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Yahoo
07-05-2025
- Business
- Yahoo
Snowflake Inc. (NYSE:SNOW): Offering Sustained Growth and Lucrative Returns
We came across a bullish thesis on Snowflake Inc. (NYSE:SNOW) on ValueInvestorsClub by Wells. In this article, we will summarize the bulls' thesis on SNOW. The company's shares were trading at $147.56 when this thesis was published, vs. the closing price of $158.96 on Apr 28. Is Nebius Group N.V. (NBIS) the Top Stock in Ken Griffin's Portfolio to Buy According to Analysts? Copyright: ralwel / 123RF Stock Photo SNOW provides a cloud-based data platform for various organizations in the United States and internationally. Its platform includes AI Data Cloud that enables enterprises to consolidate data for business insights, building data applications and solving business problems. The Database Management Systems market was worth $80 billion in 2023 with the cloud portion accounting for $47 billion and has been growing at 35% since 2019. This segment should grow to $100 billion by 2027, clocking a growth rate of +20%. SNOW offers products that target $75 billion of the market opportunity ($50 billion structured data and $25 billion unstructured data). SNOW has commanded a dominant position among enterprises due to less complexity, better security and cheaper solutions. While competition from players like Databricks has been mounting which challenges the dominant position of SNOW, there is no trend indicating a clear shift away from SNOW. The Y-o-Y quarterly growth has subsided from 100% in 2024 to 28% in Q4-24 and the net retention reduced from 178% to 126%. SNOW is looking to improve the latter by deploying customer representatives close to the clients, enabling them to identify new use cases. Realizing a 126% NRR should not be challenging amidst emerging database solutions since SNOW has historically resorted to acquisitions in a bid to catch up with the market. It should manage to pace itself with the industry growing annually at 24% backed by a growth of 28% in the product segment. Since the departure of Frank Slootman, the new CEO Sridhar Ramaswamy has been focusing on AI/ML products that are expected to provide meaningful contributions in the second half of 2025. Over 4k customers use one of these products, a 25% growth from the last quarter. While it is too early to comment on the durability of this growth, the management sounds confident and expects tailwinds from this niche to propel the revenue growth higher. Assuming a base case scenario of 24% revenue CAGR, 30% FCF margins and an FCF multiple of 35x, the fair value stands at $383, implying an IRR of 19%. In an upside case, SNOW should achieve a CAGR of 27%, commanding a valuation of $590 using an FCF multiple of 40x, thereby generating an IRR of 30%. While we acknowledge the potential of SNOW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SNOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Yahoo
07-05-2025
- Business
- Yahoo
The Hershey Company (NYSE:HSY): A Discounted Sweet Treat
We came across a bullish thesis on The Hershey Company (NYSE:HSY) on ValueInvestorsClub by angus309. In this article, we will summarize the bulls' thesis on HSY. The company's shares were trading at $186.36 when this thesis was published, vs. the closing price of $163.28 on Apr 25. The Hershey Company (HSY): Among Takeover Rumors Hedge Funds Are Buying A close-up of hands deftly molding a bar of chocolate. HSY manufactures and sells confectionery products and pantry items in the United States and internationally through its three segments: North America Confectionery, North America Salty Snacks, and International. It controls 36% of the chocolate market in the US with high single-digit sales coming from international markets like Mexico, Brazil and India. The stock is down almost 40% from its peak in 2023 due to a number of reasons. First, the launch of the weight-loss drug Ozempic by Novo Nordisk has been a popular hit due to its effectiveness. It is estimated that people will consume 20-30% fewer calories due to the influence of this medication, thereby impacting the sales of HSY. Another factor for underperformance is the torrential rains in Ghana and Ivory Coast leading to black pod disease and lower yield. HSY is expected to face higher input costs, which would reduce margins. While these headwinds are valid arguments by bears, HSY has been in the business for over a century. The likelihood of Americans reducing their intake of chocolates seems far-fetched when considering long-term consumption patterns. Moreover, HSY has expanded beyond chocolates and offers products like SkinnyPop popcorn and Dot's Pretzels that can provide a hedge if consumers shy away from high-calorie treats. The concern surrounding mounting input costs can also be dealt with since HSY has the flexibility to pass on increased costs to its customers. This was done in 2023 when a 10% hike in price enabled HSY to increase its revenue by 11% without a major drop in volume. The popularity of Feastables by Mr. Beast is another potential cause for concern. The brand is set to grow exponentially but the ability to capture market share may be constrained by lack of scale in manufacturing and distribution. HSY can also turn the tide by launching healthier versions that may offer direct competition to Feastables. HSY is trading at 15x trailing 12-month earnings, which seems unjustified for a company that saw its earnings grow by almost 15% from 2007 to 2023. The forward dividend yield is close to 3.4%, with ROIC exceeding WACC by 18 percentage points. Factoring in a high capital return, a growing dividend and a multiple higher than the S&P 500, the fair value of HSY's stock is $225. This is 40% higher than the current market price.
Yahoo
18-04-2025
- Business
- Yahoo
DaVita Inc. (NYSE:DVA): A Case of Limited Growth Potential
We came across a bearish thesis on DaVita Inc. (NYSE:DVA) on ValueInvestorsClub by Fenkell. In this article, we will summarize the bears' thesis on DVA. The company's shares were trading at $147.00 when this thesis was published, vs. the closing price of $140.03 on Apr 17. Patients connected to dialysis machines in a hospital ward, highlighting the company's dialysis and intravenous therapies. DVA provides kidney dialysis services for patients suffering from chronic kidney failure in the United States. It operates kidney dialysis centers and provides related lab services in outpatient dialysis centers. Operating in a duopoly with Fresenius, it is expected that DVA should have a high pricing power. However, the US offers a unique challenge where dialysis is covered under Medicare, with private insurers stepping in for the first three years for those having coverage. Medicare is looking to limit the reimbursements and private insurers are not keen on providing coverage for dialysis. Therefore, DVA has not been able to ramp up the prices despite providing a critical service. DVA has been closing clinics, a sign that the volume growth has stalled. The End-Stage Renal Disease (ESRD) population grew by ~4%/year from 2007 to 2014, but this has dropped due to higher mortality of this population during COVID. The rate of new ESRD cases continues to fall with better treatment, healthier habits and a preference towards transplants. DVA has guided an average of 20 clinic closures per year which indicates that the post-COVID headwinds are certainly not temporary in nature. Dialysis treatment volumes are expected to grow at 3-5% with pricing growth limited due to the involvement of Medicare. There are other risks to factor that include kidney failure medications by Novo Nordisk and legislation to limit dialysis reimbursement rates that would curb DVA's ability to charge private insurers higher. DVA has also been accused of manipulating patients away from transplants in a bid to boost its own business. All these negativities have had a direct impact on its stock, with prices plunging 7-18% every time a negative news is announced. DVA has commanded a 17x forward FCF multiple under the assumption that growth rates would be higher. However, the industry headwinds should keep FCF flat at $9 if DVA manages to keep costs under check. A 10-12x multiple is justified due to the limited growth potential, offering a price target of $90-110. This presents a 22% downside when a higher multiple is considered. While we acknowledge the potential of DVA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DVA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey. Sign in to access your portfolio
Yahoo
18-04-2025
- Business
- Yahoo
Avery Dennison Corporation (NYSE:AVY): A Compounder Facing Minor Hiccups
We came across a bullish thesis on Avery Dennison Corporation (NYSE:AVY) on ValueInvestorsClub by jso1123. In this article, we will summarize the bulls' thesis on AVY. The company's shares were trading at $183.00 when this thesis was published, vs. the closing price of $170.85 on Apr 17. A closeup of an employee's hands attaching a barcode label to a shipping box. AVY is a materials science and digital identification solutions company that provides pressure-sensitive label materials, performance tape products and other pressure-sensitive adhesive-based materials. AVY commands a 40% market share of pressure-sensitive label stock, a market where the top four players capture 80% of the market. On the other hand, its customers are highly fragmented with the top 20 players accounting for 20-30% of the market. Such dynamics allow AVY to dictate pricing and ensure AVY offers a high ROIC with low volatility. The RFID market is also largely untapped with only the apparel segment having a 40% penetration. Overall, the reach is only 5% and is expected to witness a volume growth of 20-25% and revenue growth of 15-20% due to deflationary pricing in chips. Partners like Walmart are looking to deploy RFID in ten categories of its products that would cover 50% of its floor space. Other major brands like Amazon, UPS, GAP and Uniqlo are also building the use case for RFID. Another driver for RFID is the mandate for European Digital Product Passport (DPP) which requires a digital record of information about the product. The transition of barcode standards from 1D to 2D barcodes should also ramp up the demand for RFID as a handier alternative. The demand for apparel, a segment driving 65-70% of AVY's revenue, is set to improve after a 25% drop in demand at the end of 2023. The three quarters of 2024 have been better and should ensure decent growth for AVY. The stock is trading at a level close to what it was three years ago and is down 22% in the last six months. AVY has historically traded at multiples close to the SPX but is currently at 0.7x. With the RFID segment re-accelerating in 2025, AVY can generate an EPS of $14-15 in 2027. Using a conservative multiple of 19x, the fair value should be in the range of $266-285. A lower estimate should offer a 56% gain from its current level. While we acknowledge the potential of AVY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AVY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey. Sign in to access your portfolio
Yahoo
18-04-2025
- Automotive
- Yahoo
LKQ Corporation (NASDAQ:LKQ): En Route to Simplified Business, Better Valuations
We came across a bullish thesis on LKQ Corporation (NASDAQ:LKQ) on ValueInvestorsClub by dman976. In this article, we will summarize the bulls' thesis on LKQ. The company's shares were trading at $39.40 when this thesis was published, vs. the closing price of $42.03 on Apr 17. YAKOBCHUK VIACHESLAV/ LKQ engages in the distribution of replacement parts, components, and systems used in the repair and maintenance of vehicles and specialty vehicle aftermarket products and accessories. The Wholesale North America (WNA) business accounts for 40% of revenue with 16.5% EBITDA margins. This segment is 15 times larger than its closest rival, giving LKQ a dominant position and enabling it to operate as a defensive company. LKQ is also the largest operator in Europe, which was achieved by acquiring companies like Euro Car Parts, Sator, Rhiag and Stahlgruber. This division accounts for 44% of the revenue with a 9.5% EBITDA margin. A $400 billion global market combined with macro headwinds like higher miles driven, average vehicle age, complexity of vehicles and cost of repair offers potential for secular growth in the future. The financials of LKQ also look strong with $353 million in cash holdings and a business generating generous free cash flows. The net leverage is below 2.5x and with a muted stock price, LKQ can look to repurchase stock in the near future. The management has hinted at operational improvements that could boost margins and provide better returns to shareholders. The focus on simplifying the Self Service and Speciality businesses should also improve sales by removing the cyclicity factor from these segments. The stock price has fallen after the acquisition of Uni-Select and the repeated earnings miss in the last 18 quarters. A soft macro environment, rising insuring costs and low sales in the winter of 2023 and 2024 have destabilized the otherwise consistent performer. These factors are expected to be short-lived, with normal business operations expected to resume soon. The negative factors have kept valuations low, with the stock price trading at 8.4x 2025 EBITDA, 11.3x 2025 EPS and 8.6% FCF yield. LKQ should consistently grow at low single digits with EBITDA margins expected to improve by 100 basis points. With a 10x EBITDA multiple and 2026 EBITDA estimates, the fair value of LKQ's share price comes to $58.11, providing a 38% upside. While we acknowledge the potential of LKQ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LKQ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey. Sign in to access your portfolio
