Reddit, Snapchat and Pinterest. Reddit IPO

Reddit, Snap Inc, Snapchat's owner and Pinterest, the up and coming social networks are undervalued. All three of them, according to Wolfteam Ltd.'s projections and estimates.

All Reddit, Snap Inc, Snapchat's owner and Pinterest have around 500 million monthly active users or 1/6 th of Facebook, owned by Meta Platforms' monthly active users. Meta's market capitalization is circa 1.23 trillion USD, while Reddit is valued at 10 billion USD in its latest private market raising round, Snap's market capitalization is 18.157 billion USD and Pinterest market capitalization is 24.52 billion USD.

So purely on monthly active users count basis, Reddit, Snap Inc, Snapchat's owner and Pinterest could be worth around 10 times more.

It is true, Facebook users' platform engagement is much higher and Meta, Facebook's owner consequently charges higher prices and Meta's net profit margin is 25 % + on regular basis, while only Pinterest exhibits consistent 3% - 7% net profit margins. Snap is generally loss making, while Reddit is consistently loss making.

Reddit's upcoming IPO may provide many answers regarding the economic fundamentals and valuation of Reddit.

Reddit is a niche social network. But the niche Reddit has carved out for itself is quite large currently.

Reddit is the most undervalued relatively popular social network currently, according to Wolfteam Ltd.'s estimates.

Bitcoin's Price Rise

 

Now and at 100 000 USD, which will happen within an year, Bitcoin is overvalued, according to Wolfteam Ltd.'s projections and estimates.

Bitcoin's intrinsic value or 'fair' price for the next 3 years is 71 000 USD, according to Wolfteam Ltd.'s estimates.

It is difficult to put a constant intrinsic worth for Bitcoin using conventional discounted cash flows models, comparable valuation ratios, asset based models and precedent transactions, which are tools to estimate value in economics.

The reason is Bitcoin is a new emerging, moonshot technology, the underlyings, fundamentals of which change constantly, daily, which affects Bitcoin's intrinsic value. Dynamic valuation is the only way to tackle the valuation of Bitcoin, in order to imbue the ever changing dynamics of the blockchain technology.

Bitcoin's price is getting ahead of itself. Bitcoin is in a bubble currently. The bubble is small, but if Bitcoin's price surpasses 120 000 USD and subsequently the blockchain, cryptocurrencies, Bitcoin bubble pops, the implications will well affect the global economy and the bursting of the Bitcoin bubble could entail a shallow global economic recession. NVIDIA, Intel, AMD, Arista Networks and many other technology companies' faith is deeply intertwined with Bitcoin's faith. For the mining, creation of Bitcoin computer users heavily utilize the usage of computer chips, graphic processing units produced by NVIDIA, Intel etc. Many other related producers' is deeply intertwined with the faith of Bitcoin.

Not surprising, NVIDIA has a market capitalization of circa 2 trillion USD, riding high on GPUs usage to mine Bitcoin.

Actually, artificial intelligence, AI is to not a small extent driven by Bitcoin and the hashing tree blockchain algorithm needed to produce Bitcoin and other cryptocurrencies. Not surprisingly the Magnificent 7 technology stocks namely Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla are leading the US stock markets rise with stratospheric valuations and market capitalization of more than 1 trillion USD. The Magnificent 7's rise is also closely related to Bitcoin's price rise.

Artificial intelligence, AI is taking over the world and Bitcoin's rise puts strong, additional wind in the sails of AI.

Are We In a New Dot Com Bubble?

 

Yes. We are living in a new internet dot com bubble, driven by AI. So it may be called an AI bubble.

The Magnificent 7 technology stocks Apple, Microsoft, Alphabet, Amazon, Meta, Tesla, NVIDIA are driving the AI boom, along with Arista Networks, AMD, Palantir and other artificial intelligence related stocks.

The Magnificent 7 technology stocks are overvalued by circa 48 % on average. Tesla by more than 81 % and NVIDIA is overvalued by 62 %, according to Wolfteam Ltd.'s projections and estimates.

Mr 'Market' is just getting ahead of itself. The revenue and profit forecasts of Wall Street equity research analysts for Apple, Microsoft, Alphabet, Amazon, Meta, Tesla, NVIDIA, along with Arista Networks, AMD, Palantir, other AI stocks are way too optimistic, in Wolfteam Ltd.'s view.

The macroeconomic forecasts of Wall Street economists are also too rosy, being mildly optimistic also.

The artificial intelligence, AI boom will go on blowing bubbles for the next three years, according to Wolfteam Ltd.'s projections.

Afterwards, the Standard and Poor's stock market index, which is technology heavy due to the increases of market capitalization of technology stocks, could correct by more than 52 %.

Afterwards, however, from the ashes of the AI boom and bust, the new equivalents of Amazon and Alphabet, the Google owner will emerge. Much like after the dot com boom and bust. Meta, Facebook and Twitter also were founded several years after the dot com bust, to be exact.

Bitcoin's Price Could Reach 100 000 USD In 2024

 

Bitcoin is in small bubble territory currently.

Bitcoin's price could reach and surpass 100 000 USD in 2024 on geopolitical uncertainty, Federal Reserve targeting lower interest rates levels.

Bitcoin in the current times, where there are two regional wars, more and more people turn to Bitcoin for store of wealth.

Furthermore, Federal Reserve is targeting lower interest rates, which would bring more money via the money multiplication in the technology sector and thus to Bitcoin, cryptocurrencies, which could raise Bitcoin's price to 100 000 USD, according to Wolfteam Ltd.

When Is The Federal Reserve Going To Lower Rates in 2024

The Federal Reserve is going to first lower rates, lower the Federal Funds Rate target on its March 2024 meeting, according to Wolfteam Ltd.'s projections and estimates.

The Federal reserve will lower interest rates 4 four times in 2024 mainly on pressure from the US Presidential political election. The Federal Reserve is not absolutely independent.

What is more, inflation will come down in the second half of 2024, in Wolfteam Ltd.'s view.

Reddit Files For IPO

 

Reddit finally filed for its long expected IPO.

With 800 million USD worth of revenue for 2023, net loss of 158.6 million USD for 2022 and 500 million users as of December 2023, Reddit's intrinsic worth is 16 billion USD, according to Wolfteam Ltd.'s projections and estimates.

Reddit in previous private market financing round was valued at 10 billion USD. Reddit is unprofitable, loss-making, but this could easily be mended with job cuts, more efficient operations, in Wolfteam Ltd.'s view.

Reddit's IPO could jump start the IPO market and many other technology companies may follow with IPOs of theirs. 

This, on its turn, could propel technology stocks to even higher highs. Money will flow back to venture capital funds, which are sitting on paper profits, which will be monetized via potential IPOs and this money will several times again be recycled into new technology companies investments, which will move Silicon Valley and the rest of the technology world and technology stocks in particular into a mild hyper-drive.

The AI Bubble Will Peak In 3 Years

Artificially Intelligence, AI is in a bubble currently.

AI related stocks like the Magnificent Seven 7 stocks Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla are overvalued by 48 % on average. Other smaller large capitalisation AI stocks like Arista Networks, Palantir, are also in bubble territory.

The current AI bubble will burst within 3 years from now, according to Wolfteam Ltd.

The NVIDIA Fourth Quarter 2024 Earnings

NVIDIA reported blowout fourth quarter 2023 earnings yesterday.

That said, NVIDIA is overvalued by 68 %.

NVIDIA is riding high on the AI bubble and NVIDIA is an AI bubble, according to Wolfteam Ltd.

The market just extrapolates too optimistic both revenue and profitability forecasts for NVIDIA.

The Bitcoin Bubble. AI

 

Bitcoin, the cryptocurrency, the minting, creation of which is based on the hashing tree artificial intelligence, AI algorithm is in a bubble state, according to Wolfteam Ltd. As most new, moonshot technologies, which first go through blowout expansion phase, then the price bubble pricks and a more gradual, but constant and relatively fast rise ensues.

Bitcoin's price could rise to 73 000 USD in 2024, go up to 124 000 USD in 2025 and even touch 177 000 USD in 2025. However, such a Bitcoin price development will constitute an AI, Bitcoin price bubble, according to Wolfteam Ltd.'s projections and estimates. A more gradual rise by 20 000 USD a year is more grounded on the long-term Bitcoin, cryptocurrencies fundamental long-term potential, according to Wolfteam Ltd.'s valuations estimates.

Naturally, Bitcoin, cryptocurrencies relates stocks like Coinbase, Nu Holdings Ltd. Microstrategy, Hood, Block Inc, etc. will turn out to be also in a bubble state as Bitcoin's price rises by more than 40 000 USD a year in the next three years, as Wolfteam Ltd. forecasts it will, as long as the Federal Reserve starts lowering interest rates levels and keeps on with it.

All this is barring a Black Swan regulation event, that could hinder or outlaw Bitcoin, some major cryptocurrencies totally.

How Big Is The AI Bubble?

We are currently living in a technology companies artificial intelligence, AI bubble, according to Wolfteam Ltd.'s projections and estimates. Much like the internet connected dot-com bubble in 2000.

The AI bubble is exemplified by the Magnificent 7 technology companies, namely Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla. To these AI bubble stocks the following AI bubble stocks can be added, namely Palantir, Arista Networks, Arm Ltd.

On average, the aforementioned AI stocks are 53 % overvalued, according to Wolfteam Ltd.'s view. The overvaluation of arguably the poster stock of this AI bubble NVIDIA is 71 %. Tesla is overvalued by 82 %.

However, the bursting of the AI bubble could be looked upon positively. After the bursting of the internet dot-com bubble, the waters cleared and companies like Amazon and Alphabet emerged. Even Meta Platforms, Inc, Facebook, WhatsApp and Instagram's owner was founded in 2006, not long after the dot-com bubble burst.

That said, the AI bubble must not be let get out of all proportions, so as not to severely disrupt the economy, according to Wolfteam Ltd.'s view.

The Microsoft AI Bubble

Microsoft owns 49 % of OpenAI. OpenAI develops ChatGPT and thus Microsoft is almost indirectly heavily invested in AI.

Microsoft, prefers the 49 % indirect investment, so as not to be accused of harvesting users' data,  directly, according to Wolfteam Ltd.'s view.

But Microsoft's involvement in OpenAI brings indirect involvement in artificial intelligence, AI, which brings enormous dividends to Microsoft, Microsoft's market capitalization being circa 3 trillion USD.

AI is in a bubble, hype mode, according to Wolfteam Ltd.'s view. Microsoft is overvalued on its indirect OpenAI stake and thus stake in AI.

AI will bring huge benefits to society, but not as fast as the stock market extrapolates, according to Wolfteam Ltd.'s projections and estimates. We are living in another dot-com bubble and Microsoft is riding high on the AI bubble.

Bitcoin Is In A Bubble Phase

Bitcoin's price rose aggressively since the beginning of the year 2024.

Bitcoin is in a bubble, which will keep blowing larger, especially now that the Federal Reserve is intent on lowering interest rate levels.

What could stop Bitcoin's price advance is a medium or large financial crisis that could cause broad economic disruption. A medium financial crisis has 68 % probability, according to Wolfteam Ltd.'s estimates with the current level on interest rates exemplified by the Federal Funds Rate at 5.5 % and the probability of a medium financial crisis will continue to be above 50 %, as long as the Federal Funds Rate and mortgage rates are above 4 %.

The AI Bubble

 

The AI technology stocks like the magnificent 7 technology stocks like Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla are in a bubble territory, according to Wolfteam Ltd.'s projections. In addition, smaller AI stocks like Arm Ltd. , Palantir, Arista Networks are overvalued.

AI is in a bubble territory, which only can pop in the next 4-5 years and the aforementioned magnificent 7 technology stocks like Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla will lose more than 43 % on average of their value when the AI bubble bursts.

AI is going the way of the Internet in general, exemplified by the dot-com boom and bust stocks in 2000, many of which were grossly overvalued at first, but after 10 years giant value creators like Amazon, Yahoo and Google came out of the depths of the dot-com bubble burst. Many dot-com darling companies failed and their stock prices went down to 0, zero, however.

After the AI bubble bursts, many new giant AI technology companies will emerge and many of the current leaders will remain viable AI technology behemoths. In the mean time, much pain will be felt from the bursting of the AI bubble.

That said, artificial intelligence or AI is here to stay and it will change our lives exponentially for the better, overall, baring a Black Swan event. But AI will change our lives in the long-term.

The Federal Reserve And The Current Positive Stock Market Momentum

Much of the current positive stock market momentum in US stock markets is due to the Federal Reserve signalling in January 2024 that it intends to lower interest rates levels by targeting the Federal Funds Rate mainly on the view that 'inflation is transitory'.

Lower interest rates will make margin loans to invest in stocks cheaper. Lower interest rates will enhance investing in low or mid sized technology companies by channeling US pension fund money to venture capital funds in Silicon Valley or throughout the USA. Lower interest rates will make disbursing corporate loans by banks to small, medium and large sized companies cheaper, which will give a boost to the US and by extension the global economy, which will be transferred into higher profits for publicly listed companies and ultimately higher stocks prices.

There will be four cuts of the Federal Funds Rate or interest rates due to political pressures surrounding the US Presidential elections and less on lower inflationary pressures, according to Wolfteam Ltd.'s macroeconomic view and projections.

The Current Positive Stock Market Momentum

The current positive stock market momentum will continue until June 2024, according to Wolfteam Ltd.'s economic and company profitability estimates.

Wolfteam Ltd. expects either the US economy to enter a shallow recession or a medium financial crisis to develop in the second half of 2024. Interest rates levels are just too high for everything in the economy and financial markets to run smoothly. In addition, there is a lot of debt accumulated in the US and global economy. The expectations for companies' revenues and profits built in the US stock market is just too optimistic and high, according to Wolfteam Ltd.

Oil Is Undervalued On Geopolitics

 

Oil is undervalued on geopolitical tensions.

Oil's intrinsic worth is 103 USD per barrel, according to Wolfteam Ltd.'s projections and estimates.

Once oil realizes its true worth, many companies from oil majors like Exxon Mobil, Chevron, BP, Shell, Total to midsize companies like Occidental Petroleum, Marathon Oil Corporation, Devon Energy and smaller enterprises like Chesapeake stand to benefit enormously.

The oil major's market capitalization could go up 43 %, the mid sized oil producing companies' stock prices could rise 82 % and the smaller oil companies' market capitalization could rise 144 %.

Coinbase Fourth Quarter 2023 Earnings Today

Coinbase, Inc, the cryptocurrencies exchange reported earnings yesterday.

Coinbase's stocks could jump by more than 10 % after Coinbase reported Q4 2023 earnings yesterday on better sales, gross profit margin and guidance, according to Wolfteam Ltd.'s projections and estimates.

Bitcoin and other cryptocurrencies' prices have been rising for the last three months, so Coibase's fourth quarter earnings naturally surpassed expectations and Coinbase's earnings will continue to surprise on the upside in the coming quarters, in Wolfteam Ltd.'s view.

Coinbase Legal Risks

Coinbase, the cryptocurrencies exchange, apart from the huge promise of Bitcoin, cryptocurrencies is confounded by legal risks. The Securities and Exchange Commission could potentially deem the whole operating model of Coinbase nonviable.

Coinbase's legal risks are manageable, according to Wolfteam Ltd.'s view.

The judge verdict on Ripple and the allowance of Bitcoin ETFs all speak that Bitcoin, cryptocurrencies are here to stay. Or the regulators are benevolent on cryptocurrencies for the time being,  Coinbase, as the exchange for cryptocurrencies also seems to have a bright future.

AI Periphery Stocks

 

Arista Networks and Arm Holdings can be regarded as artificial intelligence, AI periphery stocks.

Both Arista Networks and Arm Holdings produce hardware for AI servers and computers and smartphones. Arista Networks produces switches and routers for AI, while Arm produces smartphone chips, GPUs with which to drive artificial intelligence on smartphones.

Arista Networks is undervalued, while Arm Holdings is overvalued, according to Wolfteam Ltd.'s projections and estimates.

Arm Holdings' investors expect the AI smartphone boom to bring in too large benefits too quickly. 

Arista Networks, as most hardware computer chips production companies is undervalued. Outside NVIDIA.

Arm Valuation

 

Arm Holdings, Inc or Arm, the British semiconductor design company is grossly overvalued, according to Wolfteam Ltd.'s projections and estimates.

With 2.68 billion USD revenue, falling at -0.89 %, net profit margin of 19.56 % for 2022, the intrinsic worth of Arm is 62 billion USD compared with its current market capitalization of 123.35 billion USD.

Here is an except from Arm Holdings, Inc's third quarter 2023 results presentation:

Q3 FYE24 – Highlights
$824m
Total revenue up 14% yoy
$354m
License and other revenue up 18% yoy
$470m
Royalty revenue up 11% yoy
41.0% Non-GAAP operating margin
$338m(1)
Non-GAAP Operating Income up 17% yoy
$724m
Trailing 12 Months FCF up 63% yoy
280.3bn Cumulative chip shipments
7.7bn
Chips reported

Ecolab Valuation

Ecolab Inc, the water treatment and purification company is overvalued, according to Wolfteam Ltd.'s projections and estimates.

With 14.19 billion USD in revenue, growing at 11.42 %, with net profit margin of 7.69 % for 2022,  Ecolab's intrinsic worth is 51 billion USD, compared with Ecolab's current market capitalization of 63.07 billion USD.

Here is an excerpt from Ecolab's fourth quarter, 2023 earnings:

ECOLAB ANNOUNCES STRONG FOURTH QUARTER PERFORMANCE AND 2024 OUTLOOK
REPORTED DILUTED EPS $1.41; ADJUSTED DILUTED EPS $1.55, +22%
2024 ADJUSTED DILUTED EPS OUTLOOK: $6.10 TO $6.50, +17% TO 25%
FOURTH QUARTER HIGHLIGHTS
 Reported sales $3.9 billion, +7% versus last year. Organic sales +6%, led by double-digit
growth in the Institutional & Specialty segment and Pest Elimination, and solid Industrial
segment growth. As expected, Healthcare & Life Sciences segment sales were stable
versus last year but continued to show good sequential sales growth.
 Reported operating income +48%. Organic operating income +21%, driven by continued
strong pricing, volume growth and moderately lower delivered product costs.
 Reported operating income margin 15.0%. Organic operating income margin 16.0%, +200
bps reflecting continued robust gross margin expansion led by value-based pricing.
 Reported diluted EPS $1.41, +52%. Adjusted diluted EPS, excluding special gains and
charges and discrete tax items were $1.55, +22%.
 Full-year 2023 cash flow from operating activities $2.4 billion. Full-year 2023 free cash flow
$1.6 billion, resulting in free cash flow conversion of 118%.

The Technology Company With The Most Potential In The Age Of AI

 

The company with the most potential in the age of artificial intelligence, AI is Alphabet, the parent of Google, according to Wolfteam Ltd.'s projections and estimates.

The main reason for Alphabet's potential dominance in artificial intelligence, AI is the huge treasure trove of millions of terabytes of data Alphabet has gathered via its Google search engine, YouTube, AdSense, Android, Play Store and other properties.

Alphabet has just to refine its algorithms to model, extract and put the data into production of new applications. Which is easier said than done, of course.

The Large Language Models with billions of parameters that OpenAI's ChatGPT uses have long been used by Alphabet in Google search. OpenAI's ChatGPT just used more parameters using higher computing power, but Alphabet quickly caught up.

Microsoft owns 49 % of OpenAI.

Alphabet, the Google owner just has to refine its models to produce more insights and its market capitalization will soon start to reflect the enormous AI potential hidden in Alphabet, Google's data treasure trove.

The Magnificent 7 Are Overvalued On Technology Bubble

 

We are living in a new technology bubble. A new dot-com bubble.

The Magnificent 7 technology stocks, namely Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla are the poster children of the current dot-com bubble and they are overvalued by more than 30 % on average.

Yes, artificial intelligence, AI will take over the world, but not as fast as the current AI bubble envisages.

The Magnificent 7 technology stocks, namely Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla are overvalued on investment flows coming into their stocks. They are overvalued on momentum traders, investors, that is. The Magnificent 7 technology stocks, namely Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla are way over their fundamentals, their intrinsic value.

Yes, in the dot-com bubble companies did not have revenue, but now the revenue projections and estimates for The Magnificent 7 technology stocks, namely Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla and many other technology stocks are overblown, according to Wolfteam Ltd.

Bitcoin And Volatility

Bitcoin investing risk can be measured by Bitcoin's price volatility.

Bitcoin price's high volatility is one of the main reason Bitcoin has not become mainstream by now.

Since Bitcoin's price volatility prevents to an extent the store of value function of money Bitcoin is striving for. 

The main thing preventing US pension funds, the largest institutional investors from investing in Bitcoin is it's high volatility, which is mainly due to Bitcoin's low liquidity.

Hedge funds and limited number of asset managers invest in Bitcoin. But this is not enough to start the liquidity begets liquidity virtuous cycle.

Involving the public into investing in Bitcoin is the thing that could grease the wheels of cryptocurrencies trading liquidity. Much like with common stocks. When the general public in the USA started investing in stocks en masse in the 1930s, stocks market liquidity went up a lot giving broader rise to institutional investing. 

General public investing not only in cryptocurrencies, but in cryptocurrencies stocks could increase cryptocurrencies liquidity.

The media could help in this regard. But first, the cryptocurrencies system has to be cleansed from bad actors.

The Magnificent 7 Technology Stocks And Interest Rates

Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla or the Magnificent 7 are not that dependent on interest rates as many Wall Street research analysts think, according to Wolfteam LTD.

Most of the Magnificent 7 technology stocks are profitable and not so much dependent on interest rates to raise capital. So the Federal Reserve policy does not affect so much Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla or the Magnificent 7 technology stocks.

This, however, does not preclude that the Magnificent 7' s stock prices will not go on growing. Whether right or not market participants and Wall Street research analysts seem to conclude that most of the AI innovation will get created in Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla or the Magnificent 7 technology stocks.

Wolfteam LTD.'s view is that most of the innovation will again get created in small and medium technology companies. Like in the past.

Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla or the Magnificent 7 technology are overvalued by circa 43 %, 55 %, 25 %, 36 %, 32 %, 50 % and 72 % respectively.

The Hershey Company Valuation

The Hershey Company or Hershey, the American confectionery company is undervalued, according to Wolfteam Ltd.'s projections and estimates.

With 10.42 billion USD revenue, growing at 16.14 % with net profit margin of 15.79 % for the calendar 2022, Hershey's intrinsic worth is 52 billion USD, compared with Hershey's current market capitalization of 39.97 billion USD, according to Wolfteam Ltd.'s view

Hershey recently reported also its fourth quarter 2023, full year 2023 earnings:

Fourth-Quarter 2023 Financial Results Summary¹

• Consolidated net sales of $2,657.1 million, an increase of 0.2%.
• Organic, constant currency net sales decreased 0.1%.
• Reported net income of $349.0 million, or $1.70 per share-diluted, a decrease of 11.5%.
• Adjusted earnings per share-diluted of $2.02, flat with the prior year.

1 All comparisons for the fourth quarter of 2023 are with respect to the fourth quarter ended December 31, 2022.

2023 Full-Year Financial Results Summary²

• Consolidated net sales of $11,165.0 million, an increase of 7.2%.
• Organic, constant currency net sales increased 7.0%.
• Reported net income of $1,861.8 million, or $9.06 per share-diluted, an increase of 13.8%.
• Adjusted earnings per share-diluted of $9.59, an increase of 12.6%.

Will There Be Another Regional Bank Crisis In the US?

 

Source: Bank Policy Institute

No. There will not be another regional bank crisis to the extent with what happened to Silicon Valley Bank, Signature Bank and First Republic Bank last year, according to Wolfteam Ltd.'s projections and estimates.

If the Federal Reserve went on raising interest rates, then that would have been another story. But now the Federal Reserve is expected by Wall Street research analysts to lower the Federal Funds Rate 3 to 4 times by 0.25 % in 2024 and thus exert pressure to lower interest rate levels in the US and globally.

Regional banks are much more economically leveraged than big, pan US corporate banks and Wall Street banks. In that order. This means when credit losses are incurred, US regional banks tend to suffer larger percentage losses of capital. However, when things are good and the economy is booming, regional banks reap higher net profit margins.

Actually, the net profit margins of US regional banks are around 33 %, while the net profit margins of money center banks are around 23 %.

Regional banks have disbursed a large notional amount of real estate loans. This could prove an Achilles heel. But now, that the Federal Reserve has signaled it would target lower interest rates, this regional bank commercial real estate problem will be meliorated in the next several months.

To quote the US Treasury Secretary Janet Yellen, the problem will be 'contained'. The Federal Reserve could start its distressed loans programs to regional banks, anew.

Which will mellow any problems with US regional banks.

Pinterest And Snap, Snapchat's Owner Falling After Earnings

Snap, Inc, the owner of the Snapchat application fell by 30 % after reporting earnings 2 days ago. Pinterest, after reporting earnings yesterday, fell by circa 12 %.

During the COVID-19 coronavirus pandemic it became clear that Snap Inc and Pinterest Inc, were some of the main beneficiaries of lock-down and Federal Reserve printing money intensively again. 

In the past months, Snap Inc, Snapchat's owner stock and Pinterest stock went up a lot on expectations the Federal Reserve will loosen again its monetary policy by cutting interest rates aggressively. In the past week, as inflation rose again and the Federal Reserve backtracked and implied it could lower the Federal Funds Rate more slowly than expected by Wall Street research analysts, Snap Inc, Snapchat's owner and Pinterest stock tanked after Q4 2023 earnings reports.

It is clear that Snap, Inc and Pinterest's future is for the time being closely tied to the Federal Reserve's monetary policy.

Bitcoin Is Most Prone To Federal Reserve Fluctuations

 

Bitcoin and Bitcoin related stocks like Coinbase, Robinhood Markets, Microstrategy, Nu Holdings Ltd. started rising again after Wall Street renewed expectations that the Federal Reserve will cut interest rates again.

Bitcoin, small capitalization technology stocks are most prone to be volatile on Federal Reserve talk, because they need cheap funding to survive, develop and ultimately prosper.

Meta Announces Dividend. Meta's Stock Price Jumps. Bitcoin Valuation

Meta Platforms Inc, Facebook's owner recently announced a first dividend payment and a stock buyback program and Meta's stock jumped by more than 20 % in one day the 2nd of February.

Meta, Facebook, Instagram and WhatsApp's owner can now be valued using classical discounted cash flows models by discounting future terminal value and discounted cash flows constituting dividend payments. Which proves Meta could have been valued using discounted cash flows models throughout all its history. Its just that the time horizon was quite long, 20 years to be exact.

Many investors, investing gurus and Wall Street research analysts claim Bitcoin cannot be valued, does not have intrinsic value, because it has not distributed dividends. Bitcoin exists for 11 years now, much shorter time span than the 20 years that was required for Meta, Facebook's owner to start paying dividends since its founding in 2006.

So Bitcoin can be safely valued using discounted cash flow using terminal value. That is sell price minus purchase price, discounted via the risk free rate + risk premium, compounded by growth to the present.

So Bitcoin does have intrinsic value, according to Wolfteam Ltd.'s view.

Facebook is 32 % overvalued, according to Wolfteam Ltd.'s projections and estimate based on the discounted cash flows methodology's insights.

The Federal Reserve And Money Loosing Technology Stocks

 

When in January, the Federal Reserve hinted it would start lowering the interest rate levels, by targeting a lower Federal Funds Rate, the stocks of many not profitable, money loosing technology companies went up twice or thrice even.

The logic is that since these money loosing technology companies like Snap Inc, Lendingtree Inc need to borrow money or raise money from venture capital funds to survive, lower rates will benefit them enormously. Venture capital funds' amounts are also very sensitive to interest rates level, because venture capital funds compete with interest rate levels on US treasuries to raise money.

However, in recent weeks, inflation rates started rising again and the Federal Reserve backtracked and now Wall Street investment banks expect the first lowering of interest rates by the Federal Reserve to be in June 2024, not March 2024.

Respectively stocks of loss making, bonded to growth technology companies fell. Snapchat, for example, went down circa 30 % yesterday, after reporting fourth quarter, 2024 earnings. Lendingtree Inc's also fell a lot in the recent weeks.

The Federal Reserve will lower interest rate four times in the election 2024 year, according to Wolfteam Ltd.'s projections and estimates.

New York Community Bancorp. Real Estate

 

New York Community Bancorp, Inc, the New York based community bank's stock fell more than 60 % in the past week on possible problems with its commercial real estate portfolio.

New York Community Bancorp won the bidding for Signature Bank's assets. However, the Federal Reserve is soon stopping its specialty low-interest loans to distressed lenders program, which was established after the regional banks' crisis in March 2023.

Now, judging by the opening calls on regional banks' stocks we are in for a relatively contained repeat of the regional banks' crisis from last year. There are problem real estate loans in the US banking sector, especially in the regional banks' loan books.

But the problem will be relatively contained, according to Wolfteam Ltd.'s view. In any case, the Federal Reserve will step in with a money line to many troubled banks, especially regional ones if things get out of control.

However, some vehicle to clean bad real estate loans from the regional banks' books could prove timely.

The financial contagion problems resulting from New York Community Bancorp's problems will prove contained, according to Wolfteam Ltd.'s projections and estimates.

Palantir Vauation. After the Q4 2023 Earnings Report

 

Palantir Inc, the data analytics company is overvalued, according to Wolfteam Ltd.'s revenue projections and estimates.

Palantir is the leader in the automation of artificial intelligence, AI automation.

Palantir, with 2.225 billion USD revenue, growing at 16 %, circa 9 % profit margin for 2023 has intrinsic worth of 27 billion USD, compared with Palantir's current market capitalization of 36.37 billion.

Yesterday, after the reporting of the fourth quarter 2023 earnings, Palantir's stock price jumped by approximately 17 % in after hours trading. Which makes Palantir even more overvalued.

It is true that artificial intelligence, AI is changing our world, but AI is currently in a bubble. AI will gradually surpass the current AI valuations, but in a gradual, slower way. We are watching now 'irrational exuberance' with the Magnificent 7 stocks Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and AI. 

Palantir is also a poster child of the artificial intelligence, AI boom.

Here is an excerpt from the Q4 2023 Palantir Earnings Report: 

DENVER--(BUSINESS WIRE)-- Palantir Technologies Inc. (NYSE:PLTR) today announced financial results for the fourth quarter and fiscal year ended December 31, 2023.

Q4 2023 Highlights

• GAAP net income of $93 million, representing a 15% margin
  • Fifth consecutive quarter of GAAP profitability
• GAAP income from operations of $66 million, representing an 11% margin
  • Fourth consecutive quarter of GAAP operating profitability
• GAAP earnings per share (“EPS”) of $0.04
• Adjusted EPS of $0.08
• Revenue grew 20% year-over-year and 9% quarter-over-quarter to $608 million
• US commercial highlights
  • US commercial revenue grew 70% year-over-year and 12% quarter-over-quarter to $131 million
  • US commercial customer count grew 55% year-over-year and 22% quarter-over-quarter to 221 customers
  • US commercial total contract value (“TCV”) of $343 million, representing 107% growth year-over-year on a dollar-weighted duration basis
  • US commercial remaining deal value (“RDV”) grew 32% year-over-year and 28% quarter-over-quarter
• Commercial revenue grew 32% year-over-year and 13% quarter-over-quarter to $284 million
• Government revenue grew 11% year-over-year and 5% quarter-over-quarter to $324 million
• Customer count grew 35% year-over-year
• Adjusted income from operations of $209 million, representing a margin of 34%
  • Fifth consecutive quarter of expanding adjusted operating margins
• Cash from operations of $301 million, representing a 50% margin
• Adjusted free cash flow of $305 million, representing a 50% margin
• Cash, cash equivalents, and short-term US treasury securities of $3.7 billion

FY 2023 Highlights

• Revenue grew 17% year-over-year to $2.23 billion
• Commercial revenue grew 20% year-over-year to $1.0 billion
  • US commercial revenue grew 36% year-over-year to $457 million
• Government revenue grew 14% year-over-year to $1.2 billion
• GAAP net income of $210 million, representing a 9% margin
• GAAP income from operations of $120 million, representing a 5% margin
• Cash from operations of $712 million, representing a 32% margin
• Adjusted free cash flow of $731 million, representing a 33% margin
• Adjusted income from operations of $633 million, representing a 28% margin

Q4 and FY 2023 Financial Summary
(Unaudited)
(Amounts in thousands, except percentages and per share amounts)	Fourth Quarter							Full Year 2023
	Amount							Amount
Revenue				$	608,350						$	2,225,012
Year-over-year growth					20	%						17	%
	Amount			Margin				Amount			Margin
Income from Operations	$	65,794			11	%		$	119,966			5	%
Adjusted Income from Operations	$	209,355			34	%		$	632,776			28	%
Cash from Operations	$	301,172			50	%		$	712,183			32	%
Adjusted Free Cash Flow	$	304,752			50	%		$	730,524			33	%
Net Income Attributable to Common Stockholders	$	93,391						$	209,825
Adjusted Net Income Attributable to Common Stockholders	$	189,640						$	571,609
Adjusted EBITDA	$	217,327			36	%		$	666,130			30	%
GAAP EPS, Diluted	$	0.04						$	0.09
Adjusted EPS, Diluted	$	0.08						$	0.25

Outlook

For Q1 2024, we expect:

• Revenue of between $612 - $616 million.
• Adjusted income from operations of $196 - $200 million.

For full year 2024, we expect:

• Revenue of between $2.652 - $2.668 billion.
• US commercial revenue in excess of $640 million, representing a growth rate of at least 40%.
• Adjusted income from operations of $834 - $850 million.
• Adjusted free cash flow of $800 million - $1 billion.
• GAAP operating income in each quarter of this year.
• GAAP net income in each quarter of this year.

The Magnificent 7 Are Overvalued On AI Bubble

 

The magnificent 7 stocks, namely Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla are overvalued on the AI bubble.

As with most new technologies artificial intelligence is going through a bubble, which after popping a normal growth path will ensue, much like with the internet dot-com bubble and the subsequent growth and ubiquity of the internet.

Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla are overvalued by 40 %, 54 %, 15 %, 32 %, 35 %, 62 % and 80 % respectively, according to Wolfteam Ltd.'s projections and estimates.

The market is just interpolating too high growth and profitability rates for the The magnificent 7 stocks, namely Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla.

NVIDIA and Tesla are the poster children of the Artificial Intelligence, AI bubble, especially.

Tesla' intrinsic worth is just 120 billion USD, according to Wolfteam Ltd.'s view. And this is the value of the electric vehicle engineers and Tesla's AI engineers and software engineers, finance and other staff.

NVIDIA, with its 1.63 trillion USD market capitalization is also grossly, by 62 % overvalued on the artificial intelligence boom.

Yes, AI will change our world but the process will be much more gradual than market participants seem to forecast.

If China Taiwan Tensions Erupt, Apple Could Prove Overvalued By 80 %

 

90 % of iPhones are manufactured in China and so are most Macintosh computers and iPad tablets.

If hostilities or military encounter erupts between China and Taiwan, Apple's stock price could fall by 80 % in a month, according to Wolfteam Ltd.'s view. 17 % of the iPhones Apple sells are sold in China.

If hostilities come to be between China and Taiwan, Apple's manufacturing chain will be so severely disrupted, that Apple might face danger as a going concern even, according to Wolfteam Ltd.'s projections and estimates.