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You shouldn't connect this to the health of the market. There's a big chance that a lot of people will lose money in GME, which concerns him, because the regulators will get involved. The economy needs healthy markets and GME is unhealthy. There's something funny going on here and we need to get to the bottom of it.
He bought more Amazon. The economy will continue to be strong and Amazon will benefit across all fronts: AWS, retail and logistics. Trades at a reasonable 35x with a good growth rate ahead. He expects them to beat earnings estimates. He now owns a big position. The chart looks like it will break out.
Growth has slowed down and profitability has been sliding since 2018. Its valuation of 7X forward earnings reflects a lot of these concerns, and it trades just above book value at 1.1X price to book. Cash flows are mostly used to pay its dividend, and it has been a net issuer of debt over the past two years. We do not like its recent momentum, following a string of weak earnings results. We would prefer to wait until next earnings to assess if a floor can be put into its price, but for now the cheap valuation could become even cheaper if results continue to disappoint.
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NR’s total debt/equity is 100%, which means, CNR has one dollar of debt for every dollar of equity. We don’t think this leverage level is excessive given the stability and cash flow of the business. Also, we think net debt/EBITDA is a better metric to evaluate companies that generate consistent cash flow over the years, CNR’s net debt/EBITDA is 2.2x, moderately leveraged compared to CP and UNP of 3.2x and 2.7x, respectively. We are still very comfortable with CNR’s overall debt level.
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HOOD was largely written off following its IPO and subsequent flame-out, but has started to put things together nicely now. It has been losing money but will be profitable this year (53c per share), with 56c expected next year. It is cash flow positive and the stock momentum is very positive. The last quarter was excellent and blew away estimates. It is 43X earnings--expensive, but not crazily so considering its growth. Robinhood's recent momentum adds fuel to a growing and reengaging customer base, with the accelerated pace of net deposits and Gold-subscription growth the strongest year to date in the most recent monthly data available. Sustaining it is key, with promotions a likely support after fueling the robust 1Q pace that helped lift monthly active users to 13.7 million in 1Q -- the highest since 2Q22. Mr. Tenev is a huge crypto advocate, and has done a decent job growing the company so far. He has a lot to learn as a newly-public CEO, and has certainly made lots of mistakes. But we do think he is improving. We do not really know Mr. Bhatt's story very well. Bloomberg shows insiders at about 4%.
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Market Update:
The Bank of Canada cuts key interest rates for the first time in more than four years with a quarter-percentage-point cut to 4.75 percent, marking a major turning point in the fight against inflation. In addition, the European Central Bank (ECB) cuts interest rates by 25 basis points to 3.75%, joining other countries to unwind the steepest rate hikes used to tamper post-pandemic inflation. The Canadian dollar was 73.16 cents USD. The U.S. S&P500 ended the week up 2.1%, while the TSX was up 0.4%.
A lot more greens this week than reds. Consumer discretionary edged up 3.0%. Consumer staples, industrial and real estate gained 2.5%, each. Technology gained 1.8%, while financials ended the week flat. Energy and materials edged down by 4% and 1.2%, respectively. The most heavily traded shares by volume were Nevada Copper, Bitfarms, and Cenovus Energy.
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It has a lot more leverage to pull. Share are -13% in the last 3 months. They beat on revenue and EBITDA, though with slight weakness in Latin America, while inflation has been troublesome. A plus is the abundance of drivers.