Transcription
YouTube's investing gurus are screaming all the time about stocks that'll net extra money. And look, I get it; we all want that one magic stock that's going to turn you into the next Warren Buffett overnight. But guess what? Most of these YouTubers are just selling you on straight-up hype. We don't do that here; we analyze companies. So today, I'm going to break down three stocks that have great, huge growth potential, but we're going to ask the only question that really matters: Is the price worth the story? Let's go.
Stock number one: a company that I love, that we all use, that if you use twice, you're a user forever. It's not crack cocaine; it is Uber Technologies. All right, guys, Uber is a global mobility giant with its hands in everything from ride share to food delivery to freight logistics. Guys, they have 70% US market share in rides, and they have operations in over 70 countries. Uber's network effect is absolutely insane: more drivers bring more riders, and more riders attract more drivers—that's dominance. But here's the real kicker: diversification. Uber Eats is growing fast with major partners like McDonald's and Walmart, while Uber Freight is using AI to shake up the $5 trillion logistics industry. And please, let's not forget about autonomous vehicles. Uber's partnerships with Motional and Aurora could eventually eliminate driver salaries, costs by 60% per ride. And financially, Uber is turning a corner: strong cash flow, expanding margins, and a push towards profitability. If they execute, Uber isn't just the future of mobility; it's a tech-driven cash machine, and guys, it's already becoming that.
Let me first quickly go to the cash flow statement because it's really important for you guys to see the free cash flow this company has generated. This is going back 10 years: a loss of 42 billion, 2 and a quarter billion, 2.1, 5, 3.3, almost break even here, then 390, 3.47 billion—do in free cash flow last year, guys. If that's not making you go holy, I don't know what will. And this is a company that I worried about here going, "Can they actually turn this money into pre-cash flow?" And their CEO in 2022 said, "Hey, listen, the market shifted; they want cash flow; we're going to provide that." So that's what's amazing for Uber here; they've done a phenomenal job of that. $63 billion market cap, $185 billion enterprise value—that difference there is essentially their debt. So that debt looks like about $22 billion. And guys, they generated $7 billion last year—$7 billion, and it's growing; it's absolutely growing. I'm not even looking at returns on invested capital, why? Because look at this: the last five years is negative four. Well, why? Because they were putting money into their operations, making themselves better. But look at last year; it's already jumped up to 5.15—huge turnaround. It's not where we want it to be, but it's getting there; it's absolutely getting there.
Now, here are some issues we have: How's the PE and the price of free cash flow so low? Now you might be like, "Wait a second, he said that's an issue. Why are people giving such a big discount to a company like this?" If I look at this thing in myself, this is a company that has a phenomenal story, and the numbers seem to be getting pretty, pretty good here. So let's see what the eight pillars look like; what's that story looking like? Five X's, three checks—obviously revenue growth, net income growth, cash flow growth—huge, awesome. Now, not worried about this five-year return on capital, why? Because they're turning things around, and a lot of this had to do with the poor cash flow they had for years. Okay, shares outstanding: okay, 19 and a half percent. I don't like this, but I kind of understand it. You know, they, they needed cash as they were negatively cash flowing five years ago, four years ago; they had to raise money. You could either raise money through debt or through equity; they chose equity. Whatever. This is useless—this five-year debt level, because guess what? It's based on the five-year free cash flow of 1.3 billion. Guys, they did $7 billion last year. This is a useless number. If they just do this the rest of the for, for the next three or four years, this becomes three times, and it's well within a check. PE negative because they're showing a negative PE here. Look at this: their five-year PE is negative 930; their five-year free cash flow is 1.3. Guys, eight pillars absolutely useless here, absolutely useless. I don't even look at it, but we go through it to show how you can look at a company like this and say, "Wait, this doesn't make sense to me." Exactly. You don't buy on the pillars; you don't sell on the pillars; you sit there and look at the story that it tells you.
So let's see what the analysts are saying about good old Uber. Guys, look at this: they estimate $2.50 in earnings per share this year, growing to $6.70 in the next three years—that's almost 3x. Look at that growth: 32%, 39%, 31%, 47%—holy cow. Let's look at the revenue growth: 15%, 14%, 14%, 13%, 10%. Guys, I hope the analysts are right on this one, because I look at this company going, "If this company can generate $6.7 per share in profit in, in three years, put a 20 multiple on that one, that's a $130 company." Now, is it a screaming buy at 76? Yeah, it looks pretty good, like you can buy something for 76, it becomes 130 in three years, and more importantly, you have a company that you can own for a very long time.
Now, remember, we have the story, we have the numbers; we got to put them together. That's why we have the stock analyzer tool. This is why it's been used over a million times per year by our users; this is why I live in the stock analyzer tool. Now, it doesn't include the balance sheet, but it allows me to take the future assumptions about the company and tells me what's the right price to pay based on the desired return that I have. So let's go pull up Uber the last time I did it. So guys, I altered my, my 10-year analysis here just a little bit because 10 years is a long time. I did 5, 8, and 11% revenue growth. Now, the reason I did this is because obviously ride-sharing is going to go a certain way, but we don't know what's going to happen. I mean, does Uber Eats do better? What's going to happen? I, there's a lot of unknown still on this company, but I think it's going to be around. The question is how are they going to monetize even further? Profit margin: I did 10, 18, and 26%. Same with free cash flow. It did a 22% profit margin last year. Am I being too conservative here? Maybe so, but we don't have a track record long enough to see what the profit margin really will be. It's not like Microsoft or Google or Apple; we have years and years of track record of their profit margins, you know, kind of meandering about. We can say, "Ah, might be this, might be this." We don't know. This is literally a shot in the dark; that's why it made Uber so hard for me to analyze when it wasn't making money. PE: I did 18, 22, and 26. I think it's a market leader; I think its ROIC is going to get higher. I sit there and say, "I'm willing to give it a premium to the market average of 15." And finally, I put a 9% desired return in here, guys. This is my market intrinsic value: What is the company worth at a 9 or 10% return over long periods of time? But remember, you got to put a higher number in here; you need that margin of safety because we're humans; we make mistakes, and the future is unknown. So you need a margin of safety to make sure that when you buy a company, if you're right, you're going to make a lot of money; if you're wrong, hopefully you don't lose a lot of money. That's the reason for margin of safety. So I hit the analyze button, scroll down. Guys, I have a low price of 40, a high price of 220, a middle price of 106. So guys, based on today's numbers in the middle section, I'm looking at a 13 and a half percent return. If that's good enough for you, I think you need to take a deeper look into Uber.
Now let's cut through all the noise and pick up this next stock: Tesla. They dominate electric vehicles; they rock the best margins in the electric vehicle industry—15 to 25% versus legacy automakers at 8 or 12%. They cut out the middleman; they do direct consumer sales. And one thing I love about them is there's no negotiating their price. Tesla's gigafactories print money by slapping down production costs and scaling faster than the legacy car makers can even blink. And here's the kicker: affordability. A $25,000 Tesla Model 2 could blow open the market; some hope that it'll even 10x their customer base and make EVs as common as Corollas. More on that in a minute when we get to the stock analyzer, but first let's talk about FSD. If FSD, full self-driving, works, Tesla could rake in massive software margins. This is the tech play everybody talks about—well, well, what they used to talk about until FSD started to not do so good, then they talked about something else—but this could turn cars into cash flow machines. In past videos, years ago, everybody was making all these major assumptions about Tesla based on their, at the time, current Model S pricing, and I said, "Guys, for them to sell 10 million cars a year, they can't sell the average car at $80,000 a car; it's got to be a lot cheaper." It's happening now. Now investors are also baking in their energy business and robot arm to become another billion-dollar explosion. The bottom line is Tesla's future depends on cost-cutting, AI, FSD adoption, and scale. If they execute, it's a home run; if not, it's just another car company.
Now, as you can tell, Tesla's up a ton today. I hear people saying, "Are they, are there shorts covering their, their shorts right now? Is it surging?" I don't know. All I do know is it's ironic that years ago the people who loved Elon are the ones who were turning on him and resorting to violence—to blow up vehicles, to set them on fire, to vandalize them in retaliation for Elon's political views. Is it right? Of course not. People are still going to do it, though. Are they going to take it on the stock price? Maybe so, but the same people doing it, I guarantee, have Tesla somewhere in their IRA or 401k. Guys, a trillion-dollar market cap essentially for a car maker that generates $98 billion in revenue. The average car maker has 0.5 to one time sales as their market cap; this one is 9.8. What does this mean? This means it has to become something other than a car company. But here's the problem: We have a company like Microsoft should usually sell for seven of time, seven of 10 times sales. So Tesla's already selling for that; they have a lot of growth potential, though. They don't sell, they only sold 1.8 million cars last year; they can sell a lot more than that. But I believe this is where the story and the prices and the numbers aren't matching up.
Now, in a previous video I did, I saw some alarming data: FSD, full self-driving, less than 2% of people who tried up the free version end up buying the $99-a-month version. Guys, it went from $12,000 to $8,000 to $99 a month. Guys, can I ask you a question? Is it a sign of a good thing when you have to keep dropping the price and you're still not getting people to sign up? Come on, think about that for a second. You can all agree that Tesla makes a great car; we can all agree that Tesla changed the EV market. And years ago I would say, "Guys, this price is based on the absolute rosiest of rosy assumptions." Guys, look at this: Back in 2021, they hit a high of 414; they hit a low of 101 in January of 2023. The company was bigger; had three times more revenue; had more profit. What's going on here? This is what I mean when I say, "In the short run, stocks are a voting machine; in the long run, they're a weighing machine." That's the fifth tenant of our principal-driven investing, and it's a very common phrase amongst value investors, especially Warren Buffett. So again, let's go see what the analysts say about Tesla. Guys, a lot of growth here: $280 a share to $826 a share; 11 and a half, 33 and a half, 18, 442, 28, 12% earnings per share growth—that's big money there. And if this is true, it deserves a premium. Let's look at revenue growth: 12%, 18%, 15%, 19%, 25%. This is all probably before Elon took the chainsaw to the US government and everybody started to hate him. So let's see our stock analyzer tool to see what it says about good old Tesla. What have I done in the past for Tesla?
So guys, I did a 10-year analysis; I did 10, 15, and 20% revenue growth. These are huge growth numbers, but I'm keeping it in there. Profit margin: Again, look at this: The highest profit margin level, 11 and a half percent; I put the lowest level at 12%, the highest level at 24. I'm putting Uber optimistic assumptions here; these are Google-type of numbers here. Okay, PE: 17, 21, and 25. I think it deserves a premium, so I'm putting in there, and my 9% market return. Hit the analyze button. Now, before I get into the analyze, the market is currently giving people a rare golden opportunity, potentially for stocks that are falling. We have seen a fall for the last three, three or four weeks; stocks are falling; fear has been on the rise, and some people are panicking. But this is exactly when smart, principal-driven investors step in and buy great companies at a discount. What's the problem? Most people don't have the confidence or the process to do that. So my question to you is: How confident are you in your investing decisions? Do you truly understand the companies you're buying? And when I say understand, I don't mean that you can, you understand their technology; do you understand where the company is today and where it's going, and how likely that is to happen? Or are you just following stock tips from any random person hoping for the best? Well, guess what? I know what that feels like, so don't feel embarrassed if that's you; I've been there early in my investing journey. I bought a stock called Global Crossing; it was going to be the next big thing in telecom. The CEO became the fastest billionaire ever in under 11 months, and everyone was talking about it. You know, we talked about it with me, my sister's boyfriend's father. I didn't do any research; I did no process; I didn't realize that every investment is the present value of all cash flows, and worse yet, I had zero community to challenge my thinking. Guess where the stock went? It went to zero—gone. It was a painful but necessary lesson—a lesson that if you ask me to go back in time and change it, I would not. If you don't know what you're doing, the market will kick the crap out of you, and that's okay, because you have one of two options: You let it beat you up and stay on the ground, or you get up and get better, like I did. This YouTube channel, this platform, gives you the tools and the strategy to invest with confidence and conviction, even when the market is crashing—in fact, especially when the market is crashing. I want you to take away the guessing. But April 15th, just a few weeks from now, the major changes in the software we've been working on are happening. If you join Everything Money before then, you're going to be locked in for life in your pricing tier in the best offer that we've offered: full unlimited access to our powerful stock analysis software to find undervalued stocks in seconds, real estate calculators to evaluate properties, and a private community of thousands of rational investors, so you never are making those investing decisions alone. As long as you join Everything Money before we make the changes, you stay in your pricing tier forever, even after we launch this change and future changes. Get started now. No more guesswork, no more emotional decisions, just a rock-solid process that puts you in control. So click the link in the description below or go to everythingmoney.com to sign up. It is the best decision you'll make all year for investing.
So guys, I made these assumptions, and remember, I want to repeat: These assumptions are assumptions that they have not hit on the profit levels; they have not hit that yet. Hit the analyze button. Guys, I have a low price of 93, a high price of 534, a middle price of 240. And guys, that's assuming things that haven't happened yet. Is that the right thing to do? I don't know.
Now, guys, the next stock, the stock that I've gotten you YouTube battles about: a company named Palantir. Now, Palantir has absolutely exploded, but I want everybody to remember the story about Palantir when that one guy from Russia or Israel, wherever he's from, talked about Palantir at 45 bucks in early February of 2021 and said it's going to 500. I said, "Eh, I'm interested around five bucks." It went to 583, so it hit, never hit my price. Even take a look further. Do I regret that? Yeah, maybe so. It's at 95 right now, and guys, it has gone even higher; it was all the way up to $125 just one month ago. This isn't just some random AI company; it's deeply woven into government intelligence and now baking big moves in the private sector, kind of company. Now, their, their two main revenue sources come from these buckets: massive government contracts, which might be a little risky right now, and a fast-growing commercial business—things like healthcare, finance, and manufacturing—which is up 35% year-over-year. AI adoption's booming, and Palantir's artificial intelligence platform is set to ride that wave. Plus, their Apollo software keeps AI development and deployment smooth and scalable. Financially, this is the best part about them: $3 billion in cash with essentially no debt and over 80% gross margins—that is a software business. If they execute, they could be a juggernaut. What matters here, though, is price versus value, so let's keep taking a look here. Now, their net income always trails their free cash flow. Look at this: Net income, $460 million last year; free cash flow of $1.1 billion. Five-year average net income of a negative 277; five-year average free cash flow of 406. But here's the issue: $240 billion dollar market cap, 200 times free cash flow, 525 times earnings. If they grow very fast and continue to grow very fast, that's going to be what—okay, how do you bury, how do you get yourself out of 200 times free cash flow? If they 10x their free cash flow from $1.14 billion to $11.4 billion, it becomes 21 times free cash flow. Okay, the question is: How long will it take them to 10x their free cash flow? That's the real question. If they can 10x their free cash flow tomorrow, wham bam, thank you, ma'am. But if it takes them 10 years to do that, five years to do that, what's going to happen? The good news is this gross margin of 80% is going to help drive that free cash higher much faster. So where is it going? I don't have a clue. Three-year growth rate: 23%; five-year growth rate: 31%—that's the revenue. Here's the best part: practically no acquisitions; this is all done internally, all done with their own sales team—that is freaking awesome.
Now, what's a downside? They're douchebag of a CEO, Alex Karp, is an absolute cluster. I don't trust the guy at all when he speaks; I just assume he's lying or doing something shady. Another thing: Last year, what I read—I didn't verify this—zero purchases of stock by the executive team and over $3 billion in sales of their, of their stock—that's kind of a concern of mine. Now, am I being picky on Alex Karp? Yeah, maybe so; I probably am. Hey, listen, he's probably not much different than me in the sense of how bombastic I am and all that stuff, but I want my CEO of my companies to be focused on the business, not focused on the outsiders that are hating on the business. And I'm not hating on the business; I hate on price versus value; that's what I hate on. It's never an attack on the business—well, I shouldn't say that. I do have issues with the business with Palantir; they tend to beat by one penny a few too many times on the earnings numbers; they put things on their balance sheet that kind of help that number a couple of times. Do I think there's some questionable net income adjustments? Yes. What about the free cash flow? I don't know. But remember, invest, focus on this, not on this—I should say this. Retailers out there, focus on this, not on this. The true investor looks at both of these and focuses on cash flow; that's what's important. So let's see what analysts think about the growth of the company—not as well as you think: 48 cents a share going to a dollar eight in the next four or five years; revenue growing pretty substantially, $3.6 billion to $7.45. But here's my point: For it to 10x cash flow, can't even 10x its revenue; it's basically two times revenue growth—that's a concern of mine. So let's go put all this together into our stock analyzer tool.
So guys, again, just like the other two companies, I put in just like Tesla, I put in aggressive assumptions here—assumptions that haven't been hit quite yet, except for free cash flow: 15, 25, and 35% revenue growth in the next 10 years; 35, 50, and 65% profit margin. Guys, 65% profit margin on 80% gross margin will be very, very difficult. PE: 20, 25, and 30, and a 9% desired return. Part of the reason I do this is I want to put in these extreme numbers to show how potentially overpriced the company is. I hit the analyze button. Remember, guys, I really, really, really encourage you to get the software; this tool alone is so worth it to be able to sit there and put your assumptions about the future and understand where you are in the company process—the stock versus value. Hit the analyze button. Guys, a low price of 18, a high price of 210, a middle price of 66. I'm just waiting; I'm going to wait until I feel comfortable at the company. I appreciate your time.