Idea Roundup #3
The latest roundup of some of this week's most interesting ideas in a brief summary format.
Welcome to another Idea Roundup, where I do a quick preview of some of the more interesting ideas I’ve come across in the markets this week. Nothing here is investment advice—as always—and the ideas here could be bullish or bearish in sentiment.
If you haven’t already, please be sure to check out my latest equity deep dive on Franklin Covey!
Let’s get to it!
# 1. Google (GOOG) GOOGL 0.00%↑ GOOG 0.00%↑
I’m a bit of a Google bull myself, but the bear crowd has certainly grown in number and volume as of late.
over at The Pragmatic Optimist published an interesting piece this week about Google, and how the rollout of generative AI by Microsoft (MSFT) MSFT 0.00%↑ has created something of a mid-life crisis at the company.There’s a lot to unpack here (much more than this synopsis allows), but it’s an interesting counter-point for Google bulls to be aware of.
#2. Tesla (TSLA) TSLA 0.00%↑
Elon Musk’s car company reported earnings this past week and things were… not great. After the sudden departure of longtime CFO Zachary Kirkhorn in August 2023 (who was seen more or less as the adult in the room), it seems that the company is no longer on solid footing.
In the last six months, the stock has fallen by 30%. On the latest earnings call, Musk declined to provide guidance on vehicle deliveries for the coming year—something that is fairly standard in the automotive industry and a real indication of how negative things may have turned for the company.
Further compounding the issue is margin compression. Tesla bulls have long crowed about Tesla’s superior margins in what is essentially a commodity-esque and cyclical business. This latest quarter showed signs that, despite bull’s protestations, Tesla may just be a car company (and not a tech company) after all.
#3. PayPal (PYPL) PYPL 0.00%↑
PayPal didn’t do itself any favors with the hifalutin rhetoric it used to describe its new vision and product announcement on January 25th. The company promised ‘revolutionary’ vision and services, but gave us… AI-enabled transactions and one-click payments.
In the world of payment procession, neither of those things is revolutionary, and financial Twitter (sorry, X) exploded with mockery. I think this was largely justified.
However, that does not mean that the company (or stock) will forever remain a lost cause.
Indeed, what new CEO Alex Chriss introduced on January 25th is—in my thinking—exactly what the company needed. Long criticized as being out of touch with what customers want (ease of use, good customer service, etc), new features like one-click payments and AI suggestions for merchants can finally make PayPal competitive again.
After PayPal’s dismal last few years, the hype around the recent announcement may feel akin to a rug pull, but I think that over time the new features are likely to play out well.
#4. iRobot (IRBT) IRBT 0.00%↑
A few weeks ago I published an article about identifying value traps and outlined a few ways that investors can avoid them.
On the same subject,
over at On The Street recently did a write-up on vacuum cleaning robot-maker iRobot, and how the stock’s underperformance may, at first glance, seem like an interesting opportunity (but probably it isn’t).In the last year, iRobot stock has fallen over 60%, making the anemic Russell 200 look like a heavyweight champ in the process.
The underperformance shouldn’t come as much of a surprise, however, given the fact that vacuuming robots have become something of a commoditized segment.
To make matters worse, the company seems to be engaging in a novel strategy where margins get even worse as time goes on.
Going from breakeven in 2021 to negative 42% net income margin is… a bad look.
Before moving on to the next roundup idea, check out one of my previous deep dives on the best business you’ve (probably) never heard of… SSNC Technologies (SSNC) SSNC 0.00%↑. Cheers!
#5. Western Digital (WDC) WDC 0.00%↑
It’s no secret that tech customers are at the tail end of a buying spree hangover (the situation was perfectly illustrated by a comment from a Fortinet FTNT 0.00%↑ EVP). The hangover affected Western Digital, as well. After an abysmal 2022, the stock surged ~40% in 2023 and is currently benefiting from a nice tailwind via a nice upgrade from CFRA. Analysts at the firm raised their 12-month target price on the stock to $72 from $53 (the stock currently trades at $58).
While most analysts expect FY2024 to remain rocky, the outlook has ticked upward slightly in recent weeks. The outlook significantly improves, however, for non-GAAP EPS estimates going into FY2025 and beyond.
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