Watch Our Earnings Recap: Winners & Losers from NVIDIA, Walmart, Home Depot, Target, and More

Welcome everybody. It's Friday before a long weekend, so I'm excited to see so many people here. Let me know if you are a new participant today. We've got a lot of new folks joining us these days. We're excited. Hit me up in the chat. As you all know, We gotta take some requests here. We're gonna take some requests here and talk about stocks that you guys want to talk about. So we've got a list that we put out in our emails. We'll be sure to cover those. But we're also really interested in what you guys have to say in the chat and the Q&A. So this is always meant to be interactive. Look, I always tell our clients, like, I'm here a lot, like, I think once a week, sometimes twice a week. Here to take whatever questions you want. Let's go. We have the best system in the world for fundamental research, and we can prove it. That's why Google, Bloomberg, Harvard Business School, MIT Sloan School of Management, the Journal of Financial Economics, Ernst Young. So I have invested time and money with us because we're the best at what we do, and fundamentals are important. You know, I was just in a room today with JC Peretz, Stock Market Media, Spencer Israel, all those guys. And look, I love that technical analysis. I think it's great. I think it's awesome when you can match it with what we do. I think for me, in many ways, fundamentals are the core. That's the truth about what's going on. And oftentimes the technicals align with that. When they do, I think you've got a double-powered signal, right? You got 2 really strong signals working together. 2's better than 1. All right, so let's get to the screen. I'm going to share our institutional membership here, and let me go in here and show you what this guy is like. I'm going to go in, I'm going to create a portfolio. We'll call it Earnings Watch 5/22/26. Create. And then we just come back to the portfolio page here. I'm going to go find— you see, got a bunch of them here. All kinds of different portfolios accrued over time, and I'm just going to paste the tickers that we're supposed to talk about in here. And these they. So let's go. We'll go in the biggest market cap order first. Let's talk about Nvidia. So how did that go this week? Guys, in case you didn't see, we did our SpaceX report this week. Here's the most attractive stocks ETF. Let's go to the news with Nvidia. So how did Nvidia down 5% compared to the S&P 500, which is up a percent? So why, why is this incredibly profitable company, which I think— how did it do? Calling on earnings, which those are missing. Do they beat? Raised its dividend. Explosive earnings report. Largely conceded to China. So I'm not really seeing a clear falling on earnings. What sellers are missing? Did they beat on the top and bottom line? Anybody want to chime in here? I didn't say. We were showing a likely miss or some sort of lowering of expectations because the earnings were overstated here. You can see accounting earnings breaking out over core earnings, which caused us to go to strong miss. It looks like that's what we saw. But what we're also seeing is just an extremely expensive valuation. And one of the things to keep in mind here is that an expensive valuation on a company this big, we're talking about the current revenue of, or the market cap of Nvidia is bigger than every, than the GDP of every country except for, I think, the US, China, Japan. And the valuation implies it's going to be even bigger than that. And so look, this is— it did not miss. It was a beat and a raise, but it wasn't enough. Thank you, Curtis, for coming in on that. Yeah, a beat and a raise, but when expectations are already this high, I guess it's not a good enough beat. I think that's what we're seeing here. So you've got 170% return on invested capital. The free cash flow on this baby is absolutely crushingly large. But it's only 1% of enterprise value. So, I think what we're seeing here is just so much good news is priced in. So, let's take a look here. We can see economic earnings and accounting earnings diverging from economics. So, what are they doing? They're doing what every big company does and what every successful stock does, which is, hey, when times are good, let's juice the numbers as much as we can and suck down as much great goodness we can get from the market. While it's still good. When the market's going down, they do the opposite. They throw in all the expenses they can, and they go ahead and clean the books so they can juice the numbers as much as possible when the numbers when the market sentiments are good are strong. Return on invested capital. Okay, it's starting to come down a little bit. So we're in the already 200%, 173, 170, 171. Margins have come down, flattened out capital turnover. The economic boom here. might be fading. Free cash flow, $5 billion, $4 billion, $25 billion, $54 billion, $61 billion, $70 billion, $80 billion. This is Apple and Google territory. $80 billion free cash flow. Huge. But just 1% of a $5 trillion market cap. So, folks, I think what this is saying is that even in today's market, When everything seems to just go up, up. Valuation does seem to have some limits. Nvidia, so expensive that even with a top, with a beat and a raise, stock goes down. I was talking about Walmart. I think Walmart had a rough week too. Am I wrong about that? Yeah, Walmart really got crushed where they came out and they things aren't going so well for them. Let's see here. Had worst day since 2023. Cautious outlook. As gas prices at consumers, worse than expected outlook. So this is about an outlook earnings call. Mid-growth price for perfection. Yeah, look, Walmart was one of my favorite long ideas of all time. If you guys aren't familiar with our long ideas, let me know. I want to be sure and share a special offer we're making about our long ideas or special training for long ideas because those are incredible good work and. When we did a long idea on Walmart several years ago, we loved it. This is the playbook on how we actually pick stocks. I'm going to put this into the chat. If you want to know how deep research is done, this is what we show you. So this is how we get to— joked before about how only 4% of all stocks are responsible for all 100% of the value creation since 1927. The stock selection processes we talk about here get us to the 0.4% of the stocks we cover. Only 0.4% of the stocks we cover make it as a long idea or a danger zone idea. 0.4% on both sides. We are the best of the best, the worst of the worst. This is how we do the work. And this is what we talk about, I think, in our earnings watches. We overlay some of those insights, right, into what I consider to be the best stock picking platform ever built for fundamentals. So let me ask you guys a question real fast. If you could imagine the best possible platform for picking stocks, what would it look like? All right, I'll let you think about that for a minute. We'll come back to this in a second. But definitely check out that training. That's one of the best we've ever done. One of the best I've ever done in terms of explaining to people how to pick stocks, how we do what we do, how much work goes into it, how selective we are. And by the way, being selective is like being discerning. It's like the most important skill we have as humans. Be selective, be discerning. That's the most important thing. There's just junk coming at us all the time. And with Walmart, we saw an amazing stock. And I don't remember how long ago it was, but it got cheap. And I was like, this is it. This is a long idea. I've been waiting for this. And then it got expensive. And now it's really darn expensive. And so, when they don't report good news, You're going to see the stock get crushed. And that's what we saw here. And it get crushed a lot worse than Nvidia because it doesn't have the cash flows Nvidia has. And it certainly doesn't have the growth. And look again, good company. Nvidia, super cash flows, good company. But when you get expensive, there's just still, there's a limit to how far people can go. Look at accounting earnings for Walmart. Economic earnings still going up, but accounting earnings way higher. A lot of stuff looks good here in the business. One of the things I've always loved about Walmart is just Steady return on capital. These guys just crush it. Kind of reminds me of McDonald's on that front. And then free cash flow. Yeah, it's coming down a good bit. Not as high. They're having to spend quite a bit to keep the moat, keep the moat, because it's not just about logistics anymore. They've got to have some AI going. Walmart, good company, bad stock. See a lot of that these days. Home Depot, similar. I'm guessing performance. I remember these guys came out on Tuesday and I think they were, oh, pretty mostly positive. I wonder if this was, see, the 20th. Yeah, Tuesday, good day. So good. They were reaffirmed. I remember looking, seeing that, watching this on CNBC and those guys were like, yeah, not quite as positive as they thought. Reaffirmed instead of raising the full year outlook. But I think we're just seeing a strong business stay strong, a well-run business continue to be well-run. You can see here, good company, not as expensive a stock. So little room to run. And look, we may be in a world where things are permanently more expensive because honestly, companies are more profitable. They're more efficient than they've ever been. And I think we're in maybe a honeymoon period where this efficiency is not going to effectively be commoditized in so many ways by AI, where a lot of companies can be this efficient. And there will still always be firms that do it better than others. But I think we as a civilization are just getting better at running business, doing this stuff extremely well. We've had a lot of lessons to learn over the decades of what's wrong and what's really wrong and what works. And Home Depot is an example of a company where it's working. So good for them. Let's go and talk about Lowe's while we're here. They got a, they're digesting a big acquisition, a good company, even cheaper. How did these guys do? Wow, I thought Lowe's had a stronger report. I guess not. Yeah, defy the market, but he does say it's the most difficult. Beats Wall Street expectations against challenging market. Gross margin ahead. Tale of two stories. Tale of two stocks. So Lowe's, we had them as in line, and I heard Brian Nagel, like one of the biggest analysts on Home Depot and Lowe's, saying that on the margin, he feels like Lowe's is Becoming a better business. They had a little more room to grow, but he likes them a little better, and I think it's because the stock's a little cheaper. But this is a tough housing market for sure. Bonds yields keep going up; prices keep going down, and so that's I don't know how what's going to reverse that here in the near anytime in the near future, just given our financial monetary situation. And I don't know; it's tough. The big macro stuff, I don't want to pretend like I'm too good at that. That's extremely complex. ADI, Analog Devices. Okay. Midland Company, super expensive stock, 7.0, right? That's bigger than Nvidia, way bigger than Walmart. This is one of those where I'm, I'm gonna say this is dangerous when it gets like this expensive. You've got a lot of downside risk. I think it was a really good week for this go. Maybe not. Okay, so Tops quarterly estimates raises outlook, but stock falls. Wonder what that was about. Could be like Nvidia, good but not good enough. When you've got 7.0, folks, if we were to do a reverse DCF on this company, what a 7.0 price-to-economic-book value, what a market implied growth appreciation of greater than 100 years means is the hockey stick. In terms of future profit growth and revenue is huge. And keep in mind, folks, those are the expectations and the current stock price. From a fundamental perspective, for the stock to go up from here, the hockey stick's got to be even bigger than the hockey stick already implied in the stock price. So that's a big deal. And maybe we'll take a look at that before we end today. But yeah, get your suggestions in. Put them in the chat. We got a couple of requests for tickers so far. No, just one. So right now, that's an easy vote. So Analog Devices, really expensive, really expensive. Do I have an alternative scenario? What I'm gonna— here's what I'm gonna do. I'm gonna create— I'm gonna go to our reverse DCF model, and here's consensus. And let's see, we're getting to about $100 a share. Based on our DCF, and that's got these numbers. So I'm going to go, I'm going to create, let's go optimistic and let's go with, let's just double consensus growth. 56, 20, 20, 20, 20. I've done this enough times to know you need some big numbers here. And then margins, best they've ever been last 10, 15 years. Let's go 33. That's the pretax profit margin. And we'll keep tax rates the same, working capital and all that pretty light. They've been taking a lot of capital out of the business here recently. And it's a pretty capital-intensive business. We'll keep that as is. And we'll save that off. We'll come back to it in a minute. But what I'm going to demonstrate to you is just for the hockey stick. That's the cool thing about our system is being able to quantify that hockey stick because sometimes you believe in a hockey stick. A lot of people probably think SpaceX Nobody's got that on the list today. SpaceX would be an interesting look at. We've got that that company covered. Who knew? Put a thumbs up in the chat or or on the Zoom if you knew we already had SpaceX under coverage. Somebody just voted for SpaceX. Great. Seeing a lot of new names here. Welcome everybody. Welcome. You're here to see the best fundamental research in the world. It's not sexy. I'm not sexy, but the research is good. All right, so TJ Maxx quality of earnings great, but still getting pretty expensive. How'd these guys do? Good day today. Yeah, I think the TJ Maxx results were pretty good. Same with Target. Some of these smaller, I think, niche stores are being— they're doing pretty well. Yeah, good company, not so great stock. New Constructs, when I was to that link I dropped in here a little while ago. What it shows you, what I talk about there, is how we find good companies that are good stocks. That's the thing. I'll admit, you guys heard me say we loved Nvidia. We thought it got expensive a long time ago. We missed a lot of upside. We were early on Nvidia, like 25-cent split adjusted early. Okay. But we took off the long position, closed the long position long before it went on its super run. Why? Because we're really good at finding stocks that are super cheap and good companies. All greens. That's what we can do. We can scan the entire market, find all the greens. That's where you want to go. And the ability to do that, to me, is way better. It's way less risky because for every NVIDIA that just goes up, up, there are a lot that go up and come right back down. So when you can stick to a discipline that discerns between good risk and bad risk and always stay in the good risk, You're just going to have a better hit rate. Sure, you don't get to shoot the moon all the time, but shooting the moon is just, that's a gamble. It just doesn't happen that often. It doesn't happen most of the time. The wings melt and you have to come back down to earth and it wasn't as good as you ever thought it was. We like to focus on greens across and then we do an extra layer of analysis on top of that for all the long ideas. So this was one. We closed this back in 2023. I'm guessing we go back and look at rating history. We liked it. Don't like it anymore. Got dangerous. Right. And that's kind of the way to go, especially if you can always recycle back into the cheap, good stuff and you can stay in cheap, good stuff. That's just a great long-term strategy. And that's what you'll see in a lot of our testimonials. What our clients love most is that you can just trust and you're not having to worry about, oh my God, I'm not playing roulette, not doubling, tripling down on some expensive stock. All right, Deere. Deere and Caterpillar. These are like the— I like these sort of like the picks and shovels, literally, of AI. And the market's figured it out, right? Good companies, expensive stocks. Yeah. Picks and shovels. Poor disclosure because they no longer break out the financing division from the industrial division. We don't like that. We like to be able to analyze division by division, especially break out the debt related to the financing division because That's different use of debt. That's the financing division. That's— debt is their inventory. Cash is their inventory, as opposed to being a non-operating asset for the industrial side of the business. We don't like that. We don't like going from good disclosure to bad disclosure. A good business, and, but it's not as good a credit rating as I thought. Interesting. Usually we get greens here, we get greens over here, but no, not so much. It's a pretty highly leveraged business, and some of that might be because of the mixture of the financing company and the industrial company. They don't let us They don't let us parse it out anymore. Shame on them. But expensive stock. All right, Ross Stores. Good company, expensive stock. Same thing. Target in between. We had a great thesis on Target. We closed it down earlier this year since we just gave up on them getting figured out. So let's put a Ross Stores in here. Let's TGT. Ross did the best. Good week for these guys, huh? Interesting, right? Compared to Walmart, the S&P 500. Good week, Ross Stores. So these specialty folks are pretty doing pretty well. Yeah, you're seeing a lot of good point, Michael. Yeah, there's a lot of neutral stuff. Yeah, and we we know I'd love to screen the database and give you all the good stuff, but I can't give all the milk away for free, my friends. But I would absolutely look. Our Discovery membership gives you the ability to screen the entire market. You get to go in and check out these screeners and get the answer key, right? So that's a super powerful tool. And I'll show you a quick example of what that kind of looks like here. Let me sanitize it a little bit. So this is what our screener looks like. I'm only showing the neutral stocks, but you can also screen on Give me all the very attractive, give me all the very unattractive, right? And then I want a market cap greater than $5 billion. I want a dividend yield greater than 2%. I want free cash flow yield greater than 10%. I want a return on capital greater than 20%. I want an earnings distortion score beat. Bam. And just click a button, get an answer. No match my criteria. Well, guess what? When it's that easy, you can pick stocks that have an amazing set of criteria Sometimes they just don't exist because if it were that easy, people would— we'd be doing this on my yacht, right? People and clients at new constructs, some of them very large, some of the biggest investment firms you've ever heard of, are using these tools. That's why we say we're giving you an edge. We're letting you see around corners that other people don't get to see around. But that's the screening tool. That's our Discovery Membership. It's $150 a month or $99 a month. It's an incredible deal to screen the entire market. Are you kidding me? Think about the insurance benefit. If you could identify all the potential blowups in your portfolio and just sidestep those, talk to me about how much that saves you. You missing avoiding one stock that goes down 20% pretty amazing. Pretty amazing. All right, back to our earnings watch. Let's take our request today. I think I'll get equal votes, so I'm going with. Who got in first? And well, that would be Intel. So Intel, look, the chips are going on, chip stocks going on another run. It's a turnaround story. The real question is how much of a turnaround are we talking about? So let's actually, we'll do a quick, I'm going to try to, let's do the ADI. Let's go back to ADI and, and okay folks, oh my gosh. All right. So even with this super high forecast, Doubling consensus. We still can't get— what this is showing us is that these are the implied values per share. We didn't get above $300 a share, folks, and it's $384. The best ever margins and doubling consensus. So let's go with 50% for 3 years. Let's see if that does it. And Intel's still opening. It's going to take a minute. In the meantime, why don't we talk about SpaceX? We got a great report on SpaceX. out yesterday. The rating was on our, on our site and ready to roll for people like at 2 in the morning yesterday, 3 in the morning or so. But yeah, look, there's some red flags, folks. Here's the big things: lack of proper internal accounting controls. Auditors couldn't sign off. Management could not say our numbers are reliable. You know what that means? You can't sue them for fraud. As long as it's disclosed, it's effectively illegal, right? You could say, hey, our CEO is doing drugs and might be going to jail soon. And if that happens, but we're not going to fire him because we like him. And they put that in the disclosures and that happens, you can sue them because like we told you, take that for what it's worth. They're offering almost no voting rights to the people providing $80 billion in proceeds. How cool is that? Not obligations to use 78% of IPO proceeds to pay off existing debt. 78% of the $80 billion, that's the high end of the range, is already accounted for. They got to pay EchoStar for some spectrum. They got to pay a board member back. And there's another $20 billion. Oh, to pay off debt used to buy Twitter and XAI. Misleading non-GAAP reporting, never a good thing. Numerous and material red flags and related party transactions. And I didn't put this on here, but it's also the elephant in the room— huge valuation. All right, let's go back and take a look at ADI. All right, so 10 years, if we do that 50% growth, we can get to a price they got to do. That means it ends up being about 30% compounded annually for 10 years while seeing You see their return on capital versus cost of capital spread getting way better. It's negative now. So huge improvement in profitability and incredible revenue growth. What does that look like hockey stick-wise? Folks, revenue in the past, that's what they got to do for the future. What does that look like free cash flow-wise? Free cash flow all over the place. Hockey stick, negative $30 billion to positive close to $30 billion hockey stick. Let's look at Notepad, a little smoother. Look at that. That's your net operating profit after tax hockey stick. That's what ADI is showing us. And then if we look at Intel, goodness gracious, do we have a good Intel? Yeah, Intel's got really a lot of turnaround baked into it. So if we go with our neutral, so default look like Default $7. Neutral's a little better. The neutral scenario is— let's see. Well, let's put this back. Consensus is better. We're past that negative time. So let's just go 5, and we'll keep 8, 7. All right. It's probably not going to do it, but we'll go double consensus. Which would be, let's just call it 7. Let's call it 16. We'll call it 10 for growth. And then margins, what? Already going way high. Yeah. Okay. Let's leave that super high margin in there. Really, this is a great scenario for us to get a sense of how much of a turnaround is already baked in. We're going to put in best-case scenario estimates and see what kind of stock prices are implied based on those estimates. And That gives us— then we're going to go back to the DCF model that generated those stock prices, those implied values, and look at what the revenue CAGR is, the NOPAT CAGR. And it's just a great eyes-wide-open way to understand valuation. It's what drives our models, our rating system. When we go back to the rating system and we're looking at Intel, this is extremely expensive. Look at this, it's at 360.5. What was Nvidia? Was like 5 or 6 times. Greater than 50. So yeah, you're seeing a pretty huge— we're going to see as a hockey stick here. Put it neutral. Wait a second. We updated neutral. Neutral went to this high growth, this really high margin, and that didn't do it. No way. Wow. All right, let's go like 2020. Save that off. Dang. I'm missing something. Yeah, it's pretty impressive how expensive some of these stocks are. Let's go look at time. You can see economic earnings. Down, flat, not really turning around, having to sell shares, returns on capital. The business hasn't turned around. The stock market is giving it credit for turnarounds. The question is, how big a turnaround do we believe Intel will have? And is my expectation for a turnaround bigger than that which is already baked in the stock price? And I think the answer is probably going to have to be a— my guess is probably no. Done here. Still cranking. Amazon. Web services, show us your best. Okay, neutral's a little bit. We got a ton of capital here. We need to fix this. Let's make this lower. Like that might be what's weighing us down here. Maybe we'll knock off. This is fifteen, fifteen. We'll save that off. All right. That's what I was missing—the big amount of capital going in. Yeah, let's talk about Qualcomm. That's a good question. Qualcomm up a lot. Qualcomm, interestingly, I would say. Oh, we're waiting for that model to crank. Qualcomm was cheaper, so now to get a 2.4 price-to-economic book value, let's go back to our portfolio and compare. Put QCOM in here and let's rank by price-to-economic book value. Intel is crazy. You got Analog Devices, Nvidia, Walmart, Ross Stores. Qualcomm is down here pretty low. So yeah, it was cheaper and it's maybe catch-up trade. And I think people are realizing, I think they had some new, they had a, they had some news on some sort of a breakthrough. They got a new chip that's doing something that I think is good, which is also a catalyst here. But I think there's enough demand for chips to go around and for people to specialize in niche and still see plenty of growth. But yeah, it was cheaper. Like when it was back in here, we can go back and look in a month. It's had a lot of this. So. I'm guessing the price to economic book value. You can see back here in 2025, you're looking at a 1.83, and now you're just at a 2.4. So it's not that expensive. All right, let's take a look at the turnaround and baked into— gosh, whoa, the neutral scenario is still not getting us there. 23% margins, return on invested capital going way up. All right, let's get serious here. We'll do one more of these. We're going to shoot the moon here. So we're going to say we're going to create optimistic and let's go with 20, 20, 20, 20 for 10 years. And then let's go with margins that are 30. What's the best ever margin for Intel? Wow. 30s. It's about 30. Let's see if that does it, friends. I don't know if we can get too much more. expensive or too higher— any higher expectations than that there. Any other questions about new constructs while we're on here and how the models work as we're waiting for this one last reverse DCF scenario to unfold? But yeah, I think Qualcomm is a catch-up trade. And now look, it's a good company, not so good stock, almost bad stock. So it's gotten expensive. There we go. Intel optimistic. Goodness gracious. All right, so you saw me do this. You saw me put in pretty absurd, especially compared to consensus expectations for revenue growth. 20% compound annually for 5 years, then it drops off. Okay, 20% annual for 10 years. Margins best ever. Tax rates, normal. Working capital, no working capital needs, no fixed asset needs. Pretty high out here. That's not going to make that much of a difference because so much of it's in the margin. But you get the idea here, folks. Yeah, this is, this is, this optimistic scenario is— I'm going to show you, it's going to imply a huge hockey stick in profits. Let's take a look. So Here's for 10 years revenue. And by the way, that's not enough, right? Let's look at 25 years. Hockey stick, my friend. Let's look at NOPAT. 25 years. I mean, just putting it in the— that's what's priced in already. So I think Intel's fully valued. Fully valued. Okay, folks, thanks for being with me today. If there's one thing, you got some time to hang out and watch something interesting, I'd definitely check out this breakdown on our stock picking process. I think it's pretty strong. And I hope you guys have a great weekend, great Memorial Day weekend. Thanks for being with me. Welcome to the new folks, and we look forward to seeing you again soon.