AI Stocks Fall In The Last 7 Days

 

AI stocks like NVIDIA, Arista Networks and Celestica are staging a rebound today, the 31th of July 2024 on the US stock market, after falling more than 20 % or entering a bear market in the last 5 -7 trading days.

The AI stocks fall will continue in the coming weeks, according to Wolfteam Ltd.'s projections and estimates. It is just that AI stocks are significantly overvalued, according to most popular valuation metrics. In historical context, as well.

The overvaluation of AI stocks became more pronounced in the last year as the Federal Reserve signaled it is ready to decrease interest rates levels, which will guide both recycled and newly created capital towards technology investments, especially the hot AI sector again.

AI stocks, like the Magnificent 7 or Apple, Microsoft, Alphabet, Amazon, Facebook, NVIDIA and Tesla could most of them record a  30 % + fall from their recent stock peaks mainly on overvaluation and also higher than expected inflation.

Blackstone Business Strategy

  

Blackstone Inc, the asset manager predominantly active in private equity, real estate, credit and insurance, hedge fund solutions has a diversified in the above segments strategy, in Wolfteam Ltd.'s view

Via the falling interest rates credit and insurance has been the stellar performer in the fourth quarter 2023. Akin as its competitor KKR, Blackstone is trying to use insurance premiums income as a long-term vehicle for investing in its other businesses like private equity and principal strategies.

Out of its 504.7 billion USD in assets under management as of 4Q 2023 203.2 billion USD are in real estate, 159.1 billion USD in private equity, the two largest revenue driving sectors. Plus 197.3 billion USD in dry powder, cash, 80 billion USD of which are earmarked for private equity.

For FY 2023 the 5,625 billion USD in distributed earnings are as follows: 2 265 billion USD in real estate, 1 773 billion USD in private equity, 1172 billion USD in credit an insurance, 415 billion USD in hedge fund solutions.

Blackstone's main earnings driver is real estate.

Blackstone has a well-diversified business model which brings steady premiums and profits, which is reflected in Blackstone's 171 billion USD market capitalization.

KKR Business Strategy

 

KKR & Co, Inc the asset management firm with main business line private equity, with real estate at second place and private credit at third is staking its future on a Warren Buffett's Berkshire Hathaway insurance structure like strategy, which can be derived from careful analysis of KKR & Co's 2023 annual financial results, in Wolfteam Ltd.'s view.

KKR got 5.81 billion USD in revenue fees from asset management and 8.70 billion USD from insurance operations. Which means KKR is actually an insurance holding, that is KKR is using the stable insurance premiums to get additional income by reinvesting them. And with any insurance firm, KKR's net financial result is depending heavily on how KKR's reinvests its steady income stream of insurance premiums.

2.340 billion USD from the management fees come from the private equity division of KKR's business, 867.497 million USD from real assets, real estate revenue that is and 998.504 million USD come from private credit and liquid strategies. KKR gets 5.378 billion USD of insurance premiums, which after net cost of insurance become 817 billion USD in revenue.

KKR is obviously trying to develop along the lines of the Warren Buffett controlled insurance and industrial conglomerate Berkshire Hathaway by using insurance premiums to support the private equity asset management investments' carry.

Whether KKR will start more quickly approaching Berkshire Hathaway's 946 billion USD market capitalization depends to a large extent to managements both strategy and tactics to plowing the insurance premiums back into the operating private equity, real assets and credit operating strategies.

Schlumberger Valuation

Schlumberger, the offshore drilling services company is undervalued, according to Wolfteam Ltd.'s projections and estimates.

With 33.14 billion USD in revenue, growing at 17.96 %, net profit margin of 12.68 %, Schlumberger's intrinsic value is 124 billion USD, compared with Schlumberger's current market capitalization of 69.34 billion USD.

Here is an excerpt from Schlumberger's fourth quarter 2024 financial results:

SLB Announces Second-Quarter 2024 Results

19 July 2024

Q2 2024 Earnings Release PDF

Q2 2024 SLB Earnings Conference Call

Q2 2024 Earnings Conference Call Prepared Remarks

Q2 2024 Earnings Conference Call Transcript

• Revenue of $9.14 billion increased 5% sequentially and 13% year on year
• GAAP EPS of $0.77 increased 4% sequentially and 7% year on year
• EPS, excluding charges and credits, of $0.85 increased 13% sequentially and 18% year on year
• Net income attributable to SLB of $1.11 billion increased 4% sequentially and 8% year on year
• Adjusted EBITDA of $2.29 billion increased 11% sequentially and 17% year on year
• Cash flow from operations was $1.44 billion and free cash flow was $776 million
• Board approved quarterly cash dividend of $0.275 per share

Booking Holdings Valuation

 

Booking Holdings is undervalued according to Wolfteam Ltd.'s projections and estimates.

With 21.37 billion in revenue. growing at 25.01 %, net profit margin of 20.07 % for 2023, Booking Holding's intrinsic value is 145 billion USD, compared with Booking Holdings' current market capitalization of 125.53 billion USD.

Here is an excerpt from Booking Holdings first quarter 2024 statement:

Booking Holdings Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share data)
Three Months Ended
March 31,
2024 2023
Merchant revenues $ 2,388 $ 1,752
Agency revenues 1,763 1,782
Advertising and other revenues 264 244
Total revenues 4,415 3,778
Operating expenses:
Marketing expenses 1,610 1,517
Sales and other expenses 678 570
Personnel, including stock-based compensation of $144 and $113, respectively 826 722
General and administrative 186 262
Information technology 187 137
Depreciation and amortization 137 120
Total operating expenses 3,624 3,328
Operating income 791 450
Interest expense (219) (194)
Interest and dividend income 243 228
Other income (expense), net 122 (181)
Income before income taxes 937 303
Income tax expense 161 37
Net income $ 776 $ 266
Net income applicable to common stockholders per basic common share $ 22.69 $ 7.07
Weighted-average number of basic common shares outstanding (in 000's) 34,206 37,621
Net income applicable to common stockholders per diluted common share $ 22.37 $ 7.00
Weighted-average number of diluted common shares outstanding (in 000's) 34,706 37,983

Blackstone Valuation

 

Blackstone Inc, the investment manager active in private equity is overvalued, according to Wolfteam Ltd.'s projections and estimates.

With 7.68 billion USD in revenue, declining at - 4.14 % with net profit margin of 18.10 % for 2023, Blackstone's intrinsic value is 137 billion USD compared to Blackstone's market capitalization of 170.25 billion USD.

Here is an excerpt from Blackstone's second quarter 2024 report:

Blackstone | 1

BLACKSTONE’S SECOND QUARTER 2024 GAAP RESULTS
▪ GAAP Net Income was $948 million for the quarter and $2.5 billion year-to-date (“YTD”). GAAP Net Income

Attributable to Blackstone Inc. was $444 million for the quarter and $1.3 billion YTD.
Throughout this presentation, all current period amounts are preliminary and unaudited. Totals may not add due to rounding. See pages 36-38, Definitions and
Dividend Policy, for definitions of terms used throughout this presentation. NCI means non-controlling interests.($ in thousands, except per share data) (unaudited) 2Q'23 2Q'24 2Q'23 YTD 2Q'24 YTD 2Q'23 LTM 2Q'24 LTM
Revenues
Management and Advisory Fees, Net 1,709,370$ 1,787,313$ 3,367,685$ 3,514,461$ 6,633,877$ 6,818,036$
Incentive Fees 153,077 188,299 295,953 367,640 616,993 766,858
Performance Allocations 616,479 653,870 504,161 1,752,330 405,208 1,780,342
Principal Investments 218,924 42,269 (164,435) 582,489 (1,001,693) 447,593
Interest and Dividend Revenue 148,505 104,999 238,990 202,838 394,042 480,345
Other (31,664) 19,631 (45,818) 64,451 (89,718) 17,340
Total Revenues 2,814,691$ 2,796,381$ 4,196,536$ 6,484,209$ 6,958,709$ 10,310,514$
Expenses
Compensation and Benefits 1,060,595 1,206,202 1,823,706 2,514,506 3,088,003 4,003,770
General, Administrative and Other 275,034 311,928 548,428 681,878 1,111,137 1,250,755
Interest Expense 108,096 108,616 212,537 216,819 393,373 436,150
Fund Expenses 31,585 5,960 79,984 9,910 104,032 48,913
Total Expenses 1,475,310$ 1,632,706$ 2,664,655$ 3,423,113$ 4,696,545$ 5,739,588$
Other Income (Loss) 87,595$ 44,934$ 153,451$ 27,167$ 123,294$ (210,281)$
Income Before Provision for Taxes 1,426,976$ 1,208,609$ 1,685,332$ 3,088,263$ 2,385,458$ 4,360,645$
Provision for Taxes 223,269 260,246 270,944 543,917 224,029 786,434
Net Income 1,203,707$ 948,363$ 1,414,388$ 2,544,346$ 2,161,429$ 3,574,211$
Redeemable NCI in Consolidated Entities 17,688 258 10,988 (39,411) (162,829) (295,917)
Non-Redeemable NCI in Consolidated Entities 584,745 503,691 716,314 1,291,957 1,077,022 1,874,534
Net Income Attributable to Blackstone Inc. (''BX'') 601,274$ 444,414$ 687,086$ 1,291,800$ 1,247,236$ 1,995,594$
Net Income Per Share of Common Stock, Basic 0.79$ 0.58$ 0.91$ 1.69$ 1.67$ 2.62$
Net Income Per Share of Common Stock, Diluted 0.79$ 0.58$ 0.91$ 1.69$ 1.67$ 2.62

KKR Valuation

  

KKR & Co, Inc, the private equity firm is overvalued, according to Wolfteam Ltd.'s projections and estimates.

With 14.32 billion USD in revenue, jumping at 238.39 %, with net profit margin of 20 % for 2023 KKR's intrinsic worth is 89 billion USD, compared with KKR's market capitalization of 103.87 billion USD.

Here is an excerpt from KKR's first quarter 2024 earnings report:

We had a solid quarter with 20%+ year-over-
year growth in Fee Related Earnings, Total
Operating Earnings and Adjusted Net Income
and raised $31 billion of new capital. We
closed on the acquisition of the remaining
stake in Global Atlantic and are now
reporting our financial results through three
segments: Asset Management, Insurance and
Strategic Holdings. With three avenues for
long-term, sustained growth – as detailed at
our April Investor Day – we are well
positioned for the years ahead.

Gilead Sciences Valuation

 

Gilead Sciences, the American biotechnology company is slightly undervalued, according to Wolfteam Ltd.'s projections and estimates.

With 27.12 billion USD revenue, declining at -0.60 % with net profit margin of 20.89 %, Gilead Sciences' intrinsic value is 108 billion USD compared to Gilead Sciences' current market capitalization of 90.40 billion USD.

Here is an excerpt from Gilead Sciences first quarter 2024 earnings report:

GILEAD SCIENCES ANNOUNCES FIRST QUARTER 2024 FINANCIAL RESULTS

Product Sales Excluding Veklury Increased 6% Year-Over-Year to $6.1 billion
Biktarvy Sales Increased 10% Year-Over-Year to $2.9 billion
Oncology Sales Increased 18% Year-Over-Year to $789 million
Closed CymaBay Acquisition Resulting in $3.9 billion Acquired IPR&D Charge ($3.14 Diluted EPS Impact

TJX Companies Valuations

 

TJX Companies, Inc the leading off-price apparel and home fashions retailer is undervalued, according to Wolfteam Ltd.'s projections and estimates.

With 49.94 billion USD in revenue, growing at 2.85 %, net profit margin of 7.00 % for the calendar 2023, TJX Companies' intrinsic value is 154 billion USD compared with TJX Companies market capitalization of 126.86 billion USD.

 

Here is an excerpt from the first fiscal quarter of 2025 of TJX earnings statement:

 

THE TJX COMPANIES, INC. REPORTS Q1 FY25 RESULTS; COMP STORE SALES GROWTH OF 3% AT
HIGH-END OF PLAN; PRETAX PROFIT MARGIN OF 11.1% AND DILUTED EPS INCREASE OF 22%
BOTH WELL ABOVE PLAN; RAISES FY25 PRETAX PROFIT MARGIN AND EPS GUIDANCE
• Q1 consolidated comparable store sales increased 3%, at the high-end of the Company’s plan, and were entirely
driven by an increase in customer transactions
• Q1 pretax profit margin of 11.1%, up 0.8 percentage points versus last year and well above the Company’s plan
• Q1 diluted earnings per share of $.93, up 22% versus last year and well above the Company’s plan
• Returned $886 million to shareholders in Q1 through share repurchases and dividends
• Increases outlook for FY25 pretax profit margin and earnings per share
Framingham, MA – The TJX Companies, Inc. (NYSE: TJX), the leading off-price apparel and home fashions retailer
in the U.S. and worldwide, today announced sales and operating results for the first quarter ended May 4, 2024. Net sales
for the first quarter of Fiscal 2025 were $12.5 billion, an increase of 6% versus the first quarter of Fiscal 2024.
Consolidated comparable store sales increased 3%. Net income for the first quarter of Fiscal 2025 was $1.1 billion and
diluted earnings per share were $.93, up 22% versus $.76 in the first quarter of Fiscal 2024.

Cintas Valuation

Cintas, the American workers' kit producer is slightly overvalued, according to Wolfteam Ltd.'s projections and estimates.

With 8.82 billion USD revenue, growing at 12.24 % with net profit margin of 15.29 % for 2023 Cintas' intrinsic value is 65 billion USD compared with Cintas' current market capitalization of 73 billion USD.

Here is an excerpt from Cintas' fiscal third quarter 2024 results:

CINCINNATI, March 27, 2024 -- Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2024 third quarter ended February 29, 2024. Revenue for the third quarter of fiscal 2024 was $2.41 billion compared to $2.19 billion in last year’s third quarter, an increase of 9.9%. The organic revenue growth rate for the third quarter of fiscal 2024, which adjusts for the impacts of acquisitions, foreign currency exchange rate fluctuations and differences in the number of workdays, was 7.7%. 


Gross margin for the third quarter of fiscal 2024 was $1.19 billion compared to $1.03 billion in last year’s third quarter, an increase of 14.9%. Gross margin as a percentage of revenue was 49.4% for the third quarter of fiscal 2024 compared to 47.2% in last year's third quarter, an increase of 220 basis points. Energy expenses comprised of gasoline, natural gas and electricity were 40 basis points lower for the third quarter of fiscal 2024 compared to last year's third quarter. 


Operating income for the third quarter of fiscal 2024 increased 16.6% to $520.8 million compared to $446.8 million in last year's third quarter. Operating income as a percentage of revenue was 21.6% in the third quarter of fiscal 2024 compared to 20.4% in last year's third quarter. 


Net income was $397.6 million for the third quarter of fiscal 2024 compared to $325.8 million in last year's third quarter, an increase of 22.0%. The third quarter of fiscal 2024 effective tax rate was 19.9% compared to 22.1% in last year's third quarter. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Third quarter of fiscal 2024 diluted earnings per share (EPS) was $3.84 compared to $3.14 in last year's third quarter, an increase of 22.3%.

Safe Haven Assets. Donald Trump Incident

 

Safe haven assets are to rise in the wake of the assassination attempt on Donald Trump.

Gold and especially Bitcoin are rising today, Monday, the 15th of July, 2024 a day after  there was an attempt on the former US President and current electoral US presidential candidate of the Republican party Donald Trump's life.

Investors seems to be discounting more than two, possibly three Federal Reserve cuts of interest rate levels in 2024. In view of the former in the Trump Presidential mandate strong rhetoric of then president Donald Trump towards the Federal Reserve, formerly even threatening to fire Jerome Powell, the Chairman of the Federal Reserve, if he does not lower interest rate levels. And Jerome Powell then duly lowered the Federal Funds Rate three times after then president Trump's firing threats, all be it founded by lower inflation than target. Or that was the then explanation.

Most probably, this time again Jerome Powell could find another explanation, slowing labor market is one under which to cut interest rates three times in 2024, while until yesterday investors were expecting two Federal Funds Rate cuts in 2024.

Such a three rate cuts development in 2024 would be a tail wind for the economy and could spur small capitalization stocks, gold, cryptocurrencies and commodities higher.

Two Federal Reserve Cuts

The Federal Reserve, the central bank of the USA is going to cut the federal funds rate twice this year, according to Wolfteam Ltd.’s projections and estimates.

This would propel AI, technology and cryptocurrencies stocks higher again due to new money coming to the technology sector.

Gold and silver miners could benefit as well.

Chewy Meme Stock

 

Chewy, the pet supplies company which the infamous Roaring Kitty or Keith Gill has dabbled into, bought into recently is undervalued, according to Wolfteam Ltd.’s projections and estimates.

Chewy could become part of the Meme stock mania, which grabbed Wall Street in 2022.

The meme stocks blew up out of all proportions. Yes, like Chewy they could have been undervalued, but the meme stocks craze drove the meme stocks too high to be substantiated on underlying financials alone.

That said, Chewy’s intrinsic value seems triple or fourfold its current market capitalisation, in Wolfteam Ltd.’s view.

What happens, remains to be seen.

Trane Technologies Valuation

 

Trane Technologies, the American manufacturing company is slightly undervalued, according to Wolfteam Ltd.'s projections and estimates.

With 17.68 billion USD in revenue, growing at 10.54 %, with net profit margin of 11.45 % for 2023, Trane Technologies' intrinsic value is 84 billion USD, compared with its current market capitalization of 76.21 billion USD.

Here is an excerpt from Trane Technologies' first quarter 2024 earnings release:

Trane Technologies Reports Strong First Quarter Results and Raises 2024 Revenue and
EPS Guidance
Highlights (first-quarter 2024 versus first-quarter 2023, unless otherwise noted):
l Reported revenues of $4.2 billion, up 15 percent; organic revenues* up 14 percent
l GAAP operating margin up 250 bps; adjusted operating margin* up 230 bps
l Adjusted EBITDA margin* of 16.8 percent, up 200 bps
l GAAP continuing EPS of $1.92; adjusted continuing EPS* of $1.94, up 38 percent
l Organic bookings* up 17 percent, led by Americas Commercial HVAC, up 30 percent
l $7.7 billion backlog, up 10 percent versus year-end 2023, and over 2.5 times historical norms

The Southern Company Valuation

 

The Southern Company, America's second largest utility company is undervalued, according to Wolfteam Ltd.'s projections and estimates.

With 25.25 billion USD in revenue, declining at -13.75 % with net profit margin of 15.74 % for the calendar 2023, The Southern Company's intrinsic value is 163 billion USD compared with its current market capitalization of 85.31 billion USD.

Here is an excerpt from The Southern Company's first quarter 2024 earnings:
 

ATLANTA, May 2, 2024 /PRNewswire/ -- Southern Company today reported first-quarter earnings of $1.1 billion, or $1.03 per share, in 2024 compared with earnings of $862 million, or 79 cents per share, in the first quarter of 2023.

Excluding the items described under "Net Income – Excluding Items" in the table below, Southern Company earned $1.1 billion, or $1.03 per share, during the first quarter of 2024, compared with $867 million, or 79 cents per share, during the first quarter of 2023.

Non-GAAP Financial Measures	Three Months Ended March
Net Income – Excluding Items (in millions)	2024	2023
Net Income – As Reported	$                 1,129	$                    862
Less:
Estimated Loss on Plants Under Construction	(4)	(2)
Tax Impact	1	1
Loss on Extinguishment of Debt	—	(5)
Tax Impact	—	1
Net Income – Excluding Items	$                 1,132	$                    867
Average Shares Outstanding – (in millions)	1,094	1,091
Basic Earnings Per Share - Excluding Items	$                   1.03	$                   0.79

 

NextEra Energy Valuation

NextEra Energy, Inc, the American utility company is undervalued, according to Wolfteam Ltd.'s projections and estimates.

With 28.11 billion USD in revenue growing at 34.16 %, with net profit margin of 26.00 %, NextEra Energy's intrinsic value is 190 billion USD compared with its current market capitalization of 148.11 billion USD.

Here is an excerpt from NextEra Energy fourth quarter 2023 results:

JUNO BEACH, Fla. - NextEra Energy, Inc. (NYSE: NEE) today reported 2023 fourth-quarter net income
attributable to NextEra Energy on a GAAP basis of $1.210 billion, or $0.59 per share, compared to
$1.522 billion, or $0.76 per share, for the fourth quarter of 2022. On an adjusted basis, NextEra Energy's
2023 fourth-quarter earnings were $1.067 billion, or $0.52 per share, compared to $1.011 billion, or $0.51
per share, in the fourth quarter of 2022.
For the full year 2023, NextEra Energy reported net income attributable to NextEra Energy on a GAAP
basis of $7.310 billion, or $3.60 per share, compared to $4.147 billion, or $2.10 per share, in 2022. On an
adjusted basis, NextEra Energy's full-year 2023 earnings were $6.441 billion, or $3.17 per share,
compared to $5.742 billion, or $2.90 per share, in 2022, which represents year-over-year growth in
adjusted earnings per share of approximately 9.3%.

Gold Is Undervalued. Bitcoin Also

 

Gold and Bitcoin are undervalued, short-term on the Federal Reserve lowering the Federal Funds Rate.

Gold's price could reach 3 000 USD a troy ounce in 2024, while Bitcoin's price could surpass 100 000 USD in 2024.

There are tremendous amounts of extra cash looking for a home and gold and cryptocurrencies are a natural destination for more speculative capital flows, which run into trillions of USD.

Is The Stock Market Overvalued?

 

The stock market is fundamentally overvalued.

The stock market, however, tactically is undervalued since the Federal Reserve will lower interest rates levels two times in 2024, according to Wolfteam Ltd.'s projections and estimates.

The Federal Reserve just has created too much superfluous money, which is multiplied via the deposit multiplication effect and finds its way into stocks, bonds, foreign exchange and commodities.

In short, US stock markets measured by the main indices could crash by more than 40 % in the next 7 years, but could still go on rising in the next 2-3 years of Federal Reserve cutting interest rates, in Wolfteam Ltd.'s view.

Cencora Valuation

Cencora, Inc the American drug wholesale company is grossly undervalued, according to Wolfteam Ltd.'s projections and estimates.

With 262.2 billion USD in revenue, growing at 9.89 %, net profit margin of 0.67 % for 2023, Cencora's net intrinsic value is 37 billion USD, compared with Cencora's current market capitalization of 9.88 billion USD.

Here is an excerpt from Cencora's second fiscal 2024 quarter earnings:

Cencora Reports Fiscal 2024 Second Quarter Results
5/1/2024
Revenue of $68.4 billion for the Second Quarter, a 7.8 Percent Increase Year-Over-Year
Second Quarter GAAP Diluted EPS of $2.09 and Adjusted Diluted EPS of $3.80
Adjusted Diluted EPS Guidance Range Raised to $13.30 to $13.50 for Fiscal 2024
CONSHOHOCKEN, Pa.--(BUSINESS WIRE)-- Cencora, Inc. (NYSE: COR) today reported that in its fiscal year 2024 second quarter
ended March 31, 2024, revenue increased 7.8 percent year-over-year to $68.4 billion. On the basis of U.S. generally accepted
accounting principles (GAAP), diluted earnings per share (EPS) was $2.09 for the second quarter of fiscal 2024 compared to $2.13 in
the prior year second quarter. Adjusted diluted EPS, which is a non-GAAP financial measure that excludes items described below,
increased 8.6 percent to $3.80 in the fiscal second quarter from $3.50 in the prior year second quarter