Venezuela was a completely lost market for most investors just a few years ago. A combination of political instability, sanctions, collapsing infrastructure and capital flight had virtually wiped it off the investment radar. Today, however, the situation is gradually beginning to change. Geopolitical tensions, pressure on global energy security and the West's drive to diversify its sources of raw materials are reopening the question of Venezuela's potential. And the markets are beginning to react to this possibility.

Venezuela is not just an oil-rich country. It is a country with some of the largest proven oil reserves in the world, significant mineral wealth and a huge investment deficit that, if the market were to open up, could trigger a tidal wave of foreign capital. If there were a broader easing of sanctions and a stabilisation of the political environment, there would be room for a resumption of production, infrastructure modernisation and the return of major global players.

It is this scenario that investors are now gradually beginning to factor into stock prices that could participate in the country's recovery. For some, you might not expect it.

Energy

The energy sector is the natural epicenter of the entire Venezuelan operation. The country has the largest proven oil reserves in the world, but for years it has been unable to exploit its potential. Production has fallen dramatically, infrastructure has become obsolete and foreign companies have virtually disappeared from the market. However, if the country were to open up more widely, oil would be the first sector to see renewed investment.

For global energy firms, Venezuela would present a unique combination of vast resources and relatively low extraction costs while upgrading infrastructure. The return of foreign capital could mean a gradual increase in production, new long-term contracts and a strengthening of global supply at a time when energy security is a major political and economic issue.

Chevron $CVX is particularly interesting from this perspective. It is one of the few Western oil giants that has managed to maintain historical ties to the region and has long experience of running a business in Latin America. For the company, a resurgence in the Venezuelan market would mean access to vast resources, the opportunity to expand its production portfolio and strengthen its production base over the long term.

From an investment perspective, Chevron is particularly interesting because of its combination of size, technological know-how and long-term ability to finance large-scale projects. The company is one of the most efficient global oil and gas producers, with a very strong balance sheet, high return on capital and a disciplined approach to investment.

This gives it scope to enter markets in more geopolitically complex regions where smaller players do not venture. If Venezuela were to start gradually increasing production, companies of this type would be natural partners for restarting production, upgrading oil fields and building infrastructure.

At the same time, Chevron is also attractive from a valuation perspective. Shares have reacted to the events in Venezuela with a rise, but this has sold off in recent days back to pre-coup levels. The price per share of $CVX today stands at around $162, which is 14.5% below its absolute peak, but it's also 20% below what their fair value is, according to the Fair Price Index at Bulios.

The energy sector is back in the spotlight today with its emphasis on real assets, cash flow and dividend yield. Chevron has long been one of the companies that combine stable dividends with buybacks and asset value growth. Any structural growth in the production base or access to new giant reserves could strengthen the company's long-term outlook, improve market expectations and create new upside momentum for the stock. Their price could then start to approach their real intrinsic value.

For the energy sector as a whole, Venezuela's return to the oil market would mean more than just another oil field. It would mean a structural change in supply, new investment cycles and potentially new winners among global producers.

The extractive sector

Although oil is Venezuela's main symbol, from an investment perspective it would be a mistake to ignore its mineral wealth. The country has significant reserves of iron ore, bauxite, gold, copper and other strategic metals. It is these raw materials that are key to infrastructure, energy transformation and the technology industry today. Opening up the Venezuelan market could therefore mean not only the return of oil companies, but also new projects in the field of industrial metals.

Meanwhile, the mining sector is at a stage where long-term demand is structurally strong. Decarbonisation, the development of networks, electromobility and the militarisation of the world economy are increasing the pressure on the availability of raw materials. New regions with large, hitherto under-exploited deposits are therefore gaining strategic importance.

This is where Rio Tinto $RIO fits in. It is one of the world's largest mining conglomerates, with an extensive metals portfolio and a long track record of developing major projects in geopolitically complex regions. For such a company, Venezuela would represent a potential long-term expansion of its resource base. Not necessarily immediate profit, but the opportunity to build new mining capacity in a region that would be reopened to global capital with the prospect of future profits.

Rio Tinto is of particular interest to investors as exposure to long-term megatrends. Its portfolio is built on commodities that are key to infrastructure, energy, urbanisation and technological transformation. The company has a particularly strong position in iron ore, copper and aluminium, commodities whose demand is structurally supported by grid construction, renewable energy and military and industrial investment.

The company has been able to maintain solid margins over the long term (above 21% in 2024) even though its revenues have been rather stagnant. But as we can read in a recent report summarized in Flash News, metals production accelerated last quarter signaling increased demand. And the stock price is certainly not lagging behind. It has gained 41% in the past year, breaking a string of long-term price stagnation/declines.

Moreover, from an investment perspective, Rio Tinto is attractive because of its ability to execute giant projects, optimise costs and generate strong cash flow even in less favourable cycles. The company has a long history of mine development in challenging regions and knows how to work with political risk, long permitting processes and capital intensity. Thus, a new region in the form of Venezuela would be a potential extension of the company's long-term growth efforts. For the stock, it would mean a stronger resource base and a new case for a higher long-term valuation. And that would be good for them, as they are currently overvalued after last year's growth.

If new projects get underway, the entire chain would benefit. From raw material producers to end suppliers of the latest technology and processors like Nvidia $NVDA. And it is Rio Tinto, for example, that could take a leading role in this industry by producing today's indispensable materials.

The financial sector

Venezuela's return to the investment map would not be without massive capital flows. Rebuilding the energy, mining and infrastructure sectors requires tens to hundreds of billions of dollars. This is where the financial sector comes into play. Investment funds, asset managers and institutions that link capital to projects would become key players in the process.

For global asset managers, Venezuela would present opportunities not only in equities and bonds, but also in direct investment, infrastructure and projects. Once the country's risk profile began to stabilise, capital could begin to return.

And who better to compete in this segment than BlackRock $BLK itself. As the world's largest asset manager, it has direct exposure to emerging markets, the commodities sector and sovereign bonds. Any major shift in the perception of Venezuela would quickly manifest itself in the very capital flows that similar firms manage.

BlackRock may be the least direct bet of the three firms, but it is also perhaps the most versatile. For it has an ace up its sleeve that the previous firms lack. BlackRock holds Venezuelan bonds.

• Why BlackRock holds Venezuelan bonds

BlackRock got into Venezuelan bonds primarily through funds focused on emerging markets and distressed debt when they were trading well below par. It was a long-term bet on a political turnaround, debt restructuring and a return of capital. Such an environment has traditionally favoured large asset managers with both capital and patience. And now it looks like that bet could pay off.

• How they can profit from them

If sanctions are eased and a deal with creditors is reached, bond prices could rise significantly. The yield would come primarily from capital appreciation, not coupons. Each step towards stabilisation increases the chance of further revaluation of these assets. And because they have been very significantly undervalued over the long term, they could deliver fabulous appreciation.

• Why this is important for investors

Bonds tend to be the first asset class to respond to a country's return to the investment map. Their rise often heralds broader capital inflows into equities, commodities and infrastructure. The presence of players like BlackRock suggests that giant funds are already actively considering this scenario.

For investors, BlackRock is also interesting because it combines a defensive nature with long-term growth potential. The firm benefits from a structural shift of capital into ETFs, passive funds and alternative investments. Thus, a Venezuelan recovery would not be a one-off blip, but part of a broader trend of capital returning to commodities, infrastructure and emerging markets. If this story unfolds, BlackRock stands to benefit not only through fund returns, but more importantly through the growth in the volume of capital flowing through its platforms.

Conclusion

Venezuela is re-entering the game today because global priorities are changing. Energy security, access to resources and geopolitical diversification are bringing regions that have long been written off back into the spotlight. If space is opened up for greater cooperation and investment, Venezuela could become one of the most interesting markets of the coming years. And the market, as it tends to do, will usually start reacting to such markets before their full potential or performance in the data becomes apparent.

Co řiká TA?

aktuální cena (324.39$) je lehce nad důležitým supportem, který pokud novinky neudrží bude možné očekávat sestup na další důležitou hranici (318.5$-315.57$).

Prezident Trump zmínil že chce zavést strop na APR (Annual Percentage Rate - Roční úroková sazba na kreditní kartě). Dle slov Trumpa by toto zastropování mělo začít 20. Ledna 2026 a mělo by být 10% ročně po dobu 1 roku. Nic z tohoto však není oficiální a tak můžeme jen hádat zda tento zákon projde.

Trh odhaduje zisk na akcii v hodnotě ~4.9-5.0$ a tržby v hodnotě 46 mld. amerických dolarů, zda se tato prognóza naplní uvidíme už za několik hodin.

Pokud máte na $JPM vlastní analýzu/prognózu, rád si ji přečtu v komentářích. :)

For Google, the implications are profound. Securing Apple’s ecosystem as a distribution channel instantly elevates its AI models from products in search of monetisation to embedded infrastructure used by hundreds of millions of devices. What looks like a partnership is, in strategic terms, a reshaping of influence across the AI value chain.

Why Apple backed down and what it says about its AI strategy

Apple $AAPL has spent the last two years trying to build its own models and AI infrastructure with an emphasis on privacy and on-device computing. However, this approach has run into limits. Developing generative AI is extremely capital and computation intensive, and Apple, unlike Google $GOOGL or Microsoft $MSFT, does not have a large-scale cloud AI infrastructure trained on open data.

The delay of the new version of Siri was the first visible sign of a problem. While Apple has a huge amount of user data, it lacked a robust generative layer capable of competing with what Google's models offer today. The deal with Alphabet is therefore a pragmatic solution: Apple retains control over the interface, integration and privacy, while the "brainpower" is supplied by the partner.

Importantly, Apple emphasizes running AI either directly on devices or through its Private Cloud Compute system. This means that Google supplies the models and technology, not access to user data. Apple is thus protecting its core privacy narrative - while acquiring technology it didn't get to develop itself in time.

What Google gets out of the deal: more than just a billion a year

For Alphabet, this deal is a strategic win. With this move, Google becomes the "invisible infrastructure" of one of the largest ecosystems in the world. While Google won't be directly presenting itself to end users of iPhones, its models will be at the core of the new Siri and other AI features.

From an investment perspective, the key is that this is a repeatable, high-margin revenue stream that also increases Google's relevance in the AI race. In doing so, Alphabet is sending a clear signal to the market: its AI is not just a research project, but a commercially viable technology that even the most demanding partners are choosing.

Moreover, it is a reputational effect. If Apple - a company known for its extremely rigorous evaluation of third-party technologies - labels Google's AI as the "most capable foundation", it strengthens Alphabet's position against Microsoft and other players in enterprise AI.

Impact on Siri, iPhone and the entire ecosystem

In the short term, the goal is to improve Siri, which has long lagged behind competitors. A new version, planned for later this year, is expected to offer more advanced conversational capabilities, better context understanding and broader integration across apps.

But the long-term isn't just about the voice assistant. AI is set to become the system layer of iOS, impacting app experience, search, productivity and personalisation. This is where Apple, with Google's help, can quickly catch up to the competition - without having to build an entire stack from scratch.

The investment equation: who's the winner?

The market responded immediately. Alphabet's stock strengthened after the announcement, while Apple's reaction was initially weaker. This corresponds to the reality of the deal: for Google, it is a clear strategic plus, for Apple it is more of a necessary compromise.

In the long run, the deal is positive for both, but asymmetrically so. Alphabet gains new revenue, validation of its AI, and a stronger position in an ecosystem previously dominated by Apple. Apple, on the other hand, gains time - time to stabilize its AI strategy and gradually build up its own capabilities.

The move also shows that the AI race is not just between models, but between ecosystems and alliances. And this is where Google and Apple have formed an alliance that could fundamentally influence the next phase of AI development in consumer electronics.

For Google, this deal is a strategic win with no direct product risk.

• Apple is paying(according to Bloomberg, about USD 1 billion a year)

• Google gets a long-term customer with a huge volume of data

• Google's AI technology becomes an industry standard, not just a consumer product

From a valuation perspective, the key point is that:

• Google monetizes AI directly, not just indirectly through advertising

• the risk of Apple developing its own competing model is reduced

• Google's bargaining position with other partners is strengthened

This is a structurally positive signal for Alphabet investors - AI is moving from a cost item to a recurring revenue stream.

The significance lies not in an immediate judgment, but in exposure. With a key procedural shield removed, the lawsuit remains alive and potentially costly. For shareholders, the episode serves as a reminder that legacy legal risks can resurface unexpectedly, complicating capital planning, sentiment, and long-term valuation even when core banking operations remain stable.

The Mexican trail that haunts the bank

The case revolves around the now-bankrupt Mexican firm Oceanografia, a drilling and service contractor for state oil company Pemex. Between 2008 and 2014, Citigroup's Mexican unit, Banamex, was to provide up to $3.3 billion in financing to the firm, based on claims against Pemex.

But Oceanografia used false documents and forged signatures, according to prosecutors, and Citigroup $C should have known - or at least could not have known - that the company was overleveraged and that the financing structure was high-risk. In the process, the bank collected interest on the advances while other lenders and investors suffered significant losses.

The court documents go even further. The appeals court found that it would be "hardly believable" that a sophisticated global bank would be unaware of what was going on at Oceanograph. It is this formulation that poses one of the biggest reputational problems for Citigroup today.

Why the Supreme Court's rejection is so crucial

Citigroup tried to stop the litigation by arguing that the plaintiffs were improperly using the RICO statute - a federal standard originally designed to fight organized crime. This statute is particularly dangerous to defendants because it allows for the award of treble damages.

However, the Supreme Court declined to hear the case and upheld the lower court's verdict. In doing so, it effectively confirmed that the lawsuit could proceed in full and that Citigroup's arguments had not yet prevailed.

In other words, this is no longer a technical legal skirmish, but a full-blown dispute that could end up being very costly.

A financial risk that cannot just be "written off"

Citigroup has admitted in the past to failing internal controls. The US SEC fined it $4.75 million in 2018. At the time, it seemed to be a token punctuation to an unpleasant episode.

The current action, however, is of a different calibre. The aggrieved creditors - among them bondholders, shipping companies and European banks - claim their losses exceed $1 billion. If the court were to recognize the claims under RICO, the potential bill could multiply.

From an investment perspective, the key point is that this is not a regulatory penalty with a clear cap, but an open-ended dispute. It is this uncertainty that is usually worse for the market than the amount of the potential penalty itself.

What this means for investors in Citigroup

Citigroup is sufficiently well-capitalized to withstand a very adverse verdict. The problem, however, is not the ability to pay per se, but the long-term pressure on valuations and investor confidence. The banking sector is extremely sensitive to legal risks and markets have historically punished institutions that face protracted litigation.

Moreover, this case is not just about financials. The case reopens questions about the quality of risk management, internal controls and corporate culture - topics that are often as important to long-term investors as the numbers on a balance sheet.

What the market will be watching next (and why it matters)

From an investment perspective, the most important thing is not the fact that the Supreme Court refused to hear the case, but what will follow in the lower courts and how the bank itself will approach the matter. The market will be particularly sensitive in the coming quarters to signals that will indicate whether the dispute is close to settlement or, instead, escalating into a full-blown open-ended court case.

Three areas in particular will be key. First, any new information on the potential level of damages, as even a relatively small shift in estimates can change expectations about reserves and the impact on profitability. Second, management communication, in particular whether the bank will start to make additional provisions or adjust the legal risks in its outlook. And third, the defence strategy itself - whether Citigroup will attempt an out-of-court settlement or decide to go into a long and costly litigation.

For investors, this phase is often crucial. Markets usually do not wait for a final judgment, but appreciate probability and uncertainty. If the case starts to look manageable and time-bound, the pressure on shares may ease. But if new evidence, additional plaintiffs or tougher rhetoric from the courts emerges, the case could become a long-term drag on valuations - regardless of the fact that the bank itself remains capital strong.

In this case, the signal appears structural. The higher dividend aligns with stable operating cash flows, conservative leverage, and disciplined capital allocation. Rather than stretching the balance sheet to reward shareholders, the company is extending a policy built around sustainability across the cycle—turning dividend growth into a credibility marker rather than a marketing tool.

Top points of the analysis

• Dividend increased by 10% with no increase in financial risk

• Payout is covered by earnings and operating cash flow, not debt

• Conservative leverage leaves room for further dividend growth

• Combination of regulated business and industry stabilizes cash flow

• Valuation reflects quality, not a cyclical peak

Company profile and economic model

Otter Tail Corporation $OTTR is based on an unusual but very workable model from a dividend perspective. The foundation is a regulated energy business that generates predictable returns with relatively low volatility. This segment acts as a stabilizing element of the overall business and provides the foundation for the long-term dividend payout.

The second pillar is industrial production, which delivers higher margins and sensitivity to the economic cycle. It is here that the company is able to increase profitability in periods of strong demand without compromising the stability of the whole. From an investor's point of view, this means that dividend growth is not dependent on a single source, but relies on a diversified earnings structure.

This hybrid model is key to understanding dividend stability. The regulated segment dampens downturns in bad years, while the industry segments allow for earnings acceleration in better periods. The result is a balanced cash flow profile that is ideal for a dividend strategy.

Summary: Otter Tail Corporation is an electric power and generation company headquartered in Fergus Falls, Minnesota. Its subsidiaries include Otter Tail Power Company, BTD Manufacturing Inc, T.O. Plastics Inc, Northern Pipe Products Inc, and Vinyltech Corporation.

Financial performance: earnings as a long-term basis

Results over the past four years show a consistent ability to generate earnings across various phases of the cycle. Net income in 2024 exceeds $300 million and EPS is above $7, a significant shift from 2021. This is not a one-time jump, but a gradual increase supported by operational efficiencies.

Operating margins in excess of 26% and net margins in excess of 21% signal that the company can pass on costs, optimize its cost structure, while remaining competitive. This is crucial because dividends can only grow over the long term if the economic value of the business also grows.

The stability of share capital is also an important element. The number of shares increases only minimally, which means that EPS growth is not diluted by aggressive issuance. This increases the quality of earnings and strengthens confidence in the long-term sustainability of the dividend policy.

Cash flow and investment cycle

Operating cash flow was approximately US$453 million at the end of 2024 (up from US$404 million in the previous year), confirming the ability to generate cash even with higher investments. Investment cash flow is significantly negative, reflecting the capital intensive nature of the business, particularly in the energy sector. However, this is a structural feature, not a warning sign.

Free cash flow is volatile, which is typical of higher capex firms. But the key point is that the dividend is covered by operating cash flow, not short-term financing. In addition, the firm maintains a strong cash position, which provides flexibility during periods of higher investment.

This approach shows that management does not view the dividend as a residual item, but as a long-term commitment to shareholders that must hold up in investment-intensive years.

Dividend: history, sustainability and payout ratio

Key facts in figures

• Current quarterly dividend of $0.5775 per share

• Previous dividend $0.525 per share

• Year-on-year dividend growth +10%

• Annual dividend (forward) of approximately $2.31 per share

• Dividend yield of approximately 3.0%

• Uninterrupted dividend payment for several decades (since 1938)

• Consistent dividend growth streak of more than 5 years

• Payout to EPS ratio of approximately 32%

• Dividend covered by operating cash flow even in an investment-intensive year

Dividend growth of 10% pushes the annual payout to a level that still represents only a median portion of the firm's earnings capacity. Payout ratio to EPS remains conservative, which is key to future flexibility. The company is thus not forced to choose between investing and paying out to shareholders.

Historically, the dividend has shown gradual growth without extreme fluctuations. This is not an aristocrat-type title with an extremely long dividend history, but a firm that prioritizes the quality of growth over its speed. This is often a more advantageous approach from a sustainability perspective.

It is also crucial that the dividend is not funded by debt. The combination of earnings, operating cash flow and a strong balance sheet creates room for further increases without increasing systemic risk.

Balance sheet and financial stability

Net debt of around USD 720 million with EBITDA of over USD 500 million implies a Net Debt/EBITDA ratio of approximately 1.5 times. This is a very conservative level, especially in a capital intensive sector. The company is thus not exposed to refinancing pressure or sharp changes in the interest rate environment.

Equity has been growing over the long term and liquidity remains strong. A current ratio above 3 confirms that short-term liabilities do not pose a risk even in the event of short-term cash flow fluctuations. This significantly reduces the likelihood of the dividend being a victim of balance sheet stress.

Management

The company is led by Chuck MacFarlane, who has been CEO since 2015 and has been with the company significantly longer in previous management roles. His profile is not built on media visibility or aggressive strategic statements, but on long-term continuity, disciplined management and an emphasis on stability - exactly the type of leadership that dividend investors seek.

MacFarlane has taken the company through several economic cycles during his tenure, a period of increased investment and rapid changes in the energy sector. Under his leadership, there has been a gradual increase in profitability, strengthening the balance sheet while maintaining a conservative approach to debt. All of this has translated into the company's ability to not only pay a dividend, but to gradually increase it without undue risk.

A fundamental feature of its management is capital discipline. The firm avoids large transformational acquisitions, preferring instead to grow organically, expanding its regulated asset base and optimizing existing operations. This approach reduces the likelihood of strategic mistakes while increasing cash flow predictability - a key factor for dividend sustainability.

Valuation: how much an investor pays for stability and dividend

The stock's current valuation is around 12-13 times annual earnings, which, with earnings per share of around $7.2, implies a relatively moderate P/E given the quality of the business. In the context of regulated utilities, which often trade in the 15-18x earnings range, this is not a stretched valuation, but rather a discount to the most stable players in the sector. This difference is due to a combination of the industrial side of the business and the smaller size of the company, not the weaker economy.

From a revenue perspective, the stock trades at roughly around 2.5-3.0 times annual earnings, which is higher than pure regulated utilities but lower than firms with a strong growth profile. This multiple reflects above-average margins and the ability to generate earnings from a relatively stable market base. Importantly for the dividend investor, valuations are not based on aggressive growth expectations, but on sustainable cash flow.

A dividend yield of around 3% does not look extremely high, but combined with dividend growth of 10% and low volatility, it creates an attractive total return profile. Investors are not paying for speculative expansion here, but for a combination of yield, stability and gradual growth, exactly the type of valuation that makes sense for a long-term holding.

Comparison with competitors: where they stand against the sector

Comparisons with direct and indirect competitors in the North American utility space are key to a realistic assessment of dividend quality.

NorthWestern Energy $NWE

NorthWestern Energy is a typical representative of a pure regulated utility with a higher dividend history. Its dividend yield tends to be slightly higher, but at the cost of higher debt and slower earnings growth. In contrast, the firm analyzed here offers a lower yield today but a better long-term dividend growth profile and lower financial risk.

ALLETE $ALE

ALLETE has a similar size and regional focus, but higher exposure to energy transformation and capital projects. This brings growth potential, but also higher capex and free cash flow pressure. In comparison, the dividend policy of the analysed firm appears more conservative and predictable.

MDU Resources $MDU

MDU combines utilities with more cyclical construction activity, which increases earnings and dividend cover volatility. Advantage is greater sensitivity to economic growth, disadvantage is greater cash flow volatility. In this comparison, the analyzed firm comes out as a more balanced dividend title, less prone to recessionary fluctuations.

Future growth: where there is scope for additional value

The firm's growth potential lies not in aggressive expansion, but in the gradual expansion of its regulated asset base. Investments in transmission networks, infrastructure upgrades and higher generation efficiency increase the allowed return on capital and thus the long-term ability to generate stable profits. It is this type of growth that is ideal for the dividend model - slow, predictable and capital disciplined.

Another area is the optimization of industry segments. Here the company is not betting on volume, but on margins and efficiency. In an environment of stabilising supply chains and a gradual recovery in investment activity, this part of the business can again contribute to EPS growth above the regulated segment. This creates natural scope for further dividend increases without increasing financial risk.

From a long-term perspective, it is also important that the company has no need for major acquisitions. Growth is organic and controlled, which reduces the risk of misallocation of capital. For the investor, this means a higher likelihood that future cash flow will actually serve shareholders, rather than funding expansion with uncertain returns.

Analysts' view: conservative quality, not speculation

Analyst houses rate Otter Tail Corporation as a predominantly defensive dividend title with above-average management and balance sheet quality. For example, Morningstar has long emphasized a combination of regulated cash flow and disciplined capital allocation, viewing the stock as a vehicle for stable yield rather than dynamic price appreciation.

The analyst consensus generally does not expect explosive earnings growth, but does expect continued stability in profitability and gradual dividend growth. This predictability is the main reason why the title is often included in income-oriented and capital preservation portfolios. The market values the company not as a growth story, but as a quality "compounder" with low volatility.

Importantly, from an investment perspective, analysts do not see significant balance sheet or operational risks that would threaten the dividend policy. Expectations are realistic, not exaggerated - which reduces the risk of negative repricing in the event of slightly weaker results.

Investment scenarios: price and dividend evolution over time

Realistic scenario (baseline trajectory)

In the baseline scenario, the regulated part of the business remains a stable cash flow generator, while the industrial segments grow at a rather moderate pace. Earnings per share may move in the range of 3-6% per annum in the coming years, allowing for continued dividend growth at a rate slightly above inflation. Dividend yield will thus become the mainstay of returns.

At current multiples, the share price can be expected to grow broadly in line with earnings, i.e. rather gradually. An investor's total annual return in this scenario could be around 6-9%, a combination of dividend and modest price growth. This is a typical scenario for a long-term dividend holding, not a short-term speculation.

Optimistic scenario (re-rating quality)

In the more optimistic scenario, there will be better utilisation of industrial capacity and steady growth in the regulated base. Earnings could grow faster, for example in the 7-9% per annum range, allowing for continued higher dividend growth. At the same time, if the market begins to view the company more as a stable dividend title than as a mixed conglomerate, valuations could widen towards 15 times earnings.

In that case, the investor would benefit not only from the dividend but also from the share price growth. The total return could approach 10-13% per annum, while risk would remain relatively low due to the stable cash flow and balance sheet.

Conservative scenario (capital protection)

In a worse phase of the cycle, the industrial side of the business may slow down and free cash flow may temporarily decrease. However, due to the regulated part and low debt, the dividend should be maintained even if growth temporarily stagnates. The share price could be rather flat or slightly volatile in this scenario.

However, for a dividend investor, even this scenario would mean capital protection and stable cash flow, which is the main reason why the title has a place in the defensive part of the portfolio.

What to take away from the article

• The +10% dividend growth is grounded, not risky

• Dividend is covered by earnings, cash flow and balance sheet

• Conservative management increases the likelihood of further payout growth

• This is a quality dividend title, not a speculation

The health care sector has long been viewed as one of the most stable pillars of the stock market. Indeed, an aging population, rising health care spending and technological advances have combined to create an environment that allows companies to generate relatively predictable earnings even during economic slowdowns. But it also potentially makes this sector the sector of the future (but more on that later). This is why investor capital flows into healthcare whenever there is growing uncertainty in the markets or the threat of recession. But its defensive nature often leads to shares in these companies being readily bought at almost any price. And that, by definition, is the first warning sign.

In recent years, this effect has become even stronger. The combination of previously low interest rates, massive liquidity in the markets and the euphoria surrounding biotech, diagnostics and medical technology has pushed the valuations of many companies well above their historical averages. The market has come to view healthcare not only as a stable sector, but as a growth engine that deserves premium valuations. The result is an environment in which even very high-quality companies can become poor investments. Not because of their business, but because of the price at which they are now trading.

This is where the greatest risk arises for new and existing investors. If high expectations are fully factored into the share price, the scope for further growth is dramatically reduced. Any slowdown in revenue growth, margin pressure, a failed product or study, and regulatory intervention can then act as a trigger for a sharp correction. In a defensive sector, which is often considered safe, these downturns tend to be all the more painful for investors because most investors do not expect them.

Healthcare is thus in a paradoxical position today. Fundamentally, it is still one of the strongest sectors of the economy, but from an investment standpoint, it is increasingly divided into relatively fairly valued opportunities and titles where valuations have broken away from reality. And it is in the latter group that we find companies whose stocks may be significantly vulnerable in the coming quarters.

Abbott Laboratories $ABT

This company has long been one of the quality companies in the healthcare sector. Its business is built on a broadly diversified portfolio of products that generate steady demand across economic cycles. As a result, the company is able to grow over the long term, maintain solid margins and generate strong operating cash flow. It is this combination of stability and predictability that has made it one of the most popular healthcare stocks of the last decade. And it's also one of the titles that investors have stopped seeing as price sensitive.

In recent years, the company has repeatedly delivered solid results. Revenues and profits have steadily increased, even as the broader economy has struggled with significant swings. The company benefited from its strong position in diagnostics, medical device sales and consumer healthcare, which allowed it to partially offset weaker performance in each segment. The problem, however, is not that the business has stopped working. The problem is the rate at which the share price was rising compared to the rate of growth of the company itself.

The stock has had an exceptionally strong period where it has appreciated by tens to hundreds of percent over several years. Between 2016 and 2022, the stock added over 230% in value. After this much growth, when the stock was well above its fair price, came the downturn. Thus, in the last three years, we can observe stagnation on the $ABT chart, which is mainly due to stock valuations. Investors simply don't want to overpay for stocks anymore.

As a result, today Abbott Laboratories stock no longer trades as a defensive title, but as a premium growth asset. Implicit in the price is the market's assumption that the company will be able to maintain a high rate of revenue and earnings growth over the long term, preserving margins while facing regulatory and competitive pressures without major fluctuations. This dramatically reduces the scope for positive surprises. Conversely, the stock's sensitivity to any deterioration in the outlook or slowdown in key segments increases significantly. And even when the company's business is doing well, as you can see for yourself in the stock detail on Bulios, the price is simply too high already.

This is where the biggest risk is. If results start to fall even slightly short of expectations, the market may very quickly reassess what premium it is willing to pay for this business. Yet history shows that corrections in highly valued healthcare titles are neither short nor shallow. Often, there is an extended period of stagnation or a more pronounced decline, during which the price gradually returns closer to fundamental value.

As valued by the Fair Price Index, stocks today are well above levels that would be consistent with realistic long-term growth. In fact, it is currently 25.7% above its fair intrinsic value. That doesn't mean the company is bad. It does mean that the risk/reward potential ratio has deteriorated dramatically for new investors. And for existing holders, the question of whether the current price reflects peak optimism rather than real business is becoming increasingly important.

Thermo Fisher Scientific $TMO

Thermo Fisher Scientific has long been one of the best quality and players in the entire healthcare sector. The company's business is closely aligned with the pharmaceutical, biotechnology and research ecosystems, which has allowed it to build an exceptionally strong position across diagnostics, laboratory technologies and manufacturing support for drug development over the past decade. It is this role that has made the company one of the main channels through which investments in healthcare and biotechnology have flowed. The company has long benefited from growing research, development and testing budgets. And the market has rewarded this position handsomely.

The company's performance in recent years has been objectively very strong. Revenues and profits have grown at a rapid pace, strongly supported by both organic growth and acquisitions. The company has been able to expand margins, strengthen cash flow and build scale that few competitors can replicate. It is this combination of quality, growth and strategic relevance that has created one of the most compelling investment stories in the sector. But the problem is not the past. The problem is what the company must deliver today to justify the current price.

The stock has had an extremely strong growth cycle, during which its price has risen by hundreds of percent. Over the past 8 months, $TMO stock has appreciated 55%. Far from just reflecting improving results, this move has also reflected a massive expansion in valuation, with investors willing to pay ever higher multiples for exposure to the healthcare and biotech boom. The result is a situation where the title is now trading at levels that have been above its long term value. The company's stock chart can be viewed very similarly to that of the previous Abbott Laboratories. By 2022, the price was rising steadily and very strongly. However, we have not seen any new highs on the chart in the last three years. So the situation is the same - it is stagnation.

It is just at this time of stagnation that investment tensions begin. After an exceptionally strong period, the dynamics are gradually normalising. The rate of revenue growth slows, the comparative base is extremely high (what investors expect from the company) and some of the demand that was accelerated by extraordinary circumstances in recent years (mainly in the form of external investment in the sector) returns to longer-term trends. This in itself is not a problem for the quality of the firm. But it is a fundamental problem for valuations, which are based on very optimistic assumptions.

In an environment where markets are again more focused on capital efficiency, margin stability and sustainability of growth, this increases the risk of potential weakness. Should results fall short of high expectations, the scope for multiple compression is significant. And valuation compression is often the main source of long-term price declines for these types of titles, even if the business itself remains healthy.

The price is currently well above its intrinsic value, according to the Fair Price Index on Bulios, by exactly 31.94%. This creates a very unbalanced relationship between potential return and risk for investors thinking about investing in this company. Indeed, the stock is now at a stage where it is not a good idea to take profits rather than aim for further growth.

Medtronic $MDT

Medtronic boasts the title of one of the largest medical technology manufacturers in the world. In fact, its products are deeply ingrained in the day-to-day operations of global healthcare. The company is built on a broad portfolio of devices and solutions for cardiology, neurology, surgery and chronic disease management, which has historically provided it with stable demand and relatively predictable revenues. It is this predictability that has attracted long-term capital and built the company's reputation as a defensive title suitable for more conservative investors. And while the business remains robust, the question is beginning to be whether the current share price reflects this.

The firm's results in recent years paint a picture of stabilization rather than dynamic growth. While revenues have gradually increased, the pace of expansion has been rather low to moderate, especially when compared to how aggressively the share price has risen over a period of time. In addition, profitability growth is running into cost pressures, changing demand patterns and a regulatory environment that has been challenging for medical device manufacturers over the long term. Thus, while the company is generating solid numbers, they are not the kind that alone would justify significant valuation expansion. To put this in perspective, as of November 2023, the price per share of $MDT has risen 40%.

Still, the stock has undergone strong growth in recent years, driven largely by investors' return to defensive sectors and belief in structural growth in healthcare. However, their expansion started already in the crisis years around 2008-2009. Thus, the share price started to rise much earlier than the previous firms. But its expansion also ended earlier. Medtronic peaked in 2021. The price declined significantly the following years. It even got below where it was during the covid selloff in 2020. So why is the stock still overvalued when it is 28% away from the peak, which is significantly more than previous companies? The answer is simple. At the peak, the stock was driven by a giant hype and got to even more meaningless valuations. And the market then punished the stock soundly for it.

Today, the title is still valued as if it were on the cusp of a new growth phase. However, there is no significant breakout in the results so far that clearly confirms this thesis. That said, any weaker quarter, reduced outlook or margin pressure could have a disproportionately strong impact on the share price. The higher the expectations, the less room for error there is. In fact, sales have grown so little over the past four years that it's more likely to be described as stagnant, and net income was even $300 million lower for 2024 than 2021.

According to the Fair Price Index on Bulios, the stock's valuation is well above levels that would be consistent with current growth rates and returns on capital. Thus, the potential for further upside is limited, while room for correction remains open. For investors, this means an increased risk that the coming years may be marked by share repricing rather than new value creation.

Conclusion

All three companies analysed share a fundamental theme: exceptional business quality, a strong market position and a long-term attractive sector. But they are also united by very strong share growth in recent years, expansion in valuations and extremely high market expectations. It is this combination that creates an environment in which it is no longer enough to be a good company. For current valuations to hold, these companies must deliver near flawless performance over the long term, and continued earnings and revenue growth, not valuation growth.

If valuations begin to return closer to fundamentals, these companies can get back on a growth trajectory. Of course, this is not just true for these companies or the healthcare sector.

General Mills is one of those companies investing in its future growth, even if it means accepting pressures on profitability in the short term. These investments are focused on restoring organic growth, product innovation, and solidifying distribution channels, which are key to long-term competitiveness and margins in the packaged goods segment today.

How was the last quarter?

In the second fiscal quarter of 2026, net sales $GIS were $4.9 billion, down 7% year-over-year. However, it remains important to distinguish between organic sales and overall numbers impacted by structural changes in the portfolio: net organic sales were only 1% lower, reflecting actual market demand excluding the effects of divestitures and acquisitions.

Profitability faced significant pressure. Gross margin decreased by 210 basis points to 34.8% of sales, impacted by higher input costs and the adverse effects of market changes. Operating profit fell 32% to USD 728 million and operating margin fell 560 bps to 15.0%. Even after adjusting for one-off items (e.g. restructuring costs), adjusted earnings remained lower, with adjusted operating profit down 20% to USD 848 million and operating margin down to 17.4%.

Net profit was $413 million, down 48%, and earnings per share fell 45% to $0.78. Adjusted for one-time items, adjusted EPS declined 21% to $1.10. This decline was the result of lower operating performance, lower joint venture income and a higher effective tax rate, partially offset by fewer shares outstanding.

• Full presentation with results.

Management commentary

CEO Jeff Harmening commented that the team continued to execute its growth strategy well in a challenging environment, particularly through its investment in the "remarkability framework" - a comprehensive initiative aimed at restoring organic growth through product innovation, stronger marketing and omnichannel distribution. Management also confirmed that the investments have begun to positively translate into revenue recovery in certain categories, particularly in the North American retail channels.

Harmening also highlighted that the firm is reaffirming its full-year guidance for FY2026, which implies confidence in the strength of the strategy despite short-term declines in profitability. This stance is in line with the company's ambition to prioritise long-term performance and market positioning over short-term financial results.

Outlook

The company expects the transitional investment phase to end and the price/mix ratio to improve due to stronger performance in the second half of the year and the following fiscal. This should support improved margins and net income without the need to raise price levels above a sustainable level for consumers.

Long-term results

A longer-term view shows that General Mills is on a relatively stable, albeit slightly downward, sales trajectory. Total sales for 2025 are approximately $19.49 billion, down nearly 2% from 2024. This decline is not dramatic and is within the expected fluctuations of the packaged goods segment, which traditionally responds to changes in raw material prices, consumer behavior, and competition.

The company's gross profit declined nearly 3% over the same period, driven by higher input costs as well as changes in product mix. Operating profit fell by around 4% and net profit fell by more than 8%. Earnings per share (EPS) fell by more than 5%, partly reflecting the investment strategy and portfolio changes within the divestments.

But over the long term, the company continues to generate stable cash flow and maintain a relatively strong balance sheet. EBITDA and EBIT show minor fluctuations and indicate that despite short-term fluctuations, the business remains able to fund investments, dividends and potential share buybacks.

Shareholding structure

General Mills has a strong institutional investor base. Roughly 86% of all shares are held by institutions, with the largest stakes held by Vanguard (12.57%), BlackRock (10.21%), State Street (6.32%) and Charles Schwab Investment Management (3.60%).

This institutional concentration of ownership often means that investors evaluate a company more through the lens of long-term stability than short-term fluctuations, and prefer a strategy that can deliver stable returns and protection against cyclical fluctuations in the future.

Analyst expectations

Analysts approach Nike with cautious optimism, with consensus for FY2026 indicating that the market expects a gradual improvement in organic revenue growth and stabilization of margins as investments in the brand begin to generate results. Many ratings remain at Buy/Overweight, with average target prices above the market, indicating that the market still believes in medium-term growth. However, some analysts warn that without a clear acceleration in growth in key segments, sentiment may be cautious, especially if global economic uncertainty persists.

Fair Price

For me, it's probably the replacement of the Fed Chair. If someone close to Trump were to take over, that independence could be undermined and there would be pressure to cut rates. In that case, I'd expect significant volatility and stocks could swing sharply up and down.

There may be several such events this year and everyone is watching slightly different things. I'd be glad to read what you consider to be the key factors.

What makes the rally notable is its depth. Government support lowers execution risk, management change restores credibility, and capital inflows signal external confidence in the turnaround. The market is not simply pricing optimism—it is pricing the possibility that Intel can once again play a meaningful role at the technological frontier of semiconductor manufacturing.

Political tailwinds and state capital

A crucial factor is the entry of the US government into the shareholder structure. The United States has so far accumulated a stake of around 5.5%, with up to 10% in the long-term scenario. The move is part of a broader industrial strategy to reduce US dependence on Asian manufacturing capabilities and strengthen the domestic semiconductor ecosystem.

For investors, state participation has a twofold effect. On the one hand, it acts as an implicit guarantee of stability in a critical period of transition, while on the other it creates the expectation that Intel $INTC -will be a key beneficiary of public procurement and support under strategic programmes. It is this combination that explains why the market reacts so sensitively to policy statements.

A new CEO and a changing narrative

Since Lip-Bu Tan took the helm in March, the investment narrative has been changing. After years on the defensive, Intel is once again trying to position itself as a technology leader, not just a traditional processor maker. Management is emphasizing a return to execution, discipline in capital spending and a focus on process technology.

A key moment was Intel's confirmation that it will begin shipping its first products built on process 18A, a sub-2 nanometer manufacturing technology, in late 2025. For the market, this is proof that ambitions to catch up with - and eventually compete with - Taiwan Semiconductor Manufacturing Company are not just marketing, but have a concrete technological basis.

Strategic investors boost confidence

Another strong signal to the market is the entry of major technology players into Intel's capital. More than just a cash injection, the investments from Nvidia $NVDA and SoftBank $SFT.F. These moves suggest that Intel can play an important role in the broader ecosystem - whether as a manufacturing partner or as a strategic node in the AI and data center chip supply chain.

Importantly for investors, this is not just speculative capital, but long-term bets by entities that have deep insight into technology trends and future demand.

Why growth stocks are faster than the business itself

Despite the sharp rise in share prices, the reality of the business remains more complex. Intel is still outsourcing part of its manufacturing and the lost market share in server and high-performance chips will be regained gradually. However, the market today is not pricing in actual results, but the possibility of a structural turnaround.

Thus, the rise in the share price reflects a change in the probability of success rather than the finished success itself. In other words, investors today are betting that a combination of government support, new management, and technological advances greatly increases the chances that Intel will cease to be a troubled title and become a strategic player again.

What's in it for investors

The current rally shows that SE Intel has moved out of the "restructuring story" category and into the "strategic bet on US industrial policy" category. This carries potential, but also risks. Further developments will depend primarily on whether it succeeds:

• scale up production steadily on the 18A process

• attract significant external customers for the foundry business

• and translate political support into sustainable sales and margins

That disconnect is now starting to close. After several years of uneven momentum, the company is entering a phase where new products, broader indications, and faster-growing cardiovascular interventions are aligning. Analysts increasingly see a credible path back to double-digit revenue growth, turning what once looked like stagnation into a renewed acceleration story.

Top points of the analysis

• High-margin business with a strong position in cardiovascular medical technologies.

• Return to double-digit revenue growth from new products and indications.

• TMT segment growing at a rate of over 50% year-over-year in constant currencies.

• Very strong balance sheet with a net cash position and high liquidity.

• Premium valuation that stands and falls with growth expectations being met.

Edwards Lifesciences - business, products and market position

Edwards Lifesciences $EW operates in the medical device business with a focus on structural heart disease and critical care therapies. A key pillar of the business is minimally invasive cardiovascular solutions that replace traditional surgical procedures and allow a broader range of patients to be treated with a lower risk of complications. This provides the company with a long-term structural tailwind based on the aging population and the increasing prevalence of heart disease.

The product portfolio is divided into several main areas, with the transcatheter mitral and tricuspid therapies (TMT) segment playing a dominant role. It is here that the company is currently experiencing its fastest growth, driven by a combination of new devices, expanding clinical indications and gradual penetration into additional geographic markets. Alongside this, hemodynamic monitoring and critical care remain important pillars.

The Company's customers are primarily hospitals, specialty cardiology centers and health systems in both developed and emerging markets. The company has a strong presence in the US, Europe and Asia and benefits from long-standing relationships with the medical community, regulatory bodies and healthcare payers. These relationships create high barriers to entry for competitors and stabilize demand across economic cycles.

Management and leadership

The company is led by CEO Bernard J. Zovighian, who has a long career in the healthcare sector and a detailed understanding of the regulated medical device environment. Under his leadership, the company emphasizes long-term investment in research and development, clinical trials, and gradually building a portfolio capable of generating growth over many years.

Management has a long-standing preference for organic growth over aggressive acquisitions. This is reflected in a relatively clean balance sheet, high return on capital and consistent allocation of resources to areas with the highest potential for clinical and commercial impact. Strategic decisions are not focused on short-term profit optimization, but on strengthening competitive advantage.

An important element is a corporate culture that encourages close collaboration with physicians and clinical sites. It is this link that enables the company to respond quickly to market needs, increase the adoption of new technologies and expand indications for existing products.

Goldman Sachs and the return of growth

Goldman Sachs is among the analyst "houses" that have significantly changed their tone toward the company in recent months. While in previous years there was caution due to slowing growth and uncertainty about the next phase of the product cycle, current Goldman Sachs analysis is working with a scenario of a return to sustainable double-digit revenue growth.

Goldman Sachs' key argument is a combination of several overlapping growth layers over the coming years. The bank expects the firm to return to 10% or higher organic revenue growth, with the transcatheter mitral and tricuspid therapies segment to be the main driver. It is here that analysts point to year-on-year growth of around 50%+ in constant currencies, which is not yet fully reflected in long-term market models.

At the same time, Goldman Sachs stresses that growth should not be based on a single product, but on a gradual expansion of indications, new device generation and geographic expansion. This 'layered growth' approach reduces the risk of an investment thesis standing on a single binary clinical outcome. As a result, the Bank considers the growth profile to be more sustainable than in the previous cycle.

From a valuation perspective, Goldman Sachs acknowledges that the stock trades at a premium multiple, but considers this premium defensible when the growth scenario is met. In its models, it works with a target price implying roughly 20-25% upside to the then market price, and sees long-term potential primarily in a combination of profitability growth and maintaining high margins.

An important detail is that Goldman Sachs sees the main risk not in the balance sheet or liquidity, but solely in the execution of growth. Should a return to double-digit growth be delayed or the TMT segment fail to meet expectations, the bank admits pressure on multiples. Conversely, on confirmation of clinical and commercial milestones, it views the current valuation as a transitional phase before further revaluation.

Financial performance: stable base with room for acceleration

In terms of long-term results, the company is on track to generate revenues of around US$5-5.5bn per annum. The year 2024 brought a return to growth, with sales up 8.6% to US$5.44 billion, an improvement on the weaker year of 2023. Gross profit reached US$4.32 billion, corresponding to a very strong gross margin of over 78%.

Operating profitability remains strong, although it has fluctuated in recent years depending on investments in development and clinical trials. Operating profit in 2024 was US$1.38 billion and EBITDA was US$1.72 billion. These figures confirm the company's ability to generate high operating cash even in periods when some of the growth has not yet taken full effect.

Net income in 2024 increased significantly, with EPS reaching $6.98, a year-on-year increase of over 200%. This jump was partly driven by one-off factors, but also shows the strong operating leverage the company has when growth returns.

Balance sheet, liquidity and capital structure

One of the company's greatest strengths is its exceptionally strong balance sheet. The company has a net cash position with net debt deep in negative territory. Total debt is approximately USD 700 million, while cash and current assets far exceed liabilities.

Shareholders' equity is over USD 10 billion and working capital is nearly USD 4.8 billion. A current ratio of 4.0 and a quick ratio of 2.86 confirm a very comfortable liquidity position. This gives management considerable flexibility to fund development, potential acquisitions or share buybacks.

The low leverage also significantly reduces the risk in the event of a macroeconomic slowdown or regulatory changes. The company is not forced to optimize cash flow to service debt, which sets it apart from many other players in the healthcare sector.

Valuation: premium price for quality and growth

From a valuation perspective, the stock trades at a significant premium to the market. A P/E of around 37, a P/S of over 8 and an EV of around $48 billion clearly show that investors are already pricing in a return to higher growth. The market is therefore giving the company the status of a quality growth stock with high confidence in management and the product portfolio.

This valuation is only defensible if the scenario of a return to sustainable revenue growth above 10% per annum comes to fruition. If growth remains in single digits, multiples would be difficult to sustain and the scope for revaluation would be limited.

On the other hand, the exceptional quality of the business, high margins, low earnings volatility and virtually zero balance sheet risk must be taken into account. From this perspective, this is not a speculative growth bet, but a long-term investment in an innovator with very strong fundamentals.

Why growth can accelerate again

A key catalyst for growth is the TMT segment, which is currently growing at around 54% year-on-year in constant currencies. This segment is benefiting from new products, wider adoption and the gradual expansion of clinical indications, which is increasing the addressable market.

The next layer of growth is geographic expansion and gradual penetration into less saturated markets. The company is also investing in physician education and clinical data development, which supports long-term adoption of its technology.

Analysts expect the combination of these factors to enable a return to revenue growth of over 10% annually, with consensus suggesting approximately 22% share price growth potential if this scenario is realized.

Business risks

The main risk remains the high dependence of valuation on growth expectations. Any slowdown in new product adoption, delays in regulatory approvals or weaker clinical data could lead to a rapid valuation correction.

Another risk is competitive pressure from other innovators in structural heart therapies. The healthcare sector is highly regulated and a technological lead is never sustainable.

The political and regulatory risks associated with healthcare reimbursement, particularly in the US, cannot be overlooked. Changes in the reimbursement system may affect the pace of adoption of new technologies.

Investment scenarios

Optimistic scenario - return to growth + revaluation of quality

In the optimistic scenario, the analysts' thesis of a return to sustainable revenue growth above 10% per annum will come to fruition, mainly due to acceleration of the TMT segment, expansion of indications and improved geographic penetration. In this case, revenues could move from the current ~USD 5.4bn towards USD 7-7.5bn over 3-4 years, with high gross and operating margins ensuring disproportionately faster profit growth.

EPS in such a scenario could be steadily in the $9-10 per share range without the need to dramatically increase costs. The market would be willing to maintain or slightly increase a premium multiple, such as a P/E of 35-38, which is historically defensible for high-quality medical device companies.

➡️ Implied share price: $315-380

This scenario is consistent with the view of analysts who see approximately 20-25% upside as conservative today, but concede significantly higher long-term potential with a fully developed pipeline.

Realistic scenario - solid growth but no multiple expansion

In the realistic scenario, the company actually accelerates growth from previous years, but does not fully reach double-digit growth. Revenue will grow more in the 7-9% per annum range, with TMT remaining the driver but other segments holding back the overall momentum.

Profitability will remain high, and EPS could gradually get to $7.5-8.5, but without a dramatic change in the investment story. The market will retain respect for the quality of the business, but will be unwilling to pay an even higher premium than today.

➡️ Implied share price: $250-290

This scenario fits the "buy-and-hold" profile - solid yield, low balance sheet risk, but no price explosion.

Negative scenario - growth disappoints, multiples normalize

In the negative scenario, the growth acceleration turns out to have been short-lived. The TMT segment may be growing, but it cannot compensate for weaker momentum elsewhere in the long term. Revenues return to 5-6% pace, EPS stagnates around $6-6.5.

In this case, premium valuation becomes unsustainable. The market would begin to value the company more as an "ex-growth" medical device company, which historically implies a P/E of 25-28.

➡️ Implied share price: $160-200

Even in this scenario, the company remains financially healthy and profitable - the risk is primarily valuation, not existential.

What to take away from the article

• The firm has very strong fundamentals and a clean balance sheet.

• The growth story is built on innovation and expanding indications.

• The TMT segment is a key driver of future growth.

• Valuation is high and sensitive to meeting expectations.

• It is a quality investment, not a cheap one.

At the start of 2026, the market is teetering between two directions. On the one hand, the technology sector remains supported by long-term trends such as digitization, artificial intelligence, automation and the growth of data infrastructure. On the other, however, the gap between companies' fundamental growth and valuation growth is widening. While the revenues and profits of many companies are growing in the single digits or lower tens of percentages, share prices have shifted to levels that implicitly assume a nearly flawless development in the coming years for part of the market.

The NASDAQ is thus once again entering an environment where much of the index's performance is concentrated in a limited number of titles. It is this concentration that has historically increased market vulnerability. When performance is driven by a narrow group of stocks, sensitivity to macroeconomic surprises, disappointing results or rate changes increases sharply.

Monetary policy developments are also an important factor. Following the December rate cut, the market is moving into a phase in 2026 where further easing does not appear to be a given. This brings back into play the sensitivity to bond yields and to discount rates, which have a strong impact on highly valued equities.

The evolution of the 10-year US Treasury yield from 2020 - Daily Garf (US10Y)

It is in this context that companies whose market price has gradually moved away from not only historical multiples but also realistic growth scenarios are beginning to come to the fore. These are not necessarily bad companies. They are companies with a combination of high expectations, increased media attention and valuations that offer little room for error. For these companies, the market is not asking if, but when and how big the correction will be.

Teradyne $TER

Teradyne is one of the world's largest manufacturers of semiconductor and electronics test equipment. Its systems are a key part of the chip manufacturing chain. Without Teradyne's test platforms, it would not be possible to efficiently manufacture advanced processors, memories or specialized AI accelerators. It is this link to the growth in semiconductor and data center spending that has significantly increased investor interest in the company's stock in recent years.

Teradyne's business model, however, is inherently highly cyclical. The company's revenues are directly dependent on the capital expenditures of chipmakers, which typically increase their investments significantly during technology booms and sharply reduce them during slowdowns. As a result, Teradyne's results have historically been characterized by significant fluctuations. Periods of very strong growth have been repeatedly followed by phases of stagnation or declining sales. This cyclical nature of the business has not changed significantly over the past two years, despite the fact that $TER s share price itself has increased significantly.

From a financial perspective, Teradyne remains a quality company. The stock detail on Bulios shows solid profitability, high gross margins typical of a technology equipment manufacturer (around 20%) and a strong balance sheet with low debt. The company has been generating positive operating and free cash flow for a long time, which allows it to finance development and acquisitions without pressure on its balance sheet. From this perspective, Teradyne does not operate as a financially risky company.

However, the risk is not concentrated in the balance sheet, but in the valuation and expectations. According to valuation, Teradyne trades at 2026 multiples that have historically corresponded to semiconductor cycle peaks rather than the average environment. Both the P/E and EV/EBITDA are well above the firm's long-term averages and imply a scenario in which the current wave of AI infrastructure investment turns into a long-term stable growth trend without major fluctuations. This is where the main valuation tension emerges. According to the Fair Price Index, Teradyne shares are currently trading 50.68% above their intrinsic fair price. Investors are therefore paying a significant premium for them on the stock market today.

The market therefore values Teradyne as a structural growth company rather than a cyclical capital equipment supplier. This means that even a slight slowdown in semiconductor investment, the postponement of some projects or a lower rate of order growth can have a very strong impact on the share price. We could have seen this in 2024, for example, when the stock initially rose, but wrote off over 20% in the second half of the year and fell another 53% in the first half of 2025. Meanwhile, the AI trend hasn't gone anywhere.

Another factor is the concentration of optimism around AI. Much of the current valuation is built on the assumption that the AI investment cycle will not only be strong, but also smooth and growing over the long term. Any sign of a normalisation in the pace of spending, a shift in chipmakers' priorities or geopolitical intervention in supply chains could very quickly translate into a revaluation for a title valued this way.

Meanwhile, while the company remains a quality player in a key segment of the technology value chain, it is at a point where the gap between a good company and a well-priced stock is widening significantly.

Roku Inc. $ROKU

Roku is one of the most visible companies associated with the transformation of the television market. It was also undoubtedly helped to fame by Kathie Wood, CEO of ARK Innovation $ARKK, who has had it in her portfolio for a long time. The company operates the largest independent streaming platform in the US, connecting smart TV manufacturers, content providers and advertisers. Its business model today is built primarily on advertising and on monetizing its user base, not on direct subscriptions. This shift to an advertising ecosystem is a major reason why Roku is often seen by investors as a digital advertising platform rather than a traditional media company.

Streaming continues to take a bite out of linear TV share, ad budgets are shifting to digital channels for the long term, and Roku has direct access to tens of millions of active accounts. At the same time, it is a business that is extremely sensitive to the macroeconomic environment. Advertising is one of the first items companies cut when growth slows, and fluctuations in ad spending have historically translated very quickly into revenue and margins at Roku. From 2022 to 2024, the company didn't make a single dollar and lost money. Even when revenue grew (to $4.1 billion in 2024) it wasn't enough to turn a profit.

Roku's financial profile remains ambiguous in 2026. The stock detail shows that the company has long struggled with consistent profitability despite revenue growth. Operating margins are around the tipping point, free cash flow is volatile and heavily dependent on the advertising cycle. While the company has a solid cash reserve and low debt, giving it some operational flexibility, its ability to generate stable profits over the long term has not yet been fully demonstrated.

Still, Roku's valuation has shifted again to levels that anticipate significant improvement in platform economics. According to the Fair Price Index, the stock is trading at high earnings multiples, and the market clearly expects Roku to be able to not only grow but also expand margins substantially in the coming years. They are currently overvalued by 46.3% according to the index! That said, the stock price includes a scenario of successful monetization of the user base, steady growth in ad spend, and the ability to withstand pressure from large technology platforms.

This is where the main risk is concentrated. Roku does not operate in a low-competitive environment. The streaming and advertising market is dominated by global technology players with significantly greater financial capacity, stronger ecosystems and integrated platforms. At the same time, there is increasing pressure on advertising prices and on the share of revenues that platforms can sustain over the long term.

Roku is therefore an example of a company in 2026 where the optimistic structural story is once again coming into conflict with the realities of the business. The company has a strong position in the streaming ecosystem, but its economics remain sensitive to the cycle, competition and advertising sentiment. If the pace of ad spend growth disappoints or the platform's margin potential proves more limited, the scope for a repricing would be significant. Conversely, the scope for a potential price crash has increased significantly in recent months. The stock is trading today at its highest price since April 2022.

Sirius XM $SIRI

Sirius XM is a special case. Unlike most growth titles, this is not a company built on technology optimism, but one with a relatively stable, highly cash-flow oriented satellite radio and audio content model. It is this stability, high margins and strong ability to generate cash that has been the reason the stock has been in the Berkshire Hathaway $BRK-B portfolio for a long time.

Sirius XM's business is primarily based on paid subscriptions to in-car satellite radio, supplemented by podcasts, advertising and digital audio. The model is defensive on its face - recurring revenue, relatively low sensitivity to the economic cycle, and very high operating margins. The company detail on Bulios shows that Sirius has long generated strong operating cash flow and is one of the companies with a strong ability to return capital to shareholders.

However, there is a structural problem lurking beneath the surface that has already manifested itself in 2024. The core satellite radio segment has been under pressure for a long time. Subscriber numbers have been stagnant or declining, mainly due to changing consumer behavior, the emergence of streaming services, and the gradual transformation of the automotive market. The company's growth in recent years has not relied on organic expansion of its user base, but rather on pricing adjustments, content acquisitions, and cost optimization. Margins in 2024 have declined, and very significantly. They fell from the previous 14% to negative 19%, and the company ended the year in the red for the first time in a long time.

The data from Bulios support this picture. Revenues are growing very slowly or stagnating, while profitability is maintained mainly through cost control and high monetisation of existing customers. At the same time, debt levels are higher than those of the previous two companies, which is not an immediate problem in a stable rate environment, but increases the company's sensitivity to longer-term structural weakening of the business.

The risk of a correction for Sirius XM in 2026 stems not from excessive growth optimism, but from a different kind of mismatch: the market has in recent months begun to re-price the firm as a stable money machine with limited risk, even though the fundamental trend of its core product remains downward. Valuations have moved above levels that historically corresponded to companies with zero growth, implicitly assuming that Sirius will be able to offset the long-term decline of traditional subscribers with new digital formats. The Fair Price Index, which is based on DCF and relative valuations, now signals a high overvaluation of $SIRI stock, by nearly 46%!

But even that hasn't deterred Warren Buffett from buying more shares. Even before his exit, he increased his position in the firm by 4.2% to 37% today. We will have to wait and see how the new management of Berkshire will approach this position.

Sirius XM thus represents a different type of risk than Teradyne $TER or Roku $ROKU. This is not a stock inflated by rapid growth, but a title whose price has been falling for several years, but still not enough to meet the company's intrinsic value. But maybe the market is wrong and Buffett saw something more in this company...

Conclusion

The tech-oriented NASDAQ is entering 2026 at a stage where the gap between company fundamentals and market valuations is beginning to widen again. The index's strong rise in recent months has been driven by a limited number of titles and supported by optimism around long-term technology trends as well as expectations of looser monetary policy. However, this mix also creates an environment in which the market's sensitivity to any disappointment increases significantly. As valuations detach from historical and sector benchmarks, price movements become increasingly dependent on market psychology and the ability of companies to meet extremely ambitious targets.

The common denominator of stocks with higher correction risk today is not poor financial health, but the tension between expectations and reality. Whether cyclical businesses priced for structural growth, platforms whose economics remain immature, or stable companies facing long-term structural change, they all share the same characteristic: limited room for error. In an environment where investors are relearning to distinguish between business quality and share price after years of cheap money, this factor may be the main trigger for increased volatility and corrections in the technology market.

The second fiscal quarter matters less as a snapshot and more as proof of execution. Rising earnings, an improved outlook, and the approaching separation of the Freight business together signal whether cost discipline and network optimisation are translating into sustainable value. For investors, this quarter helps define how FedEx should be valued once the transformation moves from promise to permanence.

How was the last quarter?

FedEx $FDX delivered year-over-year improvement across key metrics in the second fiscal quarter of 2026, despite a difficult external environment. Revenue was $23.5 billion, a solid increase from $22.0 billion in the same period last year. More importantly, however, is the improvement in profitability: operating profit on an adjusted basis rose to US$1.61 billion and operating margin moved to 6.9%, up from 6.3% a year ago.

Net income on an adjusted basis was $1.14 billion and adjusted earnings per share were $4.82, a significant shift from $4.05 a year ago. This growth was driven by a combination of higher revenue from US domestic shipments, stronger margins on International Priority packages and continued structural savings from the transformation program. Conversely, negative impacts came primarily from global trade policy, higher labor costs and increased external freight costs.

From a segmental perspective, two dynamics were clearly separated. The Core Express and Parcel business benefited from network optimisation and higher revenue per shipment, while FedEx Freight experienced a decline in operating profit due to weaker volumes and one-off costs related to spin-off preparations. However, these costs of USD 152 million are seen by the market as transitory and not structurally detrimental to the group's long-term potential.

• Full presentation with results.

Management commentary

In his comments, CEO Raj Subramaniam stressed that the second quarter confirms the workability of the chosen strategy. He believes that FedEx can simultaneously grow, improve efficiency and invest in the long-term transformation of the network, even in an environment of increased volatility. Particularly significant is the ability to improve revenue per shipment without aggressively increasing volumes, which signals a qualitative shift in the business.

At the same time, management openly acknowledges that the environment remains challenging in the short term. Wage pressures, the impact of regulatory changes and uncertainty in international trade will persist in the quarters ahead. That is why management believes it is critical to complete the separation of FedEx Freight and allow both companies to independently optimize their capital structure and strategic priorities.

Outlook

After a strong second quarter, FedEx raised its full-year outlook for fiscal 2026. It now expects revenue growth of 5-6% year-over-year, up from its previous range of 4-6%. Adjusted earnings per share before accounting adjustments for pension plans was raised to $14.80-16.00, while after adjusting for costs related to the Freight spin-off and other one-time items, the firm now targets $17.80-19.00.

At the same time, FedEx lowered its expected pension contributions to $275 million and reaffirmed a $4.5 billion capital spending plan, with an emphasis on automation, fleet upgrades and network efficiency improvements. A key structural highlight of the outlook remains the FedEx Freight separation, which is scheduled to be completed on 1 June 2026 and is set to fundamentally change the profile of the Group.

Long-term results

Looking at a longer time series, it is clear that FedEx is going through a period of stabilisation after several years of pressure on revenues. Total annual revenues have been in the range of US$87-93 billion for the past four years, with fiscal 2025 delivering modest growth to US$87.9 billion. However, the cost structure has improved significantly, particularly at the cost of revenue level, which has fallen by almost 6% year-on-year.

Gross profit grew by more than 22% in 2025, confirming that network transformation and a better service mix are starting to work. Operating profit may have declined year-on-year, but the long-term trend points to stable EBIT in the USD 5-6 billion range. Also important is the systematic decline in the number of shares outstanding, which supports earnings per share growth even in an environment of stagnant revenues.

Shareholder structure

FedEx has a very strong institutional base, with more than 80% of its shares held by institutional investors. The largest shareholders are Vanguard, BlackRock and Dodge & Cox, signaling the long-term confidence of traditional asset managers in the company's transformational story. The relatively high insider stake also suggests an alignment of management interests with shareholders.

Analyst expectations

Analysts currently agree that the key catalyst for FedEx stock in 2026 will not be volume growth alone, but the completion of the FedEx Freight separation and visible margin improvement in the core package business. A number of investment houses expect that post-spin-off, the market will start to view FedEx as an "asset-light" logistics platform with higher returns on capital, rather than a conglomerate with a heavy capital profile.

In the short term, analysts expect results to fluctuate depending on the global business environment, but over the medium term, operating margins are expected to gradually return towards higher single digits. This could mean a significant increase in free cash flow with stable sales, creating room for further share buybacks and an attractive return for shareholders.

US President Donald Trump announced today that the state defense budget will be increased from 1 trillion USD to 1.5 trillion USD per year. The increase is therefore considerable.

Shares in the defense industry are responding with strong gains, led by $LMT, $RTX and $NOC.

Stock prices after the market opened, for example at Northrop Grumman $NOC, rose by as much as 10%. They were thus within reach of a new all-time high. By evening, however, the excitement and the gains had slightly subsided.

In Europe, the defense industry is also still a very "hot" topic. Shares of Rheinmetall $RHM.DE climbed by 1.98% today and are trading just below the 1,900 EUR mark.

We even have a local representative.

Company Czechoslovak Group, which is owned by Czech billionaire Michal Strnad, could be heading to the stock market. It is now being reported that the owner may have released up to 15% of his shares into circulation. The IPO is planned on the Amsterdam exchange.

According to recent estimates, the company could be valued at 820 billion to 1.2 trillion korunas (35-50 billion EUR).

Are you invested in this sector?

For existing users the key point is that in practice nothing changes for now. The Apple Card will operate the same as before, the payment network remains Mastercard, card management continues to be handled through the Wallet app and there is no need to reapply for the card. The physical titanium card isn’t going away either, and any changes should be communicated by Apple with sufficient notice. The whole transition is therefore more of a technical change "behind the scenes" than something users would notice in everyday use.

From a broader perspective, however, this is a significant strategic move. Goldman Sachs has in recent years stepped back from ambitions in retail banking, and with this step Apple is moving the Apple Card to a partner that has long-term experience with mass banking business, risk management, and regulation. For Apple this means a more stable foundation for further development of financial services and a reduced reputational and regulatory burden.

What sets this move apart is its regulatory realism. Level 3 systems transfer driving responsibility to the vehicle under clearly defined conditions, a fundamental departure from today’s driver-assistance features. For investors, this signals a strategy built around deployable technology and legal clarity, not speculative timelines—an approach that may prove more sustainable in the long run.

The new electric platform as the technological basis

A key element of the overall strategy is a new electric platform being developed by a dedicated Ford $F team in California. The first model based on this architecture is due to arrive in 2027 - it will be a mid-sized electric pick-up with a target price of around $30,000. It's on this platform that Level 3 technology is set to make its first appearance, though not as standard equipment.

Ford has not yet specified which specific model will get the autonomous software first, nor how much the feature will cost. Management says it is still considering whether it will be a one-time premium or a form of subscription. This suggests that the automaker sees autonomy not just as a technology, but as a long-term source of recurring revenue - similar to the BlueCruise system today.

The business of autonomy: software instead of manufacturing margins

From an investment perspective, it is key that Ford is explicit about finding the right business model. Assistance systems are fast becoming one of the few ways traditional carmakers can increase margins at a time when car prices are coming under pressure from competitors, particularly from China.

Ford already offers a Level 2 BlueCruise system in the form of:

• a monthly subscription of about $50.

• an annual payment of around $495

Level 3 should logically be even more expensive, but also more attractive because it shifts some of the responsibility from the driver to the car company. That makes it a potentially high-value digital product, not just an add-on to the car.

Lidar vs. cameras: Ford goes up against Tesla

On the technical side, Ford has confirmed that it is counting on the use of lidar for Level 3. In doing so, the automaker is clearly setting itself against the philosophy of Tesla $TSLA, whose CEO has long argued that autonomy can only be solved with cameras and software. The result is a paradoxical situation: Tesla has a massively expanded Full Self-Driving system, but formally remains at Level 2, while Ford is heading towards legally recognized autonomy.

WhileLidar increases costs, it also simplifies regulatory approvals and increases confidence in the safety of the system. This is one of the reasons Level 3 is so far limited exclusively to highways, where traffic situations are significantly more predictable than in cities.

Competition: Ford is not alone, but it is betting on accessibility

Ford is entering a space where several players already operate - but each with a different strategy:

• Mercedes-Benz $MBG.WA already offers Level 3 in the U.S. in select markets, but only on expensive models and in limited circumstances.

• General Motors $GM also plans to deploy Level 3 in 2028, starting with the luxury Cadillac Escalade IQ, priced at over $125k.

• Stellantis $STLA, on the other hand, has put its Level 3 program on hold due to high costs and uncertain demand.

So Ford is trying to find a compromise: offer a technology that is not only the prerogative of the luxury segment, but at the same time is not mass deployed without an economic payoff.

Autonomy as an intermediate step towards robotaxis and AI cars

Level 3 is not the end station. For Ford - as for the sector as a whole - it is an intermediate step towards fully autonomous cars and potentially fleets of robotaxis. At the same time, the automaker plans to expand the role of AI directly into the user experience. The upcoming AI assistant is expected to work first as a mobile app and later directly in the car, where it will help with practical tasks - from load planning to image work.

In doing so, Ford is also trying to catch up with the software lead of its competitors, with General Motors already deploying Google Gemini-based conversational AI and other brands integrating their own digital assistants.

What to take away from Ford's announcement

Ford is getting back into the advanced autonomy game after years of hesitation, but it's doing so pragmatically:

• It's not promising full self-driving

• builds on the legally graspable Level 3

• connects technology with a long-term software business

• and targets a wider audience than luxury competitors

For investors, this means that Ford doesn't just want to be a car maker, but is gradually moving towards a software-driven mobile platform. But success will depend on whether it can reconcile safety, price and customers' willingness to actually pay for autonomy.

What makes the platform strategically compelling is not just its scale, but the nature of its data. Users come to Pinterest with ideas they intend to act on, whether related to purchases, lifestyle changes, or long-term planning. In the hands of a company focused on applied AI and intent-driven discovery, that behavioral signal could become far more valuable than advertising reach alone, reshaping how such a platform is monetized.

Top points of analysis

• Pinterest has a unique position between a social network, search engine and e-commerce platform that is often undervalued by the market.

• The company's value lies not primarily in MAU growth, but in data quality and user purchase intent.

• Acquisition speculation shifts the investment story from operational metrics to the strategic value of the platform.

• OpenAI makes sense as a buyer because of synergies in multimodal AI, search and advertising.

• Weaker monetization in the US is a short-term problem, but a long-term opportunity for a stronger owner.

• The stock has significantly underperformed the S&P 500 in 2025, lowering market expectations and increasing return asymmetry.

Why OpenAI would make strategic sense

In terms of synergies, OpenAI is the most frequently mentioned name. Not because OpenAI necessarily needs a social network, but because Pinterest $PINS has what OpenAI acutely lacks: a structured, legally usable database of visual data linked to human intent.

Pinterest has billions of images, pins, and collections that are manually sorted, labeled, and ordered by users. For models focused on multimodal search, visual queries, and shopping assistants, this is extremely valuable training and application material. The combination of OpenAI's conversational interface with Pinterest's visual search would create a product that doesn't exist in full form in the market today - dialogic search inspired by buying, not just information.

Equally important is the advertising dimension. Pinterest is already running a functional advertising business with a growing number of outbound clicks to advertisers. For OpenAI, which is still looking for a sustainable monetization model beyond subscriptions, this would be a ready-made infrastructure that could be further developed in the area of purchase recommendations and performance advertising.

Monetization: a weakness for Pinterest, an opportunity for buyers

One of the main reasons Pinterest has long disappointed investors is slower ARPU growth in the key US and Canada region. While the global user base continues to grow, the North American market is hitting limits, where the company can't match the ad ecosystems built by Meta $META, Alphabet $GOOG or Amazon $AMZN.

However, this is not necessarily a product structural issue, but rather a limitation of the standalone firm. Pinterest doesn't have the data breadth or technology stack to monetize user intent as aggressively and effectively as its larger competitors. This is where a strategic owner could fundamentally change the trajectory.

A case in point is Pinterest's newly launched Performance+ package, which integrates bidding, targeting and budgets into one solution. According to management, retail advertisers are achieving an average 24% higher conversion lift on these campaigns, suggesting that the monetization potential is still there - it just hasn't been fully tapped yet.

Competitive interest: it's not just about OpenAI

Although OpenAI fits the narrative best, it's certainly not the only potential bidder. Historically, names such as Microsoft, Alphabet and Amazon have been mentioned in connection with Pinterest. Each of these players would pursue a different goal - Microsoft could use Pinterest as a data add-on for AI and advertising, Alphabet as a search extension, and Amazon as a shopping inspiration channel.

From an investment perspective, this means Pinterest represents real value. Even if an acquisition does not happen, the mere possibility of strategic interest limits the long-term downside of valuation. If a transaction were to occur, the premium would likely be well above the current market capitalization, which still reflects frustration with growth rather than the value of the data and platform.

Share performance and investment angle

Pinterest shares ended 2025 roughly 11% in the red, while the S&P 500 added approximately 17%. This relative underperformance is key - the market is not currently assigning a strategic premium to the company, but rather assessing it as a slowing second-tier social platform.

However, this is where the investment asymmetry lies. The base case assumes continued gradual growth and margin pressure. But the Bull scenario is based on Pinterest being bought not for MAU growth but for data, intent and infrastructure, factors that common social valuations often undervalue.

Risks that cannot be ignored

The biggest risk remains that management will not be able to convincingly jumpstart growth in key markets and Pinterest will gradually become a "nice to have" addition to advertising budgets. Another risk is the regulatory environment - especially if the buyer is one of the big tech firms, antitrust hurdles could make the transaction significantly more difficult.

Nor can we rule out a scenario where no strategic buyer eventually emerges and Pinterest remains a stand-alone company that will have to manage its transformation on its own.

Two investment stories: a stand-alone Pinterest and an acquisition scenario

For an investor, it is crucial to distinguish between two distinct investment stories, which often overlap in the case of Pinterest but work differently in terms of valuation and market expectations. The first is the evolution of the company as a standalone business, and the second is a scenario of a potential takeover by a strategic player. These two levels need to be viewed separately so that investment considerations are not based solely on acquisition speculation.

In the case of a stand-alone Pinterest, the main issue will be the ability to improve monetisation in key regions, especially in the US and Canada. User growth here is likely to remain limited and investor attention will therefore shift to revenue per user growth, the effectiveness of advertising tools and deeper integration of Performance+ solutions. This scenario assumes a gradual improvement in revenue quality and stabilisation of margins rather than a rapid revaluation of the stock.

The potential takeover scenario represents an additional investment opportunity, not the basis of the entire thesis. In such a case, Pinterest would not be viewed primarily as an advertising platform, but as a strategic asset - a source of data, user intent and technological infrastructure at the intersection of search and e-commerce. Interest from firms like OpenAI would reflect the long-term value of the platform in the broader technology ecosystem, not the short-term evolution of operational results.

Importantly from an investment perspective, the acquisition scenario is not a condition of investment. The underlying logic is that the market today values Pinterest primarily on social networking metrics, while the true value of the company is closer to search and shopping infrastructure. A potential takeover would only accelerate and make this difference more visible.

What could change the market's mind: key catalysts for 2026

For Pinterest's investment story to move from the "interesting option" phase to the actual re-rating phase, there are several specific signals the market will be watching for in 2026. This is not a one-off event, but a combination of operational and strategic impulses that would gradually change the way investors perceive the company.

One of the main catalysts will be the evolution of ARPU in the US and Canada. Any sign of acceleration in monetization in these regions would be a strong signal that Pinterest can better leverage the high purchase intent of users and that Performance+ is not just a short-term experiment, but a structural change to the advertising model.

Another factor is the adoption of Performance+ by large retail advertisers. If this package starts to gain traction with larger budgets and across a wider range of clients, it could change the perception of Pinterest from a complementary channel to a full-fledged performance platform.

A deeper integration of AI into the product itself, rather than just at the level of marketing messages, would also be a significant boost. The market will be watching to see if AI translates into better relevancy of results, higher conversions and longer user interactions with the platform. This is where a company's strategic value would begin to materialize the most.

Last but not least, strategic partnerships can play a catalytic role - even without a full-fledged acquisition. A collaboration with a major technology player in AI, search or e-commerce would signal that Pinterest is not seen as just another social network, but as an infrastructural element of the broader digital ecosystem.

Analyst expectations

UBS maintained its Buy rating and $50.00 price target. The firm reported mixed regional results, noting that while Pinterest faced hurdles due to slowing advertiser spending in the Asia-Pacific region in the second quarter of 2025, the company reported accelerating revenue growth in markets in Europe and the rest of the world. Despite regional challenges, Pinterest maintains strong fundamentals with an "EXCELLENT" financial health score according to analysis, supported by robust revenue growth of 17% over the past twelve months.

UBS slightly raised its revenue estimates for Pinterest by approximately 1% for 2026 and 2027, while raising its EBITDA estimates by 1% and 2% for those years, citing the industry's natural operating leverage.

What to take away from the article

• Pinterest is not a traditional social network, but an infrastructure for search and purchase decisions.

• The market is valuing the company conservatively because it is valuing it on the wrong metrics.

• Acquisition is not a prerequisite for an investment thesis, but it significantly increases the potential upside.

• It will be key to monitor the evolution of monetization, the adoption of Performance+, and management's strategic moves.

• For the long-term investor, this is a title with optionality, not a pure growth or value story.

Why the JOLTS report is a better indicator for the Fed than unemployment itself

At first glance, JOLTS (Job Openings and Labor Turnover Survey) is just another labor market statistic. But it actually tells the Fed things that you won't see in the traditional unemployment rate in time. Unemployment is often a lagging indicator: firms first stop hiring, slow down the pace of hiring, and only later do the layoffs come. JOLTS shows just the leading edge of the cycle, i.e. whether firms want to hire at all, how fast they are hiring, and how willing people are to leave. This is key to inflationary pressures through wages.

Moreover, the Fed has relied heavily in recent years on the concept of labor market tightness, which is often described through the relationship between unemployment and job openings(the Beveridge curve). What matters is not just how many people are out of work, but also how many firms are struggling to hire new employees and under what conditions. Research directly from the US Federal Reserve shows that the link between "vacancies", unemployment and inflation exists, but can change as the Beveridge curve shifts. This is why it is valuable for the central bank to monitor the detailed components of JOLTS.

Source.

From a practical perspective, two indicators are most important to the Fed. First, the number of job openings and second, the quits rate. Vacancies signal how aggressively firms are demanding labor. Quits, in turn, tell us how confident employees are. When people quit more often, they usually believe they will find a better job quickly, and this is usually associated with upward pressure on wages. For this reason, JOLTS can often shift rate expectations even when other indicators look neutral.

December's rate cut was close and the Fed may take a pause in 2026

Investor sentiment toward JOLTS will be even more sensitive this year because of what happened in December. On December 10, 2025, the Fed cut rates by 25 basis points to a range of 3.50%-3.75%, while also highlighting in its own report that uncertainty remains elevated and that risks towards employment have increased.

Source.

But subsequent information showed that this was a decision with significant internal debate. According to information from the Fed meeting, investors learned that some officials considered the move to cut rates to be very close and that there was a dispute within the Fed over whether persistent inflation or a gradual weakening of the labor market was the greater threat.

If JOLTS confirms cooling labor demand, the market may revert to a faster rate cut scenario. If, on the other hand, it shows stabilization, the December rate cut could be the last for a while.

What the latest JOLTS data showed and why the market has turned its attention

December's labor marketdata is effectively made up of several reports, but JOLTS is important because it gives markets a detailed analysis of labor market dynamics. The latest available JOLTS data (for November 2025, released on January 7, 2026) showed that the number of job openings was at about 7.1 million, but down about 885,000 year-over-year. Recruitment was around 5.1 million, and departures around 3.2 million.

These numbers send a clear signal to the markets: the US labour market is not moving into a mode of massive layoffs and firings, but into a mode where companies are not hiring as many new people, while still not firing aggressively. The AP described it as a market where hiring is subdued but layoffs remain low, creating a strange late-cyclical equilibrium.

Source.

Crucially for investors, the job openings-to-unemployed ratio also comes into play in November for the first time in a long time, exactly the type of cooling that the Fed may read as a gradual easing of wage pressures.

Why the current data may change rate expectations now

Timing is important. The market entered 2026 with the idea that there may be a pause after the December cut. For the Fed, the current situation is a paradoxical dilemma: inflation could fall further, but the economy does not yet make a clear case for a quick further cut. Markets are now working more with a scenario of a limited number of rate cuts in 2026, and labour market data are and will be key to this outlook.

For the Fed, the JOLTS data is not an isolated statistic. They are part of a broader framework the central bank is using to assess whether the labor market is still a source of inflationary pressures. In recent years, the Fed has repeatedly emphasized that the key issue is not just the unemployment rate, but more importantly the mismatch between labor demand and supply.

The Fed's internal analysis has long been that high vacancy rates mean that firms are competing for workers, pushing up wages and, in turn, prices. Research published by the Fed's regional offices shows that changes in the number of vacancies and the quits rate have a significant link to wage dynamics and inflation expectations.

The Fed therefore looks at three things in particular for JOLTS.

The first is the trend in job openings: whether labor demand is actually cooling or just stagnating.

The second is the hiring rate, which shows whether firms are actively expanding or just replacing natural attrition.

The third and often most sensitive component is quits - voluntary departures of employees. These are considered one of the best indicators of workers' bargaining power. If they are high, it means that employees believe in the availability of better positions and higher wages.

The current data show just the combination the Fed has long wanted to see: declining vacancies, low hiring, but still relatively low layoffs.

What scenarios are the market considering today

From a financial markets perspective, three basic scenarios are emerging today, all of which will be based on the labour market data.

• The first is a scenario of gradual cooling without recession. Vacancies continue to fall slowly, hiring remains subdued but layoffs do not grow. In this case, the Fed would likely adopt a wait-and-see strategy and hold rates at current levels for an extended period of time.

• The second scenario is one of faster depreciation. If the data started to show an increase in layoffs and a faster decline in vacancies, the market would immediately start pricing in another rate cut. This is where JOLTS would act as a warning signal that would sound before the changes are fully reflected in unemployment.

• The third scenario is a stabilization or even a re-energization of the labor market. If the number of job openings were to stop declining or the quits rate were to increase, the Fed could find itself in an awkward position: inflation would be lower than in previous years, but wage pressures would remain elevated. This would significantly reduce the likelihood of further rate cuts in 2026.

Conclusion

December's rate cut has moved monetary policy into a new phase in which it is no longer about fighting acute inflation, but about delicately balancing between price stability and maintaining economic activity. In this environment, the labour market becomes a key guide. Unemployment alone is not enough for the Fed today. The structure of labor demand, the willingness of firms to hire new workers, and the bargaining power of employees are critical. That's why attention is shifting to detailed reports like JOLTS that reveal changes in market dynamics before they show up in traditional indicators.

In 2026, it will be very important to track these indicators of the real strength of the economy, as it will be these, along with real company results, that will set the markets' future direction.

For investors, this phase is about credibility rather than momentum. Management is prioritising portfolio discipline, wholesale relationships, and structural fixes over short-term margin optimisation. The real question is not whether Nike can post stable sales today, but whether these choices lay the groundwork for a durable brand and earnings recovery over the next cycle.

How was the last quarter?

The second fiscal quarter presented a very mixed picture. The company's revenue came in at $12.4 billion, up 1% year-over-year, while adjusted for currency effects, it remained virtually flat. Thus, at the absolute revenue level, Nike $NKE was able to stabilize performance, but the growth structure reveals continued strains in the business model.

A major positive is the return to growth in the wholesale channel. Revenue from wholesale grew 8% to $7.5 billion, driven primarily by strong demand in North America and renewed collaboration with key retail partners. This shift confirms that the company is gradually correcting its previous overly aggressive bet on direct sales to end customers.

Conversely, the NIKE Direct segment remains a weak spot on the income statement. Direct sales fell 8% to $4.6 billion, with Nike's digital sales falling as much as 14%. Its own brick-and-mortar stores fared slightly better, but even here digital failed to fully offset the shortfall. This development confirms that consumers are more price sensitive and less willing to spend in premium online channels.

Converse's performance was also a significant negative factor. Its sales fell 30% year-on-year to USD 300 million, across all regions. Converse thus continues to emerge as a structural weakness in the portfolio that is not acting as a stabilizer at this stage of the cycle.

• Full presentation with results.

Margins, costs and profitability

Gross margin declined by a significant 300 basis points to 40.6%. The main reasons were higher tariffs in North America and a generally higher cost base associated with supply chain restructuring. This margin pressure was a key theme throughout the quarter and a major drag on a faster return to higher profitability.

Operating costs remained relatively under control. Total selling and administrative expenses increased only 1% to $4.0 billion. However, there is significant overlap within these: marketing and demand support expenses rose 13%, while overhead costs fell 4%. Thus, Nike is clearly prioritising investment in brand and sports marketing over across-the-board savings.

Net profit came in at $792 million, down 32% year-on-year. Earnings per share fell at the same rate, to $0.53. This decline is not a surprise - it is a direct result of lower margins and a conscious decision by management to sacrifice short-term profitability in favor of long-term stabilization.

Management Commentary

CEO Elliott Hill referred to fiscal 2026 as a comeback period, which aptly describes the current phase of the cycle. He said Nike is following the Win Now plan, which includes reorganizing teams, improving relationships with partners, and returning to the brand's athletic DNA. It is placing particular emphasis on the so-called sport offense - that is, product innovation geared toward specific sports and athletes, not just the lifestyle segment.

CFO Matthew Friend stressed that the company is managing the current turbulence without disrupting its financial stability. He said Nike is making the necessary shifts in its portfolio and distribution to return to full growth once the consumer environment stabilises.

Outlook

The company did not provide a detailed quantitative outlook, but management comments suggest that margins and profitability will remain under pressure in the short term. Fiscal 2026 is expected to be primarily a year of transformation, not profit maximization. Key variables will be the continued evolution of tariffs, the pace of recovery in the digital channel and the ability to restart growth in China.

Continued inventory control, down 3% to $7.7 billion, and strong capital discipline are positive signs. Cash and short-term investments of $8.3 billion provide the company with ample room to maneuver.

Long-term results

For Nike $NKE, the long-term financials are primarily a story of a skewed cycle. After a strong post-pandemic period where the company benefited from demand acceleration, high margins and aggressive growth in the Direct channel, the last two fiscal years have seen a significant turnaround. Revenues have virtually stalled since 2023 and are already down nearly 10% year-over-year in 2025, clearly showing that the original growth model has hit its limits.

This break-even is even more pronounced at the level of operating profitability. While Nike generated an operating profit of over $6.5 billion in 2021-2022, by 2025 operating income has fallen to around $3.7 billion. This represents a decline of over 40% in three years, although absolute revenues remain well above pre-pandemic levels. Margin pressure is not coming from a single source, but from a combination of higher production costs, tariffs, inventory revaluation and, most importantly, a change in sales mix.

The experiment with the Direct-to-Consumer strategy has played a crucial role in the long-term trend. In recent years, Nike has systematically prioritised its own digital channels and limited its collaboration with wholesale partners. This approach increased margins in the short term but also weakened brand reach, reduced volumes and increased operating costs. In the long-term numbers, this has translated into stagnating sales and a significant decline in EBIT and EBITDA, which have fallen by tens of percent year-on-year in 2025.

Shareholding structure

Nike remains a strongly institutionally owned company. Approximately 83% of shares are held by institutional investors, with Vanguard, BlackRock and State Street among the largest. This type of shareholder base typically implies a high emphasis on long-term strategy, cash flow stability, and disciplined capital policy, rather than short-term performance optimization.

Analyst expectations

The analyst community has a generally moderately positive to neutral outlook for Nike stock through 2026, although there is considerable uncertainty about revenue and margin growth in the near term. Consensus from multiple sources indicates that the average 12-month price target is around $77-83, with high estimates as high as $120 and low estimates as low as around $35-38, reflecting differing views among institutional analysts regarding the pace of brand recovery and pressure on profitability.

The carrier ordered 110 new aircraft, of which 105 are 737 MAX 10s and five are widebody 787-10 Dreamliners. This is the largest order in Alaska’s history and a strong signal that airlines once again believe in long-term demand and Boeing’s ability to deliver a modern fleet.

This order also doesn’t come out of nowhere. In recent months Boeing has been securing large contracts, especially for the 737 MAX and 787 models, and is trying to stabilize production rates after years of problems with quality, certification, and reputation. The return of trust from major airlines is crucial—not only because of the volumes themselves, but mainly because the backlog and cash flow from these programs will decide whether the company can return to sustainable profitability.

From an investment perspective, we’re at an interesting crossroads. Boeing still faces tough execution challenges and regulatory pressure, but large orders suggest the cycle may slowly be turning.

Do you take these orders as evidence that Boeing is truly rising from the bottom, or do you think it’s still too early to talk about a turnaround and the biggest risks are yet to come?

Yet Discord is not a typical social network. Its scale, engagement depth, and role as infrastructure for digital communities position it differently from legacy platforms. For the market, an eventual IPO would serve less as a valuation event and more as a signal: whether investors are ready to back the next generation of social platforms built around participation rather than pure reach.

What is Discord and why is its business unique

Discord started in 2015 as a voice communication tool between gamers, but has gradually transformed into a universal community platform. Today, it combines text chat, voice, video, livestreaming and community management in one environment. Unlike traditional social networks, it is not built on a public feed, but on closed servers that are managed by the users themselves.

This model is a key differentiator. Discord is not a platform primarily focused on advertising and algorithmic content distribution, but rather an infrastructure for digital communities. It is used not only by gamers and streamers, but also by developers, crypto-communities, educational projects, brands and fan groups. The company reportsmore than 200 million monthly active users, making it one of the largest communication platforms outside of traditional social networks.

Monetization: a strong community but a complex path to profit

One of the main question marks of a potential IPO is the monetisation model. Discord has long built primarily on the Discord Nitro subscription, which offers users higher quality streaming, more storage, better personalisation and other features. In addition, the company is testing sales of digital add-ons and community creator tools.

Unlike its competitors, Discord has so far avoided massive advertising, which strengthens user loyalty but also complicates the path to quick profitability. For investors, this presents a classic dilemma: a strong and engaged user base on the one hand, the question of long-term margin and scalability of revenue on the other. An IPO could increase the pressure for more transparent financial results as well as the search for new revenue streams.

IPO market in 2025: better sentiment but still selective

Discord's intention comes at a time when the US IPO market is gradually reopening after nearly three years of stagnation. The year 2025 has brought several larger IPOs, but has also shown that investors are significantly more cautious than during the tech boom of 2020-2021. Volatility associated with trade tariffs, political uncertainty and the correction in AI-related stocks are dampening the willingness to bet on growth stories without a clear path to profit.

For Discord, this means that a potential IPO will not be about hype, but about a credible business story. The company will have to convince the market that its community model can generate steady cash flow without destroying the user experience that underpins its popularity.

Strategic reasons to go public now

Confidential filing gives Discord flexibility. The company can test investor interest without publicly committing to a term sheet or valuation. Going public would also open up access to new capital that could fund further development of the platform, investments in infrastructure, security or potential acquisitions.

At the same time, an IPO would provide liquidity to early investors and employees, a logical step after nearly a decade of the company's existence. But it is also a strategic decision for Discord's management: becoming a public company means increased oversight, regulatory demands and pressure for results, which may not be in line with the platform's long-term community DNA.

What to watch next

The key will be whether Discord actually proceeds with a public listing or sticks with non-public status. If an IPO does take place, investors will focus primarily on the pace of revenue growth, cost structure, and signals as to whether the company can gradually increase monetization without user churn. Discord may be one of the most interesting technology stock market entries of recent years, but it is also one of the most analyzed.

For investors, the key question is not whether the business generates cash, but who ultimately controls it. Strong operations lose much of their appeal if debt absorbs most of the upside. In this case, valuation alone is a poor guide unless it is weighed against balance-sheet constraints and refinancing risk.

Top points of the analysis

• The operating business is stable, diversified and generates high EBITDA over the long term.

• Extreme financial leverage and a weak balance sheet remain key issues.

• The low market valuation primarily reflects debt, not the collapse of operations.

• Any fall in rates or improvement in refinancing could lead to a significant revaluation

• Investment is a test of patience rather than a growth bet.

Caesars Entertainment $CZR - business, brands and geographic reach

Caesars Entertainment is one of the largest operators of casinos, hotels and entertainment resorts in the US. Its portfolio includes iconic properties on the Las Vegas Strip, a strong regional network of casinos across the United States as well as digital assets in online betting and iGaming. This combination provides some diversification across regions and customer types.

Key competitive advantages include established brands, loyalty programs and the ability to monetize customers across multiple channels - lodging, gaming, entertainment, dining and online platforms. The company is not a pure bet on Las Vegas, but on broader consumer demand for entertainment, which has helped mitigate regional fluctuations in the past.

On the other hand, it is a capital-intensive business with high fixed costs. Hotels, casinos and resorts require ongoing investment in maintenance, upgrades and marketing. This increases operational stability but also limits flexibility in times of weaker demand.

Products, services and customers

Physical gaming operations remain the mainstay of revenue, where the company generates revenue from gaming, hotel services and ancillary activities. This segment is relatively stable, particularly in regional markets where competition is more limited and clientele more local.

The digital segment represents a strategic but so far less profitable part of the business. Online betting and iGaming have long-term growth potential, but also entail high marketing costs and strong competition. For the company, it is more about defending market position than an immediate source of profitability.

The customer base is broad - from tourists and high-rollers to regional clients. It is regional diversification that has proven to be a stabilizing element in recent years, while the Las Vegas Strip faces higher volatility and sensitivity to price and international tourism.

Management and corporate governance

The company is headed by Thomas Robert Reeg, who has led the company through a challenging period of consolidation and deleveraging. His role is not about expansion at any cost, but about stabilizing cash flow, refinancing liabilities and gradually reducing risk.

Management's long-term focus is on operational efficiency, portfolio optimization and limiting capital-intensive projects. This translates into relatively stable EBITDA despite fluctuating revenues and a challenging macroeconomic environment.

On the other hand, it must be said that management's room for manoeuvre is limited. High debt means that most strategic decisions have to be subordinated to creditors and refinancing conditions, not to maximising shareholder value in the short term.

Financial performance over time: what the numbers really say

Looking at revenues over the past four years, it is clear that the company peaked in 2023, when revenues exceeded $11.5 billion. 2024 brought a slight decline, but that in itself does not indicate a structural problem. Operating income remains well above the levels of the post-pandemic years.

Operating profit and EBITDA show a long-term upward trend, although the rate of growth is slowing. EBITDA of around USD 3.6 billion confirms that the business as a whole is capable of generating significant cash. The problem arises at the net profit level, where interest, depreciation and amortisation and tax effects have a negative impact.

The net profit is extremely volatile and in 2024 it is back in the red. This is not a result of explain collapse of operations, but evidence that the capital structure significantly distorts the bottom line for shareholders. Thus, an investor cannot just look at sales or EBITDA, but must look at the entire value stream all the way to equity.

Cash flow and the ability to create value

Operating cash flow remains relatively stable and high in absolute terms. The company is able to generate billions of dollars a year before investments and financing. This confirms the quality of the underlying business and its resilience to short-term fluctuations.

However, after interest and capital expenditures are paid, there remains limited room for rapid debt reduction or return of capital to shareholders. Free cash flow is positive, but much of it is absorbed by debt servicing. This is a key limit of the investment thesis.

Until this ratio changes fundamentally, shareholder value remains secondary to the needs of creditors. From this perspective, time is the investor's main ally and enemy - the company must last long enough in an environment of stable revenues and declining rates.

Balance sheet and financial leverage

Total debt exceeds $25 billion, while equity is around $4 billion. Net debt to EBITDA is approximately 6.7 times, a level that severely limits the company's flexibility and increases its sensitivity to macroeconomic shocks.

An interest coverage ratio below 1 indicates that the company is operating on the edge of comfort. Any negative fluctuation in operating profit or increase in interest expense can quickly deteriorate financial stability.

A positive factor is the maturity structure, which reduces short-term liquidity pressure. The firm is not immediately at risk, but in the long run remains highly dependent on the capital markets and their willingness to refinance debt on acceptable terms.

Valuation

A market capitalisation of around USD 5 billion with an enterprise value approaching USD 29 billion clearly shows that the market is pricing primarily debt risk. Low P/S or P/FCF multiples may look attractive at first glance, but are misleading without context.

Low valuations are not an expression of lack of confidence in the operating business, but the price of balance sheet uncertainty. The market implicitly assumes that much of the future value will be consumed by debt servicing, not equity growth.

However, any shift in refinancing, falling rates or faster deleveraging could lead to rapid repricing. Equities thus represent an asymmetric bet where a small change in macro conditions can have a significant impact on valuations.

Regulation and partial growth catalysts

Regulatory changes in Nevada that reduce the role of intermediaries in data and betting content distribution may slightly improve margins in the racebook segments. The impact on overall results is likely to be limited, but the trend is positive.

Regional gaming markets show different developments. While the Las Vegas Strip is facing short-term pressures, regional locations are experiencing growth. Diversification is thus fulfilling its stabilising role and reducing overall revenue volatility.

Another potential catalyst is the consolidation of the digital segment. If the company can reduce marketing costs and improve the monetization of online platforms, this segment can become a more significant contributor to cash flow.

Business risks

The main risk remains the combination of high leverage and cyclicality of consumer spending. Long-term higher rates, a recession or a decline in tourism can quickly impair a company's ability to generate cash.

Another risk is the regulatory environment, which can vary across states and segments. Any tightening of gambling or online betting rules could negatively impact growth ambitions.

Competitive pressures cannot be overlooked, especially in the digital segment where the company faces aggressive players with higher marketing budgets and lower fixed costs.

Looking ahead: where the story may be breaking

The company's near-term outlook is closely tied to the macroeconomic environment, particularly the evolution of interest rates and consumer spending in the US. Management does not anticipate explosive revenue growth, but rather a stabilisation at a high level and a gradual improvement in operational efficiency. Therefore, market expectations are set relatively low, which reduces the risk of negative surprises but also limits the short-term growth story.

In the medium term, the focus shifts to refinancing and optimising the capital structure. The firm openly communicates that the main objective is not expansion, but improving the quality of cash flow and reducing leverage. If EBITDA can be maintained around current levels while gradually reducing interest costs, the investment story will begin to shift from defensive to neutral.

The long-term outlook is binary. Either the company will be able to use time, stable operations and macro relief to reduce debt, or high leverage will become a permanent structural problem. It is this asymmetry that makes the title attractive to a certain group of investors, but also makes it unsuitable for conservative capital.

Where a company can grow or positively surprise

The first source of positive surprise may be a faster-than-expected decline in interest rates. Given the size of the debt, even a relatively small change in interest rates has a disproportionately large impact on net income and free cash flow. This is a factor that is often underestimated by the market, as it is not reflected in earnings but only deep in the income statement.

The second potential catalyst is a further shift in the regulation of the gambling and betting market. Changes such as the deregulation of distribution models in Nevada, while not in themselves changing corporate results, are gradually improving the economics of each segment. If similar moves were to spread to other jurisdictions, this could cumulatively increase margins.

The third factor is the rationalization of the digital segment. If management can reduce marketing spend, improve customer retention and increase monetisation, the online part of the business can turn from a long-term burden into a relevant contributor to cash flow. This would be a qualitative shift in the investment story.

Investment scenarios

Optimistic scenario - turning debt into leverage

In the optimistic scenario, there is a gradual decline in rates, stabilization of the macro and maintenance of EBITDA above $3.5 billion. The company refinances key portions of the debt on significantly better terms, bringing interest coverage above comfort levels. Free cash flow is beginning to increase not only in absolute terms but also relative to market capitalization.

The market ceases to view the company primarily as a highly leveraged problem and begins to value it as a stable operating business with a solvable balance sheet. The risk premium compresses and the stock can undergo a significant revaluation without having to significantly increase sales or margins.

Realistic scenario - the business works, value is released slowly

In the realistic scenario, rates remain relatively higher for longer and refinancing is gradual. EBITDA remains stable but there is limited scope for rapid deleveraging. The company is generating cash, but its main challenge is to maintain the status quo and prevent a deterioration of the balance sheet.

The stock moves in a broader range in this scenario with no clear trend. Investing becomes a strategy based on patience and waiting for macro momentum rather than a growth story. Returns are possible, but spread out over time and associated with high volatility.

Negative scenario - debt remains a structural problem

In the negative scenario, higher rates persist, consumer demand weakens and EBITDA begins to decline. Refinancing becomes more expensive and interest cover deteriorates further. The company is forced to take defensive steps such as selling assets, reducing investments or restructuring liabilities.

In this case, the low valuation proves justified and shareholder value may be further eroded. Yet even this scenario would not mean the collapse of the business - rather, it would confirm that creditors, not shareholders, remain the primary beneficiaries of value.

What to take away from the article

• The operating business is sound, but the capital structure is extremely constraining.

• Low valuations reflect debt, not business collapse.

• Investment is primarily a bet on time, rates and refinancing.

• Return potential is asymmetric, but risk remains high.

• The stock is only suitable for investors who understand the role of leverage.

What is your opinion on $NU?

The year 2026 begins with a significant selection bias in equity markets. While some investors continue to bet on technology and AI, another part of the market is gradually returning to more traditional businesses. This means to the stability of earnings, the resilience of demand and the ability of companies to generate cash across the economic cycle. It is in this environment that consumer-defensive companies whose business is based on everyday products are coming to the fore again.

The macroeconomic environment remains indecisive in 2026. While inflation has slowed from the peaks of previous years, food, energy and service prices have stabilised at higher levels, keeping pressure on household budgets. Consumers are more cautious, more price conscious and spending less on surplus goods. This shift in consumer behaviour has traditionally favoured companies operating in the staple food, packaged goods and simple protein segments - where demand has fallen only minimally even in a slowing economy.

At the same time, a shift in the investment mindset of retailers is also evident. After several years of markets being driven by valuation expansion and expectations of future growth, investors are increasingly returning to questions of return on capital, margin stability and cash flow sustainability in 2026. In this regard, the consumer defensive sector offers a combination that is relatively rare in today's environment: low valuations, solid balance sheets and the ability to pass some of the cost pressures on to customers through higher prices.

Another important factor is that many defensive titles have been overlooked in recent years. While capital has flowed primarily into technology and growth stocks, consumer companies have remained on the sidelines even though their financial performance has remained relatively stable. This has led to a situation where parts of the sector are trading at multiples that historically correspond to recessionary periods rather than an environment where margins and demand are relatively resilient. And all of the stocks in today's analysis are well below their Fair Price as measured by the Fair Price Index.

Cal-Meine Foods $CALM

Cal-Maine Foods is a specific title in terms of consumer defensiveness. Unlike traditional food concerns that have broad brand portfolios, $CALM is essentially a pure bet on the U.S. egg market. It is this narrow specialization that causes the company's results to fluctuate significantly from year to year, but it also gives it a strong position in a segment where demand is among the most resilient in the entire food industry. Eggs remain a staple item in the consumer basket regardless of the economic cycle.

Cal-Maine's business model is based on vertical integration. The company controls the entire chain from the rearing of laying hens to distribution to retail and grocery chains. This allows it to respond flexibly to price fluctuations, optimise costs and to some extent pass on input growth to customers. In an environment where consumers are more price-sensitive but at the same time cannot simply eliminate staple foods from consumption, this model has an important stabilising function.

From a financial perspective, Cal-Maine has long been one of the companies with a very strong balance sheet. Bulios's low debt and high cash-to-assets ratio are particularly evident in the stock detail, giving the company considerable flexibility during periods of price fluctuations. In recent years, the company has been able to generate strong operating cash flow, which has allowed it not only to finance investments in capacity and biosecurity, but also to pay exceptional dividends in periods of high profitability. Moreover, Cal-Maine's dividend policy is variable and directly linked to earnings, making it more of a capital return vehicle than a stable dividend in the classic sense. The current payout ratio is 6.97%.

The company's profitability remains cyclical but structurally supported in 2026. Cal-Maine's long-term operating margins have been high (28% in 2024) in periods of strong pricing and a very low cost of capital. It is this combination of low debt, high cash and the ability to generate cash flow quickly that explains why the company does not look financially vulnerable even in the face of weaker sector sentiment. For investors, it is important that the company is not dependent on external financing and can move relatively smoothly through the less favourable phases of the cycle.

From a valuation perspective, Cal-Maine ranks as a stock with relatively low earnings multiples and a conservative asset valuation. While the market clearly reflects volatility in earnings and sector risk in the share price, it also values a company that has minimal debt and long-term positive free cash flow. According to the fair price on Bulios, which is calculated based on DCF and relative valuation, the stock is currently trading 60% below its intrinsic value!

Cal-Maine's key risks remain primarily biological and regulatory. An outbreak of avian flu, changes in breeding standards, or significant fluctuations in feed prices could materially impact results in the short term. Still, the company enters 2026 as a business with a high degree of financial resilience, a strong position in the core food segment and the ability to generate cash beyond the peak of the cycle. It is this combination that explains why Cal-Maine is often viewed as an undervalued defensive title that the market has long valued based on volatility rather than actual financial strength.

General Mills $GIS

General Mills is one of the most classic representatives of the consumer defensive sector. A portfolio of global brands, a strong distribution network, and long-standing relationships with retail chains give the company a stable position in segments where demand is slow to change. In 2026, General Mills' investment story will be less about volume growth and more about the ability to maintain margins, optimize costs and generate cash in an environment where consumers are carefully weighing their spending.

The company's business model is built on a broad range of food products, from breakfast cereals and snacks to prepared meals and pet food. This diversification reduces dependence on one particular segment and allows the company to smooth out fluctuations in demand. It also creates room for incremental adjustments in pricing and packaging, where General Mills has faced rising input costs in recent years. Pricing power and brand loyalty are among the main reasons the company has been able to maintain relatively stable operating margins even in an environment of higher inflation.

General Mills' financial profile in 2026 is typical of a defensive company. The stock detail on Bulios shows long-term stable profitability, solid operating margins, and predictable operating cash flow. The company generates enough cash to fund operations, investments and shareholder returns. Debt remains manageable (albeit higher) and is supported by stability in earnings, reducing the risk of financial stress during an economic slowdown.

One of the key elements of General Mills' investment profile is the dividend. The company is one of the established dividend payers and has long been viewed as an income-oriented title. The dividend yield itself, and especially its coverage from free cash flow, which remains relatively comfortable, is important to shareholders over the long term. In the coming year's environment, where parts of the market remain highly sensitive to interest rate changes, this company's stable dividend stream represents a significant element of return. The current annual dividend of $GIS is 5.57%.

General Mills' valuation on Bulios is at levels that historically correspond to cautious sentiment rather than an environment in which the company continues to generate steady earnings. The market is pricing the stock to reflect pressure on consumer budgets, slower volume growth, and private label competition. At the same time, this caution creates room for even slightly better margin or cost developments to lead to a gradual reassessment of valuation. The stock has fallen 52% over the past 2 years and is thus trading (according to the Fair Price Index) 55% below its fair intrinsic value.

The main risks to General Mills include a long-term consumer shift to cheaper alternatives, retailer pressure on prices, and input volatility. However, the company enters 2026 as a business with global reach, strong brands and the ability to generate cash even in a weaker growth environment. It is this combination that explains why General Mills is often seen as an undervalued defensive title whose stability is largely taken for granted by the market.

Hormel Foods $HRL

Hormel Foods is one of America's traditional food companies whose business is firmly tied to basic consumption. However, the company's current position is more complicated than most defensive titles. The company is in a period of transformation as it seeks to gradually shift its portfolio toward higher value-added products and more stable margins, while its core segments, particularly meat and animal protein, remain sensitive to commodity price and cost trends.

Hormel's business model is built on a broad portfolio of brands including meat products, prepared foods, peanut butters, protein products and foodservice. This breadth provides the company with some protection against fluctuations in individual segments, but it also makes it difficult to increase margins quickly. Management is now focusing primarily on optimizing the portfolio, developing more premium products and gradually reducing exposure to the segments with the lowest return on capital.

From a financial perspective, Hormel remains a relatively conservatively managed company despite more volatile profitability, debt and long-term positive operating cash flow in recent years. The company is not financially vulnerable, although its operating margins are under pressure. This margin pressure is one of the main reasons why Hormel shares are trading at lower multiples than they have historically. It's also why its price has declined 58% since 2022, when it reached an absolute peak at $55.

The problem for investors is mainly the long-term declining margins. The company's margins have halved since 2021 from around 8% by 2025. While management is trying to work on a remedy, its efforts are not yet translating into the real results investors need to start investing in the company again. But for those with a longer investment horizon and a detailed analysis of the company and an understanding of its business and aspirations, this could represent an interesting opportunity. According to the Fair Price Index, the company is now valued 24% below its fair price due to the decline over the past few years.

Hormel has also long been known as a dividend title. The company is one of those with a very long history of regular dividend increases, making it a favorite for income-oriented investors. Not only the dividend yield itself can be tracked on Bulios, but more importantly the payout ratio and its relationship to free cash flow. The dividend yield is currently 5.1%. In 2026, the key question for investors will be whether the company can stabilise margins sufficiently to remain able to combine a dividend policy with business transformation financing.

The market's current share price reflects cost pressures, slower growth and greater uncertainty about margins returning to long-term averages. But it also means that expectations are relatively low. If the company can demonstrate that transformational steps lead to more stable profitability, this discount may gradually narrow.

Hormel's main risks remain linked to commodity price volatility, sensitivity to agricultural cycles and strong competition in the food sector. Yet it enters 2026 as a company with a long history, a strong distribution network and a portfolio of products that are among the staple items in the consumer basket. It is this combination that makes Hormel a title that is often overlooked by the market, despite offering a potentially interesting balance between stability and valuation.

Conclusion

The consumer defensive sector enters 2026 in a position that is rather exceptional in equity markets. While much of the market remains sensitive to interest rate movements, the business cycle and technology-related expectations, consumer staples firms continue to operate in an environment of relatively stable demand. This creates a contrast between fluctuating sentiment and the actual performance of companies whose sales and cash flow are much less dependent on macroeconomic fluctuations.

At the same time, it is evident that stability has become a less attractive feature for the market than growth potential in recent years, leading to a long-standing overlooking of part of the defensive sector. As a result, valuations are starting to look attractive to many investors. In 2026, the sector is portrayed as a market place that may well offer higher valuations than currently overpriced technology titles.

For investors, the appeal lies in predictability. Membership-driven revenue, disciplined margins, and steady cash generation create resilience even when broader consumer trends soften. Costco’s growth story is not about acceleration, but about durability—an increasingly valuable trait in a late-cycle consumer landscape.

How was the last quarter?

Costco $COST grew total revenue to roughly $67.3 billion in the first fiscal quarter of 2026, with merchandise sales alone up just over 8%. Growth was primarily driven by higher traffic and solid comparable sales growth across regions. Another positive signal was the very strong growth in digitally supported sales, which grew significantly faster than brick-and-mortar stores.

Membership fees reaffirmed their role as a key stabilising element of the business. Membership revenues increased year-on-year and remain highly profitable, allowing Costco to keep merchandise prices low while generating a stable operating profit. It is this model that has been the company's long-term competitive advantage.

Net income in the quarter was approximately $2.0 billion and earnings per share rose to $4.50. Results were partially impacted by a tax benefit related to employee stock-based compensation, but even after adjusting for this, performance remains very solid. Operating profit grew at a pace consistent with sales growth, confirming that Costco is managing costs even as it expands its store network.

• Full presentation with results.

Management commentary

CEO Ron Vachris ' comments highlighted steady customer behavior and continued emphasis on member value. According to management, Costco is benefiting from consumers' preference for retailers with clear pricing policies and trusted brands during a period of heightened uncertainty. It was also noted that the company does not see a significant deterioration in customer behavior, even in discretionary categories.

Management also confirmed that it is continuing to open new warehouses in a controlled manner and invest in logistics and digital infrastructure. The goal is not to maximize short-term profit, but to strengthen the long-term relationship with members and improve operational efficiency.

Outlook

Costco does not provide a detailed quarterly outlook, but management comments suggest cautious optimism. The company expects continued solid revenue growth driven by a combination of new stores, steady comparable sales and growth in the membership base. Consumer demand and cost inflation, particularly in wages and transportation, remain key drivers.

From an investor perspective, it will be important to watch whether Costco can maintain its membership growth rate and whether digital sales remain a strong complement to the traditional warehouse model.

Long-term results

Costco's long-term performance shows a clear upward trend. Revenues have increased steadily over the past few years and the company has been able to grow even in periods when the retail industry has faced significant pressures. The rate of growth is not extreme, but it is very consistent, which is key for a company of this size.

Operating profit and pre-tax profit have been rising over the long term, suggesting that Costco can scale its model without significantly impairing efficiency. Net profit has also increased gradually, although the rate of growth fluctuates depending on cost factors and tax effects. Importantly, the company maintains a strong ability to generate cash.

From a debt perspective, Costco remains very conservative. Debt is relatively low relative to the size of the company and is well covered by operating cash flow. Thus, the balance sheet provides ample room for further expansion, warehouse investment, and potentially increasing returns to shareholders.

News

Costco has continued to expand its warehouse network and strengthen its online sales channels in the recent period. At the same time, the company's long-standing Kirkland private label remains one of its primary tools for maintaining member loyalty and differentiation from competitors. International expansion has also played a significant role, particularly in Asia and Europe, where Costco is gradually increasing its presence.

Shareholding structure

Costco's shareholder structure is predominantly institutional. Approximately 72% of the shares are held by institutional investors, dominated by Vanguard Group, BlackRock, State Street and Geode Capital. The proportion of insiders is very low, which is common for an established company with a broad shareholder base. The shareholder structure suggests strong long-term capital confidence.

Analysts' expectations

Analysts view Costco as a quality defensive title with long-term stable growth. The stock's valuation has traditionally been higher than most retail competitors, reflecting confidence in the business model, stable cash flow and strong brand. The company's ability to sustain membership growth and manage cost pressures without disrupting pricing remains a key theme going into the next few quarters.

What matters for investors is the strategic direction. Nvidia is positioning itself as the architect of how artificial intelligence is built, deployed, and embodied in the physical world. By linking compute, data, and real-world interaction into one platform, the company is moving from enabling AI demand to structurally shaping it.

Ruby: the computational foundation for the next generation of AI

At the heart of the entire strategy is the new Rubin computing platform, which Nvidia has introduced as a direct successor to the Blackwell architecture. What's crucial is not just the increased performance, but the change in philosophy: Rubin is designed for agent-based AI, advanced reasoning and mixture-of-experts models, i.e. systems that decide for themselves which "expert" should tackle a given task.

The combination of one Vera CPU and two Rubin GPUs in a single superchip greatly increases efficiency in both training and inference. Nvidia $NVDA claims that Rubin will enable:

• Reduce the number of GPUs needed to train the same models by up to four times.

• Reduce inference costs by an order of magnitude due to better token handling

• scale extremely large models with trillions of parameters more efficiently

But Ruby is not just a chip. It's an entire ecosystem that includes new network elements, DPUs, NVLink 6, and the ability to build massive systems like NVL72 and DGX SuperPODs. It is these systems that are now being bought by hyperscale players like Microsoft $MSFT, Google $GOOG, Amazon $AMZN and Meta $META at volumes in the tens of billions of dollars per year.

Humanoid robots: when Ruby leaves data centres

https://www.youtube.com/embed/x5lFw6nz3t0?rel=1

The fundamental shift of CES 2026 is that Nvidia has shown where it wants Ruby's computing power to go. One major area is humanoid robotics - and not as a futuristic demonstration, but as an industrial tool.

Nvidia isn't trying to make its own humanoid. It's repeating a strategy from the AI cloud: it wants to be the platform on which robots are created. He adds:

• AI models capable of perception, planning and decision making

• simulation environment for risk-free training

• hardware and edge AI for real-time control

Companies such as Boston Dynamics, Caterpillar, LG Electronics and NEURA Robotics are using Nvidia technology to develop robots to operate in environments designed for humans - factories, warehouses, logistics or services.

The key argument is economic: a humanoid robot does not require rebuilding infrastructure. It can use the same tools, move in human space and adapt to new tasks. This significantly reduces the barriers to deployment compared to conventional industrial robotics.

Autonomous systems and physical AI

The extension of AI models for autonomous driving and so-called physical AI fits into the same strategy. Nvidia has introduced new models for self-driving vehicles that use reason chaining and context work - a similar principle to what Rubin is targeting for advanced language models.

Importantly, Nvidia is increasingly relying on virtual training. Whether it's robots or cars, the goal is to teach systems in simulation millions of scenarios, before releasing them into the real world. This reduces costs, risks and regulatory barriers.

One strategy, not three separate stories

Ruby, humanoids and autonomous systems are not separate topics. They are three layers of one strategy:

• Ruby provides extreme computing power

• the software stack enables training and inference

• physical AI (robots, cars, machines) creates a new source of demand

In doing so, Nvidia is trying to address a key investor question: what comes after data centers? The answer is: moving AI from screens to the physical world.

Investor insight: why CES 2026 is more important than the chip itself

In the short term, Rubin is likely to maintain Nvidia's lead in AI infrastructure. But in the long term, something else is more important: Nvidia is systematically building its position as an indispensable layer for physical AI.

If humanoid robots and autonomous systems make even partial inroads in industry, logistics or services, a new investment cycle will emerge - and one that will again require:

• computing power

• network infrastructure

• software for training and simulation

These are precisely the areas where Nvidia has the strongest market position today.

The underlying shift is structural. Demand is no longer driven primarily by consumer electronics, but by long-term capital investment into AI, high-performance computing, and hyperscale data centers. These end markets follow different rules: longer planning horizons, higher barriers to entry, and greater tolerance for premium pricing. That change helps explain why higher valuation multiples are starting to look sustainable rather than excessive.

Top points of the analysis

• TSMC $TSM is shifting from a cyclical semiconductor title to a digital economy infrastructure company.

• The upgrade from Goldman Sachs reflects a structural change in demand, not short-term sentiment.

• Massive capital expenditures are reinforcing the technology edge and barriers to entry.

• The firm is uniquely positioned against AI leaders and has strong bargaining power.

• Higher valuations may be the new normal, not the exception.

Why Goldman Sachs is raising the target price by 35% and why it's not excessive

Goldman Sachs' increase in target price to 2,330 Taiwan dollars ($74) $GS is not based on a one-time improvement in outlook, but on the belief that AI represents a multi-year investment cycle that fundamentally changes demand for the most advanced manufacturing processes. Goldman's analysis assumes that high-end node order volumes will grow faster than the overall semiconductor market and that TSMC will benefit disproportionately from this trend.

A key argument is TSMC's dominance in the production of high-end chips for customers such as Nvidia $NVDA and Apple $AAPL. In the AI accelerator and advanced logic chip segments, there is virtually no full-fledged alternative today that can offer the same combination of yield, volume and technology reliability. This gives TSMC not only order certainty, but also significant bargaining power.

Moreover, from an investor perspective, it is crucial that Goldman also expects margins to improve, despite massive investments in capacity. This suggests that demand for high-end chips is not price-sensitive and that customers are willing to accept higher prices in exchange for a technological edge and stable supply.

Valuation framework: why the market is reassessing how much TSMC should be worth

Goldman Sachs ' increase in its$TSM target price for Taiwan Semiconductor Manufacturing Company shares cannot be seen as just a technical adjustment to the model. Historically, the company has been valued primarily as a cyclical semiconductor manufacturer whose profits fluctuate based on consumer demand and electronics investment cycles.

In the current context, however, this view is changing. Demand for TSMC's manufacturing capabilities is increasingly driven by artificial intelligence, data centres and high-performance computing, segments that are more long-term, structural in nature. This allows the market to operate at higher multiples because the company's earnings capacity is less sensitive to short-term economic fluctuations and more dependent on customers' multi-year investment plans.

Implicit in Goldman's repricing is the notion that TSMC is no longer just a "manufacturing capability" but a critical infrastructure of the AI economy. In this case, valuations are not driven solely by historical semiconductor cycles, but rather by the logic of strategic technology assets where long-term demand, pricing power and high barriers to entry are key. It is this change in framework that explains why the market is willing to accept a target price of around USD 74 without appearing excessive.

What might challenge this investment story

Despite the strong AI narrative, there are factors that could undermine TSMC's current repricing. The first is the pace of investment in AI infrastructure. If the tech giants' spending proves to have been too aggressive and there is a significant slowdown, demand for the most advanced manufacturing processes could grow more slowly than the market expects today.

Another risk is the sheer capital intensity of the business. Investments of around $150 billion over three years make sense only if they are met by high capacity utilisation over the long term. Any scenario in which new factories reach a lower utilisation phase would put pressure on margins and returns on capital.

The geopolitical situation around Taiwan remains a specific and long-standing risk. Although the market has perceived this risk for a long time and partially ignored it, any escalation would immediately change investment sentiment. It is therefore crucial for the long-term investor to understand that TSMC combines an exceptional strategic position with an irreducible geopolitical discount.

Capital expenditure: risk at first sight, competitive advantage in practice

The plan to invest approximately $150 billion over the next three years is one of the most ambitious capital programs in the history of the semiconductor industry. At first glance, such a large capex may appear to be a risk, especially in an industry that investors have long associated with overcapacity and sharp swings in profitability. However, the current situation is qualitatively different.

Today, TSMC is not investing "in inventory" but responding to specific and long-term orders from the world's largest technology companies. Building and expanding capacity in 3nm and future 2nm processes is directly tied to the roadmaps of customers who are planning their own AI infrastructure investments in the tens of billions of dollars per year. In this context, TSMC's capex is not speculation, but a necessary condition for maintaining a technology edge.

Moreover, in the long run, these investments act as a strong barrier to entry. Very few companies in the world are able to finance, operate and optimise production at the most advanced nodes in the long term. TSMC is thus using the capital intensity of its business to build a moat that is virtually insurmountable for competitors.

TSMC as the backbone of the global AI ecosystem

The current AI revolution is often presented as a software story, but in reality it is primarily a physical computing infrastructure story. Every new model, every training cycle, and every data center expansion means an exponential increase in demand for computing power. Without advanced manufacturing processes, this evolution would not be possible.

In this ecosystem, TSMC plays the role not of one of many suppliers, but of a central node on which the entire chain depends. Chip designs may change and shift between companies over time, but the ability to manufacture at the top nodes remains extremely concentrated. This gives TSMC an exceptional position, akin to infrastructure firms in the energy or telecommunications industries.

For an investor, this means that TSMC is not just an exposure to one product or one customer, but to the very foundation of digital transformation. It is this role that is changing the way the market values the company.

The competitive landscape: why Samsung is falling behind

Against the backdrop of TSMC's growth, other Asian technology titles are also gaining strength, including Samsung Electronics. But the difference between the two firms is fundamental and key for investors. Samsung remains heavily exposed to memory chips, which are highly cyclical and sensitive to excess capacity.

TSMC, on the other hand, is focused on high value-added logic chips, where demand is structural and supported by long-term investments in AI and cloud infrastructure. This different exposure explains why investors view TSMC as a "cleaner bet" on the AI trend, while other semiconductor firms remain more tied to traditional consumer electronics cycles.

Thus, in terms of long-term valuation, it is not just about technological superiority, but the quality and stability of demand that TSMC serves.

Risks that cannot be ignored

Despite the strong fundamental story, there are risks that cannot be ignored. These include geopolitical tensions around Taiwan, the extreme capital intensity of manufacturing, and the possibility that the pace of investment in AI will slow at some stage. Each of these factors can lead to transitory margin pressure or higher stock volatility.

In the long run, however, these risks represent the price of exposure to the key technology trend of the decade. An investor who chooses to hold TSMC should be prepared for fluctuations, but also understand that it is one of the few companies that the global AI ecosystem cannot do without.

TSMC investment scenarios: how earnings capacity and valuation may evolve

In the case of Taiwan Semiconductor Manufacturing Company, it is key to understand that this is not a binary "AI succeeds/fail" bet. The real investment difference between the scenarios arises from a combination of three variables: revenue growth rate, return on capital expenditure and the ability to sustain margins in the face of massive capacity expansion.

Baseline scenario - structural growth without euphoria (most likely)

In this scenario, AI remains a multi-year growth engine, but the pace of investment gradually normalizes. Hyperscalers continue to invest in computing power, but with a greater emphasis on efficiency. TSMC maintains its technology lead in 3nm and 2nm processes, and new capacity is gradually filled without significant outages.

Operational impact (indicative framework)

• Revenue growth: 10-13% CAGR (2026-2029)

• Gross margin: stabilisation in the 52-55% range

• Operating margin: return to ~45% after capex peak fades

• Free cash flow: gradual improvement after 2027

Capex of ~$150bn over three years is defensible in this scenario as new plants reach high utilisation. Return on capital, while declining in the short term, stabilizes in the long term at levels consistent with infrastructure technology firms.

Valuation implications

• The market accepts higher but stable multiples than historically

• Shares are trading around fair value implied by Goldman Sachs-type target prices

• Price range: roughly $70-80 on standard sentiment

Optimistic scenario - AI infrastructure as the new oil of the digital economy

Here we see that AI is not just another technology cycle, but a fundamental change in the economic structure. Demands for computing power are growing faster than expected, new models are significantly more demanding, and customers are willing to pay a premium for instant access to the most advanced nodes.

TSMC is not only filling capacity in this scenario, but gaining significant pricing power. Competition is not keeping pace technologically and barriers to entry are further increased.

Operational impact

• Revenue growth: 15-18% CAGR

• Gross margin: expansion towards 56-58%

• Operating margin: return above 47%

• Cash flow: very strong, rapid return on new investment

Capex is proving to be a strategically brilliant decision in this scenario - TSMC invested "early and sufficiently" and is reaping the rewards today. The company is definitely moving into the category of global technology infrastructure, not manufacturer.

Valuation implications

• The market is willing to work with premium multiples, similar to key infrastructure assets

• There is further re-rating of the stock

• Price range: $85-95, higher in an extremely strong AI environment

Negative scenario - overcapex and cooling of AI investments

In the negative scenario, it appears that some AI investment has been too aggressive. Hyperscalers start to optimize spending, the pace of data center construction slows, and some new TSMC capacity enters a lower utilization phase. At the same time, the depreciation burden remains high.

To this may be added geopolitical risk, which will again remind that TSMC carries a structural discount that cannot be completely eliminated.

Operational impact

• Revenue growth: slowdown to 5-7%

• Gross margin: pressure towards 48-50%

• Operating margin: decline towards ~40%

• Cash flow: significantly weaker in years after capex peak

In this scenario, TSMC again starts to behave like a capital-heavy cyclical title, even though technologically it remains a top performer.

Valuation implications

• Market lowers multiples back to historical average for the semiconductor sector

• Geopolitical discounting comes to the fore again

• Price range: US$50-60

How to read these scenarios as an equity investor

• The base case scenario supports a long-term hold without the need to time the market

• Optimistic scenario explains why TSMC can still have significant upside even after strong growth

• Negative scenario reminds us that higher valuation is contingent on sustainable AI capex

The key point is that risk and reward are not symmetric: the downside is limited by the company's technological edge, while the upside depends on whether AI actually proves to be an infrastructure phenomenon similar to electricity or the internet.

What to take away from the article

• Goldman Sachs' 35% target price increase is not a reaction to one quarter, but a reflection of a change in the long-term investment view on TSMC.

• TSMC is shifting from a cyclical semiconductor title to an infrastructure company in the global AI ecosystem.

• Demand for the most advanced manufacturing processes is driven structurally by AI, not consumer electronics.

• Massive capital expenditure is not a weakness, but a tool to maintain technology lead and barriers to entry.

• Improving margins suggest strong pricing power even in a capital-intensive environment.

• Higher valuations may be the new normal if the AI investment cycle lasts longer than one technology cycle.

• Investing in TSMC means exposure to a key global trend, but also accepting geopolitical and capital risk.