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Fintech

Note On Pagaya (PGY)

Pagaya is offering 7.5Mn shares +1.125M optional, via a secondary public offering at $12.70. The dilution to existing shareholders is about 15%. They had reserved this as a shelf offering and it was always part of their disclosures, so we were always aware of dilution risk. However, the timing of this secondary offering, diluting shareholders so close to the share reverse split is a head scratcher. They’re putting the money to good use as business execution continues well, but the timing leaves a bit of a sour taste…

No change in strategy, holding for the long term.

Categories
Enterprise Software

UiPath (PATH) Earnings Update: Impressive Growth and Profitability Achievements

Earnings update – UiPath (PATH)

Excellent results all around, a lot of growth initiatives from new products and partnerships, the emphasis on execution and profitability was appreciated. The 20% cash flow margin for FY2025 is impressive.They seem to be walking the talk. 

Q4 – FY 2024

  • Non-GAAP EPS of $0.22 beats by $0.06.
  • Revenue of $405.25M (+31.4% Y/Y) beats by $21.56M.
  • Achieves first quarter of GAAP profitability as a public company

Full Year Fiscal 2024 Financial Highlights

  • Revenue of $1.308 billion increased 24 percent year-over-year.
  • Net new ARR of $260 million.
  • GAAP gross margin was 85 percent.
  • Non-GAAP gross margin was 87 percent.
  • GAAP operating loss was $(165) million.
  • Non-GAAP operating income was $233 million.
  • Net cash flow from operations was $299 million.
  • Non-GAAP adjusted free cash flow was $309 million.

2025 Outlook: 

  • Revenue in the range of $1.555 billion to $1.560 billion, better than 1.550 expected.
  • ARR in the range of $1.725 billion to $1.730 billion as of January 31, 2025
  • Non-GAAP operating income of approximately $295 million – 18% margin.
  • Full Year Non-GAAP cash flow should be around 20% of revenues $310Mn
Categories
Market Outlook

February CPI: Slightly Higher Inflation, Markets Remain Unfazed

February CPI (Consumer Price Index)

No major surprises, slightly higher than expected, the markets have mostly shrugged it off, the futures are still 0.5 to 0.6% higher, and the 10 year is also holding steady at 4.10.

  • The Consumer Price Index advanced 0.4% in February, matching the 0.4% increase expected and slightly accelerating from the 0.3% rise in January (unrevised).
  • On a Y/Y basis, the measure rose 3.2%, more than the 3.1% pace expected and +3.1% in the prior month.
  • Excluding food and energy, core CPI increased 0.4% vs. +0.3% consensus and +0.4% prior. Y/Y, core inflation gained 3.8% vs. +3.7% expected and +3.9% prior.

A 2.3% increase in energy costs helped boost the headline inflation number. Food costs were flat on the month, while shelter rose another 0.4%.

Categories
Technology

Apple (AAPL): A Steady Investment Amid Market Volatility

source:apple

Apple (AAPL)

Apple has been seeing dip buying and support around $170, as the safest port in the storm, given the overbought sentiment and volatility in semis/tech. 

There was a buy call from Evercore a couple of days back, which also supported it after seven straight days of it falling.

While I had hoped to see it drop to $160, and had recommended HOLD given the weakness in China; As a market leader, we may not see that price and given that Apple is a long term buy and hold, a few percentage points won’t make a large difference. 

If you don’t have it in the portfolio or are looking for something steadier you can start accumulating.

Categories
Industrials

In-Depth Analysis of Archer Aviation (ACHR): A Speculative Play in eVTOL with R&D Challenges and Competitive Landscape

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Archer Aviation (ACHR)

Pre-Revenue, majority spend in R&D.

Lot of dilution (likely to continue at double digits each year if not more) due to equity funding for R&D, still has about $325 Mn in net cash a year worth of expenses.

Positives include a $140Mn DoD contract, plus scope to expand in India and the middle east. United Airlines even though it is a large strategic partnership, it is non-binding – so difficult to predict what might transpire.

Also, an ongoing effort to reduce expenses to stretch cash a couple of years.

Biggest negative/challenge is getting certification and there is a milestone for 2024 testing so let’s see how that goes.

Interestingly, if eVTOL (Vertical take-off of aircraft) gets a mandate it would be a massive market.

Closest competitor among many is Joby is at a similar position developmentally and operationally, their ongoing testing program has a likely 6 to 12-month lead over Archer Aviation with successful flights in NYC, but Archer should be able to close that.

JOBY’s key supplier relationship with Toyota is a big plus.

ACHR’s primary focus is on manufacturing and selling eVTOL aircraft, while JOBY’s business model is more full stack, creation and operational management, thus Joby’s valuation is stronger. 

Bottom line – speculative volatile play for sure + definite dilution, but if successful could be huge. I’m sure your position would be small relative to the portfolio, and as long as you can deal with the volatility nothing wrong in accumulating but do keep an eye out on JOBY, the Toyota angle looks interesting.

Categories
Semiconductors Technology

Evaluating SOXX, XLK, and VOO: Current Performance and Future Outlook

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SOXX, The premier semiconductor ETF, naturally done very well with the AI, Nvidia boom. Up 62% in the last twelve months.  Solid for the long term, but I would wait for a lower entry point, 10-20% lower to get meaningful returns. Given the froth in the market for all things AI, we may not get that decline, though, I think patience is better.

XLK, Very similar to SOXX 48% up in the last 12- same thing wait for a better price, but again long term very solid. The big issue is so much of the future gains have already been priced in so going forward it’s going to be much lower than the 48% plus you have the risk of the ETF dropping or staying sideways.

VOO – follows the S&P 500, is about 28% up in the past year, and 8% YTD – not surprisingly because the S&P 500 has about a 30% technology influence, its a market capitalization weighted index so the big tech bellwethers like Nvidia, Microsoft dominate its movements. 

Many analysts have already crossed their S&P 500 targets for 2024, and just a few are revising it upwards, therefore not likely to see too many Buy Calls from these levels.

The longer-term average annual move in the S&P 500 is usually around 8%. We’ve already advanced 8% in the first two months, so the same story, currently overbought – would prefer a better entry point on a correction.

Categories
Market Outlook

February Jobs Report: Strong Gains Amid Mixed Signals

February Jobs Report

Net job gains 275K, higher than the 200K expected.

Hourly wage gains 0.1%, lower than 0.2% expected.

The two-month payroll revision, though, shows a 167,000 loss

The Unemployment rate rose to 3.9%

The 10-year treasury yield, which started at 4.09 is at 4.05

Yesterday, Powell indicated – Fed ‘not far’ from confidence to cut rates

Categories
Technology

Rivian (RIVN), Still Has A Steep Climb

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Rivian (RIVN) Good bit of a lifeline, and may get them cash following the R2 intro, which should get decent demand from a niche market. However, it’s not coming till 2026, and Tesla is itching to reduce prices of its Cybertruck (when it happens).

Unfortunately, the sales numbers are not likely to change the volume needed to get to any semblance of break even in the near future – the numbers are just too small.

At the last call Rivian’s management saw the current cash balance of $9.4B only lasting the business through the end of 2025. If they raise more cash following the R2 unveil I would use the upside as a chance to exit. 

and even though the new R2 vehicle will likely command a respectable, niche following, it will not come to market until 2026 per today’s announcement and I don’t expect the sales volume to be enough for the company’s downward trajectory to change. I recommend that investors sell the stock after today’s unveiling event.

Categories
Market Outlook

February Jobs Report: Strong Gains Amidst Rising Unemployment and Wage Growth Slowdown

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I have been taking profits in good companies and selling some weak ones in the past two weeks to a month, and am repeating some of those trades as a reminder, 5% sales of Nvidia, 50% sales of Tesla, 100% Bumble, another 5% of SuperMicro in addition to the earlier sales.

I’ve barely deployed that cash because I haven’t found compelling bargains. I’ve done some dip buying in Novo and Dell, but I still have a long way to go before I complete them – waiting for more attractive prices.

There is fatigue, and exhaustion after the fantastic earnings season and giddy highs from the AI Fear of Missing Out, (FOMO) trades. Apple, Google, and Tesla, three bellwethers’ weaknesses are also weighing in the market. There is sector rotation out of tech, which is a good thing.

It’s time to be even more selective and patient.

Categories
Logistics and Transportation

Federal Express (FDX) Still A Hold, Wait For A Pullback.

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Federal Express FDX $241 – Buy on declines, cyclical, improving margins, next three years expect at least 10-12% earnings growth, very reasonably priced at 14x earnings.

Yes, absolutely right on the patience part, this one gives medium returns, shouldn’t expect more than 10-12% a year +2% dividend yield, and with the 18% rise in the past year, some of it is already in the price. Revenue growth should improve 4-5% after a flat 2024. (Year ends in May)

Good news is there have been cost cutting moves, and emphasis on efficiency – the express business profits tend to be low, and it’s the ground services that’s really keeping the company profitable. Overall it makes only 7-8% operating profit compared to UPS’ 10-11%, but this will improve with execution of the “DRIVE” program which is its effort to improve efficiency. If they execute this well, there could be further upsides.