Is the Bitcoin Bull Run Over?

Bitcoin (BTC) prices recently surged above the $52,000 mark, pushing its market capitalization back over $1 trillion for the first time since December 2021. The rally in the prices of the flagship cryptocurrency is due to anticipation building around the impending 'Bitcoin Halving' in April this year and the sustained inflow of USD into spot Bitcoin exchange-traded funds (ETFs).

Primary Drivers Behind Bitcoin’s Price Increase

Spot bitcoin ETFs are driving BTC’s recent surge. In January 2024, the U.S. Securities and Exchange Commission (SEC) approved the listing and trading of 11 spot bitcoin exchange-traded product (ETP) shares after years of repeated rejections.

Bitcoin ETFs recorded another strong week, with net inflows exceeding $2.2 billion from February 12 to 16. As per Bloomberg analyst Eric Balchunas, the combined volume was higher than inflows received by any other among the 2,400 ETFs available in the U.S.

According to data from BitMEX Research, BlackRock’s iShares Bitcoin Trust (IBIT) received the most capital, accumulating positive flows of $1.6 billion over the last week. “$IBIT alone has taken in $5.2b YTD, which is 50% of BlackRock’s total net ETF flows, out of 417 ETFs,” stated Eric Balchunas.

Among the spot Bitcoin ETFs holding billions of dollars in assets, Fidelity Advantage Bitcoin ETF (FBTC) witnessed considerable inflows, amassing $648.5 million from February 12 to 16. The Ark 21Shares Bitcoin ETF (ARKB) gathered around $405 million in the same period, while the Bitwise Bitcoin ETP Trust (BITB) garnered $232.1 million in capital inflows.

However, outflows from the Grayscale Bitcoin Trust (GBTC) are hampering the combined performance of the other newly approved spot Bitcoin ETFs. Between February 12 and 16, the fund saw withdrawals of around $624 million. Since its conversion from an over-the-counter product to a spot ETF on January 10, Grayscale’s fund has witnessed more than $7 billion in capital outflows.

The other new ETFs are majorly driving Bitcoin’s recent price gains. The cryptocurrency is up approximately 91% in the past four months, ending on February 15.

Also, growing anticipation around a cryptic-sounding event known as “the halving,” which is to take place on April 19, 2024, is one of the primary drivers behind Bitcoin’s surge. The “halving” is a feature in Bitcoin’s protocol that automatically reduces the rate of Bitcoin production. Generally, it pushes the price of bitcoin higher.

The price rise of the world’s largest cryptocurrency was also buoyed by expectations of interest rate cuts later this year as inflation eases.

Google Trends Show a Decline in Bitcoin Interest

Recently, Bitcoin’s price jumped above the $52,000 mark; however, fascination with cryptocurrency seems to be diminishing. Google Trends data suggests a subdued level of interest, with the search term “bitcoin” scoring just 36 out of 100 in global metrics over the last 90 days.

That is a sharp contrast to the excitement seen about three years ago when Bitcoin first exceeded the $50,000 level, with Google Trends showing a score of 71 out of 100 for the search term “bitcoin” during that period.

Even with the introduction of spot bitcoin ETFs on January 11 this year, the search term “bitcoin” on Google Trends peaked at a score of 100. But since then, there has not been a significant surge in interest, with the search term “bitcoin” being steady at a score of 36 out of 100.

Despite high valuation, the declining fascination with bitcoin suggests a potential consolidation and maturation of the crypto market, where investors are more cautious in their approach or a shift in the public’s focus. While institutional investors have entered the scene, retail investors appear less engaged.

To regain the attention of the retail crowd, Bitcoin might need to surge to even greater heights.

Future Of Bitcoin Price Trajectory

The recent surge of Bitcoin to levels not witnessed in more than two years has sparked debate among analysts on the sustainability of the upward momentum. While some analysts expect this rise to be followed by a correction, others believe the bull run will continue.

According to Swissblock analysts, Bitcoin may signal a correction in the short term. Analysts wrote that the momentum of Bitcoin, which has paused at the key resistance mark of $52,000 following a recent rapid ascent of nearly 33% over the past few weeks, could indicate “a pullback” as they consider the increase potentially unsustainable.

Despite a short-term dip, Swissblock analysts added that any forthcoming pullback could be a buying opportunity if BTC holds its support near the $47,500 level. The report advises investors to consider any correction as a potential entry point for long-term positions.

Despite warnings of a potential correction, some analysts continue to be positive about Bitcoin’s future trajectory. 10x Research analysts expect a price target of $57,500 for the next surge, indicating that the uptrend in BTC could continue beyond the current resistance level.

10x Research analyst Markus Thielen has an optimistic outlook on Bitcoin, arguing that its solid liquidity and rising demand for Bitcoin futures could push its price to $57,500. He cited historical patterns before previous block reward halvings as supporting evidence for further upside potential.

In addition, institutional cryptocurrency exchange FalconX observed “extraordinary” trading volumes supporting the uptrend in early 2024, like those seen during the March 2024 regional banking crisis.

FalconX analysts also noted that historically low volumes after price increases have sometimes indicated false breakouts in crypto markets, but liquidity conditions around the January rally have generally remained strong.

Bottom Line

In January this year, the Securities and Exchange Commission finally approved 11 spot bitcoin exchange-traded funds to start listing and trading on U.S. exchanges. The growing success of U.S. spot bitcoin ETFs turned investor sentiment more optimistic, allowing Bitcoin to exceed the $52,000 level, marking the first time it has hit this price since late 2021.

Also, the value of all the bitcoin in circulation, or market cap, grew above $1 trillion after the price surge.

According to Nigel Green, Founder and CEO of deVere Group, the introduction of the spot Bitcoin ETFs provides a new avenue for institutional investors to cautiously enter the cryptocurrency market, representing a significant step toward broader adoption and acceptance.

“This approval by the financial regulator of the world’s largest economy is a landmark moment for bitcoin and the wider crypto market and boosts prices in the long-term, even if there’s a sell-off in the near-term,” said Green. “The approval of bitcoin ETFs represents a resounding institutional validation of the cryptocurrency, marking a departure from its initial reputation as a speculative and volatile asset.”

Further, Bitcoin prices are strengthened by the upcoming “halving,” the supply-restricting event written in Bitcoin’s code that occurs every four years and is set for April 2024.

The recent introduction of spot bitcoin ETFs signifies a major development in the integration of bitcoin into mainstream investment options, possibly attracting a wider array of investors beyond conventional crypto enthusiasts.

But the relatively muted response to bitcoin’s increased value, as indicated by Google Trends data, suggests that the crypto market might be transitioning into a more mature and consolidating phase, wherein investors exercise more caution and discernment.

The drastic shift in sentiment could point toward an evolving landscape for cryptocurrencies, where factors beyond price appreciation play a more substantial role in market dynamics and investor behavior.

Amid declining public interest, investors grappling with the decision to wait or sell bitcoin should consider their risk tolerance, investment horizon, and market outlook. Staying informed, implementing risk management techniques, and diversifying one’s portfolio can help navigate the dynamic cryptocurrency market.

Investors should stay abreast of cryptocurrency news, regulatory developments, and market sentiment, which can provide insights into future trends and potential catalysts for price movements. Also, it is advisable to keep an eye on institutional interest and adoption, which can help gauge the long-term potential of Bitcoin.

Is It Time to Rethink Investing in the Magnificent 7 Stocks?

The largest companies in the S&P 500 Index have witnessed “unrelenting” outperformance over the past decade. However, history shows that mega-cap stocks typically fail to keep up their market-beating run, as per the asset allocation team at Jeremy Grantham’s GMO, an investment management firm.

By some measures, “big is generally anything but beautiful,” GMO’s co-head of asset allocation, Ben Inker and team member John Pease, said in the investment firm’s first-quarter 2024 letter to clients. “Nine of the top 10 have underperformed on average.”

The biggest stocks usually become the biggest by “way of becoming expensive, and this anti-value tilt has historically been quite costly, explaining most of these companies’ poor relative returns,” said Ben Inker and John Pease. “Since 1957, the 10 largest stocks in the S&P 500 have underperformed an equal-weighted index of the remaining 490 stocks by 2.4% per year.” 

“But the last decade has been a very notable departure from that trend, with the largest 10 outperforming by a massive 4.9% per year on average,” they wrote.

Magnificent And Concentrated

According to the GMO team, the S&P 500 has become an increasingly concentrated index over the past decade, with the top seven stocks, Microsoft Corporation (MSFT), Apple Inc. (AAPL), NVIDIA Corporation (NVDA), Alphabet Inc. (GOOGL), Amazon.com, Inc. (AMZN), Meta Platforms, Inc. (META), and Tesla, Inc. (TSLA), now have surged to 28% of the total, from 13% a decade ago, as their returns are outpacing that of the average stock in the index.

These Big Tech stocks, also known as the Magnificent Seven, are being closely watched by investors after skyrocketing in 2023.

“Biasing portfolios against the very largest stocks” over the past decade has been “a disaster,” particularly last year; however, it’s been “lucrative” for most of history, as per the GMO letter. 

Despite recent trends indicating their continued growth and resilience, betting against mega-cap stocks or engaging in short selling or other strategies that profit from a decline in the stock prices of these largest companies has historically been considered a profitable strategy for reasons including valuation concerns, market cycles and mean reversion, and regulatory and antitrust risks.

“The break in the consistent downward trend of cap-weighted underperformance reflects the magnificence of the Magnificent Seven,” the letter stated.  “In 2023, as their monicker became part of the common lexicon, they outperformed the S&P 500 by an almost unimaginable 60%.”

The S&P 500 index gained about 24.2% in 2023, climbing on the back of Big Tech’s gains. Big Tech stocks’ gains were primarily driven by immense investor enthusiasm surrounding AI.

The broad S&P 500 index briefly crossed 5,000 during intraday for the first time in history last Thursday, and on Friday, it ended above the level, marking its tenth record close of 2024 at 5,026. That puts the stock market benchmark up more than 5% since the start of the year, on top of its impressive 24% gain last year.

“As far as mega caps go, they have been practically unparalleled in their outperformance” over the past decade, but 2022 was the only year when they failed to outperform the market, added Inker and Pease. In 2022, the Magnificent Seven saw significant losses of nearly 40%, mainly due to monetary tightening and interest rate hikes that adversely impacted tech-related stocks.

“This performance came in part from the unusual cheapness of mega caps at the start of the decade,” as per the letter. For instance, Apple, Microsoft, and Google boasted a combined P/E ratio of 15x in 2013; in contrast, the market’s P/E was around 25% higher.

Also, these companies managed to grow earnings “at a breakneck pace.” Inker and Pease said, “Microsoft and Amazon did so by reinventing themselves. Apple, Alphabet, Meta, Nvidia, and Tesla took over their primary industries. The medium-sized businesses among them became huge, and the large ones became giants.” 

“Ten years ago, the index was more than twice as diversified,” they wrote. “We have never seen – over any 10-year period – a decline (or increase) in diversification of the magnitude we have just witnessed.”

Comprehensive Analysis of the Magnificent Seven Stocks:

Microsoft Corporation (MSFT)

With a market cap of $3.02 trillion, Microsoft is a leading software company that operates through Productivity and Business Processes; Intelligent Cloud; and More Personal Computing segments.

In terms of forward non-GAAP P/E, MSFT is trading at 35.03x, 36.1% higher than the industry average of 25.74x. The stock’s forward Price/Sales of 12.46x is 319.8% higher than the industry average of 2.97x. Likewise, its forward Price/Book of 11.28x is 172.2% higher than the industry average of 4.15x.

MSFT is considered relatively expensive by some valuation metrics compared to its industry peers. But it’s essential to consider that what might appear costly based on traditional valuation metrics may be justified by the company’s solid fundamentals, growth trajectory, and competitive advantages.

During the fiscal 2024 second quarter that ended December 31, 2023, MSFT’s total revenue came in at $62.02 billion, beating the analysts’ estimate of $61.13 billion. That was up 17.6% from the previous year’s quarter. Its gross margin grew 20.2% from the year-ago value to $42.40 billion.

In addition, the company’s operating income increased 32.5% year-over-year to $27.03 billion. Its net income rose 33.2% from the prior year’s period to $21.87 billion. Microsoft reported earnings per share of $2.93, compared to the consensus estimate of $2.20, and up 33.2% year-over-year.

For the third quarter of 2024, Microsoft expects revenue between $60 billion and $61 billion. The software maker sees lower-than-expected cost of revenue and operating expenses during the quarter.

Analysts expect MSFT’s revenue and EPS for the third quarter ending March 2024 to increase 15.2% and 15.5% year-over-year to $60.87 billion and $2.83, respectively. Further, the company’s revenue and EPS for the fiscal year 2025 are expected to increase 14.2% and 13.7% from the previous year to $278.98 billion and $13.29, respectively.

Shares of MSFT have surged nearly 26% over the past six months and more than 50% over the past year.

Apple Inc. (AAPL)

AAPL is a leading tech company with a market cap of $2.84 trillion. Its primary products and services include iPhone, Mac, iPad, Apple Watch, and digital services, such as the App Store, Apple Music, Apple TV+, and AppleCare, among others.

In terms of forward non-GAAP P/E, AAPL is trading at 28.10x, 9.1% higher than the industry average of 25.74x. Its forward EV/Sales of 7.15x is 141.4% higher than the industry average of 2.96x. Also, its forward Price/Sales of 7.32x is 146.8% higher than the industry average of 2.97x.

Along with valuation metrics, determining whether AAPL is expensive or cheap requires analysis of other factors, such as growth prospects and market conditions.

AAPL’s net sales increased 2.1% year-over-year to $119.58 billion in the fiscal 2024 first quarter that ended December 30, 2023. Its operating income grew 12.1% year-over-year to $40.37 billion. The tech giant’s net income and earnings per share came in at $33.92 billion and $2.18, up 13.1% and 16% from the prior year’s period, respectively.

“Today Apple is reporting revenue growth for the December quarter fueled by iPhone sales, and an all-time revenue record in Services,” said Tim Cook, Apple’s CEO, in its last earnings release. “We are pleased to announce that our installed base of active devices has now surpassed 2.2 billion, reaching an all-time high across all products and geographic segments.”

Street expects AAPL’s revenue and EPS for the fiscal year (ending September 2024) to grow 1.4% and 6.9% year-over-year to $388.47 billion and $6.55, respectively. For the fiscal year 2025, the company’s revenue and EPS are expected to increase 6.2% and 9% from the prior year to $412.46 billion and $7.14, respectively.

AAPL’s stock has gained more than 6% over the past six months and approximately 18% over the past year.

NVIDIA Corporation (NVDA)

NVDA, with a $1.80 trillion market cap, NVDA is a prominent tech company that specializes in graphics processing units (GPUs), AI, and semiconductor technologies. It serves the gaming, data center, automotive, and professional visualization industries.

NVDA’s forward non-GAAP P/E of 58.79x is 127.5% higher than the 25.85x industry average. Moreover, the stock’s forward Price/Sales and Price/Book multiples of 30.33 and 40.86 are significantly higher than the respective industry averages of 2.99 and 4.17. NVIDIA is trading at a premium relative to its industry peers.

If NVDA’s growth prospects are strong, investors may be willing to pay a premium for the stock despite its higher valuation multiples.

During the fiscal 2024 third quarter ended October 29, 2023, NVIDIA posted a record revenue of $18.12 billion, an increase of 206% from the prior year’s period. Its non-GAAP operating income rose 652% year-over-year to $11.56 billion. Also, the company’s non-GAAP net income and non-GAAP EPS were $10.02 billion and $4.02, up 588% and 593% year-over-year, respectively.

For the fiscal year ending January 2024, the consensus revenue and EPS estimates of $59.18 billion and $12.36 indicate an improvement of 119.4% and 270.1% year-over-year, respectively. Further, analysts expect NVDA’s revenue and EPS for the fiscal year 2025 to increase 58.2% and $21.18 year-over-year to $93.60 billion and $21.18, respectively.

The stock has climbed more than 65% over the past six months and 218% over the past year.

Alphabet Inc. (GOOGL)

With a market cap of $1.78 trillion, GOOGL is a tech giant renowned for its internet-related products and services. Its business segments include Google Services; Google Cloud; and Other Bets. The company continues to maintain its dominance in the global online search market, boasting more than 90% market share, according to SimilarWeb data.

In terms of forward non-GAAP P/E, GOOGL is trading at 21.11x, 37.7% higher than the industry average of 15.33x. The stock’s forward Price/Sales of 5.18x is 315% higher than the industry average of 1.25x. Similarly, its forward Price/Book of 5.19x is 152.9% higher than the industry average of 2.05x. In addition to valuation metrics, assessing GOOGL’s growth prospects is crucial.

In the fourth quarter that ended December 31, 2023, GOOGL’s revenues increased 13.5% year-over-year to $86.31 billion. Its operating income grew 30.5% from the year-ago value to $23.70 billion. In addition, the company’s net income and EPS rose 51.8% and 56.2% from the prior year’s quarter to $20.69 billion and $1.64, respectively.

Street expects GOOGL’s revenue for the fiscal year 2024 to increase 11.4% year-over-year to $342.41 billion. Likewise, the consensus EPS estimate of $5.75 for the current year indicates a 16.6% rise from the prior year. Moreover, the company surpassed its consensus revenue and EPS estimates in all four trailing quarters, which is impressive.

Furthermore, the tech company’s revenue and EPS are estimated to grow 10.5% and 15.5% year-over-year to $378.35 billion and $7.81, respectively, for the fiscal year ending December 2025.

GOOGL’s shares are up more than 10% over the past six months and nearly 45% over the past year.

Amazon.com, Inc. (AMZN)

With a market capitalization of $1.76 trillion, AMZN has grown to become one of the most influential tech companies, offering a wide range of products and services in areas including e-commerce, cloud computing, digital streaming, and AI. Its products and services include amazon.com, the world’s largest online retailer; Amazon Web Services (AWS); Amazon Prime, a subscription service; and more.

Amazon is relatively expensive compared to its industry peers. AMZN’s forward non-GAAP P/E of 40.50x is 155.3% higher than the 15.87x industry average. The stock’s forward Price/Sales and Price/Book multiples of 2.75 and 6.36 are considerably higher than the respective industry averages of 0.95 and 2.66.

Now, let’s talk about the company’s growth prospects. AMZN’s total net sales increased 13.9% year-over-year to $169.96 billion for the fourth quarter that ended December 31, 2023. Its operating income grew 382.6% from the year-ago value to $13.21 billion. The company’s net income and EPS significantly grew year-over-year to $10.62 billion and $1, respectively.

Analysts expect AMZN’s revenue for the fiscal year 2024 to increase 11.6% year-over-year to $641.44 billion. The company’s EPS for the ongoing year is expected to grow 44.6% from the previous year to $4.19. Also, the company topped consensus revenue and EPS estimates in each of the trailing four quarters.

AMZN’s stock has surged nearly 23% over the past six months and more than 65% over the past year.

Meta Platforms, Inc. (META)

Formerly known as Facebook, Inc., META, with a market cap of $1.23 trillion, is a technology conglomerate with key products, including Facebook, Instagram, WhatsApp, and Messenger. 

In terms of forward non-GAAP P/E, META is trading at 28.10x, 9.1% higher than the industry average of 25.74x. Its forward EV/Sales of 7.15x is 141.4% higher than the industry average of 2.96x. Also, its forward Price/Sales of 7.32x is 146.8% higher than the industry average of 2.97x.

META posted revenue of $39.17 billion for the fourth quarter that ended December 31, 2023, up 24.7% year-over-year. Its income from operations rose 156% year-over-year to $16.38 billion. Its net income grew 201.3% from the year-ago value to $14.02 billion. The company reported earnings per share attributable to Class A and Class B common stockholders of $5.33, up 202.8% year-over-year.

For the first quarter of 2024, META expects total revenue to be in the range of $34.50-37 billion. For the full year 2024, the management expects total expenses to be in the range of $94-99 billion, unchanged from the prior outlook.

Street expects Meta’s revenue and EPS for the fiscal year (ending December 2024) to grow 17.4% and 32.4% year-over-year to $158.39 billion and $19.69, respectively. For the fiscal year 2025, the company’s revenue and EPS are expected to increase 12.2% and 15.2% from the previous year to $177.68 billion and $22.96, respectively.

The stock has gained approximately 45% over the past three months and more than 170% over the past year.

Tesla, Inc. (TSLA)

With a $638.39 billion market cap, TSLA designs, develops, manufactures, leases, and sells electric vehicles (EVs) and energy generation and storage systems internationally. The company operates in two segments: Automotive; and Energy Generation and Storage. 

In terms of forward non-GAAP P/E, TSLA is trading at 62.61x, 294.6% higher than the industry average of 15.87x. The stock’s forward Price/Sales of 5.75x is 507.9% higher than the industry average of 0.95x. Likewise, its forward Price/Cash Flow of 48.16x is 282.9% higher than the industry average of 10.54x. Along with valuation metrics, assessing TSLA’s fundamentals and growth prospects is essential.

During the fourth quarter that ended December 31, 2023, TSLA’s revenues decreased 3% year-over-year to $25.17 billion. Its income from operations declined 47% from the year-ago value to $2.06 billion. Its adjusted EBITDA was $3.95 billion, down 27% from the prior year’s period.

In addition, the company’s non-GAAP net income and EPS declined 39% and 40% from the prior year’s quarter to $2.49 billion and $0.71, respectively. But its free cash flow came in at $2.06 billion, an increase of 45% year-over-year.

Analysts expect TSLA’s revenue for the first quarter (ending March 2024) to increase 9.3% year-over-year to $25.49 billion. However, the consensus EPS estimate of $0.68 for the current quarter indicates a 20.5% decline year-over-year. Additionally, the company missed consensus revenue and EPS estimates in three of the trailing four quarters, which is disappointing.

For the fiscal year 2024, the company’s revenue and EPS are expected to grow 14.7% and 2.6% from the prior year to $110.97 billion and $3.20, respectively. TSLA’s shares have surged nearly 20% over the past nine months.

Bottom Line

Over the past decades, mega-cap stocks have demonstrated periods of outperformance and underperformance, reflecting several shifts in market dynamics and economic conditions.

While the largest companies in the S&P 500 have seen “unrelenting” outperformance over the past decade, history shows the biggest stocks generally fail to keep up their market-beating run. Citing data from 1957-2023, co-head of asset allocation Ben Inker and team member John Pease found that nine of the ten largest S&P 500 stocks underperformed on average.

“The historical underperformance of the top 10 comes down to the two main sources of return – valuation expansion and fundamental growth – being harder to achieve than for your average company. The largest stocks generally become the largest by way of becoming expensive, and this anti-value tilt has historically been quite costly, explaining most of these companies’ poor relative returns,” Inker and Pease wrote.

Since 1957, the ten biggest stocks in the S&P 500 underperformed an equal-weighted index of the remaining 490 stocks by 2.4% per year. However, the last decade seems to notably depart from that downtrend, with the largest ten outperforming by an impressive 4.9% per year on average.

So far, in 2024, the following four stocks in the Magnificent Seven are beating the S&P 500: Nvidia, Meta, Amazon, and Microsoft.

For investors considering buying, holding, or selling the Magnificent Seven stocks, it is crucial to assess each stock individually based on its fundamentals, valuation, growth prospects, and risk factors.

What Does Uber’s $7 Billion Share Repurchase Plan Mean for Investors?

Uber Technologies, Inc. (UBER) recently announced a stock buyback strategy for the first time in the company's history. The company's board of directors had authorized $7 billion in share repurchases. Investors cheered the plan, evidenced by UBER’s share price rise of about 14% on February 14, despite the nationwide strike staged by Uber drivers demanding fair pay.

UBER’s Chief Financial Officer Prashanth Mahendra-Rajah said the repurchase plan “is a vote of confidence in the company’s strong financial momentum.” He added, “We will be thoughtful as it relates to the pace of our buyback, beginning with actions that partially offset stock-based compensation and working toward a consistent reduction in share count.”

UBER joins the league of tech companies, planning initiatives to enhance shareholder returns. Also, last week, the company’s CEO, Dara Khosrowshahi, said 2023 was an inflection point, marking a possible capital return to shareholders.

Stock repurchases allow firms to utilize their cash reserves to buy back their shares from the market. This reduces the total number of outstanding shares and escalates the ownership fraction for existing shareholders. Consequently, net earnings are divided among fewer shares, leading to an enhancement of earnings per share. Such a buyback could escalate UBER's Return on Equity, a parameter highlighting the proficiency with which a company generates profits from its equity.

As of December 31, 2023, UBER had expended $1.94 billion on stock-based compensation. Furthermore, in conjunction with the share count reduction, the recent buyback was aimed at counterbalancing the equity-based compensation.

The buyback revelation arrived hot on the heels of UBER's fourth-quarter results announcement, surpassing Wall Street's top- and bottom-line predictions. Khosrowshahi referred to 2023 as a landmark year of "sustainable, profitable growth" for UBER and credited this success to a shift in consumer expenditure from retail to services.

Furthermore, special mention goes to UBER’s fiscal earnings of 2023, marking its debut annual profit since its public listing. The San Francisco-based company recorded a $1.89 billion net profit on revenue worth $37.28 billion for the year ending December 31, 2023. Its operational income was $1.11 billion, compared to a loss from operations of $1.83 billion. Moreover, adjusted EBITDA increased 137% year-over-year to $4.05 billion.

UBER’s mobility segment revenue for the fiscal fourth quarter of 2023 was up 34% year-over-year, primarily attributable to the expansion of mobility gross bookings triggered by a 24% year-on-year elevation in trip volumes. Its delivery segment’s revenue was up 6% from the year-ago quarter.

For the fiscal first quarter of 2024, the company anticipates its gross bookings between $37 billion and $38.5 billion, while its adjusted EBITDA is projected to come between 1.26 billion and $1.34 billion.

The company announced new long-term financial targets indicating an anticipated surge in bookings, adjusted pre-tax earnings, and free cash flow that surpasses previous predictions.

The company expects its Gross Bookings (GBs), driven by a rise in Monthly Active Platform Consumers (MAPCs) and increased usage frequency, to experience mid-to-high teen CAGR growth over the following three years. Concurrently, it projects a high 30s to 40% adjusted EBITDA CAGR rise for the same period, achievable through scaling GBs and realizing annual margin expansion within both the Mobility and Delivery segments. The lower limit of the company's target implies a potential increase in free cash flow, amounting to approximately $9.3 billion in 2026, a near-tripling from last year's total.

Furthermore, UBER anticipates its FCF conversion to surpass 90% of adjusted EBITDA, inclusive of insurance reserve adjustments. Cash tax is predicted to be substantially below the accrual due to loss carryforward utilization.

These financial projections have fortified analysts' optimistic views on the company's potential for enhancing MAPCs and platform frequency, intensifying even more bullish analyses. Wedbush analysts, for instance, have raised their 12-month price target to $85. Gerber Kawasaki Wealth and Investment Management’s CEO and president, Ross Gerber, who is also an investor in the company, has commended it as a "fire-breathing dragon."

Echoing these positive sentiments, New Street Research Analyst Pierre Ferragu affirms UBER's growing strength in the ride-hailing market, saying, “Uber is really playing out the way we were expecting," and maintains a ‘Buy’ rating on the company's stock.

Wall Street analysts expect the stock to reach $80.41 in the next 12 months, indicating a potential upside of 1.6%. The price target ranges from a low of $62 to a high of $95.

Bottom Line

Once a noteworthy unicorn of Silicon Valley, UBER was previously valued much less than its present value, providing artificially inexpensive taxi and food delivery services.

However, a change of management, an initial public offering, and a climate unfavorable to unprofitable market share pursuit prompted UBER to revise its strategies.

Much of UBER's transformation occurred under Dara Khosrowshahi, the former chief executive of Expedia Group Inc., who took over from co-founder Travis Kalanick in 2017. Kalanick's assertive leadership style incurred UBER a reputation marred by extravagant spending, PR disasters, corrosive workplace culture, and a combative relationship with local authorities.

Khosrowshahi redirected UBER beyond its cornerstone ride-sharing into sectors like restaurant and grocery delivery and advertising, subsequently enhancing profit margins.

The pandemic made a business re-evaluation necessary, as stay-at-home measures dampened ridesharing demand. Transitioning toward a more asset-light model, UBER divested its loss-incurred bike and scooter ventures and scaled down its capital-intensive autonomous vehicles division. Meanwhile, investment in the Uber Eats service allowed it to benefit from the lockdown-induced surge in food deliveries despite the slump in shared rides. This transition vastly strengthened UBER's market value last year, which escalated to over $162 billion following February 14 gains.

UBER has effectively utilized economies of scale in various markets domestically and globally, aiming for further expansion into sectors like delivery, inexpensive ridesharing options such as two-wheelers, and corporate travel products.

Another sign of UBER's improving financial health is the initiation of stock buybacks after years of amassing a $30.59 billion accumulated deficit due to unrestrained spending aimed at gaining market share and penetrating new markets.

Dividends may be forthcoming, but for now, the beginning of buybacks suggests the company might not be just a conventional tech startup depleting its cash reserves with limited results.

The buyback strategy could convey to market watchers that UBER perceives its shares to be undervalued and that it possesses robust financial prospects. By returning capital to shareholders, the company could bolster investor satisfaction and loyalty while attracting investors seeking greater returns.

The recent surge in growth and profitability implies a positive turnaround for the company. Its share price is nearing record highs concurrent with continuing revenue expansion.

Projections of an increase in orders starting from early 2024 underscore the expected continuity of the upward trend. UBER's bottom line appears to have been favorably impacted by cost control measures and economies of scale. The upward trend is expected to continue, provided the company remains on its current path and keeps up with developments in the autonomous driving sector.

Beyond its positive attributes, investors should take heed of UBER's Quick Ratio, which stands at 0.93. This could suggest a potential shortfall in quick assets to cover all its short-term liabilities. As of December 31, 2023, the company also exhibited long-term debt amounting to $9.46 billion. Against this figure, it holds cash, cash equivalents and short-term investments worth $5.41 billion, a factor not to be overlooked by investors.

Unraveling MSFT's Market Dominance: Investor Strategies Amid Record Valuation

Microsoft Corporation (MSFT) achieved an exceptional milestone when it ended last week with a market capitalization of $3.125 trillion, becoming the world’s most valuable publicly traded company ever.

The tech company surpassed the previous record set by Apple Inc. (AAPL) when it reached a market cap of $3.09 trillion in July, as per Dow Jones Market Data. The iPhone marker ended Friday with a $2.916 trillion market cap.

MSFT’s stock has surged more than 28% over the past six months and nearly 52% over the past year, thanks to immense enthusiasm around its AI potential.

Microsoft Market Cap Milestone: Implications and Opportunities

MSFT’s historic market capitalization milestone holds significant implications for the technology sector, investors, and the global economy. To begin with, it underscores the rising dominance of large tech companies within the stock market and the broader economy.

As Microsoft becomes one of the world’s most valuable companies, it solidifies the technology sector’s influence and sheds light on the importance of innovation and digital transformation across several industries. The company’s growing investments in AI, cybersecurity, and sustainable technologies further contribute to global competitiveness and economic growth.

For investors, MSFT’s recent milestone signals opportunities for potential growth and value creation. It offers investors exposure to a diverse range of high-growth segments, such as AI, cloud computing, gaming, and productivity software. This broad business portfolio allows investors to benefit from Microsoft’s continued innovation, market leadership, and resilience in different economic conditions.

Moreover, the tech giant’s solid financial position and cash flow generation provide stability and potential for dividend growth, making it extremely attractive to income-focused investors seeking stable returns. In addition, MSFT’s strategic partnerships and acquisitions may create opportunities for investors to capitalize on synergies, expansion into new markets, and completive advantages.

In October 2023, Microsoft completed the acquisition of Activision Blizzard, a well-known video game publisher. This deal provides MSFT with a hefty portfolio of video game franchises, including Call of Duty, Crash Bandicoot, StarCraft, and Warcraft. This acquisition aligns with the company’s strategic focus on gaming and positions it for long-term growth and leadership in the gaming industry.

Talking about the ripple effects of Microsoft’s milestone, competitors may intensify their efforts to innovate, compete, or collaborate with the company in response to its market dominance and strategic moves. Consumers may benefit considerably from increased competition and enhanced accessibility of innovative tech products and services, boosting further tech adoption in daily life.

Also, policymakers may scrutinize large tech firms’ market power, data privacy practices, and potential antitrust concerns, shaping regulatory frameworks and industry dynamics.

Now, let’s discuss several factors that could impact MSFT’s performance in the near term:

Continued Progress In AI

“We’ve moved from talking about AI to applying AI at scale,” Satya Nadella, chairman and CEO of Microsoft, said in the last earnings release. “By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector.”

Over the past year, Microsoft has made significant advancements in integrating AI into its products and tools.

In January 2023, Microsoft announced a multiyear, multibillion-dollar investment with ChatGPT-maker OpenAI. The deal marked the third phase of the partnership between the two companies after MSFT’s previous investments in 2019 and 2021. The renewed partnership would accelerate breakthroughs in AI and help the companies commercialize advanced technologies in the future.

“We formed our partnership with OpenAI around a shared ambition to responsibly advance cutting-edge AI research and democratize AI as a new technology platform,” said CEO Satya Nadella.

In February, MSFT launched an AI-powered Bing search engine and Edge browser with built-in support for OpenAI’s ChatGPT to help people get more from search and the web. The new Bing search version could deliver better searches, more accurate answers, a new chat experience, and the ability to generate content.

In March, the company further announced the addition of AI tools to its Office productivity applications and introduced a feature called Microsoft 365 Copilot. The Copilot feature uses next-gen AI to automate and simplify tasks and offer suggestions. Starting September 26, Copilot begins to roll out its early form as part of its free update to Windows 11.

Beginning November 1, Microsoft 365 Copilot is generally available for enterprise customers, along with Microsoft 365 Chat. Also, this AI-powered Copilot is added to the company’s cybersecurity offerings and GitHub service for software developers.

On November 8, Microsoft-owned GitHub introduced a Copilot assistant that can assist developers in working with their employers’ internal code, priced at $39 per person a month. This new launch might help the company boost profitability in its cloud business unit by taking advantage of its partner OpenAI’s technology.

On November 15, the tech giant debuted its first custom AI chip. At its Ignite conference, MSFT said the chip, Maia 100, is the first in its planned Azure Maia AI accelerator series. In addition to the Maia 100, the company introduced its first custom Arm-based Azure Cobalt, a cloud-native chip optimized for performance, power efficiency and cost-effectiveness for general-purpose workloads.

The chip will be used for cloud-based training and inferencing for AI models. With these chips, Microsoft is on par with rivals Alphabet Inc. (GOOGL) and Amazon.com, Inc. (AMZN), which have also developed their custom chips to run competing cloud platforms. MSFT added that it partnered with ChatGPT developer OpenAI to test its Maia 100 accelerator and will use those lessons to build future chips.

On January 11, 2024, Microsoft announced new generative AI and data solutions and capabilities for retailers. The company offers personalized shopping experiences through copilot templates on Azure OpenAI Service, retail data solutions in Microsoft Fabric, copilot features in Microsoft Dynamics 365 Customer Insights, and the Retail Media Creative Studio.

Robust Last Reported Financials

For the fiscal 2024 second quarter that ended December 31, 2023, MSFT reported total revenue of $62.02 billion, surpassing the analysts’ estimate of $61.13 billion. That was up 17.6% from the previous year’s quarter.

Microsoft’s Intelligent Cloud segment generated $25.88 billion in revenue, an increase of 20.3% year-over-year. The division comprises Azure, public cloud, SQL Server, Nuance, Windows Server, GitHub, and enterprise services. Within the segment, revenue from Azure and other cloud services rose 30%.

Six points of the Azure and other cloud services growth were tied to AI, Amy Hood, MSFT’s finance chief, said on a conference call with analysts.

Also, MSFT’s Productivity and Business Processes segment posted revenue of $18.59 billion, up 13.2% year-over-year. This business unit includes Microsoft 365 productivity app subscriptions, LinkedIn, and Dynamics enterprise software. The More Personal Computing segment contributed $16.89 billion in revenue, an increase of 18.6%.

The software company’s gross margin rose 20.2% from the year-ago value to $42.40 billion. Its operating income increased 32.5% year-over-year to $27.03 billion. Its net income grew 33.2% from the prior year’s period to $21.87 billion. Microsoft posted earnings per share of $2.93, compared to the consensus estimate of $2.20, and up 33.2% year-over-year.

Furthermore, cash inflows from operations came in at $18.85 billion for the second quarter, an increase of 68.7% year-over-year. As of December 31, 2023, MSFT’s total assets amounted to $470.56 billion, compared to $411.98 billion as of June 30, 2023.

For the fiscal 2024 third quarter, Microsoft expects revenue between $60 billion and $61 billion. The company sees lower-than-expected revenue and operating expenses during the quarter.

Impressive Historical Growth

Over the past three years, MSFT’s revenue grew at a CAGR of 14.1%. Its EBITDA and net income improved at respective CAGRs of 18.1% and 17.2% over the same period. In addition, the company’s EPS increased at a CAGR of 18.1% over the same timeframe, and its levered free cash flow improved at 18.9% CAGR.

Furthermore, the company’s total assets increased at a CAGR of 15.7% over the same period.

Attractive Dividend

On November 28, 2023, MSFT’s Board of Directors approved a quarterly cash dividend of $0.75 per share on the company’s common stock. The dividend is payable on March 14, 2024, to shareholders of record on February 15, 2024. The company pays an annual dividend of $3, translating to a yield of 0.71% at the current share price.

Moreover, MSFT’s dividend payouts have increased at a CAGR of 10.2% over the past five years. Microsoft has raised its dividends for 19 consecutive years.

Optimistic Analyst Estimates

Analysts expect MSFT’s revenue for the third quarter (ending March 2024) to increase 15.2% year-over-year to $60.87 billion. The consensus EPS estimate of $2.83 for the current quarter indicates an improvement of 15.5% year-over-year. Moreover, the company has topped consensus revenue and EPS estimates in all the trailing four quarters, which is remarkable.

For the fiscal year ending June 2024, Street expects Microsoft’s revenue and EPS to grow 15.3% and 19.2% year-over-year to $244.23 billion and $11.69, respectively. Also, the software maker’s revenue and EPS for the fiscal year 2025 are expected to increase 14.2% and 13.7% from the previous year to $278.98 billion and $13.29, respectively.

Solid Profitability

MSFT’s trailing-12-month gross profit margin of 69.81% is 43.2% higher than the 48.76% industry average. Likewise, the stock’s trailing-12-month EBIT margin and net income margin of 44.59% and 36.27% are considerably higher than the industry averages of 4.74% and 2.23%, respectively.

Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 39.17%, 20.77% and 17.54% favorably compared to the respective industry averages of 1.99%, 2.44%, and 0.80%. Also, its trailing-12-month levered FCF margin of 25.78% is 183.4% higher than the industry average of 9.10%.

Analysts Raised Their Microsoft Price Targets

Several Wall Street analysts have raised their price targets on MSFT’s stock. D.A. Davidson analyst Gil Luria added $85 to his Microsoft price target, taking it to a Wall Street high of $500 per share. He seems impressed by the company’s near-term guidance, which highlighted “increasing demand for Microsoft Cloud as well as positive margin expansion even with increasing capital expenditures related to the build-out of their AI infrastructure.”

“Microsoft has continued to show they are a strong share gainer in this new AI landscape, which is largely driven by the company's ability to build compelling generative AI applications throughout their product suite as well as capture new AI-related workloads on Azure,” said Luria.

Meanwhile, CFRA analyst Angel Zino increased the MSFT price target by $35 to $455 a share, citing in part the value created for the company’s Office 365 division with the addition of AI assistant Copilot.

Wolfe Research analyst Alex Zukin reiterated a Buy rating on MSFT on January 30 and set a price target of $510. Alex Zubin has given Microsoft a Buy rating due to several factors, including its strong financial performance and promising growth in key areas.

Further, Jefferies analyst Brent Thill maintained their bullish stance on MSFT stock, giving it a Buy rating on January 26. Thill points to the tech giant’s expected year-over-year constant currency growth, which is projected to grow from 12% to 15%, suggesting that it is poised to achieve these targets with the aid of Activision Blizzard’s contributions.

Additionally, Thill believes that Microsoft is well-poised to benefit from the rising emphasis on AI, which is coupled with favorable cloud trends, underpinning the stock’s upside potential.

Bottom Line

MSFT beat on the top and bottom lines in the second quarter of fiscal 2024, driven by growth in intelligent cloud business. Microsoft has led groundbreaking advances such as partnership with OpenAI and the integration of ChatGPT capabilities into products and tools used to search, collaborate, work, and learn.

Further, as MSFT accelerates into AI, it is rethinking cloud infrastructure to ensure optimization across every layer of the hardware and software stack. The company’s commitment to innovations across various segments like AI, edge computing, and mixed reality positions it for long-term growth and market leadership.

Gartner forecasts worldwide software spending to reach $1.03 trillion in 2024, an increase of 12.7% year-over-year. Robust spending on software among individuals and enterprises will be a primary tailwind for Microsoft. The company’s focus on providing solutions for digital transformation, including AI, cloud-based, cybersecurity, and collaboration tools, aligns with the evolving needs of businesses seeking to modernize their operations.

Moreover, the software maker’s solid financial position, including consistent revenue growth and strong cash flow generation, provides it with enhanced flexibility for strategic investments, acquisitions, and returning value to shareholders via dividends and share buybacks.

Driven by optimism surrounding its AI potential, MSFT’s shares have surged more than 50% over the past 12 months.

Microsoft dethroned Apple as the world’s most valuable company ever, ending last week with a market cap of $3.125. Amid MSFT’s record valuation, investors may adopt different strategies to navigate the market dynamics and capitalize on potential opportunities. Long-term investors may choose to maintain their positions in MSFT, leveraging its solid fundamentals and growth prospects.

In addition, income-focused investors may find Microsoft appealing for its attractive dividend payouts and potential for dividend growth. Tactical traders can also take advantage of short-term trading opportunities in this stock, capitalizing on market sentiment, technical indicators, or macroeconomic trends.

Investor Insights Into Ark's $40M PINS Investment – Buy or Wait?

The San Francisco-based digital content provider Pinterest, Inc. (PINS) recently experienced a spike in attention on social media and financial news websites following the company’s mixed fourth-quarter results, with the bottom line surpassing the analysts' consensus estimates but the revenue missing the same.

The image-browsing platform's shares experienced a sharp decline of approximately 10% following the release of its fourth-quarter results, primarily due to the fiscal 2024 first-quarter guidance falling short of Wall Street's expectations.

Cathie Wood-led Ark Invest purchased $40.3 million worth of PINS shares last week through ARK Innovation ETF (ARKK) (882,085 shares), ARK Next Generation Internet ETF (ARKW) (175,911 shares), and Ark Fintech Innovation ETF (ARKF) (79,485 shares).

Ark Invest's bold purchase appears to underscore confidence in PINS' long-term prospects despite recent hurdles. This optimism stems in part from the silver linings in PINS' quarterly results.

While PINS failed to meet its projection, revenue grew 12% year-over-year, reaching $981 million, marking continued double-digit growth in the second half of 2023 and its fourth consecutive quarter of acceleration in its top-line growth rate. With predictions for the first quarter of fiscal 2024 indicating a minimum of 15% revenue growth, PINS is potentially on track for yet another quarter of revenue growth.

Its sizable growth in its user base, noting 498 million global monthly active users for fiscal year 2023, reflects a 10.7% increase year-over-year. PINS' notable improvements in profitability were also highlighted. Its overall costs and expenses for the fourth quarter dropped by 9.9% compared to the prior-year quarter.

Through efficient cost management, including a 24.1% year-over-year reduction in sales and marketing expenses, PINS recorded a net income of $201.18 million for the quarter, resulting in a robust profit margin of 20.5%. Additionally, in 2023, PINS net cash provided by operating activities stood at $612.96 million compared to the previous year's total of $469.20 million.

Moreover, PINS recently commenced an advertising partnership with Amazon and also announced an upcoming collaboration with Alphabet-owned Google during its fourth-quarter earnings call. This latest partnership with Google would be PINS’ second third-party advertising partner on the social network.

While PINS management acknowledged that third-party partnerships had not substantially impacted fourth-quarter results, they noted a significant contribution to the current quarterly growth, anticipating this trend would continue. CEO Bill Ready further confirmed that the demand for third-party advertising is scaling as planned.

A significant 80% of PINS’ user base hails from outside the U.S., although this demographic generates only 20% of the company's revenue. The new alliances with tech behemoths Amazon and Google are predicted to ramp up user engagement. By tapping into the vast user bases of both Amazon and Google, PINS could potentially reach fresh audiences, subsequently expanding its user base and generating considerable growth in both user figures and platform activity. Ultimately, this will likely result in a rise in average revenue per user.

Additionally, these partnerships could enhance opportunities for monetization through advertising, affiliate marketing, and e-commerce transactions. This strategy has the potential to increase both revenue and profitability significantly.

Successfully implemented, these collaborations could consolidate PINS' competitive foothold in the digital landscape. The true success, however, will hinge on efficient execution, continued innovation, and the ability to leverage synergies among all parties involved.

Despite PINS' accelerating growth and promising upcoming partnerships, its recent stock downturn could be seen as a buying opportunity for long-term investors – an analysis backed by Ark’s substantial $40 million investment in PINS.

JP Morgan analysts echo this optimism, forecasting a robust 2024 performance for PINS. They cited new partnerships with Amazon and Google, expansion in regions beyond the U.S., and investments in new PINS platform products as reasons for their positive outlook. Jeffries analysts were similarly bullish on PINS, predicting that "the fastest rev growth rates are still ahead."

For the fiscal first quarter ending March 2024, PINS’ revenue and EPS are expected to increase 16.2% and 64% year-over-year to $700.23 million and $0.13, respectively.

Moreover, Wall Street analysts expect the stock to reach $43.11 in the next 12 months, indicating a potential upside of 16.9%. The price target ranges from a low of $33 to a high of $50.

Bottom Line

PINS is regarded as a distinct social media platform servicing a unique demographic compared to TikTok or Snapchat. It exclusively caters to individuals' interests and topic-oriented content, setting it apart from its counterparts. The platform's unique structure has garnered significant interest from advertisers, making PINS one of their top preferences. The company has successfully developed comprehensive solutions for advertisers while retaining major brand partners.

Financially stable and fundamentally robust, PINS presents an attractive option for institutional investors. Aside from Ark Investment, multiple institutions have adjusted their holdings in PINS’ stock. Institutions hold roughly 87% of PINS shares. Of the 775 institutional holders, 364 have increased their positions in the stock. Moreover, 124 institutions have taken new positions (15,034,165 shares).

PINS shows promise with revenue growth, favorable user trends, rising profitability, increasing popularity among Gen Z users domestically and abroad, and collaborations with tech giants. These factors make the platform highly appealing.

However, investors should pay heed to its higher-than-industry valuations. Investors need to determine their willingness to partake in long-term investment at no dividend payment and a forward non-GAAP P/E of 27.42x.

While some may perceive this as overpriced, others might find its valuation metrics, for instance, forward Price/Sales multiple of 6.99, justifiable based on anticipated future revenue growth.

Given these considerations, investors should proceed cautiously with any investments in PINS.