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The author makes a bullish case for Tencent Music Entertainment stock based on its potential for continued growth in music streaming subscribers and margins. They see a long runway for subscriber growth given Tencent Music's low subscriber to user ratio compared to other music streaming platforms. Putting more content behind the paywall should drive conversion to paid subscribers. The author also expects margin improvement as subscription revenue scales since content costs are largely fixed. While competitive risks exist, the author believes Tencent Music's network effects, including its relationship with Tencent, along with intangible assets like user data will enable it to remain the largest music platform in China. Using conservative forecasts, they estimate 16% annual EPS growth over the next 5 years and derive a fair value estimate of $12.50 per share.

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The analyst maintains a BUY rating on DraftKings Inc., with a target price of $34. The bullish outlook is driven by the legalization of online sports betting across additional states, which is expected to catapult DKNG's revenue from $2.2 billion in 2022 to $3.2 billion in 2023. Significant tailwinds include market share gains and increased customer retention. The analyst expects the company's first profitable quarter in 4Q24 and thereafter, to maintain a five-year earnings growth rate forecast of 25%. The decline in customer acquisition cost is also anticipated to fuel long-term growth. DKNG's recent acquisition of Golden Nuggets Online Gaming and its further geographic expansion strategies to operate in states such as Michigan, New Jersey, Virginia, and Tennessee are poised to amplify iGaming market share, despite the termination of the ESPN agreement. However, investors are cautioned about potential risks such as regulatory changes, fluctuations in consumer spending trends, and fierce rivalry from competing firms and technologies.

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The author is bullish on Brookfield Corp. (BN/BNRE), following its recent investor day. The company's insurance business is expected to grow from its current $100B in assets to $250B by 2028, with an annual growth rate of 8.4% to 14.9%. This rapid expansion could potentially cause the implied value of the company to surpass its current market capitalization. Brookfield also sees potential in Carried Interest, a somewhat optimistic $32B valuation. A key contributing factor to this valuation is the $14B expected to be realized from existing funds. The author expects the value of Brookfield's $24.3B real estate assets (split across a 'core' portfolio and a 'transitional' portfolio) to be largely underestimated by the market. Furthermore, the company has announced plans to repurchase shares, which could serve as an additional catalyst to close the gap in valuation. The author does mention some risk areas, such as uncertainties with achieving returns to generate the anticipated level of carried interest and some potential issues within the Transitional real estate portfolio. However, with diversified avenues for growth and a considerable safety margin at the current stock price, Brookfield Corp. is viewed as a favorable investment prospect.

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The author makes a bullish case for Amneal Pharmaceuticals stock based on several factors:
 

- Amneal is poised to benefit from discontinuation of a competitor's drug that it can ramp up production of, along with recent FDA approval of its Vyvanse generic.

- Amneal beat Q2 estimates and raised full-year guidance on the back of new complex generic drug launches, biosimilar momentum, and expanded government distribution.

- The company has a deep pipeline of pending approvals for complex generics and biosimilars plus growth potential in specialty drugs, injectables, international expansion, and authorized generics partnerships.

- Amneal trades at just 7x 2023 EPS guidance midpoint with expanding EBITDA margins and EPS growth, presenting disconnect between strong fundamentals and low valuation.

In summary, Amneal is an undervalued, high-growth pharma play with multiple near and long-term catalysts, due to it’s fundamentals and new drugs. The disconnect between strong fundamentals and low valuation multiples positions the stock for a breakout.

The author owns 2,500 shares of AMRX546 Dec 15 '23 $5 Call

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Despite being a $15 billion market cap pure-play on IoT, Samsara is not even a top ten holding in the only thematic IoT ETF. We believe analysts fail to rigorously evaluate Samsara’s opaque financial reporting (it doesn’t even report subscribers, churn or total devices), aggressive accounting, deteriorating governance practices (including failure to adopt a clawback policy for fraud or restatement) and elevated growth risks. In a rational market, Samsara would embody all the attributes that drive discounted valuation multiples: unsustainable revenue growth rate absent greater and greater spending and shareholder dilution, structurally lower gross margins, poor profitability, hardware exposure, and SMB customer focus. Samsara (and analysts) fail to acknowledge that public and precedent M&A targets in vehicle telematics suggest that a 5x-10x revenue multiple is appropriate. Compared with Samsara’s current 16x multiple and the fact it trades at a 48% premium to the SaaS companies that analysts believe will grow roughly inline with or FASTER than them over the next few years, we believe Samsara’s valuation premium is likely to compress. We see up to 45%-75% downside risk to $6.30 — $13.90 per share.

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The author foresees potential for substantial growth in BorgWarner (BWA) capitalizing massively on the e-mobility shift. The strategy for long-term growth includes focus on e-product profitability, growth, and leveraging foundational value. BWA is already seeing benefits from its e-mobility approach with its revenues increasing from $14.8 billion in December 2021 to $16.8 billion. Other revenue generation strategies include mergers, acquisitions, and geographical expansion, specifically in regions with high EV market growth such as China, the US, and Europe. The company plans to increase its portfolio giving the estimation of $1.7 billion in revenue from M&A and over $10 billion from portfolio growth by 2027. Financially, BWA is in a strong position with YoY revenue growth of 14.7%, surpassing the industry average. The company is trading at 10x its earnings, suggesting it's undervalued with a fair price estimation of $58.73 indicating an upside potential of 44%. Despite optimism, the author acknowledges risks including high material costs, market competition, and uncertainty on the supply of raw materials required for EV batteries.

Read the full article here (5 free per month). Read time: 6 min