⁠Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $UNH 🧘🏽‍♂️

•NTM P/E Ratio: 17.44x
•5-Year Mean: 19.73x

•NTM FCF Yield: 5.79%
•5-Year Mean: 5.82%

As you can see, $UNH appears to be trading slightly below fair value

Going forward, investors can receive ~13% MORE in earnings per share & ~1% LESS in FCF per share 🧠***

Before we get into valuation, let’s take a look at why $UNH is a great business

BALANCE SHEET✅
•Cash & Total Inv: $78.61B
•Long-Term Debt: $63.85B

$UNH has a strong balance sheet, an A+ S&P Credit Rating & 4.16x FFO Interest Coverage

RETURN ON CAPITAL✅
•2019: 18.6%
•2020: 19.1%
•2021: 19.1%
•2022: 19.4%
•2023: 19.1%

RETURN ON EQUITY✅
•2019: 24.1%
•2020: 23.8%
•2021: 24.1%
•2022: 25.4%
•2023: 25.0%

$UNH has strong return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2013: $122.49B
•2023: $371.62B
•CAGR: 11.73%

FREE CASH FLOW✅
•2013: $5.68B
•2023: $25.68B
•CAGR: 16.28%

NORMALIZED EPS✅
•2013: $5.50
•2023: $25.12
•CAGR: 16.40%

PAID DIVIDENDS✅
•2013: $1.05
•2023: $7.29
•CAGR: 21.38%

SHARE BUYBACKS✅
•2013 Shares Outstanding: 1.02B
•LTM Shares Outstanding: 0.93B

By reducing its shares outstanding ~8.8%, $UNH increased its EPS by ~9.6% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 14.6%
•LTM Operating Margins: 8.5%
•LTM Net Income Margins: 4.0%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~13% MORE in EPS & ~1% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $UNH has to grow earnings at a 8.72% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be more than the (8.72%) required growth rate:

2024E: $27.71 (10.3% YoY) *FY Dec
2025E: $30.97 (11.8% YoY)
2026E: $34.97 (12.9% YoY)

$UNH has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $UNH ends 2026 with $34.97 in EPS & see its CAGR potential assuming different multiples

19x P/E: $664.43💵 … ~14.5% CAGR

18x P/E: $629.46💵 … ~12.1% CAGR

17x P/E: $594.49💵 … ~9.7% CAGR

As you can see, $UNH appears to have attractive return potential even if we assume 18x earnings (a multiple below both its 5-year & 10-year mean)

That’s a solid rate of return for an excellent capital allocator & wide-moat recession-proof business like $UNH

Today at $489💵 $UNH appears to be a good consideration for investment

However, keep in mind how volatile $UNH (and all health insurers) can get amid regulatory & political risks

Those considering $UNH would be wise to piece into the position, leaving room for additional purchases if $UNH continues to trade down to an even more attractive valuation

E.g. 1/3 of the purchase at $489💵, another 1/3 at $440💵, & 1/3 at $390💵

#stocks #investing
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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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⁠Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $GOOG 🧘🏽‍♂️

•NTM P/E Ratio: 22.80x
•5-Year Mean: 23.54x

•NTM FCF Yield: 3.79%
•5-Year Mean: 4.18%

As you can see, $GOOG appears to be trading near fair value

Going forward, investors can receive ~3% MORE in earnings per share & ~9% LESS in FCF per share 🧠***

Before we get into valuation, let’s take a look at why $GOOG is a great business

BALANCE SHEET✅
•Cash & Short-Term Inv: $108.09B
•Long-Term Debt: $11.87B

$GOOG has a strong balance sheet, an AA+ S&P Credit Rating & 332x FFO Interest Coverage

RETURN ON CAPITAL✅
•2019: 16.4%
•2020: 16.2%
•2021: 27.6%
•2022: 26.1%
•2023: 28.1%
•LTM: 30.2%

RETURN ON EQUITY✅
•2019: 18.1%
•2020: 19.0%
•2021: 32.1%
•2022: 23.6%
•2023: 27.4%
•LTM: 29.8%

$GOOG has strong return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2013: $55.52B
•2023: $307.39
•CAGR: 18.66%

FREE CASH FLOW✅
•2013: $11.30B
•2023: $69.50B
•CAGR: 19.91%

NORMALIZED EPS✅
•2013: $2.19
•2023: $5.80
•CAGR: 10.22%

SHARE BUYBACKS✅
•2018 Shares Outstanding: 14.07B
•LTM Shares Outstanding: 12.65B

By reducing its shares outstanding ~10.0%, $GOOG increased its EPS by ~11.1% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 57.3%
•LTM Operating Margins: 30.5%
•LTM Net Income Margins: 25.9%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~3% MORE in EPS & ~9% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $GOOG has to grow earnings at an 11.40% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be more than the (11.40%) required growth rate:

2024E: $7.54 (30.0% YoY) *FY Dec
2025E: $8.57 (13.6% YoY)
2026E: $9.82 (14.6% YoY)

$GOOG has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $GOOG ends 2026 with $9.82 in EPS & see its CAGR potential assuming different multiples

24x P/E: $235.68💵 … ~12.6% CAGR

23x P/E: $225.86💵 … ~10.7% CAGR

22x P/E: $216.04💵 … ~8.8% CAGR

As you can see, $GOOG appears to have attractive return potential if we assume 23x - 24x earnings (a multiple near its 5-year & 10-year mean)

At 24x earnings, $GOOG CAGR potential is excellent & it’s not unreasonable for the business to trade for 24x (given current growth rate estimates, its moat, balance sheet, & exemplary capital allocation)

Today at $176.00💵 $GOOG appears to be an attractive consideration for investment

Those investing today can do well & expect decent returns, albeit without much of a margin of safety

$GOOG presents excellent value & a wide margin of safety closer to $150💵 or ~15% below today’s price

At $150💵, investors can reasonably expect ~13.8% CAGR even assuming 21x earnings

#stocks #investing $GOOGL
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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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AkhenOsiris
CELH NVDA research
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AkhenOsiris
AI is just hype crowd in shambies

NORTH KOREA, RUSSIA PACT: TO COOPERATE ON SPACE, PEACEFUL USE OF NUCLEAR ENERGY, AI - KCNA - First Squawk
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AkhenOsiris
$TSM

Bernstein analysts lifted their price target for TSMC to $200 from $150.

The investment firm expects TSMC to surpass its 2024 guidance, driven by high-end phone demand and advanced technology nodes. The company's data center AI revenue is on the rise, aligning with projections. However, an unexpected boost has come from AI's influence on smartphone upgrades.

“N3 & N5 capacity is full now,” analysts noted. “We expect 3Q24 revenue guide to beat & 2024 full-year USD revenue to rise by 25% & EPS by 28%.”

Most notably, the firm projects that EPS could see an additional 26% increase in 2026, citing continued demand for its Chip-on-Wafer-on-Substrate (CoWoS) technology, the earlier-than-expected launch of Intel’s (INTC) Lunar Lake, and a potential price hike in advanced nodes.

Despite a lower-than-expected outsourcing volume from Intel, TSMC's EPS is expected to maintain a mid-teens percentage growth in 2026. This is partly due to AMD joining Apple as an early adopter of TSMC's N2 node technology. Moreover, TSMC is likely to retain some production of supporting tiles for Intel's Panther Lake, despite the latter's plan to move its compute tile back to its own 18A process.

Bernstein has also slightly adjusted its 2024 capital expenditure projections for TSMC upward due to CoWoS investments but has left the 2025 and 2026 estimates unchanged “as we need visibility on upcoming iPhone to better gauge the impact of Edge AI.”

With a forward price-to-earnings (P/E) ratio of 20 times, TSMC stock still trades at a discount of approximately 25% compared to the SOX index, which is near “record deep,” analysts highlight.

“20x is very reasonable in light of the rapid earnings growth & good visibility,” analysts added
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AkhenOsiris
$NET 2nd firm to indicate Apple win

Wells Fargo says Cloudflare potentially embedded in Apple's new PCC architecture.

Wells Fargo analyst Andrew Nowinski believes Cloudflare (NET) was likely selected as the OHTTP provider in Apple's (AAPL) new PCC architecture, which should provide a boost to revenue growth in FY25, given that it will be GA later this fall. Since Apple did not disclose the third-party provider, "we may never hear confirmation of this win from management," the firm acknowledges.

Wells Fargo has an Overweight rating on Cloudflare's shares with a price target of $105.
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AkhenOsiris
Jefferies on cybersecurity space notes that while they don’t see material Gen AI revenue showing up until at least CY25, investors should position now given the Gen AI Software market represents an ~$500M to $2B market opportunity in 2024 growing to $3-10B in 2027. Jefferies sees Cyber platforms with access to the largest datasets are the biggest beneficiaries of Gen AI, and the biggest near-term winners in this theme likely CRWD, CHKP, PANW, VRNS, NET. Jefferies says while 2023 was spent dreaming of Gen AI's potential. 2024 will be about moving forward with concrete steps - vendors productizing features & exploring pricing, and customers looking for use cases that justify the cost. As the majority of Gen AI infused products become GA in 2H24, Jefferies expects to see a phased adoption and rev ramp into 2025 & beyond. 45% of CIOs in Jefferies 4Q23 survey expect to deploy AI in the next 12-24 months, up from just 35% in 2Q23.

H/T @heartbreakout
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AkhenOsiris
Consumer Interest in Engaging With Media Content Created With Gen AI
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AkhenOsiris
Anthropic announces latest model, Claude 3.5 Sonnet

Daniela Amodei, co-founder of Anthropic, spoke with VentureBeat about the significance of this release. “Claude 3.5 Sonnet is now the most capable, smartest, and cheapest model available on the market today,” Amodei said. “Out of the standard seven intelligence and capability metrics, Claude 3.5 Sonnet beats all of the competition on six of them and is quite close on the seventh. For standard vision metrics, we’re the top in the leaderboard on four out of five, and a close second on one.”

Anthropic’s focus on the enterprise market sets it apart from competitors like OpenAI, which has primarily targeted consumers with its GPT models. While OpenAI has made significant strides in pushing the boundaries of AI capabilities, Anthropic has carved out a niche by tailoring its offerings to the specific needs of businesses. This strategic difference is evident in the features and pricing of Claude 3.5 Sonnet, which prioritizes the key factors that matter most to enterprise customers. venturebeat.com/ai/anthropic…
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AkhenOsiris
Along with the new model, Anthropic is also introducing a new feature called Artifacts. With Artifacts, you’ll be able to see and interact with the results of your Claude requests: if you ask the model to design something for you, it can now show you what it looks like and let you edit it right in the app. If Claude writes you an email, you can edit the email in the Claude app instead of having to copy it to a text editor. It’s a small feature, but a clever one — these AI tools need to become more than simple chatbots, and features like Artifacts just give the app more to do.
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