SNAP

What Causes Fair Value Estimates to Change?

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Image: A screenshot of the discounted cash-flow model learning tool for individual investors. By Brian Nelson, CFA If you’ve been a member of Valuentum for a while, you’ll notice that when we update a stock report, our estimate of a company’s fair value and the firm’s Valuentum Buying Index ratings can change. This is completely normal and should be expected (over time, companies generate cash and stock prices change). But sometimes the changes can be confusing, particularly if they are material (i.e. 10%, 20%, or more). In this article, let’s talk about why changes are standard operating procedure for investment research publishers. First, some background. Our estimate of a company’s fair value is driven by myriad factors. To derive a … Read more

Meta’s Threads Launch Immaterial to Meta But Tragic for Twitter

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Image: Threads logo. Meta has launched a Twitter-killer with its new real-time online conversation app, Threads. By Brian Nelson, CFA Big cap tech continues to innovate and encroach upon each other’s territory, and the latest example is Meta’s (META) expansion into real-time online conversation with its new app Threads that competes directly with Elon Musk’s Twitter. Consumers have been looking for an alternative to Twitter after Musk made a number of big changes to keep the bird app afloat, and Meta’s CEO Mark Zuckerberg is now pouncing on the opportunity to take share in this area. Unlike other rival platforms such as Truth Social (DWAC), users of Threads will be able leverage Instagram to log in to Threads and easily … Read more

Meta Platforms Surges Back to Fair Value Estimate

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Image: Meta Platforms’ shares continue to recover from its massive fallout in 2022. We’re sticking with our $225 fair value estimate following the company’s first-quarter 2023 earnings report. By Brian Nelson, CFA Meta Platforms (META), formerly Facebook, has surged back to our discounted cash-flow-derived fair value estimate. Year-to-date in 2023, the social media behemoth’s shares have almost doubled, and while we are pleased with the company’s share-price comeback, we don’t envision making any material changes to our $225 per-share fair value estimate following the company’s first-quarter 2023 report, which we thought was just okay. Meta Platforms’ shares remain significantly below the $380+ highs that were reached in August 2021. We’re happy to see the pop in Meta’s stock during the … Read more

We’re Glad Microsoft Sees Promise in ChatGPT

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Image Source: Mike Mozart By Brian Nelson, CFA Not having to worry about an upstart taking ChatGPT to the finish line is a big relief for the newsletter portfolios. Having already invested $1 billion in ChatGPT’s owner OpenAI in 2019, Microsoft Corp. (MSFT) may invest as much as $10 billion more in the artificial intelligence (AI) chatbot. Reports indicate that Microsoft would own a 49% stake in OpenAI, while getting a 75% share of OpenAI’s earnings. The greater control over ChatGPT, of which we brought to readers attention in our December 5 note, “Maintaining Our Fair Value Estimates Across Ad-Driven Social Media Equities In Light of Long Term AI-Driven Chatbot Threats,” will likely augment Microsoft’s search technology and its web … Read more

Maintaining Our Fair Value Estimates Across Ad-Driven Social Media Equities In Light of Long Term AI-Driven Chatbot Threats

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Image: ChatGPT is taking the Internet by storm. A poem generated by the AI-driven chatbot in a matter of seconds about outperforming the stock market. Image Source: ChatGPT By Brian Nelson, CFA We weren’t just having fun when we tested a new chatbot asking it to write a poem about outperforming the market. In case you haven’t heard yet, making the rounds on social media is a new artificial intelligence [AI] tool called ChatGPT. The Internet is literally abuzz on the potential prospects of this chatbot phenomenon, and after trying it out for ourselves, we think it has the long-term potential to be the real deal. ChatGPT can do a lot of things. It can write poems pretending to be … Read more

In the News: META, AAPL, AMZN, RSG, DLR, VRTX, XOM, CVX

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Image Source: Valuentum By Brian Nelson, CFA Readers should expect a substantial reduction in our fair value estimate of Meta Platforms (META). The company’s spending is out of control, and the impact on our expectations of free cash flow will be materially punitive. As we have reiterated time and time again in our work, stock prices and returns are based in part on future expectations of free cash flow, and our expectations for Meta’s have changed. A look at how fast things fell apart at Meta is informative.  The company reported Q4’21 results in February 2022, and it’s only been a few months for the company to experience the considerable deterioration — for free cash flow to fall from $12.6 … Read more

Serious Question: What Are You Looking At?

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Image: Stocks with the largest 52-week losses, according to YahooFinance. By Brian Nelson, CFA Thank goodness that you’re subscribed to a service that didn’t include any of the above as top ideas in their simulated newsletter portfolios. Many were chasing returns in 2021 and are now left holding the bag this year, but we stuck to our methodology and processes, and we didn’t expose members to tremendous risks. That’s what it’s all about.  With that said, let’s talk about how we successfully navigated a number of these terrible ideas in the Exclusive publication, a monthly resource that includes an income idea, a capital appreciation idea, and a short idea consideration, released to members each month on the 8th. Exclusive Long Ideas … Read more

Microsoft Hinted at Trouble in Calendar Q2 But AMD’s Massive $1 Billion Quarterly Q3 Revenue Miss Spells Big Problems for PC Market; Search and News Advertising Revenue Also Likely Weakening Substantially

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  Image Source: Fritzchens Fritz By Brian Nelson, CFA Things aren’t going well across the technology (XLK) landscape these days. Microsoft Corp (MSFT) said in mid-July Windows OEM revenue faced pressure in its quarter ended June 30, its fourth quarter of fiscal 2022, and noted that the “PC market…deteriorated in June (slide 15).” On its fourth-quarter fiscal 2022 conference call, the software and gaming giant said that its outlook “has the trends (it) saw in June continu(ing) through Q1 (the quarter ending in September 2022). Continued weakness in the PC market demand and advertising spend (is expected to) impact Windows OEM, Surface, LinkedIn and search and news advertising revenue.” We took note of this weakness at the time, but it … Read more

Post-Mortem on Facebook (Meta Platforms): Apple Crushed Our Thesis

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Image: Thesis creep kept us excited about Meta, but we’ve since trimmed the “weighting” in the simulated Best Ideas Newsletter portfolio, as updated August 19. What more can we say–Apple is eating Facebook’s lunch, and the iPhone giant is now advancing with its advertising revenue, too. Apple blew up our thesis on Meta, and that’s the long and short of it. By Brian Nelson, CFA Meta Platforms (META) wasn’t the first idea that hasn’t worked out perfectly for us, and it won’t be the last. Frankly, we’re as surprised as the next person at how quickly things fell apart at Meta, and there wasn’t much time to be patient on the idea as the savviest portfolio managers like to do. … Read more

We’ve Suspended Coverage of Stocks in the Disruptive Innovation Industry

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Order the Exclusive publication here to gain access to idea generation that covers some of the most innovative stocks. As a member to the Exclusive publication, you’ll receive one income idea, one capital appreciation idea, and one short idea consideration each month! Order today >> — We’ve suspended coverage of stocks in the ‘Disruptive Innovation’ industry. The ‘Disruptive Innovation’ industry is unique in almost every way. The companies included don’t necessarily share a similar traditional industry or sector make-up, but they do share one big thing in common: They continue to disrupt the traditional way of doing things. Carvana is changing how consumers buy used cars, Roku is leading the streaming charge against linear TV, Teradyne’s industrial robotics technology is … Read more