🟨 This Company Won a Contract worth $80B!

Alibaba is currently undervalued, and investors are essentially getting its cloud segment for free. The cloud segment could potentially be worth more than Alibaba's core business today, and mean-reversion could present a huge profit opportunity for investors. There is a possibility of a compound annual growth rate (CAGR) of 19.72% over the next decade.

Taobao and Tmall are expected to be worth about $471.70 billion by 2032, or $178.17 in today's share price. Alibaba plans to spin off each division, and the other five segments are currently taxing the company but are on their way to profitability. The Digital Media and Entertainment Group is valued at $26.34 billion. The author believes that Alibaba's Core Business could reach a market capitalization of $683.46 billion, or $258.15 per share, and yield a CAGR of 10.38% over the next 10 years.

The Cloud segment is estimated to potentially reach revenues of $77.84 billion by 2030, with Alibaba potentially achieving an operating margin of 25% by 2032. The author believes that Alibaba could be worth up to $1.28 trillion in market cap or $485.98 per share by 2032, with an annualized share price gain of 19.72%.

The author sees similarities between Alibaba and Meta, both of which traded well below intrinsic value and saw a strong opportunity for a return to the mean. The author believes that Alibaba has a wide margin of safety and downside protection, as the stock is only trading at about 11.4x free cash flow and tends to bottom at 10x free cash flow in 2022. Based on the new value that can be unlocked over the next decade as Alibaba splits into six different components, the author is raising Alibaba from a "Buy" to a "Strong Buy."

The author is bullish on Starbucks Corporation's stock, as the company is well-positioned for strong growth in the coming years. This growth is due to increasing demand for cold and customized beverages among younger consumers, growing digital and delivery channels, new store expansion, and the reopening of China. Margins are expected to improve in FY23 due to price increases, sales leverage, and improved productivity. The stock is trading below its historical average P/E, making it an attractive buy given its revenue and margin growth prospects.

Starbucks has experienced good revenue growth post-pandemic, driven by strong demand for cold beverages and increasing food attach orders. The company's digital expansion through its Starbucks Rewards program has also boosted sales growth by increasing visit frequencies. Easing travel restrictions have further contributed to this trend. The company's Q1FY23 sales increased by 8.2% YoY or 12% YoY on a constant currency basis to $8.7 billion. The delivery channel is also growing, with sales through delivery up 20% YoY in 2H FY22.

The company aims to increase its store count to approximately 45,000 by FY2025, with eight new stores opening every day. Starbucks plans to open approximately 3,000 stores by 2025 in China, its second-largest market after the US, bringing the total store count to 9,000 and expanding to 70 more new cities in China. Management has targeted 7-9% comparable sales growth and 10-12% reported sales growth annually for the next three years.

Starbucks' adjusted operating margins were negatively impacted by inflationary commodity costs and its presence in China. Inflationary cost headwinds and China's sales deleverage continued to impact margins in Q1 of fiscal 2023, along with elevated labor wages and benefits. Price increases partially offset the impact of these headwinds, resulting in a 60 bps decline YoY in adjusted operating margin to 14.5%. The company is investing in its reinvention plan for long-term margin expansion by improving labor efficiency through automation of day-to-day store operations.

Starbucks' current forward P/E ratios are lower than its historical 5-year average, and the company is expected to post low double-digit revenue growth and mid to high teens EPS growth for the next few years. The author has a buy rating on the stock, given the company's strong revenue growth prospects, margin improvement prospects, and lower-than-historical valuation.

CION Investment Corporation has been outperforming most Business Development Companies (BDCs) over the past six months, including Ares Capital. Its access to private credit markets boosts its total portfolio value and provides a higher total return than other BDCs. In fact, CION has achieved the highest total return among BDCs in the past six months, followed closely by Owl Rock Capital.

2023 is expected to be a positive year for BDCs, particularly those lending to upper and middle-market companies like CION. The company is poised to benefit from cutbacks in bank lending and can capitalize on private credit markets. CION primarily invests in the debt of private middle-market companies through senior secured loans, which are about 85% floating rate, allowing it to benefit from rising rates.

CION Investment Corp. has demonstrated strong performance despite weakening credit markets. It recently announced a nearly 10% dividend increase and reported a net inversión income of $0.43 per share, covering the increased dividend. Non-accruals remained low, and the company repurchased over 900,000 shares while adding new investment commitments of $92 million. CION paid a special dividend in addition to the regular quarterly dividend and completed a public offering in Israel, raising about $100 million.

Co-CEO Michael A. Reisner believes the company is well-positioned heading into 2023. CION trades at a nearly 40% discount to book value while offering an annual yield of 13.3%. Other BDCs may not be as generous in passing along extra income to shareholders. CION Investment Management oversees the company's activities, and Apollo Investment Management performs certain services for the company.

The middle market is a large addressable market, with approximately 200,000 middle-market companies in the US contributing an estimated $10 trillion in annual revenue. Changes in business strategy by banks have reduced the availability of capital to middle-market companies. There is a large pool of private equity capital available to finance strategic transactions, and CION can offer leverage to these companies through a combination of equity capital and loans.

Exxon Mobil's CEO predicts that the Low Carbon business could generate billions, tens of billions, and even hundreds of billions in revenue within the next decade.

Schlumberger's new energy unit, SLB New Energy, has set its sights on reaching $3 billion in revenue by the end of this decade and at least $10 billion by the end of the next decade. SLB New Energy's Carbon Capture, Utilization, and Storage (CCUS) business is experiencing rapid growth, participating in 20 projects for most of last year and nearly 30 between November and February.

CCUS is considered an ideal solution for hard-to-abate sectors by the International Energy Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC). Companies such as Saudi Aramco, ArcelorMittal,

According to McKinsey, CCUS hubs are the most cost-effective way to scale the technology, and at least 160 such hubs are needed to meet net-zero commitments by 2050. To achieve net-zero, annual global investment in CCUS technology must range from $120 billion to $150 billion through 2035.

Textron Inc. secured a crucial contract to provide the Future Long-Range Assault Aircraft (FLRAA) to the U.S. Army, which will help offset revenue declines from other defense platforms. Despite Sikorsky's protest, the Government Accountability Office upheld the decision on April 6th. The FLRAA will replace the Black Hawk, with the Army's Future Attack Reconnaissance Aircraft (FARA) program developing a helicopter for spotting and attacking. Boeing envisions a next-generation Apache as the primary attack helicopter.

Textron's reliance on defense revenues from the V-22, which has experienced lower contract awards recently, made winning the FLRAA project essential. Their V-280 Valor design met and exceeded the Army's requirements, while Sikorsky's design lacked sufficient subsystem level detail. The contract win is worth up to $80 billion for Textron, as they provided a more capable solution compared to the cheaper, less capable offering from Boeing-Sikorsky. This success is vital for Textron to counterbalance lower V-22 sales.

Super Micro is benefiting from a major AI tailwind due to its close relationship with Nvidia. Reports of AI server shortages in March suggest that large enterprises and startups are heavily investing in AI. Inspur, the world's third-largest server maker, has been added to the entity list with restrictive policies similar to Huawei, limiting their ability to meet global demand for server hardware and conduct business outside of China.

Elon Musk's entry into the AI space is expected to create significant additional demand in Super Micro's end markets. With Inspur's ban, Super Micro may benefit as they have a similar role in the server market and focus on AI and the "ODM+" space. The ban could cause a 5% or more increase in revenue for Super Micro, with an emphasis on international revenue. ODM+ is targeted at hyper-scale and/or very large and sophisticated enterprises with custom needs for their own data centers and a reduced need for support.

The addition of Inspur to the entity list is a substantial positive for Super Micro and should add materially to their international revenue. Elon Musk has founded a company called X.AI, which will pursue large-scale generative AI research, likely using Twitter as a platform. Musk has purchased over 10,000 GPUs, potentially adding $200-400 million of additional revenue in an AI hardware and server industry that was single-digit billions per quarter in 2022.

Super Micro is positioned to be one of the premier server manufacturers in the AI space due to its close relationship with Nvidia. Additionally, the company has diversified away from AI, engaging in general data center infrastructure work that is not AI dependent.

The author previously found ZIM Integrated Shipping Services to be undervalued and suggests using an option strategy for even higher returns. Despite negative macroeconomic headwinds, the company has a solid outlook and exceeded analyst expectations for Q4 2022. The author recommends focusing on other value-creating strategies, such as mergers and acquisitions, growing book value, generating free cash flow, and enhancing the balance sheet.

ZIM is considered a great pick for a potential crisis and a great cyclical pick according to Peter Lynch's guidelines, offering a good cyclical opportunity for the next 2 to 5 years. The company's business model is directly affected by freight rates, which are vulnerable to demand and supply shocks. However, ZIM has a strong competitive position, a healthy balance sheet, and a gradually increasing market share, predicted to reach 1.7% by 2022. The company competes selectively in niche trade lanes where it has a competitive advantage, and its business model is performing well.

ZIM's leverage trend is lower than other major players, indicating a healthier balance sheet. Although the company paid high dividends in the first quarter of 2023, it still maintains a strong cash position and is prepared for any potential downturn or worsening of industry standards. Timing is crucial when investing in cyclical stocks, and the current economic trajectory suggests a greater downside risk than upside risk.

ZIM's projected earnings per share for fiscal years 2023 and 2024 are exceedingly low or even negative, leading to negative forward price-to-earnings ratios. However, management expects positive EBIT in 2023 and anticipates generating adjusted EBITDA between $1.8 billion to $2.2 billion and adjusted EBIT between $100 million to $500 million. ZIM has slightly diversified its revenue stream, which has increased results in the latest quarter and is expected to continue. The author predicts that ZIM will top revenue consensus estimates for Q1 2023.

The author suggests taking a very conservative approach when valuing the balance sheet to account for potential insolvency and to be aware of what investors should find in such a scenario. There is an opportunity in the company's stock due to its low market capitalization compared to its conservative book/equity value. The author maintains a strong bullish stance on the stock as long as the market capitalization falls below the conservative net asset value.

Stella Artois is brewed by Ambev S.A., a Brazil-based brewer owned by AB InBev. With a significant presence in South and Central America, Ambev dominates markets in Brazil and Argentina, and also holds exclusive rights to sell and distribute Pepsi CSD and Gatorade in Brazil. Under the leadership of new CEO Jean Jereissati Neto, the company has experienced double-digit growth in the past two years after a decade of sales fluctuations.

Ambev's gross margin has decreased over time, but the company remains profitable and cash-flow generative. The stock is trading at a discount on both TTM and forward P/E basis, with a 15.39% revenue growth last year—145% of the sector median. Ambev also has the highest dividend yield in the Brewers GICS sector, but investors should be cautious, as the company's dividend payout history is non-linear.

The recent growth, new CEO, and diversified commodity range, including soft drinks, make Ambev an attractive investment. The cheap P/E and cash valuation, coupled with the highest dividend yield in the sector, further support the company's potential. The author sees the dividend as an additional return, but the main focus should be on Ambev's strong revenue growth, making the stock a solid buy.

The author holds a bullish view on Lowe's, citing its strong brand recognition and pricing power that contribute to an increasing average ticket size and yearly spending. As housing prices rise, consumers typically allocate a fixed percentage of their home's value to improvements, which benefits Lowe's.

The company's large physical footprint and optimized supply chain enable operational efficiency and bargaining power. Management's dedication to returning capital to shareholders through accelerated share buybacks is expected to result in high-double-digit EPS growth.

Lowe's share price has the potential to achieve a 17% IRR, including dividends.

The author previously expressed concerns about Trivago's performance due to inflation, but has since become optimistic thanks to sustained revenue rebound, margin expansion in Q4, and a strong balance sheet. Although the company may face mixed market conditions this year, leading to pessimism from investors and analysts, the stock price is currently undervalued, presenting an opportunity for discounted purchases.

Trivago N.V. faced lawsuits and controversies in 2020 but rebounded in the second half of 2022, with operating revenue reaching $562.28 million, a 32% year-over-year growth. The labor market transformation, including remote and hybrid work setups, increased leisure and business travel, offering more flexibility for entrepreneurs and employers. Despite appearing to underperform relative to its peers, Trivago's efficiency was impeccable, with the highest operating margin of 16% in historical data. The company may face mixed market conditions due to recession fears and penalties from a 2020 lawsuit, but its efficiency and ties with Expedia make it a market staple.

Lower gasoline prices can help sustain travel hype and make airfares cheaper, which may become more advantageous to the company. Trivago N.V. has remained solid and viable amidst inflation and may stay afloat this year. Lower inflation may increase individuals' capacity to travel, and a recent study shows a substantial increase in international travel bookings for Spring. The prevalence of hybrid work in the U.S. may further increase the appeal of travel, leading to increased travel spending.

Trivago N.V. can sustain its operations and withstand potential headwinds due to its solid financial positioning, high cash reserves, and high core earnings. The stock price of Trivago N.V. has been plunging even before the pandemic, but investors may find opportunities to purchase shares at a discount, and the DCF model shows stock price undervaluation with a potential 170% upside in the next 12-18 months.

The Bear Cave's recent premium articles discuss issues at companies like Coinbase, Airbnb, and Sprout Social. White Diamond Research expresses concerns about Greenwich LifeSciences' clinical trials and alleged data manipulation.

The article also highlights executive departures from various companies such as Skillz Inc, Catalent Inc, Harley-Davidson, Ebix, Cutera Inc, Viridian Therapeutics, Western Alliance Bancorporation, OFS Capital Corp, Splunk Inc, and Mercantile Bank Corp. Reasons for these departures range from pursuing other opportunities to termination.

Additionally, the article addresses the failure of auditors to identify risks in banks and a challenge made by a secretive short seller to reports by their peers. The remaining content includes notable tweets from the week.

The article discusses the failure of Silicon Valley Bank (SVB) and its potential impact on the banking system. SVB's heavy concentration in a single sector and region, as well as its flawed investment decisions, led to its collapse. The article compares the current situation to the Global Financial Crisis of 2007-08 but notes that the causes are different.

The article also discusses the cyclical nature of financial regulation and the possibility of a government guarantee of all deposits. The failure of SVB and other banks could contribute to a credit crisis, leading to reduced credit availability and increased scrutiny for regional and community banks. The article also highlights the potential risks in the commercial real estate market and the uncertainty surrounding losses on CRE mortgages.