⁠The Kobeissi Letter
For what it's worth:

"Weekend" Nasdaq 100 futures surge +1.3% on this news. https://t.co/01A4EdJfDs

BREAKING: The US publishes reciprocal tariff exclusions for computers, smartphones, and chip-making equipment.

Just like that, big tech is back. - The Kobeissi Letter
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⁠The Kobeissi Letter
Let's put the tariff exemptions into perspective:

The US imports approximately $100 billion of computers, smartphones, and chip-making equipment from China PER YEAR.

A total of $439 billion of goods were imported from China into the US in 2024.

This means ~23% of ALL Chinese imports coming to the US are now exempt from "reciprocal tariffs."

This is a massive U-Turn in tariff policy.

BREAKING: The US publishes reciprocal tariff exclusions for computers, smartphones, and chip-making equipment.

Just like that, big tech is back. - The Kobeissi Letter
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⁠App Economy Insights
📊 This Week in Visuals:

🏦 JPMorgan $JPM
📈 Blackrock $BLK
🛩️ Delta Airlines $DAL
🍺 Constellation $STZ
🌿 Tilray $TLRY
https://t.co/ihoYX8urWL
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⁠The Kobeissi Letter
Today's tariff exemptions on smartphones, computers, and chip-makers make it clear:

Large cap technology companies will ultimately come out ahead when this is all said and done.

Small caps and small businesses will come out behind.

Large caps will get larger at small caps' expense.
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⁠Dimitry Nakhla | Babylon Capital®
A quality valuation analysis on $ASML 🧘🏽‍♂️

•NTM P/E Ratio: 24.88x
•10-Year Mean: 31.10x

•NTM FCF Yield: 2.77%
•10-Year Mean: 3.09%

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

Going forward, investors can receive ~25% MORE in earnings per share & ~10% LESS in FCF per share🧠***

Before we get into valuation, let’s take a look at why $ASML is an excellent business (*Financials in USD*)

BALANCE SHEET✅
•Cash & Short Term Inv: $13.21B
•Long-Term Debt: $3.84B

$ASML has a strong balance sheet & 68x FFO Interest Coverage

RETURN ON CAPITAL✅
•2020: 21.6%
•2021: 43.8%
•2022: 48.0%
•2023: 48.7%
•2024: 38.3%

RETURN ON EQUITY✅
•2020: 26.9%
•2021: 49.0%
•2022: 59.4%
•2023: 70.4%
•2024: 47.4%

$ASML has excellent return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2014: $7.09B
•2024: $29.28B
•CAGR: 15.23%

FREE CASH FLOW*
• $ASML FCF is very sporadic due to heavy capital expenditures & isn’t necessarily the most reliable way to analyze the company’s value

NORMALIZED EPS✅
•2014: $3.15
•2024: $20.03
•CAGR: 20.31%

SHARE BUYBACKS✅
•2018 Shares Outstanding: 426.40M
•LTM Shares Outstanding: 393.60M

By reducing its shares outstanding ~7.7%, $ASML increased its EPS by ~8.3% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 51.3%
•LTM Operating Margins: 31.9%
•LTM Net Income Margins: 26.8%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~28% MORE in EPS & 10% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $ASML has to grow earnings at a 12.44% 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 (12.44%) required growth rate:

2025E: $27.20 (24.7% YoY) *FY Dec

2026E: $32.30 (18.7% YoY)
2027E: $38.63 (19.6% YoY)

$ASML has a decent track record of meeting analyst estimates ~2 years out. HOWEVER, let’s be conservative & assume $ASML ends 2027 with $35.00*** in EPS (~9% below current estimates) & see its CAGR potential assuming different multiples:

29x P/E: $1,015💵 … ~17.6% CAGR

28x P/E: $980💵 … ~16.1% CAGR

27x P/E: $945💵 … ~14.6% CAGR

26x P/E: $910💵 … ~13.1% CAGR

25x P/E: $910💵 … ~11.6% CAGR

As you can see, $ASML appears to have attractive return potential EVEN if we assume greater or equal to 25x EPS (below its 10-year mean, current multiple, & justified given its quality, moat & growth rate)

Also, given today’s 24.88x multiple, we wouldn’t be relying on multiple expansion at 25x

Today at $668💵 $ASML appears to be a strong consideration for investment, albeit with extreme volatility

Additionally, we have some margin of safety by relying on a lower multiple & lower growth rate

As I’ve stated before, given its volatility, however, it’s wise to piece into $ASML — this way, you enhance your margin of safety while also positioning yourself to “win-win” if the stock moves up or down in the short-term 💵

#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.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚[...]

𝐭𝐢𝐨𝐧 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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⁠Finding Compounders
Buffett’s investment parameters https://t.co/Rxbr8CwO1O
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⁠The Kobeissi Letter
RT @KobeissiLetter: We now know Trump's TOP economic priority:

For weeks, President Trump said there would be NO tariff delay, even as stocks erased $12+ TRILLION.

Then, the bond market BROKE and a 90-day tariff pause was implemented 12 hours later.

Keep watching bonds.

(a thread) https://t.co/M3AltQqjee
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⁠The Kobeissi Letter
BREAKING: President Trump says semiconductors will be exempt from the higher China tariffs.

The exemption will be retroactive to April 5th.

Duties since April 5th on excluded chips will be reimbursed.
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⁠The All-In Podcast
Chamath explains four key industries that the US needs to onshore:

1) The AI Supply Chain 🧠
2) Energy ⚡️
3) Critical Minerals and Rare Earths ⛏️
4) Pharma APIs 💊

On E223, @ezraklein asked @chamath what success would look like for Trump's tariff / onshoring agenda:

Chamath:

"There is a major issue that the United States has that's much bigger than China."

"We are not in a position to take care of what we need."

"We depend on folks whose view of the United States can change in real time."

Ezra:

"Give me what indices you are going to look for."

Chamath:

"We need to measure and protect four critical areas."

1) The Entire AI Supply Chain 🧠

"Number one is all of the technology, both the chips, as well as the enabling technology around artificial intelligence."

"It must be a robust, largely American supply chain."

2) Energy ⚡️

"Number two is energy."

"We do not have the capability we need to make the energy we need quickly."

"In many ways, we have critical supply chains that can be shut off by China around photovoltaics."

3) Critical Minerals and Rare Earths ⛏️

"Number three... there are critical material inputs that drive the material science of the future."

"So we have a critical minerals and rare earths and material science input problem."

4) Pharma APIs 💊

"And then the fourth, Ezra, are pharma APIs."

"So that when American citizens get sick, we have the ability to not just make it, but also design it and manufacture it."
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⁠Finding Compounders
Join Buffett’s Wagon https://t.co/c2XHIpErvg
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