This Stock "Has More Upside" Than Nvidia (Tom Lee's Top Pick)

Summary

In this episode of the Joseph Carlson Show, the focus is on Nvidia's earnings report, marking the company's dominance as the biggest in the world. The show discusses Nvidia’s massive growth, high profitability, and key factors driving their success, such as AI and infrastructure investments. Additionally, Tom Lee provides insights into Nvidia’s potential and highlights financials, especially JP Morgan, as a strong bet for the future. The episode also covers news about Google’s $26 billion deal at risk, Cracker Barrel's logo reversal, and American Eagle’s marketing success, with a sharp look at the evolving market dynamics.

Takeaways

• 😀 Nvidia is now the biggest company in the world, surpassing Microsoft in market cap, currently valued at $4.44 trillion compared to Microsoft's $3.75 trillion.
• 📊 Nvidia's revenue has skyrocketed from $30 billion in 2022 to $150 billion on a trailing 12-month basis, showcasing immense growth.
• 💸 Nvidia is not just growing its revenue but also its profitability, with $72 billion in free cash flow over the past 12 months, which is growing at five times the rate of Google.
• 🖥 Nvidia's business growth remains strong despite concerns about deceleration, largely driven by massive demand in AI-related sectors like inference and reasoning.
• 📉 Nvidia's revenue run rate is projected to be around $180 billion over the next four quarters, even accounting for moderate growth deceleration.
• 💼 Financial analysts, including Tom Lee, are very bullish on financial companies like JP Morgan, arguing that they could deserve tech-like multiples due to AI integration.
• 🏦 JP Morgan’s stock has surged 25% year-to-date, reflecting its strong performance in various areas like credit card services, wealth management, and corporate investment.
• 📱 Google faces potential risks as it could lose a $26 billion deal due to ongoing legal battles surrounding its exclusive search contracts, particularly affecting Apple’s bottom line.
• 💡 Cracker Barrel reversed its decision to update its logo after widespread backlash from the internet, showing how public opinion can influence brand decisions.
• 👚 American Eagle's recent marketing efforts, including collaborations with Sydney Sweeney and Travis Kelce, have reignited interest in the brand, showcasing effective use of celebrity endorsements and timely campaigns.

Q & A

What major company is the focus of the episode's earnings report?

The major company discussed in the episode is Nvidia, which is reporting its earnings and has become the biggest company in the world, surpassing Microsoft in size.

What significant change has Nvidia undergone in terms of revenue growth?

Nvidia's revenue has experienced a significant spike, growing from $30 billion in 2022 to around $150 billion on a trailing 12-month basis, with estimates suggesting it could reach around $180 billion in the next four quarters.

How does Nvidia compare to other tech companies in terms of profitability?

Nvidia is not only growing its revenue but also doing an exceptional job of converting that growth into profitability. It currently has $72 billion in free cash flow, comparable to Google but growing five times faster.

What potential challenge does Nvidia face due to its size and market position?

Despite its growth, Nvidia needs to deliver substantial numbers to justify its large valuation. The company is at risk of decelerating growth as it becomes harder to maintain such rapid expansion at its current size.

What is the role of AI and infrastructure investments in Nvidia's future growth?

Nvidia benefits from continued AI investments, as seen in companies like Google, Meta, and Amazon. These companies are increasing their capital expenditures (capex), much of which is spent on Nvidia products to accommodate growing AI and infrastructure needs.

How does Nvidia typically perform in earnings reports, based on historical data?

Nvidia has consistently beat earnings expectations since 2020, with the company typically surpassing estimates by 20-30%. The company is expected to continue this trend with its upcoming earnings report.

What is Tom Lee's stance on Nvidia and its stock performance?

Tom Lee believes Nvidia is still a great investment, even though it has faced challenges post-earnings in the past. He highlights Nvidia's crucial role in the global economy but suggests there may be better trades in the financial sector.

Why is Tom Lee bullish on financial companies like JP Morgan?

Tom Lee is bullish on financials because they are benefiting from AI as 'second-order beneficiaries' and are also positioned to profit from blockchain technology. He suggests that financial companies like JP Morgan deserve tech-like multiples, which could lead to significant gains.

What major issue is Google facing that could impact its revenue?

Google is at risk of losing a $26 billion deal, primarily due to potential changes in a federal court ruling regarding its default search contract. If the ruling goes against Google, Apple, which relies heavily on the deal, could see a significant loss in revenue.

What happened with Cracker Barrel's logo rebranding, and what was the public response?

Cracker Barrel initially attempted a logo rebrand that faced overwhelming backlash. The new logo was deemed lifeless and soulless by the public. After widespread criticism, the company reversed its decision and returned to its original logo, resulting in a 7% increase in shares.

What marketing strategy has American Eagle employed that has led to renewed attention for the brand?

American Eagle has revived its brand by making strategic marketing moves, such as featuring Sydney Sweeney in ads and signing Travis Kelce for their new clothing line. Their timing, especially with Kelce's engagement to Taylor Swift, has generated significant buzz and brought the brand back into the spotlight.