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Take Two | TTWO & GTA VIIs TakeTwo Interactive Software Fairly Valued? We use what is known as a 2 stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Present Value of 10-year Cash Flow (PVCF) = US $9.1b The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.2%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 8.5%. The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$27b. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of US$139, the company appears about fair value at a 14% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Take-Two Interactive Software as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.5%, which is based on a levered beta of 1.071. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Valuation is only one side of the coin in terms of building your investment thesis, and it shouldn't be the only metric you look at when researching a company. DCF models are not the be-all and end-all of investment valuation. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. For Take-Two Interactive Software, we've put together three pertinent items you should explore: Risks: To that end, you should be aware of the 1 warning sign we've spotted with Take-Two Interactive Software Future Earnings: How does TTWO's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! long story short Using the 2 Stage Free Cash Flow to Equity, Take-Two Interactive Software fair value estimate is US$162 and with US$138 share price, Take-Two Interactive Software appears to be trading close to its estimated fair value
NASDAQ:TTWOLong
by moonypto
14
NIKE | JUST BUY ITNike topped Wall Street estimates for first quarter profit on Thursday as higher prices of its sneakers and apparel helped offset a hit from waning demand and persistent cost pressures, sending its shares up about 8% in extended trading. Nike (NKE) is the largest apparel company in the world, with leading positions across different categories and regions. The company is currently facing challenges such as elevated inventory levels, inflationary pressure, and slow growth in China. Such issues have resulted in the stock dropping by 19% YTD. Although these headwinds are serious, I believe the company's durable brand, leading position, and high-quality products should allow it to come out stronger on the other end. 'Nike is a brand that is of China and for China' -John Donahoe Like every other apparel and retail company, Nike thought post-pandemic demand would continue, so it increased production, which led to inventory levels hitting an all-time high in Q1-FY22, but as we know, that wasn't the case. Although NKE's inventory level is down from all-time highs, investors are still concerned, especially when inflation is eating into people's pockets and growth in China is slowing. Inflation in North America has come down to 3.7% from its peak in June at 9.1%, but it is still a concern in Europe (6.1% in the EU union). As you can see from the graph below, sales in China have been decreasing for the past two years. There are multiple ways one can explain this: COVID related lockdowns resulted in the shuttering of some stores. Plus, Nike and other apparel companies started facing a backlash in China in 2021 due to the alleged use of forced labor in cotton production. However, if the company is successful at expanding into China, then we can expect a lot of room for growth. Now that I have addressed the problems that are facing Nike, let me explain why I believe the company will overcome them. Nike sponsors the most well-known athletes such as Cristiano Ronaldo (+600 million Instagram followers), LeBron James, Michael Jordan, the late Kobe Bryant, Rafael Nadal, Tiger Woods, and more. This has helped the company build a loyal customer base and further boost its brand equity. With a loyal customer base comes pricing power, and as Warrant Buffet said: Nike's pricing power is no joke. Its shoes have reached a level where they are considered luxury, with some selling for more than the $10,000 mark. In 2017, Nike's median price for a shoe regardless of gender was $80, which is $10 more than its biggest competitor, Adidas. I know 2017 was a long time ago, but shoe prices have increased since then, and I believe Nike is still in the lead given their dominant market position. Plus, Nike targets mostly the age demographic of 25 and 34. These are people who have not settled in yet. They just graduated college with extra income to spend on things such as expensive shoes. I believe this pricing power will continue as the company continues to sponsor talented upcoming athletes to build trust with customers. Another way to measure Nike's brand power is by comparing its marketing spending against its peers. Nike's marketing budget in FY 23 was $4 billion, or 7.9% of revenue. On the other hand, Adidas spent 38% and Under Armour 11%. These companies have been allocating more of their revenue towards marketing but have experienced nowhere near the growth Nike has. NKE's association with well-known athletes in the U.S. has allowed them to have a 96% awareness rate, 53% usage rate, and 43% loyalty rate. Going forward, I expect the company's brand will remain high-quality due to sponsorships, high-quality products, and market-leading technology. Founded by Bill Bowerman and Phil Knight in 1994, Nike has come a long way from its first store in Portland, Oregon. As of May 31, 2023, the company had 369 stores within the U.S. and 663 internationally, operating in more than 190 countries. Stores include franchised stores and third-party retailers. The firm owns multiple brands such as Jordan, Converse, and Nike. The company derives sales from four main segments and across four regions. I excluded Converse (4.74% of revenue) from the graphs below because I wanted to focus on the Nike brand. The company's app, NikePlus, has more than 160 million users. On a trailing free cash flow basis, the stock yields over 3.3% relative to its enterprise value. My ~$104 May 24 PT implies a 28.00x P/E and 20.00x EV/EBITDA. Both multiples are below the ten-year NTM average and in line with the median. I project revenue to compound at a rate of 6.47% over the next three years, driven by market growth and new products, while shares decrease at a rate of 2.67%, driven by stock buybacks. The company is forecast to spend $12.1 billion on share repurchases over the same period. Additionally, I believe the company still has room for margin improvement driven by price increases and DTC mix (direct-to-consumer). In FY 2019, DTC sales constituted 31% of revenue, and that figure stood at 44% in FY 2023. Although NKE is trading at a premium compared to peers, I believe it is reasonable considering its scale, high-quality products, and strong brand. The first risk that I would associate with NKE is competition. The company competes with conglomerates such as Addidas, Puma, New Balance, Under Armour, and more. Additionally, e-commerce has made it very easy for anyone to start their own footwear brand. Other key risks to my rating include supply chain distributions, a recessionary environment, and slow growth in China. Finally, we can point out that NKE appears technically oversold heading into the Q1 earnings report. From the chart , there has been relentless selling pressure over the last four months since NKE was trading at $130 per share. The potential that NKE delivers a "good" earnings report with encouraging guidance, brushing aside fears the company is facing a deeper deterioration in its operating environment could be enough for shares to reprice higher. Simply put, our take is that NKE bears have gone too far, opening the door for bulls to take control. The bottom line is that Nike is currently experiencing headwinds such as elevated inventory levels, inflationary pressure, and slow growth in China. Every business goes through similar challenges at one time or another, but I believe Nike is well-positioned to overcome these issues due to its durable brand, high-quality products, and leading position. I expect the company to keep endorsing high-quality athletes to elevate its brand equity and further strengthen its pricing power. My valuation implies a price target of ~$104 for May 31, 2024. If you into NIKE brand you can watch Air film and read Shoe Dog book as well
NYSE:NKELong
by moonypto
20
ADVANCED MICRO DEVICES - Ready for a reversal?NASDAQ:AMD is retesting a significant horizontal structure and we might see a bullish reversal soon, considering that AMD already created a correction of -45% over the past couple of months. Click chart above to see detailed analysis AMD is clearly one of these "AI" hype stocks which is now coming back to normal levels after also NVIDIA and other tech stocks are correcting a bit. AMD has been trading in a rising channel formation since the "Covid" crash back in 2020. With the recent break and retest, we could definitely see a bullish reversal soon. Levels to watch: $120 Keep your long term vision, Philip - BasicTrading
NASDAQ:AMDLong
by basictradingtv
5
Is MSFT Stock A Buy, Sell, or Hold?MSFT is one of the few tech stocks which trades close to all-time highs, seemingly oblivious to the brutal valuation reset that swept through the sector In the most recent quarter, MSFT delivered strong results when factoring in the tough macro environment. MSFT grew revenues by 7% (10% constant currency) and earnings per share by 10% (14% constant currency) - two achievements not necessarily typically seen under difficult economic circumstances. MSFT generated $8.64 billion of that operating income from its productivity and business processes segment, which houses its Office 365 product suite among others. As to be expected, LinkedIn revenue growth came in light at just 8%, a reflection of lower hiring demand. MSFT generated another $9.4 billion in operating income from its intelligent cloud segment. Azure grew at a 27% clip, far surpassing the 16% growth seen at competitor Amazon Web Services Investors have been cautious on the ever-valuable cloud business ever since the cloud titans all revealed cloud optimization efforts undertaken by its customers. On the conference call, management implied that they may see easing headwinds as they pass the anniversary of those optimization efforts, stating that “at some point, workloads just can't be optimized much further.” It is possible that MSFT’s partnership with ChatGPT’s creator OpenAI has something to do with that, as management noted that while they do not consolidate any operating losses due to them holding a minority equity interest, they do indeed recognize revenues generated from OpenAI using their cloud services. The other cloud titans did not offer the same bullish commentary surrounding the end of cloud optimization. MSFT continued to see headwinds from its more personal computing segment, which saw revenues decline by 9% though still managed to generate $4.24 billion in operating income. At some point the comps should become easier here, but that may still be a couple of quarters away. MSFT ended the quarter with $104.5 billion in cash versus $48.2 billion in debt. I note that the company also has another $9.4 billion in equity investments (the announced $10 billion investment in OpenAI is set to take place in parts throughout the year). The company continues to pay a growing dividend and conducted $5.5 billion in share repurchases in the quarter. It is not too often that one can get long term innovation and have the majority of free cash flow returned to shareholders as well. Looking ahead, management has noted that overall growth may struggle due to the prior year’s quarter being a tough comp, with that being their “largest commercial bookings quarter ever with a material volume of large multiyear commitments.” Management did, however, guide for up to 27% in Azure growth, which seems to imply that the bottom for that segment may be very near if not already passed. Investors may be worried about how ongoing tech layoffs may impact Office 365 growth, but management appeared unfazed by this risk, citing that they continue to see strong demand for their product suites. MSFT continues to show why it is a favorite tech stock in growth allocations, as it has shown resilient growth in the face of tough macro. The strong fundamentals have helped the stock sustain a premium valuation multiple, as the stock recently traded hands at just under 35x earnings. Valuation remains the most obvious risk with that stock trading something between 50% and 100% higher than GOOGL depending on how many adjustments applied to the latter. With the stock trading so richly on present earnings, the stock could go nowhere for 7-10 years and still be trading at around 15x earnings at that time. Unless MSFT manages to sustain double-digit earnings longer than consensus, the stock will likely need to sustain a rich multiple in order to beat the market index. I note that this risk does not appear as large at the aforementioned mega-cap peers due to not just lower valuations but also due to MSFT appearing to already be operationally efficient with operating margins in excess of 40%. Another risk is that of potential disruption to its enterprise tech business. Wall Street appears to view the stock as being the strongest operator in any of its competing markets, but I do not share such views. In particular, I view competition from the likes of CrowdStrike (CRWD),and GOOGL’s productivity suite as being underestimated risks. It is possible that MSFT is about to face long- term disruption just as its growth story is decelerating - which would have a catastrophic impact on multiples. Due to the near term upside from OpenAI, MSFT hit ATH and now its in pullback mode, I took huge profit and waiting for more confirmation
NASDAQ:MSFT
by moonypto
2
Khaitan Chemicals & Fertilizers Short-Term Trading IdeaStock trade above all the ema and form a rounding bottom pattern after breakdown on 13 July 2022 stock try to breach the levels of 91 two time but failed, today stock breach the level of 91 with significant trading volume after 2 years with crossover on 24 june 2024. now we can wait for its retracement levels for better and stable upside move which I have already shown on the above chart for your reference you can read the chart. This stock is not for safe players this is risky stock do your complete research Technical Analysis & indicators 🔍 Daily Chart Head & Shoulder Rounding Bottom Educational content This stock analysis is designed for educational purposes and should not be taken as financial advice. Please carry out your own research or consult with a financial advisor before investing.
NSE:KHAICHEMLong
by SHEHBAZ_KHAN
Momentum Trading Picks - Pharma Stock Natco Pharma.This chart is very interesting as well as confusing at the same time for some people let's break it down step by step. If you see the monthly chart of Natco Pharma you will notice many patterns there like:- Cup pattern W pattern Pole and flag Pattern Volume is increasing significantly on the monthly chart Breakout already happened last week but those who are willing to take risks can still participate in it because the stop loss will be a bit on the higher side.
NSE:NATCOPHARMLong
by mittalanugrahit
BASF - An Investment pick with more than 70% ROI.The stock has been in an up trend. It has broken its all time high in 2021 and in good consolidation for 2 years and broken out of consolidation now. It has broken out of a bullish flag and pole pattern / falling channel pattern in a 3 M timeframe. One may also consider this for a swing opportunity , RSI intact in all time frames. Weekly price action shows, that the stock has broken out of falling channel, retested and reversed Consolidated for 7 weeks. Weekly RSI took support at 60 and bounced. Looks ready for a swing. SL - Previous week low at 3155. Target 1 - all time high, 3880.
NSE:BASFLong
by Rugminik
5
Tata Investments on make or break level nowHello Everyone, Chart Pattern known as Symmetrical Triangle Pattern in which we can say that it is a chart pattern that signals a period of consolidation before the price breaks out, which can happen in either direction—upwards or downwards. Condition #1 Breakdown Target 1 - Rs 5900 Target 2 - Rs 5400 Condition #2 Reversal Target 1 - Rs 6700 Target 2 - Rs 7500 Conclusion The symmetrical triangle pattern in our chart indicates a phase of consolidation, suggesting that a significant price movement may be on the horizon. Keep an eye on the breakout direction to understand the next trend for the asset. NOTE : Please consult your financial advisor before taking any trade as per my post.
NSE:TATAINVEST
by smartmarketview