AFRM

Cash-Based Sources of Intrinsic Value for Meta Platforms and PayPal Remain Strong

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Image Shown: Shares of Meta Platforms Inc (blue line) and PayPal Holdings Inc (orange line) have staged a nice comeback during the past month, as of the start of April 2022. By Callum Turcan Rising interest rates and the impact that has had on the market’s discount rate implictly used within the enterprise cash flow pricing process has pressured the value of equities with long free-cash-flow growth tails–stocks that are expected to grow at a meaningful premium over global economic growth over the coming decades. The rapid increase in the 10-year Treasury rate, no doubt, has had a profound impact on the equity values of long-duration cash-flow companies such as those held in the ultra-speculative ARK Innovation ETF (ARKK), for … Read more

PayPal and Visa Remain Attractive Long-Term Ideas

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Image Source: Visa Inc – Second Quarter of Fiscal 2022 IR Earnings Presentation By Callum Turcan The payment processing and payment solutions space is attractive. Companies operating in this industry have asset-light business models with relatively modest capital expenditure requirements to maintain a given level of revenues, making free cash flows easier to come by. Additionally, the industry’s growth outlook is incredibly bright and supported by secular tailwinds as the world continues to shift away from cash and towards other payment options (card, mobile apps, QR codes, online payment platforms). Our two favorite companies in this space are PayPal Holdings Inc (PYPL) and Visa Inc (V), and we include both as ideas in the Best Ideas Newsletter portfolio. Online spending … Read more

Visa’s High Margin Business Reveals Consumer Spending Remains Resilient

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  Image: Visa has been a strong performer thus far in 2023.  By Brian Nelson, CFA On October 24, Best Ideas Newsletter portfolio holding Visa (V) reported excellent fourth-quarter results for its fiscal 2023. Net revenues advanced 11% on a year-over-year basis, while non-GAAP net income and non-GAAP earnings per share leapt 18% and 21% year-over-year, respectively, in the period. For the fiscal year, Visa generated an impressive 64.4% operating margin. Payments volume increased 9% and cross-border volume advanced 16%, showcasing that the consumer remains very healthy thanks in part to low unemployment rates, despite concerns over higher mortgage costs, student loan repayments, and general economic uncertainty as savings accrued during the COVID-19 pandemic wane. We continue to be big … Read more