Top stock pitches (Mon, Jan 22)

Author

Connor Van Ooyen
January 22, 2024

👋 Good Morning!

This is the Yellowbrick Road where I share the best stock ideas from billion-dollar hedge funds, professional analysts, millionaire investors, and more!

Welcome to the 115 new readers who joined over the weekend!

Our AI read and summarized 141 stock ideas, 1429 news articles, and 185 insider trades and found:

  • Plural Investing is long $KD (featured stock idea)

  • 1000% upside on $IWG.L, a $49 price target for $RBLX, a $790 price target for $NVDA (bonus stock ideas)

  • Microsoft executive emails hacked by Russia (news)

  • CEO at $AHNR bought the stock (insider trade)

  • and much more…

Thanks for reading! Have a great day.

Connor

* If you missed yesterday’s email, don’t forget to read it here

FEATURED STOCK IDEA

HEDGE FUND

Plural Investing holding: $KD

Kyndryl Holdings, Inc. (ticker: KD) is an American multinational information technology services company that was spun off from IBM and specializes in managing and modernizing clients' infrastructure and mission-critical systems.

Ticker: KD | Price: $20.57 | Price Target: $40 (+94%)
Market Cap: 4.7B | Timeframe: 3 years

💻 Tech Services | 💻 Tech Infrastructure | 📈 Bullish Idea

Kyndryl (KD), an IBM spin-off and the largest on-premise data center management service provider, is undergoing a successful turnaround and holds a promising future, despite spinning off as a loss-making entity in a shrinking market. Our SumZero Top Stocks 2024 Challenge runner-up writeup in late November 2023 indicates Kyndryl's stock value, initially targeted at $50 by IBM, plummeted post-spin from $28 to a low of $8 in 2022. We capitalized on the decline by acquiring options when shares were $9-$11 and stock at $14-$17; the price now stands at $21, with a three-year projection of $40, assuming a generation of $4 in free cash flow per share. CEO Martin Schroeter's significant insider stock ownership suggests confidence in the company's revenue targets. Since independence from IBM, Kyndryl has seen improved gross margins, from 12% in FY22 to 16.9% year-to-date, with projections of reaching 26%. Additionally, reducing 0% margin contracts, expanding into competitive IT consulting, aiding AWS/Azure transitions, and addressing internal bureaucratic inefficiencies hint at potential growth. These improvements, along with high sales per employee, point towards Kyndryl achieving the $4 per share free cash flow, and with a possible 10x multiple could justify a $40 valuation. The prospect of revenue growth by 2025 could even lead to a 15x multiple.

Read the full article here. Read time: 2 min

+3 POINTS - WEEKLY TOURNAMENT

How do you rate the featured stock idea?

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Yesterday’s Featured Stock Idea

Etsy ($ETSY)

🟩🟩🟩⬜️⬜️ - Buy (44%)
🟥⬜️⬜️⬜️⬜️ - Pass (20%)
🟨🟨⬜️⬜️⬜️ - Watchlist (36%)

  • 🔎 mlans**** - Rising consumer credit card debt, ETSY first place to make cuts.

  • 🔎 emoj**** - Will have to see if reducing operating costs via layoffs is enough. Will need to enhance the user experience somehow in its search engine capability.

There are 3 more stock ideas after “Today’s Sponsor”

TODAY’S SPONSOR

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It’s a pivotal question worth exploring together.

Speaking of opportunities, there are massive bullish trends awaiting in the bio tech sector.

Not just that, other stocks are ready to break out, ripe for picking—if you know where to look.

Please support my sponsors. It’s how I pay the bills to keep this newsletter free :)

BONUS STOCK IDEAS

RESEARCH REPORT

Symmetry sees 1000% upside on IWG.L

International Workplace Group (IWG), which trades on the London Stock Exchange under the ticker IWG.L, is a multinational corporation that provides serviced offices, coworking spaces, business lounges, and virtual offices under various brand names. The company operates in over 120 countries and provides flexible workspaces for businesses and individuals.

Ticker: IWG.L | Price: $176.70 | Price Target: $2000 (+1032%)
Market Cap: $1.8B | Timeframe: 7 years

🏠 Co-working Spaces | 🇬🇧 Europe | 📈 Bullish Idea

International Workplace Group (IWG.L) is positioned as a promising investment, with the potential for an eleven-fold increase in value over seven years, aiming for a 2000 pence target price. Transitioning to a capital-light model, IWG expects its return on capital to grow significantly by 2030. CEO Mark Dixon, a major shareholder, is leading this strategic shift. IWG, a leader in flexible workspaces, is set to benefit from the industry's growth, driven by the trend towards flexible and hybrid work environments. The company is reorganizing its operations into Core IWG and a digital asset collective, Worka, capitalizing on its market dominance and high barriers to entry in the industry. Despite past challenges and industry risks, IWG's strong fundamentals, diverse growth avenues, and understanding of lease structures present a solid investment opportunity. Its current undervaluation, due to external factors, adds to its appeal. Future growth is expected to be driven by various catalysts including changes in reporting standards, a potential U.S. listing, and strategic business moves like share repurchases and potential segment divestiture. IWG's conservative growth assumptions, debt reduction plans, and shift towards a digital business model underscore its potential for significant returns, despite market uncertainties and competition.

Read the full article here. Read time: 28 min

ANALYST REPORT

Wells Fargo gives $RBLX a base-case price target of $49

Roblox Corporation, operating under the ticker RBLX, is an American technology company that runs the Roblox platform, which is an online entertainment platform that allows users to play, create, and share virtual experiences, often designed by other users, using its proprietary game-developing tool called Roblox Studio.

Ticker: RBLX | Price: $38.68 | Price Target: $49 (+27%)
Market Cap: 24B | Timeframe: N/A

🕹️ Gaming | 📈 Bullish Idea

We maintain our above-consensus outlook for Roblox (RBLX), forecasting a 21% year-over-year increase in bookings for Q4, driven by strong third-party engagement and robust mobile app growth, particularly with a 34% increase in mobile engagement compared to the previous quarter. Despite the mobile app being just a part of Roblox's total usage, it's a good sign for overall growth. Our estimates remain the same, with a hopeful 21.0% and 18.5% annual bookings growth for Q4 2023 and FY 2024 respectively. We predict the company's initial guidance for FY 2024 to modestly exceed expectations at $910M and $4.1B for bookings and $530M for EBITDA. Additionally, the ad platform development is a point of interest, with a potential increase in contributions starting 2025 which may improve margins faster than current estimates. We reiterate our Overweight rating and $49 price target, based on 25 times our 2026 free cash flow per share estimate of $1.95, recognizing the ad business as a significant upside opportunity for Roblox.

Read the full article here. Read time: 2 min

ANALYST REPORT

Tigress Financial gives NVDA a $790 price target

NVIDIA Corporation is an American multinational technology company incorporated in Delaware and based in Santa Clara, California. It designs graphics processing units (GPUs) for the gaming and professional markets, as well as system on a chip units (SoCs) for the mobile computing and automotive market.

Ticker: NVDA | Price: $560.53 | Price Target: $790 (+41%)
Market Cap: $1.4T | Timeframe: 12 months

⚡️ Semiconductor | 📈 Bullish Idea

Tigress Financial Partners reiterates a 'Buy' rating on Nvidia (ticker: NVDA) and increases its 12-month price target to $790, anticipating over 40% potential return from the current levels. Nvidia's preeminence in AI hardware and software, particularly in generative AI technology, is expected to contribute to a business super cycle, foster revenue and cash flow growth, and enhance shareholder value. The company is poised to benefit from a projected $1 trillion shift in global data infrastructure spending towards accelerated computing powered by AI integration. Fresh off a successful event at CES 2024, Nvidia's advancements maintain its dominance, being a critical supplier to major hyperscalers and cloud service providers who are increasingly using Nvidia GPUs. The company is set to capitalize on the AI revolution in various sectors, including healthcare, with advancements in drug discovery and patient care. The growth of Nvidia's networking business is driven by new platforms like InfiniBand and ethernet, while data center growth is spurred by the introduction of Grace Hopper GPUs and other new product launches. Nvidia's automotive partnerships are growing as the industry embraces AI for driver assistance and software-defined vehicle features. Nvidia's mastery over visual data processing, combined with the surge in AI, deep learning, and data center adoption, is expected to result in higher returns on capital, increased economic profit, and further shareholder value.

Read the full article here. Read time: 2 min

+3 POINTS - WEEKLY TOURNAMENT

Which bonus stock idea was the most compelling to you?

Login or Subscribe to participate in polls.

Yesterday’s Poll Results:

🟩🟩🟩⬜️⬜️ Medical Facilities Corp ($DR.TO) [68%]

🟨🟨⬜️⬜️⬜️ C.H. Robinson Worldwide ($CHRW) [22%]

🟥⬜️⬜️⬜️⬜️ Bel Fuse ($BELFB) [10%]

Your comments:

  • 🚛 emoj*** ($CHRW): Short-term gains can probably be realized, but ground freight will almost always rebound and prevail as the most cost-effective.

  • 🚛 alpo*** ($CHRW): A good short-term play (as long as ME hostilities continue).

MARKET OVERVIEW

Today’s market overview is brought to you by Public. If you are still saving money in a saving’s account at your bank, then you are missing out on a 5.1% interest rate in Public’s cash account. Learn more here

Are you short-term bullish or bearish on the market?

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Yesterday’s Poll Results: 63% bullish

Well, the bearishness didn’t last long. The semiconductor earnings seem to have quickly flipped the sentiment in the market. All of the indexes were green for the last two days of last week and all of them except the Russell are now positive for the year. The Fear v Greed index has jumped from the mid-50s at the start of the week to 72 at the end of the week. The news sentiment started the week negative and then jumped all the way up to 0.529 to end the week (on a scale of -1.5 to +1.5). Yellowbrick Road Readers also started the week bearish but ended at 63% bullish.

A few readers are still concerned that the Fed will cut less than people expect which could cause a headwind, but most are very bullish for the time being.

STOCK MARKET NEWS

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Today’s stock market news is brought to you by IBD. If you want to beat Wall Street, you need an edge––IBD Digital gives you the tools to invest with success. Try 8 weeks today for just $8.

Wayfair lays off 13% of employees weeks after CEO told workers to log more hours - New York Post 

S&P 500 confirms bull market with record close - Reuters 

Ford to reduce F-150 Lightning production - Reuters 

Consumer sentiment surges while inflation outlook dips, University of Michigan survey shows - CNBC 

Apple $3,499 Vision Pro headset now available to order ahead of Feb. 2 release - CNBC 

Spirit Airlines stock jumps 17% after raising fourth-quarter forecast - CNBC 

Super Micro shares soar more than 30% to record on uplifting preliminary results - CNBC 

Microsoft executive emails hacked by Russian intelligence group, company says - CNBC 

FEATURED INSIDER TRADE

The insider trade is brought to you by CEO Watcher (another free, weekly email I write). It’s the only newsletter that tracks insider returns to find the best ones. Subscribe here

President and CEO at ATHENA GOLD CORP ($AHNR)

The President and CEO purchased 1,875,000 shares at $0.03/share ($56,250.00 total) which increased their holdings by 9.4%. The current price is $0.04 (+22.0%). (trade link)

Historic Returns
1m returns: 137% weighted | 20% median | 78% win rate (7/9)
3m returns: 94% weighted | 22% median | 78% win rate (7/9)
6m returns: 77% weighted | -25% median | 33% win rate (3/9)
1y returns: 154% weighted | 80% median | 100% win rate (5/5)

QUIZ

+3 POINTS - WEEKLY TOURNAMENT

Which of these companies was NOT part of the original Dow Jones Industrial Average in 1896?

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Yesterday’s Question: This company, known for its smartphones, was originally named 'Research In Motion' (RIM). What is it now called?

Answer: Blackberry

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+15 POINTS - WEEKLY TOURNAMENT

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SECRET QUESTION

+10 POINTS - WEEKLY TOURNAMENT

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WEEKLY TOURNAMENT

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🏆 Last Week’s Winners

🥇 Prize - $25 Amazon gift card to johninv***

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