🚨 Nvidia 2023 = DotCom Cisco?

MARKET UPDATE

Good Morning Investor! Shares of sports betting heavyweights DraftKings (DKNG) and FanDuel’s parent company, Flutter (FLUT), took a nosedive after Illinois decided to play taxman. The state has upped the ante, potentially taxing betting operators a whopping 40% on their revenue. Ouch! Looks like the house always wins, except when the taxman comes knocking.

Meanwhile, shares of popular stock trading platform Robinhood (HOOD) rallied off the back of the announcement that the company is launching its maiden $1 billion share repurchase program. Forget stealing from the rich to give to the poor, Robinhood is all about buying from itself to boost shareholder value.

TODAY’S BIG HEADLINES

Nvidia 2023 = DotCom Cisco?

PayPal is Joining the Advertising Industry

Big Oil is Making Billion Dollar Moves

SEMICONDUCTORS

Nvidia 2023 = DotCom Cisco?🚨

Echoes of the Past: Buckle up, folks, because we’re diving back into the world of AI chip royalty, Nvidia (NVDA). The burning question on everyone's mind: has Nvidia’s stock skyrocketed into the stratosphere of unreason, ballooning into bubble territory? Just take a gander at the chart above, Nvidia’s stock chart resembles that of network equipment maker Cisco’s (CSCO) in its prime from 1996 to 2000, right before its glory days turned into a cautionary tale?

The Valuation Tightrope: Analyzing Nvidia’s worth is like predicting the next viral cat video—so much hinges on future earnings. This is par for the course with high-flying growth companies, but the crystal ball is always foggy. The inherent gamble? Whether those rosy forecasts will blossom or wither. And it’s entirely reliant on the spending of big tech.

• Nvidia currently trades at, based off of fiscal 2025’s figures, a forward PE of just 44.5X and a forward free cash flow yield of 2.16%. Not exactly bubble bath material.

• And get this—these valuation numbers aren’t some recent fever dream. Nvidia was strutting around with a similar valuation back in 2019. Who knew time travel was real?

Deja Vu or Just Different: The main thesis for why Nvidia isn't the modern-day Cisco lies in its secret sauce. While Cisco's straightforward networking gear made it the belle of the ball, it also lured a horde of competitors who eventually ate its lunch.

• Nvidia, on the other hand, churns out heavyweight, intricate chips that are as complex as they are costly. These bad boys can weigh upwards of 70 pounds and cost a fortune to manufacture at scale.

• Moreover, Nvidia is racing ahead at breakneck speed, continuously outpacing rivals. Case in point: their new Blackwell range has already rendered their cash cow, the H100, a relic of the past. Talk about planned obsolescence!

Meteoric Ascent: Nvidia’s stock has been partying in a bull market, with a jaw-dropping 136% surge year-to-date, practically carrying the entire market on its shoulders. But the real jaw-dropper? A mind-boggling 3,267% return over the past five years. That’s right, investing in Nvidia five years ago was like finding a winning lottery ticket in your couch cushions.

FINTECH & ADVERTISING

PayPal is Joining the Advertising Industry💰

Branching Out Beyond Payments: Hold onto your wallets, folks, because PayPal (PYPL) is about to pull a Houdini. Apparently, simply processing payments isn't providing enough thrill, so they're venturing into the wild world of advertising. In a move that seems straight out of Uber's (UBER) playbook, PayPal has announced plans to create an ad sales business powered by its treasure trove of user data. Who knew PayPal wanted to be the next Mad Men?

Milking the Advertising Cash Cow: PayPal has seen the glittering success of Amazon (AMZN), Netflix (NFLX) and Uber, who have turned advertising into a cash cow with high-margin cream. With its vast user base and a goldmine of spending data, PayPal's leap into the ad game is like a plot twist everyone saw coming. It's a logical step for a company sitting on such a valuable pile of consumer behavior insights.

• Steering this new ship is Mark Grether, the former head honcho of Uber’s ad business.

• With Grether at the helm, PayPal aims to transform its deep connections with merchants and customers into a lucrative e-commerce-focused advertising platform. Looks like Grether is ready to turn PayPal into the Don Draper of fintech.

The Nuts and Bolts: So, what’s the deal with PayPal's new ad venture? Enter the “PayPal advanced offers platform”, an ad product that wields the buzzword-du-jour: AI. This platform will help merchants dish out special discounts and personalized promotions, but here's the kicker—advertisers only pay when users actually make a purchase. No clicks without cash, just pure transactional bliss.

• Mark Grether told the WSJ, “If you’re someone who’s buying products on the web, we know who is buying the products where, and we can leverage the data,”. In other words, PayPal is gearing up to be the Sherlock Holmes of online spending, solving the mystery of who buys what, where, and when.

• PayPal’s most recent earnings report, the company showcased its muscle, processing a whopping 6.5 billion payments by roughly 400 million customers in just the first quarter. That’s a staggering $403.9 billion in spending. With figures like these, it's clear why PayPal thinks it can make a splash in the ad world.

Wall Street Whispers: But not everyone’s buying into the hype. Shares of the fintech giant actually dipped 1% in pre-market trading following the announcement, a nod to the current negative sentiment surrounding the company. Year-to-date and over the past 12 months, the stock has been as flat as a pancake.

INDUSTRIALS

Big Oil is Making Billion Dollar Moves🛢️

Oil-tastic Adventures: In the wild, wild world of oil and gas exploration, some big-money moves are shaking things up. On Tuesday, Hess (HES) decided to tie the knot with oil giant Chevron (CVX) in a $53 billion deal approved by the board. Not to be outdone, ConocoPhillips (COP) crashed the party with a $22.5 billion bid for Marathon Oil (MRO). As expected, Wall Street had mixed feelings: Conoco shares took a 3% hit while Marathon Oil shares popped by over 8%.

Guyana’s Liquid Jackpot: Imagine a nation sitting on a jackpot of oil just offshore. Welcome to Guyana, nestled on South America’s northern coast, and neighbor to Trinidad and Tobago. Guyana is currently the world’s third-fastest growing non-OPEC nation, and oil companies are practically lining up for a piece of its liquid gold.

• Chevron offered to acquire Hess back in October in an effort to gain a foothold in oil-rich Guyana's lucrative offshore fields.

• With Hess’s board giving a thumbs up, the only roadblocks left are the FTC and an arbitration claim filed by, surprise surprise, Exxon Mobil (XOM).

Deal Machine Keeps Churning: ConocoPhillips' quest to acquire Marathon Oil is just another chapter in the ongoing saga of mega-deals in the oil and gas industry. Last year alone saw a staggering $250 billion in M&A deals. As U.S. oil production hits record highs, oil companies are in a frenzy to bulk up their reserves.

• Conoco’s offer translates to about $30.33 per share of Marathon Oil, a sweet 15% premium at the time of the announcement. The acquisition, expected to wrap up in the fourth quarter, will add over 2 billion barrels of reserves to ConocoPhillips' portfolio.

• And in a cherry-on-top move, ConocoPhillips is planning share buybacks worth $7 billion in the first year after the deal closes and a whopping $20 billion over the next three years.

Wall Street Whispers: Wall Street's been buzzing. Shares of Chevron are up 5% year-to-date, while ConocoPhillips has climbed 13% over the past 12 months. Clearly, these oil titans are on a roll, but only time will tell if they can keep the momentum going amidst all the wheeling and dealing.

MORE NEWS

Additional market-moving events🌎

Jet Settters: 2.951 million travellors took flight last Friday, in the US’ busiest travel day in history. (FW)

Chicago Offensive: Politicians in Chicago have decided to offer the most generous subsidies in the US, in an effort to save the city’s downtown office district. (WSJ)

Need a Loan?: Japan’s net external assets just hit 471.3 trillion yen ($3 trillion), increasing for the sixth consecutive year, making the country the world's top creditor, followed by Germany. (Reuters)

Return of the Office: HSBC’s New York office sees an 8% uptick in attendance in the office, as the push for back to the office continues. (YH)

EARNINGS

This Week’s Earnings Calendar📅

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500.

Here’s how the two stocks have performed since then:

• Evolution AB: 1,122.00 SEK (📉-14.51%)

• Hims & Hers Health: $19.45 (📈+34.42%)

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