The Few Bets That Matter
$NBIS has been rejected twice in a row on the $100 mark.

Patience. It is a tripple digit stock. Just takes time.
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Dimitry Nakhla | Babylon Capital®
𝐀𝐖𝐒 growth is quietly re-accelerating

Over the last two quarters, 𝐀𝐖𝐒 YoY growth has inflected higher — with the September quarter marking its fastest growth rate since September 2022, despite an already massive revenue base

At the same time, 𝐀𝐝𝐯𝐞𝐫𝐭𝐢𝐬𝐢𝐧𝐠 continues to be a major strength

𝐀𝐝𝐬 revenue has compounded at a ~23% CAGR, with growth re-accelerating into the low-to-mid 20% range, making it one of the highest-margin & most durable businesses inside $AMZN

𝘛𝘸𝘰 𝘭𝘢𝘳𝘨𝘦, 𝒉𝒊𝒈𝒉-𝒒𝒖𝒂𝒍𝒊𝒕𝒚 𝒆𝒏𝒈𝒊𝒏𝒆𝒔 𝘢𝘤𝘤𝘦𝘭𝘦𝘳𝘢𝘵𝘪𝘯𝘨 𝘢𝘵 𝘰𝘯𝘤𝘦 𝘪𝘴 𝘦𝘢𝘴𝘺 𝘵𝘰 𝘶𝘯𝘥𝘦𝘳𝘦𝘴𝘵𝘪𝘮𝘢𝘵𝘦
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Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: At the time, it may have sounded overly simple. Yet occasionally, I’ll include one or two sentences in my quality valuation analysis that captures something that really matters

$LRCX & memory chip production

Even if it’s simple, it’s important to be focused on the right drivers https://t.co/hidi4BV0gV

A quality valuation analysis on $LRCX 🧘🏽‍♂️

•NTM P/E Ratio: 16.66x
•10-Year Mean: 20.20x

•NTM FCF Yield: 6.80%
•10-Year Mean: 5.51%

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

Going forward, investors can receive ~21% MORE in earnings per share & ~23% MORE in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $5.67B
•Long-Term Debt: $4.48B

$LRCX has a strong balance sheet, an A- S&P Credit Rating & 25x FFO Interest Coverage

RETURN ON CAPITAL✅
•2021: 40.0%
•2022: 46.8%
•2023: 39.3%
•2024: 31.3%
•LTM: 34.9%

RETURN ON EQUITY✅
•2021: 69.8%
•2022: 74.8%
•2023: 62.3%
•2024: 45.7%
•LTM: 50.4%

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

REVENUES✅
•2014: $4.61B
•2024: $14.91B
•CAGR: 12.45%

FREE CASH FLOW✅
•2014: $571.55M
•2024: $4.26B
•CAGR: 22.24%

NORMALIZED EPS✅
•2014: $0.44
•2024: $3.03
•CAGR: 21.28%

PAID DIVIDENDS✅
•2019: $0.44
•2024: $0.80
•CAGR: 12.70%

SHARE BUYBACKS✅
•2015 Shares Outstanding: 1.77B
•LTM Shares Outstanding: 1.30B

By reducing its shares outstanding ~26%, $LRCX increased its EPS by ~35% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 47.7%
•LTM Operating Margins: 29.7%
•LTM Net Income Margins: 26.5%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~21% MORE in EPS & ~23% MORE in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $LRCX has to grow earnings at an 8.33% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2028 EPS growth over the next few years to be more than the (8.33%) required growth rate:

2025E: $3.75 (23.7% YoY) *FY Jun
2026E: $3.88 (3.6% YoY)
2027E: $4.65 (19.8% YoY)
2028E: $5.50 (18.3% YoY)

$LRCX has a decent track record of meeting analyst estimates ~2 years out, but let’s assume $LRCX ends FY 2028 with $5.50 in EPS & see its CAGR potential assuming different multiples:

20x P/E: $110.00💵 … ~20.2% CAGR

19x P/E: $104.50💵 … ~18.3% CAGR

18x P/E: $99.00💵 … ~16.4% CAGR

17x P/E: $93.50💵 … ~14.3% CAGR

16x P/E: $88.00💵 … ~12.2% CAGR

While it’s certainly reasonable for $LRCX to trade for 18x - 20x, I wouldn’t want to rely on that assumption as it doesn’t leave us with a substantial margin of safety

Yet, $LRCX still appears to have attractive return potential if we assume 16x - 17x, a multiple that’s justified by its excellent capital allocation, wide moat & growth rate

Moreover, $LRCX derives a large portion of its revenues from memory chip production, which is a strong growth driver for the company

~40% of revenue comes from recurring-like services, making $LRCX more predictable softening sector volatility

Today at $63💵 $LRCX appears to be a great consideration, with some margin of safety

Given its high uncertainty, I’d buy in tranches and leave some room to add more if it declines further, e.g. 1/3 at $63, 1/3 at $55, 1/3 at $50
___

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 𝐢𝐧𝐝𝐢𝐯𝐢[...]

𝐝𝐮𝐚𝐥 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® tweet

Fiscal.ai
RT @BradoCapital: Widespread outage on @fiscal_ai right now. Sorry for the inconvenience, our Engineering Team will have everything back up shortly.
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God of Prompt
RT @godofprompt: I collected every NotebookLM prompt that went viral on Reddit, X, and research communities.

These turned a "cool AI toy" into a research weapon that does 10 hours of work in 20 seconds.

16 copy-paste prompts. Zero fluff.

Steal them all 👇 https://t.co/xRiTcsUnHi
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The Few Bets That Matter
Remember when $GOOG was dying?

When Search was being disrupted?

Yeah. Me neither. https://t.co/hZ9vixoPRd

$GOOG is dying. Or the market believes.

The reality is that search is migrating from our old methods to new ones, namely AI services on which $GOOG is in advance compared to many, while YouTube & its cloud business are doing wonders.

$GOOG is not dying. It will thrive hard. https://t.co/HHACJswIco - The Few Bets That Matter
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The Few Bets That Matter
$NVO is the most undervalued stock?

$NVO also has a declining growth.

Why do you think the market sells it? https://t.co/LUv47wR7as

$NVO IS THE MOST UNDERVALUED STOCK

Revenue and net-margin will continue to grow from here, yet the company is basically priced for failure.

A 12.5 P/E is absolutely ridiculous, and nobody can tell me otherwise.

This is one of these obvious buys, that most people will still miss out on. - The Analyst
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