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Netflix Still Has a Long Runway of Growth Ahead of It

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By Brian Nelson, CFA On July 18, Netflix (NFLX) reported strong second quarter results that showed revenue on a foreign exchange neutral basis increasing 22% thanks to a 16% increase in average paid memberships and a 5% increase in average revenue per member [ARM] on a foreign exchange neutral basis. Global revenue was modestly higher than the company’s beginning-of-quarter guidance thanks to strength in global streaming paid net additions. Netflix’s operating income surged in the quarter, up 42% from the same period a year ago, as its operating margin improved 5 percentage points to 27.2%, both “slightly above (its) guidance forecast due to higher-than-expected revenue.” Second quarter earnings per share came in at $4.88, up 48% on a year-over-year basis, … Read more

Oracle Misses in Q4 But Bookings Performance and Outlook Strong

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Image: Oracle’s shares have done quite well since the beginning of 2023, and management’s outlook speaks to continued strength. By Brian Nelson, CFA On June 11, Oracle (ORCL) reported fourth quarter fiscal 2024 results that missed expectations on the top and bottom line, but the company’s total remaining performance obligations increased a whopping 44% on a year-over-year basis, to $98 billion–up $18 billion from the fiscal third quarter. Total quarterly revenue advanced 4% in constant currency, while non-GAAP operating income jumped 9% in constant currency. Management commented positively in the quarterly earnings press release about the pace of orders and the visibility it provides into the coming fiscal years: In Q3 and Q4, Oracle signed the largest sales contracts in … Read more

Alphabet Posts Strong First Quarter, Initiates Dividend, Launches Huge Buyback

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Image: Alphabet’s valuable properties continue to put up nice revenue growth. By Brian Nelson, CFA On April 25, Alphabet reported better-than-expected first quarter results on both the top and bottom lines. Revenue increased 15%, or 16% on a constant currency basis in the period, while the firm’s operating margin surged higher roughly 7 percentage points, to 32%. Net income leapt an impressive 57% in the quarter on a year-over-year basis, while diluted earnings per share came in at $1.89 versus $1.17 in last year’s quarter and well above the consensus forecast. We liked what we saw almost across the board in Alphabet’s quarterly results. Google Search & other revenue increased 14.4% while YouTube ad revenue growth came in at an … Read more

Alphabet or Microsoft in Artificial Intelligence with Respect to Search? We Like Both

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Image Source: SEO By Brian Nelson, CFA The race to capture the next-generation opportunity in web search technology is fast-developing. OpenAI took the world by storm when it released ChatGPT in December 2022, sparking the proliferation of ChatGPT rivals, the list of a dozen of which can be found here. In this article, we provide a timeline of our take as it relates to large language models with respect to web search technology, and why we view playing both Alphabet (GOOG) (GOOGL) and Microsoft (MSFT) as it relates to search and AI technology may be the best way to approach new developments in this area, which are still in their very early stages. It’s very likely that, if Google search … Read more

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?

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Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. By Brian Nelson, CFA We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key … Read more

Earnings Roundup: PEP, DIS, ARM, PM

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By Brian Nelson, CFA Dividend Aristocrat Pepsi (PEP) Raises Dividend for 52nd Consecutive Year On February 9, Best Ideas Newsletter portfolio holding Pepsi reported mixed fourth quarter results that showed revenue pressures but a modest beat with respect to non-GAAP earnings per share. Organic revenue growth was 4.5% in the period, lower than the consensus forecast calling for 5.9% expansion, while core constant currency earnings per share increased 9%. The company experienced organic volume declines across the board in its operating divisions, with the greatest weakness coming from its Quaker Foods North America segment, where volumes fell 8%. Management seemed cautious in the quarterly press release noting that it “navigated another year of elevated levels of inflation, macroeconomic volatility, geopolitical … Read more

Palantir’s Fourth-Quarter Results Showcase Strong Trends in Artificial Intelligence

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Image: Palantir’s revenue continues to march higher, and the company’s performance continues to showcase the growing strength in artificial intelligence. Source: Palantir By Brian Nelson, CFA Palantir Technologies (PLTR) has three core software platforms called Gotham, Foundry, and Apollo that “provide the critical infrastructure needed to integrate (its) customers’ data and operations and run their software in virtually any environment (Form 10-K).” On February 5, the firm reported solid fourth-quarter results that showed revenue growing 20% on a year-over-year basis and GAAP net income coming in at $93 million, representing the fifth consecutive quarter that the firm has driven positive GAAP profits. We liked Palantir’s quarterly results, but we wanted to bring to members’ attention the commentary surrounding artificial intelligence [AI]: … Read more

Alphabet, Microsoft Remain Cash-Rich, Secular Growth Powerhouses

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Image Source: Shawn Carpenter By Brian Nelson, CFA All eyes were on Alphabet (GOOG) (GOOGL) and Microsoft (MSFT) after the bell January 30. We include both Alphabet and Microsoft in the newsletter portfolios due to their tremendous cash-based sources of intrinsic value: net cash on the balance sheet and free cash flow generation. It would take a monumental shift in the trajectory of these fantastic businesses for us to ever consider removing them from the newsletter portfolios, and we’re reiterating our favorable long-term view on both following their respective calendar fourth-quarter reports. Let’s first start with Alphabet. Revenue advanced ~13% on a year-over-year basis in the fourth quarter, while the company’s operating margin expanded ~3 percentage points, to 27%. Net … Read more

Best Ideas Visa, Alphabet Hit 52-Week Highs

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Image: The top weightings in Valuentum’s Best Ideas Newsletter portfolio just hit 52-week highs. By Brian Nelson, CFA We’re reiterating our view that investors should stay aggressive with their allocations to equities, “12 Reasons to Stay Aggressive in 2024,” and our top two weightings in the Best Ideas Newsletter portfolio, Visa (V) and Alphabet (GOOG) just hit 52-week highs. These are two of our favorite names on the marketplace, with targeted weightings of 10%-12% of portfolio construction seeking long-term capital appreciation. During the past year, Visa’s shares are up nearly 20%, while Alphabet’s shares are up more than 60%. Position sizing, or the weighting ranges we assign to each company within a newsletter portfolio, is important as it is another way to … Read more

12 Reasons to Stay Aggressive in 2024

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By Brian Nelson, CFA 1. The Fed has signaled that rate cuts could start with inflation at a 2 handle (2 point something) and not at exactly 2.0%. That means that the Fed may become anticipatory to prevent overshooting to the downside with inflation. We see this as positive for long-duration equities, particularly those whose free cash flow generation is robust in the out-years, inclusive of big cap tech and the stylistic area of large cap growth. 2. Unemployment is at structural lows of 3.7%. Employers are working hard to keep talent on board, and with each paycheck, employees are pumping more and more money into the stock market via retirement accounts. This tailwind remains a stiff one and will … Read more