BALANCE SHEET✅
•Cash & Equivalents: $14.19B
•Long-Term Debt: $8.43B
$CRM has an excellent balance sheet, an A+ S&P Credit Rating & 352x FFO Interest Coverage Ratio
RETURN ON CAPITAL🆗
•2020: 1.2%
•2021: 0.9%
•2022: 0.8%
•2023: 2.5%
•2024: 8.2%
RETURN ON EQUITY🆗
•2020: 0.5%
•2021: 10.8%
•2022: 2.9%
•2023: 0.4%
•2024: 7.0%
$CRM return metrics are ok, although more recently trending in the right direction
REVENUES✅
•2014: $4.07B
•2024: $34.86B
•CAGR: 23.95%
FREE CASH FLOW✅
•2014: $576.36M
•2024: $9.49B
•CAGR: 32.34%
NORMALIZED EPS✅
•2014: $0.35
•2024: $8.22
•CAGR: 37.11%
SHARE BUYBACKS❌
•2014 Shares Outstanding: 597.61M
•LTM Shares Outstanding: 984.00M
By increasing its shares outstanding ~64%, $CRM diluted its EPS by ~39% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 75.5%
•LTM Operating Margins: 17.2%
•LTM Net Income Margins: 11.9%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~67% MORE in EPS & ~40% MORE FCF per share
Using Benjamin Graham’s 2G rule of thumb, $CRM has to grow earnings at an 11.65% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly more than the (11.65%) required growth rate:
2025E: $9.91 (20.5% YoY) *FY Jan
2026E: $11.05 (11.5% YoY)
2027E: $12.65 (14.5% YoY)
$CRM has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $CRM ends 2027 with $12.65 in EPS & see its CAGR potential assuming different multiples
25x P/E: $316.25💵 … ~12.5% CAGR
24x P/E: $303.60💵 … ~10.8% CAGR
23x P/E: $290.95💵 … ~9.1% CAGR
As you can see, we’d have to assume >24x earnings for $CRM to have double digit CAGR potential (a multiple justified by its growth rate & moat)
Today at $234.44💵 $CRM appears to be worthwhile consideration for investment especially when you assess the trajectory of the company’s FCF & Net Income margins (steadily trending higher with further room to expand)
To ensure some margin of safety, if there’s further weakness, it could be wise to piece into the position, for example:
Initiating ~50% of the position at ~$234💵 & adding a second tranche at ~$200💵 or at ~20x NTM earnings
#stocks #investing
___
𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.
𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.
𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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