New Fair Value Estimates
Only a few are going higher
On global Wall Street, everyone now has the same talking points. Those are: 1) some companies will be winners from AI, and some will be losers. 2) Some AI companies will be winners, and some will be losers. 3) Software stocks are oversold, but not a clear buying opportunity. 4) There are opportunities outside of the S&P 500 and the US. 5) The “global world order” is shattering. 6) Prediction markets are the new crystal ball. 7) Be careful of the illiquidity of private markets; more blow-ups can occur.
In this week’s blog, we step away from these talking points and take a look at the intrinsic value of several companies.
Uber Technologies
My latest fair value estimate was $105. I have revised my estimates upwards for both revenues and profit margins in my financial model based on excellent results in 2025. Simultaneously, UBER has announced plans to put 20,000 robotaxis on the streets through a partnership with Rivian (and Nvidia). UBER wants to show something tangible in the build-out of autonomous vehicles to demonstrate for Wall Street that it is a relevant player in the space. In stock market terms, this might be a smart move. Anyway, hardware investments of this size will lead to cash burn, which more or less equals out higher profits. Consequently, the intrinsic value is staying pat at $105 in my book. Regardless, the company is grossly undervalued.
Palo Alto Networks
There are only three things certain in life: taxes, death, and cyber attacks. Naturally, cybersecurity has been a popular investment class. I have also wanted to get involved in the sector, but I am foremost a numbers guy, so when I have studied companies in this sector, I have always found them too expensive.
Indeed, “the sell everything software” theme has led to a sharp sell-off also in the cybersecurity sector. PANW is now standing at $148, down almost 20% this year. The market reaction seems overblown. There is no chance in hell that enterprises will start to vibecode their own cybersecurity. The risks are simply too high. In addition, when you have security breaches, it is good to have someone to blame.
In my latest analysis, I calculated $150 as fair value. Since this exercise, PANW has acquired CyberArk, boosting its revenues and its capabilities within identity security and privileged access management.
PANW’s platformization strategy is working well, and the number of customers grew 35% on PANW’s all-purpose solution last quarter. Just as PANW’s management predicted over a year ago, this demonstrates that enterprises want to consolidate their vendors. Furthermore, as a bonus, in such a competitive landscape, PANW can gain market share. The platform can serve as a one-stop shop for security, due to its broad range of services. PANW’s management must also be pleased that their new-generation security solutions have reached an ARR of 33%, signaling that the company is ready with products that can withstand the immediate challenges posed by AI-driven attacks.
Thanks to the acquisition of CyberArk, PANW’s revenue growth is now above 20%. Profit margins are also good, sitting above 30%. However, the purchase was financed with new shares. Despite higher projected growth, the higher share count (and some additional debt) implies no changes to the company’s intrinsic value - $150.
Alas, PANW is fairly valued today. It is not often that this happens, so this could be a buying opportunity
AbbVie
I am not going to say something about the business itself today; I have written quite extensively about ABBV before. In short, the end-of-year results confirmed what we already knew. As a result, I make only small changes to my fair value estimate, notching it up by $5 to $230. Today, ABBV is fairly priced ($225).
Do I have any misgivings about the company? Yes, the management could put forward a plan to pay down some debts. The debt load is big. Today, this is no problem given ABBV’s cash flow generation. $18 billion in free cash flow is more than enough to cover an interest expense of around $2.5 billion. Yet, carrying so many liabilities on the balance sheet is never positive.
Amgen
AMGN has a debt-reduction plan, and it is paying down loads of it. Last year, AMGN paid down $6 billion in liabilities, which equals 10% of its outstanding debt.
AMGN is crushing it.13 medicines are growing sales volumes above 10%. The pipeline looks even better. AMGN has late-stage candidates in several areas: general medicine, inflammation, rare diseases, and oncology.
AMGN’s management guided only a few percentage points of sales growth for 2026. They did that last year as well. It seems to me that this management likes to do the classic “underpromise and overdeliver” move. Revenue growth was 10% in 2025, and I think the trajectory will be much of the same this year.
Now, I raise my fair value estimate by $75 to $410. The substantial increase is based on the growth trajectory and the pipeline drug candidates. Among the candidates is Maritide. If this drug gets approved in the fall, AMGN becomes a player in the obesity space. Obesity can deliver 10% revenue growth alone in 2027.
Merck
MRK is having a great start to the year, up 16% so far. Yet, nothing has changed. Keytruda’s loss of exclusivity in 2028 is looming large over expected revenues at the end of the decade. Still, MRK’s management is pressing on with its research program to bring forward new blockbusters. So far, MRK has had some successes, but not enough to completely replace Keytruda. As a result, I make no changes to my intrinsic value estimate of $110. Thus, MRK is currently priced a bit over my estimate ($122).
Disclaimer: Important Information for Retail Investors
The information in this blog is for educational purposes only, not financial advice. Investing in stocks carries risks; past performance doesn’t guarantee future results. Conduct thorough research and seek advice from financial professionals before investing.
The author is a retail investor, not a licensed advisor. Due to changing market conditions, content accuracy isn’t guaranteed. All investments have risks, including the potential loss of principal. Assess your risk tolerance and goals before investing; diversification is key to managing risk.
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