⁠Investing visuals
Wonderful visual about $PLTR by @carbonfinancex! Great account to follow If you're a fan of high quality visuals👌

Palantir $PLTR is officially joining the S&P 500 $SPX, replacing American Airlines $AAL in the index.

The announcement came after hours on Friday, sending shares of the big data software company up 8%. 

Palantir has had an impressive year, with its stock up roughly 100% YTD.

To qualify for the S&P 500, a company must meet several criteria such as:
•Being profitable in the most recent quarter
•Having cumulative profits over the last four quarters
•A minimum market cap of $14.5B.

Dell $DELL will also join the S&P 500, replacing Etsy $ETSY, while Erie Indemnity $ERIE will take the spot of Bio-Rad Laboratories $BIO.

These changes will be effective on September 23rd. - carbonfinance
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AkhenOsiris
$GENI $DKNG

Seems DraftKings has signed on with Genius Sports' BetVision.

As per Sports Business Journal article last week, DraftKings was still in negotiations with Genius help.draftkings.com/hc/en-us…

Sports Business Journal article from Sept 2nd:

"Promising as the product may be, it has not been enough to spur what sources say have become contentious renewal negotiations between Genius and the three largest U.S. sportsbooks: FanDuel, DraftKings and BetMGM. As of last Thursday, with the season opener a week away, only Caesars and BetRivers had finalized deals, though talks continued.

Caesars, which was the first to renew and had exclusive rights to introduce BetVision in its first year, declined a request to discuss the product’s evolution, as did FanDuel and Fanatics, the other two sportsbooks that offered it last year. Genius declined comment on renewal negotiations.

From all indications, the sticking point for the larger books has been the price of the overall data package, not the utility of the updated watch-and-bet product."
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AkhenOsiris
Impact to $GENI:

CFO at Citi Conference: "Why it's important for Genius is because we take, broadly speaking, just a generalization, about 3x as much revenue from an in-play sports bet as we do a pre-play sports bet."
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AkhenOsiris
When in doubt, make up a new definition, we all do it...bravo Gene

Greetings from Cupertino. Here’s what you need to know about todays $AAPL event:

The bottom line: Will FY25 be an iPhone “super cycle”? If the definition of super cycle is exceeding Street's estimates, I believe the answer is yes.

A closer look at today: Since there will be little changes to the iPhone hardware, all of the focus will be on any changes to the Apple Intelligence features and rollout roadmap outlined back at WWDC. I’m most focused on when to expect the more advanced features in Europe and China. Over the weekend, Bloomberg's Mark Gurman reported two smaller Apple Intelligence features, Image Playground app and the Genmoji, will be delayed by a month or two (now expected in December). While this is a setback, and could soften iPhone sales in December, it will have little impact on FY25.

The bigger picture - Consumers will want these AI features: Despite the unknowns of feature timing and global rollout, I believe consumers will get excited about these AI features and will lead to upside to the Street's FY25 and FY26 iPhone numbers. Factset consensus estimates call for iPhone in FY24 to be down 0.3%, shifting to growth in FY25 at up 5%, and FY26 up 6%. While the Dec-24 iPhone quarter will likely be up only a few percent (below the Street at 5.7% growth), the March quarter benefits from an easy comp and ramping Apple Intelligence features and global availability. In the end, I expect the iPhone will grow in the range of 8-10% this year with similar growth in FY26.

iPhone growth sensitivity: Keep in mind if just 10% of those that typically upgrade in FY26 move forward in FY25, iPhone growth in FY25 will be closer to 15%. I’m not suggesting that will happen, just pointing out that small changes to upgrade behavior has a meaningful impact to iPhone growth rates. This dynamic works in both directions as we have seen in iPhone growth over the past couple of years being down 1% on average.

Other announcements today don’t really matter: Today we should also see new health features for the Apple Watch, and new lower-end AirPods. Both product lines combine to account for about 10% of so the changes will only have a modest at best impact on numbers. - Gene Munster
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⁠Stock Analysis Compilation
Baron Capital on Apple $AAPL US

Thesis: Apple’s growing ecosystem, powered by AI and a massive base of loyal users, positions the company for renewed growth and sustained value creation

(Extract from their Q2 letter) https://t.co/9bmhn80WfR
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AkhenOsiris
@munster_gene says as long as Apple beats estimates, it is a super cycle.

Therefore other than a few qtrs, every iPhone release has been basically a super cycle 🤦🏽

I think @DivesTech is gonna run with this.
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⁠Stock Analysis Compilation
Baron Capital on Loar Holdings $LOAR US

Thesis: Loar’s strategic focus on high-margin aerospace parts and disciplined M&A approach positions it for sustained growth and profitability

(Extract from their Q2 letter) https://t.co/pQk5kCIFWw
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⁠App Economy Insights
$ORCL Oracle Q1 FY25 (ending in August).

• RPO +53% Y/Y to $99B.

CEO Safra Catz:

"That strong contract backlog will increase revenue growth throughout FY25. But the biggest news of all was signing a MultiCloud agreement with AWS."

• Revenue +7% Y/Y to $13.3B ($60M beat).
• Non-GAAP EPS $1.39 ($0.06 beat).
• Dividend $0.40/share (unchanged).

Cloud revenue +21% Y/Y to $5.6B:
• Application (SaaS) +10% Y/Y to $3.5B.
• Infrastructure (IaaS) +45% Y/Y to $2.2B.
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⁠Quiver Quantitative
Rep. Suzan Delbene disclosed another sale of Microsoft stock today.

She has sold ~$33M in the last 3 years.

Her husband was a Microsoft exec, and appears to have received massive amounts of stock as compensation.

$MSFT has risen 1,300% since Delbene entered office in 2012 https://t.co/gMeVMyeYwn
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Aswath Damodaran (Youtube)
Dealing with Decline: Intel, Walgreens and Starbucks put to the test!
If you accept the notion that companies age and move through the life cycle, managing and investing becomes most challenging for companies in decline. Faced with that prospect, companies often go into denial, resort to desperation or become walking dead companies. Some accept aging gracefully, a few revamp themselves and even fewer find reincarnation. In this session, I look at three high profile companies that have fallen from market grace - Intel, Walgreens and Starbucks - and examine where they fall in the life cycle, and what choices make the best sense for them
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/Decline2024.pdf
Blog post: https://aswathdamodaran.blogspot.com/2024/09/dealing-with-aging-daignosing-intel.html
Valuations:
1. Intel: https://pages.stern.nyu.edu/~adamodar/pc/blog/Intel2024.xlsx
2. Walgreens: https://pages.stern.nyu.edu/~adamodar/pc/blog/Walgreens2024.xlsx
3. Starbucks: https://pages.stern.nyu.edu/~adamodar/pc/blog/Starbucks2024.xlsx

Musings on Markets
Dealing with aging: The Intel, Walgreens and Starbucks Stores Updated!
A few weeks ago, I posted on the corporate life cycle, the subject of my latest book. I argued that the corporate life cycle can explain what happens to companies as they age, and why they  have to adapt to aging with their actions and choices. In parallel, I also noted that investors have to change the way they value and price companies, to reflect where they are in the life cycle, and how different investment philosophies lead you to concentrated picks in different phases of the life cycle. In the closing section, I contended that managing and investing in companies becomes most difficult when companies enter the last phases of their life cycles, with revenues stagnating or even declining and margins under pressure. While consultants, bankers and even some investors push companies to reinvent themselves, and find growth again, the truth is that for most companies, the best pathway, when facing aging, is to accept decline, shrink and even shut down. In this post, I will look at three high profile companies, Intel, Starbucks and Walgreens, that have seen market turmoil and management change, and examine what the options are for the future.

Setting the stage

The three companies that I  picked for this post on decline present very different portraits. Intel was a tech superstar not that long ago, a company founded by Gordon Moore, Robert Noyce and Arthur Rock in 1968, whose computer chips have helped create the tech revolution. Walgreens is an American institution, founded in Chicago in 1901, and after its merger with Alliance Boots in 2014, one of the largest pharmacy chains in the country.  Finally, Starbucks, which was born in 1971 as a coffee bean wholesaler in Pike Place Market in Seattle, was converted into a coffee shop chain by Howard Schultz, and to the dismay of Italians, has redefined espresso drinks around the world. While they are in very different businesses, what they share in common is that over the recent year or two, they have all not only lost favor in financial markets, but have also seen their business models come under threat, with their operating metrics (revenue growth, margins) reflecting that threat.

The Market turns

With hundreds of stocks listed and traded in the market, why am I paying attention to these three? First, the companies are familiar names. Our personal computes are often Intel-chip powered, there is a Walgreen's a few blocks from my home, and all of us have a Starbucks around the corner from where we live and work. Second, they have all been in the news in the last few weeks, with Starbucks getting a new CEO, Walgreens announcing that they will be shutting down hundreds of their stores and Intel coming up in the Nvidia conversation, often as a contrast. Third, they have all seen the market turn against them, though Starbucks has had a comeback after its new CEO hire.


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None of the three stocks has been a winner over the last five years, but the decline in Intel and Walgreen's has been precipitous, especially int he last three years. That decline has drawn the usual suspects. On  the one hand are the knee-jerk contrarians, to whom a drop of[...]

this magnitude is always an opportunity to buy, and on the other are the apocalyptists, where large price declines almost always end in demise. I am not a fan of either extreme, but it is undeniable that both groups will be right on some stocks, and wrong on others, and the only way to tell the difference is to look at each of the companies in more depth.

A Tech Star Stumbles: Intel’s Endgame

In my book on corporate life cycles, I noted that even superstar companies age and lose their luster, and Intel could be a case study. The company is fifty six years old (it was founded in 1968) and the question is whether its best years are behind it. In fact, the company's growth in the 1990s to reach the peak of the semiconductor business is the stuff of case studies, and it stayed at the top for longer than most of its tech contemporaries. Intel's CEO for  its glory years was Andy Grove, who joined the company on its date of incorporation in 1968, and stayed on to become chairman and CEO before stepping down in 1998. He argued for constant experimentation and adaptive leadership, and the title of his book, "Only the Paranoid Survive", captured his management ethos.

To get a measure of why Intel's fortunes have changed in the last decade, it is worth looking at its key operating metrics - revenues, gross income and operating income - over time:


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As you can see in this graph, Intel's current troubles did not occur overnight, and its change over time is almost textbook corporate life cycle. As Intel has scaled up as a company, its revenue growth has slackened and its growth rate in the last decade (2012-21) is more reflective of a mature company than a growth company. That said, it was a healthy and profitable company during that decade, with solid unit economics (as reflected in its high gross margin) and profitability (its operating margin was higher in the last decade than in prior periods). In the last three years, though, the bottom seems to fallen out of Intel's business model, as revenues have shrunk and margins have collapsed. The market has responded accordingly, and Intel, which stood at the top of the semiconductor business, in terms of market capitalization for almost three decades, has dropped off the list of top ten semiconductor companies in 2024, in market cap terms:


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Intel's troubles cannot be blamed on industry-wide issues, since Intel's decline has occurred at the same time  (2022-2024) as the cumulative market capitalization of semiconductor companies has risen, and one of its peer group (Nvidia) has carried the m[...]

arket to new heights.

Before you blame the management of Intel for not trying hard enough to stop its decline, it is worth noting that if anything, they have been trying too hard. In the last few years, Intel has invested massive amounts into its chip manufacturing business (Intel Foundry), trying to compete with TSMC, and almost as much into its new generation of AI chips, hoping to claim market share of the fastest growing markets for AI chips from Nvidia. In fact, a benign assessment of Intel would be that they are making the right moves, but that these moves will take time to pay off, and that the market is being impatient. A not-so-benign reading is that the market does not believe that Intel can compete effectively against either TSMC (on chip manufacture) or Nvidia (on AI chip design), and that the money spent on both endeavors will be wasted. The latter group is clearly winning out in markets, at the moment, but as I will argue in the next section, the question of whether Intel is a good investment at its current depressed price may rest in which group you think has right on its side.

Drugstore Blues: Walgreen Wobbles

From humble beginnings in Chicago, Walgreen has grown to become a key part of the US health care system as a dispenser of pharmacy drugs and products. The company went public in 1927, and in the century since, the company has acquired the characteristics of a mature company, with growth spurts along the way. Its acquisition of a significant stake in Alliance Bootsgave it a larger global presence, albeit at a high price, with the acquisition costing $15.3 billion. Again, to understand, Walgreen's current position, we looked at the company's operating history by looking revenue growth and profit margins over time:


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After double digit growth from 1994 to 2011, the company has struggled to grow in a business, with daunting unit economics and slim operating margins, and the last three years have only seen things worsen on all fronts, with revenue growth down, and margins slipping further, below the Maginot line; with an 1.88% operating margin, it is impossible to generate enough to cover interest expenses and taxes, thus triggering distress.

While management decisions have clearly contributed to the problems, it is also true that the pharmacy business, which forms Walgreen's core, has deteriorated over the last two years, and that can be seen by comparing its market performance to CVS, its highest profile competitor.


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As you can see, both CVS and Walgreens have seen their market capitalizations drop since mid-2022, but the decline in Walgreens has been far more precipitous than at CVS; Walgreens whose market cap exceeded that of CVS in 201[...]

6 currently has one tenth of the market capitalization of CVS. In response to the slowing down of the pharmacy business, Walgreens has tried to find a pathway back to growth, albeit with acquired growth. A new CEO, Roz Brewer, was brought into the company in 2021, from Sam's Club, and wagered the company's future on acquisitions, buying four companies in 2021, with a majority stake in Village MD, a chain of doctor practices and clinics, representing the biggest one. That acquisition, which cost Walgreens $5.2 billion, has been more cash drain than flow, and in 2024, Ms. Brewer was replaced as CEO by Tim Wentworth, and Village MD scaled back its growth plans.

Venti no more The Humbling of Starbucks

On my last visit to Italy, I did make frequent stops at local cafes, to get my espresso shots, and I can say with confidence that none of them had a  caramel macchiato or  an iced brown sugar oatmilk shaken espresso on the menu. Much as we make fun of the myriad offerings at Starbucks, it is undeniable that the company has found a way into the daily lives of many people, whose day cannot begin without their favorite Starbucks drink in hand. Early on, Starbucks eased the process by opening more and more stores, often within blocks of each other, and more recently, by offering online ordering and pick up, with rewards supercharging the process. Howard Schultz, who nursed the company from a single store front in Seattle to an ubiquitous presence across America, was CEO of the company from 1986, and while he retired from the position in 2000, he returned from 2008 to 2017, to restore the company after the financial crisis, and again from 2022 to 2023, as an interim CEO to bridge the gap between the retirement of Kevin Johnson in 2022 and the hiring of Laxman Narasimhan in 2023. To get a measure of how Starbucks has evolved over time, I looked the revenues and margins at the company, over time:


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Unlike Intel and Walgreens, where the aging pattern (of slowing growth and steadying margins) is clearly visible, Starbucks is a tougher case. Revenue growth at Starbucks has slackened over time, but it has remained robust even in the most recent period (2022-2024). Profit margins have actually improved over time, and are much higher than they were in the first two decades of the company's existence. One reason for improving profitability is that the company has become more cautious about store openings, at least in the United States, and sales have increased on a per-store basis:


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In fact, the shift towards online ordering has accelerated this trend, since there is less need for expansive store locations, if a third or more of sales come from customers ordering online, and picking up their orders. In short, these graphs suggest that it is unfair to lump Starbuck with Intel and Walgreens, sinc[...]