Fountainheadinvesting

Fountainhead Investing

Menu
Menu

Author: Fountainhead

Categories
Fintech

Toast Inc (TOST): A Potential Pullback Opportunity for Investors

Toast (TOST) $23

Positives

Focused on restaurants – therefore scale in that segment helps in a commodity market, where they can compete on price.

One Stop Shop for restaurants, provides several financial/accounting/CRM/Marketing tools besides payment processing, reducing the need to go to several vendors. These have a strong attach rate and will be a key growth catalyst.

Non-GAAP profits with operating margins improving, hope to be GAAP profitable by 2025.

Good growth prospects – 23-25% revenue growth, priced at 2.5x sales, reasonable.

Negatives

Commodity, crowded business with a large number of competitors, little product differentiation, many compete on price alone.

Will find it difficult to perform outside its niche.

The stock is already up more than 60% from its low of $14, so expect some pullback.

This should be worth looking at $18-$20, I think the appreciation from here may be limited

Categories
Consumer Staples

Apple Stock Analysis: Bernstein Upgrade Signals Potential Turnaround

Apple (AAPL) $174 

Apple had an upgrade from Bernstein this morning after a spate of bad news, notably weaker China sales, and fewer iPhone sign-ups in the US. 

“AAPL has de-rated significantly amid a weak iPhone 15 cycle and fears that Apple’s China business is structurally impaired,” analyst Toni Sacconaghi wrote in a note. “We believe prevailing weakness in China is more cyclical than structural and note that historically Apple’s China business has exhibited much higher volatility than Apple overall, given its very feature-sensitive installed base.” Sacconaghi raised his rating on Apple to Outperform from Market Perform and kept his $195 price target.

While Sacconaghi acknowledges there may be short-term headwinds for Apple, the potential use of generative artificial intelligence features in the next iPhone and tailwinds from the replacement cycle could set up the company “well,” he said. It’s possible the company could top 2025 estimates of $416.9B in revenue and $7.40 in earnings per share, Sacconaghi said.

There are other positive developments.

A possibility of a tie-up with Open AI/Google Gemini for a co-pilot. Apple does have a treasure trove of data, there is no way they haven’t thought about monetizing it with AI. I suspect they are fairly advanced in the process but are as secretive as ever.

Nvidia’s omniverse is to be used with the Vision Pro – to be sure this is not revenue accretive, as the Vision Pro is still likely two years in beta before the product even becomes useful and less of a novelty. It is a step in the right direction for better use cases / commercial or other applications.

Apple steadying out around $167-$170 is a good sign for the rest of the market. They report on Thursday after the market, and while the quarter should be weak, the guidance should be key, along with product announcements or hints for announcements in their June developer conference. I don’t think they should be written off yet.

Categories
Stocks

Tesla Surges 14% on FSD Approval in China: Key Win for EV Giant Amidst Rising Competition

Tesla (TSLA) $193 up 14%

Good news for Tesla – Musk’s China visit seems to have paid off. The markets and the street love it and it’s great for those of you who had the patience to hold on to it. 

One of the key reasons for the approval seems to be the collaboration with Baidu, plus China was very keen for a win. Nonetheless, this is good for the market. Two heavyweights Apple and Tesla are seeing support.

Read on from Barron’s today.

https://www.barrons.com/articles/tesla-stock-price-news-china-elon-musk-8476fa2e?mod=BRNS_ENG_NAS_EML_BULLETIN_AUTO_NAH

Tesla Stock Soars on FSD Approval in China. 

3 Reasons the News Is a Big Deal.

According to Barrons “The win does a few things for Tesla. For starters, better driver-assistance products can mean more demand for Tesla vehicles in China. Second, it demonstrates the company can navigate complicated government regulations related to driver-assistance technology. And third, it shows that Tesla has increasing confidence in the quality of its self-driving car technology.”

“We expect this announcement to lead to a near-term uptick in FSD attach rates—which we currently model at about 10%—and improve the offering longer-term,” wrote Baird analyst Ben Kallo in a Monday report. Attach rates refer to how many people buying Tesla vehicles also buy FSD. “We also view this announcement as a potential pathway for Tesla to follow for entering new markets.”

“While the long-term valuation story at Tesla hinges on FSD and autonomous, a key missing piece in that puzzle is Tesla making FSD available in China which is now a done deal,” added Ives. “This is a key moment for Musk as well as Beijing at a time that Tesla has faced massive domestic EV competition in China along with softer demand.”

To help win Chinese approval for FSD, Musk needed to assuage regulators’ concerns about data security risks. To that end, he agreed to use navigation and mapping functions provided by Chinese firm Baidu BIDU 5.77%, the Journal said.

Baidu’s American depositary receipts, or ADRs, were up 4.1% in early trading at $104.65 apiece.

Categories
Market Outlook

March Core PCE Price Index Matches Expectations, While Personal Income and Outlays Show Steady Growth

March Core PCE Price Index:

+0.3% M/M vs. +0.3% consensus and +0.3% prior.

+2.8% Y/Y vs. +2.7% consensus and +2.8% prior.

PCE Price Index: +0.3% M/M vs. +0.3% expected and +0.3% prior.

+2.7% Y/Y vs. +2.6% expected and +2.5% prior.

Personal income: +0.5% M/M vs. +0.5% expected and +0.3% prior.

Personal outlays: +0.8% M/M vs. +0.6% consensus and +0.8% prior.

The 10-year is down slightly to 4.67%

Categories
Enterprise Software

Rubrik’s IPO: Evaluating the Potential of a Microsoft-Backed SaaS Player in Data Security

Rubrik’s IPO is priced at $32 per share. Microsoft is backing this company.

SaaS business – data and data-centric security – this is a growing business with overall industry growth in the low twenties, from migration of on-prem to cloud.

Co-founder is Ex Nutanix

Company-wide revenue growth was only 5%, and the company is still in an early growth stage to have decent profitability but has shown a lot of promise with declining losses last year. Sales and marketing expenses take away a lot of revenue – they’ll need to keep this high to convert pure license customers to SaaS customers, at least 2-3 years.

Net Retention Rate at 133% is good for SaaS customers but this number drops over total revenue because of the large license revenue base.

A lot of big competitors in this industry, including Dell EMC and IBM.

Overall, given the slowing revenue growth, I would prefer to wait. I suspect the valuation is coming in too hot at an estimated 8x sales without the growth. Let’s keep an eye out, it has promise but I think we’ll need a better price.

U.S. GDP Growth Slows to 1.6% in Q1 2024, Missing Expectations

GDP Q1- 2024

Q1 U.S. gross domestic product increased at an annual rate of 1.6%, falling short of the +2.3 % consensus and slowing from the robust +3.4% in Q4 2023.

Q1 personal consumption expenditures growth also cooled some, rising 2.5% vs. +2.8% consensus and +3.3% prior.

Categories
Fintech

Marqeta (MQ) at $5.35: Promising Growth Amid Challenges in a Competitive Market

Marqeta (MQ) $5.35

Marqeta is a credit card processor with clients like Block (Square), Affirm, and DoorDash.

Marqeta should grow in 2025, after two years of a slowdown in 2023 and 2024 (estimated). 

Total Bookings with new clients and expansions with existing clients are growing well at over 50% and 60%. They’ve also done a good job on cost reduction.

The stock, though, could likely stagnate since they’re far from profitability. The other negative is that this is a commodity business with a lot of strong older players and several new upstarts, without any real competitive advantages. But Marqeta has a strong business relationship with Block, (51% of business) so that’s a plus, and their contract is in place through 2028.

The valuation is around 5X sales, and once growth resumes should be seen as cheap.

I think it’s worth looking into around $5. I’ll keep an eye on updates.

Categories
Cloud Service Providers

Microsoft Q3 Earnings: Strong Revenue Growth Across Key Segments, Stock Rises 5%

  • Microsoft press release (NASDAQ: MSFT): Q3 GAAP EPS of $2.94 beats by $0.11.
  • Revenue of $61.9B (+17.1% Y/Y) beats by $1.01B.
  • Shares +5%.
  • Revenue in Productivity and Business Processes was $19.6 billion and increased 12% (up 11% in constant currency)
  • Revenue in Intelligent Cloud was $26.7 billion and increased 21%
  • Revenue in More Personal Computing was $15.6 billion and increased 17%
  • Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.
Categories
Cloud Service Providers

Alphabet Surges 12% on Strong Q1 Earnings: YouTube, Cloud, and Search Drive Growth

Alphabet stock surged by double digits — (NASDAQ: GOOG) +12%, — after its first-quarter earnings easily cleared analyst expectations as revenues jumped 15% with strong performance, particularly at YouTube.

Revenues rose to $80.54B, easily topping consensus for $78.7B. Advertising revenue rose 13% to $61.7B.

Meanwhile, YouTube ads revenue — previously an area of concern — rose a full 21% to $8.09B. Subscriptions, platforms, and devices revenue jumped 18%.

And the momentum in Cloud continued, with 28% revenue growth and operating income that more than quadrupled year-over-year.

Operating income jumped 46% year-over-year, to $25.47B. Earnings per share landed at $1.89 vs. $1.50 expected by Wall Street.

The operating margin also expanded, to 32% from a year-ago 25%.

“Our results in the first quarter reflect strong performance from Search, YouTube, and Cloud,” said CEO Sundar Pichai. “We are well underway with our Gemini era and there’s great momentum across the company.”

Revenues by segment: Google search and other, $46.16B (up 14.4%); YouTube ads, $8.09B (up 20.9%); Google Network, $7.41B (down 1.1%); Google subscriptions, platforms and devices, $8.74B (up 17.9%); Google Cloud, $9.57B (up 28.4%); Other Bets, $495M (up 71.9%).

Operating income by segment: Google Services, $27.9B (up 28.3%); Google Cloud, $900M (up 371%); Other Bets, -$1.02B (vs. year-ago -$1.23B); Alphabet-level activities, -$2.3B (vs. year-ago -$3.3B).

The company also authorized the buyback of up to an additional $70B worth of shares and declared a cash dividend of $0.20 per share.