Today's wording—"we trust the FAA to do its job" and "we have no indications that Boeing is not responding properly"—is actually a calming signal for the market: it’s not praise for Boeing, but rather an indication that there is no open conflict among the main regulators and that certification and production are being addressed through functioning dialogue, not through the media and political pressure. For Boeing this doesn't rewrite the fundamentals (quality and reputational issues haven't disappeared), but it reduces the regulatory risk that Europe would go its "own way" against U.S. oversight.

For the investor: EASA is showing Boeing/FAA a yellow, not a red card—the pressure and oversight remain, but the framework is cooperative and predictable. In an environment where Boeing needs years of calm certification and stable production, such a signal from Europe is a small positive, even though it doesn't materially change the long‑term investment thesis on its own.

Bill Ackman is reading the same tape very differently. In a letter to investors he describes the current turmoil as an advantage, not a hurdle, arguing that macro driven selling is allowing his fund to buy leading US companies at what he views as attractive valuations, even as the S&P 500 still trades around 20,6 times forward earnings, down from roughly 22 times at the start of the year but above its long term average. With prediction markets putting the odds of a US recession by the end of 2026 at just under 30% and the top ten S&P names expected to grow earnings by more than 20% annually over the next two years, he believes today’s multiples on global giants in tech, healthcare and consumer platforms are not only defensible but, in some cases, starting to look outright cheap.

The S&P 500 is down 5.4% since the conflict began

The S&P 500 $^GSPC has fallen 5.4% since the war with Iran began on February 28 . Thursday's 1.7% drop was then the worst since January, dragging the index to its lowest closing level since September, with eight of 11 sectors ending in the red.

The technology-focused Nasdaq 100 fell 2.4%, led by big names such as Nvidia Corp $NVDA and Meta Platforms Inc $META. The S&P 500 hit a seven-month low, while the Dow Jones fell 1.73%.

Energy stocks rose 18% for the month

The conflict with Iran has significantly restructured US equity markets. The energy sector rose 18.2% during March - Exxon Mobil $XOM gained 16.4%, Chevron $CVX 14.8%, ConocoPhillips $COP 21.3% and Pioneer Natural Resources 19.7%.

Defense stocks gained 14.7%, with RTX $RTX (formerly Raytheon) up 22.1%, Lockheed Martin $LMT up 19.4%, Northrop Grumman $NOC up 17.2% and L3Harris $LHX up 15.8%. Meanwhile, Congress approved $45 billion in emergency defense spending in March.

West Texas Intermediate (WTI) crude is up nearly 50%, while Brent crude futures, the international benchmark, are even higher.

Ackman: Chaos is an advantage, not a hindrance

In a letter to investors, Ackman explicitly called chaos "an advantage, not a hindrance." He argued that stock market disruption helps his fund buy high-quality companies at bargain prices because of macroeconomic events that may not affect their long-term intrinsic value.

Bettors at prediction market Polymarket put the probability of a recession in the US by the end of 2026 at around 29%, with Ackman reportedly able to amass the $10bn he needs to find bargain buys in his current position.

He believes current valuations are justified

According to Motley Fool analysis, the S&P 500 is now trading at about 20.6 times aggregate estimates of future earnings. That's still well above its long-term average, but well below the 22 times earnings at which it traded at the beginning of the year.

Ackman points out that the 10 largest companies in the S&P 500 are expected to grow earnings per share by more than 20% on average over the next two years. As a result, their higher-than-average valuations are justified. In fact, some of them look like bargain buys at today's prices.

The top "10" S&P 500 stocks by weight

These advantages include "their global size, dominant market position, access to low-cost capital, and leadership in artificial intelligence and related technologies." Ackman concludes, "The market's P/E multiple is justified and can remain sustainably higher than historical averages."

History points to a rapid recovery after geopolitical shocks

Strategists at Carson Group compiled a list of 40 major geopolitical and historical events over the past 85 years and calculated the S&P 500's returns in the months ahead. On average, the S&P 500 lost 0.9% in the first month afterward, but rose 3.4% in the six months following the event.

The average weekly decline in the Standard & Poor's 500 Index after the initial geopolitical shock is 1.09%, according to a Stock Trader's Almanac analysis of 17 incidents since 1939. Twelve months after each crisis, the S&P has posted an average gain of 2.92%.

In addition, it returns a significant portion of every billion in free cash flow to shareholders through dividends and buybacks, while continuing to invest in the growth of equipment protection and housing. This makes it more of a quiet growth title for the patient investor than a traditional insurance company.

Top points of analysis

• Revenues reach about $11.9 billion in 2024, with net written premiums, fees and other income from core segments increasing to $12.35 billion in 2025, implying growth of about 8% in the core business.

• Adjusted EBITDA grew 11% and adjusted earnings per share grew 12% (excluding catastrophe events) in 2025, marking the ninth consecutive year of profitable growth and the third consecutive year of double-digit earnings per share growth.

• The Global Lifestyle (Mobile Devices, Electronics, Autos) segment reported adjusted EBITDA growth in the mid-single-digit percent range in 2025, with the number of protected mobile devices increasing by nearly 2 million to more than 66 million, and the number of protected vehicles reaching 57 million.

• The company returned $468 million to shareholders in 2025 - $300 million in share buybacks of 1.4 million shares and $168 million in dividends - while maintaining liquidity in the holding company of $887 million.

• For 2026, management expects adjusted EBITDA and adjusted earnings per share, adjusted for favorable reserve development from 2025, to be at least flat or grow in the mid-to-higher single-digit percentages, with Global Lifestyle expected to be the primary driver.

• The company itself communicates a target of around $14.2 billion in revenue and $1.2 billion in profit by 2028, which implies average revenue growth of around 5% per year and roughly half a billion more profit than today - at today's earnings multiple of around 13x, this is a solid compounder in a less cyclical insurance segment.

Introducing the business and the model

Assurant $AIZ is a specialty insurer that focuses on protecting large consumer purchases and assets - from cell phones to electronics and autos to housing and renters. It doesn't sell traditional life insurance policies, but products that are tied to specific transactions: buying a cell phone from a carrier, financing a home through a bank, signing a lease, buying a car from a dealer.

Headquartered in Atlanta, it has a history dating back to the 19th century and is now a Fortune 500 company that employs over 14,000 people and operates in more than 20 countries. From an investor's perspective, it is important that it is not an extremely capital-intensive insurance company: because of its risk-sharing model, reinsurance and fee structures, much of its revenue resembles a fee-based business with high gross margins, not pure insurance risk as in some life insurance companies.

Distribution is exclusively through large partners: carriers (e.g., T-Mobile $TMUS, Verizon $VZ through the Total Wireless brand), electronics manufacturers, large retail chains, automobile dealers, and banks. Thus, Assurant does not primarily sell to the end customer, but acts as an "insurance engine" behind what is already a familiar brand to the customer - a phone carrier, an electronics retailer, or a bank. This creates a barrier to entry for competitors, as integration into the partner's systems, claims handling, equipment logistics and data handling are long-term and data-intensive processes.

Global Lifestyle segment - devices, cars, electronics

Global Lifestyle is at the heart of Assurant's growth. It includes protection programs for mobile devices and electronics, extended warranties, vehicle protection and services around large consumer purchases. In 2025, the segment reported mid-single-digit percent adjusted EBITDA growth, with the core Connected Living (mobile devices and technology) component growing similarly and the number of protected mobile devices growing by nearly 2 million to more than 66 million worldwide.

A key element here is the concept of device reuse and logistics. Assurant has processed and re-launched over 160 million used devices in recent years, aided by newly enhanced logistics facilities, including a dedicated centre for T-Mobile in the United States. The acquisition of RL Circular Operations has added technology to this part of the business, using artificial intelligence to optimise reverse logistics - that is, deciding whether to repair, resell, recycle and how to maximise value for the partner.

In vehicle protection, the "Global Automotive" segment added nearly 2 million new protected vehicles in 2025, bringing the total to 57 million. Improved claims experience (fewer costly repairs, better risk calculation) has led to profitability growth in this part of the segment as well, despite more costly repairs on modern cars full of electronics. In addition, the launch of new protection programs with partners such as Total Wireless is expanding the addressable market into the prepaid and contract-flexible segments where protection programs were not as prevalent previously.

Global Housing segment - stability with disaster risk

Global Housing includes lender-placed insurance (when a borrower does not have a policy in place, the bank "places" it through Assurant), renters insurance, insurance for prefabricated homes and flood insurance. This segment is more sensitive to catastrophe losses (hurricanes, floods), but that is why the company consistently differentiates "including catastrophe" and "without catastrophe" results in the numbers, so that the core business can be seen.

In 2025, Global Housing's adjusted EBITDA was over $1 billion, with double-digit growth when excluding catastrophes, and claims ratios improved due to lower large events and better exposure management in high-risk regions. Renters insurance was up 15%, partly due to Cover360, a digital platform that makes it easy to arrange insurance when signing a lease, and lender-placed policies were up 5%.

Geographically, the company is actively reducing its concentration of risk in the most exposed areas, particularly Florida, and shifting growth to California and Midwestern states where the mix of growth and risk is more favorable. This is important to investors because reducing concentration in "catastrophic" regions greatly improves the predictability of future results.

CEO

Keith W. Demmings has been President and Chief Executive Officer of Assurant, Inc. since January 2022, where he also sits on the Supervisory Board. After twenty-five years of service in various capacities, he now leads the Company's global operations in the Global Lifestyle and Global Housing segments. Under his leadership, Assurant is focused on developing services for the connected world - from smart devices to connected cars to smart homes. Demmings is pursuing a growth strategy based on innovation, profitability and long-term value for customers, employees and shareholders, with the clear goal of helping people enjoy the benefits of modern connected living.

Demmings is known for its emphasis on talent development, diversity and inclusion, as well as fostering creative collaboration and new ideas that improve the customer experience. He has already made a significant impact as president of the Global Lifestyle division, where he has led expansion through innovation and acquisitions since 2016 - most notably through the $2.5 billion purchase of The Warranty Group, making the division the largest part of Assurant. His career began in 1997 as a sales trainee in Toronto, from where he rose to President of the Canadian office (2005) and eventually to Global Leader with responsibility for the company's international growth across continents.

Profitability, cash and return on capital

In terms of numbers, Assurant is a typical "compounder" - not growing aggressively, but steadily and with good discipline in working with capital. In 2024, the company achieved sales of $11.88 billion, gross profit of $9.11 billion, and operating profit of $927 million; these figures continued to grow in 2025, with net income of $760 million and earnings per share of $14.55 in 2024. A return on equity of around 15.7% is very solid in the insurance sector, especially with a gross margin of over 77% and an operating margin of over 8%.

Operating cash flow in 2024 was $1.33 billion, capital expenditures were only $221 million, leaving free cash flow of over $1.11 billion, up nearly 19% year-over-year. These numbers translate into the firm's ability to return capital: $468 million was returned to shareholders in 2025, $300 million of which was in the form of buybacks and $168 million in dividends, yet the firm ended the year with a holding liquidity of $887 million.

The balance sheet is moderately leveraged: the debt-to-equity ratio is around 0.38, and an interest coverage ratio of over 10 times says that operating earnings more than comfortably cover interest expense. Altman's Z-score of around 0.5 for financial institutions cannot be interpreted in the same way as for industrial firms, but the combination of strong liquidity, stable cash flows and controlled exposure to catastrophe suggests that this is not a "fragile" balance sheet, but an institution that can afford to combine growth and shareholder payouts over the long term.

Dividends and buybacks

Assurant is not a high yielding dividend, but rather a middle and growing dividend. The current dividend is $0.88 per quarter, which at today's price equates to roughly 2% of the annual yield. In November 2025, the board of directors approved a 10% dividend increase along with a new share repurchase program of up to $700 million, beyond the existing mandate of about $141 million remaining.

Thus, in 2025, the combination of dividends and buybacks will have delivered nearly $470 million to shareholders, which, with a market capitalization of about $11 billion, equates to a "shareholder return" of about 4% per year from these two channels alone - in addition to earnings per share growth. For an investor looking for a combination of moderate income and value growth, Assurant is thus a "total return" vehicle rather than just a pure dividend rate.

Growth potential and outlook to 2028

Today, management and analysts are working with a target of getting to about $14.2 billion in revenue and about $1.2 billion in net income by 2028. This implies average revenue growth of about 5% per year and an increase in profits of about $500 million from today's level of about $700 million. The drivers of this growth are several:

• More connected devices, higher device value, and a greater willingness to pay for protection programs.

• Expansion of programs with existing partners (T-Mobile, Verizon/Total Wireless) and new partner agreements in home warranty and home insurance.

• Continued growth in the Housing segment, where improved claims experience and exposure management are enabling increased profitability even with relatively modest volume growth.

For 2026, the firm expects adjusted EBITDA and adjusted earnings per share to grow at mid to upper single-digit percentages after adjusting for one-time favorable reserve development in 2025, with Global Lifestyle expected to be the primary driver and Housing expected to hold steady and profitable. If this scenario comes to fruition and the company continues to return capital at a rate of $400-500 million per year, then at today's earnings multiple of around 13x, we are looking at a defensive growth title that can deliver interesting compounded appreciation over a few years without extreme volatility.

Valuation in the context of the sector

Today, Assurant trades at a price-to-earnings ratio of around 13.2 times, a price-to-earnings ratio of 0.87 times and a price-to-free-cash-flow ratio of around 10.7 times. Compared to select specialty insurers, that doesn't look overpriced:

Thus, Assurant trades at roughly a similar multiple to Aflac, while having a higher return on equity and business in segments that benefit from the long-term trend of digitalization, aging equipment and growth in home values.

Fair value according to models is around $218 per share, roughly in the range of today's market price, suggesting that this is not an extremely undervalued title, but rather a quality company at a reasonable price - where the combination of earnings growth and shareholder payouts will do the trick for investors.

What may surprise Assurant in the future

• Faster growth in equipment protection. If the market for higher-end mobile phones, tablets and laptops continues to grow and people are more willing to pay for protection programs, Global Lifestyle could grow faster than the projected few percent per year. This also applies to the expansion of programs to new types of devices in the home, such as smart home appliances or photovoltaics.

• New partner agreements. Signing a few larger contracts with other operators or electronics manufacturers can be very good for the stock, as such contracts tend to be long-term and challenging to replace. The market usually reacts quickly to such news as it immediately increases the visibility of future revenues.

• Stronger buyback effect. In a situation where a stock is trading only slightly above estimated fair value, more aggressive use of a buyback program (up to $700 million) can significantly accelerate earnings per share growth, even if operating earnings themselves grow at only a moderate rate. At a lower share price, management may load up on buybacks even more.

• Transforming the Housing Portfolio. A further shift in exposure away from the riskiest areas toward regions with better premium-to-risk ratios could gradually reduce swings in performance during catastrophe years. If the firm is able to simultaneously expand rental and other less volatile products, the overall stability of results could improve noticeably.

Risks - what can disrupt the scenario

• Significant catastrophe year. A severe hurricane season or series of floods can severely depress Housing segment profitability and weigh on results in the short term, although over the long term insurers typically reflect such years in pricing and terms.

• Loss of a major partner. The termination or major curtailment of a key partner such as T-Mobile, a major electronics manufacturer or a bank would have a material impact on the Global Lifestyle segment and investor sentiment.

• Regulatory pressure. Tightening rules for extended warranties or lender-placed insurance could reduce margins or restrict certain products, particularly in the U.S. where regulations vary from state to state.

• Competition and technological change. The entry of other technologically strong competitors in the equipment protection and digital insurance space may increase pressure on pricing and margins if Assurant is unable to maintain its technological edge in claims processing and data handling.

New developments in recent years

• Two consecutive years of double-digit earnings and EPS growth in 2024, driven primarily by the Global Housing segment, while management expects continued profitable growth in 2025.

• The firm has partnered with Australia's Telstra (the country's largest mobile operator), acquired iSmash (a tech repair brand in the UK) and renewed a multi-year partnership with a large US mobile client - all with the aim of long-term growth in telecoms services.

• In the automotive business (Global Auto), margins on service contracts and GAP products have stabilised, and management is "excited" about the trajectory of this segment to 2025.

• In 2025, they announced a strategic partnership with Plug, a D2C platform for certified refurbished equipment; Assurant will invest in Plug and leverage its global network of refurbished inventory and testing capabilities to accelerate growth in the aftermarket and drive circularity.

• As well, it is newly partnering with Ciocca Automotive to sell vehicle protection products across its dealer network, including dealer training and compliance support, strengthening Assurant's position in the auto segment.

• In mobile, it is expanding its collaboration with Verizon through a new Total Wireless Protect product to support further growth in Connected Living.

Investment scenarios

Base case scenario

In the base case setting, it makes sense to count on what management itself communicates - revenue growth of around 5 percent per year, adjusted EBITDA and earnings per share in the mid to upper single-digit percent range, mainly driven by the Global Lifestyle segment and a stable Housing business. In that case, at today's valuation of around 13 times earnings, Assurant can offer a combination of total returns in the lower double digits annually, composed of earnings per share growth, a dividend of around 2 percent and buybacks. This scenario assumes no extremely strong hurricane year and no loss of any key partners.

Positive scenario

The more optimistic scenario relies on two things: stronger growth in equipment and auto protection and higher share buyback rates. If the company were able to expand programs at existing partners like T-Mobile or Verizon more quickly than planned and sign a few larger new contracts in Europe or Asia, adjusted earnings per share growth could remain in the upper double-digit range for more than just three years in a row. Combined with a new buyback program of up to $700 million, that could then cause a reassessment of the multiples upward - perhaps causing the market to decide to value the company at more like fourteen to fifteen times earnings.

A more cautious scenario

At the other end of the spectrum lies a situation where a weaker year in the Housing segment combines with higher margin pressure in Equipment Protection. A strong hurricane season or major flooding could depress profitability in Housing in the short term, while pricing pressure on protection programs may come from mobile operators or new digital competitors. In such a year, adjusted earnings per share could stagnate or grow only in the low single-digit percentages, and the market could push the multiple toward 10 to 12 times, which, at current levels, would imply a sideways trend rather than share price growth. However, even in such a scenario, stable cash flows and dividend yields would remain attractive to the long-term investor.

What to take away from the article

• Assurant is not a traditional life insurer, but an equipment, auto and home protection specialist that capitalizes on large consumer purchases and has a business tied to the long-term trend of connected equipment and property value growth.

• The company has had nine straight years of rising profits, three consecutive years of double-digit growth in adjusted earnings per share and free cash flow of over one billion dollars a year.

• Underlying the growth is the Global Lifestyle segment, where the number of protected devices and cars is growing and reverse logistics services using data and artificial intelligence are being added to boost margins.

• The Housing segment adds stability to the business even though it carries catastrophe risk, so Assurant actively manages exposure in at-risk regions and reports results even after adjusting for catastrophes.

• The combination of a relatively reasonable valuation of around 13 times earnings, a dividend of around two percent and buyback programs makes for an attractive mix for an investor looking for a stable "total return" rather than a bet on a quick doubling of capital in one year.

The financial sector is a fairly specific segment of the stock market. Unlike technology companies, which attract investors primarily with the promise of rapid growth, financials often offer a combination of stable dividends, high returns on capital and direct exposure to macroeconomic developments. This is why they are among the cornerstones of the portfolios of institutional and retail investors around the world.

The year 2026 brings several significant themes for the financial sector. The regulatory environment in the United States is beginning to loosen after years of tighter oversight, opening up room for greater capital flexibility for banks and a potential wave of mergers and acquisitions. Interest rates remain relatively high, which has been good for banks' net interest income, but has also put pressure on the quality of loan portfolios.

At the same time, there is a wide variety of business models among the largest companies in the financial sector. From the diversified conglomerate Berkshire Hathaway, to the universal banking giant JPMorgan Chase, to the payment networks Visa and Mastercard with their minimally capital-intensive model. Each of these firms approaches value creation differently, and it is this diversity that makes the financial sector an interesting space for investors with different strategies.

Berkshire Hathaway $BRK-B

A conglomerate in a new era

Berkshire Hathaway represents a complete oddity within the financial sector. It is not a traditional bank or insurance company, but a diversified conglomerate that brings together insurance operations, rail transportation, energy, manufacturing and retail under one roof. As of January 2026, the company is led by a new CEO, Greg Abel, who took over the reins from the legendary Warren Buffett after sixty years of his leadership.

The company has a market capitalization of around $1.04 trillion, making it one of the largest companies in the world. Annual revenues for fiscal year 2025 reached $371 billion. However, the key number of the moment is the cash reserve, which stood at a record $373 billion at the end of 2025. This huge figure effectively represents a strategic store for future acquisitions and investments.

Challenges for the new management

The transition to new leadership has not come without complications. Operating profit for the fourth quarter of 2025 dropped nearly 30% to $10.2 billion, with the main reason being a decline in profitability in the insurance segment, where underwriting profits fell 54%. The entire insurance division, including GEICO, posted a 38% decline in results, which Abel directly acknowledged as a trend that may not break in the short term. Shares fell as much as 5.3% after the results were released.

On the other hand, in his inaugural letter to shareholders, Abel clearly signaled continuity of values, capital discipline and a willingness to aggressively use cash reserves for strategic opportunities. Berkshire has already completed the $OXY.7 billion acquisition of OxyChem from Occidental Petroleum $OXY in January 2026, showing that the new management is not passive. The company's ROE is currently around 10%, below the historical median, but reflecting the reduced profitability of the insurance segment and a massive cash balance that is reducing the effective return on capital.

JPMorgan Chase $JPM

Global banking giant

JPMorgan Chase is the largest U.S. bank by assets, exceeding $4.4 trillion. The firm's market capitalization is currently around $780 billion and TTM revenues exceed $193 billion. Led by CEO Jamie Dimon, the bank covers virtually all segments of financial services, from retail banking and wealth management to investment banking and trading.

For 2025, the bank reported total net income of around $54 billion with a return on equity(ROE) of 15-17% depending on the quarter. The dividend yield is around 2.1% and the P/E ratio at 14, which is a rather attractive valuation for the world's largest bank.

Growth engine: capital markets and payments

JPMorgan's key growth driver is the Corporate & Investment Bank (CIB) segment, where trading revenue grew 17% and the payments segment reached a record $5.1 billion. The bank also opened 1.7 million new checking accounts and issued 10.4 million new credit cards for 2025. In the Asset & Wealth Management division, revenues grew 13% to a record $6.5 billion for the quarter, with client assets exceeding $7 trillion.

For 2026, JPMorgan profiles itself as one of the main beneficiaries of the expected recovery in M&A activity and the IPO market. In addition, the lower regulatory burden in the US allows for more efficient capital allocation, including share buybacks. In the last quarter of 2025, the bank returned $12 billion to shareholders through dividends and buybacks. The potential deterioration in the quality of the loan portfolio remains a risk factor if the economy slows significantly. The bank already made a $2.2 billion provision in the last quarter to take over the Apple Card portfolio.

Visa $V

Payments infrastructure as a license to print money

Visa is the largest payment network in the world, operating in more than 200 countries. The company does not lend money, does not carry credit risk and has no loans on its balance sheet. Instead, it collects fees for each transaction processed through its network. This model is extremely efficient, as evidenced by gross margins in excess of 81% and net profit margins in excess of 50%.

The firm's market capitalization is around $570 billion, TTM revenue is $41.4 billion and ROE is a remarkable 54%. Valuation is not low. The P/E ratio is currently around 28, 16% below the firm's 10-year average but well above the financial sector average. However, investors are comforted by consistent growth in processed transactions of around 10% per year and a strong share buyback program.

Growth catalysts

In the first fiscal quarter of 2026, Visa reported revenue growth of 15% year-over-year to $10.9 billion, with GAAP earnings per share up 17%. The company describes itself as a "payments hyperscaler" and is investing heavily in expanding higher value-added services, commerce solutions, and foreign payments. The structural shift from cash transactions to digital payments remains a key long-term growth driver as a huge proportion of payments globally are still made in cash.

Mastercard $MA

Eternal rival with its own pace

Mastercard is the second largest player in global payments and operates on a virtually identical business model to Visa. It has a market capitalization of around $431 billion, TTM revenues of $31.5 billion, and a P/E ratio of roughly 30. However, Mastercard's ROE is extremely high, exceeding 200%, due to an aggressive share buyback policy and relatively low equity levels compared to the balance sheet. This figure should therefore be interpreted with caution and cannot be directly compared to the ROE of traditional banks.

Mastercard has reported revenue growth of 16.7% and earnings per share growth of 12.6% in recent quarters. In addition, the company announced a new $14 billion share buyback program and increased its dividend by 14.5%. Compared to Visa, Mastercard has historically had a faster rate of growth in processed transactions, although that rate has begun to level off in recent quarters.

Where Mastercard is moving

An interesting part of Mastercard's strategy is to expand into higher value-added services such as analytics tools for merchants, cybersecurity solutions and open banking platforms. These segments are growing faster than the core payments business and are gradually increasing the company's revenue diversification. Regulatory pressure remains a risk factor for both payments giants. The US FTC has recently launched an investigation into the practices of payment processors and the threat of regulatory intervention into firms' fees remains a concern in both the US and Europe.

Bank of America $BAC

The second largest U.S. bank

Bank of America is the second largest US bank with total assets of $3.4 trillion and a market capitalisation of around $337 billion. For the year 2025, the bank reported revenues in excess of $107 billion and net income of $29 billion. The firm's ROE is around 10.6%, an improvement of more than 100 basis points from the previous year. The P/E ratio of 12.6 is below that of JPMorgan and offers a relatively attractive valuation.

Growth on all fronts

The bank has achieved 15 consecutive quarters of year-over-year growth in trading revenue in the past year and has seen record earnings in the Equities segment. The Consumer Banking segments acquired approximately 680,000 new checking accounts and consumer investment assets grew 16% to $599 billion. The bank also increased small business lending by 7% year-over-year.

Compared to JPMorgan, Bank of America is significantly more dependent on net interest income, making it more sensitive to interest rate movements. If the Fed were to move to more vigorous rate cuts, the pressure on net interest margin would be more pronounced than at the more diversified JPMorgan. On the other hand, the current environment of higher rates is strongly in the bank's favor.

Comparison of key metrics

Note: Mastercard's ROE is visually extremely high due to the low level of equity on the balance sheet (a result of aggressive share buybacks). Numbers are rounded and based on end-March 2026 data.

Competition and sector position

The financial sector is one of the toughest in the US market and each of the companies listed faces different competitive dynamics. Berkshire Hathaway has no direct comparable competitor as it is a unique conglomerate. JPMorgan $JPM competes with Goldman Sachs $GS, Morgan Stanley $MS, and Citigroup $C, holding steady as the number one in key investment banking rankings. Bank of America $BAC operates in the same space, but with a greater reliance on retail banking and net interest income.

Visa $V and Mastercard $MA form a virtual duopoly in global payment networks. Their main competitors are not so much each other as alternative payment solutions like PayPal $PYPL, Block $XYZ or the growing Chinese platforms Alipay and WeChat Pay. In addition, regulators on both sides of the Atlantic are increasingly scrutinizing the interchange fees and dominance of these two players, a long-term risk factor for both firms.

A strategic view

The financial sector enters 2026 from a position of relative strength. Banks are benefiting from higher interest rates, the regulatory environment is easing in the US and sector consolidation is accelerating. Payments giants are benefiting from a structural shift to digital transactions that continues regardless of the economic cycle.

From a valuation perspective, banks offer a more attractive entry point than payment networks. JPMorgan, with a P/E of around 14 and a dividend yield of over 2%, is attractive to investors looking for a combination of value and quality. Bank of America, with an even lower P/E of around 12, offers a more significant valuation discount, but at the cost of higher cyclicality. In contrast, Visa and Mastercard are valued at a significant premium, justified by their capital-light model, high profitability and predictable growth. The question is whether the current valuation of around 30 times earnings leaves sufficient room for further appreciation.

Berkshire Hathaway represents a specific category. Under the new leadership of Greg Abel, it offers exposure to a broadly diversified business with a huge cash reserve that can be deployed at any time in down markets or strategic acquisitions. The risk lies in the uncertainty around the management transition and the short-term weakness in the insurance segment.

What to watch next

• Bank results for the first quarter of 2026, expected around April 14. Key indicators will be the evolution of loan portfolio quality and net interest margins.

• The Fed's interest rate decision and its impact on banks' net interest income. Any signal of a more drastic rate cut could significantly impact profitability, particularly at Bank of America.

• Regulatory developments in the U.S., particularly the potential increase in the threshold for the most stringent supervision from $50 billion to $700 billion in assets, which would significantly change the competitive landscape.

• Regulatory developments and FTC investigations against payment processors, including Visa and Mastercard.

• Greg Abel's actions as head of Berkshire Hathaway, particularly how he will handle the $373 billion cash reserve in an environment of increased market volatility.

Summary

The financial sector offers a diverse range of investment opportunities in 2026, but requires careful differentiation between business models. Traditional banks such as JPMorgan and Bank of America offer more attractive valuations and higher dividend yields, but carry higher risk associated with the credit cycle and macroeconomic developments. Payments giants Visa and Mastercard stand at the opposite end of the spectrum with minimal cyclical risk but at the cost of higher valuations.

Berkshire Hathaway, on the other hand, represents a unique category where the investor is not buying one company, but an entire ecosystem of value-driven businesses. It is this diversity of the financial sector that makes it a space where the conservative dividend investor and the growth-oriented trader can find opportunity. The key is to understand exactly what you are getting for the price.

The jury did more than accept that social media can be harmful. It found that the companies deliberately built features to keep young users hooked, knew about the risks, failed to give adequate warnings and that an ordinary user could not realistically see what was happening, making Meta and Google liable for 6 million dollars in compensatory and punitive damages. For parents, schools and US states preparing thousands of similar suits, the verdict is a clear signal that this legal strategy can work and that attention based business models will now be tested in court, not just in public opinion.

What this litigation is really about

The case, referred to as JCCP 5255, involved a young woman who began using social networking sites at age 10 and, according to the lawsuit, developed a "dangerous addiction" to them, accompanied by anxiety, depression, self-harm and impaired self-perception. The jury found that:

• Meta and YouTube knew about the risks of their platforms' design

• ordinary users were unaware of these risks

• the companies still failed to warn them, even though a 'reasonable operator' would have done so

The plaintiff and her mother were awarded a total of $6 million in compensatory and punitive damages. Both Meta $META and Alphabet $GOOG plan to appeal, so the litigation is far from over.

How the lawyers got around Section 230

For many years, the rule of thumb was that lawsuits against social networking sites ended at a wall called Section 230. This law protects internet companies from liability for content posted by users and allows them to moderate what they deem harmful in "good faith." The traditional "content on the platform is harmful to children" argument has mostly been quickly dismissed by the courts.

This time, however, the lawyers have done an about-face: they are not judging the content, but the design. They're targeting:

• endless scrolling

• likes and other feedback

• Notification

• algorithms that maximize engagement

He says these are active design decisions, not passive hosting of someone else's content. If it destroys mental health, Section 230 doesn't apply by that logic. That's the construction on which the verdict rests.

Free speech vs. algorithm liability

The next round of the battle will be over free speech arguments. Legal experts expect Meta and Google to build an appeal on that:

• algorithms and the way they classify and display content

• as well as interface design

are a form of speech and therefore protected by the constitution.

If higher courts say that companies can be sued across the board for design and algorithm choices, there is a risk of a "chilling effect."

• Either platforms will become much more cautious and limit addictive mechanisms, or they will start aggressively filtering controversial topics to minimize legal risk - thereby narrowing the space for online debate.

It is possible that the dispute will eventually end up in the Supreme Court, which will have to decide where the line between technical design and protected speech lies.

Three possible trajectories

1) The verdict will be upheld on appeal

If the Court of Appeal decides that:

• Section 230 applies to algorithms and design

• or that the lawsuit is an impermissible attempt to circumvent statutory protection

the verdict will not stand and the wave of other lawsuits will weaken significantly. The "let's attack design" legal strategy will lose its charm and the litigation will revert to piecemeal cases, not a systemic attack on a business model. For both Meta and Alphabet, this would mean that the reputational pressure would remain, but the legal and financial risk would be manageable.

2) The verdict will stand, but will only lead to incremental changes

The second option is that the court upholds the ability to claim liability for certain design choices, but sets a high bar:

• It will require clear proof of a causal connection between the feature and the specific harm

• limit liability to extreme cases

In practice, this would likely mean:

• more "wellbeing" features (time limits, reminder breaks, stronger parenting tools)

• more careful handling of notifications for teenagers

• more transparency around algorithms

The mindfulness-based business model would remain at the core, but companies would have to account for ongoing legal and compliance costs.

3) The verdict will set a precedent for an avalanche of lawsuits

The harshest scenario comes if higher courts uphold that:

• Section 230 does not apply to design

• companies can be held liable for the "addictiveness" of their product

• and Congress does not decide to modify the law in favor of platforms.

Result:

• Thousands of similar lawsuits from parents, schools and states

• Pressure from investors to modify products to reduce the risk of addiction (even at the cost of lower engagement)

• Real interventions in algorithms and UX - limiting infinite scroll, different default settings for minors

Technology platforms would legally start to approach "regulated products" like tobacco or gambling. This would have a major impact on company valuations, growth multiples and expected profitability.

Global pressure: from Australia to Brazil

The Los Angeles trial is not an isolated event. Tougher rules are already emerging in other countries:

• Australia has banned the use of social networking sites by children under 16

• Brazil has banned infinite scrolling features for certain user groups

• Other countries are developing a combination of age limits, mandatory "safety by design" features and mental health impact tests

This raises a new issue: how to verify age in practice? Without some form of identification (e.g. state or private ID systems), laws are difficult to enforce. This runs into privacy concerns and the risk of misidentification, where adults would mistakenly fall into 'child mode' and have to prove their age.

What to take from this

The verdict against Meta and Google is not yet a revolution, but it is the first serious tug on the lifeblock of the "the more time online the better" digital model. Decisions will be made in the coming years:

• Whether algorithms and design will remain legally protected like content, or whether it will become an area where companies will be held specifically responsible for the impact on the health of users, especially children and teenagers.

When people hear about nuclear weapons, most switch off automatically. Too abstract, too remote, too apocalyptic. Yet right now there’s a shift playing out behind the scenes of global politics that will have concrete effects on oil prices, defence budgets, bonds and arms manufacturers’ stocks. This is a topic investors can’t afford to ignore.

The conflict between the US, Israel and Iran is entering its second month. And instead of the world seeking a path to de‑escalation, it’s doing the opposite — seriously discussing who else might acquire a nuclear bomb.

Iran was closer than anyone admitted

Let’s start with the facts. The International Atomic Energy Agency confirmed that before the June strikes by Israel and the US, Iran had almost 441 kilograms of uranium enriched to 60 percent.

For context: military‑grade enrichment is 90 percent. Experts estimate that material could have been assembled into fuel for nine nuclear devices.

An even more chilling figure came from US defence intelligence: it would probably take Iran less than a week to produce enough weapons‑grade uranium for a first bomb. One week.

The strikes damaged some of those capabilities. Targets included, among others, the heavy‑water reactor at the Arak complex and a uranium ore processing plant in Yazd province. The Iranian programme was halted, perhaps damaged — but destroyed?

No one can swear to that yet.

Macron’s grand plan or grand theatre?

At the other end of the world, Europe is responding to American unreliability under the Trump administration in a way that would have been unthinkable five years ago.

French President Emmanuel Macron announced an expansion of the nuclear arsenal, stopped publishing its exact size, and offered eight European countries — including Germany, Poland, the UK and Sweden — participation in a so‑called “advanced deterrence” programme.

German Chancellor Friedrich Merz discussed cooperation with France under a new nuclear umbrella. Polish Prime Minister Donald Tusk went further and hinted that Poland might consider its own nuclear weapons.

France currently possesses roughly 290 nuclear warheads, the UK about 225. These are arsenals designed for deterrence, not for total great‑power war. They’re not sized to give Europe the same security shield that the US nuclear umbrella historically provided through NATO.

Back to 1962?

The situation resembles, though does not reach the same intensity as, the Cuban Missile Crisis of 1962. Back then the world stood on the brink of nuclear war over Soviet missiles in Cuba. Paradoxically, the crisis led to stronger control mechanisms: the Moscow–Washington hotline was created and the first limits on nuclear testing were signed.

Today we see the opposite. The New START treaty, which limited US and Russian nuclear arsenals, has expired, and the 55‑year‑old Non‑Proliferation Treaty is under the greatest strain in its history. Instead of new agreements, we hear a country’s prime minister talking about getting his own bomb.

Back then the world survived the crisis and struck deals. The question is whether there is the political will to do the same this time.

Macron: saviour or gambler?

I have to be honest — I have mixed feelings and I won’t sell you a simple story.

On one hand, I understand Macron’s logic. If Trump is truly weakening the US commitment to NATO, Europe needs its own deterrent. By offering a “shared French umbrella,” Paris is trying to prevent every country from getting its own bomb — which would be the worst possible outcome.

On the other hand, this looks like political theatre with very serious consequences. A French arsenal of 290 warheads simply cannot replace the American shield.

And that’s what worries me most. Once “having the bomb” becomes a legitimate part of European debate, other regional powers will ask: why not us?

What this means for your money

Now to what investors care about most.

Defence stocks: This is probably the clearest opportunity. European defence budgets are rising fastest since the Cold War. Germany has breached its own “debt brake” because of defence spending, and Poland is spending over 4% of GDP on its military. Companies like $RHM.DE, $LDO.MI, $SAABF and $BSP.DE are direct beneficiaries of this trend. The market has priced some of this in, but the structural increase in spending is a long‑term story for years to come.

Oil and energy commodities: Conflict in the Persian Gulf is a classic catalyst for rising oil prices. Investors looking to hedge portfolios against escalation traditionally turn to oil names or ETFs.

Bonds and safe havens: Geopolitical uncertainty historically drives capital into safe havens. Gold in particular is very sensitive to nuclear uncertainty.

Risk to markets in general: If the conflict escalates, we’re talking about a scenario where markets react with a sharp correction. No one can precisely estimate the probability of such a scenario, but ignoring it is gambling.

The nuclear debate in Europe is not just an abstract issue for political scientists. It’s a signal that the world is entering a phase of higher geopolitical instability, which always feeds through to markets. The defence industry is structurally on the rise. Oil remains a volatile commodity dependent on escalation or de‑escalation in the Gulf. Gold and defensive positions gain sense as portfolio insurance.

Do you hold oil company shares, or do you think their price is already inflated by the conflict and preferred to sell?

I don’t like getting into politics, especially on Bulios, but macroeconomics and the geopolitical situation are, in today’s world, almost everything that moves the markets.

Last week the European Parliament voted on something that will directly affect goods prices, the competitiveness of European companies and geopolitical tensions for years to come.

Result: 417 in favor, 154 against.

The deal passed. Yet some lawmakers call it bad.

How come? How can an agreement meant to bring stability and freer trade provoke such resistance?

The answer is simple: the two sides are not playing by the same rules. And the vote tally hides a much more important story.

Let's break down what the agreement actually contains and what it lacks.

What the EU offered:

Reductions in import tariffs on American industrial goods. Better access for American agricultural products. Continued zero tariffs on American lobsters — this was originally negotiated back in 2020.

Overall, this is a significant opening of the European market toward the USA.

What the USA offered:

The base tariff of 15% remains. It's not an exception for the EU; it's the standard condition Trump introduced broadly for almost the entire world.

And now the part usually missing from headlines: one month after the agreement was signed in Turnberry, the USA introduced 50% tariffs on the steel and aluminum content of products like wind turbines and motorcycles. In other words, exactly on the industry where the EU exports the most. The deal was signed in July — in August the new tariffs arrived. That's no coincidence. It's testing the limits.

So why did Parliament vote in favor anyway?

Because the alternative is worse. Without a deal, full escalation is a real risk. And the EU exports a record volume of goods to the USA — in 2025 it was €555 billion. This exposure creates structural pressure to conclude any agreement, even on unfavorable terms. Rejecting it would mean a trade war, which European industry, frankly, simply isn't prepared for.

Three safeguards that Parliament secured:

Parliament wasn't willing to approve the deal unchanged, and that's an important detail. Lawmakers pushed through three safeguard mechanisms that weren't in the government's original November version.

The sunrise clause means that the EU's tariff reductions will only take effect once the USA demonstrate they have fulfilled their part. No automatic concessions up front.

The sunset clause says the whole agreement expires on March 31, 2028. If no consensus to extend is found, the EU's tariff concessions automatically lapse. This mechanism is important — the EU is leaving itself a backdoor in case Trump or his successor changes course.

The suspension clause allows the EU to suspend the agreement if the USA violate the terms or if there is a devastating surge in American imports.

Parliament also demands that the USA lift the mentioned 50% tariffs on the steel and aluminum content of industrial products — a direct reaction to Washington's August move.

These are sensible guarantees. The real question is: will they work?

My thoughts

I follow this agreement with very mixed feelings and I don't want to mask that with artificial optimism.

On one hand, I understand the pragmatism behind this decision. Europe cannot ignore a market the size of the USA. A trade war would hit sectors that are key for economies like Germany, Italy or the Czech Republic. So a deal in any form is better than escalation.

On the other hand — this agreement is structurally uneven and I think everyone in Brussels knows it. The EU cuts tariffs, the USA hold at 15%. The EU exports at record levels but is negotiating from the position of the supplicant, not the partner. And the sunset clause until 2028 essentially says this: even Europe itself doesn't believe the deal will hold in its current form. Otherwise the sunset clause wouldn't be necessary.

I see a larger pattern. America under Trump systematically tests how far it can go — in trade, in NATO, on the question of Greenland. And the answer it gets is: pretty far.

For me as an investor this means one concrete thing: this vote is not the end of the story. It's the start of another round. Be prepared for the path to a final agreement to be winding.

The European Parliament voted for a deal that might be a reasonable choice, but definitely not the best. It's a compromise struck from a weaker position, with safeguards whose real strength will only be tested in practice.

On April 13 trilogue talks between the Parliament and the Council of the EU begin. Final voting is expected no earlier than June. Until then nothing will be settled.

Will this agreement become the new standard in geopolitics for Europe?

The loan is being underwritten by a syndicate of global banks including JPMorgan Chase, Goldman Sachs, Mizuho Bank, Sumitomo Mitsui Banking Corp and MUFG Bank, with SoftBank signaling that part of the repayment will come from future asset sales. For investors, tohle je učebnicový příklad toho, jak moc je skupina ochotná riskovat bilanci ve jménu expozice na jeden z nejžhavějších AI příběhů současnosti.

Total investment in OpenAI will reach $64.6 billion

Upon completion of the follow-on investment, SoftBank $SFTBY s total investment in OpenAI is expected to reach $64.6 billion, representing approximately 13% ownership stake, according to SoftBank's official statement.

SoftBank has invested a total of $34.6 billion in OpenAI through SoftBank Vision Fund 2 as of September 2024. Financing for the follow-on investment will initially be provided through bridge loans and other financing arrangements from major financial institutions and then replaced over time by leveraging existing assets.

OpenAI completes historic $120 billion funding round

In February of this year, OpenAI raised $110 billion in a deal that valued the company at $730 billion, representing the largest round of funding for a startup to date, according to a Bloomberg report.

OpenAI is raising another $10 billion from investors as part of the historic funding round, bringing the total raised to over $120 billion, as confirmed by the company's CFO, according to a CNBC report. Amazon $AMZN invested $50 billion, Nvidia $NVDA invested $30 billion, and SoftBank invested $30 billion in this round, with the investment boosting OpenAI's valuation to $730 billion before the funding was completed.

Masayoshi Son exceeds own debt limits for AI bet

SoftBank has its own debt ceiling of 25% - the maximum ratio of net debt to portfolio value it can afford under normal conditions. SoftBank's CFO Yoshimitsu Goto has publicly acknowledged that the ratio, which has already risen from 16.5% to 20.6% in recent months, is likely to temporarily exceed that limit due to AI commitments, according to a FinTech Weekly analysis.

S&P lowered SoftBank's credit rating outlook to negative from stable while maintaining its long-term credit rating at BB+ - below investment grade. S&P concluded that OpenAI is among SoftBank's investments with the "weakest" credit quality, according to a report by European Business Magazine.

Son's response is basically: the rules were written for normal times, and these are not normal times. SoftBank and OpenAI were among the companies behind last year's Stargate Project, which aims to invest up to $500 billion over four years to build AI infrastructure in the United States. Son and then-President-elect Donald Trump announced in December 2024 that SoftBank planned to invest $100 billion in AI and related infrastructure in the U.S. over four years.

SoftBank's investment strategy represents one of the most aggressive bets on AI in the current tech boom era. It confirms the company's position as a key player in the global race for AI dominance, even as it faces growing criticism over its debt levels and investment concentration.

2025 was the first real test of whether this ambition works in practice. Our article breaks down why the company exceeded its binding synergy target and what that means for the outlook for margins and free cash flow, what valuation looks like when looking beyond the superficial P/E, and why the shift from plastics to paper is a structural driver that the market is not fully pricing in today, what the numbers say about the balance sheet, and how quickly the integration phase can turn into a period where a company starts to return capital more significantly to shareholders - and whether the current near fair value price is a real opportunity or just a fair valuation.

Top points of the analysis

• Smurfit Westrock was formed in July 2024 by the merger of European leader Smurfit Kappa and US player WestRock, instantly becoming the world's largest listed packaging company with revenues of over $31bn and a presence in over 40 countries.

• The company exceeded its binding integration savings target of $400 million in 2025 and closed some 600,000 tonnes of inefficient capacity, demonstrating that the mega-merger is not just on paper but delivers real results.

• Adjusted operating profitability at the EBITDA level reached about $4.94 billion in 2025 with a margin of about 15.8%, with analysts estimating a move to $5.2 billion in 2026 due to a second wave of synergies.

• A valuation of around 29 times earnings looks expensive at first glance, but looking at EBITDA and operating flow, the valuation is more sobering - the market value of the company roughly matches the enterprise value and the P/S is only 0.66, well below 1, signaling an ever-present discount for a global industry leader.

• The dividend of $0.45 per share represents a yield of around 3% and signals that management believes in the stability of the business even in a challenging macroeconomic environment.

• The investment story rests on whether Smurfit Westrock can convert the largest merger in the history of the packaging industry into consistently higher margins, strong free cash flow and gradual deleveraging - if so, today's valuation could be a springboard for solid appreciation over the next two to three years.

Company introduction

Smurfit Westrock $SW is the world's largest listed packaging company today, formed in July 2024 through the acquisition of US-based WestRock by Ireland's Smurfit Kappa. Smurfit Kappa itself bears the name of the founding family - John Jefferson Smurfit laid the foundations of the family packaging business in Ireland and his grandson Tony Smurfit now heads the company as President and CEO. The combination of two continentally dominant players has created a group with revenues of over $31 billion, a presence in over 40 countries, over 500 converting plants and 63 paper mills, serving customers ranging from small regional companies to the world's largest consumer and industrial corporations.

The company focuses on paper and corrugated packaging, i.e., packaging boxes, shipping containers and consumer packaging made from recycled or virgin paper. It's a business that doesn't look exciting at first glance, but a closer look reveals deep barriers to entry: its own paper mills, large-scale processing plants, long-term contracts with customers and a logistics network that can't be built overnight. Geographically, the company is highly diversified - North America accounts for around 60% of earnings and is identified as the biggest opportunity for value creation in the medium term, while Europe, Latin America and the rest of the world bring geographic balance and access to differently evolving markets.

The company earns on the volume of tonnes of paper processed and on the conversion margin between the input paper price and the selling price of the final packaging. Vertical integration - i.e. ownership of both paper mills and converting plants - gives Smurfit Westrock greater control over costs and ensures more stable margins in periods when raw material prices fluctuate unfavourably. The customer base is broad and includes the food industry, e-commerce, pharmaceuticals, consumer electronics and industrial companies - this brings some stability as demand for packaging follows overall economic activity rather than one particular sector.

Management and CEO - a family heritage with a global vision

The company is headed by Tony Smurfit, grandson of the founder of the packaging dynasty, born in 1963, with a lifelong career in the family business. He's not a manager brought in from the outside to restructure - he's a man who built the entire company from within, and who had a clear vision from the start: to create a global leader in paper packaging capable of competing with even the world's largest customers from a position of strength, not as a regional player. The merger with WestRock was the logical culmination of this strategy and the biggest test of its ability to drive integration in the history of the sector.

Its approach in the first year after the merger showed a combination of operational toughness and strategic clarity: the company closed some 600,000 tonnes of inefficient capacity, laid off over 4,600 employees in North America, and exceeded its integration savings targets while maintaining the dividend. The CEO himself did not disguise at the February 2026 earnings presentation that the macroeconomic environment was "the toughest of his career for such a long period of time," but he also emphasized that the company had passed this test and was ready for the phase when integration turns into organic growth.

Market and industry - stable demand with a significant shift away from plastics

The paper and corrugated packaging market is globally large, relatively stable and driven by structural factors that work regardless of short-term cyclical fluctuations. Paper-based packaging is a mainstay of e-commerce logistics, the food and pharmaceutical industry and industrial supply chains - sectors that will not disappear in the foreseeable future. As the world's largest corrugated packaging manufacturer, Smurfit Westrock serves this market from a position of advantage that is hard to replicate.

The key driver for future growth is the shift from plastic to paper alternatives. Regulatory pressure in Europe and the United States, as well as consumer demand for sustainable packaging, is pushing manufacturers to replace plastic packaging with paper. Smurfit Westrock estimates that the untapped market for replacing plastics with paper solutions is worth over $10 billion globally, and the company is seeking to address it through a combination of innovation in materials and proximity to customers in key segments.

On the other hand, the short-term outlook for the corrugated packaging market in Europe is challenging. Tony Smurfit himself said in October 2025 that the market there is "pretty bad right now", but also added that when it turns around, it will turn around quickly and sharply. A number of paper mill operators in Europe have been forced to close plants, market capacity is declining, and once economic activity picks up, the supply/demand balance could quickly tip in favour of producers. In North America, the situation is much better - around 70% of Smurfit Westrock's corrugated operations there are "solidly profitable", according to management, and the region is showing marked improvement since the merger.

The merger as an investment story - what it delivers, what it costs and what it promises

The Smurfit Kappa and WestRock merger was not just a transaction on paper - it was a strategic move that leapfrogged years of organic growth and immediately delivered global scaling, access to the US market for the European leader and the ability to offer customers consistent packaging solutions across multiple continents under one roof. The original savings target from the integration was set at $400 million per year - the company exceeded it in 2025 and management now suggests that the total potential synergies could reach over $800 million by 2027.

But the cost of this transformation is not small. Investments in integration, restructuring, plant closures and manufacturing base upgrades have swallowed up much of the operating cash flow in 2024, when free cash flow fell to just $17 million. Meanwhile, in 2023, the company generated free cash flow of over 600 million, showing the temporary impact of integration costs on cash generation. The key question for investors, therefore, is how quickly this investment will be recouped in the form of higher sustained free cash flow and reduced debt.

Management unveiled a medium-term plan in February 2026 that positions North America as a major source of value creation. The plan envisions a large volume of smaller capital projects - the average project is less than $4 million, with no project over $200 million - suggesting deliberate discipline in capital allocation and a desire to maximize the return on every penny invested rather than making big bets. For 2026, analysts estimate adjusted EBITDA growth of about $5.2 billion and adjusted earnings per share of about $3.15, with a second wave of synergies expected to gradually improve margins and boost free cash flow back to historically stronger levels.

Financial performance and numbers

Smurfit Westrock's revenues have grown to around $31.2 billion in 2025, up from $20.4 billion in 2024, with the jump largely reflecting the first full year of Westrock's consolidation following the July 2024 merger. Gross margin is around 19%, operating margin around 5.6% and adjusted EBITDA margin around 15.8% - numbers that are acceptable for an integrating industrial colossus in a challenging macro environment, but show where there is room for improvement.

Net income for 2025 was around $660 million, earnings per share around $1.25, with average share count up by a third due to the merger issues. Return on equity is around 4.6%, return on invested capital around 3.8% - both low numbers, but consistent with the integration phase and high one-time costs. In a normalised operating environment without integration costs, these indicators would look significantly different.

Operating cash flow reached $1.48 billion in 2024, but the investment in integration and capacity projects consumed almost all of it, leaving free cash flow to be symbolic. This is a key number for investors to watch - a turnaround to strong free cash flow is a prerequisite for deleveraging, dividend increases and potential share buybacks. Management for 2025 reported adjusted free cash flow of $679 million in the fourth quarter alone, indicating that a turnaround is indeed underway.

Balance sheet and debt

Smurfit Westrock's balance sheet is one of the key metrics we monitor - the merger was funded with a combination of equity and debt, and the resulting structure is not as conservative as companies that do not accumulate assets through large acquisitions. An Altman Z-score of around 1.3 is in the zone of heightened attention and signals that the firm is not in the safe part of the band. At the same time, it is important to distinguish between "credit distress risk" and "a firm in an integration phase with temporarily high debt" - Smurfit Westrock is more likely to be in the latter category, as operating cash flow is strong and the assets the firm holds have real value.

Interest cover of around 4.7 times is acceptable - the firm generates operating profit to cover interest with sufficient headroom. The equity ratio of around 41% says that most of the funding is still coming from equity, not debt, and the debt-to-equity ratio of 0.02 is paradoxically very low - this probably reflects the specifics of accounting consolidation and the way liabilities are reported. For a complete picture, one would also need to monitor net debt to EBITDA, where management is focused on gradually reducing to target levels.

Valuation and what is included

At first glance, a P/E of around 29 times looks expensive - and looking at 2025 net income, which is loaded with integration costs, it is. But the relevant metric is more likely to be adjusted EBITDA, where the company trades at significantly more favourable levels, and a P/S of 0.66 shows that the market is not paying a premium multiple for earnings. The fair value according to the data is $38.44 per share, and the current price is close to that - so the discount is not that significant, but the upside exists in the form of gradually improving margins and a move to stronger free cash flow.

For the valuation to move favourably, Smurfit Westrock needs to meet a combination of conditions over the next two to three years: get adjusted earnings per share into the $3 to $4 area (analysts estimate $3.15 for 2026), increase free cash flow to sustainable levels of over $1 billion a year, and convince the market that integration is past its peak. If this succeeds and the market assigns the sector a P/E multiple in the 15 to 18 range, we have room for real appreciation in the stock - without having to speculate on a significant economic expansion or commodity price movement.

What could surprise the company in the future

Synergies are the biggest source of positive surprise - management promised $400 million per year in the merger, topped that in 2025, and now hints at the potential for over $800 million by 2027. If the integration savings prove to be structural and not one-off, and if organic price and volume growth is added, EBITDA could move well above current analyst estimates.

The second source of surprise is the shift away from plastics. The market for replacing plastic packaging with paper solutions is estimated to be over $10 billion globally, and Smurfit Westrock is uniquely positioned to benefit from this transition more than anyone else due to its size, innovation capabilities and customer relationships. Regulatory pressure in Europe, which is gradually spreading to other regions, can significantly accelerate this transition and create a revenue stream for the firm that the market has only conservatively factored into models today.

A third catalyst may be the divestment of unneeded assets. Analysts expect the firm to divest non-core assets - land, specialty chemical operations or other parts of the portfolio taken with WestRock - during 2026 and use the proceeds to reduce debt or buy back shares. Each step in this direction improves the balance sheet, reduces complexity and increases focus on where the company is actually creating value.

Investment scenarios

In a positive scenario, the company meets or exceeds its synergy target of $800 million by 2027, the European packaging market turns around faster than the market expects, and the transition away from plastics adds further momentum to organic growth. Adjusted earnings per share reach $3.5 to $4 over two years, free cash flow exceeds $1 billion annually, debt declines to target levels and the dividend grows. In such a world, the market assigns a higher multiple to the company and the stock can approach values well above today's price.

In the base case, integration proceeds as planned, but the pace is more moderate. The synergy target of 400 million is consistently met, the second wave brings in another 200 to 300 million, the European market recovers slowly and North America holds its role as the main source of earnings. Adjusted earnings per share approach $3, free cash flow gradually rises toward $1 billion, and the stock slowly moves from "integration story" to "stable industry leader" - with the market assigning a slightly higher multiple and the investor profiting from both earnings normalization and a modest rerating effect.

The negative scenario will occur if the macroeconomic environment deteriorates significantly, demand for packaging declines, integration synergies prove harder to realise than planned and the European market remains under pressure for longer. In such an environment, free cash flow under pressure would limit the scope for deleveraging and payouts to shareholders, Altman Z-scores near the borderline zone would draw more analyst attention to the balance sheet, and valuations could fall as the market reassesses the premium it is willing to pay for an "integration story" without a clear outcome.

What to take away from the article

• Smurfit Westrock is the world's largest listed packaging firm, formed by merger in 2024, and 2025 was the first real test of whether the mega-merger works - the results show it does, although margins and free cash flow are still below potential due to integration costs.

• The company has exceeded its synergy target of $400 million and indicates potential of over $800 million by 2027, with a second wave of savings expected to significantly improve free cash flow and open up room for debt reduction or higher payouts to shareholders.

• The valuation is not dramatically cheap on the data - the current price is near fair value at $38.44 - but upside exists in the form of incremental margin improvement, normalization of earnings per share to an estimated $3.15 for 2026, and potential revaluation upon successful completion of integration.

• The Altman Z-score of around 1.3 and low free cash flow in 2024 are signals that investors need to watch - they are not acute crisis signals, but they are indicators that need to improve over the next two years for the story to make sense.

• The structural story of the transition from plastic to paper packaging and a market estimated at over $10 billion are factors that may not be fully reflected in today's price and that may be a source of positive surprise in the longer term.

• For an investor looking for an industry "compounder" with global reach and a clear strategy, Smurfit Westrock is an interesting candidate - but it requires patience and a willingness to track integration milestones quarter by quarter, as true value will be revealed incrementally, not all at once.

Four ultimatums and four retreats

Since the beginning of March Trump has issued at least four public ultimatums to Iran regarding the strait. Each time he warned that a harsh retaliation would follow if conditions weren’t met. And each time he stepped back. Most recently, last Saturday he promised an attack on Iranian power plants within 48 hours. On Monday the deadline was extended to Thursday, and on Thursday at a press conference in front of his ministers he announced a further extension of the deadline by another 10 days to April 6.

His poll numbers are falling

The public is noticing the war, and Americans are beginning to lose tolerance for it.

A poll from March 20 to 23 recorded Trump's overall approval at just 36%, while 62% of Americans disapprove of his performance. Prices and inflation are Trump’s weakest point with voters, rated at minus 39 points, and this indicator is worsening every month.

Pew Research Center, in its survey from March 16 to 22, found that 61% of Americans disapprove of Trump's handling of the conflict. Only 37% approve.

Support among independent voters has fallen especially sharply: only 24% of them approve of Trump's handling of Iran, while 63% disapprove. A week ago it was 30 to 53. Independents are a key group for the November election.

Is a less favorable deal looming?

The longer the war continues and the more Trump's support falls, the greater the pressure will be to end the conflict quickly. And a quick end may mean terms that do not fulfill the original American objectives.

Bloomberg summed it up succinctly: the “rally around the flag” effect in wartime, where a president’s popularity usually jumps, did not appear in this case at all.

For energy markets this means one thing. Until there is a clear agreement guaranteeing the opening of the strait, the geopolitical risk premium in oil will not disappear. And that transmits directly into companies’ results—from airlines through chemical companies to retail.

How do you see it? Do you believe that some agreement will actually be reached by April 6, or should we expect another extension and oil to remain above $100?

The year 2026 has returned oil to the centre of the markets' attention in a way that few predicted at the start of the year. The conflict between the US and Israel on the one hand and Iran on the other has triggered a blockade of the Strait of Hormuz, one of the world's most important shipping arteries, through which around a fifth of global oil supplies flow. The result has been a sharp rise in the price of 'black gold', with the price of Brent crude still above USD 100 per barrel and temporarily above USD 114. In this environment, the energy sector has become by far the strongest segment of the US stock market, while technology titles are losing ground under the pressure of macroeconomic uncertainty.

For investors who wish to participate in these developments through ETFs, there are essentially four basic instruments, which differ significantly in structure, risk and exposure to oil prices. Each brings different investment characteristics, benefits and pitfalls that need to be well understood before allocating capital. Here they are.

United States Oil Fund $USO

The United States Oil Fund (USO) is the most straightforward oil price exposure vehicle available in the U.S. market. The fund does not invest in oil company stocks, but directly in West Texas Intermediate (WTI) crude oil futures contracts, the U.S. benchmark for light crude oil delivered to Cushing, Oklahoma. The fund aims to track daily movements in the spot price of WTI, not the performance of oil companies.

This structure makes USO a fundamentally different vehicle from the other funds in today's review. If the price of oil rises 3% in a day, USO should mirror that movement almost exactly. In contrast, oil company earnings can be affected by many factors such as costs, hedging or capital allocation, and their shares move differently from the spot price of the commodity.

Contango and structural risk

A fundamental $USO issue that every investor needs to be well informed about is the so-called contango. This is a situation in which oil futures contracts with a later expiry date are more expensive than contracts with a closer expiry date. Because the USO has to sell expiring contracts and buy new ones every month, it sells cheaper and buys dearer virtually every month. This effect can cause the fund's performance to fall significantly over a longer period of time from the actual movement of the spot price of oil. Contango thus makes USO a tool primarily for short-term and tactical trading, not for long-term investing.

You can read exactly how contango works and why it can reduce returns here.

Another specificity is tax complexity. A USO is structured as a limited partnership, which means investors receive a Schedule K-1 tax form instead of a standard 1099-DIV. This complicates tax filing and may discourage more conservative investors.

Performance and Key Data

This year, $USO has clearly benefited from the sharp rise in oil prices. The fund is priced at $117 per unit, with a 52-week range of approximately $61 to $125. Over the past 12 months, the fund has gained approximately 54%, with over 50% gained in the past 30 days, indicating extreme momentum in response to geopolitical events.

Energy Select Sector SPDR ETF $XLE

The Energy Select Sector SPDR ETF (XLE) is easily the largest and most liquid energy ETF in the U.S. market. The fund tracks the S&P 500 Energy Sector Index, which includes 22 of the largest U.S. energy companies selected directly from the S&P 500. It is therefore a pure large-cap exposure to the energy sector, combining integrated oil giants, exploration and production companies, refiners and oil and gas transportation infrastructure.

XLE's dominant positions are ExxonMobil $XOM and Chevron $CVX, which together account for over 40% of the fund's total weight. This concentration brings the advantage of high liquidity and stability, but also means that the performance of the fund is largely determined by these two giants. The fund is rounded out by companies such as ConocoPhillips $COP, EOG Resources $EOG, Williams Companies $WMB and Schlumberger $SLB.

Lowest expenses and a regular dividend

XLE is one of the most affordable sector ETFs on the market. The expense ratio of just 0.08% per year is extremely low, even compared to other sector funds. In addition, the fund pays a regular dividend with a yield of around 2.5%, making it an attractive instrument even for income-oriented investors. This year, the annual dividend yield is around 2.54%.

XLE's price level currently stands at around $60.57 per unit. The fund's market capitalization exceeds $42 billion. The energy sector as a whole has significantly outperformed the broader market this year. Analysts at Wolfe Research have pointed out that the sector has gained approximately 30% in the last 2.5 months or so of 2026, although a temporary consolidation has come in recent days in response to hints of possible peace talks between the U.S. and Iran. Since the beginning of the year, the $XLE price is then 38% higher on the exchange.

Benefits and limitations of the fund

The high concentration in ExxonMobil $XOM and Chevron $CVX gives investors the advantage of relatively stable cash flow and lower volatility compared to pure exploration companies. These firms have diversified operations, including upstream, refining and petrochemicals, and are able to generate solid results even in the event of a temporary downturn in oil prices. On the other hand, it is this structure that does not allow them to participate fully in extreme movements in commodity prices as more specialised funds can.

SPDR S&P Oil & Gas Exploration & Production ETF $XOP

The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) differs from XLE in two key ways. First, it focuses exclusively on the upstream segment of the oil and gas exploration and production industry and does not include refiners, integrated giants or infrastructure. Second, it uses an equal-weight methodology that assigns all companies in the portfolio approximately the same weight, regardless of their market capitalization.

This combination has a major impact on the performance of the fund at different stages of the cycle. The equal-weight structure gives more weight to mid-sized and smaller exploration and production companies, which tend to perform significantly better than integrated giants when oil prices are rising. This is why this fund has historically outperformed XLE during oil price spikes, but at the cost of significantly higher volatility.

Portfolio and exposure

The fund invests in 50 companies. The largest positions include Venture Global $VG, APA Corporation $APA, SM Energy $SM, PBF Energy $PBF, and Murphy Oil $MUR. Each of these make up approximately 2.6% to 3% of the portfolio, the result of just an equal-weight approach. The fund's total AUM is around $3.5 billion. The expense ratio is 0.35% per year, still very acceptable. The fund pays a quarterly dividend with a yield of approximately 2.08%.

The current price of XOP is around $185 per unit. Data from the beginning of the year shows that the fund has temporarily reached around $182, an increase of over 80% from last year's lows.

Leveraged exposure to the oil price

One of the key features of XOP is its so-called leveraged exposure to the price of oil. Exploration and production companies have very high operating leverage because their costs are largely fixed and margins increase sharply with each additional dollar of higher oil price above the breakeven point. If the price of oil rises from $80 to $100 per barrel, the profits of many exploration companies can increase by substantially more than 25%. This effect explains why $XOP outperforms other funds so significantly in a straight oil price uptrend.

VanEck Oil Services ETF $OIH

The VanEck Oil Services ETF (OIH) brings a very different perspective to the energy sector. Unlike $XLE or $XOP, it does not invest in companies that extract oil, but rather in companies that sell equipment, technology and services to mining companies. This is the so-called oilfield services segment, which includes manufacturers of drilling equipment, subsea and surface technologies for production, seismic surveys or pumping systems.

The fund tracks the MVIS US Listed Oil Services 25 Index and invests in the 25 largest such companies listed on the US market. The largest position is $SLB (formerly Schlumberger) with a weighting of approximately 20.25%, followed by Halliburton $HAL (6.91%), Baker Hughes $BKR (11.88%) and TechnipFMC $TFI (6.46%). The Fund has a significant concentration in the top 10 positions, which comprise over 70% of the total portfolio.

Why service companies react differently than miners

Service firms operate on the principle of direct dependence on the capital expenditures (CapEx) of mining companies. When oil prices are high and producers are doing well, they invest in new drilling and exploration projects. This translates directly into the companies' orders in $OIH. However, this mechanism has a time lag. Service firms benefit most when oil prices are high over the long term and oil companies increase their capital spending, not necessarily in the first week of a price shock.

Multiple oil shocks have historically shown that service firms like $SLB or Halliburton benefit from structurally higher oil prices because producers are incentivized to invest more in production.

Performance and key data

OIH has a YTD performance of approximately 45%. The fund's AUM ranges from $1.2 billion to $2.6 billion, with a three-month increase of approximately $1.08 billion in response to the energy boom. The expense ratio is 0.35% per year and the dividend yield is around 1.23%. The fund's beta to the market is 1.25, so OIH tends to be more volatile than the market as a whole.

Comparison of funds and their key differences

The four funds analysed cover the energy sector in four very different ways and are suited to different types of investors and investment horizons. Below is a clear comparison of their basic parameters.

In terms of expense ratio, $XLE is the absolute leader at 0.08% p.a. and offers the cheapest route to the energy sector. Conversely, $USO is the most expensive of the group at 0.70%, adding contango risk and a complex tax structure. XOP and OIH stand at identical 0.35% but offer significantly different portfolio characteristics.

In terms of liquidity, XLE is the unrivaled leader with AUM in excess of $42 billion. The fund's bid-ask spread is typically one cent, making it ideal for institutional investors moving large amounts of capital. Other funds are liquid enough for most retail and mid-sized institutional investors, but fall short of XLE's liquidity.

Strategic view

A key macroeconomic factor in the energy sector this year is the geopolitical premium in the price of oil. The conflict in the Middle East and the blockade of the Strait of Hormuz have triggered a sharp price shock that is directly translating into the performance of all four funds described above. Analysts at Raymond James have flagged the risk as asymmetric in favour of a growth scenario for stocks with direct exposure to oil prices, while UBS has raised its Brent crude price forecasts for 2026.

At the same time, the geopolitical premium is inherently volatile. Any signals of conflict de-escalation can quickly push oil prices back and with them the performance of these funds. This is what was seen over the past week, when news of potential peace talks caused Brent crude to move intraday from $114 towards $100 per barrel, or over 10% in a single day.

From a strategy perspective, it is useful to think of these funds in three scenarios. If an investor believes in short-term price shock research without structural reassessment, USO offers the most straightforward exposure, but only on a horizon of days to weeks due to the contango effect. If they believe in a longer energy cycle with structurally higher oil prices, XLE is the safest choice due to its diversification, dividend and extremely low cost. For investors with a higher risk tolerance and a belief in further oil price increases, XOP offers potentially the highest returns but also the highest volatility due to its equal-weight structure and leverage to exploration companies.

OIH is a specific choice for those who believe high oil prices will encourage producers to increase CapEx over the long term. Service companies like SLB or Halliburton directly benefit from the production boom that comes with a time lag behind the price shock. If oil prices remain at higher levels for longer, it is service companies that may surprise positively in the quarters ahead.

What to watch next

• Developments in the Middle East conflict and the state of Hormuz Strait passage. A full opening of the Strait would quickly depress the geopolitical premium in the oil price.

• OPEC+ decision on production quotas. If the cartel maintains or reduces production, oil prices will remain higher for longer. Any increase in production would, in turn, help to normalize them.

• CapEx plans of major oil companies. If ExxonMobil, Chevron or ConocoPhillips increase investment in exploration and production, this will be a positive signal, especially for OIH.

• Macroeconomic developments in the US and China. Strong demand from China and a stable US economy are supporting higher oil consumption. Conversely, a possible recession or a significant slowdown would push prices down.

• Technical contango level in the oil futures market. It is crucial for USO investors to monitor whether the structure of the futures curve is in contango or backwardation, as this directly affects the fund's actual return compared to the spot price.

• Earnings of oil companies for Q1 2026. The results of Exxon, Chevron, ConocoPhillips or SLB will show how high oil prices translate in real terms into earnings and cash flow, and give a hint about the sustainability of dividend policy.

Summary

Energy ETFs are a phenomenon in 2026 that has returned investor attention to a sector that until recently was seen as outside the technology mainstream. The four funds in today's roundup offer different paths to the same thematic opportunity and differ significantly from each other in structure, risk profile and expense ratio.

In light of current geopolitical developments and the continued uncertain outlook in the Middle East, the energy sector remains one of the most important market segments of 2026. The question remains, however, whether today's oil prices are structurally sustainable or whether this is a temporary geopolitical premium that will quickly diminish at the first sign of de-escalation.

At the heart of the dispute is that Anthropic refuses to have its models run in autonomous weapons or for domestic surveillance — and the government responded by placing it on a list of risky suppliers without giving the company a real chance to defend itself. Anthropic framed the case around the Constitution: an infringement on free speech and the right to due process. The court is now saying: stop, at least until the entire proceeding is properly reviewed.

The company is effectively testing how far it can push average revenue per user without triggering meaningful churn. With guidance calling for 50.7 to 51.7 billion dollars of sales next year, higher prices are set to do a significant part of the heavy lifting alongside subscriber growth and expanding ad revenue.

Standard plan without ads priced at $19.99

The ad-free Standard plan now costs $19.99 per month, an increase of $2 from the previous $17.99. At the same time, the premium plan also increases by $2 to $26.99 per month. The cheapest standard plan with ads increases by $1 to $8.99 per month.

New members will see the new prices starting March 26, while existing subscribers will gradually transition to the new prices over the coming months. Existing members will be notified by email a month before the new prices are applied.

Non-household sharing pricing

Netflix $NFLX is also increasing the cost of adding non-household users at the same time - it now costs $6.99 for plans with ads instead of the original $7.99, and $9.99 instead of $8.99 for plans without ads. This change follows the crackdown on password sharing that Netflix launched in 2023.

Content investment to reach $20 billion

The price hike comes at a time of massive investment in content. Netflix plans to spend approximately $20 billion on content in 2026, a 10% increase from the previous year. The company is expanding its offerings to include live events, including NFL games, MLB matches, WWE broadcasts and boxing matches.

CFO Spence Neumann mentioned at the investor conference that key drivers of revenue growth will be pricing, growth in the membership base and roughly doubling advertising revenue to about $3 billion .

Shares react positively after the exit from Warner Bros acquisition

The pricing comes a month after Netflix abandoned plans to buy the studio and streaming division of Warner Bros. Discovery after Paramount Skydance submitted a higher offer of $31 per share, and Netflix received a $2.8 billion compensation fee.

Netflix shares ended yesterday at $93 with a market capitalization of $394.18 billion. This puts the stock in a 52-week range of $75.01 to $134.12.

Netflix boosts pricing power in competitive environment

The higher prices show Netflix's perceived "pricing power" relative to rival services, with the company, which has more than 325 million customers at the end of 2025, expecting increased revenue per subscriber to make up for the eventual exodus of some of its clientele.

The price increase represents an average 11% increase across Netflix's product offerings, according to TD Cowen analysis. With the new prices, average revenue per subscriber in the US and Canada will increase by 6% year-on-year.

This puts Netflix among the streaming services that have systematically increased prices in recent years. Most of the major streaming services have been increasing in price in recent years in an attempt to achieve the difficult-to-achieve profitability of subscription services.

What price increases can bring

1) Optimistic scenario - most subscribers will stay

In the optimistic scenario, management's thesis that Netflix has "pricing power" will be confirmed and customer churn will remain minimal. For example, if 90% of US subscribers accept the price increase and 10% leave or switch to a cheaper plan, the higher ARPU would still lift revenues in the region by several percentage points above current estimates on a net basis. In this case, the price hike would help to achieve the top end of the $51.7 billion outlook without significantly impairing profitability or engagement. This would confirm that Netflix has definitively gone from a pure growth story to a "pricing power" business akin to cable or premium TV channels.

2) Medium scenario - some subscribers will leave, but ARPU will make up for it

More realistic is the middle scenario, in which the price increase will cause a more noticeable subscriber churn, but higher prices will partially offset it. Imagine 20-25% of US users either canceling their subscription, switching to a cheaper plan, or sharing their account more. With an average 11% price increase and roughly 6% ARPU growth in the US/Canada, total revenues in the region could still remain slightly higher than in 2025, albeit below the high end of the corporate outlook.

Higher revenue per subscriber, higher share of ad-supported plans, significantly higher monetization for those who stay. For the stock, this may mean that the market stops seeing price through the number of users and focuses more on margins, ARPU and free cash flow.

3) Pessimistic scenario - a larger proportion of subscribers will cancel their subscriptions

In the negative scenario, price increases cross the psychological threshold, especially for the standard plan without ads, which has swung above $20, and the premium plan approaching $27. If, for example, a third of subscribers in the most expensive segments left, or a significant portion switched to a cheaper plan with ads, Netflix could see its advertising revenue component grow, but overall subscription revenue would fall short of its $50.7-51.7 billion target.

In that case, the company would appear to be hitting the limit of households' willingness to pay more money for streaming in an environment where almost everyone is getting more expensive. The "pricing power" narrative would get a crack, and investors would start to re-price Netflix more as a cyclical consumer title dependent on household wallets than as a "must-have" digital service with unlimited pricing power.

Caterpillar shows no signs of stopping; year after year it delivers great results and its stock performance is solid. It's a cash machine and I don't see much reason why its growth should slow down significantly. The shares have been rising over the long term and major drawdowns aren't very common, so I'm thinking about buying even at the current price.

Looked at in context, though, this looks more like a classic overreaction to a complex research update than the start of a new downcycle. TurboQuant is an early stage algorithm aimed mainly at making inference more efficient on conventional DRAM, while the structural story in high bandwidth memory, the stacked chips bolted next to GPUs and critical for training large AI models, is still defined by tight supply, rising demand and full order books at the key suppliers.

Breakthrough technology sparks market panic

Google Research $GOOG has unveiled a new memory compression algorithm called TurboQuant , which researchers say can compress key cache memory used in large language models at least six times faster with up to eight times faster inference, without sacrificing accuracy .

The market reaction was immediate and dramatic. On Thursday, shares of the world's two largest memory chip makers, SK Hynix and Samsung $SSNLF, fell 6% and nearly 5% respectively in South Korean trading. Samsung Electronics closed down 4.71%, while SK Hynix fell 6.23%, pulling the South Korean benchmark KOSPI index down 3.22% .

A similar trend continued in the US markets, where shares of companies such as Micron Technology $MU, which fell 7% , and SanDisk $SNDK, which fell 6.8% . These moves followed declines in SanDisk and Micron shares in the US on Wednesday .

How TurboQuant works and why it scares investors

TurboQuant represents a revolutionary approach to solving one of AI's biggest bottlenecks - the enormous memory requirements during inference operations. TurboQuant is a compression method that achieves high model size reduction with zero loss of precision, making it ideal for supporting both key cache (KC) compression and vector search.

The technology works in two phases. The first phase uses PolarQuant, which thinks about mapping high-dimensional space differently. Instead of using standard Cartesian coordinates (X, Y, Z), PolarQuant converts vectors into polar coordinates consisting of a radius and a set of angles. The breakthrough lies in the geometry: after random rotation, the distribution of these angles becomes highly predictable and concentrated.

The second phase acts as a mathematical error corrector. Even with the efficiency of PolarQuant, a residual amount of error remains. TurboQuant applies a 1-bit quantized Johnson-Lindenstrauss (QJL) transformation to this residual data.

The actual market impact remains a question

Despite the immediate market reaction, analysts caution against exaggerated concerns. Ray Wang, a memory analyst at SemiAnalysis, said Google's research won't necessarily lead to the need for fewer chips. Cache values are "a key bottleneck that needs to be addressed for better models and hardware performance," he said. Wang said it will be "hard to avoid higher memory consumption" as a result of improving the performance of models .

It is also important to distinguish between different types of memory. It should be noted that compared to standard DRAM chips, this technology will have less impact on HBM (High Bandwidth Memory). TurboQuant is mainly used to optimize the inference of AI models, a phase that mostly requires only ordinary DRAM chips. However, HBM remains a necessity in the AI training phase.

According to a CNBC report, despite Thursday's stock drop, a perfect storm of factors continues to support the memory market over the long term. Significant demand coupled with supply shortages pushed memory prices to unprecedented levels and supported gains for Samsung, SK Hynix and Micron .

Structural fundamentals remain solid

It is also key to remember that TurboQuant is still only a research project. It is worth noting that TurboQuant has not yet been deployed on a larger scale; it is still a laboratory breakthrough at this time. This makes comparisons to something like DeepSeek, or even the fictional company Pied Piper, more difficult.

Data shows that the HBM market size will grow 58% to $54.6 billion in 2026, accounting for nearly 40% of the DRAM market. The sudden increase in demand has led to an imbalance between supply and demand. Despite Samsung, SK Hynix and Micron allocating 70% of their new/additional capacity to HBM, there remains a 50-60% capacity gap for HBM.

According to Wells Fargo analysts, the Google TurboQuant update could actually be a positive for memory companies. Although this kind of breakthrough might look negative for memory companies, the idea of the Jevons paradox suggests that the opposite can happen - making AI more efficient reduces costs, which can actually encourage much wider use and demand .

Structural drivers tied to AI infrastructure, supply constraints and tight HBM markets support a resilient long-term outlook. Investors should distinguish between short-term noise and fundamental trends anchored in persistent memory shortages and AI workload expansion .

For a long term investor, the question is not whether the story sounds exciting, but whether the current price already assumes too much. That means looking beyond headlines to growth rates, capacity build‑out, regulatory decisions and the rest of Lilly’s pipeline to see how much of future cash flow really comes from obesity and how much from other areas. Only vdetailní analysis of these moving parts can show whether Lilly is genuinely the best positioned big pharma name for the next 5 to 10 years, or whether expectations have pulled too far ahead of fundamentals.

Top points of analysis

• Lilly achieved record revenues of $65.2 billion in 2025 (+44% YoY), with tirzepathide (Mounjaro + Zepbound) contributing $36.5 billion, more than 56% of total revenues.

• Q4 2025 delivered revenue of $19.3 billion (+43% YoY), adjusted EPS of $7.54 (8.7% above consensus), management issued 2026 guidance for revenue of $80-83 billion and non-GAAP EPS of $33.50-35.00.

• Mounjaro (diabetes) generated roughly $23 billion in 2025 (+99% YoY), while Zepbound (obesity) added another $13.5 billion (+175% YoY), both figures well ahead of analyst estimates.

• The historic agreement with the Trump administration and Medicare brings GLP-1 drug coverage to millions of new patients at a copay (fixed amount) of $50 starting in July 2026, one of the biggest demand expansion catalysts in Lilly's history.

• Lilly has invested over $18 billion in manufacturing capacity (US, Ireland, Germany, China) since 2020, with the new $9 billion Indiana plant being the largest single investment in drug synthesis in US history.

• Valuation matches "premium growth" status: forward P/E of around 28-30× on 2026 EPS, analysts estimate growth of $1,260-$1,500.

What's changed: from mediocre pharmas to the most well-supplied obesity bet

Back in 2021, Lilly $LLY was a solid dividend title with a diversified portfolio (insulin, oncology, immunology, neuroscience) but no clear "next big thing". The breakthrough came with the results of the clinical program of tirzepathide, which was the first ever to combine both GIP and GLP-1 receptor agonism and achieve +20% weight reduction in obese patients in the SURMOUNT-1 trial - numbers that previous generation drugs (GLP-1 monotherapy like semaglutide) were unable to achieve.

Zepbound received FDA approval in November 2023 for obesity and Mounjaro was approved for diabetes back in 2022. Since then, Lilly has essentially been out of production. Demand has outstripped capacity, the stock has become one of the most followed titles on Wall Street, and management has reframed the entire industry around one thesis: obesity as a treatable chronic disease, not a cosmetic problem.

The deal with the Trump administration in November 2025 was a watershed moment not only from a medical perspective but also from an investment perspective. For the first time in history, Medicare agreed to cover GLP-1 drugs for obese patients (not just diabetics), opening access for an estimated tens of millions of previously uncovered patients in the US. Implementation is planned to begin in July 2026, when the "GLP-1 payment demonstration" model begins, and transition to a more permanent balance model in 2027.

What needs to work for this to work

• Mounjaro and Zepbound must maintain dominant market shares despite increasing pressure from Novo Nordisk and others.

• Oral GLP-1 orforglipron must get regulatory approval and establish itself as an alternative to injections.

• The Medicare deal must actually generate new patient volume and not just shift existing payments to lower prices.

• Manufacturing capacity must ramp up fast enough that Lilly does not lose share due to the unavailability of the drug.

• Retatrutide and other pipeline must deliver positive clinical data and perpetuate the "next big thing" story after tirzepatide.

How does that become money

1) Tirzepatide as a global bestseller - now and historically

Tirzepatide (Mounjaro + Zepbound) exceeded $24.8 billion in sales in the first 9 months of 2025, surpassing Keytruda (Merck's $MRK pembrolizumab ) as the world's best-selling drug in the period under review. This is an extraordinary fact: a drug that has been on the market for less than 3 years has reached the top of the global pharmaceutical ranking.

Projections to 2030 envisage tirzepathide sales of around USD 62 billion per year if the combination of Mounjaro (T2D) and Zepbound (obesity + new indications) continues to grow. This assumes maintaining about 58% market share in the US in GLP-1 prescribing, which Lilly currently holds, and expanding into new geographies (China, Japan, Europe).

2) Medicare deal as a demand gamechanger

Until November 2025, Medicare coverage of GLP-1 drugs for obese patients was minimal or non-existent - the 2003 Medicare law explicitly excluded drugs for "lifestyle" conditions. Trump's deal with Lilly and Novo Nordisk effectively circumvents this rule through a demonstration model: copay $50/month for eligible patients, Lilly agrees to a lower realized price, Medicare pays the rest.

If an estimated 10% of the Medicare population is eligible for GLP-1 coverage (and this number may continue to grow as indications expand), this is additional demand in the order of millions of patients who previously paid out of pocket or did not receive treatment at all. For Lilly, this means potentially hundreds of millions to units of billions of dollars of additional Medicare revenue per year, albeit at a lower unit cost. The exact balance (lower price vs. higher volume) remains to be seen in reality after July 2026, but the logic is clear: massive volume growth.

3) New indications for tirzepathide

Tirzepate is not just a cure for obesity and diabetes. Lilly is actively expanding indications, the most important being:

• Heart failure with preserved ejection fraction (HFpEF) - a huge unmet need in patients where there is not yet a good pharmacological therapy. Positive study results may add millions of potential patients.

• Sleep apnea - FDA recommends Zepbound as a treatment for obstructive sleep apnea in the obese - was approved in 2024, making Zepbound the first approved pharmacological treatment for this condition.

• MASH (NASH, metabolic liver disease) - tens of millions of patients in the US and Europe.

• Prediabetes, cardiovascular prevention - repeated studies show benefits of tirzepatide beyond weight reduction.

Each new approved indication expands the addressable population and reduces the risk of "single-indication" dependence. In particular, HFpEF and MASH are indications where other treatments are virtually non-existent, so Lilly could become a sole or first mover, giving a strong pricing position.

4) Orforglipron - a revolution via the tablet

The biggest debate in the GLP-1 space is whether an oral (tablet) drug can be effective. The current top products (Zepbound, Wegovy) are injectable, which puts off some potential patients and limits penetration in countries where patients refuse or cannot inject.

Lilly'sOrforglipron achieved -12.4% weight loss in 72 weeks in Phase 3 - a figure that is significantly higher than older oral GLP-1 candidates (for example, the semaglutide tablet Ozempic/Rybelsus achieves around -15% at a higher dose but with necessary food intake restrictions).

Nevertheless, orforglipron remains a potentially transformative product because:

• it's a tablet with no restrictions on food or water intake (unlike semaglutide tablet).

• It targets a segment that refuses or cannot inject.

• may dominate in developing countries and Asian markets where injections are less accepted.

Lilly plans a regulatory filing in 2026 and approval is also expected later this year. If the Medicare deal also covers oral GLP-1, orforglipron could catch a wave of new demand immediately after launch.

5) Retatrutide - the "nextgen" tirzepatide with historic numbers

If tirzepatide was a breakthrough, retatrutide is potentially a revolution. It is a triple agonist of GIP, GLP-1 and glucagon - the first such molecule in the clinical pipeline.

In the TRIUMPH-4 trial (phase 3), retatrutide achieved a mean weight reduction of -28.7% at 68 weeks, met all primary and key secondary endpoints, and produced results in pain and physical function in patients with musculoskeletal problems. This figure is higher than anything previously achieved in a clinical programme for the pharmacological treatment of obesity - by comparison, tirzepatide achieves around -20%, semaglutide (Wegova) around -15-17%.

In its Drugs to Watch 2026 report, Clarivate identified orforglipron and retatrutide as "defining next-generation GLP-1 candidates", highlighting the combination particularly in the context of "metabolic innovation beyond replicating existing GLP-1 therapies". If retatrutide makes it through the regulatory process and gets approval, Lilly will have products on the market in three efficacy generations: oral (orforglipron, -12%), injectable tirzepatide (-20%) and ultra-effective retatrutide (-28%). That's a portfolio that no other player in the industry has.

6) Production capacity as a strategic moat

One of the most underappreciated aspects of the Lilly story is manufacturing. GLP-1 drugs are chemically complex and manufacturing intensive - you can't just start "copying" them overnight. Lilly has invested over $18 billion in manufacturing capacity since 2020, with the new Indiana plant alone receiving a $9 billion investment - the largest-ever investment in drug synthesis in the US.

Parallel expansions are underway in Ireland (Limerick), Germany (Alzey), North Carolina and China (Suzhou, +$200 million). This infrastructure creates a real barrier to entry for competitors: even if someone were to announce a comparably effective drug today, it would take them years to build production capacity at a similar level. Lilly is effectively 'closing' the space before the big competitors get there.

The numbers that support this thesis

• Revenues: $34.1 billion (2023) → $45.0 billion (2024) → $65.2 billion (2025), a CAGR of roughly 38% over 2 years.

• Mounjaro: 5.2bn (2023) → 11.5bn (2024) → US$23.0bn (2025, +99% YoY).

• Zepbound: launch November 2023 → USD 4.9bn (2024) → USD 13.5bn (2025, +175% YoY).

• Q4 2025: revenue $19.3bn (+43% YoY), adjusted EPS $7.54 (+42% YoY), beating consensus by 8.7%.

• Q2 2025 gross margin: 85% (non-GAAP), operating margin around 44%, operating profit +63% YoY.

• R&D spending 2025: $13.3bn (+21% YoY), around 20% of sales.

• Outlook 2026: revenues USD 80-83bn (midpoint +25% YoY), non-GAAP EPS USD 33.50-35.00 (midpoint +35% YoY).

• Tirzepatid as the world's #1 bestseller: surpassed Keytruda with USD 24.8bn in the first 9 months of 2025.

• 58% market share in US GLP-1 prescribing (2025).

• Investment in manufacturing by 2020: over $18 billion.

Dividend and financial health

Lilly pays a conservative dividend - payout ratio is deliberately low, with the company prioritizing reinvestment in R&D and manufacturing capacity. The annual dividend is roughly around USD 5-6 per share, so the yield is only 0.5-0.6% at a price of around USD 989 - not a dividend story, but a growth story.

Financial health is solid: gross margin around 85% (pharma products are high margin after fixed costs), operating margin increasing towards 44-45% as sales grow faster than costs. R&D spending of $13.3 billion (20% of sales) is enormous in absolute terms, but necessary in the pharma industry to maintain pipeline.

Free cash flow is very strong and management is using it to:

• reinvestment in production and R&D.

• Acquisitions/partnerships (complementary pipeline).

• Moderate buybacks and dividends.

Valuation - what's included and what's not

Lilly is not a cheap stock even in the most optimistic scenario. Forward P/E on 2026 EPS (~$34) at a price of around $989 implies a multiple of around 29×, well above the S&P 500 average and typical pharmaceutical titles (P/E 15-20×). Thus, the market is paying a large premium for:

• Revenue Momentum: 44% revenue growth in 2025 is not the norm, but the exception.

• Pipeline: orforglipron, retatrutide and new indications of tirzepatide are priced in as likely positives.

• Structural position: dominance in the fastest growing segment of pharma.

To rerate (or maintain) multiples, companies with a P/E of 29× must regularly beat guidance, otherwise there is a "de-rating" effect where even a slight slowdown causes the stock to fall 20-30%.

A basic valuation framework for an investor:

• With EPS 2026 guidance midpoint of $34.25 and P/E 30× → implied value of ~$1,028 (slightly above price).

• At 2027 EPS (guidance around USD 45-50) and P/E 28× → implied value of USD 1,260-1,400.

• At a P/E compression of 20× (scenario where growth slows more significantly) and EPS of 34 USD → risk downside to ~680 USD.

Macro and market

The global obesity epidemic is a structural, not a cyclical trend: 1 billion adults globally now meet clinical criteria for obesity and the numbers are growing. Penetration of pharmacological treatments is still extremely low - estimated at less than 3-5% of eligible patients actually take the drug, although interest is growing. This means that Lilly is operating in a market that is still largely untouched.

The market for GLP-1 drugs is estimated at $157.5 billion today, with Lilly having a market share of around 58% in the US. At 25-30% market share in this market (Lilly vs. Novo Nordisk and new competition), this would imply revenues from obesity and diabetes alone in the tens of billions, which would be only one part of the overall portfolio.

Risks

1) Price pressure

The agreement with Medicare and Medicaid lowers the realized price of GLP-1 drugs relative to the listing price. Zepbound sells for a $50 copay to Medicare patients at a significantly lower price than commercial insurers pay. If similar pricing pressures spread to the commercial market, it could compress margins despite rising volume. This is a key issue for 2026-2027, when the Medicare model rolls out in full.

2) Competition

Novo Nordisk's semaglutide (Wegovy for obesity) is a direct competitor with proven cardiovascular efficacy (SELECT study) and a strong position especially in Europe. Amgen, AstraZeneca, Roche and a number of others have GLP-1 or GLP-1 combination candidates in the pipeline. If any of these candidates achieve efficacy comparable to retatrutide at a lower cost, Lilly's market share could be eroded.

3) Orforglipron expectation gap

While the -12.4% results in Phase 3 were clinically meaningful, the market expected 13-14% and the response was negative. If orforglipron achieves lower adoption after launch than management expects (because patients and physicians prefer the stronger injectable tirzepatide or future retatrutide), the contribution to sales may be lower than projections.

4) Manufacturing and supply chain risks

At $65 billion in revenue, tirzepathide accounts for over 56% of revenue - that's an extreme concentration per molecule and per production line. Any problem at the plants (contamination, natural disaster, regulatory footprint) would have an immediate impact on revenues. Geographic diversification of production (US, Ireland, Germany, China) reduces but does not eliminate this risk.

5) Political and regulatory risk

The Trump administration is now in favor of expanding access to GLP-1 drugs, but the political equation could change quickly. Potential "drug pricing negotiations" under the IRA (Inflation Reduction Act) or pressure on Medicaid rebate structures could affect realized prices in the U.S., a key market for Lilly.

Checklist of risks

• Significant compression of realized prices in the U.S. following the rollout of the Medicare model.

• Entry of a strong new competitor with better efficacy or a more favorable price tag.

• Lower than expected adoption of orforglipron after launch.

• Manufacturing incident or supply chain issue with tirzepatide capacity.

• Regulatory setback with retatrutide or new indications for tirzepatide.

• Policy change in the US around GLP-1 pricing or access.

Investment scenarios

Optimistic scenario

In the optimistic scenario, Lilly executes on all fronts. Tirzepate maintains dominant market share, Medicare deal generates massive new volume, orforglipron makes inroads as an oral alternative, and retatrutide gets approval for obesity by 2027-2028.

• 2027 revenues: $90-95 billion.

• Non-GAAP EPS 2027: around US$45-50.

• Valuation: P/E 32-35× → share price $1,440-1,750.

• Annual return from today's price: around 15-18% per year.

Realistic scenario

Lilly delivers solid numbers, but faces increasing competition, modest price compression from Medicare, and orforglipron reaches moderate adoption. Retatrutide is in registration or early launch phase.

• 2027 revenues: $80-87 billion.

• Non-GAAP EPS 2027: around $40-45.

• Valuation: P/E 28-32× → share price $120-1,440.

• Annual return from today's price: about 7-12% per year.

Pessimistic scenario

Medicare pricing pressure seeps into the commercial market, orforglipron disappoints, competitive pressure builds, and the pipeline hits a regulatory slowdown. Revenues stagnate around $75-80 billion.

• Non-GAAP EPS 2027: around USD 30-35.

• Valuation: P/E compression at 20-25× → share price of USD 600-875.

• Downside from today's price: -10% to -40%.

• This is a scenario where "premium valuation" hints at slowing growth.

What to watch next

• Mounjaro and Zepbound quarterly earnings - maintaining momentum is key to 2026 outlook.

• Details of Medicare GLP-1 model launch in July 2026, especially new patient volume vs. impact on realized prices.

• Regulatory filing and timeline for orforglipron approval (expected 2026).

• Phase 3 data on retatrutide for other indications and potential submission to FDA.

• Study results for HFpEF (heart failure) and MASH as new indications for tirzepatide.

• Competitor development - especially pipeline Novo Nordisk (cagrisema), Amgen and new entrants.

• Management comments on manufacturing capacity and ability to meet demand in 2026-2027.

• Developments in the policy environment around drug pricing in the US (IRA, Medicaid rebate).

What to take away from the article

• Lilly is the best-stocked pharma company in the obesity space today with tirzepatide dominance, a rich pipeline and massive manufacturing investment as a moat.

• The numbers for 2025 are extraordinary, $65.2 billion in revenue (+44%), but the outlook for 2026($80-83 billion) shows the story doesn't end there.

• The pipeline in the form of orforglipron (oral GLP-1) and retatrutide (-28.7% weight, triple agonist) gives Lilly the potential to dominate the obesity market over the next decade.

• The Medicare deal from July 2026 is the largest structural demand catalyst in the history of the GLP-1 segment.

• Valuation is challenging (forward P/E ~29×) but consistent with "high visibility growth" status. The main risk is P/E compression in a slowdown, not the fundamental breakup of the business.

• For an investor looking for a company with a visible 5-10 year growth story in one of the biggest healthcare trends of the generation, Eli Lilly remains the most compelling bet in the obesity space despite its premium valuation.

When the story overcomes reality

The year 2021 has been a dream come true for a certain category of stocks. Pandemic created a seemingly ideal environment for companies offering virtual fitness, telehealth, game engine or augmented reality technologies. Low interest rates reduced the discount rate on future earnings to a minimum, allowing extreme valuations for companies whose profits were years away. Investors were paying astronomical multiples for the mere promise of what could be.

Then came the turnaround. Rates began to rise, the pandemic premium began to fade, and the market began to demand concrete results instead of grand visions. The result has been declines unprecedented in history. Slump percentages are not mere statistics; they are a memento mori for anyone who buys purely on the basis of story without regard to valuation.

At the same time, it does not automatically mean that these companies have no investment value. The question that more and more analysts are asking today is different: is there a real catalyst for a comeback in any of these companies, or is it a value trap where the cheap price beckons but the fundamentals don't justify it?

Vuzix Corporation $VUZI

From the hype of AR glasses to reality

Vuzix Corporation is one of the pioneers of industrial smart glasses and augmented reality technologies for the enterprise segment. The company offers products such as the M-Series or Vuzix Shield that find applications in logistics, medical, defense, and industrial manufacturing. On paper, the business model is solid: it sells hardware to companies that integrate it into operational processes where it increases efficiency. The problem is that this vision has hardly been reflected in the numbers so far.

In April 2021, VUZI's share price hit an all-time high of around $32.43 apiece. Back then, the hype around AR technology was at its peak and investors believed that smart glasses were the next big hardware segment to replace smartphones in industrial settings. The reality is markedly different.

The company's quarterly revenue is around $1 million and the company reports negative EPS every quarter. Net losses exceed sales. The market capitalization today stands at $200 million, and the firm has no dividends and hedge funds hold zero stake in it. A negative EBITDA margin exceeding 450% is unique even by the standards of technology startups.

Where are the bright spots

There are some positive signs. Vuzix has entered into a strategic partnership with Taiwan's Quanta Computer, one of the world's largest ODM electronics manufacturers. In February 2026, it received new FCC and CE certifications for the LX1 model of smart glasses, opening the door for the company to further commercial deployment. The company holds over 246 patents and pending patents in the area of waveguide optics, a key technology for future next-generation AR headsets. The partnership with Garmin $GRMN to develop nanoscale optical projection systems also indicates that the company has customers in the premier league.

However, competition is strong. Meta Reality Labs, Apple Vision Pro, and new projects from Google are competing for the same segment, with multiples larger R&D budgets. It is structurally very difficult for a small company with revenues of a few million dollars to compete with these giants.

Overview of key metrics

Peloton Interactive $PTON

From pandemic star to giant drop

The story of Peloton is perhaps the most dramatic example of how quickly sentiment can turn. The company, which makes premium bikes and treadmills with a connected streaming ecosystem of trainers, experienced explosive growth during the pandemic. Investors have been snapping up shares of the company, whose revenue has been growing at triple-digit rates. At its peak in January 2021, the stock traded over $171. Today, they are trading around $4, down more than 97%.

The decline is due to a combination of factors that reinforce each other. Consumers stopped buying home fitness equipment after pandemic restrictions were eased. Demand for the expensive $1,500 bikes the company sells has plummeted. But in the meantime, the company invested massively in production and expanded capacity, leading to a huge inventory surplus. The company's operations swallowed up a cumulative total of over $2.7 billion between 2021 and 2024.

There were product sales at reduced prices, layoffs, CEO replacements, and founders leaving. Each of these moves dealt another blow to the stock price. A company that appeared to be the definitive winner of the pandemic fitness trend has turned into a cautionary tale for investors.

Is there a realistic recovery scenario?

Yes, there is, but it is very narrow. Peloton has focused in recent quarters on what it can influence: drastic cost cuts and cash flow optimization. In January 2026, the company laid off another 11% of its workforce. This brought it close to positive free cash flow for the first time, reaching $324 million in fiscal 2025. Net debt decreased 52% for the year to about $319 million.

On the other hand, fundamental issues remain. Subscriber numbers continue to decline and have reached a four-year low. Sales in FY2025 were $2.49 billion, down 7.77% year-over-year, and management projects a further decline to about $2.4 billion in FY2026. This is the fifth straight year of declining sales.

The company is expanding into the commercial segment, where it now offers bikes and treadmills for hotels, fitness centers and apartment complexes. Whether the move can stem the erosion of the customer base remains a question mark. The stock is trading at a price-to-sales ratio of around 0.7x today, but analysts say a low valuation without improving fundamentals is not an argument to buy.

Overview of key metrics

Unity Software $U

Game engine seeks comeback via AI advertising

Unity Software is the dominant game engine for mobile and indie games, powering over 70% of mobile games worldwide. The company went public in September 2020 and soon became a favorite of tech-oriented investors. In November 2021, the stock reached an all-time high of over $210. Today, they are around $18, down over 90%.

The road to the bottom has not been a straightforward one. Unity merged in 2022 with ironSource, a controversial mobile advertising platform that caused a massive exodus of developers. In 2023 came the so-called Runtime Fee, a fee charged to developers for each game installation. The community reacted with fury, and many studios began switching to the competing Unreal Engine or other alternatives. Eventually, under pressure, management had to abolish the Runtime Fee. But the reputational damage was palpable.

In May 2024, new CEO Matthew Bromberg, former COO of Zynga, stepped in. His first steps were clear: abolish the Runtime Fee, reduce the workforce by thousands of positions, rebuild trust with the developer community, and emphasize monetization through the AI-powered ad network Unity Vector.

Unity Vector as a key catalyst

Unity Vector is an AI-enhanced mobile ad network that has become a focal point for investors. In January 2026, it reported 72% higher ad revenue year-over-year. Analysts at Barclays $BCS have raised their 2026 growth estimate for the advertising segment to 17%. The Grow Solutions segment's total revenue reached $1.23 billion in 2025, and a potential run-rate of over $1 billion per quarter by the end of 2026 would be transformative for the company. More on Unity's advertising model can be found in their developer documentation.

On the other hand, the Q4 2025 and full fiscal year results were disappointing. Revenue for Q4 was $545 million, only 3% year-over-year, and the outlook for 2026 calls for only 5-7% growth, a dramatic drop from the historical 20% pace. The company is coming from a position of huge reputation loss and the rebuild is taking longer than expected.

The big structural threat is $APP, a direct competitor in mobile advertising that has been significantly outperforming Unity in efficiency in recent quarters. Losing mobile ad market share to Apple and Android games is a real risk that could slow or stop the rebound of Grow Solutions.

Overview of key metrics

Teladoc Health $TDOC

Telehealth giant that failed to deliver on its promises

Teladoc Health is the world leader in virtual healthcare. The company operates two main divisions: Integrated Care, which offers virtual medical consultations and chronic disease management, and BetterHelp, the world's largest online psychological counseling platform. As of February 2021, TDOC's stock price had reached over $308. Today, it is around $5.5, a drop of over 98% from its all-time high.

This dramatic drop is the result of a series of setbacks. The biggest was the acquisition of Livongo Health in 2020 for approximately $18.5 billion, one of the largest health-tech transactions in history. The integration did not succeed to the extent expected and the company subsequently had to book a huge goodwill impairment. Total write-downs over the years exceeded tens of billions of dollars, with the firm coming up with new losses quarter after quarter.

BetterHelp, which was considered the fastest growing part of the business, began to slow down significantly in 2024 and 2025. Revenues in Q4 2025 were down 7% year-over-year, and adjusted EBITDA for the entire segment was down 46% for 2025. The problem is the highly competitive online therapy market, where Hims & Hers $HIMS, Cerebral, and a number of other platforms are outbidding customers through aggressive marketing.

The struggle to stabilise

Management is trying to restructure on multiple fronts. In the Integrated Care segment, it projects 2026 revenue of about $1.61 billion, up slightly year-over-year. The company is expanding its preventive care offerings with the acquisition of Catapult Health in February 2025 for $65 million. Enrollment (number of registrations) in chronic programs (diabetes, hypertension) is also growing, where retention is higher and ARPU (Average Revenue Per User) is more favorable.

However, the overall market dynamics remain a structural problem. The expiring ACA subsidy (health care law) may reduce the number of insureds using telehealth. The outlook for Q1 2026 calls for revenues of $598 million to $620 million, well below the consensus of analysts who were expecting over $633 million. Overall guidance for FY2026 (EPS of -0.70 to -1.10) was weaker than market expectations. As a result, Leerink Partners lowered its February 2026 target price from $8.50 to $5.50.

The firm's market capitalization has fallen below $1 billion.

Overview of key metrics

Comparison Table: Four bubbles that popped

A summary of key data for all four firms:

Strategic view

Looking at these four companies as a whole reveals one key lesson about investing: valuation at the time of purchase is arguably the most important factor in long-term performance. All four firms had compelling businesses in real and growing market segments. The issue was not what the companies did, but what their shares sold for years ago.

At the height of the hype, investors were paying for valuations that implied decades of flawless execution without any problem. Once reality set in, it wasn't just revenues or profits that fell, but more importantly, reassessed valuations, causing declines that multiplied for both factors.

For conservative investors, these stocks are more of a cautionary tale than an opportunity. For speculative-oriented players with a high tolerance for risk and the ability to react quickly to changes in fundamentals, Unity $U in particular may offer asymmetric opportunities, but only with great respect for positional risk and stop-loss discipline.

What to watch next

• $VUZI: Orders from Quanta Computer and commercialization of the LX1; development of quarterly sales above $2 million would signal real scaling

• $PTON: Declining or stabilizing churn in sub-script base; new commercial segment results (hotels, fitness centers); free cash flow development in FY2026

• $U: Unity Vector's quarterly run-rate to end FY2026; whether it will reach $1 billion in annualized ad revenue; results compare to AppLovin in mobile advertising

• $TDOC: Evolution of BetterHelp enrollment after ACA subsidies expire; adoption of AI-enabled clinical programs at Integrated Care; whether management will deliver on top end guidance in 2026

Final lessons learned

These four companies share a common story: extreme valuations at the moment the story overtook reality, and a subsequent brutal return to basics. For investors, the lesson is clear. No thematic thesis, no structural trend or pandemic premium justifies ignoring valuations at the point of purchase.

The common denominator for those who can survive is discipline. The ability to reduce costs, generate positive cash flow and refocus the business model on segments with real demand. Companies that manage this may never return to their historical highs, but they can offer compelling returns from today's levels. Firms that fail to do this will remain a deterrent from the investing textbooks.

The deal is Merck’s third sizeable transaction in roughly a year and part of a broader buying spree worth more than 29 billion dollars. The company has already moved for Verona Pharma in a 10 billion dollar bet on respiratory medicine, acquired rare‑disease player SpringWorks for 3.9 billion dollars and is now adding Terns, all with the same strategic goal: building a pipeline strong enough to backfill the sales that will fade as Keytruda’s exclusivity runs out.

What Merck is actually buying for 6.7 billion

The entire transaction is based on one asset. TERN-701 is an experimental drug in clinical trials for the treatment of chronic myeloid leukemia (CML), a blood and bone marrow cancer in which leukemia cells grow uncontrollably.

The mechanism of TERN-701 differs from existing treatments. It is a highly selective allosteric inhibitor of BCR::ABL1 in oral form, i.e. in tablets. Unlike the older generation of drugs, it targets a different site of the protein that drives leukaemia, and the data from the first phase of clinical testing are exceptionally promising. At the ASH conference in December 2025, Terns reported that 64% of pretreated patients achieved a major molecular response after 24 weeks. This result was described as "unprecedented" in the oncology community for a group of patients for whom other treatments had previously failed.

$MRK is now managing the CARDINAL study, adding a new cohort in January 2026 to test the 500 mg once-daily dosing. Initial dose selection is expected in mid-2026, followed by a key interaction with the FDA regarding conditions for approval.

Is 6.7 billion too much or too little?

The view of the net price of an acquisition varies depending on how you approach the risk. Terns had about $1.4 billion in cash on the books, so the effective price for the drug and research team alone is closer to $5.3 billion. The premium over the stock's last closing price was just 6%, a very modest premium compared to standard pharma acquisitions. The market took notice: shares of Terns jumped 5.5% after the announcement, not tens of percent as is usual with large buyouts.

The problem is that TERN-701 is still in Phase 1/2 clinical testing. Historical data shows that drugs in this phase successfully make it through the entire FDA approval process less than a third of the time. Merck has paid for this drug as a future blockbuster, with years of clinical data, regulatory approval and ultimately the actual commercial launch still to come. A direct competitor in the CML market is Novartis' Scemblix $NVS, which is already approved and has shown a 67% molecular response rate in clinical testing. The difference in efficacy is minimal, the competition will be fierce.

The key question: will this save Merck from the fall of Keytruda?

The answer itself is no. No single acquisition of Merck by $MRK is enough to offset Keytruda's revenue. Keytruda's primary patent expires in the U.S. in December 2028, and in Europe in 2031. Bloomberg Intelligence estimates that the global patent is more likely to be extended to 2033, which would bring Merck extra revenue of about $22 billion.

Therefore, Merck $MRK is betting on a combination: extend the life cycle of Keytruda through new formulations and combination treatment protocols, while building a diversified oncology pipeline through acquisitions. In February 2026, the company announced the separation of its oncology business into a separate division with its own leadership and strategy. Terns Pharma fits into this plan as the hematology leg of the portfolio.

Scenarios for investors

Bullish: TERN-701 successfully passes the CARDINAL trial, the FDA approves the drug in late 2028/early 2029, and Merck launches commercial sales just as Keytruda revenues begin to decline. CML may be a rare disease, but blockbuster drugs for rare cancer diagnoses can generate billions even with a narrow patient population. In such a scenario, 6.7 billion paid today in 2030 may look like a good price tag.

Base case: TERN-701 will pass clinical trials, but commercial launch is slower than expected due to direct competition with Novartis' Scemblix. The drug will plateau at revenues in the range of $1 billion to $2 billion per year by 2031, justifying the acquisition as a reasonable diversification but not a strategic breakthrough.

Bearish: CARDINAL trial fails to show sufficient benefit over current treatment, FDA requires extensive additional studies or conditional approval with limited indication. Direct battle with Scemblix loses and Merck writes off a substantial portion of the 6.7 billion. In the context of an overall $29 billion acquisition strategy, such an outcome would increase pressure on management and MRK stock.

🟢 What exactly is it?

TurboQuant is a language LLM model from Google that aims to solve a technical problem: huge demands on memory usage and speed.

When you communicate with an AI (e.g., via ChatGPT or Gemini), the model needs to "remember" the context of the entire conversation. This "memory" is stored in the so-called KV Cache.

🛑 But here's the problem: This memory is incredibly space-hungry. The longer your conversation (longer context), the more memory (VRAM) the graphics card needs.

🟢 How does it work?

Think of it as compressing the conversation data so intelligently that the model can still work with it, even though it takes up a fraction of the space.

👉 6x less memory: That means where you previously needed 60 GB of memory, you now only need 10 GB.

👉 8x higher speed: Because the data is smaller, the chip can process it much faster. So instant responses from the AI.

🟢 How else can Google's TurboQuant help us?

• AI directly on mobile: Thanks to this, you'll soon see top models running directly on your phone without needing the internet (Local AI Inference).

• Huge context: You'll be able to load an entire book or thousands of lines of code and the AI will "remember" them without running out of memory.

• Cheaper operation: For companies like Google this means operating AI will be much cheaper, which could lead to better free versions for users.

🚨 Memory card companies are under pressure today.

The market is reacting positively to signs that Beijing is finally cracking down on the debilitating price wars that are devastating the profitability of China's biggest tech companies in the express delivery sector. $BABA and $MPNGY have been major beneficiaries of this change in regulatory approach.

The food delivery sector as a major winner

The State Council's top antitrust authority will launch an investigation into competitive practices among delivery platforms under China's Anti-Monopoly Law through local inspections, interviews and surveys, according to the State Administration for Market Regulation. The authorities aim to assess monopoly risks, restore market order and promote fair competition.

According to a January 2026 Bloomberg report, regulators aim to crack down on practices that distort the real economy and promote destructive competition. A commission official noted that while the delivery platform industry has played a key role in stimulating consumption, expanding employment and encouraging innovation, significant problems have emerged in recent years, including excessive subsidies, price wars and traffic control issues.

Economic motivation for intervention

The entire food delivery industry, according to a column in the Economic Daily, has fallen into a "vicious cycle" of losing money just to get attention, which ultimately puts a strain on the broader consumption recovery. Price wars go directly against the central government's efforts to boost consumption.

Meituan posted its first loss in nearly three years, reflecting the effects of a three-way battle with Alibaba Group Holding and $JD.com in China's weak consumer market. The company posted an adjusted net loss of 16 billion yuan ($2.3 billion) for the third quarter.

The situation illustrates the paradox of China's economy: while the government seeks to boost domestic consumption, aggressive competition in key sectors is paradoxically dampening consumption through unsustainable price wars. According to Asia Society analysis, Beijing faces the challenge of striking a balance between encouraging innovation and avoiding destructive competition.

Impact on market shares and the future

Analyst firm Morningstar projects that Meituan's share of the express delivery market will fall to 55% of gross transaction volume by 2027 from 73% in 2024. Alibaba's share should expand to 40% from 21% over the same period, and JD.com' s share should rise slightly to 6%.

According to Catherine Lim, an analyst at Bloomberg Intelligence, "increased control over competition will boost industry margins" and "limit subsidy-based expansion and increase compliance costs for new entrants."

The regulatory crackdown signals a fundamental shift in the Chinese authorities' approach to the technology sector. Whereas they previously tolerated aggressive competition as an engine of innovation, they now prioritise market stability and sustainable business models over growth at any cost.

The broader context of the Chinese economy

The intervention in the food delivery sector fits into a broader effort by Chinese regulators to stabilise an economy beset by deflationary pressures and weak domestic demand. According to a March 2026 CNBC report, Chinese policymakers have set an inflation target of "around 2%" for 2026, the lowest level in more than two decades, in an effort to boost domestic demand and curb aggressive price wars hitting many sectors.

Steven Leung, executive director of UOB Kay Hian in Hong Kong, expects the tone of regulators in curbing intense competition to "get stronger and stronger until the market finally gets the full message".

This regulatory crackdown may represent a key turning point for China's technology sector, which has long been dominated by a "growth at any cost" philosophy. Investors are now watching to see whether similar interventions will hit other sectors affected by price-destroying competition.

Yesterday I opened a new position in Rolls‑Royce Holdings. I had this stock on my watchlist for some time with a planned entry at 1170 GBP, which has now been reached. I entered with a position size of 1% of the portfolio and have set a target price of 1380 GBP.

(As usual, I wanted to include the company’s interactive chart for illustration, but it’s not available on Bulios. I’m therefore only attaching a generated image.)

Rolls‑Royce is one of the leading global players in aviation and the defense industry. It is best known for the Trent engines, power systems, and marine propulsion solutions.

Main advantages of Rolls‑Royce:

Strong recovery in civil aviation - The number of flights and the utilization of wide‑body aircraft are increasing, which raises demand for Trent engine maintenance — and service is a key source of recurring, high‑margin revenue for the company.

Large order backlog - A backlog exceeding £100 billion provides very good visibility of future revenues for several years ahead.

Exposure to the defense industry and new technologies - The company benefits from rising defense spending and is developing projects such as small modular reactors, which could be a significant growth segment in the future.

Key risks:

Higher indebtedness - The company still carries debt from the pandemic period, which limits financial flexibility.

Execution risk - Large and technologically complex projects carry the risk of delays or higher costs.

Industry cyclicality - The aerospace sector is sensitive to the economic cycle — an economic slowdown or supply‑chain issues can significantly slow growth.

Comparison with competitors:

Compared with companies like GE Aerospace, Safran or Honeywell, Rolls‑Royce has a strong position especially in the wide‑body aircraft segment and a higher share of revenues from aftermarket services. GE has broader diversification and Safran a stronger balance sheet, but Rolls‑Royce currently offers very interesting growth potential thanks to the ongoing post‑pandemic engine maintenance cycle.

For me, this is a well‑timed entry into a quality company with long‑term potential.

What do you think? Are you adding aerospace to your portfolio, or do you prefer to avoid this sector?

The English version of this post is available on my profile on www.etoro.com. If you want to follow me there or possibly copy my USD portfolio, I’d be very happy!

For 2026, management guided 1.452–1.462 billion dollars in revenue, 18–19% growth, with non-GAAP operating income of 165–175 million dollars and a compressed margin of 11–12%, reflecting deliberate reinvestment in AI product development rather than further near-term margin expansion. The margin guidance came in roughly 45 million dollars below analyst consensus and sent the stock down more than 20% in February, creating the valuation entry point the article sets up, while the strategic reason for the spending is a March 2026 announcement that AI agents can now sign up for and operate the platform autonomously alongside human teams - a structural platform shift not yet reflected in 2026 revenue guidance but one that could meaningfully accelerate enterprise expansion if the agentic workflow thesis plays out.

Top points of analysis

• Revenues for 2025 reached $1.23 billion, up 27% year-over-year, with the company posting a positive net income for the first time in its history - $32 million versus a loss of $1.9 million in 2023 - while gross margin held at an exceptional 89%.

• The outlook for 2026 calls for revenues of $1.452 billion to $1.462 billion (18% to 19% growth), operating profit in the $165 million to $175 million range, and adjusted free cash flow of $275 million to $290 million, a margin of 19% to 20%.

• The number of customers with annual contracts over $100,000 grew 45% to more than 1,750, and customers with contracts over $50,000 already account for 41% of total revenue, up from 36% in the prior year - the company is shifting from small teams to large enterprise customers.

• In March 2026, the firm launched an infrastructure for autonomous artificial agents that act and make decisions on their own instead of just designing - a fundamental shift from a passive tool to an active digital worker.

• Analysts are modeling $2 billion in revenue by 2028 at an average annual growth rate of around 23%, with fair value according to these models estimated to be in the neighborhood of $135 per share.

• Valuation after the stock dropped significantly in early 2026 - the market was disappointed by the slowdown in growth rate from 33% to an expected 18% to 19%.

Company performance

monday.com $MNDY was founded in Tel Aviv in 2012 under the original name daPulse, renamed monday.com in 2017, as a visual project management and team collaboration tool. Founders Roy Mann and Eran Zinman were at the birth of the idea that enterprise software doesn't have to be complex and unfriendly, but can function intuitively like a consumer app - and built a platform on this idea that today serves over 245,000 customers in virtually every industry around the world. The company went public on NASDAQ in 2021, during one of the worst sell-offs in technology stocks, but since then has systematically improved profitability and expanded its product portfolio toward enterprise customers.

The company makes its money on subscriptions - customers pay a monthly or annual fee depending on the number of users and the plan they choose, with higher plans unlocking advanced features, automation, analytics and artificial intelligence. The business model is therefore inherently recurring and predictable, with a natural tendency for the average contract value to grow over time as customers add users and migrate to higher tariffs. A key indicator of the health of this model is the so-called net customer retention rate, which is 116% for large customers with annual contracts over $50k - meaning that this group of customers spends on average 16% more each year than the previous year, purely through organic expansion without the need for new customer acquisition.

CEO and management

monday.com is a rare example where the company is run by a pair of co-founders as CEOs - Roy Mann and Eran Zinman have shared the CEO role since the company's inception. Mann is primarily responsible for product vision and customer experience, while Zinman is responsible for technology development and engineering - a role split model that is unusual but clearly workable in the case of monday.com. Their approach is characterized by an emphasis on simplicity and accessibility of technology for business users without a technical background, and it is this philosophy that they are now bringing to the world of AI - instead of an isolated AI tool, they are building a platform where intelligence permeates the entire workflow.

Products - where monday.com differentiates itself from the competition

monday.com is not a single product, but a platform of four interconnected product areas, each targeting a specific business function.

Project and work management remains the historical core where the company has grown. It's all about visual dashboards, timelines, reports and automation for teams that need to keep track of who is doing what and by when. The key differentiator is flexibility - monday.com doesn't prescribe one way of working for the customer, but gives them the tools to build the workflow themselves, without the help of a developer.

monday CRM is a newer product focused on customer relationship management, business process and marketing campaigns. In September 2025, the company added monday Campaigns to the CRM, a tool that allows marketing teams to create, run and optimize campaigns directly tied to CRM data and business results - in practice, this means the marketer can see which campaigns led to closed deals and can build on that. Net customer retention rates in the CRM area are above the platform-wide average, according to management, confirming that customers who try CRM stay with it and expand.

Monday Service is the youngest product area focused on internal service teams - IT help desk, HR support, facilities management and similar functions. It's a direct entry into a territory now dominated by ServiceNow and Zendesk, and the company is building it with AI as a foundation, not an add-on. The customer gets a service platform where AI automatically categorizes, assigns and resolves routine requests without human intervention, and the entire platform is connected to other monday.com products, making it a natural choice for a company that already uses monday.com elsewhere.

monday Dev targets development teams and their specific needs - version control, bug tracking, scheduling, and integration with technical tools like GitHub or Jira. It's the most competitive market in the portfolio, with Atlassian being an established giant, but monday.com is betting that developers in companies where other teams already use monday.com will reach for a tool that integrates with their entire company rather than running an isolated system.

Customers of

The strongest number in the entire investment story is not the revenue growth rate, but the net customer retention rate of 116% for the segment with annual contracts over $50K. In practice, this means that even if the company doesn't gain a single new customer from this group as of today, its revenue from this segment next year would be 16% higher than this year - purely by existing customers adding users, moving to higher tariffs, or expanding monday.com to other departments.

This segment accounts for 41% of total revenue and is growing faster than the rest of the customer base. Customers with an annual contract over $100,000 increased 45% to over 1,750, with the average value of their contract increasing year-over-year. If the company maintains a retention rate of 116% through 2026, and this segment accounts for, say, 45% of its projected $1.45 billion in revenue - or approximately $650 million - then approximately $104 million of incremental revenue will come in 2027 from organic expansion of existing customers alone, without a single new acquisition. That's the foundation on which the company builds its outlook, and the argument for why the customer base is more valuable than a simple total customer number indicates.

A key risk of this model is that retention rates may deteriorate if customers begin to consolidate tools or switch to competitors with more integrated offerings. But so far, the data speaks the opposite - customers who cross the $50k/year threshold are deeply integrated into the company's processes and leaving would be costly and organizationally complicated, which naturally increases loyalty.

Margins in the context of competition

The gross margin of 89% is among the absolute top in the application software segment and in itself says that once a customer is acquired, it costs the minimum to serve them. For comparison with key competitors:

monday.com has a gross margin comparable to Asana $ASAN and significantly higher than Salesforce $CRM or ServiceNow $NOW, but it also shows where the margin lies: the operating margin is still token, while Atlassian $TEAM or ServiceNow have it at 20-24%. The difference is not that monday.com has a structurally worse business - it's that it's still aggressively reinvesting in product development, sales expansion, and now AI infrastructure. If it manages to approach an operating margin of 15% to 20% within three years, which the outlook for 2026 with margins of 11% to 12% suggests is a realistic direction, it will compare significantly more favourably with its competitors - and the market will likely start to appreciate this before those numbers fully materialise.

Artificial intelligence as a platform rebuild, not just an extra feature

What differentiates monday.com's approach to AI from many competitors is the intention to rebuild the entire platform around autonomous action, not just add a chat window or a text summarization button. In March 2026, the company launched an infrastructure for artificial agents that aren't just advice or suggestions - they're autonomous digital workers capable of taking action, making decisions and completing tasks within the platform without the need for human approval of every move.

The platform is built on three principles. Artificial building blocks are the building blocks from which a user with no technical background can assemble intelligent automation of their workflow - for example, automatic task assignment based on the content of an email or alerts when a risk is detected in a project. The AI-enhanced products then mean that each of the four products - project management, CRM, service and development - receive specific intelligent features to meet the specific needs of those teams. The digital agents are then the top layer, where customers can build their own agent for repetitive processes - for example, an agent that produces reports every Friday, highlights deviations from the plan and suggests specific actions without having to be asked.

Sidekick, the entry point into AI on the platform, came out of beta in January 2026 and has become the main interface for working with AI tools across the platform. The company also announced a new partner rewards program at the February 2026 Partner Summit focused on selling AI products and specializing in AI implementations, building a distribution network for this new revenue stream.

Growth potential - where, how and by how much

The biggest source of growth is moving customers up the value ladder - from small teams to entire companies. There are now over 1,750 customers with annual contracts over $100k and growing at 45% per year, while the overall customer base is growing more slowly. If this pace holds, the large customer group will account for the vast majority of revenue within two years, while delivering higher margins, lower churn rates and a more stable revenue stream.

The second growth driver is the expansion of the product portfolio. A customer who has started project management is a natural candidate for a CRM, service or developer module - and each such extension increases the annual contract value without the need for costly new customer acquisition. At the 2025 earnings presentation, management emphasized that CRM saw a record number of new customers in the fourth quarter and that monday Service, while the youngest product, is attracting interest specifically from customers who are already using monday.com in other departments.

The third driver is artificial intelligence as a source of additional revenue, not just a marketing argument. The company is gradually rolling out premium AI features on higher tariffs and autonomous agents as a separate paid tier. If customers prove willing to pay for a digital worker to replace some of their manual administrative work, it could open up a revenue stream that is not yet fully visible in today's numbers. For 2028, analysts model $2 billion in revenue at an average annual growth rate of around 23%, with success in the enterprise and AI layer being key.

Financial performance and numbers

Revenues in 2025 are $1.23 billion, up 27% year-over-year, compared to $972 million in 2024. Gross margins hold at an exceptional 89%, among the highest in the entire application software segment, reflecting the fact that the subscriber software model has minimal incremental costs once a certain level of revenue is reached. Operating profit on an adjusted basis has increased significantly, and for 2026 the company expects operating profit of $165 million to $175 million, a margin of around 11% to 12%.

Net income for 2025 was $32 million, with 2024 ending with a token $1.9 million profit and 2023 still a loss of over $136 million. The transition from four years of losses to positive profits is a significant milestone, although the absolute numbers are still modest compared to sales. EPS for 2024 was $0.65 and is estimated to be significantly higher for 2025, while the outlook for 2026 with unadjusted numbers will depend on the pace of reinvestment in AI and corporate expansion.

Adjusted free cash flow for 2026 is estimated at $275 million to $290 million, a margin of 19% to 20%. This is a crucial number because it shows that the company is not just generating profit on paper through accounting adjustments, but is generating real cash that it can use to invest in products, share buybacks or acquisitions.

Balance sheet and company health

monday.com is in a comfortable position in terms of financial stability. Working capital exceeds $1.2 billion, a cash ratio of 2.19 indicates that the firm holds significantly more cash than current liabilities, and an Altman Z-score of over 3.7 is in the safe zone. The debt to equity ratio of 0.09 and minimal long-term debt say that the firm is not financed with external capital to a greater extent and has no structural financial stress.

This strong liquidity position gives management free rein - the firm can invest in AI infrastructure, hire talent, or make smaller acquisitions of complementary technologies without having to tap the debt market or dilute shareholders. For the investor, this means that the risk of existential pressure or involuntary restructuring is minimal and the story will be driven purely by commercial performance, not financial issues.

Valuation and what's included

After the stock's significant drop in early 2026, monday.com trades on a P/E of approximately 60 times and a price to earnings of 3.3 times, with an enterprise value of $2.4 billion, well below its market capitalization of $3.9 billion due to its strong cash position. Analytical models working with a 2028 outlook and $2 billion in revenue estimate a fair value significantly higher at approximately $135 per share, a potential upside of over 80% from current levels.

The gap between these estimates says that valuation is entirely dependent on assumptions about growth rates and whether the company can sustain 18% to 23% revenue growth while improving operating margins. The stock's decline after the fourth-quarter 2025 results was a reaction to a slight slowdown in the growth rate from 33% in previous years to an outlook of 18% to 19% - a signal to some investors that the expansion phase was peaking and the company was entering a more mature, slower stage. On the other hand, the outlook for $275 million to $290 million of adjusted free cash flow puts the valuation to cash flow at just over 10 times, which is attractive for a sophisticated software platform with 89% gross margin and recurring revenue from enterprise customers.

Investment scenarios

In a positive scenario, the firm maintains a growth rate of around 20% beyond 2026, AI agents become a paid premium feature that significantly increases average contract value, and customers with annual contracts over $100k surpass 3,000 by the end of 2027. Revenues reach $2bn in 2028, operating margins approach 15%, and the market assigns the firm a multiple equivalent to a mature premium software platform. The upside to today's price is significant in such a world.

In the base case, the company grows 18% to 19% annually as the outlook says AI products are successful, but more as a customer retention tool than a massive new revenue stream. Revenues in 2027 approach $1.7 billion, free cash flow grows to $350 million, and valuation gradually declines from today's revaluation to levels consistent with a quality mid-sized software company. Investors will profit from improving fundamentals rather than a dramatic rerating effect.

A negative scenario occurs if growth rates slow further below 15%, competitors like Microsoft or Salesforce more aggressively attack the same customer segments with integrated offerings, and AI agents prove to be a difficult feature to monetize. In such an environment, today's valuation at 60 times earnings would be difficult to defend, and the stock could face further downward revaluation.

What to take away from the article

• monday.com reported positive net income for the first time in its history, and the outlook for 2026, with revenues of over $1.45 billion and adjusted free cash flow of around $280 million, shows that the company is transitioning from growth speculation to the category of profitable software companies with predictable revenue streams.

• A key indicator of the health of the business is a net customer retention rate of 116% for large enterprise customers - this means that existing customers are spending an average of 16% more each year, purely through expansion with no new acquisitions, and this is the basis for sustainable compound growth.

• The firm's AI strategy is not just a marketing story - it launched an infrastructure for autonomous digital agents in March 2026, and the firm is building a new premium revenue stream behind it, the true size of which will become apparent in the 2026 and 2027 numbers.

• The valuation is less extreme after the stock's early 2026 plunge, but still assumes continued strong growth - at a price to free cash flow of around 10 times, the firm looks cheaper than at a P/E of 60 times, and it is this metric that is relevant for a software platform with recurring revenue.

• The biggest risk is not financial - the balance sheet is strong and debt is minimal - but competitive: Microsoft, Salesforce and Atlassian are playing on the same playing field with much deeper pockets and integrated ecosystems, and this is a factor that investors need to weigh.

• For an investor with a two- to three-year horizon who believes in the continued shift of enterprise work to cloud platforms and the monetization of AI in enterprise applications, monday.com may be an interesting position after the recent slump - but it requires monitoring the growth rate of enterprise customers and the first clear signals of the success of an AI premium revenue stream.

Memory chips are among the less visible, yet absolutely key building blocks of modern AI infrastructure. Every GPU accelerator, every server rack in a data center, and every large language model training requires massive amounts of fast, high-capacity memory. This is where DRAM and NAND chip manufacturers come into play, whose products today determine how fast and how efficiently AI systems can process data.

The year 2025 was a watershed year for the memory sector. After the protracted overcapacity of 2022 and 2023, which pushed memory chip prices well below the cost of production, came a structural turnaround. Huge investments in AI infrastructure by hyperscalers like Microsoft $MSFT, Amazon $AMZN, and Google $GOOG have created demand for a special category of memory called high-bandwidth memory, or HBM. These chips, which are mounted directly next to GPU accelerators using 3D stacking technology, allow data to be transferred extremely quickly and have become a critical bottleneck in the entire AI computing chain.

Analysts estimate that the HBM memory market will reach approximately $35 to $38 billion in 2025, and projections for 2026 call for a further jump to approximately $55 to $58 billion. By 2028, the market could exceed $100 billion, which would be larger than the entire DRAM market in 2024. The dramatic change in the situation is evidenced by the fact that HBM capacity is sold out for all key manufacturers for the entire year 2026. The environment in which manufacturers find themselves can be described as a supercycle, a period of structurally higher demand that goes beyond the traditional sector cycle. Let's take a look at the four companies that are benefiting most from this trend and that will shape this strategic sector in the future.

Micron Technology $MU

From commodity producer to tier one player

Micron Technology is an American memory chip manufacturer headquartered in Boise, Idaho, and the only major US company in the DRAM and NAND segment. This in itself makes it a strategically important entity at a time when geopolitical tensions are increasing government interest in diversifying supply chains away from Asian manufacturers. Over the past two years, Micron has transformed itself from a highly cyclically volatile commodity firm to a key supplier of AI infrastructure.

Results for its fiscal second quarter, which ended in February 2026, beat even the most optimistic analyst estimates. Revenue reached $23.86 billion, up 196% year-over-year. Gross margin on a non-GAAP basis jumped to a record 74.9%, up from 36.8% in the same period a year ago. Earnings per share of $12.20 significantly beat consensus. A key factor was the announcement that all of HBM's capacity is sold out by the end of 2026. For more on the company's results and outlook, check out the Flash News on Bulios.

HBM4 and the technology edge

Micron entered 2026 in the strongest competitive position in its history. The company has moved into high-volume production of HBM4, the latest generation of high-bandwidth memory, and has begun shipping samples with transfer rates of up to 11 Gbps. HBM3E, which is the basis for Nvidia's Blackwell series accelerators, delivers 1.2 terabytes per second of throughput while consuming 30% less power than the previous generation. The company also launched its Cloud Memory Business Unit, which aims to provide hyperscalers and cloud providers with tailored HBM solutions, shifting its model from a pure component supplier to an integrated solution provider. Capital expenditures for fiscal 2026 have been raised to $20 billion.

Key metrics

Industry cyclicality remains a risk. If the pace of AI investment slows, or if producers begin to aggressively add capacity, pricing dynamics may normalize faster than the market expects. Micron $MU has gone through very deep dips in profitability in the past, and again, the level of today's margins reflects an exceptional supply and demand side situation. The last time we saw this weakness was in 2024 when $MU stock fell as much as 60% from its peak.

SanDisk Corporation $SNDK

A spin-off with perfect timing

SanDisk went public as a separate company in February 2025 after parent Western Digital $WDC completed the spin-off of its NAND flash memory division. The timing of this move was extremely fortunate from an investor perspective. The flash memory market was in the midst of a strong recovery from a protracted overcapacity, and a global shortage of NAND chips for AI infrastructure had caused prices to rise dramatically. SanDisk thus went public just as its segment was beginning to experience one of the strongest booms in history.

The company is focusing on three key segments:

• enterprise storage for data centers

• client SSDs for PCs and tablets

• consumer flash memory.

For data centers, SanDisk offers PCIe Gen5 drives and is developing the BiCS8 QLC Stargate solution, which combines higher capacity with lower manufacturing costs. More about the product portfolio can be found on the company's official website.

Rocketing growth and fundamental issues

In the second fiscal quarter of 2026, which ended in early January, SanDisk reported revenues in excess of $3 billion, a 61% year-over-year increase. Revenue from the data center segment grew 64%, driven by interest from AI infrastructure builders, semi-custom customers and technology companies deploying AI at scale. Earnings per share of $6.20 were five times the previous year's result. The outlook for the third fiscal quarter calls for revenue of $4.40 billion to $4.80 billion, which would represent an extraordinary jump.

SanDisk shares have risen more than 1,500% since going public, adding approximately 147% this year alone. Valuation at approximately 4.7 times sales is above-par for a cyclical memory business and reflects the market's belief that the NAND flash market has transformed from an end-user commodity to a strategic asset in the AI era. A key structural catalyst is also the partnership with Japan's Kioxia in the form of a shared manufacturing venture, which differentiates SanDisk from direct competitors by sharing manufacturing costs while maintaining its own product portfolio.

Key Performance Indicators

The risk is the above-trend valuation for a cyclical business, the dependence on continued pricing power in the NAND segment, and the fact that SanDisk does not manufacture HBM compared to Micron, SK Hynix or Samsung, and thus does not benefit from the very hottest part of the AI memory boom. Still, it's a key player with a clear data center transition strategy is a very interesting bet on the continued digitization of infrastructure.

Samsung Electronics $SSUN.F

The giant with the broadest global reach

Samsung Electronics is a unique entity in the context of the storage industry. It is a company that combines leadership in DRAM and NAND manufacturing with extensive diversification into consumer electronics, displays, smartphones and contract chip manufacturing (Foundry). On the one hand, this diversification is a source of stability, while on the other hand it causes memory results to be diluted to some extent by other segments in the overall corporate numbers. More on the company's structure can be found at Samsung Global Newsroom.

The year 2025 was a different year for Samsung in the memory segment. While competition in the form of SK Hynix benefited from its dominant position in HBM right from the start of the AI boom, Samsung struggled as its HBM chips failed to pass qualification tests at Nvidia $NVDA, a key customer. The result has been a drop in HBM market share from around 41% in Q2 2024 to around 17% in Q2 2025. However, this situation has brought about a vigorous management response.

Large turnaround in the second half of 2025

In the third quarter of 2025, Samsung announced that its HBM3E chips had successfully passed qualification tests at Nvidia and shipments for mass production had begun. Sales of HBM3E, and SSDs led to record quarterly sales of 26.7 trillion Korean won for the memory division. In the fourth quarter of 2025, this record was broken again: the DS division achieved consolidated sales of 44 trillion won, or approximately $30.8 billion, with year-on-year growth of more than 46%. The DS division's operating profit for the fourth quarter reached 16.4 trillion won, and the operating profit of the entire company for Q4 2025 reached 20 trillion won, tripling the 2024 figure.

In addition, Samsung confirmed that pre-sales of its HBM4 capacity for 2026 are completely exhausted, and started shipping HBM4 samples with a transmission speed of 11.7 Gbps to key customers. Analysts at banks such as Goldman Sachs $GS and Bank of America $BAC predict that Samsung's operating profit for 2026 could surpass 100 trillion Korean won, more than double the 2025 level, assuming memory prices remain high.

Key metrics

Fragmentation of the business remains a structural risk. Improvement in the memory segment may be dampened by weaker performance in Foundry or DX (consumer electronics), especially in a price competitive environment in the smartphone market. The technology gap with SK Hynix in HBM persists and Samsung will have to prove it can close it in the HBM4 generation.

SK Hynix $HY9H.F

AI memory market leader

SK Hynix is a South Korean memory chip manufacturer and currently the clear dominant player in the HBM memory market. The company started focusing on this segment before its competitors, building capacity and technological know-how at a time when other manufacturers still preferred conventional DRAM. This strategic foresight has paid off in measurable ways.

According to Counterpoint Research data, SK Hynix held a 62% share of the HBM market in Q2 2025, and NVIDIA is its key customer, taking approximately 90% of production. The firm then posted a record operating profit of 11.4 trillion won in the third quarter of 2025, up 62% year-on-year. For the full year 2025, SK Hynix surpassed Samsung in operating profit for the first time ever, with total annual operating profit reaching 47.2 trillion won. Bank of America $BAC named SK Hynix as the Top Pick of the entire memory industry for 2026, and Goldman Sachs confirmed that the company will maintain its dominance in HBM3 and HBM3E at least through 2026 with a total share exceeding 50%.

HBM4 and retention of leadership

SK Hynix was the first manufacturer to complete HBM4 development and announced a 40% improvement in power efficiency at 10 Gbps transfer rates. Series production is expected to follow immediately after completion of customer qualification. The company also announced an increase in infrastructure investment for 2026 by more than four times the amount originally planned, and is building a new M15X plant expected to be operational in mid-2027. The combination of technology leadership, capacity sold for the full year 2026, and the structural advantage of an exclusive relationship with Nvidia puts the company in an extremely strong position.

SK Hynix also confirmed that customers are starting to place pre-orders not only for HBM but also for standard DRAM and NAND products for 2026, as capacity constraints on the HBM side of production are reducing available production for traditional memory types as well.

Key indicators

High dependence on Nvidia as a key customer is a risk. If Nvidia diversifies suppliers or if its growth rate slows, SK Hynix would feel the impact very quickly. Another risk is geopolitical exposure as a South Korean manufacturer dependent on Asian supply chains in an environment of heightened tensions.

Comparison of players and market dynamics

The four firms occupy distinct market positions, differing in both technology profile and exposure to different types of memory. SK Hynix is the clear leader of the HBM segment with a dominant share and the most trusted relationship with Nvidia. Samsung is the largest firm in terms of total memory sales, but loses points for its slower entry into the HBM generation and fragmentation of the business. Micron is the US player with the most aggressive margin growth and strategic position as the only US alternative to Asian dominance. SanDisk is a pure-play NAND company with no HBM exposure, betting that flash storage for AI data centers is experiencing its own structural boom.

All four companies share a common trend: HBM capacity is sold out for all of 2026 and demand from hyperscalers and AI chipmakers remains extremely strong. Bank of America talks of a supercycle similar to the boom of the 1990s and forecasts global DRAM and NAND sales growth of 51% and 45% year-on-year, respectively, in 2026. Moreover, Counterpoint Research and Goldman Sachs warn that the structural shortage of HBM capacity is likely to persist through 2027.

A strategic view

The memory sector has gone through repeated boom and bust cycles over the past two decades, and investors who have experienced these cycles are justifiably cautious. But today's supercycle has one key peculiarity: demand is being driven not by consumer products like PCs or smartphones, which are highly sensitive to the economic cycle, but by hyperscalers' investments in AI infrastructure. These investments are multi-year strategic decisions with huge barriers to backward movement.

Each of the four companies has a different risk profile. Of the four firms, SK Hynix has the most direct exposure to the HBM boom and the lowest valuation relative to 2026 earnings estimates. For investors looking for a direct bet on the AI memory cycle with a relatively compressed valuation, SK Hynix is therefore the cleanest play. The downside is limited accessibility for Western-oriented investors, as the stock trades primarily on the Korean exchange, while there are ADR certificates tradable in foreign markets.

Micron is the US alternative with a growing market share in HBM and the strongest absolute margins. After a series of record quarters, the market has repriced the company significantly higher, but forward valuations remain conservative if the supercycle continues. Samsung offers a combination of memory exposure with diversification into other technology segments, which reduces volatility but also dilutes the net gain from the HBM boom.

SanDisk is most interesting from an investment story perspective as a turnaround and spinoff story combined with the NAND supercycle, but is also the highest valuation firm with no HBM exposure. Investors should expect that any slowdown in AI investment or normalization of NAND pricing would have a very large and rapid impact on the stock.

What to watch next

• The pace of hyperscaler (Microsoft, Amazon, Google, Meta) investment in AI infrastructure in 2026 is the most important macro indicator for the sector.

• Samsung's qualification for HBM4 with Nvidia and other customers is a key catalyst for reassessing Samsung's HBM market share.

• SK Hynix's (M15X from 2027) and Micron's (Singapore, US$2.5bn investment) production capacity ramp-ups may impact market supply-side and price dynamics.

• The transition to HBM4 and HBM4E changes winners and losers in each generation. The companies that reach high volume production first will lock in a premium.

• Pricing trends for traditional DRAM and NAND outside the HBM segment will be key to the results of Samsung and SanDisk, whose mix is more heavily dependent on traditional memory types.

• Geopolitical factors, particularly US-China relations and their impact on semiconductor export controls, may affect supply chains and redistribute market shares.

• Edge AI and consumer electronics as a new wave of memory demand in the AI-PC and AI-smartphone segment in 2026 and 2027.

Summary

The memory sector has entered a structurally new cycle that differs from previous booms in one key characteristic: demand is being driven by AI infrastructure investments that have multi-year horizons and huge barriers to backward movement. SK Hynix, Micron, Samsung and SanDisk form an oligopoly that controls this market, whose individual members compete in a technology race for dominance in the HBM generation that directly determines whether their products end up in the most prestigious AI servers or are pushed into less profitable segments.

At the same time, it's important to remember that every supercycle will eventually end or at least transform into a more normal environment. Manufacturing capacity is ramped up, new plants are built, and historically the memory industry tends to overshoot on both sides of the cycle.

While Wall Street is selling MU after record results, the geopolitical crisis in the Persian Gulf is quietly rewriting the rules of the memory market for the next 5 years.

Ras Laffan – The Flash That Changed Everything

On March 2, 2026, Iranian drones and missiles struck the Ras Laffan industrial complex in Qatar – the world’s largest LNG terminal. Flashes from the explosions were visible from Doha. Within 48 hours it became clear that the world had lost 33% of global helium production.

Most investors heard the word "helium" and moved on to the next headline. Mistake. Helium isn’t just for birthday balloons. It is an irreplaceable component in the manufacture of every modern chip – without helium EUV lithography stops, and without EUV there is no Nvidia Blackwell, HBM or DDR5.

QatarEnergy CEO Saad Al‑Kaabi said it directly on March 19: “Extensive damage to production facilities will require up to five years of repairs and force us to declare a long‑term force majeure.”

Five years. Even if the war ended tomorrow.

Why the Repair Takes So Long

This is not about politics or willpower. It’s about physics and industrial reality.

LNG trains 4 and 6 in Ras Laffan – the heart of Qatari helium production – were destroyed by direct hits. Their original construction cost $26 billion and took 7 years. Key components – cryogenic heat exchangers and turbines – are made worldwide by only 2–3 companies (Air Products, Linde, Chart Industries) with lead times of 18–24 months. Helium recovery units are physically integrated into LNG trains – without a functional train there is no helium as a by‑product.

Realistic recovery timeline, even with immediate peace:

Phase — Time horizonDiagnostics and repair planning 3–6 monthsDelivery of critical components 12–24 monthsConstruction reconstruction 24–48 monthsTesting and commissioning 6–12 monthsFull capacity 2029–2031

The global helium deficit for 2026–2030 is therefore structural, not temporary. The world market lost 30% of supply and it won’t return in two or three years.

$SSNLF SAMSUNG and $HY9H.F SK Hynix: A Ticking Time Bomb

Now to the crux — why this crisis will hit the Korean competitors and Micron very differently.

SK Hynix, the current leader in the HBM market with a 62% share, sources 64.7% of all its helium from Qatar. Samsung is similar – dependence on Ras Laffan exceeds 60%. Both companies have stockpiles for roughly 6 months – i.e., about until September 2026.

SK Hynix did implement its own HeRS recycling system, but it captures only 18.6% of consumption. The rest must come from elsewhere – and spot supply elsewhere currently costs roughly double the normal price, with analysts forecasting a rise to $2,000/MCF (from pre‑conflict $500).

Moreover: shipping liquefied helium from the U.S. to Korea by tanker is not logistically trivial. Liquid helium evaporates – trans‑Pacific transport implies enormous losses and requires specialized cryogenic tankers with limited capacity. Samsung can buy capacity from the U.S., but at a price that will dramatically compress margins.

Timeline of the Korean crisis:

September 2026: SK Hynix and Samsung inventories critically low

October–December 2026: Forced production cuts in DRAM and HBM of 15–35%

2027–2028: Structurally constrained capacity, premium spot helium prices

Micron: A Natural Advantage Built into the Map

Micron Technology’s main fabs are in Boise, Idaho – in the heart of the U.S., the world’s largest helium producer (43% of global production, fully operational).

While the Korean competition built dependence on cheap Qatari helium, Micron quietly built a supply chain based on domestic U.S. production. Air Products and Linde have long‑term contracts with Micron as an established customer – Samsung, which will show up as an emergency spot buyer, will get whatever remains at triple the price.

But the most important number isn’t in the supply chain — it’s in recycling. Micron’s fabs recycle 80–90% of all helium. Effective external spot consumption is therefore 5–10× lower than the Korean competition. Micron simply doesn’t need as much helium for the shortage to threaten it.

An Investment Asymmetry the Market Ignores

After MU’s record Q2 results (revenue $23.86 billion, EPS $12.20, guidance Q3 $33.5 billion) the market sold the stock. Reasons? Higher capex, worries about a cyclical peak, macro uncertainty.

Yet the fundamental picture is exactly the opposite:

Micron at ~$400 trades at 5.3× forward P/E (FY27 EPS consensus $76–80, Barclays estimates $100+). That is less than half the historical average and roughly a third of Nvidia’s valuation.

The helium crisis doesn’t arrive as a risk for Micron — it arrives as a market‑share catalyst:

SK Hynix must cut production from September 2026 → 12–22% of the HBM market is missing

Nvidia, ~90% dependent on SK Hynix, has no option but to shift orders to Micron

Micron already has a 5‑year SCA contract with Nvidia – emergency volume expansion = premium pricing

MU’s U.S. manufacturing capacity is fully operational, without restrictions, unaffected by the helium crisis

Conclusion: A Quiet Revolution in the Memory Market

Ras Laffan was not just an industrial catastrophe. It was a tectonic shift in the balance of power of the memory industry – and it is unlikely to be fully reversed by the time Micron brings HBM4 into mass production, signs new SCA contracts, and possibly reaches a 25–30% share of the HBM market instead of today’s 21%.

The market doesn’t see this yet. Fitch, BNP Paribas and TrendForce see it. QatarEnergy’s CEO confirmed it. Repairs will take 3–5 years even with immediate peace.

Micron at $400 with a forward P/E of ~5× and a structural competitive advantage over the next 5 years is a story worth the attention of any investor with a medium‑term horizon.

The financial ambition behind the launch is significant. CEO Rene Haas told investors ARM targets 25 billion dollars in total annual revenue and CFO Jason Child confirmed the AGI CPU carries a roughly 50 percent gross margin, with analysts projecting the chip product line alone could contribute 15 billion dollars in annual revenue by 2031 as Haas forecasts a fourfold increase in CPU demand driven by agentic AI workloads requiring continuous inference rather than periodic query responses. The move is a direct bet that entering hardware will expand Arm's addressable market to customers who never engaged with its IP licensing model, though it also places the company in direct competition with longtime licensees like Nvidia, Qualcomm and AMD, who attended the launch and offered endorsements while knowing they now share a customer pool with their foundational supplier.

What AGI CPUs can really do

The chip is built on Neoverse V3 cores and offers up to 136 compute cores per processor. Arm claims performance over 2x higher per rack compared to classic x86 CPUs from Intel $INTC or AMD $AMD, and with significantly lower power consumption. A single air-cooled rack holds up to 64 AGI CPUs, for a total of over 8,700 cores - a compact configuration that targets power-constrained data centers.

The economic argument is also important: Mohamed Awad, head of Arm's cloud AI business, has calculated that deploying AGI CPUs can save up to $10 billion in building a single large AI datacenter at a cost of around $50 billion. At a time when hyperscalers like Meta $META, Microsoft $MSFT or Amazon $AMZN are planning AI infrastructure investments in the hundreds of billions, this is an argument that executives are hearing.

Chip production is entrusted to TSMC $TSM on a 3nm process - the same technology that underpins Apple's most advanced chips $AAPL or Nvidia's $NVDA. Arm has already received test samples that work as expected, and mass production is planned for the second half of 2026.

Meta as the number one partner

Arm is not alone behind the development of the AGI CPU. Meta Platforms has become a major partner and co-developed the chip directly with Arm. The goal is specific: Meta wants to deploy the AGI CPU alongside its own MTIA chips to more efficiently manage the large-scale AI systems powering Instagram, Facebook, WhatsApp or Llamas.

But the customer base for the new chip goes beyond a single company. Early customers include OpenAI, Cloudflare, SAP and SK Telecom, with Arm in talks with other hyperscalers. On the server manufacturer side, Arm is working with Lenovo, Quanta Computer and Supermicro, which are preparing complete server systems based on AGI CPUs.

A breakthrough in a business that has been around for 35 years

The move from a pure licensing model to selling its own chips is a strategic earthquake for Arm. Until now, the company has lived off royalties, a percentage of each chip sold by customers. That model delivered steady revenue without manufacturing risk, but it also limited maximum growth potential - Arm earned a fraction of the value its technology generated in chips from Apple, Nvidia or Qualcomm.

The new model brings higher margins, but also higher risk. For the first time, Arm is in direct competition with its own customers. Intel, AMD and, in a sense, Nvidia are now competitors of the company whose design instructions they also license. Haas doesn't hide this paradox - he talks about it openly and says the market is big enough for everyone.

The numbers and outlook for investors

Arm has consistently beaten analysts' estimatesin recent quarters. In the third quarter of fiscal year 2026, it reported revenue of $1.24 billion, up 26% year-over-year, and it was the fourth consecutive quarter with billions in revenue. For the full fiscal year, Wall Street expects net income of $1.75 per share on revenue of $4.91 billion.

AGI CPU hasn't yet fully factored the potential of the new segment into those estimates. Arm says the custom chips will add "billions of dollars" to annual revenue - a specific number is not yet in question, as mass shipments don't start until the second half of 2026. The next chip in the new family is expected to be 12 to 18 months out, and Arm plans a regular iteration cycle similar to Nvidia's with its GPU architectures.

For investors, the AGI CPU signals a structural change in Arm's valuation story. The company is moving from being a mere licensing company with a limited revenue ceiling to becoming a direct player in the most lucrative AI hardware segment. The question remains how key licensing customers - Apple, Qualcomm or Nvidia - will react to the fact that their supplier has turned into a competitor.

Scenarios and projections: where the numbers are heading

The basic Wall Street consensus is working with revenues of $4.91 billion for the current fiscal year and $6 billion in 2027. By 2030, analysts are projecting revenues of around $12 billion on average, with more optimistic models working with a figure of over $15 billion. AGI CPU does not yet fully incorporate the potential of the new segment into these estimates - mass shipments only start in the second half of 2026, and the first full fiscal year with a chip on sale will not be until 2027.

The key structural argument comes from data centers. Arm has more than doubled revenue from this segment year-over-year in recent quarters, and analysts estimate that Arm-based processors could power up to 50% of new CPU installations at the largest hyperscalers by the end of 2026. Server CPU royalty revenues are growing at a rate of over 76% annually and are expected to reach approximately $4 billion from this segment alone by fiscal 2031, according to analyst estimates.

Net income is growing even faster than revenues. From $792 million in 2025, analysts model a jump to $1.8 billion in 2026 and $2.3 billion in 2027, while EBITDA is expected to approach $6 billion by 2030, which would put Arm among the most profitable semiconductor companies in the world.

A consensus of 27 analyst houses puts the 12-month target price at $156, with the highest bull case going as high as $170. But Wells Fargo warned in February 2026 that the consensus estimate of royalty earnings growing 27% annually may be too optimistic - and this is where AGI CPU enters the picture as a variable that skews existing models in both directions. If the chip sees rapid adoption by hyperscalers, estimates will have to be rewritten upwards. If customers react to Arm's direct competition by limiting licensing, the equation may reverse.

Three scenarios for the next 18 months look like this:

Bullish: Meta, OpenAI and other AGI CPU customers deploy quickly, Arm reports first billion-dollar revenue from direct chip sales in H1 2027, royalty revenue simultaneously grows due to dominance in datacenters, and the stock approaches over $180.

Base case: AGI CPU deployments are gradual, with the first significant revenue contribution coming in FY 2028, revenues arriving at consensus around $6 billion in 2027, and the stock trading in the $140-160 range.

Bearish: Key customers like Qualcomm or Nvidia react to Arm's entry into direct chip sales by limiting investment in new licenses, transition costs for AGI CPUs are higher than expected, and market adoption remains slow - sales disappoint consensus and the stock tests levels below $120.

Is anyone following $GRAB?

After days of searching for a bottom, it looks like the company might finally be reversing the trend. On paper this company has a good chance to grow, but we’ll see what reality brings.

Do you have this stock in your portfolio as well? Did you buy more in the last few days (during the biggest drop)?

The first name on the risk factors list is Microsoft, the very partner that made OpenAI what it is. Microsoft has invested 13 billion dollars since 2019, holds a 27 percent stake in the for-profit entity valued at roughly 135 billion dollars, and supplies "a substantial portion of our financing and compute," according to the document, which explicitly warns that if Microsoft modifies or terminates its commercial partnership, OpenAI's business, prospects and financial condition could be "adversely affected." Beyond the Microsoft dependency, the document flags a projected 14 billion dollar net loss in 2026 driven by infrastructure buildout, model training and research hiring, legal exposure from three lawsuits by Elon Musk and xAI with a first hearing in April, at least 14 user class actions in the U.S., concentration risk at TSMC for chip supply and the unusual governance structure as a public benefit corporation overseen by the OpenAI Foundation.

Seven years, 13 billion and a complicated relationship

Microsoft $MSFT entered OpenAI in 2019 with its first billion dollars, back when it was still a non-profit research project. Today, the total investment exceeds $13 billion, and after the October 2025 deal, Microsoft holds a 27% stake in the new for-profit OpenAI entity, OpenAI Group PBC, worth roughly $135 billion.

This interdependence takes a concrete form: Microsoft provides OpenAI' s Azure cloud infrastructure, secures the rights to distribute APIs to third parties, and de facto determines what hardware GPT-4, o1 or their successors run on. As an added bonus, OpenAI has committed to purchase $250 billion worth of additional Azure services as part of the renegotiation of the October 2025 terms. In other words: dependency has deepened, not weakened.

OpenAI's prospectus document states in black and white - its operating results depend on its ability to build partner relationships outside of Microsoft. And it warns that if the tech giant were to reduce or end its collaboration, the impact would be substantial for the company. For investors considering an IPO, it's a signal that can't be overlooked.

110 billion and still not enough

In February 2026, OpenAI closed the largest private funding round in the history of the tech industry to that point. The total value of the round reached $110 billion at a valuation of $730 billion. Major investors:

• Amazon $AMZN - $50 billion

• SoftBank $SFTBY - $30 billion

• Nvidia $NVDA - $30 billion

Still, OpenAI is working hard to secure an additional $10 billion from a wider range of investors, including venture capital and sovereign funds. The reason is simple: an internal document estimates total spending on computing infrastructure by 2030 at a staggering $665 billion. So even a record funding round is not enough to cover the full cost of maintaining technological leadership.

TSMC $TSM : the risk no one wants to say out loud

Alongside Microsoft, OpenAI names a second major systemic risk in the document: the Taiwanese chipmaker TSMC. TSMC makes the vast majority of the world's most advanced AI chips, including those from Nvidia that run OpenAI's models. Any disruption to production caused by the conflict in the Taiwan Strait would directly impact the company's ability to scale its models.

In doing so, OpenAI acknowledges that its infrastructure sovereignty has clear geographic limits. At a time when geopolitical tensions around Taiwan remain one of the key systemic risks to the entire technology sector, this mention in the IPO document is more important than it first appears.

Elon Musk and the legal front

The internal document also mentions ongoing litigation as an operational risk. Elon Musk, the co-founder of OpenAI who left the organization and then publicly attacked it through his AI firm xAI, has led a series of lawsuits challenging the legitimacy of OpenAI's transformation into a for-profit company. Litigation burdens management and can affect the brand's pre-IPO reputation - just when OpenAI needs to look stable and credible.

In addition, OpenAI operates as a so-called public benefit corporation under the oversight of a nonprofit foundation, which brings specific regulatory constraints that prospective shareholders must consider.

What the numbers say

Despite all the risks, the business results are impressive. Revenues for 2025 have reached $13.1 billion, the platform has over 900 million weekly active users, and ChatGPT has transformed from a technological curiosity to a global work tool in less than three years. Meanwhile, annualized revenue is heading towards $20 billion by the end of 2026.

At the same time, however, the cost of developing and running the models is growing faster than revenue. OpenAI does not anticipate profitability until 2030. Record funding rounds are therefore not a signal of strength in the traditional sense - they are a reflection of the enormous capital intensity of the AI frontier as an industry.

What IPOs mean for the market

OpenAI plans to file documents with regulators in the second half of 2026, with the IPO itself expected in the fourth quarter. If the valuation reaches one trillion dollars, it will be one of the largest stock market debuts in history - comparable to the IPOs of Saudi Aramco or Alibaba.

For investors, this opens up direct exposure to an AI industry leader that has so far only been available to select institutional players. But the risk-factor document provides a sobering reminder: OpenAI is not just a ChatGPT growth story. It's a story about a company that depends on one technology partner, one chip manufacturing site, and a constant flow of outside capital. Those who want to enter the IPO will have to accept these risks as part of a bet on the most ambitious technology project of the 21st century.

The investment case hinges on three unresolved questions. First, the U.S. business: management guided North America revenue down 1–3% for full year 2026 and mid-single digits in Q1, with the recovery path tied to exiting the markdown cycle and launching new product innovation like the ShowZero fabric technology, but without a permanent CEO the execution risk is real. Second, the CEO search: interim co-CEOs Meghan Frank and André Maestrini are running the business while the board searches for a permanent chief, with founder Chip Wilson running a parallel proxy fight criticising the board's strategic direction, creating leadership uncertainty at exactly the wrong moment. Third, the valuation: with 1.8 billion dollars in cash, a 1.2 billion dollar buyback authorisation, 42-plus percent gross margins even under pressure and China growing at 20 percent in 2026, the current multiple prices in a structurally impaired brand, but if the U.S. stabilises and a strong CEO arrives, the rerating potential is significant.

Top points of analysis

• Q4 FY2025 (through Feb 2026): revenue $3.64B (+1% YoY), EPS $5.01 (beat consensus by 4.6%), but net income down 18.4% YoY due to margin.

• Full year FY2025: revenue $11.1B (+5% YoY), diluted EPS $13.26 (-9% YoY) - the first EPS decline in the firm's history as a publicly traded company.

• Outlook for 2026: revenue $11.35-11.5 billion (+2-4% total), but North America is expected to decline 1-3%, international markets are expected to grow +20% or more.

• CEO Calvin McDonald left Jan. 31, 2026; company is looking for a successor; interim leadership includes CFO Meghan Frank and CCO André Maestrini; founder Chip Wilson is pushing for strategic changes behind the scenes.

• Valuation at a decade low: trailing P/E ~12×, forward P/E on EPS guidance of $12.10-12.30 (~13×), while the firm's historical valuation in "normal times" was 30-40×.

• China pulls as only clear growth driver: comparable sales +11.5% in FY2025, plan to reach 200 stores in mainland China as second largest market.

• Gross margin fell 550 bps (basis points) YoY in Q4 FY2025 due to significant markdowns, expect another 250 bps compression in operating margin in FY2026 due to tariffs on Asian imports.

• Analyst expectations: 61 analysts, median price target $205, range $170-295, preponderance of "Hold" ratings (30), only 3 Buy, 0 Sell; stock around $160 implies consensus upside of +28%.

What has changed

lululemon $LULU has built one of the rarest business models in retail: a premium athleisure brand with minimal discounts, high customer loyalty, gross profit margins of over 55-58%, and the ability to open stores that instantly became destinations. Between 2019 and 2023, revenue nearly tripled from $3.3 billion to $9.6 billion, EPS shot up over 250%, and the stock peaked above $490.

Then came the double whammy. The first was the product. lululemon made a series of "missteps" - failed collections, inappropriate color spectrum, merchandise that didn't resonate with the target customer, and in parallel began pushing volume through markdowns (price reductions to clear out stock), slowly eroding the premium brand perception that had been built up over years as the company's biggest "moat." The second blow was macro: the US consumer in the higher income bracket became more discerning (words of McDonald's CEO himself), purchase frequency dropped, and the emergence of competitors (Alo Yoga, Vuori, On Running) began to take share in a segment where lululemon had dominated.

At the end of 2025 came the resignation of CEO Calvin McDonald - a signal that the problems were not just temporary. The company is now operating with interim leadership, searching for a successor, while also having to deal with pressure from founder Chip Wilson, who is calling for structural changes to strategy and the board. All of this gives the situation the feel of a classic retail turnaround: the fundamentals are sound (brand, margins, international expansion), but the short-term picture is unpleasant and the uncertainty around management adds another layer of risk for investors.

What needs to work for a return to the original story

• A new CEO needs to come in quickly, have credibility with the market and a clear strategy for US recovery.

• US comparable sales must stop declining by H2 2026 and start growing by the end of 2027.

• Markdowns must recede and gross margin must stabilize or improve.

• China must maintain double-digit growth despite Chinese consumer volatility.

• Tariffs (30% on Chinese imports, 10% on other Asian) must be absorbed through renegotiation with suppliers or shifting production, without dramatically impacting prices.

How does this become money

1) US: a problem that can be solved by product

The US generates approximately 72-73% of lululemon' s sales today, but this figure needs to be read in context: even the "troubled" US is a business with sales of over $8 billion a year with gross margins still above 50%. So the problem is not existential, but one of margin and reputation.

The way back is through full-price selling (selling at full price without discounts) - this is an explicit management priority for FY2026. If markdowns can be reduced, gross margin could stabilise or even improve on the 550bp lost this year. In parallel, the company is working on a product reset - returning the collection to what lululemon customers love: functionality, detail, clear identity. This is not a project for the quarter, but if the new CEO comes up with a clear product vision, sentiment in the US could turn around quickly.

2) China as a second home market

International expansion - especially China - is one of the strongest arguments for investment. lululemon is seen in China as a premium aspirational brand for the emerging middle class who want a fitness lifestyle and are willing to pay for quality. Comparable sales grew +11.5% in FY2025 in an environment where other foreign brands have faced a significant decline in the Chinese consumer.

The company is targeting 200 stores in mainland China (around 130-140 in 2025) and expanding into secondary cities. If it reaches 200 stores at a similar average revenue per store as today, China could generate over US$1bn in annual revenue by 2027-2028 - around 9-10% of total revenue, up from around 4-5% today. This would be a fundamental shift for valuations as China establishes itself as a true second growth pillar.

3) Male segment and digital - achievable goals?

ThePower of Three x2 strategy targeted a doubling of male revenue and digital revenue vs. 2021 by FY2026. Digital is around 40% of total revenue (good), but the male segment grew slower than the plan assumed. Still, the men's segment is an interesting opportunity: male penetration is dramatically lower than women, brand awareness is growing, and products like ABC Pant (All the Balls Comfortable) are building a loyal base.

If the new CEO comes up with a clearer male strategy and product planning, the male segment could become in 3-5 years what the female segment was 10 years ago. That's a big story, but for now, it's more of an option than a certainty.

4) Membership and community moat

lululemon has one of the strongest "community" strategies in retail: ambassador programs, fitness events, runs, yoga, collaboration with instructors. This isn't just marketing - it's a barrier to entry that's difficult for pure online or DTC (direct-to-consumer) players to replicate. If a company maintains this community identity even in turbulence and stops disrupting it with excessive discounting, chances are that once the product "clicks", customers will return faster than with other brands.

The numbers that support this thesis

Box - key numbers FY2021-FY2025

• Shares: top $490 ( 2023) → bottom around $150 ( 2026), down -67%.

• Trailing P/E: historical average 30-40× → today ~12× (decade low).

• Forward P/E on guidance 2026 EPS midpoint $12.20 at $160 price: ~13×.

• China comparable sales FY2025: +11.5%, 2026 guidance: +20-25%.

• S. America Q4 FY2025: -6% YoY in sales, guidance 2026 S. America: -1 to -3%.

• Gross margin Q4 FY2025: compression -550 bps YoY (impact of markdowns and tariffs).

• Share buyback: 1.4m shares repurchased in Q4 at average price of $188, new program approved for additional $1bn.

• Inventory: $1.7 billion (+18% YoY) - higher inventory is a short-term risk, but signals the company is preparing for a sales turnaround.

Dividend and financial health

lululemon does not currently pay a dividend - this is purely a growth and capital allocation story. Shareholder value is coming through:

• Organic sales and margin growth.

• Aggressive share buyback (share repurchase) - program raised $1 billion in December 2025.

• Investment in expansion (new stores, China, Europe).

Company's financial health remains solid despite margin pressure:

• Gross margin still above 55% (vs. retail average of 30-40%).

• Operating margin around 22% (Q4 FY2025), still well above sector average despite compression.

• Relatively low debt, strong ability to generate free cash flow (free cash after capex).

Buybacks at prices of $160-190 at a historical average of $300+ are extremely attractive from a capital allocation perspective if management believes in a turnaround - and they seem to.

Valuation - what's in and what's out

This is the crux of the "generational buy" argument. lululemon has never, since going public, traded at as low a multiple as it does today. Forward P/E of ~13 times on a company that:

• has a gross margin of 55%

• generates an operating margin of 22%

• is growing at double-digit rates internationally

• Holds one of the strongest consumer brands in the athleisure.

By comparison, Nike trades at a forward P/E of ~23×, Adidas ~22×, both of which have worse margins and weaker brand positioning in the premium athleisure segment.

The market fully discounts in price (accounting for worst case scenario):

• Continued US decline with no clear turnaround

• sustained margin issues from tariffs

• Risk of leadership vacuum and failure to find a CEO

• pressure from founder Wilson to destabilize the board

What the market, in turn, does not reflect or undervalues in the price:

• China as a second home market with potential for $1+ billion in revenue by 2028

• The ability of a new CEO to bring about the reset that the market has seen in, for example, Nike after new leadership takes over

• Structural premium brand positioning that remains stronger than direct competitors even after markdowns

• buyback at historically low prices

Valuation scenarios:

• With EPS recovery at $15-16 (FY2027) and P/E 18× (mid-case scenario) → price of $270-288.

• With EPS of USD 15 and P/E of 22× (re-rating in a clear US turnaround) → price of USD 330.

• At EPS of $12 (no turnaround) and P/E of 13× (no re-rating) → price of $156 (virtually today's price = "bottom").

Analyst estimates: median $205, range $170-295. At a price of $160, even the most conservative target ($175) goes up +9%, and the median +28%.

Macro and market

Athleisure (athleisure wear) is a structural trend, not a cyclical fluctuation. The lines between athleisure, everyday wear and workwear (workwear) are constantly blurring, and lululemon is better positioned than almost anyone else on this trend. The global sportswear market is estimated to be over $200 billion and growing at around 6-7% per year.

The macro risk for lululemon is specific: it targets the higher income segment of consumers, which is traditionally more resilient to economic fluctuations. The slowdown in the US is therefore not the result of a recession, but of a specific brand and product problem that management itself acknowledges. This is paradoxically good news - structural problems are hard to solve, but product and brand problems have precedents for successful turnarounds (see Nike, Adidas in past crises).

Risks

1) Leadership vacuum

The company has been operating without a permanent CEO since January 31, 2026. The search for a successor may take 6-12 months, interim management does not have a full mandate to make major decisions, and investors are nervous about uncertainty. If the new CEO comes in weak, with a unclear vision, or if the selection is controversial (Wilson vs. board pressure), sentiment may continue to fall.

2) US decline with no visible bottom

Guidance 2026 projects North American revenue declines of 1-3% - the third year in a row. If comparable sales do not improve at the end of 2026, the market will start to consider whether this is a structural erosion of the story or just a temporary reset. This is the biggest bear argument: that lululemon has lost its "must have" status with the American consumer.

3) Margins and tariffs

Tariffs of 30% on Chinese imports and 10% on other Asian goods are squeezing margins, which are compressed by 550 bps in Q4 FY2025. FY2026 guidance expects another 250 bps compression in operating margin. Some of this may be offset by production shifting, renegotiation with suppliers or slight price increases, but not all of it.

4) Inventory and markdown risk

Inventories of $1.7bn (+18% YoY) are well above historical norms. Failure to sell inventory at full price will continue to put pressure on markdowns and margins, further hindering the turnaround on the gross margin line.

5) China as a double-edged sword

China is the biggest driver of international growth today, but also the riskiest market. The Chinese consumer is volatile, geopolitical risks are high, and foreign brands can quickly lose popularity to domestic competitors (Anta Sports, Li-Ning). lululemon has held its position as a premium aspirational brand for now, but one political upset or PR incident could change this.

Checklist of risks

• No new CEO by mid-2026 or the arrival of a controversial candidate.

• US comparable sales not falling to -3% or worse in Q1-Q2 2026 with no signal of a turnaround.

• Gross margin falls below 53% due to a combination of tariffs and markdowns.

• China comparable sales slow to single digits due to macro fluctuations.

• Inventories of $1.7bn force further markdowns and worsen margins in H1 2026.

• Chip Wilson pressure escalates into proxy battle (shareholder vote fight) and destabilizes management.

• Increased competition from Alo Yoga, Vuori, On Running in core women's segment.

Investment scenarios

Optimistic scenario

New CEO arrives by late summer 2026, is a strong candidate with retail credibility. U.S. comparable sales will turn around in the second half of 2026, full-price sales will return and gross margins will begin to recover. China surpasses 200 stores by 2027 and generates over US$1bn. EPS will return to growth trajectory towards US$15-16 in FY2027.

• Valuation at a P/E of 20-22× → price of USD 300-350.

• Return from today's price of $160: +88-119% over 2 years.

Realistic scenario

New CEO arrives, US comparable sales stabilize (not turning around yet), China continues to grow. EPS remains under pressure in FY2026 (~$12) but improves to ~$14 in FY2027. P/E slightly re-rating to 16-18×.

• FY2027 price: USD 225-252.

• Return from today's price: +41-58% over 2 years.

Pessimistic scenario

CEO search drags on, US comparable sales continue to decline in 2027, tariffs and markdowns continue to squeeze margins, China slows to single digits. EPS falls to ~$10-11 and P/E remains compressed at 12-13x.

• Price: $120-143.

• Downside from today's price: -10 to -25%.

• It will be a "value trap" scenario: the company looks cheap, but earnings are falling and valuation does not warrant re-rating.

What to watch next

• Appointment of a new permanent CEO - who, when, what experience, how the market reacts.

• Q1 FY2026 results (circa June 2026) - first signal of whether US comparable sales are starting to stabilise.

• Gross margin developments - is the company returning to full-price selling or are markdowns continuing?

• China: pace of new store openings, comparable sales for Q1 and Q2 2026.

• Management comments on inventory - needs to decline towards normal US$1.2-1.3bn.

• Share buyback activity - at prices below USD 180, this is a strong signal of management confidence.

• Chip Wilson pressure development - escalation or retreat, implications for board composition.

• Competition: how fast Alo Yoga, Vuori and On Running are growing in the women's premium segment.

What to take away from the article

• lululemon is a premium company with 55% gross margin, strong international growth and one of the best brands in athleisure, trading at an all-time low of 12-13x forward earnings.

• At the heart of the problem is a product and leadership reset in the US - a structurally sound company facing a temporary loss of step, not an existential threat.

• China is a key differentiator: 11.5% comparable sales growth, 200-store plan, potential to become a $1B+ per year business by 2028.

• A new CEO is the number one catalyst: the right candidate can deliver a re-rating from today's 13× to 18-22×, meaning +80-120% upside as EPS stabilizes.

• The biggest risk is not bankruptcy or losing the business, but the "value trap" - a scenario where the company looks cheap but earnings continue to fall and re-rating doesn't occur.

• For the long-term investor (3-5 year horizon) who believes in the strength of the lululemon brand and international expansion, this is an asymmetric bet: limited downside at today's valuation, potentially significant upside at a successful turnaround.

Personally, I think Muddy Waters Research just wants to profit from a decline in the price of $SOFI, which is why their report was so strongly negative. SoFi is a regulated bank overseen by US authorities, including the Fed, so the scope for major accounting manipulation should be fairly limited. Even if certain shortcomings were found, they probably wouldn't be on the scale the report suggests.

A positive sign is also the CEO buying shares shortly after the report was published. To me, that shows management's confidence in the company's fundamentals. The CEO likely wouldn't have invested their own money in the stock if they knew of material problems.

This is just my opinion on the current situation, and I'd appreciate other viewpoints or any counterarguments.

At first glance, a double-digit dividend yield looks like an ideal investment for anyone looking for regular passive income. If a company offers a yield of 15%, 20% or even 25%, it seems like a significantly better opportunity than traditional dividend stocks with yields of around 2-4%. But the reality is usually more complicated. In fact, an extremely high dividend yield is often not the result of a company's generosity, but the result of a significant decline in share price. The market is essentially telling the investor that there is a real risk of a future reduction or complete cancellation of the payout.

The mechanism is relatively simple. The dividend yield is calculated as the ratio of the annual dividend to the current share price. If the share price falls significantly while the dividend remains unchanged for the time being, the yield automatically jumps to visually attractive levels. It is this phenomenon, known as the dividend trap, that poses one of the greatest risks to unsophisticated dividend investors. Instead of a stable income, the investor often sees a dividend cut and a further fall in price.

In the following review, we look at three specific stocks that currently offer yields well above 15% and where it is important to understand what is really behind the number.

PIMCO Dynamic Income Fund $PDI

Yield: 15.61%

The PIMCO Dynamic Income Fund is aclosed-end bond fund managed by PIMCO, one of the largest bond portfolio managers in the world. The fund invests in a broad range of bond instruments including mortgage-backed securities (MBS), investment- and speculative-grade corporate bonds, developed and developing country sovereign bonds, and securitized assets. It is the breadth of coverage and active portfolio management that are the main arguments that PIMCO Fund presents to the investing public.

The fund's current dividend yield is around 15%, making it one of the highest yields in the entire closed-end bond fund segment. The fund pays dividends monthly, which is particularly attractive to many income-oriented investors. The fund has a market capitalization of over $6.4 billion.

Where's the catch

The problem lies in how the fund generates its high yield. The use of leverage, which is approximately 35% for $PDI, plays a significant role. The fund essentially borrows money with which it buys more bonds, thereby increasing the overall return of the portfolio. In a low interest rate environment this approach has worked well, but in a higher interest rate environment the cost of borrowed capital increases significantly and leverage begins to work against the fund.

Another problem is the payout structure. A significant portion of the fund's distributions do not represent actual interest income, but what is known as Return of Capital (ROC). This means that the fund pays investors partly their own money instead of the actual returns earned. According to available data, ROC has accounted for up to 65% of total payouts in past periods. While this practice is not illegal, it gradually erodes the net asset value of the fund, meaning that the investor recovers his own capital and the illusion of high returns is partly misleading.

On top of this comes a high expense ratio, which for PDI is around 6%. By comparison, conventional bond ETFs operate with expenses below 0.5%. In addition, the fund has traded at a premium to NAV for most of its history, meaning that investors have paid more for the underlying assets than they are actually worth. The combination of leverage, high costs, return of capital and premium to NAV thus creates an environment in which an investor's real return may be significantly lower than the 15% optical dividend yield suggests.

Icahn Enterprises $IEP

Yield: 26.5%

Icahn Enterprises is a diversified conglomerate controlled by legendary activist investor Carl Icahn. The firm operates in a number of segments including energy (through its stake in CVR Energy $CVI), automotive, metals, real estate, food packaging, and investment funds. It is structured as a limited partnership, which has specific tax implications for investors.

The current dividend yield is around 26.5%, a number that should put any investor on notice immediately. Shares are trading around $7.50 apiece, down about 95% from the highs of 2013.

The drop and the clash with short-sellers

The turning point for $IEP came in 2023, when short-seller (a firm that makes money on stock declines) Hindenburg Research published a critical report that questioned the valuation of the company's assets and highlighted the unsustainability of the then-current dividend. Hindenburg called the payout ratio unsupported by the firm's earnings and cash flow. The market reacted to the report with a massive sell-off.

Subsequently, the company actually proceeded to cut the dividend dramatically. It paid out $2 per share per quarter from 2019 to mid-2023. The dividend was first cut to $1 and later to the current $0.50 per quarter, a total decrease of 75% over two years. Despite this significant reduction, the payout ratio remains extremely high. In 2024, the company paid out $391 million in dividends, while its EBITDA (earnings before interest, taxes, depreciation and amortization) was just $156 million. Dividends thus represented 251% of EBITDA, a clearly unsustainable level.

Why the yield is deceptive

The high dividend yield $IEP is almost entirely the result of the massive drop in share price. The company generates negative earnings per share (EPS for the past year was approximately -$0.79) and pays a dividend that far exceeds its generated earnings. On top of that, the company has significant debt in excess of $7 billion, which, with a current market capitalization of around $5 billion, creates an unfavorable debt-to-book ratio. In addition, there are significant bond issues maturing in the next few years, which may further limit the scope for dividend payouts. The combination of declining net asset value (NAV reduced by $654 million in the most recent reporting period), negative earnings, and a history of two dividend cuts in a short period makes IEP a textbook example of a dividend trap.

ZIM Integrated Shipping $ZIM

Yield: 7.69%

ZIM Integrated Shipping Services is an Israeli container shipping company that operates a fleet of approximately 128 ships and offers shipping services on all major global trade lanes. The company operates primarily on a charter basis, meaning that it charters most of its fleet instead of owning it. This model allows it to respond flexibly to changes in demand, but also increases cost sensitivity during periods of lower freight rates.

ZIM's dividend yield has been around 13-16% in recent months, which is appealing on the face of it. However, it is currently "only" above 7% as the stock has appreciated significantly (108%) in the last 6 months. However, to understand what this number really means, an investor needs to look at the extreme cyclicality that is typical of container shipping.

A rollercoaster of dividends

The ZIM story illustrates why it is important for cyclical companies to look at the dividend in the context of the entire cycle. In 2021, when container rates hit all-time highs due to post-covenant demand and supply chain congestion, ZIM paid a dividend of $17 per share in a single year. This was followed by a payout in excess of $27 per share in 2022. These amounts, however, reflected quite extraordinary market conditions. Once freight rates normalized in 2023 and demand weakened, the company went into a loss and stopped the dividend altogether. There was another brief recovery in 2024 due to geopolitical tensions that disrupted shipping lanes, but again this proved temporary.

Current situation and takeovers

In February 2026, ZIM announced that it had entered into a takeover agreement with Germany's Hapag-Lloyd for $35 per share, a premium of 58% to the previous day's price. The total value of the transaction is approximately $4.2 billion. However, the shares are currently trading around $26, well below the offer price. The market is signaling that there are significant risks associated with completing the transaction. Complications include the need for approval from the Israeli government (which holds the so-called Golden Share), geopolitical concerns over the ownership structure of Hapag-Lloyd, which includes sovereign funds from Qatar and Saudi Arabia, and resistance from employees who have called a strike at the company's headquarters.

Management behaviour is also a worrying sign. CEO Eli Glickman sold 87% of his shares at prices around $28-29, 20% below Hapag-Lloyd's offer price. If insiders are selling at a discount to the acquisition price, they are clearly indicating that they attach a high probability to the transaction not going through. In addition, ZIM has suspended the release of its 2026 financial outlook, which further reduces the visibility of future earnings and dividends, increasing investor nervousness.

Common features and comparisons

All three titles share several key characteristics that should make investors cautious:

• A visually high dividend yield that is largely the result of price declines, not strong income generation.

• A history of reduced or extremely volatile dividend payouts. $IEP has cut the dividend twice, $ZIM has completely stopped and reinstated it, and $PDI is partially paying out of capital returns.

• Structural risks specific to each title: high leverage and costs for PDI, negative earnings and declining NAV for IEP, extreme cyclicality and uncertainty around acquisition for ZIM.

• Payout ratios that are not sustainable over the long term at current levels in either case.

By comparison, companies like Johnson & Johnson $JNJ, Procter & Gamble $PG or Coca-Cola $KO offer dividend yields of around 2-3%, but with a history of decades of uninterrupted payout increases. It is this predictability and stability that tends to be ultimately more valuable to long-term dividend investors than a one-time high yield that can disappear at any time.

A strategic view

Dividend yields above 15% should not tempt investors, but rather warn them. In practice, there are very few cases where a company or fund can sustain such a high payout over the long term without a reduction in yield or a further fall in price. Key metrics that investors should monitor before buying high yielding titles include:

• Payout ratio: if the company is paying out more than it is earning, the dividend is being funded by the principal or debt.

• NAV or book value development: a declining net asset value indicates that payouts are eroding capital.

• Dividend history: firms that have cut the dividend in the past are statistically more likely to cut it again.

• Income structure: for funds, it is important to distinguish between actual return and return on capital (ROC).

An investment rule of thumb often mentioned in this context is: if the yield looks too good to be true, it probably isn't. For titles with double-digit dividends, it is therefore essential to understand the reasons behind the yield and not to go by the number alone.

What to watch next

• $PDI: the evolution of Fed interest rates and their impact on the fund's cost of leverage, the ratio of capital returns to actual returns, and the evolution of the premium or discount to NAV.

• $IEP: next quarter's results, especially the development of NAV and EBITDA, maturities of bond issues in the coming years and any further dividend cuts.

• $ZIM: the progress of the approval process for the acquisition by Hapag-Lloyd, the Israeli government's position on Golden Share, the development of freight rates and the possible renewal of the financial outlook for 2026.

• General: track payout ratio, free cash flow yield and dividend payout history for any title.

Lessons learned

PIMCO Dynamic Income Fund, Icahn Enterprises and ZIM Integrated Shipping show that extremely high dividend yields often signal structural problems, not extraordinary investment opportunity. Each of these titles has specific reasons why the yield has reached current levels, but the common denominator is the unsustainability of the current payout model over the medium term.

For investors looking for stable dividend income, the key rule remains: the quality of the dividend is more important than the amount. A reliable payout with moderate growth over time generates a significantly better total return than a one-off attractive number that can disappear at any time. In dividend investing, more than anywhere else, patience and careful analysis pay more dividends than chasing the highest yield.

In his latest commentary on the investment environment , Fink delivers not reassuring news, but a clear message: those fleeing to cash today are making arguably the biggest mistake of their investing careers. The reason? Artificial intelligence will change the rules of the game before most investors realize it.

As Fink describes today's markets

Fink notes that over the past 20 years or so, the S&P 500 index has managed to appreciate more than eight times an investor's capital, despite financial crises, pandemics, inflation and geopolitical shocks. The key conclusion is simple: over the long term, time in the market has been more important than trying to hit the ideal timing of entry and exit.

At the same time, he points out that we are living in a "compressed" era, where what used to fill an entire decade happens in a few years. Energy shocks, the rebuilding of supply chains, the rise of trillion-dollar tech companies and the breakthrough of AI. This brings more unknowns, but according to Fink, it doesn't change the fundamental principle: the store of value in the long run is real assets and quality companies, not cash.

AI as a structural trend, not a bubble

Fink sees AI not as short-term hype, but as a structural change that will create enormous economic value, transform entire sectors from finance to healthcare to industry to media, and become a key axis of competition between the US and China.

He mentions that the eventual "victims" of AI, i.e. companies that fail to adapt, are part of capitalism, but that does not mean that the sector as a whole is a bubble. On the contrary, Fink repeatedly says that a bigger risk than an "AI bubble" is a situation where Western economies invest little and leave the technological leadership to China.

From an investor perspective, he is implicitly pointing to titles like Nvidia $NVDA, Microsoft $MSFT, Alphabet $GOOG, Meta $META or Amazon $AMZN, but also to less visible infrastructure players such as providers of datacenters, optical networks and power solutions for AI.

Why not exit the market, according to Fink

Fink's key argument rests on historical experience: volatility, geopolitics and recessionary fears have always been there, but technology disruptions generally reward those who are inside the market, not on the sidelines.

Specifically with AI, this means that those who have no exposure to the AI ecosystem in their portfolio, which includes chips, cloud, models and apps, risk missing out on a substantial portion of future appreciation. A long horizon, typical of pension strategies or long-term savings, is an advantage: an investor with such a horizon is less forced to panic in short-term downturns.

Fink doesn't say it doesn't matter what you buy. He says that fleeing to cash at a time when the technology trajectory is breaking down is an expensive mistake in the long run.

AI, inequality and why growth shouldn't benefit only the elites

Fink also points out that AI can further open the scissors between those who own capital and those who sell labour. Globalisation has hit manual and blue-collar professions hardest. AI can push analysts, administration, parts of IT or marketing in the same way. And if AI mainly benefits the shareholders of a few companies, this will inevitably lead to political and social pressure.

The solution he proposes is to involve the wider public in the benefits of AI through pension schemes and funds. From the perspective of BlackRock $BLK, this is of course also a business. But the idea has real substance: AI is becoming such a big growth engine that if it remains locked in the portfolios of wealthy investors only, the inequality problem will deepen and with it the risk of a regulatory backlash that slows down the entire sector.

How this can inform portfolio construction

If you want to translate Fink's insight into concrete investment logic, several practical points emerge.

The key is not to play short-term scenarios, but to have a long-term portfolio skeleton consisting of a global or US equity index like the S&P 500, supplemented by a focused AI infrastructure and leadership component.

Within AI, it then makes sense to distinguish layers of exposure. The base layer includes chip players like Nvidia $NVDA or AMD $AMD and AI server makers. The middle layer covers cloud and hyperscalers, i.e. Microsoft, Alphabet or Amazon. The application layer then represents companies that can monetize AI in specific products, from Meta and Salesforce to Adobe and smaller niche players.

Fink himself says that some AI projects will fail, and that's okay because that's capitalism. But as a whole, AI will shift the profitability and productivity of companies that integrate it sensibly. So he recommends treating volatility as a cost of entry into a long-term growth trend, not as a signal to flee the market.