Offshore
Photo
โ Dimitry Nakhla | Babylon Capitalยฎ
RT @DimitryNakhla: A quality valuation analysis on $ANET ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 32.74x
โข10-Year Mean: 31.71x
โขNTM FCF Yield: 3.13%
โข10-Year Mean: 3.42%
As you can see, $ANET appears to be trading near fair value
Going forward, investors can expect to receive ~3% LESS in earnings per share & ~8% LESS in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $ANET is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $8.30B
โขLong-Term Debt: $0
$ANET has an excellent balance sheet
RETURN ON CAPITALโ
โข2019: 24.8%
โข2020: 19.3%
โข2021: 22.1%
โข2022: 30.9%
โข2023: 31.0%
โข2024: 29.3%
RETURN ON EQUITYโ
โข2019: 34.1%
โข2020: 20.4%
โข2021: 23.0%
โข2022: 30.5%
โข2023: 34.5%
โข2024: 33.1%
$ANET has great return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2019: $2.41B
โข2024: $7.00B
โขCAGR: 23.77%
FREE CASH FLOWโ
โข2019: $0.95B
โข2024: $3.68B
โขCAGR: 31.10%
NORMALIZED EPSโ
โข2019: $0.61
โข2024: $2.27
โขCAGR: 30.05%
SHARE BUYBACKS๐
โข2019 Shares Outstanding: 1.29B
โขLTM Shares Outstanding: 1.28B
MARGINSโ
โขLTM Gross Margins: 64.1%
โขLTM Operating Margins: 42.0%
โขLTM Net Income Margins: 40.7%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~3% LESS in EPS & ~8% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ANET has to grow earnings at a 16.37% 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 less than the (16.37%) required growth rate:
2025E: $2.49 (9.9% YoY) *FY Dec
2026E: $2.96 (18.7% YoY)
2027E: $3.61 (22.0% YoY)
$ANET has a great track record of meeting analyst estimates ~2 years out, but letโs assume $ANET ends 2027 with $3.61 in EPS & see its CAGR potential assuming different multiples
32x P/E: $115.52๐ต โฆ ~14.2% CAGR
30x P/E: $108.30๐ต โฆ ~11.6% CAGR
29x P/E: $101.08๐ต โฆ ~8.8% CAGR
28x P/E: $93.86๐ต โฆ ~6.0% CAGR
As you can see, weโd have to assume >30x multiple for $ANET to have attractive return potential
At 29x earnings $ANET has decent CAGR potential
However, we must be aware of the risk that if data center demand cools, we could see downward revisions in already aggressive growth estimates that could lead to a 10% - 15% multiple contraction
While $ANET is an excellent business, it may not have the same level of predictability as other quality compounders, so we should require a greater margin of safety
If I want to own $ANET, Iโd likely consider buying in tranches, 1/3 at $80, 1/3 at $70 & 1/3 at $60
___
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.
tweet
RT @DimitryNakhla: A quality valuation analysis on $ANET ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 32.74x
โข10-Year Mean: 31.71x
โขNTM FCF Yield: 3.13%
โข10-Year Mean: 3.42%
As you can see, $ANET appears to be trading near fair value
Going forward, investors can expect to receive ~3% LESS in earnings per share & ~8% LESS in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $ANET is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $8.30B
โขLong-Term Debt: $0
$ANET has an excellent balance sheet
RETURN ON CAPITALโ
โข2019: 24.8%
โข2020: 19.3%
โข2021: 22.1%
โข2022: 30.9%
โข2023: 31.0%
โข2024: 29.3%
RETURN ON EQUITYโ
โข2019: 34.1%
โข2020: 20.4%
โข2021: 23.0%
โข2022: 30.5%
โข2023: 34.5%
โข2024: 33.1%
$ANET has great return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2019: $2.41B
โข2024: $7.00B
โขCAGR: 23.77%
FREE CASH FLOWโ
โข2019: $0.95B
โข2024: $3.68B
โขCAGR: 31.10%
NORMALIZED EPSโ
โข2019: $0.61
โข2024: $2.27
โขCAGR: 30.05%
SHARE BUYBACKS๐
โข2019 Shares Outstanding: 1.29B
โขLTM Shares Outstanding: 1.28B
MARGINSโ
โขLTM Gross Margins: 64.1%
โขLTM Operating Margins: 42.0%
โขLTM Net Income Margins: 40.7%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~3% LESS in EPS & ~8% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ANET has to grow earnings at a 16.37% 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 less than the (16.37%) required growth rate:
2025E: $2.49 (9.9% YoY) *FY Dec
2026E: $2.96 (18.7% YoY)
2027E: $3.61 (22.0% YoY)
$ANET has a great track record of meeting analyst estimates ~2 years out, but letโs assume $ANET ends 2027 with $3.61 in EPS & see its CAGR potential assuming different multiples
32x P/E: $115.52๐ต โฆ ~14.2% CAGR
30x P/E: $108.30๐ต โฆ ~11.6% CAGR
29x P/E: $101.08๐ต โฆ ~8.8% CAGR
28x P/E: $93.86๐ต โฆ ~6.0% CAGR
As you can see, weโd have to assume >30x multiple for $ANET to have attractive return potential
At 29x earnings $ANET has decent CAGR potential
However, we must be aware of the risk that if data center demand cools, we could see downward revisions in already aggressive growth estimates that could lead to a 10% - 15% multiple contraction
While $ANET is an excellent business, it may not have the same level of predictability as other quality compounders, so we should require a greater margin of safety
If I want to own $ANET, Iโd likely consider buying in tranches, 1/3 at $80, 1/3 at $70 & 1/3 at $60
___
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.
tweet
โ Wall St Engine
$LCID | Lucid Q1'25 Earnings Highlights
๐น Revenue: $235M (Est: $246.0M) ๐ด
๐น EPS: ($0.20) (Est: -$0.23) ๐ข
๐น Net Loss: $366.2M (Est: -$719.2M) ๐ข
๐น Operating Loss: $691.9M (Est: -$683.7M) ๐ด
Operational Metrics
๐น Vehicles Produced: 2,212 (excludes 600+ units in transit to KSA)
๐น Vehicles Delivered: 3,109 (+58% YoY)
tweet
$LCID | Lucid Q1'25 Earnings Highlights
๐น Revenue: $235M (Est: $246.0M) ๐ด
๐น EPS: ($0.20) (Est: -$0.23) ๐ข
๐น Net Loss: $366.2M (Est: -$719.2M) ๐ข
๐น Operating Loss: $691.9M (Est: -$683.7M) ๐ด
Operational Metrics
๐น Vehicles Produced: 2,212 (excludes 600+ units in transit to KSA)
๐น Vehicles Delivered: 3,109 (+58% YoY)
tweet
โ Dimitry Nakhla | Babylon Capitalยฎ
Pepsiโs $PEP FCF | Dividends Paid๐ฅค
2017: $7.06B | $4.47B (63%)
2018: $6.13B | $4.93B
2019: $5.42B | $5.30B
2020: $6.37B | $5.51B
2021: $6.99B | $5.82B
2022: $5.60B | $6.17B
2023: $7.92B | $6.68B
2024: $7.19B | $7.23B (101%)
Dividends as a % of FCF, not what you want to see ๐
tweet
Pepsiโs $PEP FCF | Dividends Paid๐ฅค
2017: $7.06B | $4.47B (63%)
2018: $6.13B | $4.93B
2019: $5.42B | $5.30B
2020: $6.37B | $5.51B
2021: $6.99B | $5.82B
2022: $5.60B | $6.17B
2023: $7.92B | $6.68B
2024: $7.19B | $7.23B (101%)
Dividends as a % of FCF, not what you want to see ๐
tweet
Offshore
Photo
โ App Economy Insights
$AMD AMD Q1 FY25:
โข Revenue +36% Y/Y to $7.4B ($320M beat).
โข Gross margin 50% (+3pp Y/Y).
โข Operating margin 11% (+10pp Y/Y).
โข Non-GAAP EPS $0.96 ($0.03).
โข Q2 rev. guidance ~$7.4B ($0.2B beat).
Dr. Lisa Su: "Our second quarter outlook highlights the strength of our differentiated product portfolio and consistent execution, positioning us well for strong growth in 2025."
tweet
$AMD AMD Q1 FY25:
โข Revenue +36% Y/Y to $7.4B ($320M beat).
โข Gross margin 50% (+3pp Y/Y).
โข Operating margin 11% (+10pp Y/Y).
โข Non-GAAP EPS $0.96 ($0.03).
โข Q2 rev. guidance ~$7.4B ($0.2B beat).
Dr. Lisa Su: "Our second quarter outlook highlights the strength of our differentiated product portfolio and consistent execution, positioning us well for strong growth in 2025."
tweet
โ Dimitry Nakhla | Babylon Capitalยฎ
RT @DimitryNakhla: โThere are 60,000 economists in the US, many of them employed full-time, trying to forecast recessions and interest rates. If they could do it successfully twice in a row, theyโd all be millionaires by now. As far as I know, most of them are still gainfully employed, which ought to tell us somethingโ
โ Peter Lynch ๐ฃ๏ธ
tweet
RT @DimitryNakhla: โThere are 60,000 economists in the US, many of them employed full-time, trying to forecast recessions and interest rates. If they could do it successfully twice in a row, theyโd all be millionaires by now. As far as I know, most of them are still gainfully employed, which ought to tell us somethingโ
โ Peter Lynch ๐ฃ๏ธ
tweet
โ Wall St Engine
CHINA VICE PREMIER HE LIFENG TO MEET WITH BESSENT: CHINA MOFA
tweet
CHINA VICE PREMIER HE LIFENG TO MEET WITH BESSENT: CHINA MOFA
BESSENT, GREER TO MEET WITH CHINA ๐จ๐ณ TO LAUNCH TRADE TALKS tweet
twitter.com
undefined
undefined
โ The All-In Podcast
NEW INTERVIEW: secretary of the interior doug burgum sits down with friedberg!๐ข๏ธ๐โก๏ธ
this interview was recorded at sabine pass in louisiana
@SecretaryBurgum joined @friedberg to discuss:
-- how his background in tech and as governor of north dakota led to his role in the administration
-- america's energy emergency: ai, competing with china, the energy addition roadmap
-- making america more risk-on
-- creating a national balance sheet
++ much more
(0:00) friedberg introduces secretary burgum
(2:11) burgum's background and how it led him to his role in the administration
(10:56) understanding the state of american energy production and how we got here
(22:32) america's energy emergency, unlocking potential, keeping up with china, increasing national risk tolerance
(34:22) burgum's national balance sheet idea: how it could help reduce national debt
(42:25) mining, overseeing the epa, aligning agencies with outcomes
tweet
NEW INTERVIEW: secretary of the interior doug burgum sits down with friedberg!๐ข๏ธ๐โก๏ธ
this interview was recorded at sabine pass in louisiana
@SecretaryBurgum joined @friedberg to discuss:
-- how his background in tech and as governor of north dakota led to his role in the administration
-- america's energy emergency: ai, competing with china, the energy addition roadmap
-- making america more risk-on
-- creating a national balance sheet
++ much more
(0:00) friedberg introduces secretary burgum
(2:11) burgum's background and how it led him to his role in the administration
(10:56) understanding the state of american energy production and how we got here
(22:32) america's energy emergency, unlocking potential, keeping up with china, increasing national risk tolerance
(34:22) burgum's national balance sheet idea: how it could help reduce national debt
(42:25) mining, overseeing the epa, aligning agencies with outcomes
tweet
twitter.com
undefined
undefined
Offshore
Photo
โ App Economy Insights
Visuals of the week (so far):
๐ช $BRK Buffett steps down
๐ต๏ธ $PLTR Palantir's acceleration
โ๏ธ $AMD AMD's surprise guidance
๐๏ธ $RACE Ferrari's pricing power.
๐ $HIMS Hims & Hers' pivot
โก๏ธ $CELH Celsius + Alani and more!
https://t.co/QUA3PQhE2J
tweet
Visuals of the week (so far):
๐ช $BRK Buffett steps down
๐ต๏ธ $PLTR Palantir's acceleration
โ๏ธ $AMD AMD's surprise guidance
๐๏ธ $RACE Ferrari's pricing power.
๐ $HIMS Hims & Hers' pivot
โก๏ธ $CELH Celsius + Alani and more!
https://t.co/QUA3PQhE2J
tweet
โ Wall St Engine
$EA delivered a strong Q4, reporting a $254M profitโup 40% from last yearโdriven by โCollege Football 25โ and over $1B in bookings from its American Football segment.
Full-year net bookings hit $7.36B, with live services making up 73%. Looking ahead, EA forecasts FY26 bookings of $7.6B to $8B, helped by continued strength in its sports titles, double-digit monetization growth in โFC,โ and the upcoming โBattlefieldโ release. The delay of GTA 6 to FY27 removes a major competitive headwind, giving EA more room to capture market share. Shares jumped 6% after hours.
tweet
$EA delivered a strong Q4, reporting a $254M profitโup 40% from last yearโdriven by โCollege Football 25โ and over $1B in bookings from its American Football segment.
Full-year net bookings hit $7.36B, with live services making up 73%. Looking ahead, EA forecasts FY26 bookings of $7.6B to $8B, helped by continued strength in its sports titles, double-digit monetization growth in โFC,โ and the upcoming โBattlefieldโ release. The delay of GTA 6 to FY27 removes a major competitive headwind, giving EA more room to capture market share. Shares jumped 6% after hours.
tweet