Hello everybody. I just finished my valuation report on PayPal Holdings Inc. and you can read it for free to Substack. Enjoy and feel free to discuss any ideas. Thanks!

Hello everybody. Paypal seems to have been criticized by the media and many investors due to the huge stock price decline. In my opinion, this drop in price represents an excellent opportunity to revisit Paypal valuation:

I would like to hear your thoughts about my valuation assumptions and the value per share of 100$.

$AMZN $TDOC

Hello folks. Three days ago I wrote a post (can be found here: https://commonstock.com/post/3aa53673-a861-4845-b02b-6008187e93ab) on the Valuation of Teladoc Health Inc and I attached a value of operating assets at 7 Billion. One of the comments was from @rihardjarc who asked about my view on the risk that could be created. It is a very logical question and in this post I will try to answer it, looking at the fundamentals.

On the 1st of Aug 2023, Amazon announced that will offer telemedicine services in 50 states in the US via Amazon Clinic and the price of Teladoc Helath Inc declined about 6%. Many thoughts and comments were expressed on that day about Amazon.com and the advantage that will be gained from that sector.

It is clear that Amazon wants to show up in another one more sector because in 2022 acquired One Medical for 3.9 Billion to improve in-person whole care services.

Let's examine what Health care services, Amazon provides:

Amazon Clinic: Offers affordable and convenient virtual care for more than 30 common health conditions—it’s great when you need to get treatment quickly from home or on the go, and you’ll always know the cost of a visit upfront.

One Medical: This is a membership-based primary care organization that combines in-person care with 24/7 on-demand virtual health services. Members enjoy seamless access to comprehensive care with primary care providers that support them on their health journey across every stage of life.

Amazon Pharmacy: This is a full-service pharmacy in the Amazon.com store. Customers can use Amazon Pharmacy to purchase medications prescribed by their doctor and have them delivered to their door, with free two-day delivery for Prime members. Amazon Pharmacy accepts a wide range of insurance plans, or Prime members can save with RxPass or Prime Rx.

What we conclude is that Amazon offers Telemedicine services via two different “departments” and tries to mitigate the delivery cost of Amazon Pharmacy into the Amazon Primers.

Looking at the FAQ of the Amazon Healthcare website I found that Amazon clinic using a group of companies to provide the services which are: Wheel, SteadyMD, Curai Health, and Hello Alpha

Before starting to value each company I would like to make my basic narrative about how I see Amazon.com as a whole company and the advantage that will gain. As most known, Amazon is an online retailer with the main focus to become the biggest marketplace on the internet. A place where everyone will join and can find everything they want at the price they want. On one hand, this business model offers high revenues but the disadvantage is that has huge intermediate costs from the seller to the customer. This effect can be translated into low operating margins with high reinvestment rates. As a result, Jeff Bezos to mitigate that cost, created the Amazon Primer Membership in 2005, and the next year, AWS (Amazon Web Services) was launched as an Infrastructure Service (cloud services) to improve the

operating margins. In my valuation, I will assume that the main focus of Amazon remains on Online retailing, AWS, and Amazon Primers, and as a result, the telemedicine will become a service that Amazon Primers will be the main beneficiaries (like drug delivery and consulting for free) and not the casual users.

Since I have breakdown the evolved companies, the only barrier that I have to pass through, is the valuation of them. I will value One Medical separately and I

will breakdown Amazon Clinic into four sub-parts:

To value this company, I could have used the acquisition deal of 3.9 Billion but I don’t know if M&A has taken into account the premium that will be created from Amazon Primers. The company offers a subscription model that provides all the necessary healthcare services and that’s why I will value the subscription model to find the total value of One Medical.

The last disclosure about the total subscribe users can be found in 4Q-2022 which was 836.000. Revenues for the same year were 1.046 Billion which means that each user spend 1250$. From 2020 to 2022 the growth rate in users was 24% and the average growth of Amazon Primers in the last 10 years is 19%. To depict the premium of Amazon Primers (since they will be the main beneficiaries) in the growth rate I will almost double the growth of subscription users from 24% to 40% for the first 5 years and then I will decline the growth at 10%. Furthermore, Amazon Primers are 93% more probable to stay with the service after one year and that’s why I used a similar (but lower) number for the retention rate of 90%. Finally, I assumed that the cost of revenues contributes to keeping its existing users and the

total operating expenses will contribute to acquiring new users. The results are the following:

Value of Existing Members: $ 1.89 Billion.

Value of New Members: $ 4.78 Billion.

PV of Corporate Expenses: $0.490 Billion.

Value of Subscription Membership/One Medical: $6.18 Billion

(Note: To find the value of each user, I used a paper from Professor Aswath Damodaran and the excel spreadsheet from his website)

Then I used the dataset from Aswath Damodaran website with EV/EBITDA=19.3 and EBITDA margin= 17%.

The equation for an average company in the Healthcare Technology and Information sector now becomes :

EV=Revenues*3.2 and the value of Curai Health and Hello Alpha is 23.8 and 10 Million respectively.

Finally, the total value of Amazon.com Healthcare services will derive as sum of all the above companies, which is: 16.3 Billion.

Since I have measured the value of Teladoc (7 Billion) I will examine the effect of the following variables:

The distribution that i used and the (value) range between 20th and 90th percentile can be found at the following two pictures:

Since i have define the range of each variable within a random distribution, i will examine the effect of each variable to Teladoc Operating Assets:

My initial thought was to examine how exactly Amazon will benefit from the expansion of Healthcare Services and I conclude that Amazon Primers would be the main force that will increase the value of this service. My second step was to value each involved company, with any available information, and I tried to “Boost” my results with the effect of Amazon Primers. As a result, I came up with a value for Amazon Healthcare Services, at 16.3 Billion (Double of that Teladoc Health Inc).

Since I calculated the value of Teladoc and Amazon operating assets, I ran a simulation and sensitivity analysis to examine which factor has the most effect on the value of operating assets of Teladoc. Even with an increase of 46 Billion for Amazon Healthcare Services (“Amazon Effect”) and at the same time decrease in the Total

Market at 715 Billion, the effect against Teladoc was minimal. On the other hand, market share and operating margin seem to affect Teladoc the most because the growth of revenues is dependent from the total market share and the increase of operating margin from the goodwill impairment of Livongo.

Thank you and I hope good investments. Goodbye!

Hello everybody! I just finished my Valuation report for Teladoc Health Inc. $TDOC

I will summarize for you the most important parts:

In valuation one of the first steps is to set the landscape, looking at the following parameters:

Following a report from the website www.futuremarketinsights.com, the whole value of the Telemedicine market in 2023 will be 106 Billion and is projected to grow to 912 Billion by 2033, exhibiting a compound annual growth rate (CAGR) of 24%. Furthermore, the company held a leading position (Top 5 company) in the market share of Telemedicine which is estimated at 6% in 2023 (source: here).

My narrative for Teladoc Health goes as follows:

Teladoc Health Inc is one of the leading companies in the Telemedicine sector which is going to grow at a fast pace in this decade. I assumed that the market share of Teladoc will be improved from 2%(2023) to 5%(2033) because as a leading company will have a higher competitive advantage than the competitors. Furthermore, I assumed that operating income in the first year will remain negative at -100% as a result of the poor operation of Livongo and then will converge to the third quantile of the sector. Due to high expenses from Livongo, Teladoc will need to make higher reinvestment rates than an average company in the sector and as a result, I set the value at 0.74 for the next years. After year 5, the company will have improved its operations with an established business model and average Reinvestment rate. As a global company that wants to offer a whole care solution, I attached a cost of capital at the third quantile of the sector which is 12.84%. Finally, the company will be efficient as an average company in the sector with no competitive advantage (in perpetuity).

Value of Teledoc $7,216,025

Probability of failure = 0.00%

Value of operating assets = $7,216,025

-Debt $1,575,060

-Minority interests$0

Value of equity $6,599,659

Value of options $64,601

Value of equity in common stock $6,535,059

Number of shares 159,675.00

Estimated value /share $40.93

Price per share $29.00

% Under or Over Valued -29.14%

If you want to learn more about their business mode, fundamentals and results from Monte Carlo simulation ( with Scenario and sensitivity analysis) then you can follow the links below. Thank you for the support!

Download for free the Valuation Report here: https://readysetvalue.gumroad.com/l/guarv or

you can read it at my Substack Newsletter:

Hello folks. Beliefs and high expectations for a stock can affect the valuation of a stock. A good example is $PLTR because of my belief in a bright future for AI software platforms and for the business model of Palantir. The parameters of my narrative are the following:

I found a value per share at 19$ and I thought " Ok, Palantir is undervalued by 30% and I accept the price that the market offers me".

Before closing my valuation spreadsheet I looked again at my valuation and specifically the parameters on Terminal year (the value for perpetuity) which was:

When I attached the value of 22% in ROIC perpetuity it was like to assume that Palantir will have a competitive advantage forever which is a HUGE assumption in valuation. To illustrate an example, I have assumed that Palantir will be like Coca-Cola but in the Software sector, or Walmart in the retailing sector. When I changed ROIC to 8%, which is the average for most global companies, my valuation suddenly droped at 13$ per share.

Closing Thoughts

Beliefs are one of the worst enemies in valuation because we are starting to have subjective views for a stock. Furthermore, my example comes in contrast with the theory of the circle of competence that has been proposed by Warrent Buffett because the more you investigate a stock, more likely is to gain a subjective view that will affect negative the results.

If someone belives that Palantir will keep his competitive advantage for perpetuity then the market price is a good offer for him. On the other hand, if someone believes that Palnatir will become a typical global company then company has reached for good the overvalued levels.

Below it is my newsletter on $PLTR. Thank you!

Hello everybody. I just finished my Valuation report on Palantir Technologies and you can download it for FREE here: https://readysetvalue.gumroad.com/l/kuaav

Meanwhile, I will update my Substack with a summary of this report!

I hope you like it and thank you for supporting my work!

Hello everybody. I am writing this post as a request from @nachomart for another view on DANAOS Corporation.

Introduction

Generally, I like companies from the technology sector but this time I give a try to something different. My first view was that something wrong happens in Danaos, due to generally low debt to equity which comes as a result of very high Retained earnings. I tried to convert them into cash and to adjust all the valuation but

with negative results since the ROIC becomes negative and is wrong for a Mature company. I tried also to convert them as expenses with also negative results because operating margins become also negative, which is again wrong for a mature company. Finally, I think that this type of company is good to value as it is

since they are at a mature and slow growth phase.

Assumption

As Debt, I use the book value of Debt and as Operating leases, I measured:

The reason that am I doing this is that are future obligations that must be fulfilled in order for the company to work properly.

Survey the Landscape

First, we are looking at the market cap and %change, to gain a first view of what we are going to purchase. As we can see, market cap was generally stable and gained a record high in market cap in 2020 and 2021. Furthermore, we observe two spikes in 2010 and 2014 but the most obvious thing is the cyclicality of the company.

Now lets observe the revenues and the profitability. Company has an average growth of 11% in revenues with operating margins to hit 38%!!Furthermore, transportation industry has 10% (5 year average) growth in revenues which means that DANAOS is growing with similar pace of the whole sector.

The next thing that I checked was the reinvestment rate and ROIC because with so high profitability the company could be the next big thing. The results are the following:

This company has:

Valuation Narrative

Taking into account the above financial results I will make my narrative about DANAOS Corporation:

Conclusion

I treated the company as a slow mover in the Industry because of the average revenues, low reinvestment rate and low ROIC. For me is a company which has been matured and cannot make excess returns. As a result, I came up with a value per share at 62$ and i am not willing to pay the price that the market offers me.

I would like to hear other opinions about my approach . I hope all of you have good investments and thank you for supporting my work.

Hello, I have started a substack channel where I post all of my Valuation reports. Below is an example of my valuation on NVIDIA. Hope you like it. Thank you.

$NVDA is one of the most pioneered companies in the semiconductor industry and particularly in the creation of AI chips. NVIDIA pioneered accelerated computing to help solve the most challenging computational problems. Since their original focus on PC graphics, they have expanded to several other large and important

computationally intensive fields. Fueled by the sustained demand for exceptional 3D graphics and the scale of the gaming market, NVIDIA has leveraged its GPU architecture to create platforms for scientific computing, artificial intelligence, or AI, data science, autonomous vehicles, or AV, robotics, metaverse, and 3D internet applications.

$NVDA Business Model

They report business results in two segments. The Compute & Networking segment which includes Data Center accelerated computing platform; networking; automotive AI Cockpit, autonomous driving development agreements, and autonomous vehicle solutions; electric vehicle computing platforms; Jetson for robotics and other embedded platforms; NVIDIA AI Enterprise and other software; and cryptocurrency mining processors, or CMP. The Graphics segment includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming services and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU, or vGPU, software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse Enterprise software for building and operating metaverse and 3D internet applications.

The company is specialized in markets in which computing platforms can provide tremendous acceleration for applications. These platforms incorporate processors,

interconnects, software, algorithms, systems, and services to deliver unique value. Their platforms address four large markets where their expertise is critical: Data Centers, Gaming, Professional Visualization, and Automotive.

First, we are looking at the market cap and %change, to gain a first view of what we are going to purchase. As we can see, NVIDIA has gained a record high in market cap and has become a 1 trillion dollar company. Furthermore, was too volatile especially during the dot.com bubble (2001), during the global crisis (2008), during the period of high demand for Bitcoin mining (2016-2017), and now for AI chips.

Looking at the whole revenues we can see that from 2000 through 2008 NVIDIA has an increase in revenues but after and till 2016 was almost stagnated. In 2016-2017 it is clear that they started to take advantage of the increasing demand for Data centers (cloud computing) with AI chips and at the same time they reported

high revenues from the high demand of GPU for Bitcoin mining. From 2017 till today, NVIDIA has been transformed from graphic chip processors to AI chip

processors for every possible workload.

As a result and looking at the table below, it is clear that the graphic segment, which was in high growth in the previous years, now seems to have stagnated because NVIDIA has shifted its interest in AI chips for Data centers and Automotive. As a result, I will assume that the Graphics (Gaming and professional

visualization) segment has reached a mature growth phase, and the Data Center with Automotive is in a high growth phase.

Since we spoke about revenues now we will examine the profitability of the company during all these years.

As we mentioned before, NVIDIA is a company that is very sensitive to macro events and operating profits has depicted that fact. Between 2000 and 2010, operating margins had the highest value at 20% (2007-2008), which is close to the median of the third percentile for the semiconductor sector and the lowest was in 2009-2010 after the global crisis with value -2%. After that, the profitability of the company increased with a peak in 2021-2022 and an operating margin of 37%. Last year, as a consequence of high inflation, the company announced stable revenues with operating margins of 20%.

As a high-tech company in hardware, R&D expenses were too high because they wanted to innovate, firstly as a graphic processor company and then gradually started to take advantage of the crypto space and now as an AI chips company for Data centers and Automotive. Since accountants handle R&D as expenses, it is very logical for companies like NVIDIA to report lower operating margins than the true ones, and I will capitalize R&D expenses because the company gains high future value from them. As a result, the average (2000-TTM) operating margin of 16% becomes 38%, and during the last 3 years from 25% to 49%.

Every valuation starts with a narrative, a story that you see unfolding for your company in the future. In developing this narrative, I will try to make assessments

for the company (its products, services, and management), the market, the competition, and the macro environment in which operates trying to:

NVIDIA is a company in a mature growth phase because its IPO date was in 1999. Regardless of its phase, I will treat the Data center and Automotive segment as being in high growth because of the potential of AI chips and the Graphic segment as being in a Mature growth phase.

Below you will find my final valuation with my narrative and assumptions:

Monte Carlo Simulation and Scenario Analysis

The reasons that I use a Monte Carlo simulation are the following:

Results from the simulation:

What Market Believes about the Value of NVIDIA can be found to the table below:

Conclusion

A good valuation stands between the numbers and narratives. I tried to make estimations in fundamental factors, looking at the history of the company and then I adjusted them to reflect the high competition and the macroeconomic effects. Furthermore, I ran a Monte Carlo simulation to watch where my valuation stands relative to the market view. Taking into account the above table I believe that the assumptions that the market has done are impossible to happen and that’s why, not only believe that is overvalued but also has reached irrational levels.

The main advantage of NVIDIA is that has early entry in AI chips and leads the way in the Global market. Due to the high growth of the sector, it is avoidable the

high competition from other companies like Intel, Qualcomm, Tesla, Xilinx, Apple, and AMD and that’s why I assumed that the market share of AI will reduce during

the decade. Also in my narrative, I assumed high growth with a medium reinvestment rate (relative to the semiconductor sector) and at the same time high competitive advantage for perpetuity. As a result, I gave my best shot to my valuation and I couldn’t even touch the market price. To conclude, for my taste NVIDIA is overvalued and I will not pay the price that the market offers me. I hope all of you have good investments and thank you for supporting my work.

You can purchase my Valuation report of NVIDIA for FREE here: https://readysetvalue.gumroad.com/l/yqwve

My next valuation will be on $NVDA ! A high promising stock in AI. Also, If you like my Valuation approach you can make a comment in which company would you like to value.