Valuation

New fair value estimates

I have updated some of my spreadsheets and can give you a series of new price targets. Firsthand, I focus on my three picks for 2025: Uber, Amgen, and Soundhound. Afterward, I give you an update on various companies from a more randomized perspective.

Uber Technologies Inc.

I have increased my fair value estimate from $85 to $100 per share. The driver for the upgrade is first and foremost a better EBIT-margin trajectory than I could foresee half a year ago. UBER looks very strong. Gross bookings were up 20% in 2024. Naturally, this number will stair-step down as the business matures, but we have a long runway for growth here. Investors must have the stomach to sit calmly through wild share price fluctuations. The trick is remembering that UBER has transformed into a transport utility, so the business is far more stable than the stock movements might lead us to believe. I am confident patient investors will be rewarded handsomely in the name. The stock is up around 15% since I recommended it in November 2024.

Amgen

Since the last earnings report, I have only made minor adjustments to my fair value estimate. Thus, my thesis is the same: AMGN is worth $335 per share. The market underestimates the innovative pipeline, especially within oncology, a portfolio enhancement AMGN acquired by purchasing Horizon Therapeutics. Furthermore, my analysis does not include any upshots from successful obesity medicines developed by the company. Obesity is a multi-billion dollar opportunity from 2026 onwards.

AMGN is flattish since I recommended it. This statement hides enormous volatility in the stock performance. AMGN has zig-zagged between $260 and $305 in the last two months. Nevertheless, remember that you get paid to wait here. The dividend yield is approximately 3%, and for those who followed me into the name, the first installment of it came last Friday. The stock price hovers around $290 today.

Soundhound AI

I recommended SOUN in combination with UBER and AMGN. The purpose was to have an unknown name to have some fun with. However, I’m already out of the name, I bought it at $7,12 and sold it at $14,53 two weeks later. When SOUN doubled on getting a contract with a small Californian pizza chain, the stock got too crazy for me. There are reasons behind the hype, the tech is awesome, but there is a limit to how much you want to pay for this awesomeness. Anyways, price movements in this stoch have gotten erratic. Degenerates sit on Reddit forums pumping and dumping. It’s impossible to say where this baby will be a year from now. If you are a gambler, you ride the momentum. If you are an investor like me, you get the hell out, and pocket a nice profit. The stock price could be 40, 20, or 2 dollars a few weeks from now. To put a pin on it, the stock price is currently around $10,70, down 30% last Friday, due to Nvidia reducing its stake in the company. Take out your bingo card!

Gilead Sciences

So, you don’t believe in my abilities as a stock picker. GILD was among my top three stock tips for 2024. If you followed me into the stock in November 2023, you are up 45% now. Today, however, I am a bit more sanguine about the stock.

I am still bullish long-term. However, I recommend a hold here. The reason is simple. 2025 will be a year where the company has to maneuver through several exogenous headwinds. First, the Inflation Reduction Act will reduce revenues by approximately 4%, Secondly, the dollar is strong, giving you a revenue reduction between 1 - 2% in dollar terms. Finally, a projected decline in COVID-related hospitalization reduces revenues by an additional 1%. In sum, these factors counteract the strong underlying growth in GILD’s business. As a result, I project GILD’s revenue growth only to be slightly positive this year.

Gild has strong cost discipline and will retain good profitability despite these challenges. However, all these headwinds make it impossible for me to raise my fair value estimate from $115. I am not a fortuneteller, but I think something extraordinary must happen if GILD’s share price should surpass my price target during 2025.

To trigger an outperformance, interest rates have to come down substantially, the dollar has to crash, sales have to surprise to the upside, or something similar. Of course, these potential surprises could happen, but none are currently in the cards. At the end of 2025, all of the current headwinds will be behind us, so 2026 could be more constructive from a share price perspective.

If you’re in the stock, do nothing, collect the dividends, and see where we are in the fall of 2025. I expect the stock to consolidate in the next few months. If you are not in the stock yet, put it on your watchlist and monitor the price action to find a good entry point.

Merck

Do you want to catch a falling knife? MRK has imploded after delivering end-of-year results. Vaccines are the primary source of the problem. In the first half of 2025, MRK will stop shipments of HPV vaccines to China. This moratorium will reduce sales by approximately $5B. In addition, there is all the commotion around USAID, which might impede vaccine shipments internationally, but MRK has yet to announce any concrete news about this.

Long story short, MRK’s revenue growth will stagnate in fiscal 25. It’s not all gloom and doom, sales growth in oncology medicines saves MRK’s projected topline from going negative year over year. Nevertheless, recent developments have led me to reduce the fair value estimate to $110 for the share price.

I have a small position in MRK. The stock has been hammered so much down lately that it almost seems overdone, but as we all know, the market always overreacts to the ups and the downside. As a result, MRK has gotten so cheap that I am considering adding to my position. We only have to wait until the stock chart goes into an obvious bottoming formation. Usually, pharma stocks stay in the penalty box for 3 to 6 months when going into downturns, which could serve as a heuristic guide.

MRK could bounce back fairly strongly if it releases positive news from promising potentials in its pipeline. MRK has 27 trials ongoing in phase III, so it’s not too farfetched to believe that updates on new therapies with blockbuster potential can overshadow all the negativity that is currently going on. By the way, MRK is possibly one of the cheapest stocks in the DOW right now with a P/E of around 10. However, it’s important to find a good entry point.

Cognizant

CTSH turned a corner in the last quarter. Revenue growth was up nearly 7% in a 4th quarter comparison. This has given me the confidence to adjust revenue growth projections by a few basis points in my spreadsheet. CTSH has also used the elongated swoon in enterprise spending on IT services to strengthen its profit margin. In sum, these two factors contribute to an increase in my fair value estimate by 5 dollars. My price target is now $100. The stock is currently overbought, so if you want to take a position here, you will presumably get a better buying opportunity in a few weeks or months. The price today is approximately $90.

Airbnb

I liquidated ABNB from my portfolio last year. I got worried that ABNB couldn’t keep the topline growth above 10%. However, ABNB finished 2024 on a stronger note than I feared. In the last earnings report, ABNB grew sales by 12% year over year. ABNB’s EBIT margin was the most impressive part of the report. In 2025, I believe ABNB will grow 11% on its top line, and continue to expand its profit margin further, from 23% to 26%. These revised projections make my fair value estimate go from $120 to $155 for the share price.

ABNB’s share price popped on the earnings report last Friday, and the stock looks somewhat overvalued today. However, ABNB is a compounding machine. The company generates impressive free cash flow, and the management team has initiated a buyback program that slowly but surely reduces the share count. ABNB is constantly tinkering with its platform to make it more user-friendly. With the upcoming summer release, the company will roll out over 500 new features and upgrades.

Currently, ABNB has 8 million listings and 5 million hosts. The company is steadily expanding, and the share price should move in tandem with this expansion over the long term. Unfortunately, the stock has been in a three-year consolidation pattern, and it seems profitability has to increase a bit more to make the stock break out to a new all-time high.

Ok, that was all for this week.

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. Content accuracy isn't guaranteed due to changing market conditions. All investments have risks, including the potential loss of principal. Assess risk tolerance and goals before investing; diversification is key to managing risk.

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