🟨 Oracle as a Sneaky AI Winner?

Marqeta's stock has experienced a nearly 40% drop since December due to concerns about its reliance on Block (70% of MQ revenue) and the short report on Block that came out last month. The report claimed that some transactions on Cash App are fake and fraudulent, and that the company artificially inflated its user count. However, the market's reaction to Marqeta's decline seems to be an overreaction, as Block has addressed the allegations and Marqeta is working to reduce its reliance on Block through acquisitions.

At its current valuation, Marqeta is trading at a discount compared to fintech peers, making the risk-to-reward ratio compelling. Block's response to the Hindenburg Research report indicates that the claims are speculative and without substance. The short report is likely just a tactic for Hindenburg Research to benefit from its short position. As Block's Cash App transactions are compliant with the SEC and verified through its Identity Verification program, it is unlikely that the accounts are fake or fraudulent.

To reduce reliance on Block, Marqeta is expanding into new markets, entering the banking segment with Marqeta for Banking and acquiring Power Finance to expand into the credit card market. The Power Finance acquisition should improve Marqeta's product breadth and increase its addressable market. Currently, Marqeta's valuation is discounted, trading at an EV/sales ratio of just 0.96x, significantly lower than payment peers such as Block, Payoneer, and Shift4 Payments. This valuation offers a great margin of safety and presents a bottom fishing opportunity for risk-tolerant investors.

As Marqeta actively expands into new markets through acquisitions and product offerings, it is working to diversify its revenue stream. The author rates the company as a buy, considering its efforts to mitigate risk and its promising growth prospects.

Northern Trust, a high-quality player, appears undervalued given recent developments and valuation. The company benefits from deep asset management and custodial relationships, leading to a loyal client base.

JPMorgan Chase upgraded Northern Trust to Neutral with a $97 target, stating it should benefit from recent banking turmoil. The firm navigates economic uncertainty well, with 2022 revenue growing by 5% and strong demand for integrated trading solutions.

Northern Trust maintains an A+ rated balance sheet, a 10.8% common equity tier 1 capital ratio, and a 3.4% dividend yield. Trading at $88.88 with a forward PE of 12.9, the stock sits below its normal 17.9 PE, indicating value.

In summary, Northern Trust is a reputable trust bank with a strong balance sheet and attractive dividend, offering potential returns for investors over the next year.

Crescent Point Energy Corp., a liquids-focused E&P with operations in Canada and the US, focuses on four primary basins, with the largest production areas being the Kaybob Duvernay and Viewfield resource area. Recent transactions include acquiring additional Kaybob Duvernay and Montney assets in Alberta, with the Montney acquisition expected to close in Q2 and have low breakevens of US$40 oil.

The company is aggressively growing production through acquisitions and organic means compared to other E&Ps. Crescent Point has transformed its portfolio by acquiring acreage in Kaybob Duvernay and Montney basins, representing around 45% of its production this year and growing to ~60% by 2027. The company projects generating C$5.2 billion in cumulative excess cash flow over the next five years at US$75 WTI.

However, the focus on these basins adds basin risk and a net debt of C$3 billion, or 1.3x leverage, which increases risk when energy prices sink. Crescent Point typically hedges 15-20% of production, making energy prices a significant driver of its results.

Trading at 3.3x the 2023 EBITDA and 2.9x the 2024 EBITDA consensus, the stock has upside potential. The author is bullish on oil, seeing Crescent Point's stock reaching $11+ with potential debt reduction and a 3.4x multiple.

As investors seek stable and profitable companies in a flight to quality in the stock market, Oracle Corporation emerges as a strong investment candidate due to its track record of delivering value and executing plans efficiently. Operating in three segments: Cloud & License, Services, and Hardware, Oracle's stock has outperformed the S&P 500 over the past four months, potentially due to its near-term earnings prospects.

Analyst estimates for Oracle's revenue have remained steady, while operating cash flow expectations have consistently climbed. The company's business is considered essential and necessary, even in an environment of rising interest rates and cost-cutting measures. With its existing cluster scale and ability to efficiently solve complex AI problems, Oracle has the potential to succeed in the AI market. CEO Larry Ellison stated that Oracle is ahead of other hyperscalers in terms of their network and AI capabilities.

The market potential for AI is significant, and any first-mover advantage a company can secure is likely to pay dividends in the future. Oracle's strong track record of flexibility and willingness to move on new ideas makes it a successful company. The recent separation from the market may indicate a positive change in how the market views Oracle Corporation stock, and investors should closely monitor the company.

Zurn Elkay Water Solutions Corporation (ZWS) offers a comprehensive array of water management solutions for various industries and appears to be a relatively undervalued investment opportunity based on valuation metrics such as P/E, P/S, EV/Sales, EV/EBITDA, and P/B ratios. The drinking water solutions market, with potential for expansion, is a promising investment opportunity, and ZWS is a leading force in the market with an extensive installation base of point-of-use drinking water systems. The global water treatment systems market is projected to experience an 8.8% annual growth rate from 2022 to 2030, emphasizing the long-term potential for growth in this market.

Growing awareness of lead in drinking water has created urgent demand for reliable solutions, presenting a great chance for firms like Zurn Elkay to provide secure drinking water options and take immediate action against this alarming public health issue. Legislative action and heightened awareness on the issue of lead in drinking water present an immense opportunity for the company to cater to schools and public areas and develop a high-margin, recurring revenue stream potentially exceeding $100 million in the years to come. The recent merger between the company and Zurn is poised to bolster profitability through strategic implementation of 80:20 simplification measures. The company's ambitious forecast of consolidated sales ranging from $1.5 billion to $1.55 billion for 2023 appears attainable due to strategic initiatives undertaken to streamline and optimize operations.

However, ZWS has seen a contraction in core sales to the residential sector and only low single-digit expansion in non-residential end markets. The merger has had some tribulations, including a 100 basis point reduction in sales due to foreign currency translation and a 30% decline in residential end market sales. The first-quarter margin has been impacted by higher-cost inventory acquisitions and investments in safe drinking water initiatives. The company's sales forecast is not optimistic, and its circumspect approach to purchasing patterns suggests that its offerings may have lost their allure or that rivals have captured some market share. Despite these challenges, ZWS's commitment to providing safe drinking water solutions and addressing the public health issue of lead in drinking water may help the company overcome these obstacles and improve its position in the market.

ZWS's P/CF ratio surpasses most of its competitors, potentially implying overvaluation based on this lone metric, but taking into consideration all of these valuation metrics, the company teeters between being fairly valued and somewhat undervalued in comparison to its peers. Despite these concerns, the company's solid financial footing and commitment to safe drinking water initiatives make it an enticing investment opportunity that warrants a "buy" rating.

Consolidated Communications (CNSL) has recently received a non-binding acquisition proposal at $4/share from a buyer consortium led by Searchlight Capital Partners and British Columbia Investment Management. The potential acquirer has mentioned that a transaction might require approval from a majority of CNSL's minority equity holders. Since the announcement, CNSL's share price has jumped 40%, but the downside to pre-announcement levels is 29%.

The current acquisition bid comes at an opportunistic time as CNSL's share price is near historic lows. The company has been going through a multi-year strategic transformation from a legacy wireline business to a higher-quality fiber provider business. CNSL's management expects the company's revenue and earnings to substantially improve going forward.

The buyer consortium's attempt to acquire the company at the cusp of a substantial revenue/EBITDA inflection seems opportunistic, and there is a decent chance that the current offer will not be accepted by the company. Relative valuation suggests there is substantial headroom for an offer above current share price levels, with CNSL trading at 5.3x TTM adjusted EBITDA and comparable industry transactions suggesting a higher valuation.

The buyer consortium is reputable and experienced in the telecommunications industry. Searchlight Capital Partners has a history with CNSL and investing in similar companies such as Ziply, GCI, and Liberty Latin America, while British Columbia Investment Management is a large investment manager in Canada. Considering these factors, CNSL may be undervalued and worth more than its current share price levels.

BankUnited, Inc. is exposed to risks associated with economic volatility and is sensitive to inflation and interest rate changes. The bank's contracting margins have shown the unfavorable impact of macroeconomic disruptions, but it has maintained positive returns and a solid financial position. BankUnited, Inc. continues to increase its dividend payouts, and its stock price remains in a downtrend after a sharp plunge earlier this year, presenting an opportunity to buy shares at a discount.

Various price metrics reveal that the stock price is lower than the intrinsic value of the stock, making BankUnited, Inc. a cheap and secure dividend stock. The company operates in a volatile industry and faces risks in a tough market environment. However, it remains stable and viable, with primary revenue sources coming from loans, investment securities, and other interest-earning assets.

BankUnited, Inc. has managed to stabilize its growth despite hammered margins through well-diversified loans and investment securities. The company's financial positioning is sound, with high liquidity and sustainability demonstrated by its stellar balance sheet, decent loan-to-deposit ratio, and adequate reserves to cover potential defaults.

The stock price of BankUnited, Inc. remains in a downtrend, but it may open more opportunities for investors to buy shares at a discounted price. The stock price is undervalued, with a potential 25% upside in the next 12-18 months. The bank is also an attractive dividend stock with inconsistent payouts and a dividend yield of 5%.

BankUnited, Inc. may face challenges due to macroeconomic disruptions, but it is still a viable company with a strong financial position that allows it to sustain its operations and provide capital returns. The company is an attractive dividend stock with high yields and adequate means to cover it, making it a good buy. According to an analyst at Zacks Investment Research, "BankUnited has a strong balance sheet with ample liquidity and capital to weather the current economic environment." The company's dividend yield is currently at 6.6%, higher than the industry average, and its price-to-earnings ratio of 7.6 is lower than the industry average, suggesting that the stock is undervalued.

The banking sector is currently facing fear due to recent failures and challenges, leading to a decrease in regional bank stocks by more than 20% since the beginning of the year. M&T Bank has underperformed, but it remains a good long-term investment due to its better deposit base compared to peers, lower uninsured deposits, and average deposit size. The bank's deposit costs are better than average, with interest-bearing deposit costs amounting to two-thirds of the peer group.

M&T is more liquid than average, with cash making up around 13% of earning assets. Investors will be particularly interested in deposit flows and costs in the upcoming quarter. However, credit and provisioning costs could pose an under-appreciated risk for banks, including M&T, later in the year. M&T has a higher exposure to commercial real estate loans, particularly office loans, which could lead to credit losses if credit quality deteriorates.

Despite this, M&T's deposit situation is not a concern, and the bank has a lower reliance on securities as a source of interest income compared to its peers. The author has lowered their earnings expectations for M&T and anticipates tougher regulations and higher compliance costs over time. Nonetheless, M&T is well-positioned for the current environment due to its conservatism, high-quality deposit franchise, and merger-driven cost savings. The fair value for M&T drops to the high $150s (currently $125), but there is still good upside potential.

Alphabet has launched its generative AI platform, Bard, in response to Microsoft's integration of OpenAI's ChatGPT into the Bing search engine. There are concerns about accuracy, safety, data efficiency, and high computing costs associated with Bard's launch. The short-term financial results for F1Q2023 are expected to come in below analyst estimates due to a pullback in year-over-year growth in advertisement sales and softer sales growth in cloud computing. However, margin improvement is anticipated on a quarter-over-quarter basis due to a lower headcount and a decrease in R&D and S&M expenses.

Long-term prospects for Google are positive with the advent of generative AI search engines, but the company needs to deliver on its generative AI technology to maintain market share in Google Search. Previously, the lack of a definitive pipeline was a key reservation against Google, but the increased focus on developing Bard has addressed this concern. ChatGPT, a generative AI platform from OpenAI, has gained notoriety for frequently providing inaccurate responses. Google has an opportunity to plug the gaps in current generative AI models and be the first to market with a solid product that's free for all, boasting superior safety and accuracy.

Google's proven brand and history of maintaining dominant positions in the market make it more likely to win the generative AI war against Microsoft. ChatGPT has provided Google with a pipeline and opportunity to ensure the long-term survivability of Google Search, its key revenue generator. Google should utilize the intellectual muscle of its founders, who remain significantly invested in the firm, to develop a generative AI-enabled Google Search that will outperform the competition's efforts.

The idea that Wells Fargo wouldn't be significantly impacted by Silicon Valley Bank's failure has proven accurate. Systemically important banks, like Bank of America, have seen notable deposit inflows, and Wells Fargo is expected to experience similar increases. The Federal Reserve's new lending facility launched in March, along with declining yields, should aid big banks' recovery. However, big bank stocks, including Wells Fargo, remain down year-to-date.

The upcoming bank earnings release will be particularly informative as it covers a period that includes part of the recent banking crisis. Key metrics to watch include deposit figures, which could show money exiting scandal-ridden banks and moving to other institutions like JPMorgan and Bank of America. Metrics such as the percent of insured deposits can offer insights into client behavior during the crisis.

Wells Fargo remains under an asset cap as punishment for past misconduct, but news regarding a timeline for regulatory relief could boost the stock. Net interest margins will be interesting to observe, as interest rates were volatile during the past quarter. Wells Fargo is expected to earn $4.71 per share in 2023, just below its record 2021 earnings. Despite this, the stock trades for less than $40/share, compared to around $60/share between 2015 and 2018.

The market will eventually reward Wells Fargo for its improved earnings capacity, and the company is expected to see additional EPS growth after cutting overhead and legal costs related to past scandals. Wells Fargo's price-to-tangible book value has been dropping for the past 15 years, but its fundamentals are improving, with increased profitability and key metrics such as NIM. The recovery from the current banking sector panic could be an opportune time for investors to reassess Wells Fargo's value, with multiple reasons for optimism in 2023, including deposit base growth and higher net interest margins in recent quarters.