🤖📈 This Chinese AI Company is Growing Revenue 48%

Xiao-I Corporation is a leading virtual chatbot technology provider in China, focusing on AI solutions across various industries. Despite a 7% decline in stock price since its IPO, AIXI has seen strong revenue growth, particularly a 48% YoY increase in 2022. AIXI's operating margin dropped due to increased R&D expenses, but it remains well-positioned to capitalize on China's growing AI investment, predicted to reach $26.69 billion in 2026. With a strong presence in AI applications and connections across multiple sectors, AIXI is poised for long-term growth. However, risks include the stock value not being fully realized in the market and high competition in China's AI sector.

Regional banks have declined by 44% since January 2022, but historically, banks tend to rally 56% in the year after significant declines. M&T Bank, a top 15 US bank, has a strong balance sheet, solid underwriting standards, and has never cut its dividend during recessions. Although a recession is likely, M&T Bank's loan quality trends are improving, and its commercial real estate portfolio is being actively reduced. The company's stock is deemed undervalued, and its 4.2% dividend yield is considered safe which is why the author owns both preferreds and common stock of M&T Bank

StoneCo is a rapidly growing Brazilian fintech company, offering payment processing, banking services, software, and credit to SMBs. Its growth is fueled by expansion, diversification, and increasing penetration in the SMB segment, with a 22% YoY increase in total payment volume and a 63% YoY growth in total revenue. StoneCo aims to provide superior customer experience, lower fees, and transparency compared to incumbents. The company is well-positioned to benefit from Brazil's digitalization and financial inclusion trends, as well as the expected doubling of e-commerce sales by 2027. Despite competition, StoneCo has been investing in innovation and acquisitions, and is undervalued compared to fintech peers. Berkshire Hathaway holds a 3.4% stake in StoneCo, which has the potential to be a "10 Bagger" in long-term portfolios.

JPMorgan Chase & Co. has acquired First Republic Bank from the FDIC for $10.6 billion, which is expected to bring in an incremental $500 million of net income per year and expand JPM's high-net-worth franchise. JPM's updated 2023 forecast for net interest income is $81 billion, and the company's goals include a 17% return on tangible common equity and plans to hire about 1,300 advisers by 2025. Analysts view JPM as a strong investment due to its lending growth profile, credit card franchise, and expected market share gains in its capital markets businesses.

JPMorgan Chase reported 1Q23 EPS of $4.10, up from $2.63 in the prior-year quarter, and net revenues rose 25%, to $38.3 billion. The author is bullish on JPMorgan Chase, and the company's financial strength rating is high, with a Basel III Tier I capital ratio of 13.8% in 1Q23. The lending business is benefiting from higher rates despite a weak capital markets environment, and loss provisioning is a wildcard for 2023 as the company prepares for a slower economy. JPM trades at a reasonable 9.9-times the author's revised 2023 EPS estimate, and the author recommends buying JPM stock.

The author maintains a $60 fair value estimate for Cloudflare despite mixed Q1 earnings, where better-than-expected profitability was offset by a weaker sales outlook. The market's selloff of Cloudflare shares is seen as overly punitive, and long-term investors could benefit from purchasing at a discount. Cloudflare's unique infrastructure, sticky product portfolio, and investment in sales and research position it well in the web security and edge computing spaces. The company has a narrow economic moat due to strong switching costs and network effects. Cloudflare's blend of security and edge computing could allow it to capture a portion of the projected $700 billion public cloud market and edge computing space over the next five years. The company is assigned an Exemplary capital allocation rating based on its sound balance sheet, exceptional investments, and appropriate shareholder distributions.

Zscaler is a cloud-first cybersecurity leader focused on network security, with products such as Secure Internet Access, Secure Private Access, and Digital Experience. As the only leader in Gartner's magic quadrant for secure web gateways, Zscaler has demonstrated consistent growth and aims to reach $5B in ARR with 20-22% operating margin. Despite underperforming in the past year, the stock is considered undervalued based on its fundamentals and growth rate.

The author believes that Zscaler's recent selloff is overdone, and if the company achieves its long-term targets, the stock could appreciate 3-4x, with a price target of $160 (77% upside). Some risks include potential industry underperformance, unexpected market changes, and unimproved negative margins, but the author does not view these risks as major concerns in the near term.

Carvana has received a debt-for-equity swap proposal from its creditor group, raising concerns about financial challenges and possible bankruptcy. Short sellers have a high interest in the company, with 66% of float shares being shorted. However, the author believes Carvana can survive and be a good investment.

Despite skepticism about Carvana's online used car business model, the company serves a wide range of customers and has experienced record website visits in 2023. Carvana has $3.9 billion in liquid assets and $1 billion in financial receivables, and its bond price trades at a premium to its book value, suggesting bankruptcy is not imminent. The used car market is showing early signs of stabilization, and Carvana's business model promotes transparency in pricing. The author has a strong buy rating for Carvana's stock, considering the balance of risk and reward.

Altria's Q1 2023 results show a decline in cigarette volume, with Marlboro losing market share, but Reduced Risk Products are not to blame. Despite this, Altria's EPS grew 5.0% in Q1 and is expected to grow 3-6% this year. The decline in cigarette volume is attributed to high inflation, and Altria's total U.S. retail share has also been falling since Q3 2022.

The article discusses the cyclical and structural changes in the tobacco industry, specifically in relation to Altria's cigarette volume declines. Altria may face challenges in maintaining positive earnings growth due to difficulties in pricing and increasing costs for developing and marketing Reduced Risk Products. The company's low valuation reflects low investor expectations, but management aims to raise the dividend yield by mid-single-digits annually. The article reiterates a Buy rating on Altria but will continue to monitor it closely.

The author highlights the potential growth opportunity in Tesla's energy storage business, which has been overshadowed by the focus on autonomous driving technology and the automotive division. Tesla's energy storage has generated over $1B in revenue every quarter since Q3 2022 and shows a YoY growth of 149%. With both consumer and commercial offerings, Tesla has a significant market opportunity in a total addressable market of $300B in the US alone for consumer energy storage and an expected $15.04B in 2027 for commercial storage. Tesla's core competency in batteries and its market positioning make it uniquely positioned to capture a large growth market in the next two decades. The author remains bullish on Tesla, believing the energy storage opportunity will yield returns for the company and its shareholders.

General Motors reported a 1Q23 net profit of $3.104 billion, beating estimates and raising its 2023 adjusted diluted EPS forecast to $6.35-$7.35. The company is diversifying into electric and autonomous vehicles, benefiting from strong margins, cash flow, and a solid balance sheet. Despite challenges from commodity price inflation and supply-chain disruptions, demand for GM vehicles remains high. Investors have undervalued the company's strength in traditional vehicles, its Chinese JV, Ultium battery, and financial services businesses. GM reinstated its dividend in September 2022 and plans to resume share repurchases. The company faces risks from economic weakness, changing consumer preferences, higher component costs, and supply-chain disruptions. GM shares trade at 4.8-times the 2023 EPS estimate and are below the midpoint of their 52-week range. The author rates GM as a BUY with a price target of $48.