Value Investing Why the Price of Lumber Has Soared |
- Why the Price of Lumber Has Soared
- Berkshire annual meeting discussion on r/SecurityAnalysis discord!
- Systematic Investing and Deep Learning - Part 1
- Roaring Eighties - The Japanese Bubble during the 1980s
- My value analysis for CD Projekt Red
- ASML - When does a monopoly become too expensive?
- Dating app industry economics with Kimberly Kaplan, former VP of Plenty of Fish (sold to Match for $575M) and currently founder of Snack
- Tobi Lütke on Shopify’s impact on the creator economy, COVID forcing focus
- Donville Kent - Knee of the Curve
- View from the Top: Craig Federighi (Nov '19)
| Why the Price of Lumber Has Soared Posted: 30 Apr 2021 01:19 AM PDT |
| Berkshire annual meeting discussion on r/SecurityAnalysis discord! Posted: 29 Apr 2021 01:02 PM PDT Greetings! A year ago we created a discord server to talk about the Berkshire Hathaway annual meeting, and then we decided to stay! The unofficial r/SecurityAnalysis discord is a place to discuss investments and current events from all over the world, with an emphasis on fundamental security analysis. This is not a place for speculation or penny stocks. With the Berkshire annual meeting this weekend we'd like to invite anyone with an interest in security analysis to join us and hopefully stay as well. Invite link: https://discord.gg/ehbvR5EnNY [link] [comments]  |
| Systematic Investing and Deep Learning - Part 1 Posted: 30 Apr 2021 01:11 AM PDT |
| Roaring Eighties - The Japanese Bubble during the 1980s Posted: 30 Apr 2021 03:14 AM PDT |
| My value analysis for CD Projekt Red Posted: 29 Apr 2021 09:16 AM PDT |
| ASML - When does a monopoly become too expensive? Posted: 30 Apr 2021 03:58 AM PDT Introduction I currently hold shares in ASML, I'm very optimistic about the company's future but I am concerned that the sentiment around semiconductor shortages has driven up their market cap beyond that justified by their future earning potential. I've updated my DCF to try and find support for the current valuation. In some cases I think I've been overly optimistic in an attempt to justify the current price, but it's quite a stretch to do so. I'm trying to justify holding this stock so any feedback is appreciated. If you are still bullish please let me know which assumptions are invalid, where I have been overly conservative or any mistakes. Assumptions These assumptions are largely based on ASML's 2018 report (link at the bottom) for which they will be giving an update on their investor day (Sept 29th). Given the changes in the semiconductor sector between 2018 and now it's possible this is slightly conservative now, so in some cases I have inflated these values. I have estimated installed base mgmt income will continue to grow at ~5% on average per year. I have estimated system prices based on the current average NXE:3400 unit cost and estimated the future models price reflects the improvement in performance (~15-20% for 3600 and ~70% for a EXE:5000). I haven't modelled the 3800 as this is unknown, but perhaps that could see an additional 10% increase in ticket price. I haven't discounted these prices in future as I believe robust demand coupled with lack of competition will enable ASML to maintain prices. System Sales I've very crudely modelled unit sales based on ASML's 2018 report as well as previous production ramps (e.g. that High-NA EUV will ramp similarly to EUV, although slightly less aggressively due to the constraints on the Zeiss side). I've projected a continued decline in DUV immersion sales and a significant ramp in EUV. I haven't really bothered modelling dry DUV units and just put a flat 2000. These sales numbers align fairly well with my expectations of Samsung, TSMC and Intel's significant capex projected up to 2025. This would see ASML taking ~$60bn logic sales up to 2025 of their committed ~$200bn capex, which seems close to their recent spends ~30-35% going to ASML. Financials Based on the unit sales and assumptions above I've modelled earnings below. I have modelled a gradual increase in gross margin from the current 50% up to 55% in 2025 to reflect the high demand and shifting product mix towards EUV. These align fairly well with the upper end of ASML's 2018 estimate for 2025 sales (14-25bn), which I am confident they will hit given the extreme demand and their near-perfect execution to date. Valuation I've modelled the intrinsic value of ASML in 4 different ways. Using 2025-terminal earnings (which I am relatively confident in and 2030-terminal earnings, which I have much less confidence in. For each I have modelled using a perpetual growth rate of 2% or an exit P/E of 25. I've used a fairly generous discount rate of 6% as I believe ASML to be highly reliable and relatively low risk. I also think current low interest rates and low equity risk premium justify a lower discount rate. All of these models put ASML's intrinsic value below current market cap. To change my assumptions to get closer the current market cap requires one of a few things: Significant growth in system sales - this feels somewhat unlikely, I don't think they will have capacity for this and are constrained by Zeiss on the optics. Significant growth in system prices - perhaps in the short term if Intel/TSMC/Samsung are all desperate to get EUV capacity, but that seems unlikely to persist. Increased perpetual growth rate - This is probably the biggest unknown and the potential for the greatest value. There isn't a roadmap beyond high-NA (except increasing beyond NA=0.55) but ASML seems best equipped to lead whatever comes next in lithography. Conclusion These models suggest ASML is currently overbought, which feels like a strong possibility given the amount of hype around semiconductors in general and the huge amount of capex planned by the EUV foundries. If this current market elation is part of a continued growth trend for significant semiconductor demand and corresponding capex then perhaps my model is too conservative. If however this is just a cyclical uptick and the semiconductor foundries will experience a period of digestion once supply constraints are met then perhaps ASML is indeed overbought. The biggest unknown in my mind is beyond 2030. If we really don't find a way past current lithography/silicon limits then what does that mean for ASML and its customers. EUV has perhaps one more swing with some higher NA (~0.75) solution but then we hit physical constraints (in lithography and silicon) - it's hard to know what position this puts ASML in. Discussion
I'd like an excuse to hold this stock because ASML is the gatekeeper to almost all significant trends (AI/ML, computer-vision, autonomous driving, IoT, drones, Blockchain/Crypto, cloud), however I think the current price represents overexuberance for semiconductors in general and ASML specifically. I'd be surprised if there wasn't a better entry point by 2025 as supply constraints on semiconductors ease and foundry capex declines and it seems unlikely ASML earnings will grow quick enough to justify the current price. Resources ASML Business Model and Capital Allocation Strategy This 2018 report gives a forecast on 2025 EUV earning potential. An update is due in September. 4Q20 Results 1Q21 Results [link] [comments]  |
| Posted: 29 Apr 2021 09:48 AM PDT |
| Tobi Lütke on Shopify’s impact on the creator economy, COVID forcing focus Posted: 29 Apr 2021 09:10 AM PDT |
| Donville Kent - Knee of the Curve Posted: 30 Apr 2021 12:50 AM PDT |
| View from the Top: Craig Federighi (Nov '19) Posted: 29 Apr 2021 08:56 PM PDT |
| You are subscribed to email updates from Security & Investment Analysis. To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google, 1600 Amphitheatre Parkway, Mountain View, CA 94043, United States | |
No comments:
Post a Comment