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Top stock ideas (Fri, Dec 15)
Connor Van Ooyen
December 15, 2023
More Stock Ideas // About // Sponsorships // Twitter // Upgrade
👋 Good Morning!
Welcome to the 103 new readers who joined yesterday!
Our AI read and summarized 61 stock ideas, 1411 news articles, and 132 insider trades and found:
Analyst gives $MSFT a $430 price target due to Copilot AI (featured stock idea)
AT&T to buy Rivian electric vehicles (news)
A CEO bought $1M of his own stock (insider trade)
3 bonus stock ideas - including one with a 10% dividend
and much more…
Thanks for reading! Have a great day.
Connor
* If you missed yesterday’s email, don’t forget to read it here
TODAY’S SPONSOR
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Jeff Bezos Backs "Drug Smuggler" to Fight Alzheimer's
A small, publicly traded biotech is racing to the discovery of a lifetime: Using a Drug Smuggler to Fight Alzheimer's, Parkinson's and Dementia.
This radical treatment is so promising, Biogen, Sanofi and Genentech paid $1 billion to license it.
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FEATURED STOCK IDEA
ANALYST REPORT
Macquarie gives MSFT a $430 price target due to Copilot AI
Microsoft Corporation is a global technology company that develops, licenses, and supports a wide range of software products, services, and devices. Its portfolio includes the Windows operating system, the Microsoft Office suite, Azure cloud services, and more.
Ticker: $MSFT | Price: $366.30 | Price Target: $430 (+17%) | Timeframe: N/A
☁️ Cloud | 🤖 AI | 💻 SaaS | 📈 Bullish Idea
$MSFT price target to $430 at Macquarie. In our base case, we estimate that Microsoft could generate ~$7.3bn of incremental ARR from Microsoft 365 Copilot by the end of 2025 from the ~20 million users that our 5% uptake rate implies. We believe this is reasonable as Microsoft 365 Copilot is available for purchase at a price of $30/user/month by Microsoft 365 E3 or E5 customers, or by small and mid-sized businesses with Microsoft 365 Business Standard or Business Premium licenses.
Read the full article here. Read time: 1 min
POLL - FEATURED STOCK IDEA
+3 POINTS - WEEKLY TOURNAMENT
How do you rate the featured stock idea? |
Yesterday’s Rating (link):
Carvana ($CVNA)
🟩🟩🟩⬜️⬜️ - Buy (37%)
🟥🟥⬜️⬜️⬜️ - Pass (33%)
🟨⬜️⬜️⬜️⬜️ - Watchlist (30%)
fortu*** (buy) - I’ve been seeing Carvana license plate holders everywhere. I believe it is really catching on
matt*** (buy) - This should be the future of car buying
* There are more stock ideas later in the email!
MARKET OVERVIEW
Are you short-term bullish or bearish on the market? |
Yesterday’s poll results: 55% bullish
If you thought we were bullish before, we have hit new records! All of the indexes were green again (though slightly less green than the last two days), the Fear v Greed index hit a new record of 71 (up 2 points), 55% of Yellowbrick Road readers are bullish, and the news sentiment hit a new record of 0.763 bullish.
STOCK MARKET NEWS
Today’s news is brought to you by InvestorPlace. Get their free report with the top 5 stock ideas for 2024.
* If you want all of the day’s most important stock market news, sign up for my free, daily email called Market Mornings.
QUIZ
+3 POINTS - WEEKLY TOURNAMENT
Before becoming a global leader in electric vehicles, what was Tesla Motors' first electric car model? |
Yesterday’s Question (link): What was the first product made by Sony, originally Tokyo Tsushin Kogyo, when it was founded in 1946?
Answer: A rice cooker! Shoutout to weca*** who pointed out that transistor radios and Walkmans didn’t exist yet.
FEATURED INSIDER TRADE
The insider trade is brought to you by CEO Watcher (another free, weekly email I write). It’s the only newsletter that tracks insider returns to find the best ones. Subscribe here
Chief Executive Officer at OmniAb, Inc. ($OABI)
The Chief Executive Officer purchased 200,000 shares at $5.05/share ($1.01M total) which increased their holdings by 8.2%. The current price is $5.42 (+7.3%). (trade link)
Historic Returns
1m returns: 18% weighted | 2% median | 57% win rate (12/21)
3m returns: 28% weighted | 15% median | 65% win rate (13/20)
6m returns: 20% weighted | 14% median | 65% win rate (13/20)
1y returns: 63% weighted | 58% median | 68% win rate (13/19)
LINKS YOU’LL LOVE
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The unemployment rate typically doesn’t spike until AFTER rate cuts begin
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SECRET QUESTION
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If you read this far, reply to this email with your answer to gain points for the weekly tournament. (Or if you’d rather not answer but still want the points, you can just reply and say hi!)
Secret Question: Any big weekend plans? The wife is out of town so I’ll be playing some golf and watching football!
BONUS STOCK IDEAS
Best of the Best: $LULU
Lululemon Athletica Inc. is a designer, distributor, and retailer of athletic apparel and accessories. Known for their high-quality yoga and workout wear, the company has a strong emphasis on community and sustainability, offering products for men and women.
Ticker: LULU | Price: $489.80 | Price Target: N/A | Timeframe: N/A
🩳 Athletic Apparel | 📈 Bullish Idea
JPMorgan includes Lululemon (LULU) on its "Best of Best" list after a third-quarter sales beat, highlighting significant growth driven primarily by international and women's segments. Q3 revenue grew by 18.7% year-over-year with North American revenues up 12% and international growth at an impressive 49%, on top of a 24.5% compound annual growth rate (CAGR) since 2019. Women's sales rose 19% with new product success and men's maintained a 15% growth, despite economic uncertainty. The +14% currency constant (c/c) comp exceeded the consensus of +12.3%, fueled by e-commerce and in-store traffic. The holiday period's guidance is cautious with expectations of 13-14% Y/Y growth, with new seasonal product releases in women’s top franchises. Inventory levels are healthy with a year-over-year decline of 4% in Q3, better than expected, and Q3 gross profit margin increased by 214 basis points to 58.1%. Lululemon expects flat to slightly lower inventory levels in Q4 and predicts 90 to 120 basis points of gross profit margin expansion, maintaining stable markdown levels comparable to last year. Operating margin guidance for the fiscal year is raised to expand by 70 basis points, supported by investments in international market expansion, omni-channel guest experiences, and brand awareness, indicating an overall improvement in bottom-line expectations.
Read the full article here. Read time: 2 min
HEDGE FUND
Optimist Fund believes $FVRR has 800% upside
Fiverr is the leading global service-as-a-product marketplace connecting freelancers and businesses for digital services. It simplifies the process of hiring freelancers by allowing buyers to shop a service catalog and directly purchase services, akin to buying products on Amazon.
Ticker: FVRR | Price: $28.99 | Price Target: $230 (+693%) | Timeframe: 5-year
💻 Freelance Marketplace | 📈 Bullish Idea
Fiverr revolutionized the freelancer hiring process by establishing a service-as-a-product marketplace where freelancers list digital services similar to products on Amazon, easing the buyer experience. Since its inception in 2010, Fiverr has become the largest platform of its kind, exploiting the vast U.S. freelance market worth approximately $250B—of which Fiverr has penetrated less than 0.5%—with technical and creative jobs suited for remote work. Fiverr capitalizes on network effects for market dominance, bringing together an increasing number of sellers and buyers, resulting in projected decades of double-digit growth. Financially robust, Fiverr boasts strong unit economics: $100 in marketing spend yields a $60 contribution profit in the first year, followed by $40 annually. With mid-teen EBITDA and free cash flow margins, and potential to exceed 30% long-term, Fiverr is set for significant growth. Despite already aggressive customer acquisition investments, a forecast of 23% annual revenue growth and 30% incremental free cash flow margins over the next five years positions Fiverr's stock for a 9x appreciation potential, which could result in an 800% upside or 56% compounded annual return, reaching a $230 stock price. Currently undervalued, Fiverr has a market cap of ~$900 million with $230 million net cash, generating $70-$80 million annual free cash flow, equating to about 8x free cash flow excluding cash. Once a $270 stock at roughly 20x sales, it now trades at an attractive ~$25, around 8x run-rate free cash flow, making it an enticing opportunity in the small cap growth space.
Read the full article here. Read time: 3 min
HEDGE FUND
Bireme Capital on $BAT
British American Tobacco, formed in 1902, is a global tobacco company with a strong position in next-generation products, including vaping and 'modern oral' products. It owns notable brands such as Kent, Dunhill, Lucky Strike, Newport, and Camel and has a significant global presence in both traditional tobacco products and reduced risk products.
Ticker: BTI | Price: $30.12 | Price Target: N/A | Timeframe: N/A
🚬 Tobacco/Vaping | 💰 10% Dividend | 📈 Bullish Idea
British American Tobacco (BTI), established in 1902, is an undervalued tobacco giant, offering investors a significant opportunity with a current valuation at just 8x Free Cash Flow (FCF). BAT's underperformance—dropping 40% over five years, predominantly due to the surge in ESG investing—is at odds with its steady or growing profits. The market's overlooking of BAT's \"reduced harm\" products, such as nicotine vapes, that have much less associated health risks and are gaining traction globally, despite lagging public perception of their safety. BAT boasts strong cigarette brands like Kent and Lucky Strike, but it's making waves with next-generation products (NGPs) like Vuse, Glo, and Velo, which cater to an expanding market for vaping and modern oral products. BAT expects NGP revenue to grow from GBP 2.9 billion in 2022 to GBP 5 billion by 2025, with these segments showing strong market share performance and indication of future profitability.\n\nBAT faces regulatory risk, especially related to its menthol cigarette sales in the U.S., which the FDA has considered banning. This risk is mitigated by BAT's diverse global presence and growing NGPs segment. The company’s earnings resilience will be further supported by high potential margins in NGPs, as seen with Philip Morris's success with IQOS. Moreover, BAT's 30% stake in ITC, trading at 25x forward earnings, represents an undervalued asset that could significantly benefit its valuation if divested or if ITC achieves expected growth. BAT's adaptation to the shift away from traditional tobacco towards NGPs could command a higher PE ratio closer to 15-20x, suggesting a considerable undervaluation. The current market misapprehension, partly due to BAT's ESG non-compliance perception, offers an attractive entry point with a high dividend yield while waiting for market sentiment to catch up to the company’s potential.
Read the full article here. Read time: 10 min
+3 POINTS - WEEKLY TOURNAMENT
Which bonus stock idea was the most compelling to you? |
Yesterday’s Poll Results (link):
🟩🟩🟩⬜️⬜️ Stellantis ($STLA) [45%]
🟨🟨⬜️⬜️⬜️ DoubleVerify ($DV) [28%]
🟥⬜️⬜️⬜️⬜️ Ulta Beauty ($ULTA) [27%]
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WEEKLY TOURNAMENT
Gain points and earn prizes every week just for voting on the quizzes/polls, replying to this email, and clicking on ads/sponsored links!
🏆 This Week’s Leaderboard
alpo**** (211 points)
dmon*** (211 points)
davi**** (211 points)
Scoring
+3 points for voting in each poll
+10 points for replying to this email
+15 points for clicking on an ad/sponsored link
+50 points for referring a friend
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MY OTHER FREE NEWSLETTERS
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THAT’S ALL FOLKS
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Connor (@connorvo on Twitter)
How would you rate today's newsletter?If you vote 1 or 3 stars, please leave a comment with what you didn't like so I can improve it! |
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