Fountainheadinvesting

Fountainhead Investing

Menu
Menu

Category: Industry

Categories
Technology

Understanding Apple’s Antitrust Case: Bernstein’s Analysis and Market Implications

Apple (AAPL)

I don’t believe there is any reason to panic, I agree with Bernstein’s reasoning below.

It will take years and the outcome will be limited.

Apple (NASDAQ:AAPL) was sued by the U.S. Justice Department in a landmark antitrust case amid concerns about monopolization in the smartphone market, something Apple has vehemently denied.

While the case is likely to play out in the judicial system for years, investment firm Bernstein does not believe it will have much of a financial impact on the tech giant.

“While the DoJ’s charges are focused on iPhone, we do not see likely remediation as materially impacting Apple financially or undermining the iPhone franchise: worst case, Apple pays a fine, and loosens restrictions for competition across the iOS platform, which we believe will have limited impact on iPhone user retention or on Services revenues,” analyst Toni Sacconaghi wrote in a note to clients.

Sacconaghi believes any outcome is likely to take some time, likely between three and five years, given historical precedent from Microsoft (MSFT) and Google (GOOG) (GOOGL). And while it may not undermine Apple’s iPhone franchise, it could result in competitors having access to Apple’s APIs and ecosystem, level the playing field for future devices and result in some “regulatory overhang” for the stock.

“We think the DoJ creates some regulatory overhang on the stock, but see limited to no impact over the next several years,” Sacconaghi added.

Categories
Semiconductors

Micron (MU) Rating Upgrade to Buy: Strong Earnings and HBM Demand Drive Optimism

source:micron

Micron (MU) Rating Upgrade to Buy from Hold, $100.

Results expected this afternoon were very good, and I am more optimistic about the guidance. I was hesitant to add or recommend buying because it looked overpriced compared to its historical average and it had doubled in the past year.

Nvidia’s comments on needing more high bandwidth memory (HBM) vendors like Samsung, suggest the Micron is more likely to have challenges meeting demand. Unlike the past year when they had to discount inventory.

https://www.barrons.com/articles/micron-technology-stock-earnings-d6cd03f9?mod=BRNS_ENG_NAS_EML_BULLETIN_AUTO_NAH

With this beat and these upgrades from Wall Street analysts in Barron, I would start buying.

“Micron is likely to report continued soaring demand for “high bandwidth memory,” or HBM—parts that combine multiple DRAM chips to improve data-processing speeds.

TD Cowen analyst Krish Sankar wrote in a recent research note previewing the quarter that when it comes to Micron, “HBM remains the centerpiece of attention.” Last week, he lifted his target for the stock price to $120, from $100. He said there is a “potential scenario” where the stock can reach $150, for a gain of more than 50% from current levels.”

For the May quarter, the Street is projecting revenue of $5.98 billion, with an adjusted profit of 8 cents a share. Analysts expect the rebound to continue from there. Estimates for the August quarter now point to $6.86 billion in revenue and an adjusted profit of 81 cents a share.

FQ3-24 

Revenue 6.6Bn Expected 5.8Bn

EPS $0.17 Expected $0.08

FQ3-24GAAP(1) OutlookNon-GAAP(2) Outlook
   
Revenue$6.60 billion ± $200 million$6.60 billion ± $200 million
Gross margin25.5% ± 1.5%26.5% ± 1.5%
Operating expenses$1.11 billion ± $15 million$990 million ± $15 million
Diluted earnings per share$0.17 ± $0.07$0.45 ± $0.07

Wedbush analyst Matt Bryson wrote in a recent research note that recent trends in prices for both DRAM and NAND memory chips suggest Micron will beat its guidance for the quarter. Bryson, who has an Outperform rating on Micron shares, said he expects positive commentary from the company on the outlook for HBM demand.

“Since last summer, management has provided consistently optimistic commentary around anticipated progress with HBM in light of the technology being a derivative of their highly successful standard DRAM nodes,” Bryson writes.

Meanwhile, analysts say the balance between supply and demand has stabilized following a supply glut that spanned multiple quarters.

“Customer inventories have largely normalized, demand conditions across markets appear stable, and supply growth remains muted,” Raymond James analyst Srini Pajjuri wrote in a research note previewing the quarter. “In addition, HBM is a significant secular driver that could add $1.5-$2 in incremental EPS at the next peak.”

Pajjuri maintains an Outperform rating on the stock.

Categories
Technology

Samsara (IOT) Stock Review: A Hold for Now at $35.86

source:samsara

Samsara $35.86 (IOT)

Hold for now, 15x sales 26% growth, no adjusted operating profits, but the promise of expansion of fleets and other business benefiting from AI/LLM’s more computing power should help the best IoT in the business. Pure play should be a moat.

Copy from the earnings report about the future growth prospects.

Categories
Technology

Apple, (AAPL), Still A Hold.

source:apple technology

Apple, (AAPL) – $170 Hold 

The recent drop, especially today, has been because of weak iPhone sales in China, which fell 24% year-over-year in the first six weeks of 2024, amid rising competition from Chinese rival Huawei Technologies, Counterpoint Research said. There’s a lack of consumer confidence in China, and several attempts to kickstart their economy have not succeeded; If it goes into a deflationary spiral, this problem could continue for a few quarters before bottoming out.

Getting out of the car project was a good idea, even if they wasted a decade and billions of dollars, but that’s no longer a drain, and diverting that to AI development is absolutely necessary, even if it is a little late.

The stock should remain sideways and sluggish for a while, but this is not a trading stock, it’s a long term investment, which doesn’t quite give blockbuster returns but is a steady performer. I’m not planning to sell any and will revisit if it falls further.

Categories
Fintech

Pagaya (PGY): Addressing Investor Concerns in Upcoming Fireside Chat

Pagaya (PGY)

After the disastrous action taken by management to dilute shareholders within a few days after a reverse split, a lot of analysts including some of us on Seeking Alpha, raised some important questions. The management has agreed to a fireside chat and hopefully resolve this.

Pagaya has welcomed questions from investors for an upcoming fireside chat with CEO Gal Krubiner, CFO Evangelos Perros and President Sanjiv Das. The conversation will be moderated by John Hecht from Jefferies, on Tuesday, March 26, 2024 at 1:00 PM ET.

www.businesswire.com/…

These are the questions from a group I was interacting with…

“1) Please address the surprise, blindsiding nature of the capital raise (3 days after the Reverse Split). Also, the midstream lowering of the price of the offering while increasing the number of shares you offered.

“I believe the original estimate was $14.70, then it was $12.70, and I watched the volume that day of the offering: the majority of it was under $12, and the share price closed a little above $11. Institutional participation seemed hesitant, even lacking. Today the share price is $9.12

“The timing and execution of this offering has been an unmitigated disaster for your shareholders, somewhere around a $600ML loss for a $90ML capital raise.

“How do you square that? Now that the damage has been done, it’s time to be honest with your investors about the capital raise. What happened?

“2) Since the bearish analyst at Wedbush Morgan downgraded your price target to $11.50, while remaining neutral, citing “losses in risk-retention assets” there has been a horde of relatively-inexperienced DYI accountants pouring through your past financial statements, looking for buried losses that you have not explicated for investors.

“You stated them, yes, in the March 8th 20-F, but now the investing world wants an explanation.

“What is the performance of your risk-retention assets? Are they insured? What is their current status? Do you now have sufficient capital to steer Pagaya to the end of the year? And cover the 5% needed for future ABS investments? Can you reaffirm your 1Q24 guidance and your full year estimates? Thank you.”

There are other questions, and other analysts will be on the call as well. I’ll update right after.

Categories
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
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

source

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

source

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.