This video provides an in-depth analysis of the recent earnings reports for Duolingo (DUOL), Shift4 Payments (FOUR), and Brookfield Asset Management (BAM), followed by a broader commentary on current market trends and the creator's investment strategy.
Duolingo's stock has fallen significantly despite reporting strong revenue growth, a decline attributed to decelerating total bookings and a strategic pivot by management to prioritize user growth over immediate monetization. Shift4 Payments presented very strong results, with high revenue growth and a new $1 billion share buyback program, leading the creator to view its low valuation as highly compelling, pending further research on its competitive moat. Brookfield Asset Management reported solid fee-related earnings, highlighted by a massive $80 billion nuclear partnership via its Westinghouse holding, and issued bullish long-term growth guidance.
The video concludes by observing a market heavily concentrated in the "Magnificent 7" and speculative stocks, while many high-quality businesses like Constellation Software are being sold off. The creator advocates for a strategy focused on fundamentals, taking advantage of this divergence by purchasing fundamentally sound companies at attractive valuations.
Analysis of Duolingo, Shift4, Brookfield, and Market Trends
1:08 Duolingo (DUOL) Stock Analysis: Duolingo's stock has plummeted roughly 63% from its all-time high. This is despite reporting a strong quarter with impressive metrics, including a 41% year-over-year increase in revenue and a 51% increase in free cash flow.
3:31 Key Concern: Growth Deceleration: The primary reason for the stock's decline is a weak outlook for the fourth quarter. The growth of "total bookings," a key indicator of future demand, is projected to decelerate significantly from 33% to around 22% year-over-year.
5:33 CEO's Strategy and Valuation: The CEO explained a strategic shift to prioritize long-term user growth over immediate monetization. While the stock's valuation appears compelling at approximately 24 times free cash flow, the creator is not buying due to a lack of personal confidence in the company's long-term competitive moat.
9:22 Shift4 Payments (FOUR) Earnings: Shift4 reported a very strong quarter, with revenue growing 61% year-over-year (19% on an organic basis). The company reiterated its medium-term guidance of achieving a 30% compounded annual growth rate.
12:16 Massive Buyback and Low Valuation: Shift4's board authorized a new $1 billion share buyback program, which could retire over 16% of the company's shares at its current price. The stock is trading at a low forward price-to-free-cash-flow multiple of about 12, which seems disconnected from its high growth rates.
18:47 Brookfield Asset Management (BAM) Earnings: BAM reported record fee-related earnings, up 17% year-over-year. However, distributable earnings grew at a slower 7% pace, which the creator attributes to a one-time higher cash tax payment.
20:48 Westinghouse's $80 Billion Nuclear Deal: A major positive catalyst for BAM is the announcement of an $80 billion partnership between its co-owned company, Westinghouse, and the U.S. government to construct new nuclear power plants.
24:50 Bullish Long-Term Outlook: Management projects they can double the business over the next five years, targeting over 20% annualized earnings growth. Despite the solid report, the creator still prefers Brookfield Corporation (BN) for its higher growth potential and more attractive valuation.
27:44 Current Market is a "Voting Machine": The creator notes that the current market is highly concentrated, with gains being driven by the "Magnificent 7" and speculative, unprofitable companies. In contrast, many high-quality, profitable businesses are being sold off due to fears of AI disruption, even with strong underlying performance.
32:27 Example: Constellation Software (CSU): Constellation Software is highlighted as a prime example. Its stock is down 35% in its largest-ever drawdown, yet its latest earnings report showed revenue growth of 16% and free cash flow growth of 46%. Its valuation is now below its long-term historical average.
36:02 Creator's Investment Strategy: The creator is sticking to a strategy of focusing on business fundamentals rather than short-term market sentiment. He is actively buying shares in companies like Constellation Software, viewing the current sell-off as an opportunity to acquire high-quality businesses at a discount.