Insider buying only attracts real attention when it carries personal risk. Executives are paid largely in stock and options, but writing a multi-million-dollar check from personal capital is a different signal entirely. Tim Cook’s recent purchase of Nike shares stands out precisely because it is discretionary, material, and executed during a period of strategic uncertainty for the company.

The timing is critical. Nike is navigating a reset of its growth narrative, supply chain strategy, and brand momentum in a more competitive global market. When a board member with Cook’s operational discipline and capital allocation track record chooses to increase exposure at this stage, markets interpret it less as optimism — and more as conviction that downside risk is already priced in.

What exactly did Tim Cook do and why is it important

According to the regulatory report bought Tim Cook (Apple CEO) 50,000 shares of Nike $NKE, bringing his total holdings to about 105,000 shares worth about $6 million. This was not an option bonus or an automatic plan - it was an outright purchase for equity.

Such moves are traditionally viewed by investors as:

• a vote of confidence in the company's long-term outlook
• a signal that management considers the stock undervalued
• confirmation of support for management's current strategy

The move takes on an even stronger meaning when combined with the fact that another board member, Robert Swan, bought about half a million dollars worth of Nike stock. When multiple insiders buy at the same time, the market reads this as a coordinated signal.

The support of CEO Elliott Hill and the ongoing restructuring

Cook's purchase is also a clear statement of support for the current leadership. Nike leads Elliott Hillwho returned to the company as CEO with the task of carrying out one of the most difficult transformations in the brand's history.

Hill took over the company in a state where:

• lost some of its relevance to new, agile competitors
• it had fallen victim to an overemphasis on direct sales and partner limitations
• slipped into excessive discounting that hurt the brand and margins

His "win now" strategy relies on a return to Nike's sporting core - running, basketball, football and training - and a renewal of the brand's marketing power. There is also a renewal of senior management and an effort to reconnect product, story and retail presence.

Issues that continue to weigh on Nike

Despite insider optimism, Nike faces real challenges. The biggest of these is China, where the company reported a significant drop in sales last quarter. Waning consumer demand, growing domestic competition and geopolitical tensions are creating a very difficult environment there.

Tariffs and cost inflation are other pressures. Nike has already openly admitted that it plans to pass some of the impact on to US customers in the form of higher prices, but this risks further weakening demand. The company's shares are still down roughly 18% this year, illustrating that the market is still waiting for tangible results of the turnaround.

Nike and Apple's long-standing relationship

Tim Cook is no newcomer to Nike - he's been a board member since 2005. The partnership between Nike and Apple has deep roots, from fitness apps to special editions of the Apple Watch to a long-term collaboration in health and exercise.

Cook also actively supports Nike symbolically. He repeatedly appears in public in unique Nike sneaker designs, including custom pairs created by Japanese designers. This reinforces the brand's image in the premium and technology-oriented segment.

How to read this from an investor perspective

Tim Cook's stock purchase alone does not solve Nike's structural problems. But it is a strong indicator that people with detailed access to information believe in the company's turnaround. Combined with the purchases of other insiders, the new management strategy, and the still-strong global brand, this is a moment investors can't afford to ignore.

Nike remains in a transition phase. If Hill can stabilize China, restore growth in key categories, and keep margins in check, the current weakness could prove to be a long-term opportunity. Cook's purchase suggests that at least some insiders think so too.

The evolution of finance rarely happens through sudden disruption. Instead, it advances through infrastructure upgrades that quietly redefine speed, cost, and accessibility. Stablecoins have emerged as one of the few technologies that genuinely challenge legacy payment rails — not as an experiment, but as a working alternative that already moves value globally in seconds.

What ultimately determines winners in this space is not code quality alone. Payments and money are governed by trust, regulation, and institutional credibility. This creates a sharply bifurcated market where most projects fail outside the spotlight, while a small subset earns regulatory legitimacy and strategic relevance. The company at the center of this analysis positions itself not as a rule-breaker, but as a compliant financial layer — a distinction that fundamentally alters its long-term growth profile.

Top points of the analysis

• Stablecoins are moving from crypto-speculation to real financial infrastructure.
• The firm's current profitability is strongly tied to interest rates.
• Regulatory compliance creates a barrier to entry for competitors.
• The firm's balance sheet is extreme but economically logical.
• A payment network and proprietary blockchain can fundamentally change the source of value.
• Investment asymmetry arises between today's valuation and the future profile of the firm.

Company introduction

Circle Internet Group $CRCL is a fintech company focused on issuing stablecoins and building digital payment infrastructure. Its core product USD Coin is a digital dollar that is fully backed by liquid dollar assets and designed to meet US and European regulatory requirements.

The economic model is based on reserve management. Each token issued is backed by an equivalent amount of cash and short-term government bonds on which the company collects interest income. The model is simple, highly scalable and extremely profitable at high rates. At the same time, it creates macro dependencewhich reduces the quality of returns from the perspective of the long-term investor.

What differentiates the firm from its competitors is not the issuance of stablecoin itself, but its strategic ambition to move up the value chain - from a passive reserve holder to an active operator of the payments infrastructure. This is where Circle will decide whether it remains a cyclical "rate play" or becomes a structural infrastructure player.

Stablecoins as a new financial layer

Stablecoins today fulfill a role that the traditional banking system addresses inefficiently. Cross-border payments are slow, expensive and dependent on correspondent bank networks. Stablecoins circumvent this problem by transferring value directly at the digital infrastructure level, rather than through bank accounts.

Crucially, it is not the most technologically open solution that wins at this layer, but the most trusted. It is crucial for companies, banks and government institutions that the digital dollar meets regulatory standards, has transparent reserves and is auditable. This significantly narrows the field of competitors.

This approach makes USDC an "institutional stablecoin". Growth may not be the fastest during the boom phases of the crypto market, but it is significantly more stable during periods of regulatory pressure when weaker projects disappear from the market.

Management and capital discipline

CEO: Jeremy Allaire

Jeremy Allaire is one of the key architects of the regulated approach to stablecoins. He founded Circle with a vision to create a digital money compatible with the traditional financial system, not a replacement standing outside of regulation. He has many years of experience in internet and payment technologies and a strong reputation in regulatory circles.

Its management style is conservative, focused on long-term credibility. This is reflected in slower expansion, but also in the fact that Circle has survived regulatory upheaval that has removed many competitors from the market. From an investor's perspective, Allaire is more of an "infrastructure CEO" than a growth visionary - a key trait in this sector.

The weakness of this approach is a lower tolerance for risk and slower monetisation of new products. The company often builds a position before it starts to fully monetise, which puts pressure on margins and investor patience in the short term.

Financial performance: How to read the results of a firm that is neither a bank nor a fintech

Financial Performance Circle Internet Group cannot be evaluated by looking at a single year or the traditional "revenue growth = company health" view. The key is the dynamics of three variables simultaneously: the volume of USDC in circulation, the interest rate environment and the cost structure associated with monetizing reserves and building infrastructure.

Between 2021 and 2024, the company has undergone an extreme transformation. Revenues grew from less than USD 85 million to more than USD 1.67 billion, which is not classic organic growth, but a function of two factorsa dramatic increase in circulation USD Coin and a sharp rise in interest rates. In other words, Circle has gone from a small infrastructure firm to a major holder of profitable reserves in just three years.

But the key point is that the quality of this growth has been uneven. Gross profit peaked in 2023 and has already declined year-over-year in 2024, despite higher revenues. This clearly shows that the company is not in an operating leverage mode but in an investment phase. Operating costs are growing faster than revenues as Circle invests massively in compliance, technical infrastructure and the payments network. This pressure on margins is not a failure of the business, but a conscious strategic choice.

More importantly, reading the results through rate sensitivity. The high profits of recent years are not structurally guaranteed . With a 200 basis point drop in rates, the firm's net interest income would fall by hundreds of millions of dollars per year without changing the USDC. This means that current profitability is not a "run-rate"but a cyclical peak.

From an investor perspective, therefore, the fundamental question is different: Can Circle convert USDC's volume growth into less cyclical, transactional revenue before rates drop significantly?

Potential: from interest to payment rails (projections and expectations)

Circle's greatest long-term potential lies not in the issuance of stablecoin itself, but in the active use of USDC as a payment infrastructure. As long as the firm remains merely a reserve manager, its returns will always be a function of monetary policy. But if USDC becomes the backbone of payment flows, the economics of the firm will change fundamentally.

Circle Payments Network (CPN) is an attempt to create a global payment rail for corporate and institutional use. This means moving from a passive "hold reserves and collect interest" model to a "process money flow and collect fees" model. This difference is fundamental from a valuation perspective.

If we start from conservative assumptions:

• a global B2B payments market in the order of hundreds of trillions of USD annually
• i 0,05-0,10 % effective fee per transaction
• and only fraction of a percent of market share

then we are talking about potential billions of dollars in revenuethat are independent of interest rates. That's an order of magnitude different business than the current interest margin.

Analyst estimates suggest that the stablecoin segment alone could grow at around 50% CAGR by 2030, with Circle seen as the preferred partner of financial institutions due to regulatory compliance. If non-interest income were to be able to account for, for example 30-40% of revenue, the firm's macro-sensitivity would be reduced to the point where the market would start to value it as an infrastructure fintech rather than an interest rate derivative.

Own Blockchain Arc plays a supporting role here. Stable and predictable transaction costs are key for enterprise use cases and allow for guaranteed pricing models to be offered. This is something that public blockchains are struggling to address and where Circle can gain a competitive advantage.

Most optimistic scenario: Needham and a target price of $250

One of the most bullish voices among analysts is investment bank Needham, which has been making a strong case for the stock Circle Internet Group is working with a target price of around $250. This estimate deviates significantly from the market average and suggests a belief in an extremely strong growth scenario in which Circle becomes not just another cryptocurrency title, but a key infrastructure player in digital finance.

The logic of this view is primarily based on the assumption that Circle can capitalize on its dominant position in stablecoins over the long term and gradually translate its technological relevance into a sustainable and highly scalable business. In this scenario, Needham evaluates the company not through the lens of short-term crypto market volatility, but as a platform that can benefit from the mass adoption of digital payments, the tokenization of financial flows and the institutional adoption of blockchain solutions.

At the same time, the $250 price target implies a significant valuation expansion, which the analyst appears to be building on a combination of rapidly growing Circle product usage, operating leverage, and a gradual transition from the growth phase to a stable cash flow generation phase. In such a scenario, the market ceases to view Circle as a speculative title tied to sentiment around cryptocurrencies and begins to value it similarly to a technology infrastructure with global reach.

Needham's estimate thus represents more of a a longer-term vision rather than a conservative 12-month projection. It's a bet that Circle can take advantage of structural changes in the financial system and become one of the winners of the new digital payments era. It is this ambition and the scale of the potential market that explains why this price target is so significantly above the average of other estimates.

Sensitivity analysis: how dependent is the business on rates

The current economy Circle Internet Group is inherently highly macro-sensitive. The bulk of revenues and virtually all operating profit today are derived from interest income on reserves backing USD Coin. This means that the company is not only exposed to the growth of the stablecoin market, but also an indirect bet on the level of short-term interest rates in the US.

Taking a simplistic view, every 100 basis points change in rates has an order of magnitude impact in the hundreds of millions of dollars per year on a company's interest income, depending on the current volume of USDC circulation. This creates a situation where Circle can report very strong results even without significant volume growth, but still face a rapid decline in profitability when rates fall without anything changing at the product level.

A 100-150 basis point rate drop scenario would put significant pressure on operating margins that could only be partially offset by cost savings. In this environment, it remains to be seen whether investments in payment infrastructure are starting to bear fruit. If, in such a scenario, transaction and non-interest income would still make up only a marginal portion of revenue, the market would likely continue to price the firm as a cyclical interest rate business.

Conversely, a scenario of a deeper decline in rates, say 200-300 basis points, would be a real stress test of the investment thesis. In that case, the distinction between "stablecoin issuer" and "payment infrastructure operator" would become an existential question. In this environment, if Circle could generate increasing transaction volumes over its own network and increase non-interest income, the nature of the company and its valuation would change. If not, expectations would be significantly overstated.

There is one key lesson for the investor: tracking earnings without the context of rates is misleading for Circle. The key is to watch whether the company's growth gradually loses correlation with monetary policy developments.

Competitive map: where Circle has an advantage and where it is vulnerable

The competitive landscape for stablecoins and digital payments is crowded at first glance, but in reality it is highly polarised. Most projects are either at the technological edge with no institutional relevance or, conversely, in the traditional banking system with no technological flexibility. Circle sits between these poles, which is its greatest strength - and potential weakness.

The most frequently mentioned competitor is Tether $USDTUSD. The latter dominates in volume and liquidity, especially in the crypto world. However, its weakness is limited transparency and regulatory acceptance, which virtually precludes deeper institutional use in the US and Europe. For Circle, this means that in pure crypto use-cases it will always be difficult to displace Tether, but in the institutional segment the competitive pressure is significantly less.

The second group of competitors consists of traditional banks and potential state digital currencies. These have the trust and regulatory support, but suffer from slowness, high costs and low flexibility. If there is a mass introduction of state digital currencies, this could limit some of the growth potential of stablecoins. At the same time, these systems are unlikely to replace a global, open payment infrastructure for commercial use in the short term.

A third competing group is fintechs and payment networks that are trying to digitise cross-border payments without their own stablecoin. These may offer user simplicity but remain dependent on banking infrastructure and its limits. Circle gains an advantage here through vertical integration - it controls both the digital asset and the payment layer.

Investment scenarios: three paths, three different companies

Pessimistic scenario

Interest rates fall faster than the market expects. Interest income on USDC reserves declines significantly, while CPNs are slow to develop due to regulatory complexity and bank caution. Non-interest income remains marginal. The company remains profitable but with significantly lower margins. The market values it as a volatile financial intermediate layer with no clear identity. Valuations are stagnant or falling.

Realistic scenario: hybrid model

Rates fall gradually. Interest yields weaken but do not collapse. CPN expands, transactional revenue grows but does not yet form the dominant part of revenue. The firm operates as a hybrid - part interest business, part infrastructure. Profitability is stable but without dramatic re-rating. The stock offers solid long-term returns, not explosive growth.

Optimistic scenario: transformation into an infrastructure platform

CPN has established itself as the standard payment layer for select segments of B2B payments and cross-border transfers. Non-interest income makes up a significant portion of revenue, rate sensitivity declines. The market is no longer valuing Circle as a "rate play" and is starting to see it as an infrastructure fintech with recurring revenue. There is a significant revaluation.

What to take away from the article

• Circle is not a classic fintech or crypto firm, but a financial infrastructure in transitionwhose current profitability is largely a reflection of the macro environment, not the final form of the business.
• The key source of value today is not revenue or short-term profit, but the volume and quality of USDC circulationbecause it is from this base that transactional and infrastructure monetization can emerge.
• The current results should be read as a cyclical peak in the interest rate businessnot as a long-term run-rate; without a successful transformation, profitability would decline in a lower rate environment.
• The real investment upside lies not in the growth of the stablecoin market per se, but in whether Circle can turn USDC into an active payment rail with recurring fees.
• Regulation is not a threat in this case, but a competitive barrierthat limits the number of relevant rivals and increases the value of reputation and trust.
• The action is in the nature of an asymmetric long-term option: the downside is limited by USDC's stable fundamentals, the upside arises only in the event of a successful infrastructuralisation of the business.
• The investor should primarily follow the the growth rate of non-interest income, the adoption of the Circle Payments Network, and signals that the company is approaching its infrastructure profile, not short-term earnings fluctuations.

The semiconductor industry is on the brink of historic growth as AI demand drives revenue expansion and new market leadership. Bank of America’s latest outlook highlights key chip makers with robust profitability metrics and strategic positions across AI accelerators, advanced packaging, and memory solutions. From established giants to tech infrastructure plays, these stocks aim to capture the next wave of industry expansion. Investors seeking exposure to long-term secular trends should understand why these picks stand out. 

Bank of America $BAC in its latest forecast highlightedthat the global semiconductor market is set to cross the $1 trillion mark for the first time in 2026, with artificial intelligence and related infrastructure playing a key role in this growth. Strong year-on-year increases in sales and demand are expected across segments ranging from microchip manufacturing to sophisticated software tools for designing and testing them.

In this context, some technology stocks appear particularly interesting because their position in the value chain is strong and the expected market growth is embedded in their fundamentals. Based on Bank of America data, our team has identified several companies that should be able to benefit from the anticipated market growth while showing solid financial health, a strong market position and long-term demand for their products or services.

While the most familiar faces AI boom are often companies like Nvidia $NVDA or Broadcom $AVGO, there are a group of other technology companies that have a strategic role to play in the overall technology ecosystem. They are not just chip makers, but also manufacturers of semiconductor fabrication equipment, providers of key quality control tools or software solutions essential in the design and testing of integrated circuits.

Let's introduce them. For each company, we will analyse not only their position in the technology chain, but also fundamental factors, market performance, competitive advantages and reasons, and profitability, which is extremely high for these companies.

Lam Research $LRCX

Lam Research is one of the most important, yet often overlooked, players in the entire technology sector. It is not a manufacturer of the chips themselves, but a company without which modern semiconductors would be virtually impossible. Lam Research specialises in the manufacture of equipment and technologies used in chip manufacturing, particularly in the areas of etching and thin film material deposition. These processes are essential in the production of ever smaller, more powerful and energy efficient chips that are essential for artificial intelligence, data centres and modern electronics.

From a shareholder's perspective, Lam Research is a typical example of a company that benefits from a long-term structural trend rather than a short-term cycle. Demand for its technologies is directly linked to global investment in semiconductor manufacturing. When chipmakers decide to expand capacity or move to more advanced manufacturing processes, Lam Research is one of the first suppliers they turn to. It is this fact that makes it one of the major winners in the expected growth of the chip market, which Bank of America expects to exceed the one trillion dollar mark by 2026.

Financially, Lam Research has long been a high-quality company. The company has high operating margins as a result of the technological sophistication of its product portfolio and its strong negotiating position with customers. Indeed, chipmakers cannot simply replace Lam Research's equipment with a cheaper alternative without significantly impacting quality and production yield. This allows the company to maintain stable profitability even during periods when the entire semiconductor sector is undergoing a cyclical cooling.

According to Bulios' profitability ratio Lam Research is doing very well. Operating margins stand at 33%, making it one of the companies with strong financial stability.

In terms of capital discipline, Lam Research is also very interesting. The company generates strong free cash flow, which it uses through a combination of share buybacks and dividend payments. This is particularly important for long-term investors because it means the company is not only growing, but also returning capital to shareholders. Even in periods of weaker demand, Lam Research has been able to maintain a healthy balance sheet and low debt, which reduces risk in the event of a deeper market slowdown.

The market sees strong potential for Lam Research, particularly with the advent of artificial intelligence. AI models require extremely powerful chips with high transistor densities, which are becoming increasingly complex to manufacture technologically. This increases the demand for advanced manufacturing equipment, where Lam Research has long had a very strong position. At the same time, analysts point out that while investment in chip manufacturing is cyclical, the trend towards miniaturisation and growth in computing power is long-term.

Lam Research is also interesting to investors because it offers exposure to the growth of the semiconductor market without a direct bet on a particular chipmaker. In other words, the firm benefits from the growth of the entire industry, whether one manufacturer or another is doing best. This allows the firm to act as a more stable element in the portfolio than the chipmaker stocks themselves, whose results can fluctuate more depending on demand for specific products.

Overall, Lam Research can be described as a technology company with very strong fundamentals, a clear role in the semiconductor ecosystem, and a high sensitivity to long-term trends such as artificial intelligence, automation, and data center growth. It's no surprise, therefore, that its stock is up 132% this year and is now at an all-time high.

According to Fair Price on Bulioswhich is calculated based on DFC and relative valuation, however, the company is now overvalued. It is therefore worth keeping an eye on Bulios to do a thorough analysis.

KLA $KLAC

KLA is one of those technology companies that are not so visible at first glance, but without which the entire semiconductor industry simply would not function. While chip makers compete for power, transistor size and energy efficiency, KLA stands in the background as a key player in ensuring that the production of these chips is even possible at the necessary quality. It is this role that makes KLA one of the most strategic companies in the entire technology ecosystem.

KLA's core business is process and quality control systems for semiconductor manufacturing. Simply put, the company develops and supplies equipment that can detect even microscopic defects on chips during the various stages of production. The more complex and smaller the chips, the more important this inspection becomes. This is where the strength of KLA's business model comes into play. As the technological complexity of production increases, so does the indispensability of its products.

From an investment perspective, it is crucial that KLA does not operate in the cyclical part of the semiconductor market in the same way as the chip manufacturers themselves. While manufacturers may face sharp fluctuations in demand at certain times, KLA's inspection and measurement technologies are needed virtually all the time. As manufacturers invest in the next generation of production, they cannot afford to skimp on quality and accuracy. This creates a relatively stable demand for CLA even in the less favourable phases of the cycle.

KLA is one of the key companies for the coming years precisely because of this structural trend. With the advent of artificial intelligence, advanced data centers and increasingly complex chip architectures, the pressure on precision manufacturing is increasing. Every error is extremely costly and loss of yield can mean billions of dollars in losses. In this environment, KLA sells the solutions needed to produce the most advanced semiconductors.

Financially, this model translates into above-average profitability over the long term. KLA is one of the companies with high operating margins (33.4% in 2024), which is the result of its technological lead and very limited competition. The company has a dominant position in the process control segment. Moreover, entry barriers are extremely high. Not only because of the technology itself, but also because of long-term customer relationships and the integration of equipment directly into production lines. This means that KLA customers do not change suppliers overnight.

What is also interesting is that the investment in KLA is not a pure bet on one particular trend, such as artificial intelligence only. The company is benefiting from broader technological developments such as the miniaturisation of chips, the move to new manufacturing nodes, the increasing complexity of architectures and higher reliability requirements. AI is only accelerating and amplifying this trend.

Another important aspect is capital discipline. KLA has long generated strong cash flow, which it uses to both further develop technology and return capital to shareholders. The company regularly pays a dividend (currently 0.6% per annum) and also makes share buybacks, a combination that investors appreciate in technology companies.

In the context of the prediction that the semiconductor market will reach a value of one trillion dollars by 2026, KLA seems like one of the cleanest ways to participate in this growth without having to bet on a specific winner among chipmakers. Whatever architectures or manufacturers dominate, the need for precise manufacturing control will remain constant.

Analog Devices $ADI

Analog Devices is one of the technology companies that, while not in the media spotlight, plays a key role in the entire semiconductor industry. While artificial intelligence companies are often associated with powerful digital chips and graphics processors, Analog Devices operates in an area without which modern technology could not function - the processing of analog signals and their conversion into digital form. It is this ability to connect the physical world with digital systems that gives the company a long-term strategic advantage.

Analog Devices' core business is the development and manufacture of analog, mixed-signal and digital integrated circuits used in industrial applications, automotive, telecommunications, healthcare and data center applications. This means that the company is not dependent on one short-term trend, but on a wide range of end markets that have long-term structural growth. This diversification is positively reflected in the stability of sales and profitability.

In terms of fundamentals, Analog Devices is a typical example of a technology company with a very high quality business. The company has long achieved above-average operating margins (17.35% in 2024), which have been well above the semiconductor sector average in recent years. This is due to a strong bargaining position vis-à-vis customers, high product value added and relatively low price sensitivity. Analogue chips are often tailored to specific applications and are difficult and costly to replace with competitors.

Unlike more cyclical memory or logic chip manufacturers, Analog Devices' business is less susceptible to sharp fluctuations in demand, which is a significant advantage.

Another strength is the ability to generate free cash flow. Analog Devices has a long history of generating high cash flow, which it uses both to invest in R&D and to return capital to shareholders through dividends (current annual yield is 1.43%) and share buybacks. This is an important distinction from many growth technology companies, which, while growing rapidly, have limited profitability. ADI, on the other hand, combines growth with financial discipline.

In terms of valuation, Analog Devices stock has historically traded at a premium to the broader market, reflecting its quality and stability. Despite this premium, valuation remains relatively reasonable in the context of expected growth and high margins. Investors are not just paying for an AI story here, but for a long-established business model that is capable of operating through different phases of the economic cycle. The Fair Price Index at Bulios reports that $ADIstock is currently overvalued by 19.22%.

Analog Devices' strong position in industrial applications, where demand is being driven by the digitization of manufacturing processes and improvements in energy efficiency, is also playing a significant role. These trends are not short-lived and provide a solid basis for revenue growth in the coming years. This nature of demand is one of the reasons why analysts consider Analog Devices a lower-risk technology investment compared to companies heavily dependent on one market segment.

Overall, Analog Devices can be seen as a technology company that may not deliver the fastest growth, but offers high quality, stability, and predictability. Its stock is up 32% this year, which may seem small to some in terms of the sector, but let's not forget that the company pays a dividend and is much better off financially than the vast majority of the sector.

Cadence $CDNS

Cadence Design Systems is also, like the previous firms, a very different type of technology company than semiconductor or equipment manufacturers, yet its role in the overall ecosystem is absolutely crucial. Cadence specializes in software development for the design, simulation and verification of integrated circuits, SoCs and complex electronic systems. Without these tools, it would be impossible to design advanced chips for artificial intelligence, data centers, automotive or consumer electronics. Cadence stands at the very beginning of the semiconductor industry value chain, which gives it an extremely strong and long-term stable position.

One of the main reasons why Cadence is so interesting is the structure of its business model. Most of the company's revenue comes from long-term licensing agreements that customers renew regularly. This means a high degree of revenue predictability and very low sensitivity to short-term fluctuations in chip demand. Even in periods when semiconductor manufacturers are cutting back on capital expenditure, design teams must continue to develop new generations of chips, ensuring stable demand for Cadence tools.

In terms of financial metrics, Cadence has long been one of the best-performing technology companies in the market. The company has high operating margins (22.74% in 2024), strong return on capital and very stable free cash flow. These characteristics are typical of software-dominant companies, where variable costs are relatively low and each new customer significantly increases profitability.

Another key factor is the increasing complexity of modern chips. With the advent of artificial intelligence, the complexity of design and testing is increasing dramatically. This creates a natural barrier to entry for new competitors and strengthens the position of established players, of which Cadence is one. In addition, customers rarely switch design software vendors because switching would mean high costs, risk of errors and development delays. This customer lock-in effect is one of the main reasons why Cadence is able to maintain high margins even in a competitive environment.

The company is investing heavily in expanding its portfolio towards the design of systems for artificial intelligence, high-speed connectivity and automotive electronics. The automotive sector in particular, especially the area of autonomous driving and advanced assistance systems, represents significant long-term growth potential for Cadence. Every new vehicle contains more and more chips and their design is extremely complex, increasing manufacturers' dependence on cutting-edge electronic design tools.

From a market perspective, Cadence is often seen as a less visible winner in the technological transformation. It does not sell chips or finished devices, but it does supply the infrastructure without which the entire ecosystem could not function. This is reflected in the relatively lower volatility of the stock compared to semiconductor manufacturers, which are more exposed to cyclical fluctuations. Shares of $CDNS are up 6.3% for 2025, having rather weakened in the last 5 months, thus stealing from higher earlier gains. Investors are more cautious on this stock as it has strengthened significantly over the past few years. Currently, even according to the Fair Price Index, the stock is trading 34% above its intrinsic value.

Conclusion

The technology sector is entering the next phase of its evolution where it is no longer just about the speed of growth, but more importantly the ability to manage its complexity. Artificial intelligence, manufacturing automation and increasing demands on chip performance are putting pressure on the entire semiconductor ecosystem - from design to manufacturing to quality control. This is why companies that are not only at the end of the chain as manufacturers of finished products, but also ensure the functioning of the technology infrastructure itself, are coming to the fore.

The companies analysed in this article represent different but interconnected parts of the technology ecosystem. Semiconductor equipment manufacturers, inspection and measurement companies, and providers of software tools for chip design form the backbone of the industry. Without their technologies, it would not be possible to achieve the higher efficiencies, smaller production processes, and reliability that the market demands today.

The actions associated with the semiconductor ecosystem today are no longer just a bet on future innovation, but a reflection of a deeper transformation of the entire industry. The growth of data, the proliferation of artificial intelligence, and the push for manufacturing efficiency are creating an environment where there is an increasing emphasis on quality, precision, and the long-term sustainability of technology solutions. It is in this context that it makes sense to analyse technology companies not only according to their growth story, but also according to their actual role in the overall segment.

Snowflake continues to prove that demand for modern data platforms has not peaked, even as the cloud market matures and enterprise budgets remain selective. In the third quarter of fiscal 2025, the company demonstrated that usage-driven analytics, AI-ready data architectures, and vendor neutrality remain compelling value propositions for large organizations navigating increasingly complex data environments.

At the same time, the quarter reinforced a familiar tension in Snowflake’s story. While revenue growth remains strong and customer engagement continues to deepen, operating costs stay elevated as the company prioritizes product expansion, AI integration, and ecosystem development. For investors, the key debate is no longer whether Snowflake can grow — but how efficiently that growth can be converted into durable margins over the next phase of the cycle.

How was the last quarter?

Snowflake reported revenue of $1.21 billion in the third quarter of fiscal 2026, representing 29% year-over-year growth. Product revenue remains a key metric, reaching $1.16 billion and also growing at a 29% rate. This confirms that the core of the business - the data platform itself - remains the main driver of the results.

A very important signal of the quality of the growth is the retention rate of revenue from existing customers, which reached 125%. In other words, existing clients are, on average, increasing their spend by a quarter a year without the company having to aggressively chase new customers. The number of clients with annual product sales exceeding $1 million rose to 688, indicating Snowflake $SNOW's growing position in large organizations.

From a profitability perspective, the improving operating structure is evident. Gross margin on product sales on a non-GAAP basis is around 76% and the company reported a positive operating result on an adjusted basis. Free cash flow exceeded $110 million, confirming that Snowflake is gradually moving from a growth phase to a more mature model with an emphasis on cash flow.

• Full presentation with results.

CEO commentary

CEO Sridhar Ramaswamy in his comments, highlighted that Snowflake is becoming a cornerstone of customers' data and AI strategies. He paid particular attention to the rapid adoption of the product Snowflake Intelligencewhich, according to management, has seen the fastest ramp-up in the company's history.

Management is also highlighting strategic partnerships with AI model providers, cloud services and application platforms. The goal is not just to provide a repository of data, but to create an environment where companies can instantly translate data into decisions, automation and real business value.

Outlook

For the fourth fiscal quarter, Snowflake expects product revenue in the range of $1.195 billion to $1.200 billion, representing additional year-over-year growth of approximately 27%. At the same time, the company expects continued improvement in operating margin and steady free cash flow generation.

At the full fiscal year 2026 level, management has reaffirmed product revenue expectations of around $4.45 billion, with a target product gross margin of approximately 75% and an operating margin approaching 9%. This suggests that Snowflake is no longer just a "future story" but is gradually becoming a structurally profitable platform.

Long-term results

Looking at the last few years, it is clear that Snowflake is undergoing extremely rapid expansion. Revenues have grown from just under $600 million in 2021 to over $2.8 billion in 2024, and the growth rate remains above average even after this expansion. Gross profit is growing even faster than revenue itself, demonstrating the very strong operating leverage of the business.

At the same time, it is evident that the company is still investing massively in operations, development and acquisitions. While the operating loss is relatively stable year-on-year, Snowflake remains in a phase where it prioritises long-term platform building over short-term accounting profitability. EBITDA is gradually improving, indicating a tipping point that could be pivotal to the company's investment story in the years ahead.

Shareholder structure

Snowflake's shareholder structure confirms strong institutional trust. Approximately 74% of shares are held by institutional investors, with Vanguard, BlackRock and JPMorgan among the largest. Relatively low insider ownership is typical for companies at this stage of development and does not indicate a structural problem, especially with such a strong institutional backing.

Analyst expectations

Analysts agree that Snowflake is among the key long-term bets for the development of the data economy and artificial intelligence. Expectations are primarily focused on continued spending growth from existing customers, monetization of AI tools, and incremental margin improvement. Target prices are generally well above current levels, with valuation pressure remaining the main risk should growth slow.

Fair Price

The global gaming industry has reached a point where scale is no longer the primary differentiator — endurance is. While gaming now rivals film and music combined in revenue, the economic reality is far from evenly distributed. A small group of publishers captures the majority of profits, not because they release more titles, but because they control franchises capable of absorbing decade-long development cycles and monetizing them far beyond launch.

This dynamic creates a recurring analytical trap for investors. Financial statements often deteriorate precisely when a company is making its most consequential bet. Costs peak years before revenues arrive, balance sheets tighten, and margins compress — not due to weakening demand, but because capital is being deployed ahead of monetization. In this environment, the most expensive game in history is not merely a product launch. It is a stress test of capital discipline, brand power, and investor patience — and potentially the moment where short-term financial weakness converts into long-duration cash flow dominance.

Top points of the analysis

• The gaming market is structurally growing, but the economic value is concentrated with only a few global IP owners.
• The company's business model is extremely cyclical, with long investment phases followed by strong monetization.
• Most revenue today comes from recurring payments and digital content, not one-off sales.
• Current loss-making is due to cost phase and accounting effects, not a collapse in demand.
• The balance sheet is tighter, increasing the importance of a successful execution in the coming years.
• The impending transition to a new monetization phase for key IP may fundamentally change the company's financial profile.

Company performance

Take-Two Interactive $TTWO is one of the world's leading publishers of video games and interactive entertainment. The company is behind franchises that rank among the absolute top of the industry in terms of cultural impact and economic value. The key feature of its business is not the high number of titles released, but the ability to monetise a limited number of extremely strong brands across generations of players and platforms over the long term.

The economics of this model are built on a combination of one-off sales at launch and long-term revenue from online modes, digital content and microtransactions. These recurring revenues now account for roughly 83% of net bookings, fundamentally changing the nature of the business from the historical "hit-driven" game publishing model. The lifespan of individual titles extends over many years and revenues are spread over time, while costs remain concentrated at the beginning of the cycle.

However, this approach also implies a high volatility of results. During the development and preparation phase, the company is burdened with massive fixed costs that are reflected immediately in the financial statements, while revenues are delayed. But once a title hits the market and the fixed costs are already "sunk", every additional dollar of revenue has a very high contribution to margin. This creates the potential for a sharp improvement in profitability in a relatively short period of time.

Management and capital discipline

The company is led by Strauss Zelnickwho has been at the helm since 2007 and is one of the longest serving CEOs in the gaming industry. His key asset is his ability to combine creative risk taking with financial discipline in an industry where the temptation to "buy growth" is often destructive.

Under his leadership, the company has long relied on a strategy of concentrating capital in a few projects with the potential to become global phenomena, rather than spreading resources across a large number of mediocre titles. This approach increases the volatility of results but maximizes the return on capital if successful. At the same time, Zelnick has experience in the broader media business, which translates into an emphasis on long-term IP monetization, not just short-term sales records.

The weakness of this style is a willingness to accept significant short-term deterioration in financial metrics in favor of long-term value. This is evident in the increase in costs, debt and accounting losses in recent years. It is therefore crucial for investors to monitor whether management can switch into monetization and balance sheet stabilization mode once the investment phase is complete.

Financial performance - the long-term picture

The financial performance of recent years has shown the extreme volatility that is typical of a cyclical gaming model. Revenues were around $5.35 billion in the last fiscal year and stagnated year-over-year, which at first glance may appear to indicate growth exhaustion. In reality, however, this is a result of the timing of major releases, not a structural decline in demand.

Gross margins have remained around 50% for a long time, confirming that the product economics themselves remain healthy. The problem is the explosive growth in operating costs, which have far outstripped the rate of revenue growth in recent years. These costs include development expenses, marketing, integration of acquisitions and amortisation of intangible assets. The result is a deep operating loss in excess of $3.5 billion in the last year.

It is critical to distinguish that this loss is not due to gross margin collapse, but primarily due to the timing of costs. Historically, this company has repeatedly shown that there is a sharp improvement in operating leverage after a key title launch, as fixed costs remain flat while revenues grow. The current numbers therefore reflect the end of the investment phase rather than a sustained destruction of value.

Cash flow and economic reality

From a cash flow perspective, the situation is tighter than for defensive titles. Operating cash flow is weak and the company is not currently generating enough cash to fully cover investments and debt service. This increases sensitivity to project delays or weaker take-up of new titles.

At the same time, the gaming business operates in waves. Historical experience shows that periods of weak cash flow are often followed by several years of significant cash surpluses after a successful release. The key issue is therefore not the absolute level of cash flow today, but the ability of the company to get back into strong monetisation mode in the years ahead.

Balance sheet and financial stability

The balance sheet is the weaker side of the investment profile. Net debt is around USD 2.8 billion, liquidity ratios are strained, and an Altman Z-score of around 2.3 signals elevated financial risk. This is not an imminent threat, but a clear signal that the company does not have unlimited room for further mistakes.

The current balance sheet increases the importance of a successful execution strategy. If the monetization phase is delayed or fails to meet expectations, the pressure on the capital structure could be significant. Conversely, a successful transition to the monetization phase would allow for a rapid improvement in debt and a return of financial flexibility.

Potential growth catalyst

The company's biggest growth catalyst lies not in the launch of the new play itself, but in the the timing of the transition from the investment phase to the monetisation phase. The game business is extremely asymmetric: costs are incurred years in advance, while revenues materialise in leaps and bounds and then persist for long periods. Today, the company bears the full burden of development costs, marketing and amortisation, without the corresponding revenues being visible on the income statement.

Upcoming release Grand Theft Auto VI represents a turning point in the cycle in this respect , not just another product in the portfolio. The previous installment in the series sold more than 215 million copies and is still generating significant revenue more than a decade later. This is quite exceptional within the media industry and demonstrates that this IP is not about a short-term "release effect" but about a long-term monetization ecosystem.

A key difference from the past is the revenue structure. Today, it is roughly 83% of net bookings are recurring consumer spendingnot one-off sales. This means that the main economic value is not transferred to the results in the year of release, but in the following few years. Once fixed costs are "locked in" and new revenue starts flowing in, operating leverage can work very aggressively - sales growth translates into profits many times faster.

Analyst estimates reckon that the first full fiscal year after release could bring in revenues of around $9 billion, which would represent a leap from current levels. But the important thing is not the revenue number itself, but that, it's how quickly the margin structure improves. If the historical pattern repeats itself, operating expenses will no longer grow at the same rate and much of the additional revenue may be siphoned into EBIT and cash flow.

At the same time, this catalyst must be viewed realistically. It is a time-concentrated event with high expectations. The risk of delays, weaker monetization or cost shifting to later periods cannot be ignored. Therefore, this catalyst is not an investment thesis in itselfbut an amplifier of the overall cyclical profile. If it comes to fruition, it can fundamentally change the financial picture of a company. If not, the current balance sheet position will quickly reveal the weaknesses of the strategy.

The sensitivity framework: what determines the success of monetisation

The key risk and opportunity of the entire investment thesis lies not in the launch of the new game itself, but in the the ability to monetise the player base over the long term. The historical success of the series creates a high bar of expectations, but it also distorts reality: the economic outcome will not be determined solely by the number of copies sold in the first months, but by how deeply and how long players engage with the online ecosystem.

The downside is when a strong launch is confirmed, but player activity and willingness to spend on additional content begins to fade quickly. Weaker online monetization, lower microtransaction spending or a shorter game world lifespan would mean that the operating leverage would only partially kick in. In such a scenario, while the company would see revenue growth, margins and cash flow would remain below expectations, limiting the ability to quickly reduce debt and increasing pressure on the balance sheet.

In contrast, the positive sensitivity scenario is built on repeating - or even outperforming - the pattern familiar from the previous section. If player engagement can be kept high for several years and digital content continues to expand, the focus of the economics may shift from one-off sales to stable, high-margin cash flow. In this case, every additional dollar of sales translates into profit significantly faster than in the past, and the investment phase appears rational, not excessive, with hindsight.

This sensitivity framework shows that investment is not a binary bet on the "success or failure of a single play." It is a range of outcomes where the decisive variable is not the launch itself but the depth and length of monetisation. This is where the distinction between merely normalising results and actually turning a company into a strong cash generator will break down.

How much did Grand Theft Auto V actually earn

Since its release in 2013, GTA V has become the highest-grossing entertainment product of all time across film, music and games. It's not just the number of copies sold, but the the ten-year monetization cyclethat is virtually unprecedented in the media industry.

Game sales (one-off revenue)

• Sold more than 215 million copies
• Average price realized over time (launch + discounts + re-releases): ~35-40 USD

👉 Estimated cumulative revenue from game sales:
≈ 7.5-8.0 billion USD

That alone would make GTA V an extremely successful title. But that's less than half of the story.

GTA Online - a long-term monetization machine

The real turning point came with GTA Online, which gradually changed the economics of the entire game.

• Microtransactions (Shark Cards)
• Digital content
• Long-term player engagement
• extremely low marginal cost

Conservative investment estimate:

• ~600-700m. USD 600600 per year in the best years
• Gradual decline, but still a strong contribution after 10 years

👉 Cumulative GTA Online Revenue (2013-2024):
≈ USD 3.5-4.0 billion

Investment scenarios

Realistic scenario: normalisation after the investment phase

In the realistic scenario, the key title is released without significant delay and the company gradually moves from investment mode to the monetization phase. Revenues increase significantly, but more importantly the margin dynamics change. Operating expenses are growing slower than revenues, depreciation and amortization is gradually declining and EBIT is returning to positive. Cash flow is stabilising and allowing a gradual reduction in net debt.

In this scenario, the current valuation is not extremely cheap, but it is no longer risky. The stock may move more sideways or rise slightly as the market begins to view the company as a standard cyclical media business with strong IP, not a troubled title. The investment return here is driven primarily by risk reduction, not dramatic overvaluation.

Optimistic scenario: operating leverage and re-rating of valuation

The optimistic scenario assumes that the monetisation of the new phase of IP exceeds expectations not only in terms of revenue volume but above all in terms of revenue structure. Recurring payments, online modes and digital content generate stable cash flow, while the cost base remains relatively fixed. EBIT and free cash flow are growing significantly faster than revenues and the company is positioning itself to be a strong cash generator within a few years.

In such an environment, the investment narrative changes dramatically. The market stops valuing the company as a "risky bet on one release" and starts to see it as a a long-term monetizable media ecosystem. This opens up room for re-rating valuations towards higher multiples of revenue and profit. The combination of EPS growth and valuation change can deliver above-average long-term returns in this scenario.

Pessimistic scenario: execution fails, balance sheet under pressure

The pessimistic scenario works with a combination of delayed releases, weaker monetisation and persistent cost pressures. Revenues grow, but less than the market expects, and operating leverage does not fully materialize. EBIT remains weak, cash flow is insufficient to rapidly reduce debt and the balance sheet remains stretched.

In this scenario, the current valuation proves too optimistic. The market begins to re-emphasise financial risks, volatility and management's limited room for manoeuvre. The stock may undergo a significant correction as the investment story shifts from a "cyclical opportunity" to a structurally challenged title.

What to take away from the article

• The gaming business is cyclical and capital intensive, but extremely profitable for top-tier IPs.
• Current loss-making reflects an investment phase, not a collapse in demand.
• Balance sheet increases sensitivity to execution strategy.
• Moving into a new monetization phase can fundamentally change a company's financial profile.
• Investment is a bet on the right timing of the cycle, not on short-term numbers.

🚨BREAKING NEWS🚨

$NVDA is acquiring the company GROQ (not Musk’s GROK) for $20 billion. (excluding the Cloud segment)

✅ It specializes in inference — the phase when a finished AI responds to the user. Its chips are known for their extreme speed in generating text (LLM)

✅ With this acquisition, Nvidia eliminates the risk of being overtaken in this part of the market by a new, more efficient technology. From a long-term perspective, this strengthens the market position of $NVDA (MOAT). This is a BULLISH message for the shareholders of this giant.

After several years of declining relevance, foreign smartphone brands are staging a notable comeback in China. Recent shipment data point to a sharp rebound, driven primarily by premium devices, with Apple emerging as the key beneficiary. The resurgence does not reflect a broad market expansion, but rather a redistribution of demand within a largely mature ecosystem.

What makes this shift significant is its timing. Chinese consumers appear increasingly willing to trade up again, prioritizing ecosystem quality, software integration, and brand reliability over price. In a market where domestic manufacturers have dominated volumes through aggressive pricing and incremental innovation, premium differentiation is once again proving capable of capturing share. For global brands, this marks a return from defensive positioning to selective growth.

Apple $AAPL is finding its footing again

Although the available data is not broken down by manufacturer, analysts agree that Apple is the main driver of growth. iPhones make up the vast majority of foreign shipments in China, and so November's jump suggests an improvement in sentiment towards a brand that has been under heavy pressure in recent quarters.

Apple faced a combination of several negative factors in 2024: Huawei's aggressive return to the premium segment, political restrictions on the use of iPhones in the government sector, and generally weaker consumer demand in China. But November's developments show that these pressures may not be structural but cyclical.

Price incentives, strong demand during shopping festivals and the gradual stabilisation of the Chinese economy have played a key role. Importantly for Apple, growth is not coming from the low-end, but from the premium segment, where the company has the highest margins and strategic value.

The Chinese market is not changing in volume but in structure

Overall market growth of less than 2% confirms that China is no longer the growth engine for global smartphone sales. The market is saturated and stagnating in volume terms. But the struggle for share and customer quality is all the more important.

Foreign brands, especially Apple, are benefiting from the return of consumers who are willing to pay more for the ecosystem, software and long-term support. Domestic manufacturers may dominate volumes, but they face pressure on margins and high competition among themselves.

Huawei remains a strong player, thanks largely to its own chip ecosystem and national sentiment, but November's numbers suggest its return may not automatically mean a long-term displacement of foreign brands.

Geopolitics gives way to consumer realities

The growth in foreign shipments is also interesting from a geopolitical perspective. In recent years, there have been fears that US technology firms would systematically lose ground in China due to regulatory and political pressures. However, recent data shows that consumer behavior is more pragmatic than political rhetoric.

Chinese consumers still make their phone purchase decisions based on product quality, brand and user experience. If Apple offers an attractive combination of price, performance and service, geopolitical friction will take a back seat.

What this means for investors

November's jump in shipments is not a one-off curiosity, but an important signal to investors watching Apple and the broader technology sector. China remains a key market for Apple, and any sign of stabilisation or a return to growth has a direct impact on the long-term outlook for both revenue and margins.

It is also a reminder that the "Apple is losing China" story is not black and white. The market is volatile, price and sentiment sensitive, but still open to quality foreign products. If the positive trend is confirmed in the months ahead, it could mean a reassessment of the risks investors have recently attributed to Apple.

November's data thus represents not just a statistic on phone sales, but an indicator of a deeper change in sentiment in one of the world's most important technology markets.

A dividend yield above 10% is usually interpreted as a warning sign. In most sectors, such a payout reflects deteriorating fundamentals or an unsustainable capital structure. Energy midstream infrastructure operates under a different logic. Revenue is not driven by commodity prices, but by volumes locked into long-term, take-or-pay contracts that shift risk away from the operator and toward producers and end users.

This business model prioritizes distributable cash flow over earnings growth. Capital allocation is designed to support predictable quarterly distributions, supported by regulated-like assets, inflation-linked escalators, and minimal exposure to demand shocks. For income-focused investors, the appeal lies not in rapid expansion, but in durability: cash flows that persist across cycles and support payouts even when energy markets turn volatile.

Top points of the analysis

• Yield of around 10% is covered by operating cash flow, not debt
• Distribution is covered at approximately 1.3x, creating a safety cushion
• 51 consecutive quarters of distribution growth is an extraordinary figure
• The business is built on long-term, predominantly fee-based contracts
• High debt is structural but stable and serviceable
• This is a title for income investors, not a growth strategy

Company presentation and business model

Delek Logistics Partners $DKL is an MLP that owns and operates midstream energy supply chain infrastructure. The portfolio includes pipelines, terminals, storage facilities, processing units and water infrastructure. A key feature of this business is that most of the revenue is not directly dependent on oil or gas prices, but on volume and contract fees.

A substantial portion of the assets serve the parent company, Delek US, which ensures long-term capacity utilization. At the same time, the company is gradually diversifying its revenues through third parties and acquisitions such as Gravity Water Midstream and H2O Midstream. These steps strengthen cash flow stability and reduce risk concentration.

From an investor perspective, the key point is that this type of infrastructure generates relatively stable EBITDA across the cyclewhich is the ideal basis for a high dividend payout over the long term.

Dividend history: consistency instead of volatility

Delek Logistics Partners is one of a very small group of MLPs that have been able to not interrupt distribution growth even during extreme periodsincluding pandemics, energy crises or sharp changes in interest rates. The company currently holds a series of of 51 consecutive quarterly distribution increaseswhich is an extremely strong signal in terms of income strategy.

The pace of distribution growth has been moderate rather than aggressive, which is important. The company is not trying to maximize short-term payout growth, but long-term sustainability. This discipline is one of the reasons why distributions have not been cut in the past, even in periods of higher volatility.

From a long-term investor's perspective, continuity is more important than momentum. Here, DKL fulfils exactly the role that a dividend title should: stable income with moderate but persistent growth.

1) The main risks of MLPs for the ordinary investor

• Distribution No guaranteed dividend, can be reduced at any time
• High dependence on debt and capital markets
• More complex taxes and administration compared to shares
• Limited investor influence on management and strategy
• Sensitivity to Rising interest rates

2) Who has priority in payouts

• Lenders (banks, bonds) - absolute priority
• General Partner - Fees, often priority rights
• Preferred units (if any)
• Ordinary limited partners (retail investors) - only last

3) What's in it for the investor

• LPs are not a substitute for dividend shares, but an income supplement
• High yield = higher structural risk
• The key is to monitor Distribution and debt coverage, not just percent of yield

Payout ratio and distribution coverage: key point of the whole thesis

For MLPs, the classic payout ratio on net income does not make sense. The critical metric is distributable cash flow (DCF) and its ratio to the distribution paid. Delek Logistics Partners expects distribution coverage in 2025 to be approximately 1,3×, which means the firm generates 30% more cash than it pays out to investors.

This cushion has several important functions. First, it allows the firm to absorb short-term fluctuations in cash flow without having to dip into distributions. Second, it creates room for reinvestment in growth projects without the need for massive debt raises. And third, it gives management the flexibility to continue to gradually increase distribution.

From a dividend security perspective, this is a healthy level. It is not an extremely conservative approach, but neither is it an aggressive "blood" payout.

Cash flow: the real dividend driver

For dividend MLP-type titles, the cash flow is the only metric that really makes the difference. Book earnings, EPS or return on equity have only limited predictive power. In the case of Delek Logistics Partners it is therefore crucial to analyse the long-term development of operating cash flow, capital expenditure and the ability to generate cash net of necessary investments.

Operating cash flow has been stable in recent years around USD 200-225 million per yearwhich confirms the high predictability of the business. Even in 2024, when there was a slight year-on-year decline in OCF, the level of cash remained sufficient to cover distribution and part of the investments. This is a key difference from riskier dividend titles where payouts depend on external funding.

Free cash flow is more volatile, which is normal for midstream infrastructure. Years with lower FCF are not the result of deteriorating operations, but increased capital expendituretypically on expansion of processing capacity, terminals or water infrastructure. These investments are not speculative, but contractually based and aimed at future cash flow stability.

From a dividend investor's perspective, it is important that the company never finances distribution purely with debt. Even in investment-intensive years, the core of the payout is operating cash, which significantly reduces the risk of a sudden reduction in distribution.

Free cash flow vs. distribution: how big is the safety cushion

Free cash flow net of capex is not constant for DKL, but that in itself is not a problem. The key point is that distributable cash flow (DCF) - i.e. cash available for distribution - in the long term exceeds distributions paid out by around 30%.

Distribution coverage at the level of 1,3× means that even at:

• a slight decrease in volumes
• a temporary rise in interest costs
• or higher maintenance investments

the firm has enough room to keep the payout unchanged. This cushion is exactly what an investor expects from a stable income title. It is not overly conservative, but it is not dangerously stretched either.

It is also important to follow the trend. The distribution coverage has been above 1.2x for a long time, indicating that management isn't sacrificing future stability in favour of short-term higher returns.

Debt and interest costs: where the real risk lies

Delek Logistics Partners operates with a high level of debt, which is structurally typical for MLPs. However, the crucial question is not "how much debt" but whether the debt can be serviced from operating cash in the long term.

The total debt is around USD 1.9 billionwhile EBITDA exceeds 390 million USD. This implies a debt to EBITDA ratio of approximately 4,8-5,0×, which is a higher but still acceptable level for a stable midstream infrastructure with long-term contracts.

The weakest point is interest coverage of around 1.6×which increases the company's sensitivity to a higher rate environment. However, this does not pose an immediate threat to the dividend. Rather, it limits the pace of its future growth. In such an environment, management is likely to favor stability over aggressive payout increases.

From a dividend investor's perspective, this is an important signal: the risk is not a reduction in the dividend, but a slowdown in dividend growth if rates remain high over the long term.

Dividend stress test: what would have to happen to put the payout at risk

For a DKL distribution to be truly at risk, a combination of several negative factors would have to occur simultaneously:

• a significant and sustained decline in transported volumes
• a deterioration in contractual conditions
• a simultaneous significant increase in interest costs

A fall in volumes alone would probably only lead to a slowdown in distribution growth. Similarly, higher rates alone are not critical as long as EBITDA remains stable. Only a combination of operational and financial pressure would create a scenario where management would have to reassess payouts.

Business quality: why cash flow is stable beyond dividend logic

The fundamental strength of Delek Logistics Partners lies not in the dividend itself, but in the nature of the assetsthat make the dividend possible. The company operates in the midstream infrastructure segment, where the return on capital is not driven by commodity prices but by the volume, availability and contractual security of capacity. This fundamentally reduces the volatility of returns and makes the business relatively resilient to the fluctuations of the energy cycle.

Most of the revenue comes from long-term, predominantly fee-based contracts, often of the type take-or-paywhich guarantee a minimum level of revenue regardless of short-term demand trends. These contracts create high visibility of future cash flows and reduce the risk of sharp drops in revenue. At the same time, this is infrastructure that cannot be easily replaced - pipelines, terminals and processing units are capital intensive, regulatory complicated and locally anchored.

The link to the parent company is also an important aspect Delek US. This ensures stable underlying demand for capacity, which strengthens the predictability of revenues. At the same time, it is not a one-sided dependency - the company has been purposefully expanding its cooperation with third parties in recent years, thereby reducing the concentration of risk. The result is a business that is not just a "dividend cow" but a functional infrastructure with long-term economic value.

Growth levers beyond the dividend: where company value can continue to be created

Delek Logistics Partners is often seen as a ready-made, mature title whose main function is cash distribution. This view is simplistic. The firm has several growth levers that, while not leading to explosive earnings growth, can increase EBITDA, cash flow stability and asset value over the long term..

The first growth lever is organic infrastructure expansion. Projects such as Libby 2 gas processing plant or the development of water infrastructure are not speculative investments, but responses to specific demand backed by contracts. These investments increase system capacity while deepening relationships with existing customers.

The second lever is acquisition of complementary assets, particularly in water and supporting infrastructure. These segments are less cyclical and contribute to further cash flow smoothing. In terms of long-term strategy, this is a shift towards an even more defensive profile.

A third, often overlooked option is potential drop-down transactions from the parent company. These may bring new assets into the MLP structure at relatively attractive terms in the future. If executed in a disciplined manner and with distribution coverage in mind, they can support EBITDA growth without disproportionately increasing risk.

These growth factors alone may not lead to significant share price appreciation, but enhance the long-term sustainability of the business and create scope for continued distribution growth in a less favourable macro environment.

Management and capital allocation: discipline over aggressiveness

• CEO since 2012 Uzi Yemin

The quality of management at midstream MLPs is not known by media visibility, but by the ability to allocate capital in a balance between growth, debt and investor payouts. In this regard, Delek Logistics Partners' management has been consistent and disciplined.

Management has long prioritised sustainable distribution coverage over maximising short-term returns. This is reflected in both the level of payout and the pace of payout increases. Instead of aggressively growing distributions, it opts for gradual, regular increases that are covered by cash flow and do not require leapfrogging debt.

In terms of investments, there is a clear tendency to channel capital into projects with clear returns and contractual security. The company avoids expansions that would increase operational risk or significantly worsen the balance sheet profile. This is particularly key in a higher interest rate environment where capital allocation errors are quickly punished.

From an investor's perspective, it is important that management does not give the impression of sacrificing long-term stability for the short-term attractiveness of the stock. On the contrary, the overall approach suggests that the priority is maintaining the confidence of income investors and protecting cash flow across the cycle.

Investment scenarios: how the story may unfold in the coming years

Baseline scenario: stable infrastructure with high returns

In the baseline scenario, the Delek Logistics Partners is primarily a defensive infrastructure asset with stable and predictable cash flow as its core value. The volume of products transported remains relatively stable, new projects are executed selectively and with contractual security, while EBITDA growth is gradual rather than dynamic.

Distribution in this scenario continues to grow modestly but consistently, with coverage around 1.2-1.3 times. Debt remains high but serviceable, without the need for major refinancing interventions. The stock is behaving in this environment as income instrumentwhere most of the total return comes from cash paid out, not from price appreciation.

For the investor, this scenario means attractive long-term income with relatively low volatility but limited capital upside.

Optimistic scenario: EBITDA growth and gradual revaluation

The optimistic scenario assumes that growth levers beyond the dividend itself start to play a more prominent role. New infrastructure projects and acquisitions prove to be above-average returns, volumes increase and revenue diversification reduces dependence on a single customer or region. EBITDA grows at a faster than historical rate, while capex gradually declines as major projects are completed.

In this scenario, the balance sheet profile also improves, with the debt to EBITDA ratio slowly declining, interest cover stabilising and the market starting to see the company as a a higher quality and less risky midstream infrastructure. This may lead to a slight valuation overvaluation, not dramatic, but enough for the share price to contribute to the total return in addition to the dividend.

Dividend growth continues here, possibly accelerating slightly, without compromising the sustainability of the payout. For an investor, this would be a scenario that combines a high ongoing yield with limited but meaningful capital appreciation.

Pessimistic scenario: pressure on the balance sheet and stagnation in value

The pessimistic scenario assumes a combination of several negative factors. Volume pressures or deteriorating contract terms lead to a decline in EBITDA, while higher interest rates increase debt servicing costs. Distribution coverage tightens towards the 1.0-1.1× mark, limiting management flexibility.

In this environment, there is unlikely to be an immediate reduction in distribution, but rather a freeze and the postponement of growth projects. The market would continue to price the title purely as a riskier income instrument, with no expectation of growth. The share price could stagnate or decline slightly, while the dividend yield would remain high.

For the investor, this would be a scenario where cash collection remains the main benefit, but with a higher level of nervousness and a smaller safety cushion.

Risks of investing in DKL

🔴 Structural and legal risks (MLP model)

• This is not a traditional stock, but a MLP units - the investor is Partner, not a shareholder
• Tax Form K-1, more complex taxation and higher administrative complexity
• Foreign investors often higher withholding tax and worse tax optimization
• Not suitable for certain types of accounts (retirement, tax-advantaged accounts)

🔴 Risk of business concentration

• Strong Dependence on parent company Delek US Holdings
• Limited customer diversification and geographic concentration
• Problem at parent company may quickly spill over into DKL's cash flow

🔴 Dividend sustainability risk

• Very high dividend yield = market pricing in risk
• Payout dependent:
• • stable shipping volume
  • debt refinancing
  • availability of capital
• If margins fall, this can lead to freezing or reduction of the dividend

🔴 Debt and interest rate risk

• Relative Higher debt burden typical of the MLP sector
• Sensitivity to:
• • Rising interest rates
  • worse refinancing conditions
• When debt markets are stressed, there may be Priority of debt over dividend

What to take away from the article

• Dividend yield over 10% is covered by operating cash flow, not debt
• Distribution coverage around 1.3x creates a meaningful safety cushion
• Debt is high but serviceable at current EBITDA levels
• The biggest risk is not a reduction in the dividend, but a slowdown in dividend growth
• This is typical income title for long-term holdingnot for speculation

Lockheed Martin quietly strengthened one of the most stable pillars of its defense portfolio. The U.S. Department of Defense approved a major expansion of an existing airlift framework agreement, pushing its total potential value to roughly $25 billion. Rather than a single procurement wave, the deal reinforces a long-term production, modernization, and sustainment pipeline that stretches well into the next decade.

What makes the contract strategically important is not the aircraft count alone, but the scope. The agreement embeds Lockheed deeper into allied logistics systems through upgrades, engineering services, and lifecycle support. In practice, this turns the C-130J platform into a recurring-revenue defense ecosystem, insulating cash flows from short-term budget volatility while tying multiple NATO and partner countries into a common operational standard.

Why the C-130J: an old concept but strategically indispensable

C-130J is not a new aircraft, but its importance has been growing inrecent years . It is a modernised version of a proven platform that is capable of operating where larger and more expensive transport aircraft fail. The aircraft can handle short and unpaved runways, extreme weather conditions and a wide range of missions - from troop and equipment transport to humanitarian operations and special military missions.

This versatility is the main reason why states keep it in their arsenals even in the era of the advent of unmanned systems and sophisticated fighters. In practice, the C-130J is a "workhorse" that no military with global ambitions can do without.

What exactly does the contract increase include

Increasing the value of the contract doesn't just mean a larger number of newly produced aircraft. The key part is long-term services, which are extremely attractive financiallyto Lockheed Martin $LMT.

In particular, the contract includes:

• production of new C-130J aircraft in various configurations
• avionics and systems upgrades to meet national requirements
• technical support and engineering work
• spare parts, maintenance and lifecycle service
• integration of specific military and communication systems

From a business perspective, it is important that servicing and upgrades generate stable revenues for decadesoften with higher margins than manufacturing itself.

Why the contract is growing now

The timing of the increase is not coincidental. The war in Ukraine, the tensions in the Indo-Pacific and NATO's increasing emphasis on logistics readiness have shown that the ability to move troops and materiel quickly is as important as combat equipment.

At the same time, many European militaries are replacing older versions of the C-130 or other transport types and opting for upgrades rather than developing entirely new platforms. For countries such as Germany or France, this is a pragmatic choice: a proven aircraft, NATO compatibility and relatively fast delivery.

What this means for Lockheed Martin

For Lockheed Martin, the contract increase is significant on several levels. It's not just the increased order volume, but the strengthening long-term revenue visibility. It confirms the C-130J program as one of the company's pillars alongside the F-35 fighter and missile systems.

At the same time, the contract:

• Increases production capacity utilization
• strengthens relations with key US allies
• spreads the risk beyond one dominant programme
• supports stable cash flow even if other parts of the defence budget slow down

Broader impact on the defence sector

Contract increase sends a clear signal to the rest of the market: Defense budgets are not returning to pre-war levels. On the contrary, there is a growing emphasis on logistics, interoperability and rapid deployment of forces. This favours companies that offer proven platforms with a long service life.

For investors, this is further evidence that the defence sector remains structurally strong, even if media attention is often focused on fighter jets, drones or cyber security.

Summary for investors

The increase in the C-130J contract from $15 billion to $25 billion is not a one-off event, but a confirmation of a long-term trend. It secures Lockheed Martin stable revenue, a strong position with allies and a continued role as a key supplier of essential military infrastructure.

It's not about "sexy" technology, it's about a business that works in every geopolitical scenario.. And that is what makes it one of the most solid pillars of the defense portfolio.

European figures for November show a clear shift in the dynamics of the electric vehicle market. Sales Tesla $TSLA in the EU, EFTA and the UK fell year-on-year by almost 12% and market share dropped to 2.1%...

Compared to a weak October there was a slight improvement, but the overall trend remains downward. Tesla therefore continues to face in Europe a combination of stronger competition, slower model refresh cycles and reputational impacts associated with Elon Musk.

At the other end of the spectrum stands BYD, which in Europe recorded year-on-year sales growth of more than 220% and is rapidly taking market share. All of this comes in an environment where the overall European car market is growing only modestly and the main drivers are hybrids and electric vehicles. For investors, it’s a clear signal that competitive pressure from China is no longer a theoretical scenario, but a reality that is reflected directly in the numbers.

Is the current development in Europe just a temporary wobble for Tesla before a new model offensive, or are we witnessing the start of a more lasting loss of position in favor of players like BYD? And whom would you trust more in the European EV story?

The latest quarter confirms that CrowdStrike has entered a different stage of its maturity, one where the pace of growth no longer comes at the expense of financial discipline. The company is demonstrating that it can scale quickly while maintaining solid cash generation and increasingly visible operational efficiency. For investors, this is the sign of a business starting to run on autopilot.

But the key change is at the strategic level. CrowdStrike is transforming from a point security solution into a critical layer of modern IT infrastructure. As customers adopt more functionality and integrate the platform into their daily processes, the revenue model becomes more resilient, and vendor dependency grows in a natural, not forced, way.

How was the last quarter?

CrowdStrike $CRWD achieved total revenue of $1.23 billion in Q3 FY2026, up 22% year-over-year. The vast majority of revenue continues to come from the subscription model, where revenue grew 21% to $1.17 billion. This development confirms the stability of recurring revenues and high visibility of future cash flow.

A key indicator for the quarter was net ARR growth, which reached a record $265 million. This accelerated the year-on-year growth rate of net new ARR to 73%, an exceptionally strong dynamic even in the context of the broader software market. Total ARR at the end of October rose to $4.92 billion, up 23% year-on-year.

Profitability moved differently on a GAAP and non-GAAP basis. While on a GAAP basis the company posted an operating loss of $69 million, on an adjusted basis operating profit reached a record $265 million. Non-GAAP net income rose to $245 million and earnings per share reached $0.96, a significant year-over-year improvement.

Cash flow developments were also very strong. Operating cash flow was $398 million and free cash flow was $296 million, confirming that CrowdStrike is no longer just a growing company, but is starting to generate a significant cash surplus. The cash position at the end of the quarter was $4.8 billion, giving the company significant strategic flexibility.

• Full results presentation.

Comment from CEO

George Kurtz called the third quarter one of the best in the company's history and emphasized that CrowdStrike is becoming a key player in the secure AI transformation. He said the combination of the Falcon unified platform and Falcon Flex subscription enables customers to consolidate security tools and reduce IT infrastructure complexity.

The leadership also emphasized that ARR growth is no longer being driven solely by endpoint protection, but increasingly by cloud security, identity and next-generation SIEM solutions. This breadth of the portfolio strengthens the company's long-term competitive advantage.

Outlook

Based on strong momentum in the third quarter, CrowdStrike has improved its outlook for the full fiscal year 2026. The company now expects revenue of approximately $4.80 billion and non-GAAP operating profit of more than $1.0 billion. Adjusted earnings per share are expected to be about $3.70.

For the fourth quarter, the company expects continued solid revenue growth to approximately $1.29 billion to $1.30 billion, with a continued focus on maintaining solid margins and continued acceleration of net new ARRs. Management also suggests that the strong pipeline is a good case for growth in 2027.

Long-term results

From a long-term perspective, CrowdStrike confirms that its business model is structurally highly scalable. The company has repeatedly increased the average number of modules per customer - more than half of its customers now use six or more modules on the Falcon platform, and the proportion of customers with seven and eight modules continues to grow.

This trend translates not only into faster ARR growth, but also improved unit economics for customers. Gross subscription revenue margins have been around 80% for a long period of time, giving the company significant headroom to invest in both development and expansion without significant pressure on profitability.

At the same time, it is clear that CrowdStrike is gradually moving from a phase of net growth to a combination of high growth and profitability. Growing free cash flow and a strong balance sheet increase the company's resilience to cyclical fluctuations in IT spending.

News

In the third quarter, CrowdStrike further expanded its product portfolio, particularly in the area of AI-based security. The company introduced its next generation of identity protection, data protection, IT environment solutions and agent-based AI tools under the name Charlotte AI. These innovations strengthen the company's position in so-called agent-based security, which is increasingly important as AI systems become more autonomous.

Strategic partnerships also play a significant role. Collaborations with AWS, NVIDIA, EY, EY, KPMG and CoreWeave confirm that CrowdStrike is seen as a key security partner for cloud and AI infrastructure by global players.

Shareholder Structure

CrowdStrike's shareholder structure is typical of high-quality technology companies. Around three-quarters of the shares are held by institutional investors, dominated by the largest global asset managers, led by Vanguard Group, BlackRock and State Street. The share of insiders remains relatively low, reflecting the company's more mature stage of development and the wide dispersion of capital among institutional investors.

Analysts' expectations

Analysts are very positive on CrowdStrike's results, mainly due to accelerating ARR growth and record cash flow. Consensus is moving toward the view that CrowdStrike has the potential to maintain its growth momentum in the broader cybersecurity market over the next few years.

In particular, the company's ability to monetize trends in artificial intelligence, consolidate security tools with customers, and increase operational leverage are viewed positively. Despite a relatively higher valuation compared to traditional software firms, analysts emphasize that the combination of growth, margins, and cash flow gives CrowdStrike an attractive long-term above-average profile.

According to 12-month price targets 52 analysts for CrowdStrike, the average target is $555.10. The highest price target for CRWD is $706.00 while the lowest price target for CRWD is $353.00.

Fair Price

CrowdStrike’s latest quarter marks a turning point where growth and efficiency are no longer competing priorities, but mutually reinforcing forces. The company is expanding at a faster pace while simultaneously strengthening its financial backbone, a combination that few software firms manage at this stage of scale. What stands out most is not a single metric, but the consistency across revenue durability, operating leverage, and cash generation.

Equally important is how the business mix is evolving. CrowdStrike is no longer perceived primarily as an endpoint security vendor; it is becoming embedded in how enterprises run, monitor, and automate security across cloud-native environments. As customers deepen their reliance on the platform, spending becomes broader, stickier, and structurally more predictable—laying the foundation for long-term value creation well beyond cyclical IT budgets.

How was the last quarter?

CrowdStrike $CRWD achieved total revenue of $1.23 billion in Q3 FY2026, up 22% YoY. The vast majority of revenue continues to come from the subscription model, where revenue grew 21% to $1.17 billion. This development confirms the stability of recurring revenue and the high visibility of future cash flow.

A key indicator for the quarter was net ARR growth, which reached a record US$265 million. This accelerated the year-on-year growth rate of net new ARR to 73%, an exceptionally strong dynamic even in the context of the broader software market. Total ARR at the end of October rose to US$4.92 billion, up 23% year-on-year.

Profitability trended differently at GAAP and non-GAAP levels. While on a GAAP basis the company posted an operating loss of $69 million, on an adjusted basis operating profit reached a record $265 million. Non-GAAP net income rose to $245 million and earnings per share reached $0.96, a significant year-over-year improvement.

Cash flow development was also very strong. Operating cash flow was US$398 million and free cash flow was US$296 million, confirming that CrowdStrike is no longer just a growth company but is beginning to generate a significant cash surplus. The cash position at the end of the quarter was $4.8 billion, providing the company with significant strategic flexibility.

• Full presentation with results.

CEO commentary

George Kurtz called the third quarter one of the best in the company's history and emphasized that CrowdStrike is becoming a key player in the secure AI transformation. He said the combination of Falcon's unified platform and Falcon Flex subscription enables customers to consolidate security tools and reduce IT infrastructure complexity.

Management also highlighted that ARR growth is no longer driven solely by endpoint protection, but increasingly by cloud security, identity and next-gen SIEM solutions. It is this breadth of portfolio that strengthens the company's long-term competitive advantage.

Outlook

Based on strong momentum in the third quarter, CrowdStrike raised its full-year outlook for fiscal 2026. The company now expects revenue in the range of approximately $4.80 billion and non-GAAP operating profit in excess of $1.0 billion. Adjusted earnings per share are expected to be around $3.70.

For the fourth quarter, the company projects continued solid revenue growth to approximately $1.29 billion to $1.30 billion, with a continued focus on maintaining strong margins and continued acceleration in net new ARR. Management also suggests that the strong pipeline sets up a good case for growth in 2027.

Long-term results

From a long-term perspective, CrowdStrike confirms that its business model is structurally highly scalable. The company has repeatedly increased the average number of modules per customer - more than half of its clients now use six or more modules on the Falcon platform, with the proportion of customers with seven and eight modules continuing to grow.

This trend translates not only into faster ARR growth, but also into improving unit customer economics. Gross margins on subscription revenue have been around 80% for a long time, giving the company significant scope to invest in both development and expansion without significant pressure on profitability.

At the same time, it is evident that CrowdStrike is gradually transitioning from a net growth phase to a combination of growth and high profitability. Growing free cash flow and a strong balance sheet increase the company's resilience to cyclical fluctuations in IT spending.

News

In the third quarter, CrowdStrike further expanded its product portfolio, particularly in the area of AI-driven security. The company introduced next-generation identity protection, data protection, IT environment solutions and agent-based AI tools under the Charlotte AI. These innovations strengthen the company's position in the so-called agent-based security, which is increasingly important as AI systems become more autonomous.

Strategic partnerships also play a significant role. Collaborations with AWS, NVIDIA, EY, KPMG and CoreWeave confirm that CrowdStrike is seen as a key security partner for cloud and AI infrastructure by global players.

Shareholding structure

CrowdStrike's shareholder structure is typical of high-quality technology companies. Approximately three-quarters of the shares are held by institutional investors, dominated by the largest global asset managers led by Vanguard Group, BlackRock and State Street. The share of insiders remains relatively low, reflecting the company's more mature stage of development and the broad dispersion of capital among institutional investors.

Analyst expectations

Analysts view CrowdStrike's results very positively, primarily due to accelerating ARR growth and record cash flow. The consensus is shifting towards the view that CrowdStrike has the potential to maintain its growth momentum over the broader cybersecurity market in the coming years.

In particular, the company's ability to monetize AI trends, consolidation of security tools with customers, and growing operating leverage is viewed positively. Despite a relatively higher valuation compared to traditional software firms, analysts highlight that the combination of growth, margins and cash flow gives CrowdStrike an above-average attractive long-term profile.

According to 12-month price targets 52 Analysts for CrowdStrike, the average target is $555.10. The highest price target for CRWD is $706.00 while the lowest price target for CRWD is $353.00.

Fair Price

As the year drew to a close, the film industry faced a question with clear implications for investors: can theatrical releases still deliver durable, predictable cash flows in an era dominated by streaming, higher ticket prices, and fractured consumer attention? The final weekend of December suggests the answer is yes—but under a fundamentally different set of rules. The performance of the new Avatar installment, alongside the sustained momentum of Zootopia, points to a market that is evolving rather than shrinking.

What matters from an investment perspective is not just the presence of a single blockbuster, but the breadth of demand across studios and genres. With the top ten films generating over $175 million collectively, the box office showed a healthier, more diversified structure than in recent years. This dispersion of revenue reduces dependency on isolated hits and strengthens the case for cinemas as a viable, though transformed, cash-generating segment.

Top points of the analysis

• Avatar confirms the strength of Disney's event brands, but in a model of long-term staying power, not explosive launch
• Zootopia 2 performs as a highly stable and margin-attractive pillar of results
• Significant portion of revenue will be reflected in subsequent quarters
• Market shifts from chasing records to predictable cash flow
• Title diversification reduces quarterly volatility across the sector

Avatar: Fire and Ash - investment significance beyond one weekend

Movie debut Avatar: Fire and Ash with global sales of around $345 million and 88 million domestically must be read in the context of changing audience behavior. Comparisons to 2022 are investmentally misleading, as the market has since shifted from impulse visits to more selective and time-phased decision-making. Thus, the avatar today is not a tool for a one-off shock to results, but an asset with a longer life cycle.

A key factor is the geographic structure of returns. Avatar has historically generated most of its revenue outside North America, particularly in Europe and Asia, where audiences respond more slowly but steadily. This means that the bulk of global revenues will only begin to materialize in the coming weeks, or mostly in the next quarter. For the Walt Disney Company $DIS, this creates room for positive surprises in the Studios division.

Pricing structure is another level. Avatar has an above-average share of premium formats, which increases the average ticket price and improves the margin profile. Thus, even with lower attendance, it can make a comparable or even higher contribution to the operating result than other blockbusters with higher ticket sales.

From an investment perspective, it is important that Avatar acts as a spread-out source of cash flow. It does not deplete in a few weeks, but gradually boosts sales, strengthens the studio's bargaining position vis-à-vis cinemas and increases the value of the entire brand ahead of the next planned installments.

In a broader context, then, Avatar confirms that premium IP with global reach remains the most valuable asset in the movie business. Not because of records, but because of its ability to generate stable and recurring revenues.

Zootopia 2 - a stabilising pillar with high predictability

A completely different, but perhaps even more important investment role is played by Zootopia 2. The film continues to post strong numbers in its fourth weekend, with domestic receipts already exceeding $282 million. This performance confirms that animation remains the most stable component of the Disney portfolio.

Animated titles have a structural advantage in audience behavior. Families tend to have repeat visits, less sensitivity to reviews, and a longer decision horizon. This translates into slower but significantly more stable revenue declines, which is critical from a quarterly predictability perspective.

Another key factor is secondary monetization. Cinema is only the first step for animated IPs. Streaming, licensing, merchandising and theme parks follow, where margins often exceed cinema distribution alone. Thus, Zootopia 2 does not just contribute to current revenues, but creates a long-term revenue stream.

For the next quarter, this means that Zootopia 2 will act as a volatility smoother. Combined with Avatar's international reverberations, it creates a very solid foundation for the studio division's results.

From an investment perspective, this combination - event hit and stable animation - is the ideal model to reduce risk and increase market confidence.

The return of the middle segment: a healthier market structure

In addition to the two main drivers, it is important to monitor the performance of mid-market titles. Films such as David, The Housemaid or The SpongeBob Movie: Search for SquarePants show that audiences are responding to projects outside the top tier.

This return of the middle segment is crucial for the entire ecosystem. Cinemas are no longer dependent on a single title, studios can better spread capital and risk, and the entire sector becomes more resilient to individual failures.

From an investment perspective, this is a signal of normalisation. The market is returning to a model where more films contribute to the bottom line, increasing cash flow stability and reducing quarterly fluctuations.

This is exactly the environment that long-term investors prefer over extremely binary outcomes.

Next quarter impact projections and study results

The combination of Avatar and Zootopia creates a very favorable outlook for Disney going into the next quarter. Avatar will continue to generate international sales with a high proportion of premium formats, while Zootopia will provide a stable and margin-attractive base.

This increases the likelihood that the studio division will surprise positively not only on a revenue level but also on an operating result. Importantly, these revenues are not one-off but spread over time, which promotes cash flow predictability.

From a sector-wide perspective, this is confirmation that the film business remains investment relevant - as long as it is built on strong brands and a disciplined strategy.

Impact on Disney shares: growth catalyst or stabiliser?

From a stock investor's perspective, it is crucial to separate media success from the actual impact on valuations. The performance of Avatar and Zootopia alone does not represent a dramatic growth catalyst that would immediately change an investment thesis Walt Disney Company. Its significance is more subtle, but all the more important: it reduces risk, increases predictability, and confirms that the restructured film segment is capable of generating stable cash flow.

The market has been rather sceptical of Disney in recent years, mainly due to high debt levels, the fluctuating performance of the studio division and the uncertainty surrounding the return on investment in content. Avatar and Zootopia do not shift this narrative to an aggressive growth plane, but significantly normalize. For investors, this means that the stock is not driven by speculation on a single hit, but is underpinned by broader fundamentals.

From an investment point of view, this development is therefore mainly relevant for long-term holders. This is not a short-term trade on earnings, but a confirmation that Disney is rebuilding the profile of a quality, predictable company where the risk of negative surprises in the coming quarters is diminishing. It's this type of signal that often precedes gradual overvaluation of a stock, not sudden jumps.

Resilience of results: what if the next hit doesn't come in the next quarter

One of the biggest weaknesses in the historical model of movie studios has been the extreme dependence on individual titles. One weak quarter without a significant hit could significantly erode results and sentiment around a stock. This is where you can see that the structure of Disney's business is changing. Avatar and Zootopia are creating a time bridgethat carries revenue across quarters and reduces dependence on a constant stream of new releases.

From an investment perspective, it is important that both titles have a long shelf life. Avatar because of its international reverberation and premium formats, Zootopia because of its family audience and secondary monetization. This means that even if the next quarter doesn't deliver a new blockbuster, the studio division won't face a sharp drop in revenue or margins.

This increased resilience is essential for an equity investor. It reduces earnings volatility, improves the ability to plan for cash flow, and supports a more stable stock valuation. It is this aspect - not the sheer size of opening weekends - that is key to whether Disney can return to the "core holding" category for a long-term portfolio.

Risks framed in investment terms: what could change the narrative

While the current trend is positive, an investment view also requires a clear articulation of risks. The first is the return on capital for big-ticket projects. If the willingness of audiences to pay for a premium experience begins to diminish for future Avatar installments, the margin profile of these films could erode, and thus their investment benefit.

Another risk is audience fatigue with sequels and franchises. Even strong IPs can lose traction over time if they are not creatively refreshed. This would not be reflected immediately in revenues but gradually in lower secondary monetization, which is crucial for shareholders.

The third factor is the relationship between cinema distribution and streaming. If Disney were to shorten cinema windows or aggressively move content to its own platforms in the future, it could boost streaming in the short term but weaken the economics of the studio division. The investment narrative would then become less clear again.

Importantly for the investor, none of these risks dominate today. They are factors to watch, not reasons to cautiously step back. But it is the clear naming of these points that adds credibility to the whole investment story.

Investment scenarios: What Avatar and Zootopia mean for Disney stock

Investment scenarios around current movie performance need to be read differently than those for conventional earnings catalysts. It's not a one-time impulse that would dramatically change valuations in one quarter Walt Disney Company. It is a process that gradually alters perceptions of risk, predictability and the quality of cash flow. That's why the scenarios tend to have medium- to long-term in nature..

Optimistic scenario: Return to a "quality compounder" investment profile

In the optimistic scenario, both Avatar and Zootopia confirm above-average cinema retention and their contribution is significantly reflected in the following quarters. Avatar will continue to benefit from international markets and premium formats, while Zootopia will provide a stable and high-margin base through secondary monetization. The studio division will cease to be a volatile element of results in this scenario and will begin to operate as a predictable source of cash flow.

For the stock, this would represent a shift in the investment narrative. Disney would cease to be seen primarily as a company dealing with past decisions and high debt, and would begin to be valued as a quality media company with strong IP and disciplined capital allocation. In this scenario, the market would be willing to accept higher valuation multiples, not because of rapid growth, but because of lower risk and higher earnings stability. It would not be a sharp rise in share price, but a a gradual, more sustained revaluation.

Realistic scenario: Stabilisation without dramatic revaluation

The most likely scenario is less spectacular, but very solid from an investment perspective. Both Avatar and Zootopia will meet expectations, deliver strong but not record results, and their main contribution will be smoothing out quarterly volatility. The Studios division will not be a growth driver in this scenario, but will cease to be a source of negative surprises.

For shareholders, this means that Disney will remain a "hold" investment, not a speculative bet. Shares in this scenario benefit from a combination of stable IP, gradually improving cash flow and a reduced likelihood of weak quarters. Valuations will not move significantly, but the risk premium will continue to decline. This scenario is particularly attractive to long-term investors looking for predictability and lower volatilityrather than quick returns.

Pessimistic scenario: strong weekend, weaker long-term effect

The pessimistic scenario does not foresee a downturn, but a disappointing long-term effect. Avatar could lose momentum faster in international markets and Zootopia would remain solid but would not deliver the expected secondary effect. In such a case, it would prove that the film segment, while capable of generating one-off successes, cannot consistently translate them into higher profitability.

For the stock, this would mean a return of caution. The market would view Disney more as a company that can avoid downturns but struggles to create a long-term growth story. Valuations would remain under pressure and the stock would move more sideways. This would not be an investment disaster, but an acknowledgement that Disney is more of a a defensive title rather than a growth opportunity.

What to take away from the article

• The film industry is not moving into a downturn, but into a more mature phase
• Avatar is less about the record and more about long-term value IP
• Zootopia 2 confirms animation's key role in stabilizing results
• Diversifying titles reduces risk and volatility
• For investors, this is a positive fundamental signal heading into the next quarters

The U.S. dollar’s persistent decline is reshaping financial conditions around the world, influencing everything from corporate earnings to cross-border capital flows. A weaker dollar can lift exporters and emerging markets while compressing margins for import-reliant firms and pressuring import prices. Investors need to understand not just the price movement, but the macro drivers behind it and how shifts in currency valuation affect portfolio risk, sector leadership, and future returns. This piece explores why the dollar is weakening and what that means for markets in the year ahead.

The weakening of the US dollar is one of those topics that at first glance may seem abstract and not given much weight by many investors, but in reality has a very concrete and often fundamental impact on the economy, financial markets and portfolio performance.

Indeed, the U.S. dollar is not just the currency of one economy, but a global financial economic engine in which most of the world's trade, commodities, bonds and international capital flows are priced. When the dollar weakens, it means not just a change in the exchange rate, but a shift in relative asset prices, in financial conditions and in the behaviour of investors around the world. That is why it is crucial to understand not only that the dollar is weakening, but why it is weakening in the first place and in what macroeconomic context it is weakening.

The dollar index

When talking about the weakening of the dollar, it is important to stress at the outset that there is no single universal definition. The most commonly used dollar index in the media and markets is the DXY, which compares the US dollar against a basket of major developed currencies, notably the euro, the Japanese yen and the British pound.

This index is useful for a quick reference to the currency market, but it is not so easy with deeper economic analysis. It has limitations because it does not reflect US trade links with emerging economies. For this reason, academic studies and central banks are more likely to work with the so-called trade-weighted broad dollar index, which weights individual currencies according to their importance in US foreign trade.

The Federal Reserve has long published these indices and explains their methodology on, for example, the FRED databasewhere the nominal and real dollar exchange rate can be tracked over time. It is the real exchange rate, adjusted for differences in inflation, that is key to assessing the competitiveness of the US economy in the long term.

Chart of the dollar index as of August 2022 (1W)

Why is the dollar weakening?

The reasons for a weakening dollar can vary widely and this is where one of the biggest investment fallacies lies, where a weaker dollar is automatically interpreted as a positive signal for stocks.

In some cases this is true, while in others a weaker dollar signals structural problems or a rising risk premium. The most common and, from the markets' perspective, relatively sound reason is a change in expectations about monetary policy. If investors come to believe that the Fed will cut interest rates faster than other central banks, the interest rate differential between the US and the rest of the world falls. This reduces the attractiveness of dollar assets and leads to a weakening of the currency. This scenario is often associated with rising equity markets, as lower rates mean a lower discount rate for future earnings and looser financial conditions.

A completely different dynamic is the weakening of the dollar in an environment of so-called risk-on sentiment. The US dollar has long acted as a global safe haven to which investors move in times of crisis and heightened uncertainty. As market sentiment improves and investors are willing to take on more risk, capital moves back into equities, commodities and emerging market currencies, leading to a weaker dollar.

Evolution of the USD/EUR currency pair since the beginning of this year (1D)

In this regime, a weaker dollar typically correlates with rising global equity indices and outperformance of non-US markets.

Historical analysis by the IMF has repeatedly shown that easing dollar financial conditions encourages capital flows to emerging markets and improves their economic growth, as well documented, for example, in studies published by the IMF.

However, there is also a less favourable scenario where the dollar weakens due to a loss of confidence in US fiscal policy or in the long-term stability of public finances. In such a case, investors demand a higher risk premium for holding US assets, which can be reflected not only in a weaker dollar but also in rising government bond yields. This type of dollar weakness is potentially dangerous for equity markets because it combines currency pressure with tighter financial conditions. World Bank study and IMF show that a sharp and uncoordinated weakening of the reserve currency can lead to higher volatility in global markets and a repricing of risk across asset classes.

Impacts on the economy

From a macroeconomic perspective, a weaker dollar has several direct impacts on the US economy. The first and most frequently cited effect is the improvement in price competitiveness of US exporters. A weaker currency makes U.S. goods and services cheaper abroad, which can boost export performance and improve the balance of trade. Empirical studies, such as papers published in the Journal of International Economics, however, show that this effect is not immediate and depends on the so-called J-curve effect, in which the trade balance first deteriorates in the short term before improving over time.

On the other hand, a weaker dollar makes imports more expensive, which has a direct impact on inflation. Higher prices for imported goods gradually spill over into consumer prices, especially for energy, electronics and consumer goods. In its research papers, the Federal Reserve has repeatedly pointed out that the pass-through of exchange rate changes to inflation is lower in the US than in smaller open economies, but certainly not negligible. This means that a prolonged weakening of the dollar can complicate the fight against inflation and affect central bank interest rate decisions.

US interest rate developments since 2019 (1M)

The impact of a weaker dollar on equity markets is differentiated and strongly sector-dependent. In general, US companies with a high proportion of foreign sales benefit from a weaker dollar as their foreign currency earnings increase when converted into USD. This is particularly the case for technology giants, pharmaceutical firms and industrial conglomerates. Analyses by investment banks, such as Goldman Sachs $GS, have long shown that approximately 40% of the revenues of S&P 500 companies come from abroad, making foreign exchange an important factor in profitability. Conversely, companies that are predominantly domestically focused and dependent on imported inputs may face pressure on margins.

Global implications

A weaker dollar also has a significant impact on global capital allocation. When the dollar weakens in an environment of loose monetary policy, commodity prices, which are predominantly priced in dollars, often rise. Gold, oil and industrial metals have historically had a negative correlation with the dollar, as confirmed by long-term statistics from databases such as World Bank. For investors, this means that a weaker dollar can act as a supportive factor for the commodity segment of the portfolio, not only through the prices themselves, but also through the shares of mining companies.

For European and Czech investors, the weakening of the dollar has another specific dimension, namely the currency translation of returns. If a Czech investor holds US equities without a currency hedge, a weaker dollar can reduce the koruna yield even if the dollar-denominated stock itself is rising. This is an often underappreciated factor that will be especially pronounced over longer investment horizons. Conversely, in periods of a strengthening dollar, foreign investors may paradoxically underperform US investors, even when equity indices are rising.

Is this just a phase of the current cycle?

In terms of longer-term cycles, the dollar moves in multi-year waves that are related to relative productivity, demographics, technological edge, and U.S. institutional credibility. History shows that periods of structural dollar depreciation often correspond with outperformance of foreign equity markets and higher attractiveness of real assets. This does not signal an end to the dominance of US markets, but rather a change in relative returns.

Conclusion

Summing up the whole issue, the weakening of the US dollar is neither good nor bad in itself. It is a signal that needs to be read in the context of monetary policy, global sentiment, the fiscal situation and the structure of the economy. For stock markets, a weaker dollar can be a strong supportive factor if it is the result of easing financial conditions. Conversely, if the dollar weakens due to a loss of confidence or macroeconomic imbalances, it may be a warning sign of higher volatility and lower returns. The current situation does not give us a clear signal for either direction despite rising equity markets and still rapidly growing US debt.

Alphabet’s acquisition of Intersect is not about sustainability optics or marginal efficiency gains. It is a recognition that the next bottleneck in artificial intelligence is no longer compute alone, but the ability to secure reliable, scalable power. As AI workloads grow exponentially, electricity is turning into a strategic constraint rather than a utility input.

By internalizing energy development, Alphabet reduces its exposure to grid delays, regulatory friction, and volatile pricing. More importantly, it gains control over project timelines—something increasingly critical as AI infrastructure races ahead of public utilities. This move places Alphabet closer to the logic of an infrastructure operator than a pure technology company.

Who is Intersect and what makes $GOOG so valuableto Alphabet

Intersect is not an electricity generator in the classical sense, nor is it a utility that operates a distribution network. It is a company that specializes in the design and construction of power projects for large industrial customers, particularly data centers. Its main task is to find suitable sites, secure permits, prepare technical solutions and then build power sources and storage facilities capable of delivering stable power in large volumes.

Crucially, Intersect often builds its projects close to the point of consumption. As a result, electricity does not have to flow through congested transmission grids, which are one of the main obstacles to further data centre construction in the US today. It is this model that makes Intersect a company that is extremely attractive to technology giants.

Why Alphabet is buying Intersect now

Alphabet has been getting to a point in recent years where having high-end chips and proprietary software is no longer enough. The development of artificial intelligence means a huge increase in electricity consumption, and without the certainty that it will be available in sufficient quantities and at the right time, a new data center cannot be launched at all.

With the acquisition of Intersect, Alphabet secures greater control over this critical input. It gains access to projects that are already under development or under construction and can better match the pace of computing capacity growth with energy availability. This isn't about trying to capitalize on the energy business, but about removing one of the major risks that could slow AI growth significantly.

From a management perspective, this is a defensive but very rational move. It reduces Alphabet's reliance on state-owned grids, lengthy permitting processes, and the uncertainty that exists today around future transmission capacity.

How does the acquisition fit into the long-term strategy?

Google has long been one of the largest data centre operators in the world, and the development of artificial intelligence reinforces this trend. Training large models and running cloud services requires a stable and continuous supply of power, which places new demands on infrastructure.

Intersect will remain a formally separate company, but its projects will be closely tied to Google's needs. Typical examples are projects where battery storage is being built alongside data centres. These help to smooth out fluctuations in power consumption and increase operational reliability, which is crucial for AI systems.

In this way, Alphabet is gradually moving from simply buying electricity to actively building its own energy infrastructure. This is a change that may become standard for most large technology companies in the years to come.

Impact on the technology sector as a whole

This acquisition clearly shows that the next phase of AI development will not only be limited by technology, but also by physical infrastructure. Electricity, permits and the availability of suitable sites are becoming factors that may determine where and how quickly new AI projects will emerge.

It is likely that other tech giants will follow suit. Companies that can secure stable energy sources will gain a competitive advantage. Others may face limits that cannot be solved by investing in chips or software alone.

What to take away from the acquisition from an investor's perspective

The purchase of Intersect is not a transaction that will have an immediate impact on the bottom line. It is a long-term investment in stability and predictability of future growth. In doing so, Alphabet is taking higher capital expenditures today to reduce risks in the future.

For investors, it's a signal that the company is counting on AI to remain a key pillar of its business for years to come. It also shows that Alphabet is willing to tackle problems that aren't visible on the financial statements but may determine its ability to grow in the long run.

If the trend continues, energy may become as much a strategic asset as data or computing power. By taking this step, Alphabet ensures that it will not be dependent on circumstances beyond its control in this area.

Agricultural demand is cooling, and Deere is no exception. Farmers are delaying equipment upgrades, construction activity is moderating, and order books no longer reflect the urgency seen during the post-pandemic boom. Yet what stands out this quarter is not the slowdown itself, but how little damage it has done to Deere’s underlying economics so far.

Margins remain resilient, cash generation is still strong, and management continues to prioritize pricing discipline over volume chasing. Instead of forcing growth, Deere is clearly positioning itself for the next phase of the cycle—protecting profitability now, preserving balance sheet flexibility, and ensuring that when demand returns, it does so into a structurally stronger business than before.

How was the last quarter?

The fourth fiscal quarter of 2025 delivered $DE lower year-over-year profitability, reflecting cooling demand, particularly in the large agricultural equipment segment. Net income was $1.065 billion, compared to $1.245 billion in the same period last year. Earnings per share thus fell from USD 4.55 to USD 3.93. This development is in line with market and management expectations, which have repeatedly warned throughout the year of a gradual weakening of commodity prices and pressure on farmers' investment activity.

However, at the revenue level, the quarter showed relative stability. Total sales and earnings rose 11% year-on-year to USD 12.4 billion, with net sales reaching USD 10.6 billion. This suggests that despite the cyclical downturn, demand in some segments, particularly in the smaller agriculture and construction sectors, remains solid. The company also benefited from geographic diversification and a broader customer base.

Discipline on the cost side was an important element of the quarter. While margins faced pressure, Deere was able to maintain operating efficiencies through production optimization, inventory management and an emphasis on a Smart Industrial operating model. This allowed the company to get through the quarter without significant cash flow erosion, which is key in a down cycle.

• Full presentation with results.

CEO commentary

CEO John May called fiscal 2025 one of the most challenging fiscal years in recent memory, but also emphasized that the company achieved "the best results for this phase of the cycle." He said the structural changes Deere has implemented in recent years, particularly greater manufacturing flexibility, a stronger link to services and technology, and better working with capital, have taken full effect.

May reiterated that the goal is not to maximize volumes at any cost, but to protect return on capital and long-term shareholder value. This approach is evident not only in the results, but also in the cautious tone of the outlook, which reflects the realities of the market without undue optimism.

Outlook

For fiscal 2026, management expects net income to be in the range of $4.0 billion to $4.75 billion, which would represent a further year-over-year decline from fiscal 2025. This outlook is based on the assumption that the large agricultural equipment segment will be near a cyclical low in 2026, while the smaller agriculture, turf and construction segments should gradually show signs of improvement.

The firm also notes continued pressure on margins due to tariffs, higher costs and geopolitical risks. On the other hand, it is betting on tight inventory control, limited capital expenditure and continued operational improvements to cushion the negative impact of weaker demand. Management expects 2026 to represent a stabilization phase rather than a return to growth.

Long-term results

Looking at a longer time series, it is apparent how significantly Deere's results have fluctuated with the cycle in recent years. Fiscal 2024 brought a decline in sales to $50.5 billion from the previous $60.2 billion, clearly showing a retreat from record levels. Profitability declined even more sharply, with net income down more than 30% year-over-year to $7.1 billion and EPS falling from $34.8 to $25.7.

But at the same time, the long-term data shows that even after this decline, Deere remains structurally stronger than in previous cycles. Both operating profit and EBITDA are still well above 2021-2022 levels, suggesting that the company has been able to move its performance base higher. Higher contributions from software, services, precision farming and better pricing discipline are playing a significant role.

Shareholding structure

Deere's shareholder structure is stable and strongly institutional. The institution holds approximately 83% of the stock, with JPMorgan Chase, Vanguard, BlackRock and State Street among the largest investors. Insider participation is minimal, which is typical for a firm of this size and nature. High institutional participation also increases the emphasis on capital discipline, returns and long-term strategy.

Analyst expectations

Analysts view Deere as a firm that is at the bottom of the cycle, not in structural decline. The consensus consensus is that 2026 will be a transition year, with limited growth and pressure on profitability, but with the potential for improvement in the years ahead as farm income and farmer investment stabilize.

Commodity prices, global trade policy, tariff developments and the company's ability to further develop its high-margin technology and service segments remain key drivers going forward. It is these that may determine how quickly and how strongly Deere can rebound from the next cycle.

Fair Price

Looking at the markets today: AI stocks are expensive, gold is at highs, defense and energy have already seen much of their gains and at the same time nobody really knows when and how quickly interest rates will come down. Of course there are exceptions.

👉 But where would you invest new money today and why?

Biotechnology is often associated with binary risk: a single clinical trial, a regulatory decision, or a headline can dramatically reshape a company’s valuation overnight. Yet alongside this high-volatility segment exists a quieter corner of the healthcare market that operates on very different principles. These businesses are not dependent on unproven pipelines or speculative science. Instead, they generate revenue from already approved therapies, typically focused on rare or narrowly defined diseases where pricing power is strong and competitive pressure is structurally limited.

What makes this model compelling for long-term investors is its blend of defensiveness and organic growth. Demand is largely insulated from economic cycles, patient populations are clearly defined, and treatments are often chronic rather than one-off. The real investment question is not whether a breakthrough will occur, but whether management can translate these advantages into durable operating leverage, predictable cash flow, and disciplined capital allocation—without introducing unnecessary risk into an otherwise resilient business model.

Top points of the analysis

• The firm operates as a fully commercialized player in rare diseases, where barriers to entry are high and direct price competition is typically limited.
• It has been growing double-digit growth in revenue for a long time while significantly improving operating leverage, which has led to sharp growth in operating and net income.
• Gross margins have remained exceptionally high and the business combines strong pricing power with efficient operations.
• The balance sheet is stronger than average, with high liquidity, low debt and a net cash position that significantly reduces financial risk and increases strategic flexibility.
• Valuation multiples under TTM metrics appear rather conservative relative to margins, return on capital and business stability, creating room for revaluation if profitability trends are maintained.
• A planned cash acquisition of another company in the rare disease segment is emerging as a medium-term growth trigger, which management believes should be accretive to EPS.

Company presentation and business model

BioMarin Pharmaceutical $BMRN is a specialty biotechnology company focused on developing, manufacturing and commercializing therapies for rare genetic diseases. From an investment perspective, it is significant that it is not a typical "R&D-only" biotech whose value is based on a single experimental program. The company is already at the commercial stage, i.e., generating revenues from multiple approved therapies, and its performance is much more driven by product mix, pricing discipline, manufacturing capacity, and the efficiency of the commercial apparatus than by pure clinical uncertainty.

Core product portfolio

Orphan drugs model has several recurring economic advantages. The patient population is small, but diagnoses tend to be clearly defined and treatment is often long-term. This increases revenue visibility because in many cases there is not a one-off "peak sales" wave, but rather a stable revenue base that can be expanded over time through better diagnostics, geographic expansion and optimisation of treatment protocols. In an environment where there is high clinical need and limited alternatives, a company typically has greater pricing power than in mass indications, which translates into margins.

Operational architecture is also important. The company has its own manufacturing facilities and extensive in-house expertise, which reduces dependence on suppliers and can stabilize margins even when there is pressure on capacity and quality in biopharma. At the same time, it means that the company must manage the balance between investment in production and return on capital over the long term. After all, in this type of business, the winner is not the one who "spends the most", but the one who can produce consistently, scaling costs slower than revenues while maintaining regulatory quality.

Competition and market position

Competition in rare diseases is different from conventional pharmaceuticals. It is not primarily a fight for a share of a huge market, but a fight for specific indications, for relationships with specialty centers, for the ability to get therapies into reimbursement schemes, and for the trust of regulatory authorities. Direct competitive clashes tend to be less frequent because each therapy usually targets a specific genetic mechanism or a narrow patient group. However, this does not mean that the environment is risk-free. Rather, the risk shifts to scientific substitution, the emergence of alternative technologies, and the pricing policies of payers, which may increase the pressure to demonstrate long-term benefit for expensive therapies.

Compared to smaller biotech firms, the company has a major advantage in global commercial infrastructure and the ability to fund development without ongoing shareholder dilution. Smaller players often achieve approval but then face limits in distribution, access to payers and in building manufacturing capacity. In contrast, large pharmaceutical companies are up against a firm with greater specialisation, greater focus and usually a faster ability to translate investment into profitability because it does not manage dozens of mass portfolios and does not have such extensive 'organisational burdens'.

From an investment perspective, the key is that this position creates a natural strategic consolidator role. Indeed, in the orphan segment, it often pays to add assets that fit into the existing network, as the fixed costs of the commercial apparatus and production can be spread over a larger volume of sales. If the M&A discipline is sound, it is this "soft synergy" that can increase margins and strengthen the portfolio's defenses against single product fluctuations.

Management and capital discipline

CEO: Alexander Hardy

• In the CEO role since 2017; took over the business during a period of high investment and low profitability and guided it through the transition to a fully profitable phase.
• Under his leadership, operating leverage improved significantly - revenue growth was accompanied by much slower cost growth, leading to a jump in EBIT and net profit.
• He has a long track record of commercializing specialty drugs and building a global infrastructure for orphan drugs, which is key to scaling this type of business.
• He is considered a CEO with an emphasis on capital discipline, not aggressive expansion at the cost of shareholder dilution or excessive debt.
• He actively pursues a strategy of selective acquisitions that fit into the existing platform and have the potential to be accretive to earnings per share, not just growth "on paper".
• His investor communications focus more on operational metrics, cash flow and return on capital than pure scientific or clinical storytelling.

In biotech, the capital discipline is often a bigger factor than the science itself. Companies can have excellent programs but still destroy value through poor cost management, overly expensive acquisitions, or persistent shareholder dilution. The long-term numbers provided show that the company has been able to translate revenue growth into significantly improved operating results in recent years, suggesting that managing the cost base and operating leverage has been a priority.

Particularly important is the rate of growth in operating costs compared to revenue growth. In 2024, sales grew by around 18%, while operating costs only grew by around 5%. This asymmetry is the essence of operating leverage and demonstrates that the company is not in a "buy growth at any cost" mode, but instead is monetizing existing infrastructure and increasing efficiency. In a sector where it is common for costs to outpace revenues, this is an important signal to investors.

Financial performance

The long-term numbers paint a picture of a company that is growing consistently while undergoing a transition to a significantly more profitable phase. Revenues have increased from $1.846 billion in 2021 to $2.854 billion in 2024. The growth rate has been double-digit sequentially: approximately 13.5% in 2022, 15.4% in 2023, and 18.0% in 2024. Importantly for an investor, this is growth that is not a one-off. On the contrary, it has the character of a trend, which is more valuable in biopharma than an exceptional shot in one year.

Even more striking is the trend in gross profit. Gross profit grew from $1.376 billion in 2021 to $2.274 billion in 2024. Gross profit grew faster than sales, implying an improvement in gross margin and confirming the economic strength of the portfolio. On TTM metrics, the company has a gross margin of 80.35%, which is exceptionally high even within the healthcare industry and represents a key "firewall" for the investment story. If a company holds such a high gross margin, it has much more room to absorb pricing pressures, invest in development or weather weaker periods without a collapse in profitability.

But the biggest structural shift has taken place at the level of operating profit. In 2021, operating profit was negative; by 2022, the company had already achieved an operating profit of around US$161 million, in 2023 around US$186 million, and in 2024, a jump to US$484 million. This jump is not a marginal improvement, but a regime change. In practice, it means that the cost base has been set up so that revenue growth dramatically boosts profits, not just keeps the firm "afloat."

The same story can be seen in net income and EPS. Net income went from minus $64 million in 2021 to $142 million in 2022, $168 million in 2023, and $427 million in 2024. Earnings per share went from negative to $2.25 in 2024, with diluted EPS of $2.21. From an investor's perspective, it's important that earnings growth isn't just accounting. It is also accompanied by the ability to keep the share count in check, as the average share count grew only modestly. This reduces the risk of profitability "dissolving" into aggressive stock compensation.

Cash flow and earnings quality

We do not have a detailed breakdown of cash flow in the data provided, but some metrics still suggest the quality of cash generated. A price-to-cash flow ratio of 8.74 and an operating cash flow ratio of 1.63 imply that the firm is generating operating cash in excess of current liabilities and that cash flow is not a cosmetic addition to accounting earnings. In the context of biopharma, this is crucial because much of the sector only shows accounting profits in certain years, while cash is weak in the long term due to high investment and research spending.

Crucially, the economics of the orphan-drug model typically support solid cash conversion because returns are relatively predictable and production, while quality intensive, can be highly profitable when scaled up. Here, a gross margin of over 80% increases the likelihood that the firm will be able to fund strategic moves largely from internal sources rather than from repeated share issues. For the investor, this means lower dilution risk and greater confidence that EPS growth will actually translate into value per share.

At the same time, it must be perceived that biopharma businesses may experience temporary fluctuations in cash flow due to timing of inventory, production investments or changes in reimbursements. Therefore, monitoring the trend and the company's ability to maintain operating margins and profitability is crucial for a long-term view. The TTM metrics show that the company has an operating margin of 18.04% and a net margin of 15.81%, which is very solid for biotechs and gives the assumption that cash generation will not be episodic but structural.

Balance sheet and financial stability

The balance sheet is one of the strongest parts of the investment profile. Total assets in 2024 are approximately US$6.989 billion and equity is US$5.658 billion, implying a high equity-to-funding ratio and low reliance on debt. Total liabilities fell to US$1.331 billion in 2024, a significant improvement year-on-year. The result is a very conservative financial structure that buffers risk even in less favourable periods, such as temporary reimbursement pressure or investment peaks.

Debt is low not only in absolute terms but also in relative terms. Total debt has fallen to about $649 million in 2024 and the company has a net cash position because net debt is negative, i.e. cash exceeds debt. This is a strong argument for an investor as it reduces rate sensitivity, increases flexibility, and also opens up the ability to fund growth moves without the need for aggressive capital operations. In the TTM metrics, we see debt to equity of 0.10 and debt to assets of 0.08, confirming extremely conservative leverage.

Liquidity is above standard. The current ratio of 4.83, quick ratio of 2.84 and cash ratio of 1.57 show that the short-term financial position is very comfortable. Working capital is around $3.1 billion, according to TTM, which provides the firm with an operating buffer and the ability to absorb even larger strategic expenditures without stress. In addition, the interest coverage of 51.56 indicates that even with debt servicing, interest coverage is very strong. Finally, the Altman Z-score of 5.10 corresponds to a very low risk profile of financial distress.

Valuation

The valuation picture is relatively sobering for the type of business. A market capitalization of around $10 billion and an enterprise value of $9.3 billion indicate that the market is valuing the company at only a modest premium above the level of a "mature" biopharma, although margins and return on capital appear above normal. The P/E of 12.31 is surprisingly low for a profitable firm with double-digit growth and high margins, and may reflect investor skepticism about whether current profitability is sustainable and how much risk future competition or pricing pressures pose.

A P/S of 1.92 is also conservative, especially in light of gross margins of over 80%. For companies with similar gross margins, the market tends to be willing to pay higher earnings multiples if it believes in the long-term sustainability of margins and the ability to translate sales into growing EPS. P/B of 1.65 and P/CF of 8.74 then suggest that the firm is not priced as a "hypergrowth" story, but rather as a quality business with a reasonable price. For an investor, this opens up a logical question: is this discount justified, or is it an opportunity if the company can prove that 2024 profitability is not a peak, but a new base.

Return on equity plays an important role here. ROE of 13.98%, ROA of 10.80% and ROIC of 10.77% in TTM metrics show that the company is creating value above the cost of capital and doing so in a low debt mode. This improves the quality of earnings because they are not "leveraged" out. If a company can maintain a ROIC around 10% while growing at double digits, a conservative valuation can become a catalyst for earnings in its own right as the room for revaluation is obvious.

Potential growth catalyst

Company announces cash acquisition agreement Amicus Therapeutics $FOLD for approximately $4.8 billion with an offer price of $14.50 per share and a premium of around 33% to the target company's latest closing price. Completion is expected in the second quarter of 2026 and the company plans to fund with a combination of cash and approximately $3.7 billion of non-convertible debt. Management has disclosed that the transaction is expected to improve adjusted diluted EPS in the first 12 months following completion and significantly increase non-GAAP diluted EPS beginning in 2027.

This type of acquisition makes strategic sense, particularly in the orphan segment, as the value-add often lies not in "discovering a new market" but in scaling existing assets more efficiently. If the buyer has an established global commercial infrastructure and in-house manufacturing capabilities, it can monetise the acquired portfolio at a lower marginal cost than a smaller standalone player could. This is exactly the logic that can generate EPS accretion in such a transaction even without aggressive assumptions about revenue growth.

From an investment perspective, however, it is important to distinguish strategic logic from integration reality. Financing with new debt means that the firm will temporarily move away from today's extremely conservative balance sheet. The question is not whether the balance sheet will "collapse", but whether the increased leverage will be offset by real profit accretion and whether integration will increase the cost base so that some of the synergies will disappear. If management manages to maintain operational discipline, this transaction can act as an earnings per share growth amplifier and also as an argument for re-pricing valuations towards higher multiples.

Investment risks

• High reliance on a limited number of key products means sensitivity of results to regulatory, safety or competitive events.
• Long-term payer and government pressure on orphan therapy pricing may gradually limit pricing power and revenue growth rates.
• Regulatory changes in the U.S. or Europe may reduce the attractiveness of the orphan segment.
• Integration of acquisitions may not deliver expected synergies in the projected timeframe.
• Higher post-M&A debt will temporarily reduce financial flexibility compared to the current very conservative profile.
• Technological advances in alternative treatment approaches may disrupt the current treatment model in the long run.

Where the company can succeed

• A stable orphan-drug model with high barriers to entry supports above-average margins and predictable cash flow over the long term.
• Further revenue growth has the potential to significantly bolster earnings per share thanks to the infrastructure and operating leverage already in place.
• Selective acquisitions can be accretive due to the ability to scale acquired assets efficiently.
• Geographic expansion and better diagnostics can gradually increase the number of patients treated.
• Maintaining a high return on capital increases the likelihood of revaluation.
• A strong balance sheet provides room to respond to opportunities in a less favorable market environment.

Investment scenarios

Realistic scenario

The realistic scenario relies on the company maintaining double-digit revenue growth, maintaining high gross margins and continuing to develop operating leverage. In this scenario, the 2024 profitability would not prove to be a temporary anomaly, but a new "baseline" for the company from which to grow. At the same time, if ROIC remains around 10% and the balance sheet remains comfortable after any debt financing, the market may gradually stop valuing the company as a cautious biopharma and move valuations closer to premium quality healthcare titles.

Optimistic scenario

The optimistic scenario adds successful integration of the acquisition with visible EPS accretion and better monetization of the acquired portfolio due to the existing infrastructure. In practice, this would imply faster earnings per share growth than revenue growth, as synergies are usually reflected in margins and fixed costs. In such a situation, a combination of rising EPS and re-rating of valuation could generate above-average returns even without extremely aggressive growth assumptions.

Pessimistic scenario

The pessimistic scenario is typically associated with pricing pressure, regulatory complications, or the cost base starting to grow faster than revenue again, blunting operating leverage. In addition, in the M&A scenario, there is a risk that integration costs exceed expectations and that the projected contribution to EPS is delayed. But the key takeaway is that the company has a significantly larger "time cushion" than most biotech companies due to today's very strong financial position. This reduces the risk of forced shareholder dilution-type moves at inopportune times.

What to take away from the article

• This is a profitable, commercialized biotech with a structurally advantageous rare disease model that delivers a more stable profile than the typical "clinical" biotech.
• Long-term revenue growth is consistently double-digit, while the company has significantly strengthened operating leverage, which translates into a jump in operating and net profit growth in 2024.
• Gross margins in excess of 80% and solid operating and net margins create strong business resilience and room for reinvestment and strategic moves.
• The balance sheet is exceptionally strong, with high liquidity, low debt and a net cash position, reducing financial risk and increasing flexibility.
• Valuation by TTM metrics looks conservative relative to the quality of the business and return on capital, which increases attractiveness to a long-term investor if the company maintains its profitability trend.
• A planned cash acquisition can act as a medium-term EPS growth amplifier, but will also temporarily increase leverage, so execution and integration discipline will be key.

After years of regulatory hesitation, Europe is stepping directly into the frontline of autonomous mobility. London is emerging as the first major European city where robotaxis will not merely be tested, but deployed in real urban conditions. The convergence of Uber, Lyft, and China’s Baidu signals a shift from controlled pilots to competitive, market-driven experimentation.

What makes London unique is not just its size or density, but its regulatory posture. The UK is positioning itself as a proving ground where technology, safety, and scalability collide under real-world pressure. For investors, this moment matters: cities that successfully absorb autonomous transport early tend to shape platform dominance for years to come.

What exactly are Uber, Lyft and Baidu up to

The crux of the deal is the integration of autonomous cars Apollo Go RT6 from Baidu $BIDU into London's Uber $UBER and Lyft $LYFT networks . The deployment is planned for 2026 and will be the first time Chinese robotaxi technology will directly connect with US ride-hailing platforms in a European metropolis.

Key features of the project:

• Driverless vehicles will be available directly on the Uber and Lyft apps
• Baidu to supply autonomous driving technology and fleet of cars
• Uber and Lyft will provide demand, pricing and operational infrastructure

This move makes London the place where three different approaches collide for the first time in Europe: US platforms, Chinese autonomy and the UK regulatory framework.

Why the UK is ahead of the rest of Europe

The main reason why robotaxis are taking off in the UK is Automated Vehicles Act 2024. This law addresses a problem on which the EU has long failed: accountability.

While Europe is still sorting out whether the manufacturer, the software or the 'driver' is responsible for an accident, UK legislation simplifies things. It shifts legal responsibility to the so-called 'driver'. authorised self-driving entity - the company that operates the autonomous system.

This has major implications:

• Regulatory uncertainty is significantly reduced.
• allows commercial operation, not just testing
• opens the door to faster scaling of fleets

For technology firms, this is a clear signal that Britain wants to be a leader in autonomous mobility, not a bystander.

Competition is growing: Waymo, Wayve and the global race

Uber and Lyft are not alone in London. Alphabet's $GOOG-owned Waymo has already begun human-monitored trials in the city, and British startup Wayve is preparing for fully autonomous operation in 2026. What's more, Wayve is betting on a different philosophy - called mapless AIwhich learns to drive without detailed HD maps.

Wayve has made a roughly billion-dollar investment led by SoftBank and Uber, showing that London is becoming a magnet for capital and talent. Similar dynamics can be seen globally:
- Baidu and WeRide are expanding into the Middle East and Switzerland
- US has strong hubs in San Francisco and Austin
- China is building mass operations in Wuhan, for example

This puts London in the top league of the world's robotaxi cities.

Economic reality: technology promising, profit uncertain

Although robotaxis promise safer, cheaper and greener transport, investors remain cautious. Publicly traded companies like Pony.ai or WeRide are still losing money and the cost of autonomous fleets remains extremely high.

For Uber and Lyft, this presents a dilemma:

• robotaxis can reduce driver costs in the long run
• but in the short term, they can squeeze margins due to high investment
• threatens to cannibalize the existing model

That's why analysts are increasingly talking about hybrid model - a combination of autonomous cars and human drivers to manage peaks in demand and better manage prices.

What this means for Uber, Lyft and investors

For Uber, London is the next step in building a global autonomous strategy without the company bearing the full technological risk. For Lyft, the UK project carries even more weight - it fits in with its international expansion following its acquisition of European app FreeNow.

From an investment perspective:

• Uber is strengthening its position as a platform, not a technology maker
• Lyft seeks to reduce dependence on the US market
• Baidu gains coveted entry into the European market

If London's model proves successful, it could become a template for other metros. And therein lies its real significance: it is not just a few autonomous cars, but a test of the future structure of urban mobility.

Conclusion: London as a litmus test for the future of mobility

What happens in London over the next few years will have an impact far beyond the UK. It will not just be a test of autonomous cars in dense urban traffic, but a test of the whole ecosystem: legislation, operational economics, technological reliability and public willingness to embrace fundamental change in transport. London is an extremely challenging environment - chaotic junctions, historic infrastructure, unpredictable road user behaviour - which is why its outcome carries so much weight.

If robotaxis can be operated here safely, smoothly and at least on a path to economic sustainability, it will greatly strengthen the case for their mass deployment in other world capitals. Conversely, failure could slow down the entire sector for years and confirm investor fears that autonomous mobility will remain a capital-intensive experiment for longer without a clear return.

From an investment perspective, it is important to perceive that Uber and Lyft are not playing for immediate profit, but for strategic positioning. Robotaxis are not a short-term revenue catalyst, but a long-term bet to restructure urban transport. Platforms that build regulatory know-how, partner relationships and operational data early on can dominate the mobility distribution layer in the future - regardless of who supplies the hardware itself.

London is thus becoming a kind of global reference market. Regulators in the EU, the US and Asia will be watching its development closely, as will automakers, chipmakers and infrastructure investors. The outcome will influence not only where robotaxis spread first, but also whether autonomous transport becomes a real business or remains a technology with great potential but limited application.

Explore four healthcare companies that combine attractive dividend yields with valuation levels suggesting they are trading below their fair prices. These names stand out in a sector known for resilience and predictable cash flows, offering potential income and value to long-term investors. Using data-driven insights from the Fair Price Index, we break down why these stocks deserve attention now.

An introduction to the sector

The healthcare sector has long been one of the most stable parts of the stock market. Unlike cyclical sectors such as industrials or technology, its performance is not directly dependent on economic growth or consumer sentiment. People need medicines, healthcare and medical treatments regardless of whether the economy is growing, stagnant or in recession. It is this resilience that makes healthcare an attractive area for investors looking for a combination of stability, regular income and long-term capital protection.

In recent years, however, healthcare stocks have been more on the periphery of investor interest. Market attention has focused on technology firms and artificial intelligence, while pharmaceutical companies have faced pressure on drug prices, regulations and a temporary drop in demand for some products as the pandemic has subsided. As a result, many high-quality healthcare companies now trade at valuations that are significantly lower than both their historical average and those of the broader market.

One of the key themes of the day is the dividend. In an environment of higher interest rates and more volatile than usual markets, many investors are beginning to place renewed emphasis on regular income from their investments. Healthcare companies are among the traditional dividend-paying titles that are able to pay a dividend not only in good times but also during economic slowdowns.

Another important factor is a fair price. According to the Fair Price Index on Bulios, which rates companies based on DCF and relative valuations, the healthcare sector is extremely interesting. Several pharmaceutical companies come out as undervalued according to this index, despite the fact that their financial situation remains very strong.

From a risk-return perspective, the healthcare sector thus offers an attractive combination. On the one hand, there is stable demand, high barriers to entry for competitors and strong cash flows. On the other, relatively low market expectations, which have translated into lower valuations.

Our team has carefully selected 4 stocks that meet all these metrics and now appear to be at least very interesting in the market.

Bristol Myers Squibb $BMY

This company is one of the largest and longest running pharmaceutical companies in the world. Its business is primarily based on the development and sale of drugs in oncology, immunology and cardiovascular disease. It is this focus on specialty therapies with high added value that has long enabled the company to generate stable revenues and above-average operating margins.

Between 2021 and 2023, the company was able to maintain margins above 13%, and often above 15%. As a result, its business prospered and profits increased. In 2023, the company reported a net profit of $8 billion.

In recent years, however, Bristol Myers stock has come under pressure. This was not due to a collapse in earnings or a dividend issue, but primarily due to market concerns about patent expirations on key drugs and uncertainty around the pace of replacing those shortfalls with new products. This investor fear has had a significant impact on the share price, which has gradually fallen well below both historical valuations and fair values calculated on the basis of long-term fundamentals.

Since the peak in March this year, the share price has fallen as much as 30% in the next two months. It is currently down less than 3% since the start of this year, which was at $56 per share. In fact, since the beginning of November, $BMYstock is up 27.7%.

From a dividend investor's perspective, Bristol Myers Squibb is one of the most interesting titles in the entire healthcare sector. The company's dividend has been well above 3% in recent years. Today, the company's current annual yield is 4.65%. Until recently, the yield was closer to 5 percent. But the key is not the yield number itself, but its sustainability. The company has long generated strong operating cash flow that amply covers dividend payments, even in periods of increased R&D investment.

It is the ability to generate cash that is critical for pharmaceutical companies. Bristol Myers has a business built on drugs that are often reimbursed by health systems and insurance companies, which means relatively stable demand regardless of the economic cycle. Even in periods of economic slowdown or increased inflation, the firm's revenues remain resilient, making it a defensive title suitable for investors looking for regular income.

According to the Fair Price Index, Bristol Myers Squibb shares are currently trading below their fair value. The Fair Price Index suggests that the market is pricing in a rather pessimistic scenario in which new drugs do not fully replace the shortfalls of older products. This view may not be entirely justified, however, as the company has a large portfolio of candidates in clinical development that could contribute significantly to revenues in the coming years.

Now, the valuation comes out such that $BMYstock is trading 23.6% below its fair market price. From today's values (one share trades around $54 on the market), that would mean the stock would have to rise to $67 to be at its fair price. Just for perspective, the market last valued$BMY stock this high in June 2023.

Another important factor is debt. While the company has increased debt in the past in connection with acquisitions, its debt remains manageable and is backed by stable cash flows.

Overall, Bristol Myers Squibb thus represents a typical example of a stock that has fallen out of favor with the market due to fears about the future rather than a real deterioration in current performance. The combination of an above-average dividend, stable cash flow and a valuation below fair value makes it an interesting candidate for long-term investors looking for income and willing to accept short-term volatility in exchange for a higher dividend yield.

Merck & CO. $MRK

Merck has long been one of the best-performing pharmaceutical companies in the U.S. market and one of the most stable dividend stocks in the healthcare sector. The company has more than a century of history, during which it has built a reputation for producing high-value-added drugs, strong research, and a very conservative approach to finance. It is this combination that makes it an interesting candidate for investors seeking not only regular dividend income but also some degree of capital protection during periods of heightened market volatility.

In terms of its earnings structure, Merck is a typical example of a company that has managed to combine growth potential with financial stability. A key role here is played in particular by the oncology drug Keytruda, which has become one of the best-selling drugs in the world and accounts for a significant part of the company's revenues. Although a high dependence on a single product could be perceived as a risk, Merck is well aware of this fact and has invested in the expansion of its portfolio over the long term as well as in the development of new indications that further extend the life of this drug.

In terms of dividend, Merck is one of the companies that does not pay an extremely high yield, but rather relies on sustainability. The dividend yield has recently stood at 3.36%, which is above average compared to the broader market. Importantly, however, the dividend is backed by strong operating cash flow and a reasonable payout ratio. This means Merck is not forced to go into debt just to maintain the dividend, which is often a problem with lower quality dividend paying titles.

According to the Fair Price Index on Bulios, Merck currently comes out as undervalued. The company's market valuation is relatively low relative to its earnings, cash flow stability, and the quality of its product portfolio. This disconnect between fundamental value and market price is one of the main reasons why Merck regularly appears among the favorites of long-term value investors.

Moreover, the trend on $MRKstock is quite similar (at least this year) to that of $BMY. The first half of the year was not very favorable for the stock price, but over the past few weeks the stock has been making up for the losses it had previously accrued. For 2025, Merc & Company shares are up 2.5%.

Another strong argument in favor of Merck is its balance sheet. The company maintains a healthy level of debt and has sufficient cash reserves to fund research, acquisitions, and potential revenue shortfalls due to patent changes. This is crucial in the pharmaceutical sector, as the development of new drugs is capital intensive and the return on investment is often calculated over a decade or more.

In terms of future developments, it is important to note that Merck is actively working to diversify its revenues. In addition to oncology, it is also strengthening in vaccines, cardiovascular diseases and rare diseases. These segments not only have high social value but also attractive economic potential, as demand for specialty drugs has been growing over the long term, regardless of the economic cycle.

Pfizer $PFE

Pfizer is currently one of the most discussed pharmaceutical companies in the U.S. market for several reasons. On the one hand there is a strong brand, a long history and a robust research background, and on the other hand a significant decline in sales after the withdrawal of extraordinary revenues from covid products. It is this combination that has put Pfizer's shares under pressure, which has had a significant impact on their valuation. At the same time, however, it opened up the space for dividend-oriented investors.

The basic fact that cannot be overlooked is the dividend amount. Pfizer is now one of the highest dividend yielding companies in the entire healthcare sector. The dividend yield currently stands at 6.83%, a value that is rather exceptional in the US market. Such a high yield is not the result of aggressive dividend increases, but primarily the result of the share price decline in recent years. Since the absolute peak reached in 2021, the stock is now 59% lower in price.

Pfizer's dividend policy has long been conservative. The company has paid a dividend continuously since 2006 and has been able to maintain payouts even during periods of heightened volatility. From a cash flow perspective, the dividend is currently still covered by operating cash flow, although admittedly the cover is not as comfortable as in the pandemic years.

The main reason for the decline in sales was the normalisation of demand for vaccines and covid-related medicines. This development was expected, but the market reflected it in the share price very sharply. Pfizer thus moved from being a growth pharmaceutical leader to a stable but temporarily weakened dividend stock in a short period of time.

According to the metrics tracked on Bulios, Pfizer stock is trading below its estimated fair value. The Fair Price Index suggests that the market is currently pricing in a rather negative scenario going forward, and is only reflecting the potential of the new product portfolio to a limited extent. As a result, the company's fair intrinsic price now stands at $33.79, up 34.1% from today's price.

Pfizer has long been one of the highest spending companies on research in the healthcare sector. These investments weigh on profitability in the short term, but in the long run are key to restoring growth. The market tends to penalize these investments in periods when new revenues are not immediately visible, contributing to the stock's undervaluation relative to its long-term potential.

From a balance sheet perspective, Pfizer is not without risk, but neither is it in a critical state. The company carries higher debt than some competitors, a result of its acquisition strategy of recent years. At the same time, it has ample liquidity and stable access to capital markets. Rating agencies continue to rate Pfizer as an investment-grade company, which is important for keeping funding costs low.

For dividend investors, the sustainability of the payout is a key issue. In Pfizer's case, the current dividend is relatively safe in the short term. Management is focused on stabilizing the business and returning to earnings growth rather than aggressively increasing the payout to shareholders. This is consistent with the current stage of the company's life cycle.

Thus, Pfizer is a typical candidate for investors seeking dividend income and willing to accept higher share price volatility in the short term. Within the healthcare sector, it is one of the few companies today that combines a very high dividend yield with a relatively low valuation relative to historical standards.

Amgen $AMGN

Amgen represents a specific but very important part of the healthcare sector. Unlike traditional pharmaceutical companies, which have a broad portfolio of drugs across therapeutic areas, Amgen has long profiled itself as a biotechnology company focused on highly specialized treatments. Its key competitive advantage is its deep expertise, strong research and ability to monetise its own innovations over the long term. It is this combination that makes it an attractive title not only for growth-oriented investors, but in recent years also for dividend investors.

In terms of size and stability, Amgen is one of the largest biotechnology companies in the world. The company has a global footprint, a strong negotiating position vis-à-vis health insurers and regulators, and, above all, stable cash flows. This is quite exceptional in the biotech sector, as many smaller players are dependent on one or two key products and often operate at a loss. Amgen, on the other hand, has long generated high operating profits and free cash flow, which it uses to pay dividends and buy back shares.

In terms of dividend, Amgen is one of the most attractive titles within biotechnology. The dividend yield has been above 3% in recent years (3.08% to be exact), and the company has not only paid a regular dividend but also increased it over time. Importantly, dividends are not paid at the expense of financial stability. On the contrary, Amgen has a very solid long-term dividend payout to earnings and free cash flow ratio, suggesting that the dividend is sustainable even in a less favorable economic environment.

The structure of the firm's portfolio plays a significant role in Amgen's investment story. This includes several established drugs that generate steady revenues, while also investing heavily in the development of new therapies. This reduces the risk of a sudden drop in revenues if patent protection for one particular product expires. In addition, Amgen has strengthened significantly in recent years through acquisitions that have expanded its research capabilities and market reach.

According to the Fair Price Index, the stock is trading below its fair value. This is a relatively unusual combination for a stable biotech company with a dividend above 3%. This is because the market often either values biotechs very highly because of expected growth or, conversely, penalizes companies with lower rates of innovation. Amgen is between these two extremes. The investment potential based on DFC and relative valuation is as high as 17.7% for this company.

An important factor often cited by analysts for Amgen is its resilience to economic cycles. Healthcare spending tends to remain relatively stable even during economic slowdowns, and the specialty therapies that Amgen focuses on are among the high-priority segments. This means that the company is not heavily dependent on consumer demand or short-term market fluctuations, which increases its attractiveness as a defensive component of the portfolio.

From a financial perspective, Amgen has a relatively robust balance sheet. While it uses debt to fund acquisitions and optimize its capital structure, its debt remains manageable given the size and stability of its cash flows. Interest expense is well covered by operating profit, which reduces risk in a higher interest rate environment. It is this financial discipline that allows the company to combine investment in research, dividend payments and share buybacks without having to significantly increase debt.

Amgen therefore stands out in its field, so to speak. Its specialization, strong cash flow, sustainable dividend, and relatively conservative valuation make Amgen one of the most interesting dividend stocks in the healthcare sector.

Conclusion

The healthcare sector has long been one of the most volatile parts of the stock market, largely due to non-cyclical demand, strong regulation and a high barrier to entry for new players. In an environment of heightened uncertainty, fluctuating interest rates, and inflated valuations in other sectors, pharmaceutical companies offer a combination that is the exception rather than the rule in today's market: stable dividend yields, strong cash flows, and valuations that are below estimated fair value for some titles.

The companies analyzed show that a high dividend alone need not be a warning sign if it is backed by profitability, a robust balance sheet, and a long-term ability to generate cash. It is the combination of an above-average dividend yield and relative undervaluation according to the Fair Price Index that creates an interesting contrast to a market that is otherwise predominantly growth-oriented.

Dell’s latest quarter confirms that the company is no longer defined by the old rhythm of PCs and traditional servers. What once looked like a mature, cyclical hardware business is increasingly transforming into a critical pillar of the global AI build-out. The momentum is not coming from a temporary demand spike, but from Dell’s deep integration into large-scale data center deployments where speed, reliability, and execution matter more than brand visibility.

The real shift is strategic. Dell has positioned itself at the intersection of hyperscale computing, enterprise AI adoption, and mission-critical infrastructure. As AI workloads grow in complexity and scale, customers are prioritizing partners who can deliver complete systems, not just components. Q3 highlights that Dell is capturing this demand at an accelerating pace, reshaping both its revenue mix and its long-term investment profile.

How was the last quarter?

In the third quarter of fiscal year 2026, Dell Technologies $DELLrevenue reached $27.0 billion, representing 11% year-over-year growth and the highest level of revenue the company has ever reported in a third quarter. Growth was primarily driven by the Infrastructure Solutions Group segment, which benefited from unprecedented demand for AI servers and networking solutions.

Operating profit grew 23% year-over-year to $2.1 billion and net income reached $1.55 billion, up 32%. Earnings per share rose 39% to $2.28, while adjusted (non-GAAP) EPS reached a record $2.59. This development clearly shows that revenue growth is not being bought out by dramatic margin pressure, but instead is delivering operating leverage.

Cash flow is also a very important element of the quarter. Operating cash flow was $1.2 billion and adjusted free cash flow was $1.67 billion, more than double the same period last year. The company is thus generating enough cash not only to fund growth but also to return capital to shareholders. In the third quarter alone, Dell returned $1.6 billion to investors through dividends and buybacks.

• Full presentation with results.

A segment view: where growth is born

The segment was a key driver of results Infrastructure Solutions Group (ISG). Revenues for this segment were $14.1 billion, representing 24% year-over-year growth. Even stronger was the development in the server and networking segment, where sales grew 37% to $10.1 billion. It is here that the AI infrastructure boom is in full effect.

Dell reported record AI server orders of $12.3 billion in the quarter, and total AI order backlog reached $18.4 billion. Moreover, the five-quarter pipeline is many times higher than the current backlog, indicating that demand is far from ending. Moreover, the customer structure is diversified - it includes neocloud players, government projects and traditional enterprise clients.

Segment Client Solutions Group (CSG) achieved revenues of $12.5 billion, up 3% year-over-year. The commercial segment grew 5%, while the consumer segment declined 7%. Operating profit remained virtually unchanged year-over-year, confirming that the PC business is stable but no longer the main source of the company's growth or investment story.

Management commentary

CFO David Kennedy called the third quarter a confirmation that fiscal 2026 will be a record year for Dell. The company raised its AI server shipment estimate to about $25 billion, which implies year-over-year growth of more than 150%. According to management, Dell has become the partner of choice for customers who need to rapidly deploy large-scale AI clusters while requiring global support.

COO Jeff Clarke emphasized that Dell's key competitive advantage is not just the hardware itself, but the ability to design, deliver and operate complex, customized solutions. It is this capability that is critical in an environment where AI infrastructure is becoming a critical part of customers' businesses.

Outlook

The company's outlook remains very strong. For the full fiscal year 2026, Dell expects revenue in the range of $111.2 billion to $112.2 billion, which would represent 17% year-over-year growth. Adjusted earnings per share are expected to reach approximately $9.92, representing 22% growth.

For the fourth quarter, the company expects sales of around USD 31.5 billion, up more than 30% year-on-year. These estimates reflect not only a strong backlog, but also the continued acceleration of AI investments across the market.

Long-term results

A look at the long-term numbers clearly shows that Dell has undergone a fundamental transformation. Between 2021 and 2024, revenues were mostly in the $85-102 billion range, with strong cyclical trends. In 2024, the company came under pressure due to the downturn in the PC market, which translated into a decline in sales and margins.

However, profitability remained relatively stable. Operating profit has fluctuated between $3.7 billion and $5.8 billion over the past four years, while EBITDA has long oscillated between $8 billion and $12 billion. The key difference from the past is now the structure of growth - instead of volumes in the PC business, Dell is growing through higher value-added infrastructure.

Net income in 2024 was $3.39 billion and EPS was $4.71. However, with the current momentum of the AI segment, these historical numbers are becoming less consistent with the company's future potential. Importantly, Dell has also been systematically reducing the number of shares outstanding, which has supported EPS growth and return on equity.

Shareholder structure

Dell has a strong institutional base. Institutional investors hold approximately 74% of the stock, with Vanguard, BlackRock, State Street and Morgan Stanley among the largest. Insider ownership of 6.5% ensures a relatively good alignment of management interests with shareholders.

Analyst expectations

Analysts increasingly agree that Dell is one of the purest "AI infrastructure plays" among traditional technology firms. The key question remains the sustainability of current growth rates and margins in an increasingly competitive environment. However, results to date show that Dell can not only capture the AI boom, but also monetize it effectively.

Fair Price

After years of regulatory threats and political brinkmanship, TikTok’s future in the United States is taking a decisive turn. ByteDance has agreed to restructure its U.S. operations under a new ownership framework that places effective control in the hands of American investors. The move marks a fundamental shift away from confrontation toward compromise, easing fears of an outright ban that had loomed since the early days of the Trump administration.

For Washington, the deal offers a pragmatic solution to a complex problem: preserving a platform deeply embedded in American digital culture while reducing foreign influence over sensitive data and recommendation algorithms. For ByteDance, it represents a calculated retreat designed to protect the platform’s largest and most lucrative market. And for investors, the outcome signals a broader change in tech geopolitics—one where forced exits are replaced by structural realignments.How the deal works: TikTok's new structure in the US

At the heart of the deal is the creation of a new company TikTok USDS Joint Venture LLCwhich will be responsible for operating the TikTok app in the United States. This entity is to operate as a technologically and legally separate structure from the parent ByteDance.

Key parameters of the agreement:

• U.S. and global investors will own 80,1 % of the new company.
• ByteDance will retain 19,9 % Share
• Major investors include Oracle $ORCL, Silver Lake and Abu Dhabi'sMGX fund
• Oracle becomes a "trusted security partner" for the entire solution

Formally, TikTok thus ceases to be a Chinese-controlled platform in the US, at least in terms of ownership structure. This is exactly what US legislation has long required.

Algorithm as the key question: who really controls it?

The most sensitive point of the whole deal remains the algorithm - the "heart" itself TikTok. It is the recommendation system that decides what content users are shown that has been the main security argument of the app's critics.

According to a statement from TikTok's management, the new US entity has:

• full control over the protection of U.S. data
• responsibility for the security of the algorithm
• authority over content moderation and technical audits

At the same time, it remains unclear whether the algorithm was:

• fully transferred to the ownership of the new entity
• only licensed
• or remains effectively under the control of ByteDance

It is this ambiguity that has drawn criticism from some in the security community and US lawmakers, who point out that a formal change in structure does not automatically imply a real change of control.

The political dimension: Trump, China and the "American compromise"

The deal has a strong political dimension. President Donald Trump, who has sought to ban TikTok in the past, now openly supports the project and credits the app with playing a significant role in his election campaign. In doing so, the administration is sending a signal that it prefers direct bans to capital and institutional solutions.

From the US perspective, this is:

• The effort to maintain influence over the digital space
• limiting direct Chinese control without open escalation
• setting a precedent for resolving other technological disputes with China

From Beijing's perspective, the deal is a pragmatic concession - ByteDance retains a minority stake and does not lose the entire US market, which is strategically key for TikTok.

Market and investor reaction.

The markets reacted immediately. Oracle's shares strengthened significantly after the announcement of the deal, as the company finds itself in an extremely advantageous position at the intersection of cloud, regulation and geopolitics.

For investors, the deal is interesting for several reasons:

• Oracle wins long-term contract to manage and secure TikTok data in the U.S.
• TikTok itself eliminates a major regulatory risk
• a new model of "separate technology ownership" between the US and China is created

At the same time, however, it remains an open question how revenues from advertising, e-commerce and other commercial activities, which are to remain partially under ByteDance's control under the agreement, will be distributed.

What this means for the future

If the deal is completed as planned, it will close one of the longest-running chapters of the US-China technology conflict. TikTok thus becomes the first global digital product to be fractured by geopoliticsnot technology.

Going forward, this could mean:

• A precedent for other platforms with global reach
• pressure to 'localise' digital services by region
• a new way for states to regulate tech giants without outright bans

TikTok survives in the US - but no longer as a single global platform. Rather, as a symbol of a new era where data, algorithms and capital are more subject to borders than ever before.