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AI, the pinnacle of technological advancement, has emerged as a premier investment avenue, revolutionizing mundane tasks and business operations alike. Akin to King Midas, its touch is rendering prosperity, as reflected in the soaring stock performance of top AI chip and software enterprises.
Palantir Technologies Inc. (PLTR) stands as a prime example, surging over 42% this year and a remarkable increase of more than 205% over the past year. The driving force behind the ascent extends beyond the prevailing currents of generative AI, encompassing factors such as stellar quarterly financial results that exceeded investor expectations.
A business’ capacity to generate substantial cash autonomously is pivotal. It liberates the enterprise from reliance on debt or additional stock offerings for growth. The self-sufficiency catalyzes several expansion opportunities, fostering resilience and agility in navigating market dynamics.
Considering this, in its fiscal fourth quarter that ended December 31, 2023, PLTR disclosed an operating cash flow of $301.17 million, up 282.4% year-over-year.
Expanding this metric could empower PLTR to bolster its operational investments or even contemplate acquisitions. Sustained growth in cash flow would signal robust health for the company, enticing risk-averse investors to its stock. The trajectory could fortify PLTR’s position and amplify its appeal in the market.
Additionally, PLRT’s AI prowess is garnering momentum through the implementation of “bootcamps.” These initiatives empower both new and existing clientele to advance high-impact AI applications rapidly. The success of Artificial Intelligence Platform (AIP) “bootcamps” is amplifying PLTR’s potential market reach.
Having set a goal of executing 500 AIP bootcamps within a year back in October 2023, the company has already surpassed expectations by conducting 560 bootcamps involving 465 organizations. As per the company’s management, these bootcamps have significantly reduced sales cycles and accelerated customer acquisition.
In the fourth quarter of fiscal 2023, the company reported a doubling of new U.S. commercial deals exceeding $1 million compared to the year-ago value. Commercial revenue surged by 32% year-over-year to $284 million, whereas Government segment revenue increased by 11% year-over-year to $324 million.
While the Government segment remains the primary revenue driver, the Commercial segment exhibits significantly higher growth rates, underscoring robust momentum in this sector. The remarkable expansion is fueled by the success of its AI integration platform, highlighting its pivotal role in driving business growth.
In 2024, the company anticipates its U.S. commercial revenue to surpass $640 million, up roughly 40% from the previous year. CEO Alex Karp remains optimistic, citing “unrelenting” demand.
Future quarters will likely see investors closely monitoring the commercial revenue figure. Increases in this metric would signify successful conversion of bootcamp participants into clients, signaling the business’ efficacy in capitalizing on its initiatives and expanding its customer base.
Additionally, to bolster international Commercial revenue growth, PLTR has forged strategic partnerships. For instance, PLTR has collaborated with Fujitsu to broaden its presence in Japan, facilitating the deployment of AIP and data integration capabilities in a new geographic market.
Moreover, the company is diversifying into healthcare, retail, and financial services sectors via strategic partnerships to broaden its market presence. For instance, PLTR has teamed up with SOMPO Care, a prominent healthcare insurer in Japan, to provide real-time data solutions to nursing homes and elder care facilities.
Also, PLTR has been active in the energy sector for over a decade, aiding clients ranging from small operators to supermajors and national oil companies in navigating challenges and seizing opportunities across the value chain. This includes activities from production to distribution, as well as supporting efforts to reduce carbon emissions.
That said, on February 8, PLTR and Bapco Upstream, a wholly-owned subsidiary of Bapco Energies, unveiled a strategic, multi-year partnership. The collaboration aims to implement PLTR’s software, facilitating and expediting Bapco Upstream’s endeavors to advance the next generation of energy in the Kingdom of Bahrain.
Another metric bound to attract long-term investors is a robust profit margin. In the fourth quarter, PLTR recorded a net income of $96.91 million, equivalent to 15.9% of its total revenue. This marks a notable enhancement from the preceding quarter, where the profit margin stood at 13.2%.
Sustained growth in PLTR’s top line alongside a robust profit margin could lower its price-to-earnings ratio, rendering the stock a more appealing investment prospect in the future. The combination signifies a healthier financial position, potentially attracting more investors seeking value in the market.
Institutional investors are also evidently keen on PLTR shares, with 599 holders increasing their positions, totaling 118,615,063 shares. Additionally, 170 holders have initiated new positions, accumulating a total of 28,129,517 shares. The surge in institutional interest underscores growing confidence in the company’s potential.
Bottom Line
Delving into PLTR’s recent financial performance unveils various factors driving the sustained margin improvement. Notably, the expansion of the commercial sector, characterized by higher margin contracts compared to the government sector, emerges as a primary catalyst behind the margin expansion.
Furthermore, economies of scale and the company’s commitment to responsible growth have significantly contributed to margin enhancement. With a growing contribution to revenue from the Commercial segment, PLTR appears poised for further margin expansion, solidifying its position for sustained growth and profitability.
Presently, commercial revenue signifies a substantial growth avenue, with businesses embracing AIP and harnessing PLTR’s AI capabilities to leverage their data. Recent quarters’ performance underscores this potential, positioning the company to potentially achieve record-free cash flow in 2024, possibly driving an increase in the stock price.
Bloomberg Intelligence suggests that Generative AI could burgeon into a $1.3 trillion market by 2032. This colossal growth potential, coupled with substantial demand for PLTR’s offerings, rising sales, and profitability, underscores the company’s auspicious positioning for significant long-term growth.
Analysts project the company’s revenue and EPS to rise by 17.2% and 52.2% year-over-year to $615.52 million and $0.08, respectively, for the fiscal first quarter ending March 2024.
However, a significant factor deterring some investors from the stock presently is its sky-high valuation. In terms of forward non-GAAP P/E, PLTR is trading at 72.16x, which is higher than the industry average of 25.03x. Similarly, its forward EV/Sales and forward EV/EBITDA multiples of 18.25x and 56.58x, respectively, are also higher than the industry averages.
Thus, given PLTR’s lofty valuations, investors may opt to wait for a better entry point into PLTR.

BuzzFeed, Inc. (BZFD) has enjoyed significant success as a digital media powerhouse, leveraging its content across various platforms, both owned and in partnership with others. However, the company’s trajectory appears to have shifted, signaling a departure from its former glory.
In recent years, digital publishers have been grappling with tough industry conditions, a sluggish advertising market, dwindling social media referrals, and the looming threat of Artificial Intelligence (AI). That said, BZFD stands as a prime example, embodying the hurdles faced by digital publishers amid these challenges.
The deterioration of BZFD’s digital empire has become increasingly prominent in the public eye in recent years, marked by multiple rounds of cost-cutting measures and workforce reductions through layoffs.
Following its Initial Public Offering (IPO) in 2021, BZFD witnessed a drastic decline in its share price. Moreover, last year April, BZFD made headlines by closing its prestigious news arm, BuzzFeed News, which once boasted extensive global coverage and a large team.
On top of it, the company’s third-quarter earnings revealed a sharp 29.3% year-over-year drop in its top line and reported a loss of $13.93 million. Its advertising revenue dipped 35.3% year-over-year to $32.59 million, while its revenue from content witnessed a 31.7% year-over-year decline, reaching $26.25 million.
Additionally, the time spent by the audience engaging with BZFD’s content across its owned and operated sites decreased 19% year-over-year, totaling 92 million hours. Meanwhile, during the same quarter, its adjusted EBITDA came in at $3.07 million versus an adjusted EBITDA loss of $2.40 million in the prior-year quarter. As of September 30, 2023, BZFD’s cash and cash equivalents stood at $42.47 million.
Nevertheless, despite the dimmed third-quarter performance, Jonah Peretti, BZFD’s Founder & CEO, emphasized that the company is poised for a year-over-year improvement in adjusted EBITDA for both the fourth quarter and the entire fiscal year. Peretti further highlighted BZFD’s commitment to safeguard its liquidity position by establishing a sustainable long-term model for content creation.
BFZD recently announced the closing of its sale of Complex to NTWRK and its plans to trim its remaining workforce by 16%. This news sparked significant investor enthusiasm, with BZFD’s share skyrocketing over 80% during pre-market trading last week Thursday.
BZFD completed the sale of Complex to NTWRK in a transaction valued at $108.60 million in cash. The agreement, inclusive of an extra $5.70 million designated for the utilization of BZFD’s New York offices and associated severance expenses, signifies a strategic pivot for the media entity and underscores its commitment to streamlining operations and prioritizing its flagship brands, namely BuzzFeed, HuffPost, First We Feast (including Hot Ones), and Tasty.
Furthermore, the company unveiled a strategic cost-cutting initiative featuring a planned workforce reduction of 16%. This bold move is projected to deliver around $23 million in annualized compensation cost savings.
The company’s restructuring details, scheduled to be shared on Wednesday, February 28, 2024, aim to trim centralized costs and drive the organization toward a leaner, more adaptable, and more profitable future. In addition, the cash proceeds generated from the sale of Complex have been designated for various financial strategies aimed at bolstering BZFD’s balance sheet and enhancing liquidity.
These strategies encompass redeeming $30.90 million of the company’s convertible notes maturing in 2026, fully repaying a $35.50 million revolving credit facility, funding the forthcoming strategic restructuring, and optimizing working capital.
The company expects its revenue for the fiscal fourth quarter to be between $73 million and $78 million, while adjusted EBITDA on a continuing operations basis is projected to be between $15 million and $20 million.
Bottom Line
BZFD has navigated a tumultuous period marked by significant setbacks and strategic modifications. Once celebrated as a digital media powerhouse, the company has faced declining revenues, workforce reductions, and a substantial drop in its share price following its IPO.
However, it might be premature to adopt an entirely bearish outlook on the company’s shares. BZFD’s recent developments, including the sale of Complex and restructuring plans, are a clear signal to investors that the company can make critical adjustments and enhance its business model for the betterment of the shareholders.
Additionally, BZFD’s focus on improving adjusted EBITDA and liquidity and implementing cost-cutting measures demonstrates a commitment to financial stability and future growth.
As BZFD moves forward with its restructuring plans and strategic initiatives, it aims to streamline operations, prioritize flagship brands, and bolster its financial position to adapt to evolving market dynamics and pursue long-term success. Furthermore, CEO Peretti anticipates that these changes will expedite BZFD’s integration of AI to foster innovation and introduce interactive content formats.
To that end, given the company’s restructuring details set to be disclosed on February 28, it might be advantageous for investors to monitor the stock and wait for a more favorable entry point.

Despite the pharmaceutical industry’s reputation for resilience amid economic turbulence, investments in pharmaceutical companies have dipped below historical levels over the past two years.
However, rising U.S. Food and Drug Administration (FDA) approvals, the increasing number of chronic diseases, and robust demand for the latest innovative weight-loss drugs have heightened the industry’s allure among investors. In 2023, the FDA approved almost 50% more novel drugs compared to 2022, restoring approval rates to historical levels.  
Meanwhile, approvals for innovative therapies featuring an active ingredient or molecule not previously sanctioned increased to 55 in 2023, a rise from 37 in 2022 and 51 in 2021. Analysts and investors believe these improvements could potentially trigger increased investments in firms operating in the industry.
Furthermore, the huge demand for the industry’s latest groundbreaking weight loss drug could prove to be highly profitable for the industry in the forthcoming years. Goldman Sachs analysts project that the number of U.S. adults utilizing obesity medications will reach a staggering 15 million by the year 2030.
Given such robust demand, drug-manufacturing companies are racing to enter the lucrative market of widely sought-after weight loss drugs that could accrue a value of tens of billions within a decade.
Buoyed the bright industry prospects, during the fourth quarter of 2023, family offices representing billionaire Waltons and George Soros made their mark in the biotechnology sector, enticed by the growing appeal of drug developers among affluent investors.
Soros Fund Management capitalized on this trend by acquiring a new stake worth $19.20 million in Eli Lilly and Company (LLY) and also made a significant investment of $24.50 million in Merck & Co., Inc. (MRK). Meanwhile, the Walton Investment Team secured a $8.20 million position in Madrigal Pharmaceuticals, Inc. (MDGL).
Therefore, let’s analyze why LLY, MRK, and MDGL could be potential buys.
Eli Lilly and Company (LLY)
Boasting a market cap of over $700 billion, pharma giant LLY has captured the spotlight, drawing attention from both retail and institutional investors alike. This fervor stems from the resounding success of its revolutionary weight-loss drugs, Mounjaro and Zepbound.  
Within a year of initiating treatment for obesity, 42.3% of individuals receiving tirzepatide, the key component in Mounjaro and Zepbound, experienced a weight loss of at least 15%. Responding to the high demand for these weight-loss medications, LLY launched its direct-to-consumer (DTC) platform named “LillyDirect” last month.
Through this website, individuals can directly order from the pharmaceutical company, including its weight-loss medication Zepbound, and access connections with telehealth companies for conditions like obesity.
Moreover, the company’s fourth-quarter performance revealed solid growth in both topline and bottom-line figures. Its total revenue reached $9.35 billion, reflecting a 28.1% year-over-year surge.
Notably, revenue from Mounjaro, LLY’s top-selling product, witnessed a staggering 689.9% year-over-year rise, underscoring the solid demand for the drug. Meanwhile, Zepbound, which was launched in November 2023, registered a revenue of $175.80 million.
In light of the overwhelming demand for its weight-loss pipeline, LLY’s market capitalization surged, surpassing that of Tesla, Inc. (TSLA), thereby solidifying its position among the top 10 most valuable companies in the S&P 500 Index.
The stock’s relentless success has sparked speculation among analysts about the possibility of it becoming the first biopharmaceutical company to reach a market value of $1 trillion.
Such considerable advances, along with the LLY’s addition to Soro Fund’s equity portfolio, signify a robust endorsement of confidence in the company.
Merck & Co., Inc. (MRK)
With a strong market cap of over $323 billion and a roughly 24% surge in its shares over the past three months, a global healthcare company, MRK offers a diverse range of human health pharmaceutical products spanning oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular, and diabetes.
In its most recent earnings, the company’s top-selling cancer drug Keytruda generated a remarkable revenue of $6.61 billion, up 21% year-over-year, while its HPV vaccine Gardasil brought in an impressive $1.87 billion in revenue, reflecting a 27% year-over-year rise.
MRK’s Chairman and Chief Executive Officer, Robert M. Davis, expressed immense satisfaction with the company’s performance throughout last year. He highlighted MRK’s significant reach, with its medicines impacting over 500 million people. Additionally, the company invested approximately $30 billion in research and development last year to drive forward the discovery and development of impactful innovations in collaboration with others.
With oncology as its primary focus, MRK recently announced its decision to acquire Harpoon Therapeutics, Inc. for an approximate total equity value of $680 million. This strategic move is anticipated to complement MRK’s existing portfolio and drive forward innovative scientific breakthroughs to serve individuals better worldwide battling cancer.
On top of it, the company is actively exploring avenues to diversify its product portfolio and could possibly venture into the burgeoning market of weight-loss drugs.
Its experimental GLP-1 drugs, initially developed to treat non-alcoholic fatty liver disease, have shown unforeseen indications of weight loss. Alongside targeting weight loss, the pharmaceutical company is also pursuing therapies that provide benefits for diabetes and other disorders.
Soros Fund’s investment in MRK could bolster the pharma company’s growth strategies and R&D initiative. The investment signals its confidence in MRK’s performance and prospects. Furthermore, MRK’s exceptional track record of dividend payouts may infuse more investor confidence in its stock performance.
Madrigal Pharmaceuticals, Inc. (MDGL)
MDGL is a pre-revenue clinical-stage pharmaceutical company developing novel drugs to address major unmet needs in cardiovascular, metabolic, and liver diseases. Over the past six months, the stock has jumped over 27%.
The company’s lead compound, resmetirom, is being advanced for non-alcoholic steatohepatitis (NASH), a liver disease that commonly affects people with metabolic diseases such as obesity and diabetes, and non-alcoholic fatty liver disease (NAFLD).
 
MDGL’s positive findings from the Phase 3 MAESTRO-NASH trial last year November demonstrate the potential effectiveness of resmetirom in treating NASH with liver fibrosis, addressing a critical unmet medical need. It is also close to being commercialized. These promising results could not only validate the company’s research and development efforts but also have the potential to bolster investor confidence.
MDGL’s latest quarterly report revealed losses of $98.74 million and $5.44 per share, while its research and development expenses rose 3.9% year-over-year. Nevertheless, analysts foresee the company experiencing a final loss in fiscal year 2024 before rebounding with positive profits of $57 million in fiscal year 2025.
Also, as of September 30, 2023, its cash and cash equivalents stood at $62.06 million. However, total operational costs outpaced this liquidity by reaching $263.32 million, of which a significant $201.71 million was research and development expenses.
The company’s financial capabilities may hinder certain research initiatives along with corresponding clinical expenses and curtail investment in commercial readiness. This could necessitate fundraising efforts to propel R&D or even propel commercialization strategies for its pharmaceutical product lines.
So, Walton Investment’s stake in MDGL serves as a strong endorsement of the pharma giant’s potential and growing portfolio. This move undoubtedly bolsters the standing of MDGL’s stocks in the market.
Bottom Line
Overall, the pharmaceutical industry remains dynamic, with companies deftly maneuvering evolving market trends and seizing opportunities for growth and innovations. Thus, investors could consider keeping an eye on the shares of LLY, MRK, and MDGL for potential gains.

Bitcoin (BTC) prices recently surged above the $52,000 mark, pushing its market capitalization back over $1 trillion for the first time since December 2021. The rally in the prices of the flagship cryptocurrency is due to anticipation building around the impending ‘Bitcoin Halving’ in April this year and the sustained inflow of USD into spot Bitcoin exchange-traded funds (ETFs).
Primary Drivers Behind Bitcoin’s Price Increase
Spot bitcoin ETFs are driving BTC’s recent surge. In January 2024, the U.S. Securities and Exchange Commission (SEC) approved the listing and trading of 11 spot bitcoin exchange-traded product (ETP) shares after years of repeated rejections.
Bitcoin ETFs recorded another strong week, with net inflows exceeding $2.2 billion from February 12 to 16. As per Bloomberg analyst Eric Balchunas, the combined volume was higher than inflows received by any other among the 2,400 ETFs available in the U.S.
According to data from BitMEX Research, BlackRock’s iShares Bitcoin Trust (IBIT) received the most capital, accumulating positive flows of $1.6 billion over the last week. “$IBIT alone has taken in $5.2b YTD, which is 50% of BlackRock’s total net ETF flows, out of 417 ETFs,” stated Eric Balchunas.
Among the spot Bitcoin ETFs holding billions of dollars in assets, Fidelity Advantage Bitcoin ETF (FBTC) witnessed considerable inflows, amassing $648.5 million from February 12 to 16. The Ark 21Shares Bitcoin ETF (ARKB) gathered around $405 million in the same period, while the Bitwise Bitcoin ETP Trust (BITB) garnered $232.1 million in capital inflows.
However, outflows from the Grayscale Bitcoin Trust (GBTC) are hampering the combined performance of the other newly approved spot Bitcoin ETFs. Between February 12 and 16, the fund saw withdrawals of around $624 million. Since its conversion from an over-the-counter product to a spot ETF on January 10, Grayscale’s fund has witnessed more than $7 billion in capital outflows.
The other new ETFs are majorly driving Bitcoin’s recent price gains. The cryptocurrency is up approximately 91% in the past four months, ending on February 15.
Also, growing anticipation around a cryptic-sounding event known as “the halving,” which is to take place on April 19, 2024, is one of the primary drivers behind Bitcoin’s surge. The “halving” is a feature in Bitcoin’s protocol that automatically reduces the rate of Bitcoin production. Generally, it pushes the price of bitcoin higher.
The price rise of the world’s largest cryptocurrency was also buoyed by expectations of interest rate cuts later this year as inflation eases.
Google Trends Show a Decline in Bitcoin Interest
Recently, Bitcoin’s price jumped above the $52,000 mark; however, fascination with cryptocurrency seems to be diminishing. Google Trends data suggests a subdued level of interest, with the search term “bitcoin” scoring just 36 out of 100 in global metrics over the last 90 days.
That is a sharp contrast to the excitement seen about three years ago when Bitcoin first exceeded the $50,000 level, with Google Trends showing a score of 71 out of 100 for the search term “bitcoin” during that period.
Even with the introduction of spot bitcoin ETFs on January 11 this year, the search term “bitcoin” on Google Trends peaked at a score of 100. But since then, there has not been a significant surge in interest, with the search term “bitcoin” being steady at a score of 36 out of 100.
Despite high valuation, the declining fascination with bitcoin suggests a potential consolidation and maturation of the crypto market, where investors are more cautious in their approach or a shift in the public’s focus. While institutional investors have entered the scene, retail investors appear less engaged.
To regain the attention of the retail crowd, Bitcoin might need to surge to even greater heights.
Future Of Bitcoin Price Trajectory
The recent surge of Bitcoin to levels not witnessed in more than two years has sparked debate among analysts on the sustainability of the upward momentum. While some analysts expect this rise to be followed by a correction, others believe the bull run will continue.
According to Swissblock analysts, Bitcoin may signal a correction in the short term. Analysts wrote that the momentum of Bitcoin, which has paused at the key resistance mark of $52,000 following a recent rapid ascent of nearly 33% over the past few weeks, could indicate “a pullback” as they consider the increase potentially unsustainable.
Despite a short-term dip, Swissblock analysts added that any forthcoming pullback could be a buying opportunity if BTC holds its support near the $47,500 level. The report advises investors to consider any correction as a potential entry point for long-term positions.
Despite warnings of a potential correction, some analysts continue to be positive about Bitcoin’s future trajectory. 10x Research analysts expect a price target of $57,500 for the next surge, indicating that the uptrend in BTC could continue beyond the current resistance level.
10x Research analyst Markus Thielen has an optimistic outlook on Bitcoin, arguing that its solid liquidity and rising demand for Bitcoin futures could push its price to $57,500. He cited historical patterns before previous block reward halvings as supporting evidence for further upside potential.
In addition, institutional cryptocurrency exchange FalconX observed “extraordinary” trading volumes supporting the uptrend in early 2024, like those seen during the March 2024 regional banking crisis.
FalconX analysts also noted that historically low volumes after price increases have sometimes indicated false breakouts in crypto markets, but liquidity conditions around the January rally have generally remained strong.
Bottom Line
In January this year, the Securities and Exchange Commission finally approved 11 spot bitcoin exchange-traded funds to start listing and trading on U.S. exchanges. The growing success of U.S. spot bitcoin ETFs turned investor sentiment more optimistic, allowing Bitcoin to exceed the $52,000 level, marking the first time it has hit this price since late 2021.
Also, the value of all the bitcoin in circulation, or market cap, grew above $1 trillion after the price surge.
According to Nigel Green, Founder and CEO of deVere Group, the introduction of the spot Bitcoin ETFs provides a new avenue for institutional investors to cautiously enter the cryptocurrency market, representing a significant step toward broader adoption and acceptance.
“This approval by the financial regulator of the world’s largest economy is a landmark moment for bitcoin and the wider crypto market and boosts prices in the long-term, even if there’s a sell-off in the near-term,” said Green. “The approval of bitcoin ETFs represents a resounding institutional validation of the cryptocurrency, marking a departure from its initial reputation as a speculative and volatile asset.”
Further, Bitcoin prices are strengthened by the upcoming “halving,” the supply-restricting event written in Bitcoin’s code that occurs every four years and is set for April 2024.
The recent introduction of spot bitcoin ETFs signifies a major development in the integration of bitcoin into mainstream investment options, possibly attracting a wider array of investors beyond conventional crypto enthusiasts.
But the relatively muted response to bitcoin’s increased value, as indicated by Google Trends data, suggests that the crypto market might be transitioning into a more mature and consolidating phase, wherein investors exercise more caution and discernment.
The drastic shift in sentiment could point toward an evolving landscape for cryptocurrencies, where factors beyond price appreciation play a more substantial role in market dynamics and investor behavior.
Amid declining public interest, investors grappling with the decision to wait or sell bitcoin should consider their risk tolerance, investment horizon, and market outlook. Staying informed, implementing risk management techniques, and diversifying one’s portfolio can help navigate the dynamic cryptocurrency market.
Investors should stay abreast of cryptocurrency news, regulatory developments, and market sentiment, which can provide insights into future trends and potential catalysts for price movements. Also, it is advisable to keep an eye on institutional interest and adoption, which can help gauge the long-term potential of Bitcoin.

Microsoft Corporation (MSFT) achieved an exceptional milestone when it ended last week with a market capitalization of $3.125 trillion, becoming the world’s most valuable publicly traded company ever.
The tech company surpassed the previous record set by Apple Inc. (AAPL) when it reached a market cap of $3.09 trillion in July, as per Dow Jones Market Data. The iPhone marker ended Friday with a $2.916 trillion market cap.
MSFT’s stock has surged more than 28% over the past six months and nearly 52% over the past year, thanks to immense enthusiasm around its AI potential.
Microsoft Market Cap Milestone: Implications and Opportunities
MSFT’s historic market capitalization milestone holds significant implications for the technology sector, investors, and the global economy. To begin with, it underscores the rising dominance of large tech companies within the stock market and the broader economy.
As Microsoft becomes one of the world’s most valuable companies, it solidifies the technology sector’s influence and sheds light on the importance of innovation and digital transformation across several industries. The company’s growing investments in AI, cybersecurity, and sustainable technologies further contribute to global competitiveness and economic growth.
For investors, MSFT’s recent milestone signals opportunities for potential growth and value creation. It offers investors exposure to a diverse range of high-growth segments, such as AI, cloud computing, gaming, and productivity software. This broad business portfolio allows investors to benefit from Microsoft’s continued innovation, market leadership, and resilience in different economic conditions.
Moreover, the tech giant’s solid financial position and cash flow generation provide stability and potential for dividend growth, making it extremely attractive to income-focused investors seeking stable returns. In addition, MSFT’s strategic partnerships and acquisitions may create opportunities for investors to capitalize on synergies, expansion into new markets, and completive advantages.
In October 2023, Microsoft completed the acquisition of Activision Blizzard, a well-known video game publisher. This deal provides MSFT with a hefty portfolio of video game franchises, including Call of Duty, Crash Bandicoot, StarCraft, and Warcraft. This acquisition aligns with the company’s strategic focus on gaming and positions it for long-term growth and leadership in the gaming industry.
Talking about the ripple effects of Microsoft’s milestone, competitors may intensify their efforts to innovate, compete, or collaborate with the company in response to its market dominance and strategic moves. Consumers may benefit considerably from increased competition and enhanced accessibility of innovative tech products and services, boosting further tech adoption in daily life.
Also, policymakers may scrutinize large tech firms’ market power, data privacy practices, and potential antitrust concerns, shaping regulatory frameworks and industry dynamics.
Now, let’s discuss several factors that could impact MSFT’s performance in the near term:
Continued Progress In AI
“We’ve moved from talking about AI to applying AI at scale,” Satya Nadella, chairman and CEO of Microsoft, said in the last earnings release. “By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector.”
Over the past year, Microsoft has made significant advancements in integrating AI into its products and tools.
In January 2023, Microsoft announced a multiyear, multibillion-dollar investment with ChatGPT-maker OpenAI. The deal marked the third phase of the partnership between the two companies after MSFT’s previous investments in 2019 and 2021. The renewed partnership would accelerate breakthroughs in AI and help the companies commercialize advanced technologies in the future.
“We formed our partnership with OpenAI around a shared ambition to responsibly advance cutting-edge AI research and democratize AI as a new technology platform,” said CEO Satya Nadella.
In February, MSFT launched an AI-powered Bing search engine and Edge browser with built-in support for OpenAI’s ChatGPT to help people get more from search and the web. The new Bing search version could deliver better searches, more accurate answers, a new chat experience, and the ability to generate content.
In March, the company further announced the addition of AI tools to its Office productivity applications and introduced a feature called Microsoft 365 Copilot. The Copilot feature uses next-gen AI to automate and simplify tasks and offer suggestions. Starting September 26, Copilot begins to roll out its early form as part of its free update to Windows 11.
Beginning November 1, Microsoft 365 Copilot is generally available for enterprise customers, along with Microsoft 365 Chat. Also, this AI-powered Copilot is added to the company’s cybersecurity offerings and GitHub service for software developers.
On November 8, Microsoft-owned GitHub introduced a Copilot assistant that can assist developers in working with their employers’ internal code, priced at $39 per person a month. This new launch might help the company boost profitability in its cloud business unit by taking advantage of its partner OpenAI’s technology.
On November 15, the tech giant debuted its first custom AI chip. At its Ignite conference, MSFT said the chip, Maia 100, is the first in its planned Azure Maia AI accelerator series. In addition to the Maia 100, the company introduced its first custom Arm-based Azure Cobalt, a cloud-native chip optimized for performance, power efficiency and cost-effectiveness for general-purpose workloads.
The chip will be used for cloud-based training and inferencing for AI models. With these chips, Microsoft is on par with rivals Alphabet Inc. (GOOGL) and Amazon.com, Inc. (AMZN), which have also developed their custom chips to run competing cloud platforms. MSFT added that it partnered with ChatGPT developer OpenAI to test its Maia 100 accelerator and will use those lessons to build future chips.
On January 11, 2024, Microsoft announced new generative AI and data solutions and capabilities for retailers. The company offers personalized shopping experiences through copilot templates on Azure OpenAI Service, retail data solutions in Microsoft Fabric, copilot features in Microsoft Dynamics 365 Customer Insights, and the Retail Media Creative Studio.
Robust Last Reported Financials
For the fiscal 2024 second quarter that ended December 31, 2023, MSFT reported total revenue of $62.02 billion, surpassing the analysts’ estimate of $61.13 billion. That was up 17.6% from the previous year’s quarter.
Microsoft’s Intelligent Cloud segment generated $25.88 billion in revenue, an increase of 20.3% year-over-year. The division comprises Azure, public cloud, SQL Server, Nuance, Windows Server, GitHub, and enterprise services. Within the segment, revenue from Azure and other cloud services rose 30%.
Six points of the Azure and other cloud services growth were tied to AI, Amy Hood, MSFT’s finance chief, said on a conference call with analysts.
Also, MSFT’s Productivity and Business Processes segment posted revenue of $18.59 billion, up 13.2% year-over-year. This business unit includes Microsoft 365 productivity app subscriptions, LinkedIn, and Dynamics enterprise software. The More Personal Computing segment contributed $16.89 billion in revenue, an increase of 18.6%.
The software company’s gross margin rose 20.2% from the year-ago value to $42.40 billion. Its operating income increased 32.5% year-over-year to $27.03 billion. Its net income grew 33.2% from the prior year’s period to $21.87 billion. Microsoft posted earnings per share of $2.93, compared to the consensus estimate of $2.20, and up 33.2% year-over-year.
Furthermore, cash inflows from operations came in at $18.85 billion for the second quarter, an increase of 68.7% year-over-year. As of December 31, 2023, MSFT’s total assets amounted to $470.56 billion, compared to $411.98 billion as of June 30, 2023.
For the fiscal 2024 third quarter, Microsoft expects revenue between $60 billion and $61 billion. The company sees lower-than-expected revenue and operating expenses during the quarter.
Impressive Historical Growth
Over the past three years, MSFT’s revenue grew at a CAGR of 14.1%. Its EBITDA and net income improved at respective CAGRs of 18.1% and 17.2% over the same period. In addition, the company’s EPS increased at a CAGR of 18.1% over the same timeframe, and its levered free cash flow improved at 18.9% CAGR.
Furthermore, the company’s total assets increased at a CAGR of 15.7% over the same period.
Attractive Dividend
On November 28, 2023, MSFT’s Board of Directors approved a quarterly cash dividend of $0.75 per share on the company’s common stock. The dividend is payable on March 14, 2024, to shareholders of record on February 15, 2024. The company pays an annual dividend of $3, translating to a yield of 0.71% at the current share price.
Moreover, MSFT’s dividend payouts have increased at a CAGR of 10.2% over the past five years. Microsoft has raised its dividends for 19 consecutive years.
Optimistic Analyst Estimates
Analysts expect MSFT’s revenue for the third quarter (ending March 2024) to increase 15.2% year-over-year to $60.87 billion. The consensus EPS estimate of $2.83 for the current quarter indicates an improvement of 15.5% year-over-year. Moreover, the company has topped consensus revenue and EPS estimates in all the trailing four quarters, which is remarkable.
For the fiscal year ending June 2024, Street expects Microsoft’s revenue and EPS to grow 15.3% and 19.2% year-over-year to $244.23 billion and $11.69, respectively. Also, the software maker’s revenue and EPS for the fiscal year 2025 are expected to increase 14.2% and 13.7% from the previous year to $278.98 billion and $13.29, respectively.
Solid Profitability
MSFT’s trailing-12-month gross profit margin of 69.81% is 43.2% higher than the 48.76% industry average. Likewise, the stock’s trailing-12-month EBIT margin and net income margin of 44.59% and 36.27% are considerably higher than the industry averages of 4.74% and 2.23%, respectively.
Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 39.17%, 20.77% and 17.54% favorably compared to the respective industry averages of 1.99%, 2.44%, and 0.80%. Also, its trailing-12-month levered FCF margin of 25.78% is 183.4% higher than the industry average of 9.10%.
Analysts Raised Their Microsoft Price Targets
Several Wall Street analysts have raised their price targets on MSFT’s stock. D.A. Davidson analyst Gil Luria added $85 to his Microsoft price target, taking it to a Wall Street high of $500 per share. He seems impressed by the company’s near-term guidance, which highlighted “increasing demand for Microsoft Cloud as well as positive margin expansion even with increasing capital expenditures related to the build-out of their AI infrastructure.”
“Microsoft has continued to show they are a strong share gainer in this new AI landscape, which is largely driven by the company’s ability to build compelling generative AI applications throughout their product suite as well as capture new AI-related workloads on Azure,” said Luria.
Meanwhile, CFRA analyst Angel Zino increased the MSFT price target by $35 to $455 a share, citing in part the value created for the company’s Office 365 division with the addition of AI assistant Copilot.
Wolfe Research analyst Alex Zukin reiterated a Buy rating on MSFT on January 30 and set a price target of $510. Alex Zubin has given Microsoft a Buy rating due to several factors, including its strong financial performance and promising growth in key areas.
Further, Jefferies analyst Brent Thill maintained their bullish stance on MSFT stock, giving it a Buy rating on January 26. Thill points to the tech giant’s expected year-over-year constant currency growth, which is projected to grow from 12% to 15%, suggesting that it is poised to achieve these targets with the aid of Activision Blizzard’s contributions.
Additionally, Thill believes that Microsoft is well-poised to benefit from the rising emphasis on AI, which is coupled with favorable cloud trends, underpinning the stock’s upside potential.
Bottom Line
MSFT beat on the top and bottom lines in the second quarter of fiscal 2024, driven by growth in intelligent cloud business. Microsoft has led groundbreaking advances such as partnership with OpenAI and the integration of ChatGPT capabilities into products and tools used to search, collaborate, work, and learn.
Further, as MSFT accelerates into AI, it is rethinking cloud infrastructure to ensure optimization across every layer of the hardware and software stack. The company’s commitment to innovations across various segments like AI, edge computing, and mixed reality positions it for long-term growth and market leadership.
Gartner forecasts worldwide software spending to reach $1.03 trillion in 2024, an increase of 12.7% year-over-year. Robust spending on software among individuals and enterprises will be a primary tailwind for Microsoft. The company’s focus on providing solutions for digital transformation, including AI, cloud-based, cybersecurity, and collaboration tools, aligns with the evolving needs of businesses seeking to modernize their operations.
Moreover, the software maker’s solid financial position, including consistent revenue growth and strong cash flow generation, provides it with enhanced flexibility for strategic investments, acquisitions, and returning value to shareholders via dividends and share buybacks.
Driven by optimism surrounding its AI potential, MSFT’s shares have surged more than 50% over the past 12 months.
Microsoft dethroned Apple as the world’s most valuable company ever, ending last week with a market cap of $3.125. Amid MSFT’s record valuation, investors may adopt different strategies to navigate the market dynamics and capitalize on potential opportunities. Long-term investors may choose to maintain their positions in MSFT, leveraging its solid fundamentals and growth prospects.
In addition, income-focused investors may find Microsoft appealing for its attractive dividend payouts and potential for dividend growth. Tactical traders can also take advantage of short-term trading opportunities in this stock, capitalizing on market sentiment, technical indicators, or macroeconomic trends.

Valentine’s Day is a time to celebrate love and romance, whereby people express their affection by exchanging candy, cards, flowers, jewelry, and other gifts with their special ones. This annual Lover’s Day has become extremely popular, and creative retailers are preparing to cash in on this event.
Americans really like to spend on their loved ones for Valentine’s Day. According to the annual survey released by the National Retail Federation (NRF) and Prosper Insights & Analytics, total spending on Valentine’s Day is expected to reach a new high of $14.20 billion in 2024, or a record $101.84 per person.
“Retailers are ready to help customers this Valentine’s Day with meaningful and memorable gifts,” said Matthew Shay, NRF President and CEO. “With consumers prioritizing their spouse or significant other this year, retailers expect to see a shift in spending for certain gifting categories.”
The top gift categories include candy (57%), greeting cards (40%), flowers (39%), an evening out (32%), jewelry (22%), clothing (21%) and gift cards (19%). New spending records are anticipated for jewelry (around $6.4 billion), flowers ($2.6 billion), clothing ($3 billion) and an evening out ($4.9 billion).
More than half of customers (nearly 53%) plan to celebrate Valentine’s Day this year, on par with 52% in 2023. Overall, consumers plan to spend a total of $25.8 billion to celebrate Valentine’s Day, on par with the previous year’s spending and the third highest in the survey’s history.
Now, let’s take a close look at the fundamentals of four key stocks that might thrive this Valentine’s Day:
Berkshire Hathaway Inc. (BRK.B)
Warren Buffett is widely considered one of the greatest investors of all time. One way to share in his success is by investing in his holding company, Berkshire Hathaway Inc. (BRK.B)v, whose market capitalization stands at $861.40 billion.
BRK.B owns a mix of businesses across several industries. The profits from these businesses accumulate on Berkshire Hathaway’s balance sheet, and Warren Buffett and his team use these funds to expand the company, make new investments, and so on.
Since 1972, Buffett’s leading conglomerate owns See’s Candies, a beloved brand for candies, particularly chocolates. Today, more than 50 years later, this candy brand has grown into a testament to the power of brand loyalty, high-quality products, and intelligent management.
With its steady growth, See’s Candies provided BRK.B with an income of nearly $2 billion, representing an impressive return of more than 8,000%, or approximately 160% a year. Beyond its financial triumphs, this brand holds a special place in Buffett’s heart as it embodies his investment philosophy, which prioritizes businesses with competitive advantage, reliable cash flows, and a focus on customer satisfaction.
For most people, chocolate and candy are the perfect way to celebrate Valentine’s Day as they associate them with emotional connections, primarily driving See’s Candies sales and ultimately giving a significant boost to BRK.B’s stock.
BRK.B’s trailing-12-month EBITDA margin of 31.46% is 49.4% higher than the 21.05% industry average. Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 15.63%, 9.86%, and 7.52% are higher than the industry averages of 10.67%, 6.41%, and 1.09%, respectively.
For the first nine months that ended September 30, 2023, BRK.B’s total revenues increased 21.1% year-over-year to $271.11 billion. Its earnings before income taxes were $73.23 billion versus a loss before income taxes of $52.61 billion in the prior year’s period. Its net earnings came in at $59.39 billion, compared to a loss of $40.24 billion in the same quarter of 2022.
Analysts expect Berkshire Hathaway’s revenue and EPS for the fiscal year (ended December 2023) to increase 4.1% and 24.4% year-over-year to $314.42 billion and $17.39, respectively. Moreover, the company topped the consensus EPS estimates in three of the trailing four quarters.
BRK.B’s stock is already up nearly 11% over the past six months and has gained more than 28% over the past year. Further gains could come with a Valentine’s Day rally.
PayPal Holdings, Inc. (PYPL)
Another stock that could capture Valentine’s Day sentiment is PayPal Holdings, Inc. (PYPL). With a $63.14 billion market cap, PYPL operates as a technology platform enabling digital payments on behalf of merchants and consumers. As digital payments continue to rise across the globe, PayPal remains a strong player in the fintech industry.
Valentine’s Day might cause an influx of online transactions. Spending surges as consumers celebrate Valentine’s Day with memorable gifts for their friends and loved ones, propelling digital payments worldwide and benefiting PYPL considerably.
On January 25, 2024, PYPL announced six innovations to revolutionize commerce through artificial intelligence (AI) driven personalization for merchants and consumers. During the PayPal First Look keynote, President and CEO Alex Chriss introduced a completely new PayPal checkout experience; Fastlane by PayPal, a faster guest checkout experience; and Smart Receipts, giving customers AI-personalized recommendations from merchants.
Further, the company introduced the PayPal advanced offers platform so merchants can provide personalized, real-time offers to consumers and drive sales; a reinvented PayPal consumer app offering shoppers new ways to earn cash back; and Venmo’s enhanced business profiles so that small businesses can find and engage new customers and grow their businesses.
PYPL’s trailing-12-month ROCE, ROTC, and ROTA of 20.55%, 9.43%, and 5.17% favorably compared to the industry averages of 10.76%, 6.44%, and 1.08%, respectively. Also, the stock’s 18.40% trailing-12-month levered FCF margin is 3.2% higher than the industry average of 17.83%.
During the fourth quarter that ended December 31, 2023, PYPL’s non-GAAP net revenues increased 8.7% year-over-year to $8.03 billion. Its non-GAAP operating income grew 10.6% from the prior year’s quarter to $1.87 billion. Its non-GAAP net income and non-GAAP EPS came in at $1.60 billion and $1.48, up 13.2% and 19.4% year-over-year, respectively.
Furthermore, the company’s free cash flow was $2.47 billion, an increase of 72.3% year-over-year. Its fourth-quarter total payment volume (TPV) grew 15% from the year-ago value to $409.80 billion. Its payment transactions rose 13% year-over-year to $6.80 billion.
As per its financial guidance, PayPal expects net revenue to increase by nearly 6.5% and 7% on a foreign-currency neutral basis (FXN) for the first quarter of fiscal 2024. Its non-GAAP earnings per share are expected to grow in mid-single digits compared to $1.17 in the previous year’s period.
For the full year 2024, the company’s non-GAAP earnings per share are expected to be in line with $5.10 in the previous year.
Analysts expect PYPL’s revenue and EPS for the first quarter (ending March 2024) to increase 6.7% and 4% year-over-year to $7.51 billion and $1.22, respectively. Additionally, the company surpassed consensus revenue estimates in each of the trailing four quarters, which is impressive.
PYPL’s stock has surged more than 8% over the past three months.
Movado Group, Inc. (MOV)
With a $616.47 million market cap, Movado Group, Inc. (MOV) designs, markets, and distributes watches worldwide. The company offers its watches under the Movado, Concord, Ebel, Olivia Burton, and MVMT brands, along with licensed brands like Coach, Tommy Hilfiger, HUGO BOSS, Lacoste, and Calvin Klein. If your loved one appreciates luxury watches, Movado could be an exciting pick this Valentine’s.
The company has a robust capital allocation strategy. MOV paid a cash dividend of $0.35 for each share of the company’s outstanding common stock and class A common stock held by shareholders of record as of the close of business on December 12, 2023. Its annual dividend of $1.40 translates to a yield of 4.95% on the current share price. Its four-year average dividend is 4.22%.
Moreover, the company’s dividend payouts have increased at an 11.8% CAGR over the past five years.
Also, during the third quarter of fiscal 2024, Movado Group repurchased around 69,700 shares under its November 23, 2021, share repurchase program. As of October 31, 2023, the company had $18.60 million remaining available under the share repurchase program.
MOV’s trailing-12-month gross profit margin of 55.71% is 57% higher than the 35.48% industry average. Likewise, the stock’s trailing-12-month EBIT margin and net income margin of 9.86% and 8.34% are higher than the industry averages of 7.53% and 4.74%, respectively.
In terms of forward P/E, MOV is currently trading at 14.8x, 12% lower than the industry average of 16.83x. The stock’s forward EV/Sales of 0.78x is 36.7% lower than the industry average of 1.23x. Also, its forward EV/EBITDA of 7.36x is 27.3% lower than the industry average of 10.13x.
MOV’s reported net sales of $187.69 million for the fiscal 2024 third quarter ended October 31, 2023. Its net income came in at $17.67 million, or $0.77 per share, respectively. As of October 31, 2023, the company’s cash and cash equivalents were $200.97 million, compared to $186.67 million as of October 31, 2022.
Street expects MOV’s revenue and EPS for the fiscal year (ending January 2025) to increase 3.3% and 7.9% year-over-year to $689.90 million and $2.06, respectively. Also, the company has topped the consensus EPS estimates in all four trailing quarters.
Shares of MOV have surged more than 4% over the past three months and approximately 12.7% over the past nine months.
Signet Jewelers Limited (SIG)
The last stock, Signet Jewelers Limited (SIG), also tends to shine around Valentine’s Day. For those who want to go beyond chocolates, jewelry is a classic Valentine’s Day gift. Signet Jewelers, with a market cap of $4.56 billion, owns brands like Key Jewelers, Zales Jewelers, Diamonds Direct, James Allen, and Banter by Piercing Pagoda and could benefit from a surge in sales.
After all, SIG’s trailing-12-month EBIT margin and net income margin of 8.49% and 6.29% are higher than the respective industry averages of 12.73% and 32.77%. Similarly, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 29.14%, 11.39%, and 7.61% are significantly higher than the industry averages of 11.43%, 6.08%, and 4.08%, respectively.
In terms of forward non-GAAP P/E, SIG is currently trading at 10.29x, 36.4% lower than the industry average of 16.17x. The stock’s forward EV/Sales of 0.81x is 34.1% lower than the industry average of 1.23x. Moreover, its forward Price/Sales of 0.63x is 31.9% lower than the industry average of 0.93x.
In the fiscal 2024 third quarter ended October 28, 2023, SIG’s reported sales of $1.39 billion. The company reported non-GAAP operating income and non-GAAP EPS of $23.90 million and $0.24, respectively. Its cash and cash equivalents totaled $643.80 million as of October 28, 2023, compared to $327.30 million as of October 29, 2022.
“We’re reaffirming guidance for FY2024 with the full year outlook updated for the profitable and strategic sale of 15 primarily luxury watch stores in the U.K. We continue to make progress expanding gross margin through merchandise and sourcing strategies and growth in services revenue,” said Joan Hilson, Chief Financial, Strategy & Services Officer.
“Cost savings initiatives are on track and healthy inventory enables product newness as we enter the holiday season and improved free cash flow, allowing Signet to return nearly $160 million to shareholders already this year,” he added.
For the fiscal year 2024, Signet expects total sales to be in the range of $7.07 billion-$7.27 billion. The company’s operating income and EPS are expected to be $397-$437 million and $9.55-$10.18, respectively.
SIG’s stock has climbed more than 28% over the past six months and is up nearly 34% over the past year.
Bottom Line
Every year on February 14, people celebrate love with their “valentine,” and most will break the bank by buying flowers, chocolates, jewelry, and other gifts for their beloveds. Today, this event is a big business. NRF survey shows that Valentine’s Day is returning to its romantic traditions, with total spending on significant others reaching a new record of $14.20 billion this year.
Therefore, it could be wise to add the featured stocks to one’s watchlist ahead of Valentine’s Day.

Consumers have long relied on Walmart Inc. (WMT) for affordable goods, a key feature of the retail chain’s offerings. Now, the company’s investors will also be offered ‘value deals’ as WMT initiates steps to make its equity more accessible.
On January 30, the retail giant declared its intention to effectuate its shares’ affordability in line with increasing store managers’ salaries and providing annual grants of up to $20,000.
The corporation announced a share-splitting strategy that awards shareholders in possession of WMT stock as of February 22 with three shares for each one owned. This move marks the first of its kind since 1999.
Stock splits often garner significant media attention, particularly when happening at corporations like WMT. The common stock volume would be increased from approximately 2.7 billion to roughly 8.1 billion. As a result, each share will hold a smaller percentage of the company, decreasing its nominal value.
Although this may give an impression of cheaper stock, it’s important to note that the size of the overall business, whether calculated by earnings, cash flow, or revenue, remains constant. The stock splitting will not affect any valuation but will divide the company’s metaphorical share pie into additional pieces. Hence, investors will maintain the same business percentage ownership as prior to the split.
This does not necessarily imply irrelevant implications for investors concerning WMT’s 3-for-1 stock split; rather, it piques interest in the company’s motivations for such a move.
WMT proposed that the stock split aims to incentivize employees to invest in their corporation’s shares. The company highlighted that over 400,000 employees participate in its established Associate Stock Purchase Plan, enabling them to buy stocks through payroll deductions and benefit from a 15% match on the first $1,800 contributed annually. Regardless, how this split will impact the company’s future trajectory and investor sentiment remains to be seen.
CEO Doug McMillon said of the decision: “Sam Walton believed it was important to keep our share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates. Given our growth and our plans for the future, we felt it was a good time to split the stock and encourage our associates to participate in the years to come.”
The stock market’s stellar performance in 2023, coupled with better-than-expected January job figures, has triggered a surge in retail investor activity. GenZ investors, having limited trading funds, could be attracted by WMT’s strategic decision to split its shares.
There seems to be a correlation between stock splits and an outperforming stock. This trend may be attributable to the momentum leading up to the split, as such occurrences often follow substantial price gains or heightened investor interest. WMT anticipates that this move will spur increased purchasing among its employees, potentially driving the stock price upwards.
However, certain additional factors could also contribute to the surge in WMT’s stock price:
WMT’s retail segment epitomizes stability, boasting over 10,000 stores and achieving a same-store sales growth (U.S. segment) of 4.9% in 2023’s third quarter, resulting in a new record for its trailing-12-month revenue of $638.79 billion.
On top of this, WMT is pursuing overlooked growth opportunities, notably in the realm of advertising. In partnership with The Trade Desk, a leading advertising technology firm, WMT has seen swift progression in its advertising endeavors, a promising venture given e-commerce competitors’ significant advertising revenue over the past year.
Over the past year, WMT’s stock climbed approximately 20% as the company enhanced its online shopping services and offered higher employee remuneration. E-commerce continues to thrive for WMT, demonstrated by a 24% year-on-year increase in U.S. online sales for the quarter that ended October 31, 2023. This boom can be seen throughout the year with similar growth across preceding quarters. WMT’s U.S. e-commerce sales grew 27.2% year-over-year in the first quarter and 24% year-over-year in the second quarter.
Moreover, WMT has announced plans to launch 12 additional stores and upgrade a smaller location to a Supercenter – an indicator of imminent growth.
Furthermore, WMT is set to publish its fiscal fourth-quarter earnings on February 20. Analysts anticipate its EPS to come at $1.63 and revenue at $169.24 billion. The fiscal fourth quarter that ended January of 2023 saw the company report quarterly earnings of $1.71 per share, and net sales reached $162.74 billion. If WMT reports another resilient quarter, it is likely to provoke a further increase in its stock price.
WMT shares sit slightly below $170 and trades above the 50-, 100-, and 200-day moving averages of $159.06, $160.27, and $157.91, respectively, indicating an uptrend.
Jefferies raised WMT’s stock price target to $195 from $190, thereby affirming a buy rating on the shares ahead of the earnings report. It anticipates a modest sales beat for WMT, with cautious guidance for fiscal 2025, factoring in the continued slowdown in inflation.
Bottom Line
WMT is a notable player on Wall Street, and its distinctive position is fueled by not only its status as one of the world’s most extensive retail chains but also its resilience during diverse market situations. WMT has been considered a recession-proof stock due to the consistency of its revenues and sales, even amid various economic upheavals. People put away their discretionary purchases during tough times but continue filling their grocery baskets, often seeking cost-effective options, a specialty of WMT.
WMT’s history also boasts of 11 two-for-one stock splits, which have created attractive entry points for investors previously unable to access the stocks due to high prices, potentially driving up stock costs with their participation. Employees, too, may find the affordability appealing for their Employee Stock Ownership Plan (ESOP) benefits, prompting additional stock procurement.
Investing in WMT the day after its last stock split in 1999 would have yielded a price return of approximately 268%, comparable with S&P’s 274% return. With the inclusion of the dividend, this could have surpassed S&P over an equivalent duration.
Particularly for long-term investors seeking both growth and income, WMT can be a favorable bet, considering its global brand recognition and historically robust financial positioning. This is crucial as the company continually expands its operations.
Moreover, WMT has reliably paid dividends over 50 consecutive years, pointing toward dependable shareholder value creation. The annual dividend stands at $2.28 per share, which translates to a dividend yield of 1.35%, given the existing share prices. Its four-year average dividend yield is 1.57%. WMT’s dividend payments have grown at a CAGR of 1.8% and 1.9% over the past three and five years, respectively.
WMT’s anticipated stock split will not affect these dividends. Considering a 3-for-1 split, this would adjust the quarterly dividend to $0.19 per share (current $0.57 per share), equating to an annual return of $0.76 per share. With approximately 8.1 billion shares outstanding, WMT would need an annual free cash flow of nearly $6.16 billion for the yearly return. Based on free cash flow of $4.34 billion and net cash provided by operating activities of $19.01 billion for the nine months that ended October 31, 2023, it appears plausible that the dividends will remain adequately covered after the split.
Usually, a business opts for a stock split when the cost of its shares becomes high, creating a psychological barrier for retail investors who may find it impossible to purchase a single share. Nevertheless, almost every brokerage, including WMT’s Associate Stock Purchase Plan, now offers the opportunity to buy fractional shares, rendering the nominal value of a single share less significant than before. However, post-split, the attraction lies in owning a larger number of shares at an equivalent total investment rather than a fractional portion.
Moreover, when WMT employees purchase company stock, they essentially become part owners. As such, their personal financial standing becomes interwoven with the company’s long-term success, potentially sparking a profound investment in the company’s future.
WMT’s impending stock split could potentially foster an ‘ownership mentality’ among its workforce. Investors are advised to bear in mind insider ownership when researching stocks. While insider ownership does not guarantee successful investments, it can imply an alignment of interests between insiders and common shareholders. However, investors should always remember to prioritize the business’s underlying health.
Nonetheless, WMT’s recent stock split – the first in 25 years – may raise eyebrows. Considering that the last split in 1999 coincided with the dot-com burst, could it be possible that WMT is employing the split as a defensive strategy, ideally ensuring sufficient operational capital to weather potential storms? Hence, a certain level of unease may accompany the news of the split taking place at the current low price.
 

Intel Corporation (INTC) CEO Pat Gelsinger acquired 3,600 shares of Mobileye Global Inc. (MBLY) stock at an average per share price of $27.75 on January 29, according to Form 4 filing dated January 31. The transaction was worth $99,915 in total. After this purchase, Gelsinger now owns around 129,095 shares through his trust.
Pat Gelsinger has purchased MBLY’s shares four times separately since the company became publicly traded in October 2022. Excluding the most recent one, his last purchase was on October 27, 2023, when he acquired 2,845 shares at an average per-share price of $35.18.
Meanwhile, Director Saf Yeboah-Amankwah recently reported an insider buy. As per Form 4 filling, on February 1, Yeboah-Amankwah bought 940 shares at an average per-share price of $25.67, bringing his total stake in MBLY to 48,459 shares. The recent transaction marks Yeboah-Amankwah’s second purchase of MBLY stock since it started trading publicly.
On October 28, 2022, Yeboah-Amankwah acquired 47,519 MBLY shares at an average per share price of $21.
Overall, during the past year, Mobileye insiders have sold $1.57 billion worth of shares while purchasing $1.32 million worth of shares. In June 2023, Intel sold about $1.5 billion from its MBLY stake. Even after the sale, Intel owned 98.7% of Mobileye’s voting shares, a decline from 99.3%.
Market participants closely watch insider activity, as the transactions can reflect existing sentiment around the prospect of the business. Typically, investors get a confidence boost in the stock when there are signs of solid insider buying. Even Mobileye’s short-term challenges didn’t stop Pat Gelsinger from making the recent purchase, as he could be confident about the company’s long-term outlook.
Moreover, Goldman Sachs analyst Mark Delaney has maintained his bullish stance on MBLY stock, giving it a Buy rating despite the company’s bleak 2024 guidance. He pointed out that management’s lower outlook for 2024 is due to supply chain-related customer inventory adjustments and specific production levels from Original Equipment Manufacturers (OEMs).
Delaney looks beyond the near-term challenges and focuses on Mobileye’s long-term potential. He remains optimistic about future growth and cash generation prospects. The shift toward high-value solutions such as SuperVison and Chauffeur would position MBLY for growth in the long run.
However, despite attractive insider buying lately, MBLY’s shares are down more than 15% over the past month and have declined nearly 31% over the past six months.
Now, let’s take a closer look at several factors that could impact the stock’s performance in the near term:
Latest Developments
On January 22, 2024, HiRain Technologies, a system provider of intelligent driving solutions to automakers in China, announced the mass production of the first Mobileye EyeQ™6 Lite-based ADAS system, scheduled to debut in China in the second quarter of this year.
The newest member of MBLY’s systems-on-chip portfolio, EyeQ6, is engineered to redefine performance and efficiency in core and premium ADAS offerings. EyeQ6 Lite features Mobileye’s vision-based sensing technology and excels in real-time detection and analysis of its surroundings. The company’s partnership with HiRain reflects its shared vision for high-quality automotive innovations.
Also, on January 9, MBLY expanded its existing relationship with Mahindra & Mahindra Ltd. (M&M), an Indian-based leader in automotive, farm and services businesses. Mobileye will collaborate with M&M to introduce several solutions based on Mobileye’s next-gen EyeQ™6 systems-on-chip and sensing and mapping software, including an intent to develop a full-stack autonomous driving system.
“As more advanced models emerge, we see great opportunities for growth in India and look forward to executing with Mahindra to bring Mobileye SuperVision-based services to one of the most challenging driving environments in the world,” said Mobileye CEO Prof. Amnon Shashua.
Robust Last Reported Financial Results
For the fourth quarter that ended December 31, 2023, MBLY reported revenue of $637 million, beating analysts’ estimate of $633.79 million. This compared to the revenue of $565 million in the same quarter of 2022. The company’s adjusted gross profit was $439 million, an increase of 5.5% year-over-year.
The company’s adjusted operating income rose 13.8% from the prior year’s quarter to $247 million. Its adjusted net income rose 260.3% year-over-year to $228 million. It posted adjusted earnings per share of $0.28, compared to the consensus estimate of $0.27, and up 3.7% year-over-year.
Furthermore, Mobileye’s cash and cash equivalents stood at $1.21 billion as of December 30, 2023, compared to $1.02 billion as of December 31, 2022. The company’s current assets were $2.07 billion versus $1.52 billion as of December 31, 2022.
“Our fourth quarter performance was very strong across the board but is understandably overshadowed by the inventory build-up at our customers which will impact our growth in 2024,” said MBLY’s CEO Amnon Shashua.
Inventory Issues Prompt Revenue Warning
Mobileye, an Israel-based autonomous driving technology company, warned that customer orders for auto chips would fall dramatically short of the prior year’s quarter.
The company said that automakers built up on Mobileye’s chips to avoid part shortages after the global supply glut crisis that persisted through 2021 and 2022 hampered manufacturing.
“As supply chain concerns have eased, we expect that our customers will use the vast majority of this excess inventory in the first quarter of the year,” MBLY said in its preliminary full-year outlook. The excess inventory reflects a pullback in demand from so-called Tier 1 customers, as they will not be placing orders for new chips at the same level they did in last year’s quarter.
For the first quarter of 2024, MBLY expects revenue to be down about 50%, as compared to the 459 million of revenue reported in the first quarter of 2023. Also, the company currently thinks that over the remainder of the year, the revenue will be impacted by inventory drawdowns to a much lesser extent.
The self-driving technology company anticipates lower-than-expected volumes in the EyeQ® SoC business, which will temporarily impact its profitability. Like revenue, MBLY’s first-quarter profit levels are expected to be considerably below the subsequent quarters.
Mobileye expects its first-quarter 2024 operating loss to be in the range of $257 million to $242 million. Excluding amortization of intangible assets and stock-based compensation, the company’s adjusted operating loss is projected to be in the range of $80 million to 65 million.
For the fiscal year 2024, MBLY expects revenue to be between $1.83 billion and $1.96 billion. Its full-year operating loss is anticipated to be in the range of $468 million to $378 million. Also, the company’s adjusted operating income will be in the range of $270 million to $360 million.
Mixed Analyst Estimates
Analysts expect MBLY’s revenue for the first quarter (ending March 2024) to decline 49.6% year-over-year to $230.71 million. The company is expected to report a loss per share of $0.06 for the ongoing quarter. However, Mobileye has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
For the fiscal year ending December 2024, Street expects Mobileye’s revenue and EPS to decrease 8.5% and 51.9% year-over-year to $1.90 billion and $0.39, respectively. However, the company’s revenue and EPS for the fiscal year 2024 are expected to increase 42.4% and 102.6% from the previous year to $2.71 billion and $0.80, respectively.
Extremely Stretched Valuation
In terms of forward non-GAAP P/E, MBLY is currently trading at 69.15x, 337% higher than the industry average of 15.82x. The stock’s forward EV/Sales of 10.90x is 793.5% higher than the industry average of 1.22x. Similarly, its forward EV/EBITDA of 53.76x is 444.2% higher than the industry average of 9.88x.
Moreover, the stock’s forward Price/Sales multiple of 11.52 is significantly higher than the industry average of 0.90. Also, its forward Price/Cash Flow of 47.56x is 367.8% higher than the industry average of 10.17x.
Decelerating Profitability
MBLY’s trailing-12-month gross profit margin of 50.36% is 42.1% higher than the 35.44% industry average. However, the stock’s trailing-12-month EBIT margin and net income margin are negative 1.59% and negative 1.30% compared to the industry averages of 7.68% and 4.66%, respectively.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 0.18%, negative 0.14% and negative 0.17% unfavorably compared to the respective industry averages of 11.73%, 6.15%, and 4.12%. Also, its trailing-12-month asset turnover ratio of 0.13x is 86.4% lower than the industry average of 0.99x.
Bottom Line
MBLY beat earnings and revenue analysts’ estimates in the fourth quarter of fiscal 2023. However, the self-driving technology company issued a revenue warning as it deals with excess inventory.
As per the company, its Tier 1 customers stocked up on chips following the global supply chain crisis that persisted in 2021 and 2022 and are now opting to work with excess inventory, resulting in a significant pullback in demand for its Advanced Driver Assistance Systems (ADAS) products.
Mobileye forecasted first-quarter 2024 revenue to be down nearly 50%, although the company believes inventory drawdowns will impact the revenue to a lesser extent over the balance of the year.
The near-term concerns didn’t stop Intel CEO Pat Gelsinger from purchasing around 3,600 shares of MBLY stock, with Mobileye Director Saf Yeboah-Amankwah joining along. When we notice any attractive insider activity, we shouldn’t react by impulsively buying the stock.
Given MBLY’s significantly elevated valuation, declining profitability, and bleak near-term prospects, as excess inventory concerns would cause declining revenue, it could be wise to avoid this stock for now.

Dividend-loving investors worldwide woke up with exciting news on Friday, as Facebook parent Meta Platforms, Inc. (META) announced its first-ever quarterly dividend and authorized a $50 billion share buyback program.
The company will pay a cash dividend of 50 cents per share on March 26 to shareholders of record as of February 22, joining other peers, including Apple Inc. (AAPL), Microsoft Corporation (MSFT), and Oracle Corporation (ORCL), which have regular payouts. META’s board intends to issue a cash dividend on a quarterly basis.
“Introducing a dividend just gives us a more balanced capital return program and some added flexibility in how we return capital in the future,” Meta’s Chief Financial Officer Susan Li told analysts on its earnings call.
META’s annual dividend of $2 translates to a yield of 0.4% at the prevailing share price. The stock finished nearly 20% higher to $474.99 on Friday after reporting better-than-expected fourth-quarter and full-year 2023 earnings.
The average yield for a dividend-paying stock in the S&P 500 is nearly 2%. Meta’s dividend payout is lower than that rate; however, companies generally start small. Now, investors can look forward to its dividend growth and stock gains.
Looking at Microsoft, the company initiated its cash dividend on January 16, 2003. Its annual dividend was $0.08 per share, which resulted in a yield of about 0.3%. A year following the dividend declaration, MSFT’s stock was up 10%, and the annual dividend for 2024 was raised to $0.16. Currently, the company pays a quarterly dividend of $0.75.
Talking about Apple, it stopped paying cash dividends in 1995 but then declared again in January 2013. Adjusting for all the splits, cash dividends in 2013 translated to an annualized yield of nearly 1.4%. A year after the dividend restart, AAPL’s stock was approximately 24% up as the company continued payouts. Since the restart, Apple has paid a total of around $34 per share.
Dividends are typically welcomed by shareholders and signal management’s confidence about the company’s future growth. Moreover, initial dividend payouts open up to investors who only hold stock in dividend payers.
Further, Meta’s recently released report marked the fourth quarter of the company’s self-described “year of efficiency,” which founder and CEO Mark Zuckerberg announced in February 2023. The company’s turnaround strategy involved layoffs and other cuts to spending, which in turn ended up being a successful effort to reverse the previous year’s revenue declines and share price weakness.
Outstanding Last Reported Financials
For the fourth quarter that ended December 31, 2023, META reported revenue of $39.17 billion, an increase of 24.7% year-over-year. The revenue surpassed analysts’ estimate of $40.11 billion. The company’s revenue from the Advertising segment grew 23.8% year-over-year, and its revenue from the Family of Apps segment rose 24.2%.
Meanwhile, META’s total costs and expenses reduced by 7.9% year-over-year to $23.73 billion. Its operating margin more than doubled to 41%, a clear sign that several cost-cutting measures are boosting profitability.
Facebook parent Meta’s income from operations rose 156% from the prior year’s period to $16.38 billion. Its net income increased 201.3% from the year-ago value to $14.02 billion. The company posted earnings per share attributable to Class A and Class B common stockholders of $5.33, compared to the consensus estimate of $1.76, and up 202.8% year-over-year.
As of December 31, 2023, META’s cash and cash equivalents stood at $41.86 billion, compared to $14.68 billion as of December 31, 2022. The company’s total assets were $229.62 billion versus $185.73 billion as of December 31, 2022.
Family daily active people (DAP) came in at 3.19 billion on average for December 2023, up 8% year-over-year. Family monthly activity people (MAP) was 3.98 billion as of December 31, 2023, an increase of 6% year-over-year.
Also, Facebook daily active users (DAUs) and Facebook monthly active users (MAUs) were 2.11 billion on average and 3.07 billion as of December 31, 2023, up 6% and 3% year-over-year, respectively.
As of December 31, 2023, the tech giant completed the data center initiatives and the employee layoffs, along with the facilities consolidation initiatives. META’s headcount was 67,317 at the end of the year 2023, a decline of 22% year-over-year.
“We had a good quarter as our community and business continue to grow,” said CEO Zuckerberg. “We’ve made a lot of progress on our vision for advancing AI and the metaverse.”
Fiscal 2024 Outlook
For the first quarter of 2024, META expects total revenue to be in the range of $34.50-37 billion. For the full year 2024, the management expects total expenses to be in the range of $94-99 billion, unchanged from the previous outlook.
The company anticipates full-year capital expenditures to be in the range of $30-37 billion, an increase of $2 billion in the high end of its prior range. Meta expects growth to be driven by investments in servers, including AI and non-AI hardware and data centers, and it plans to ramp up construction on sites with its previously announced new data center architecture.
META’s updated outlook reflects its evolving understanding of its AI capacity demands as the company anticipates what will be needed for the next generations of foundational research and product development.
Ramping up Efforts in AI and Metaverse
Meta is making consistent efforts to secure its place in the increasing AI arms race. Last month, CEO Mark Zuckerberg announced that META plans to build its own artificial general intelligence, known as AGI, which is artificial intelligence that meets or exceeds human intelligence in almost every area. He added that the company further plans to open it up to developers.
In a video posted to Meta’s social network Threads, Zuckerberg said building the best AI for chatbots, creators, and businesses requires enhanced advancement in AI across the board. “Our long term vision is to build general intelligence, open source it responsibly, and make it widely available so everyone can benefit,” he said in a post on Threads.
The tech giant announced building out its infrastructure to accommodate this push to get AI into products, and it planned to have about 350,000 H100 GPUs (graphics processing units) from chip designer NVIDIA Corporation (NVDA) by the end of this year. In combination with equivalent chips from other suppliers, Meta will have around 600,000 total GPUs by the end of the year, Zuckerberg said.
He added that the company plans to grow and bring its two major AI research groups – FAIR and GenAI – together to accelerate its work. He further said he believes that Meta’s vision for AI and the AR/VR-driven metaverse are connected.
“By the end of the decade, I think lots of people will talk to AIs frequently throughout the day using smart glasses like what we’re building with Ray Ban Meta.”
Mark Zuckerberg’s recent announcement is one of the company’s biggest pledges to double down on AI. Earlier last year, after the viral success of OpenAI’s ChatGPT, Zuckerberg announced that Meta is creating a new “top-level product group” to “turbocharge” the company’s work on AI tools.
Since then, Meta has introduced tools and information aimed at assisting users understand how AI influences what they see on its apps. The company has launched a commercial version of its Llama large language model (LLM), ad tools that can generate image backgrounds from text prompts, and a “Meta AI” chatbot that can be accessed directly via its Ray-Ban smart glasses.
In his posts last month, Meta CEO said the company is currently training a third version of the Liama model.
Impressive Historical Growth
Over the past three years, META’s revenue and EBITDA grew at CAGRs of 16.2% and 15%, respectively. The company’s net income and EPS rose at respective CAGRs of 10.3% and 13.8% over the same timeframe. Its levered free cash flow improved at 25.6% CAGR over the same period.
Moreover, the social networking company’s total assets increased at a CAGR of 13% over the same timeframe.
Favorable Analyst Estimates
Analysts expect META’s revenue for the first quarter (ending March 2024) to grow 25.3% year-over-year to $35.88 billion. The consensus EPS estimate of $4.25 for the ongoing quarter indicates a 93.3% year-over-year increase. Moreover, Meta has topped consensus revenue and EPS estimates in each of the trailing four quarters, which is remarkable.
Furthermore, Street expects Meta’s revenue and EPS for the fiscal year (ending December 2024) to grow 17.3% and 32.4% year-over-year to $158.20 billion and $19.69, respectively. For the fiscal year 2025, the company’s revenue and EPS are expected to increase 11.2% and 15.3% from the previous year to $175.98 billion and $22.70, respectively.
Solid Profitability
META’s trailing-12-month gross profit margin of 80.72% is 64.5% higher than the 49.07% industry average. Likewise, the stock’s trailing-12-month EBIT margin and net income margin of 36.33% and 28.98% are considerably higher than the industry averages of 8.47% and 3.50%, respectively.
In addition, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 28.04%, 17.84% and 17.03% favorably compared to the respective industry averages of 4.09%, 3.52%, and 1.43%. Also, its trailing-12-month levered FCF margin of 23.52% is 202.7% higher than the industry average of 7.77%.
Bottom Line
Facebook parent META recently reported a big beat on earnings and revenue for the fourth quarter of fiscal 2023. The company, which owns Facebook, Instagram, and WhatsApp, also announced its first-ever dividend of $0.50 per share and authorized a $50 billion share buyback program. Dividends generally signal management’s confidence about the company’s future growth.
Moreover, Meta’s market capitalization last month surpassed $1 trillion. The company last exceeded this mark in the market cap in 2021, when it was still known as Facebook.
Meta’s “year of efficiency” and several cost-cutting measures paid off in a significant way and offered a sweetener for investors, sending its shares higher. The stock is up nearly 38% over the past month and has gained more than 150% over the past year.
2023 was a pivotal year for the social networking giant, where it raised its operating discipline, delivered solid execution across its product priorities, and significantly improved ad performance for the businesses that rely on its services. In 2024, the company further seems well-positioned to build on its progress in each of these areas while advancing its ambitious efforts in AI and Reality Labs.
Given META’s robust financials, accelerating profitability, dividend initiation, and solid growth outlook, primarily as it seeks to strengthen its position in AI, it could be wise to invest in this stock now.

Advancements in Artificial Intelligence (AI) have yielded remarkable progress in technological and operational efficiencies across various sectors. Yet, AI’s noteworthy penetration into the healthcare field is raising propositions of transformation.
Pharmaceutical companies have been capitalizing on AI long before the recent surge in interest – the utilization of intricate AI models to decipher disease mechanisms serving as a prime example. AI-facilitated applications like AlphaFold2, ESMFold, and MoLeR offer novel insights into protein structures that unravel numerous diseases.
While the most advanced AI-centric medicine entities have Phase 2 clinical trial drugs, the unlocking of AI-healthcare collaboration power, especially in fashioning potential cures for lethal diseases, will witness compelling progression in the upcoming years.
Researchers today regard AI as a pioneering tool offering an expedited analysis of vast data quantities, surpassing human capabilities. Presently, drug development demands a decade or more in research and development, compounded by the escalating production costs over the past decade – a conundrum existing despite technological advancement.
With AI’s intervention, the feasibility of expediting this process, slashing developmental timeframes and drug production costs by up to 30%, emerges. There is also a reduction in failure risk, given the current approximately 90% attrition rate, depending on the therapeutic domain.
GenAI (a subset of deep learning) embarks on a fresh leap in AI evolution and imbues computers with transformative abilities. Its arrival challenges us to envision its implications within the healthcare sphere, particularly drug discovery.
While most ongoing projects are in their infancy stages, the merger of GenAI and drug discovery might instigate not only novel treatments but also breakthroughs potentially outpacing nature. GenAI is revolutionizing several facets of the pharmaceutical realm, from speeding up drug discovery, enhancing procedural efficiency in clinical trials, accelerating regulatory approvals, and ultra-targeting marketing to facilitating in-house medical materials production. GenAI’s potential to unlock billions in industry value is imminent.
By expediting drug compound identification processes and their corresponding development, approval, and efficient marketing, this technology could generate an economic value between $60 to $110 billion annually for the pharma and medical-product industries.
The looming GenAI-steered transformation in life sciences lends immeasurable advancements to human health and quality of life. An accelerated drug discovery process, for instance, aids in combating diseases swiftly, freeing up resources for underserved areas such as orphan diseases.
GenAI’s capability to derive patterns and insights from extensive patient data will ignite more personalized treatments, hence improving patient outcomes and streamlining patient care by minimizing discrepancies in therapeutic manufacture and delivery.
Lastly, by automating mundane tasks like document creation and record-keeping, GenAI carries significant potential to augment productivity within the medical research field and enables researchers and medical liaisons to devote more time to patient-centered tasks. In turn, this holds promise for improved service to both clinicians and patients.
Pharmaceutical powerhouse Merck & Co., Inc. (MRK) has set sights on exploring GenAI platforms. The company’s interest comes on the heels of the Merck Research Labs collaboration announcement with Variational AI, supported by the CQDM Quantum Leap program.
At the core of this innovation is Variational AI, a trailblazer in optimizing drug discovery and development through the efficient employment of GenAI. This potent technology called Enki offers a novel approach to drug discovery. Drawing parallels with AI software like DALL-E and Midjourney, which can translate text prompts into visual images, Enki generates small molecular structures in response to target product profiles (TPPs). The user picks the desirable attributes, selecting the targets they aim to affect alongside those they seek to avoid; then, Enki produces molecules tailored to meet the TPP specifications.
Constructed as a fundamental model for small molecule drug discovery, Enki serves to hasten and mitigate risks attached to the early stages of discovery. The startup believes that a series of prompts about the TPP is all that stands between users and innovative, selective, and lead-like structures ready for synthesis. Utilizing experimental data, Variational trained Enki to generate molecules based on TPPs, thereby handing researchers the tool to canvas a broader scope of chemical space.
Thanks to the Enki Platform, chemists can bypass the complex process of developing their own GenAI models. They can input their TPP and receive an array of innovative, diverse, selective, and synthesizable lead-like structures within days, facilitating a swift transition into lead optimization. With this dynamic start, it is evident that MRK, the leading purveyor of pharmaceuticals, aims to make a significant splash in the new year.
Several other factors present an optimistic outlook for MRK in 2024.
MRK’s flagship oncology drug, Keytruda – the highest-grossing prescription medication worldwide – is slated to gain approval for additional uses. In 2023 alone, Keytruda grossed a remarkable $25.01 billion, equating to 45.2% of MRK’s fourth-quarter sales. Forecasters project Keytruda to yield over $30 billion in sales by 2026.
MRK has already seen the tangible effects of its 2023 transactions, substantially boosting the company’s future revenue projections. The pharma giant now anticipates garnering $20 billion from fresh oncology products in development by the mid-2030s, almost doubling its earlier pipeline forecast of just over $10 billion.
However, as Keytruda approaches its patent expiration in 2028, MRK is already searching for strategic acquisitions within $15 billion, preparing to weather the ensuing patent erosion. This effort is to ensure continuous growth through novel lucrative ventures, replacing the revenue stream provided by Keytruda upon losing its exclusiveness.
MRK’s proactive approach comes on the heels of its recent $680 million acquisition of Harpoon Therapeutics, following the larger purchases of Prometheus Bio ($10.8 billion) and Acceleron Pharma ($11.5 billion).
MRK, buoyed by solid fourth-quarter performances backed by strong Keytruda sales, has secured several deals over the past year. Notably, this includes a notable $5.5 billion agreement with Japan’s Daiichi Sankyo, granting co-development rights for three antibody-drug conjugate cancer treatments. This partnership has contributed to MRK’s non-GAAP R&D expenses, increasing them to $9.63 billion in the fourth quarter of 2023 and $30.53 billion for fiscal 2023.
Aside from its dominant presence in the oncology sphere, MRK is also targeting the weight loss medication market. The company is developing Efinopegdutide, a GLP-1 class drug for weight management that has demonstrated promising trial results.
After securing only 1% year-over-year sales growth in fiscal year 2023, analysts project a 5.3% year-over-year increase in the fiscal year ending December 2024. This predicted growth is expected to propel the company’s EPS to $8.49, a 462.1% year-on-year increase.
MRK estimates its global sales between $62.70 billion and $64, while non-GAAP EPS is expected to be between $8.44 and $8.59.
Furthermore, MRK boasts an impeccable dividend history, with the annual dividend currently at $3.08 per share, yielding 2.55%. In an impressive display of consistency, MRK has increased its dividend for 13 consecutive years and holds a four-year average yield of 2.97%. Also, over the past three and five years, its dividend grew at a CAGR of 7.8% and 9.3%, respectively.
MRK’s shares have gained over 15% year-to-date to close the last trading session at $126.38. Moreover, it trades above the 50-, 100-, and 200-day moving averages of $110.53, $107.39, and $109.24, respectively. If this upward trajectory persists, the company is poised for a notable performance in 2024.
Bottom Line
With the employment of GenAI, the pharma industry has made a considerable stride forward, leading to significant operational enhancements and quicker benefit realization, especially in drug discovery. The GenAI in drug discovery market is projected to surpass around $1.13 billion by 2032, growing at a CAGR of 27.1%.
MRK has swiftly evaluated and addressed the potential impact of GenAI, demonstrating commendable adaptability in deploying the most appropriate tool for each specific use case. This technology holds great promise for MRK’s research, trials, manufacturing, and commercialization endeavors.
Partnerships formed between MRK, AI technology firms, and research institutions could catalyze innovation in GenAI for drug discovery and bolster the company’s product pipeline in the future. MRK, with an abundant oncology pipeline, is utilizing advanced technology for drug research. Furthermore, MRK shares are compelling due to robust shareholder returns, growth prospects, solid profitability, and an optimistic outlook.
However, the stock is priced at a premium compared to its competitors. In addition, despite displaying consistency in its dividend payment, its yield of 2.55% sits not only below the U.S. consumer inflation rate but also under that of its healthcare counterparts, potentially rendering MRK a less appealing proposition for conservative investors.
Further complicating matters, government regulations and the Inflation Reduction Act might unfavorably affect MRK’s operations. Modifications such as negotiations with Medicare, implementation of medication discounts covered under Medicare Part B and D, and enforced penalties for escalating drug prices pose potential financial risks. MRK’s Januvia ended up on this list, jeopardizing the financial stability of MRK’s diabetes franchise.
Sales for the Januvia/Janumet (diabetes) franchise declined 13% year-on-year to $787 million in the fiscal fourth quarter of 2023. The drug’s sales suffered due to dwindling demand in the U.S. and generic competition in certain international markets. Such regulatory restraints could decelerate MRK’s future revenue growth, pressuring management to reassess its R&D approach.
Therefore, investors are advised to weigh both the positive and negative factors prudently before investing in this stock.