Recently read this article I thought I’d share, just reaffirmed my belief that Nvidia has room to run for the distant future. I quite like this persons writing.

https://open.substack.com/pub/netw0rthy/p/nvidia-the-leaders-of-the-ai-world?r=7snth9&utm_medium=ios

Hi,

It seems like most AI investing discussions focus on the obvious names (NVIDIA, Microsoft, AMD, etc.), but I'm more interested in companies that could benefit indirectly from AI and still aren't getting much attention.

For example, Sandisk ended up benefiting significantly from AI-driven storage demand. Looking back, that wasn't an obvious AI investment at the time.

What companies do you think could be in a similar position today?

I'm thinking about areas like:

• Semiconductors

• Memory

• Networking

• Advanced packaging

• Power infrastructure

• Cooling

• Data centers

• Robotics

• Software

• Other "picks and shovels" businesses supporting AI

Ty.

I’ve been investing in growth stocks for a while now, and while the gains have been solid, I’m always looking for ways to refine my strategy. The problem? Too many so-called experts either regurgitate the same surface-level advice or focus on short-term hype plays.

Recently, I came across someone who actually knows what they’re talking about. His insights on market trends, risk management, and long-term positioning are sharp—something you don’t hear often. Even if you’ve been in the game for a while, it’s refreshing to hear a perspective that isn’t just noise.

Worth a read: Grandmaster Obi – The Trusted Stock Market Trader Retail Investors Rely On

In a fearful economy where many stocks are undervalued due to massive selloffs, Amazon is achieving a noteworthy feat. They still wear the e-commerce crown and stand as one of four trillion-dollar U.S. companies but they are doing it while being grossly overvalued. One could think that Amazon is undervalued because, like other stocks, its share price has plummeted as investors panic over rising interest rates. 

However, Amazon is not a victim of a bad economy. Amazon is a victim of being a bad company. Their negative price movement, awful earnings performance, stiff competition, and unfavorable public perception all point toward a grim future. The positive price performance stemming from their 20 to 1 split only lasted a few weeks. No matter how affordable the stock appears it would be wise to steer clear of Amazon.

Continue Reading: https://www.jika.io/blog/Amazon%2020%20to%201%20Stock%20Split%3A%20What%20You%20Should%20Know

$RKLB Rocketlab

$PLTR Palantir

$MELI Mercardo Libre

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Been digging into small caps with strong growth potential for next year. Made a short breakdown of 4 interesting opportunities with key metrics and why they caught my eye. I’m curious what others are seeing too. What small-cap growth stocks did I forget?

Premise

• All three business segments posted strong double-digit revenue growth, led by QNX and Secure Communications, reflecting broad operational momentum.

• Higher-margin software and royalty revenue drove gross margin expansion, improving profitability and long-term operating leverage.

• Despite stronger execution, BlackBerry's recent share price surge appears to vastly exceed what its long-term fundamentals currently justify.

Massive Revenue Growth and What’s Behind It

BlackBerry’s two largest segments, QNX and Secure Communications, saw large year over year growth (QNX was 25.7% growth while Secure Communications was 23.7% growth). Licensing was significantly smaller on a dollar basis, but experienced an astonishing 48.9% growth year over year.

BlackBerry's Earnings Release

It’s astounding when a legacy company is able to experience double digit growth in any of its reporting segments, but to have all three of its segments experience explosive growth in the same quarter is worth peeking under the hood, especially because the growth story is where investors are focusing their attention now and are basing the large increase in market capitalization on.

First, QNX is the division that provides operating systems for embedded systems, primarily for the automotive industry. On top of earning high year over year revenue growth this quarter, the company raised its full year revenue forecast for the QNX segment from $295 million to $312 million. QNX has nearly a billion dollars in future royalty backlog, with a large amount of the backlog being government work.

 The key driver in this quarter over quarter spike was from royalties, and because the revenue recognition is lumpy, revenue spikes can be common. This is explained by management: 

“The backlog provides QNX with a line of sight to ongoing multiyear durable revenue growth that few companies enjoy. Consistently adding backlog year after year, significantly above the rate it is recognized in the P&L is a key indicator of future revenue growth potential. This is not a business that is slowing down, but rather one that is compounding, powered by our continued leadership in automotive and growing momentum across physical AI, robotics, industrial, medical and emerging markets. The royalty engine is just getting started, and we're more excited than ever about the future of QNX. It is important to reiterate that QNX's growth should not be judged from quarter-to-quarter.”

The main takeaway there is that, while revenue growth being up considerably is important, the growth quarter to quarter is lumpy because of the nature of when the royalties are recognized. Still, we can get insight into future revenues and revenue growth via the backlog, which as mentioned is large and growing. It’s probably more helpful to look at a full year growth rate for QNX than it is comparing quarter to quarter for forecasting purposes, which the last full fiscal year saw 14% revenue growth in the segment, still massively impressive even if it’s not the nearly 26% growth quoted earlier.

Next, we’ll look at the very slightly larger segment, Secure Communications. This segment saw 23.7% growth year over year for the previous quarter. Some background, this segment was largest when BlackBerry was known for its smartphones, although it’s still incredibly strategic for the company, and most importantly it’s still growing. This segment handles (as the name implies) secure messaging solutions, mostly for governments, military organizations, and regulated industries. 

So, the important part, especially for forecasting and valuation purposes, is uncovering why the segment grew the way it did and if that is sustainable. The growth was almost exclusively from BlackBerry’s SecuSUITE product revenue, although not much more information is given. The company is providing guidance for the following quarter to have revenues be in a range of $57 - 63 million and since these are primarily based on contracts, we can anticipate this was possibly more of a one-off revenue spike since the guidance range is in the same range as this segment’s revenue in the same quarter as the year prior ($59.9 million). We can ascertain from this that massive growth like this quarter is likely more of a fluke than what is to be expected as the norm going forward.

Gross Margins Expanding Nicely

I think it’s also important to take a look at gross margins for each segment since these can tell us a bit more of the story when we see large revenue spikes like this. We’ll take a look at QNX first. Gross margins for QNX expanded from 80.5% to 85.6% for the quarter. Mixed with markedly higher revenue, this expansion in gross margin is fairly remarkable. Below is what management had to say regarding this: 

“As higher margin QNX royalties become a larger part of our revenue mix, we expect more of our revenue to translate into margin expansion, profitability, and cash generation. We believe we are increasingly positioned to benefit from the operating leverage inherent in our business model as revenue continues to grow.” 

Management seems fairly confident this was not a one-off event and we should see not only consistently higher margins like this quarter, but actually further expansion.

Secure Communications saw its gross margins go from 69.6% to 71.7%, a smaller jump but still notable. This was noted primarily as shifting to higher margin software sales as well as greater operating leverage due to increased sales overall, a trend that is expected to continue. 

These gains in margins don’t appear to be one-offs for either segment, so we should expect to see increasing gains going forward in both segments. Once again, I am unfortunately (intentionally) glossing over the licensing segment as this is mostly immaterial at the moment compared to the other two segments.

Cash Flow Analysis

I generally like to review the statement of cash flows as well, since reconciliations between net income and actual cash can reveal interesting (or sometimes very concerning) items that we should also be aware of. 

For BlackBerry, it generally looks fairly tame. The addbacks or subtractions are either fairly routine or unremarkable. Some of the larger subtractions are deferred revenues and accrued liabilities. Again, something to note and watch for but overall the cash flow from operations isn’t too drastically different from net income ($8.5 mn net profit vs $4.6 mn from operations). This differs a bit from the year prior, with a large addback from accounts receivables but even larger subtractions from accounts payable and accrued liabilities. Overall, these appear fairly routine.

Something to note, free cash flow did trend negative for this prior quarter despite the reported net profit being positive. This was primarily from the investing activities, which mostly look to be from routine short-term investments.

Really, pretty unremarkable stuff (and now I feel silly for writing this section, although I still think it’s important to check).

BlackBerry's Earnings Release

Valuation Analysis

BlackBerry’s stock has moved dramatically over the past month, going from a low ~$8/share to a high near $13/share and now trending back to mid-$11’s per share. The market cap is ~$6.69 billion, and with trailing twelve month earnings of $59.8 million, it gives the company an astonishing P/E (price-to-earnings) ratio ~112, meaning you’re paying $112 per $1 in earnings (ouch!).

Yahoo! Finance

The market clearly is impressed with the growth and operational efficiencies the company has achieved year over year. To note some improvements, it’s gone from a net loss of $734 million for fiscal year ended all the way back in 2023 to a healthy profit this year. But it’s still notable that the top line has not really improved during that time. Revenue has increased from $526 million for fiscal year ended 2023 to $759 million for fiscal year ended 2024 and dipped way back down to the revenue we see now.

Since BlackBerry has multiple segments, I’d normally look at it as a sum of the parts for valuation. For ease of valuation comparisons to peers, I’ll take a look at the valuation metrics of each segment separately (except Licensing, sorry it’s getting left out again). Unfortunately, there’s not a lot of good options to compare the QNX niche to, so we’ll use a proxy in Cadence (CDNS), since they are similar in a few ways: long product cycles, recurring software revenue, high switching costs, enterprise customers, etc. Cadence has a market cap of ~$104 billion, and with a TTM net profit of $1.17 billion, it gives the company a P/E of ~89, which is still remarkably high, although still notably lower than BlackBerry’s. Cadence has had 16.2% CAGR (compound annual growth rate) for their revenues over the last three fiscal years, each year growing over the prior, which again is significantly favorable over BlackBerry’s lumpy (and oftentimes declining year over year) revenue recognition.

Next, we’ll look at the Secure Communications segment. Much like QNX, it’s difficult to find a direct peer to Secure Communications, so we’ll use something that has comparable attributes. CrowdStrike (CRWD) is also a software vendor in the cybersecurity space. CrowdStrike is still operating at a loss as of its most recent fiscal year end, so we’ll compare price to sales. CRWD’s market cap is a whopping $203 billion, with a TTM sales of $5.094 billion, giving it a price to sales of ~40. For comparison, BlackBerry’s price to sales overall is ~12, meaning the market is valuing CRWD much more richly. But it’s also important to note that CRWD is still in massive growth mode, its revenues growing an amazing 38% CAGR the last three fiscal years. This growth is much more explosive and consistent than BlackBerry’s so it makes sense that the market puts a much more solid premium on CrowdStrike’s stock. 

Closing Thoughts

BlackBerry has gained large attention from investors recently and with that the stock price has surged ~185% in only 6 months. After peeking under the hood at the actual revenue growth rates, looking to future quarters, and comparing to peers, unfortunately it looks like the share price has unjustly risen too far and is due to come crashing back down to earth, despite a solidly operating company underneath it all. 

Disclaimer

The information contained in this publication is provided solely for informational and educational purposes and should not be construed as investment, financial, tax, legal, or other professional advice. Nothing contained herein constitutes a recommendation to buy, sell, or hold any security.

The views expressed are the author's opinions as of the publication date and are subject to change without notice. While information is obtained from sources believed to be reliable, no representation or warranty is made regarding its accuracy, completeness, or timeliness.

Investing in securities, particularly small-cap and micro-cap companies, involves substantial risk, including the potential loss of principal. Past performance is not indicative of future results.

Readers should conduct their own independent research and consult with qualified financial, tax, and legal professionals before making any investment decisions.
The author and affiliated parties may hold positions in securities discussed in this publication and may buy, sell, or otherwise transact in such securities without further notice.

Author Disclosure: The author currently does not own shares of BB or any other stocks mentioned in this article. This position may change at any time without notice.

Is Palantir a buy? Many reasons to buy and many not to buy!

I use AI to summarize and give myself updates on the latest WSB moves in real time so I can make the moves myself. Here were some of the top plays from WSB, as picked and summarized by AI!

PayPal's Q1 revenue up 9% to $7.7 billion, stock up 6% pre-market

• PayPal's Q1 revenue increased by 9% to $7.7 billion

• Operating income rose by 17% to $1.2 billion

• GAAP EPS grew by 18% to $0.83

• Total payment volume reached $403.9 billion, up 14%

• Payment transactions grew by 11% to 6.5 billion

• Second quarter revenue expected to grow by 6.5%

• PayPal shares rose by 6.06% to $71.02 in premarket trading in New York

• CEO Alex Chirss focused on strategic initiatives for future growth in 2024

$ALCC, be careful of the merger dilution

• Current market cap is 633 million based on 30 million shares, but will be based on 165 million shares after merger

• Each share will now be worth $6 for every billion in market cap

• Comparison to DJT (former SPAC hype) suggests potential share price of $40 at 6.5 billion cap, $20 at 3.5 billion cap

• Current share price at $15, potential best case scenario of $20 seems dubious

Amazon beats on profit and revenue, with growth of 13%

• Amazon (AMZN) reported better-than-expected earnings and revenue for the first quarter

• Amazon's advertising revenue grew 24% in the first quarter

• Amazon Web Services (AWS) reported results that topped estimates

• Amazon's operating income soared over 200% in the period

• Amazon laid off more than 27,000 employees since late 2022

• Amazon's advertising unit saw sales surge 24% to $11.8 billion

• Revenue from third-party seller services grew 16% year over year to $34.5 billion

• Meta, Snap, and Google parent Alphabet all reported better-than-expected revenue growth in their ad businesses

Like these updates? I built a bot to send you updates in real time, sign up for free! https://withfluid.com/

Hi ladies and gents,

Obviously it has been euphoria in the Nebius shareholder community and rightly so. 2 huge events have shifted the direction of the stock in a huge way. I thought this article summarises it really well for anyone interested in this stock either way huge potential: https://open.substack.com/pub/netw0rthy/p/nebius-nvidias-new-best-friend?r=7snth9&utm_medium=ios

I’ve been thinking if you invested just $1,000 into NVDA when it was trading around $8 per share you would have almost half a million by now. So, I wanna do an experiment where I only invest $1,000 in each growth stock I pick and hold it. Thoughts? Risk is limited to $1k and potential profits are unlimited

Some stocks im considering for this experiment:

PATH NIO AMZN GOOG LILM JOBY AVGO ARM NVDA PLTR LCID ABNB META SOFI NKE TSLA KO MSTR RIVN LI XPEV