⁠Dimitry Nakhla | Babylon Capital®
RT @SShevda: @DimitryNakhla I should have listened to you rather than Barclay with target of 110 $ :))
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AkhenOsiris
$GOOGL Downgrade

Rosenblatt Downgrades Alphabet to Neutral, 'Rising Transition Risk'

Price target: $181
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AkhenOsiris
$GOOGL

ROSENBLATT cuts $GOOGL to neutral:

“:. multiple areas of transitional risk that recommend stepping back for a little while to see how the company handles it. Areas of risk include the AI's impact on search .. nascent evidence of search share loss to Bing .. the transitioning of search ad revenue to retail media networks seems set to accelerate as other retailers such as $WMT follow $AMZN lead ..

“.. We also see risk that competitive dynamics push Alphabet into a higher-than-anticipated capex spending cycle ..” [Crockett] - Carl Quintanilla
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⁠Dimitry Nakhla | Babylon Capital®
An update on $NKE 👇🏽 … the most recent post is attached below so you can compare the pre-earnings & post-earnings expectations:

PRE-EARNINGS EXPECTATIONS

2024E: $3.72 (15.0% YoY)
2025E: $3.86 (3.9% YoY)
2026E: $4.31 (11.5% YoY)

POST-EARNINGS EXPECTATIONS

2024A: $3.72 (15.0% YoY)
2025E: $3.44 (-7.3% YoY)
2026E: $3.80 (10.2% YoY)

Let’s assume $NKE ends 2026 with $3.80 in EPS & see its CAGR potential assuming different multiples:

25x P/E: $95.00💵 … ~14.5% CAGR

24x P/E: $91.20💵 … ~12.2% CAGR

23x P/E: $87.40💵 … ~9.9% CAGR

22x P/E: $83.60💵 … ~7.5% CAGR

As you can see, $NKE appears to have attractive return potential if we assume a >24x multiple which is well below its 10-year average of 29.54x (albeit elevated due to valuation spike between 2020-2022 & partly why I’m not willing to rely on this assumption)

25x earnings used to be a solid level of fundamental support, however given its slowdown $NKE may not be able to demand that multiple anymore until earnings are expected to grow in the 11% - 13% range once again

Today at $75💵 I consider $NKE a decent purchase (assuming 22x as base case) with a small margin of safety & great deal with a large margin of safety at $70💵 where I can reasonably expect ~11% CAGR when assuming a 22x multiple

#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."

A sober valuation analysis on $NKE 🧘🏽‍♂️

•NTM P/E Ratio: 25.36x
•10-Year Mean: 29.58x

•NTM FCF Yield: 4.55%
•10-Year Mean: 3.21%

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

Going forward, investors can receive ~16% MORE in earnings per share & substantially MORE in FCF* per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $10.57B
•Long-Term Debt: $8.93B

$NKE has a strong balance sheet, an AA- S&P Credit Rating & 26x FFO Interest Coverage

RETURN ON CAPITAL✅
•2019: 35.7%
•2020: 14.2%
•2021: 27.3%
•2022: 22.1%
•2023: 20.9%
•LTM: 21.0%

RETURN ON EQUITY✅
•2019: 42.7%
•2020: 29.7%
•2021: 55.0%
•2022: 43.1%
•2023: 34.6%
•LTM: 36.4%

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

REVENUES✅
•2014: $27.80B
•2024E: $51.65B
•CAGR: 6.39

FREE CASH FLOW✅*
•2014: $2.12B
•2024E: $5.64B
•CAGR: 10.27%

*FCF isn’t the most reliable figure in assessing $NKE valuation, despite how high the FCF Yield may be today

NORMALIZED EPS✅
•2014: $1.49
•2024E: $3.72
•CAGR: 9.58%

SHARE BUYBACKS✅
•2014 Shares Outstanding: 1.81B
•LTM Shares Outstanding: 1.54B

By reducing its shares outstanding ~14.9%, $NKE increased its EPS by ~17.5% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 44.3%
•LTM Operating Margins: 11.6%
•LTM Net Income Margins: 10.1%

***NOW TO VALUATION 🧠

As[...]

stated above, investors can expect to receive ~16% MORE in EPS & substantially more in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $NKE has to grow earnings at a 12.68% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2026 EPS growth over the next few years to be less than the (12.68%) required growth rate:

2024E: $3.72 (15.0% YoY) *FY May $NKE reports earnings today After Market Close

2025E: $3.86 (3.9% YoY)
2026E: $4.31 (11.5% YoY)

$NKE has a good track record of meeting analyst estimates ~2 years out, so let’s assume $NKE ends 2026 with $4.31 in EPS & see its CAGR potential assuming different multiples:

26x P/E: $112.06💵 … ~10.7% CAGR

25x P/E: $107.75💵 … ~8.6% CAGR

24x P/E: $103.44💵 … ~6.5% CAGR

23x P/E: $99.13💵 … ~4.4% CAGR

As you can see, $NKE appears to have attractive return potential if we assume a >26x multiple which is well below its 10-year average of 29.54x (albeit a bit elevated due to valuation spike between 2020-2022 & partly why I’m not willing to rely on this assumption)

With 25x earnings being a solid level of fundamental support, $NKE appears to have decent growth potential but not enough to get me interested

Yet, even assuming 25x, we’re not left with much of a margin of safety

I’d consider $NKE a strong purchase with a substantial margin of safety closer to 23x NTM earnings or closer to $85💵 (~9% below todays price)

#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. "- Dimitry Nakhla | Babylon Capital®
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⁠Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: “Investors who expect to be ongoing buyers of investments throughout their lifetimes should adopt a similar attitude toward market fluctuations; instead many illogically become euphoric when stock prices rise and unhappy when they fall.

They show no such confusion in their reaction to food prices:

Knowing they are forever going to be buyers of food, they welcome falling prices and deplore price increases. (It's the seller of food who doesn't like declining prices)”

— Warren Buffett 🗣️

#stocks #investing

Source: Berkshire Hathaway 1990 Shareholder Letter 📝
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⁠Dimitry Nakhla | Babylon Capital®
$NKE is trading near its lowest multiple in the last 10 years:

NTM P/E: 22.58x
LOW P/E: 20.90

This means that $NKE is trading just 8% above its lowest multiple in the last 10 years

Do you think $NKE is a buy, sell, or hold?

#stocks #investing https://t.co/xgRsBF5a0P
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AkhenOsiris
$SNOW

Snowflake added to Americas Conviction List at Goldman Sachs.

The firm sees an attractive entry point for a company that focuses on data storage and analytics. Increasing use cases for Snowflake's data will enable the next phase of the artificial intelligence revolution platform and eventually the application phase, the analysts tell investors in a research note. Goldman has a Buy rating on the shares with a $220 price target.
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AkhenOsiris
$NVDA Raised to $144 at Morgan Stanley following Asia trip

"We had positive data points from both our Taiwan trip and our China trip that keep us confident on near term #s," said analysts at Morgan Stanley. The data doesn't surprise the bank, which is mindful of just how much market cap NVDA has added since the last earnings report, which they state does point to a higher bar.

However, "the catalyst path remains strong, as the very strong surge in H20 builds and demand removes any concern for us about a pre-Blackwell pause," add analysts at Morgan Stanley.

While the bank acknowledges that it is clear we are at the tail end of the Hopper cycle, and the frothiness and visibility are lower than it was, they state that demand side indications remain robust for Hopper.

"Hopper builds continue to go up, as H100 starts to transition to H200 (bringing better memory bandwidth from HBM3e as well as higher memory content), and we are hearing confidence that sales of both products will remain strong," state analysts at Morgan Stanley.

When assessing the current share price, while the bank isn't "pounding the table at these levels given the sharp appreciation since the last earnings report," they believe Nvidia "remains the most compelling narrative in the AI semis space," and that as the transition from H100 to H200 and then Blackwell progresses, "visibility and backlog will improve materially."
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AkhenOsiris
@LizThomasStrat says

"I still think we are in late cycle, although an elongated late cycle"

So we were or still are basically mid-cycle? Word salad?
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