⁠Finding Compounders
RT @gainify_io: VALUATION CHECK of the largest SEMICONDUCTORS post-tariff exemption.

Massive valuation gaps vs. 5-year P/E averages for these names:
🔻 $NVDA: -52%
🔻 $AMD: -51%
🔻 $ASML: -40%
🔻 $TSM: -27%

Room to rerate?👀 https://t.co/87X8DrMaP7
tweet

⁠Hidden Value Gems
A nice chart on shareholder dilution from management compensation at tech companies.

$BOX $LYFT $W $TWLO stand out https://t.co/Yiin5bhC0l
tweet

⁠The Kobeissi Letter
BREAKING: Commerce Secretary Lutnick says tariffs on semiconductors and electronics will come in “a month or so.”
tweet

⁠Dimitry Nakhla | Babylon Capital®
A quality valuation analysis on $MELI 🧘🏽‍♂️

•NTM P/E Ratio: 42.45x
•1-Year Mean: 47.73x

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

Going forward, investors can receive ~12% MORE in earnings per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $3.70B
•Long-Term Debt: $2.82B

$MELI has a strong balance sheet, an ok BB+ S&P Credit Rating & 48x FFO Interest Coverage

RETURN ON CAPITAL🆗➡️✅
•2019: (4.8%)
•2020: 3.7%
•2021: 8.1%
•2022: 14.7%
•2023: 25.7%
•2024: 23.0%

RETURN ON EQUITY🆗➡️✅
•2019: (14.2%)
•2020: (0.1%)
•2021: 5.2%
•2022: 28.7%
•2023: 40.3%
•2024: 51.5%

$MELI has strong and improved return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2019: $2.30B
•2024: $20.78B
•CAGR: 55.30%

FREE CASH FLOW✅
•2019: $314.29M
•2024: $7.05B
•CAGR: 86.32%

NORMALIZED EPS✅
•2019: ($3.71)
•2024: $37.69

SHARE BUYBACKS❌
•2019 Shares Outstanding: 48.69M
•LTM Shares Outstanding: 50.70M

MARGINS🆗➡️✅
•LTM Gross Margins: 52.7%
•LTM Operating Margins: 12.7%
•LTM Net Income Margins: 9.2%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~12% MORE in EPS

Using Benjamin Graham’s 2G rule of thumb, $MELI has to grow earnings at a 21.23% 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 (21.23%) required growth rate:

2025E: $47.04 (24.8% YoY)
2026E: $65.23 (38.7% YoY)
2027E: $85.38 (30.9% YoY)

$MELI has an ok track record of meeting analyst estimates ~2 years out, but let’s assume $MELI ends 2027 with $85.38 in EPS & see its CAGR potential assuming different multiples

38x P/E: $3244💵 … ~19.5% CAGR

36x P/E: $3073💵 … ~17.2% CAGR

34x P/E: $2902💵 … ~14.7% CAGR

32x P/E: $2732💵 … ~12.2% CAGR

30x P/E: $2561💵 … ~9.6% CAGR

As you can see, $MELI appears to have attractive return potential IF we assume >32 earnings (a multiple well-justified by its growth rate & moat)

$MELI boasts an expansive growth trajectory, fueled by powerful network effects that should drive sustained momentum

Key factors contributing to its promising outlook include 🔑

1. Margin expansion

2. Unparalleled access to Latin America's burgeoning economy

3. Network effects that produce self-reinforcing dynamics ensuring long-term competitiveness, among other things

Those buying $MELI today at $1996💵 are buying a great business for a great price, with a decent margin of safety — these growth rates have to be revised down substantially for $MELI to miss the mark, even if the company grows earnings at 22% CAGR over the next 5 years, shareholders will likely end up with a great result

I consider $MELI a steal closer to $1790💵 (~10% below today’s price) where I can reasonably expect ~11% CAGR while assuming a very conservative 26x end multiple, ensuring a large margin of safety

#stocks #investing
___

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.
tweet

⁠The Kobeissi Letter
BREAKING: Commerce Secretary Lutnick says electrotonic products will have "special tariffs" coming soon.

He also says pharmaceutical tariffs are coming in the next month or two.

“This is not a permanent sort of exemption," he says on the exemptions announced this weekend.
tweet

⁠The Kobeissi Letter
BREAKING: Commerce Secretary Lutnick on the "tariff exemptions" announced this weekend:

"They are exempt from reciprocal tariffs, but they are INCLUDED in the semiconductor tariffs which are coming in a month or two."

So basically, they are not tariff exempt just recategorized?
tweet

⁠The Kobeissi Letter
BREKAING: Commerce Secretary Lutnick says semiconductors and pharmaceuticals require "special attention and the President is on it."

"Semiconductors and pharmaceuticals will have a tariff model in order to encourage them to be built in America," he says.
tweet

⁠The Kobeissi Letter
BREAKING: Commerce Secretary Lutnick on tariff exclusions, "this is not a permanent exemption."
tweet

⁠Quiver Quantitative
AOC: Congress has conditioned itself to believe that it is normal for them to day trade individual stocks. https://t.co/x1wReVt4NY
tweet

⁠The Kobeissi Letter
Key Events This Week:

1. Markets React To "Tariff Exclusions" - Monday

2. March Retail Sales data - Wednesday

3. Fed Chair Powell Speaks - Wednesday

4. March Housing Starts data - Thursday

5. Philadelphia Fed Manufacturing Index - Thursday

6. ~10% of S&P 500 Companies Report Earnings

We have another busy week ahead of us.
tweet

⁠Finding Compounders
Warren Buffett explains how Berkshire selects their stocks. https://t.co/WpyJMW2rkP
tweet

⁠The Kobeissi Letter
We have now gone from:

“No exemptions” on tariffs, to refunds on tariffs going back to April 5th, to exemptions not being “permanent.”

The result?

Markets are incredibly confused ahead of the futures open.
tweet