Offshore
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โ The Kobeissi Letter
The market remains historically concentrated:
The 10 largest S&P 500 stocks now reflect 38% of the index's market cap, near the highest since the 1960s.
By comparison, at the 2000 Dot-Com Bubble peak, this percentage was ~27%.
At the same time, the top 11-50 stocks now account for ~23% of the S&P 500's market cap, near an all-time low.
This is 12 percentage points lower than at the 2000 Dot-Com Bubble high.
The market cannot survive without big tech.
tweet
The market remains historically concentrated:
The 10 largest S&P 500 stocks now reflect 38% of the index's market cap, near the highest since the 1960s.
By comparison, at the 2000 Dot-Com Bubble peak, this percentage was ~27%.
At the same time, the top 11-50 stocks now account for ~23% of the S&P 500's market cap, near an all-time low.
This is 12 percentage points lower than at the 2000 Dot-Com Bubble high.
The market cannot survive without big tech.
tweet
Offshore
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โ Dimitry Nakhla | Babylon Capitalยฎ
A quality valuation analysis on $GOOG ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 17.74x
โข10-Year Mean: 23.69x
โขNTM FCF Yield: 3.94%
โข10-Year Mean: 4.17%
As you can see, $GOOG appears to be trading below fair value
Going forward, investors can receive ~33% MORE in earnings per share & ~6% LESS in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $GOOG is a great business
BALANCE SHEETโ
โขCash & Short-Term Inv: $95.66B
โขLong-Term Debt: $10.88B
$GOOG has a strong balance sheet, an AA+ S&P Credit Rating & 467x FFO Interest Coverage
RETURN ON CAPITALโ
โข2019: 16.4%
โข2020: 16.2%
โข2021: 27.6%
โข2022: 26.1%
โข2023: 26.9%
โข2024: 32.3%
RETURN ON EQUITYโ
โข2019: 18.1%
โข2020: 19.0%
โข2021: 32.1%
โข2022: 23.6%
โข2023: 27.4%
โข2024: 32.9%
$GOOG has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $66.00B
โข2024: $350.02B
โขCAGR: 18.16%
FREE CASH FLOWโ
โข2014: $12.01B
โข2024: $72.76B
โขCAGR: 19.73%
NORMALIZED EPSโ
โข2014: $1.28
โข2024: $8.04
โขCAGR: 20.17%
SHARE BUYBACKSโ
โข2018 Shares Outstanding: 14.07B
โขLTM Shares Outstanding: 12.45B
By reducing its shares outstanding ~11.5%, $GOOG increased its EPS by ~13% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 58.2%
โขLTM Operating Margins: 32.6%
โขLTM Net Income Margins: 28.6%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~33% MORE in EPS & ~6% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $GOOG has to grow earnings at an 8.87% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be more than the (8.87%) required growth rate:
2025E: $8.89 (10.6% YoY) *FY Dec
2026E: $10.05 (13.1% YoY)
2027E: $11.48 (14.3% YoY)
$GOOG has an excellent track record of meeting analyst estimates ~2 years out, but letโs assume $GOOG ends 2027 with $11.00 in EPS & see its CAGR potential assuming different multiples
22x P/E: $242๐ต โฆ ~17.0% CAGR
21x P/E: $231๐ต โฆ ~15.0% CAGR
20x P/E: $220๐ต โฆ ~12.9% CAGR
19x P/E: $209๐ต โฆ ~10.8% CAGR
18x P/E: $198๐ต โฆ ~8.7% CAGR
As you can see, $GOOG appears to have attractive return potential IF we assume >20x earnings (a multiple below its 5-year & 10-year mean while assuming a lower 2027E)
At >21, $GOOG has aggressive CAGR potential & itโs not unreasonable for the business to even trade for ~22x (given its growth rate, moat, balance sheet, & exemplary capital allocation)
Today at $160๐ต $GOOG appears to be a strong consideration for investment
Between cloud โ๏ธ , AI ๐ค , quantum computing โ๏ธ, $GOOG has a strong growth runway ahead, with the potential for continued margin expansion serving as an additional tailwind
$GOOGL
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ. <a href='http[...]
A quality valuation analysis on $GOOG ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 17.74x
โข10-Year Mean: 23.69x
โขNTM FCF Yield: 3.94%
โข10-Year Mean: 4.17%
As you can see, $GOOG appears to be trading below fair value
Going forward, investors can receive ~33% MORE in earnings per share & ~6% LESS in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $GOOG is a great business
BALANCE SHEETโ
โขCash & Short-Term Inv: $95.66B
โขLong-Term Debt: $10.88B
$GOOG has a strong balance sheet, an AA+ S&P Credit Rating & 467x FFO Interest Coverage
RETURN ON CAPITALโ
โข2019: 16.4%
โข2020: 16.2%
โข2021: 27.6%
โข2022: 26.1%
โข2023: 26.9%
โข2024: 32.3%
RETURN ON EQUITYโ
โข2019: 18.1%
โข2020: 19.0%
โข2021: 32.1%
โข2022: 23.6%
โข2023: 27.4%
โข2024: 32.9%
$GOOG has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $66.00B
โข2024: $350.02B
โขCAGR: 18.16%
FREE CASH FLOWโ
โข2014: $12.01B
โข2024: $72.76B
โขCAGR: 19.73%
NORMALIZED EPSโ
โข2014: $1.28
โข2024: $8.04
โขCAGR: 20.17%
SHARE BUYBACKSโ
โข2018 Shares Outstanding: 14.07B
โขLTM Shares Outstanding: 12.45B
By reducing its shares outstanding ~11.5%, $GOOG increased its EPS by ~13% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 58.2%
โขLTM Operating Margins: 32.6%
โขLTM Net Income Margins: 28.6%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~33% MORE in EPS & ~6% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $GOOG has to grow earnings at an 8.87% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be more than the (8.87%) required growth rate:
2025E: $8.89 (10.6% YoY) *FY Dec
2026E: $10.05 (13.1% YoY)
2027E: $11.48 (14.3% YoY)
$GOOG has an excellent track record of meeting analyst estimates ~2 years out, but letโs assume $GOOG ends 2027 with $11.00 in EPS & see its CAGR potential assuming different multiples
22x P/E: $242๐ต โฆ ~17.0% CAGR
21x P/E: $231๐ต โฆ ~15.0% CAGR
20x P/E: $220๐ต โฆ ~12.9% CAGR
19x P/E: $209๐ต โฆ ~10.8% CAGR
18x P/E: $198๐ต โฆ ~8.7% CAGR
As you can see, $GOOG appears to have attractive return potential IF we assume >20x earnings (a multiple below its 5-year & 10-year mean while assuming a lower 2027E)
At >21, $GOOG has aggressive CAGR potential & itโs not unreasonable for the business to even trade for ~22x (given its growth rate, moat, balance sheet, & exemplary capital allocation)
Today at $160๐ต $GOOG appears to be a strong consideration for investment
Between cloud โ๏ธ , AI ๐ค , quantum computing โ๏ธ, $GOOG has a strong growth runway ahead, with the potential for continued margin expansion serving as an additional tailwind
$GOOGL
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ. <a href='http[...]
Offshore
โ Dimitry Nakhla | Babylon Capitalยฎ A quality valuation analysis on $GOOG ๐ง๐ฝโโ๏ธ โขNTM P/E Ratio: 17.74x โข10-Year Mean: 23.69x โขNTM FCF Yield: 3.94% โข10-Year Mean: 4.17% As you can see, $GOOG appears to be trading below fair value Going forward, investorsโฆ
s://twitter.com/DimitryNakhla/status/1915488446463848912'>tweet
โ The All-In Podcast
Inside the All-In Summit: Behind the Scenes of the World's Greatest Conference ๐
Recap the 2024 @allinsummit with exclusive access to your besties!
(0:00) Opening + setup ๐จ
(3:55) Day 1: @JDVance, @elonmusk, Sergey Brin, @megynkelly, and more! ๐ฅ
(9:01) Top Gun Party at the Santa Monica Pier ๐๏ธ
(10:09) Day 2: Mearsheimer/Sachs panel, Travis Kalanick, and more! ๐ฅ
(15:19) Back to the Future Party ๐
@chamath @Jason @DavidSacks @friedberg
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Inside the All-In Summit: Behind the Scenes of the World's Greatest Conference ๐
Recap the 2024 @allinsummit with exclusive access to your besties!
(0:00) Opening + setup ๐จ
(3:55) Day 1: @JDVance, @elonmusk, Sergey Brin, @megynkelly, and more! ๐ฅ
(9:01) Top Gun Party at the Santa Monica Pier ๐๏ธ
(10:09) Day 2: Mearsheimer/Sachs panel, Travis Kalanick, and more! ๐ฅ
(15:19) Back to the Future Party ๐
@chamath @Jason @DavidSacks @friedberg
tweet
twitter.com
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Offshore
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โ Investing visuals
$GOOGL Q1 Earnings ๐จ
โข EPS $2.81 vs $2.01 Est.
โข Revenue $90.2B vs $89.2B Est.
Stock is up +4% https://t.co/MFMCrWnrSJ
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$GOOGL Q1 Earnings ๐จ
โข EPS $2.81 vs $2.01 Est.
โข Revenue $90.2B vs $89.2B Est.
Stock is up +4% https://t.co/MFMCrWnrSJ
tweet
Offshore
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โ Dimitry Nakhla | Babylon Capitalยฎ
$GOOG $GOOGL Q1 2025 Highlights ๐๐ฝ
Rev: $90.23B vs $88.87B est โ | +12% YoY
EPS: $2.81 vs $2.02 est โ | +48% YoY
GOOGLE CLOUD โ๏ธ +28.05% YoY https://t.co/6jsl0HLERn
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$GOOG $GOOGL Q1 2025 Highlights ๐๐ฝ
Rev: $90.23B vs $88.87B est โ | +12% YoY
EPS: $2.81 vs $2.02 est โ | +48% YoY
GOOGLE CLOUD โ๏ธ +28.05% YoY https://t.co/6jsl0HLERn
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Offshore
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โ App Economy Insights
$GOOG Alphabet Q1 FY25:
โข Revenue +12% Y/Y to $90.2B ($1.0B beat).
โข Operating margin 34% (+2pp Y/Y).
โข EPS $2.81 ($0.80 beat).
โ๏ธ Google Cloud:
โข Revenue +28% Y/Y to $12.3B.
โข Operating margin 18% (+8pp Y/Y).
โถ๏ธ YouTube ads +10% to $8.9B. https://t.co/mgcf8ntqlc
tweet
$GOOG Alphabet Q1 FY25:
โข Revenue +12% Y/Y to $90.2B ($1.0B beat).
โข Operating margin 34% (+2pp Y/Y).
โข EPS $2.81 ($0.80 beat).
โ๏ธ Google Cloud:
โข Revenue +28% Y/Y to $12.3B.
โข Operating margin 18% (+8pp Y/Y).
โถ๏ธ YouTube ads +10% to $8.9B. https://t.co/mgcf8ntqlc
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Offshore
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โ The Kobeissi Letter
BREAKING: The NY Empire State Manufacturing Index fell to -8.1 points in April, recording the 3rd negative reading this year.
More importantly, 6-month outlook for general business conditions plummeted to -7.4, the lowest in 24 years.
Additionally, the 6-month outlook for new orders fell to -6.6, the lowest in history.
Not even the 2008 Financial Crisis saw such a grim outlook.
All while prices paid outlook spiked to 65.6, the highest since mid-2022.
Stagflation is here.
tweet
BREAKING: The NY Empire State Manufacturing Index fell to -8.1 points in April, recording the 3rd negative reading this year.
More importantly, 6-month outlook for general business conditions plummeted to -7.4, the lowest in 24 years.
Additionally, the 6-month outlook for new orders fell to -6.6, the lowest in history.
Not even the 2008 Financial Crisis saw such a grim outlook.
All while prices paid outlook spiked to 65.6, the highest since mid-2022.
Stagflation is here.
tweet