⁠App Economy Insights
📊 This Week in Visuals:

$LOW, $ADI, $DELL, $CRWD, $WDAY, $ADSK, $TGT, $HPQ, $ZM, $NTNX, $BBY, $MANU.

Check out the latest earnings!👇
https://t.co/znLp86XBZp https://t.co/nrHaKrCoI9
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⁠Stock Analysis Compilation
TCW on Omnicom Group $OMC US

Thesis: Omnicom leverages its iconic brands and diverse services to drive innovation and global expansion, underpinned by attractive valuations

(Extract from their Q3 letter) https://t.co/UxbXQbJUaH
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⁠App Economy Insights
What are you watching this week?

• Monday: $ZS.
• Tuesday: $CRM, $OKTA.
• Wednesday: $CHWY, $S, $SNPS.
• Thursday: $ASAN, $DOCU, $GTLB, $HPE, $IOT, $LULU, $PATH, $VEEV.

All visualized in our PRO coverage next Saturday! https://t.co/9EOio4h4KA
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⁠Startup Archive
Sequoia partner Michael Moritz explains why Bill Gates had the radio removed from his car dashboard

When asked what founder obsession looks like, Moritz gives two examples.

The first is Apoorva Mehta, founder & CEO of Instacart. Before investing in Instacart, Michael asked Apoorva how he got into the business of grocery delivery.

Apoorva responded that after toying with a variety of other businesses, he decided Instacart was the one for him when the idea of the business was “the last thing he thought about when he went to sleep and the first thing that he thought about when he woke up in the morning.”

Moritz comments:

“To me, that was as good a definition of obsession as any I’ve heard… it’s sort of that full on experience that you can never stop thinking about and you don’t switch off.”

His other example is Bill Gates.

When Microsoft was still private and quite small in the 1980s, Bill gave Michael a ride to the airport. When Michael asked him why the radio was missing from the dashboard, Bill said he had it taken out:

“If I’ve got the radio, I’m afraid that I’ll switch it on and I won’t be thinking about Microsoft.”

Moritz quips, “That’s obsession.”

Video source: @StanfordGSB (2019)
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⁠Dimitry Nakhla | Babylon Capital®
A quality & valuation analysis on $KLAC 🧘🏽‍♂️

•NTM P/E Ratio: 20.87x
•10-Year Mean: 20.04x

•NTM FCF Yield: 4.81%
•10-Year Mean: 4.94%

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

Going forward, investors can receive about the same in earnings per share &
FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $4.63B
•Long-Term Debt: $5.88B

$KLAC has a strong balance sheet, an A- S&P Credit Rating & 10.71x FFO Interest Coverage

RETURN ON CAPITAL✅
•2020: 25.4%
•2021: 32.8%
•2022: 41.3%
•2023: 42.0%
•2024: 34.0%

RETURN ON EQUITY✅
•2020: 45.3%
•2021: 68.6%
•2022: 139.2%
•2023: 156.9%
•2024: 87.8%

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

REVENUES✅
•2014: $2.93B
•2024: $9.81B
•CAGR: 12.84%

FREE CASH FLOW✅
•2014: $711.38M
•2024: $3.03B
•CAGR: 15.59%

NORMALIZED EPS✅
•2014: $$3.55
•2024: $23.74
•CAGR: 20.92%

PAID DIVIDENDS✅
•2019: $3.00
•2024: $5.65
•CAGR: 13.49

SHARE BUYBACKS✅
•2014 Shares Outstanding: 168.12M
•LTM Shares Outstanding: 135.63M

By reducing its shares outstanding ~19%, $KLAC increased its EPS by ~23% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 59.7%
•LTM Operating Margins: 37.6%
•LTM Net Income Margins: 28.9%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive about the same in EPS & FCF per share

Using Benjamin Graham’s 2G rule of thumb, $KLAC has to grow earnings at a 10.44% 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 (10.44%) required growth rate:

2025E: $30.66 (29.2% YoY) *FY Jun
2026E: $33.00 (7.6% YoY)
2027E: $37.47 (13.6% YoY)

$KLAC has a decent track record of meeting analyst estimates ~2 years out, but let’s assume $KLAC ends 2027 with $37.47 in EPS & see its CAGR potential assuming different multiples:

22x P/E: $824.34💵 … ~10.9% CAGR

21x P/E: $786.87💵 … ~8.9% CAGR

20x P/E: $749.40💵 … ~6.9% CAGR

19x P/E: $711.93💵 … ~4.8% CAGR

18x P/E: $674.46💵 … ~2.7% CAGR

While it’s certainly reasonable for $KLAC to trade for >22x, I wouldn’t want to rely on that assumption as it doesn’t leave us with a substantial margin of safety

While $KLAC has a wide moat & exemplary capital allocation, I’d want to ensure some margin of safety

Today at $647💵 $KLAC appears to be fully valued

I’d get more interested in $KLAC closer to $580💵 (~10% below today’s price) where I can reasonably expect double digit CAGR while assuming 19x earnings

#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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⁠Investing visuals
5 elite software companies with >30% free cash flow margins. A short thread🧵👇

Whose your favorite? $PLTR $CRWD $PANW $VEEV $NOW

#1 - Palantir $PLTR: Empowering organizations with advanced AI and data platforms to solve complex challenges at scale https://t.co/TpPAvr1p16
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⁠Stock Analysis Compilation
Artisan on https://t.co/sBpynOFNfk $TCOM US

Thesis: https://t.co/sBpynOFNfk leverages its strengthened domestic position to drive growth as China's outbound travel resumes, with potential for global market expansion

(Extract from their Q3 letter) https://t.co/KUFOpm1wqa
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⁠Dimitry Nakhla | Babylon Capital®
$NKE valuation multiple expanded +1.6% despite the stock’s -27% YTD decline 📉📉

#stocks #investing https://t.co/YalyNP3aTK
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