🤖📈 Top Trade Ideas for June 23

The market valuation of DiDi Global on the OTC market does not accurately reflect its true value, and there is a significant discrepancy between the perceived value of DiDi by market participants and its actual intrinsic value. When DiDi lists on the Hong Kong stock exchange in the future, this discrepancy will be resolved, potentially doubling the current investment when the market eventually adjusts and recognizes DiDi's intrinsic value. DiDi is the market leader in China's ride-sharing industry with a 91% market share in 2018, and its strong presence and dominance in the industry have created a robust flywheel network, making it challenging for competitors to challenge its position. Despite facing a significant test to its network moat in 2021 and 2022 due to a cybersecurity review, DiDi still maintained a remarkable market share of 70% in 2021. DiDi's stock has been trading at low valuations due to the cybersecurity review and subsequent delisting of its app, which created uncertainty and caution among investors. The re-listing of DiDi on a major stock exchange, such as the Hong Kong exchange, has the potential to trigger a significant revaluation of the company's stock. The author estimates DiDi's minimum fair valuation to be $19 billion and maximum fair valuation to be $147 billion. The long-term shift towards robot-taxis could greatly influence the operations and business models of companies like DiDi, potentially reducing or eliminating the driver's share of revenue and increasing profitability. The re-listing of DiDi on a major stock exchange is not certain, and the specific timeline for its relisting remains uncertain.

Verizon's stock has underperformed the market and industry since 2017 due to secular headwinds and softening profitability metrics. However, the stock is undervalued and offers an attractive forward dividend yield of above 7%. Verizon has invested in new technologies related to 5G telecom generation, making it well-positioned to absorb favorable secular trends. The company's financial performance has been stable over the past decade, with a modest revenue CAGR and declining margins. Verizon's Q1 earnings missed on the top line, but the company recently implemented price increases that have the potential to generate higher revenues. The author believes that Verizon stock is a great investment opportunity with immense upside potential and assigns it a "Strong Buy" rating. The author uses a discounted dividend model (DDM) valuation approach and projects a fair share price of $54 with a 47% upside potential for the stock. Even with no dividend growth, the stock still looks undervalued with a fair share price of $38. However, the industry faces risks related to limited options for revenue growth, susceptibility to disruptive technological change, and regulatory changes.

Paramount expects a weak 2023 due to peak content spending for their streaming transformation and cyclical ad weakness reducing near term free cash generation. Despite this, comparing PARA to the Time Warner acquisition in 2018 and industry peers suggests a large margin of safety. The dividend cut is a prudent move given the current lack of free cash flow generation combined with the interest rate environment. Buffett's recent commentary on PARA could indicate that it is a similar play to his purchase of the Washington Post 50 years ago, where he helped unlock shareholder value. PARA may be an acquisition target, but this is pure speculation. The company is burning cash right now and may need to keep spending heavily on content to remain competitive, which could impact shareholder returns. Interest rates are much higher than they were a few years ago, which could impact the sale price of the company if investors are looking at it as a potential acquisition target. Shari Redstone has a controlling interest in the company and may not act in the best interest of shareholders, but there are signs that this could be changing. Recent selling pressure is due to knee-jerk reaction to dividend cut, not informed investor decision making. Management has been transparent about cash burning year due to peak streaming investment. It doesn't make sense to continue paying a dividend not supported by free cash flow. PARA appears cheap on a normalized EV/FCF basis relative to industry peers. The author started a position in Paramount.