Charged Alpha Stock Encyclopedia

Charged Alpha Stock Encyclopedia

By Colton ThomasBusinessInvesting
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Charged Alpha Stock Encyclopedia episodes

  • Alvotech (ALVO) H1 2026: Revenue -30.8%, Guidance Unchanged, And A 2x Second Half
    Alvotech (ALVO) H1 2026 — H1 2026 (six months ended June 30, 2026): total revenue $211.9m, DOWN 30.80% from $306.1m. Adjusted EBITDA $46.9m vs $53.6m. Loss per share $0.22, basic and diluted. Full-year guidance REAFFIRMED unchanged at $650-700m of revenue and $180-220m of adjusted EBITDA, which requires the second half to be 2.07x to 2.30x the first.
    Alvotech's first-half revenue fell 30.80% to $211.9m and management left the full-year guidance exactly where it was, so the second half now has to deliver $438.1m - 2.07x the first. The obvious explanation is milestone timing, and it is false: product revenue fell 48.26% while licence revenue GREW 4.37%. But the licence line only grew because $39.75m came from an entity under common control.
    THE CALL: HOLD (3/5, A REAL PLATFORM, A GUIDED RAMP WITH NO PRECEDENT, AND A LEVERAGED STUB) — base-case value ~$4.17 vs ~$4.43 today.
    KEY METRICS:
    - THE SPINE: total revenue $211.9m, DOWN 30.80%, while FY2026 guidance of $650-700m revenue and $180-220m adjusted EBITDA was REAFFIRMED for the third time. That leaves $438.1m-$488.1m for the second half - 2.07x to 2.30x the first - on 2.84x to 3.69x the EBITDA.
    - THE SEASONALITY DEFENCE IS DEAD: FY2025 revenue was $593m against an H1 of $306.1m, so LAST YEAR'S SECOND HALF WAS SMALLER THAN ITS OWN FIRST ($286.9m, -6.30%). EBITDA skewed 1.56x; the 2026 guide asks 1.82x more skew than the company has ever delivered.
    - THE MILESTONE-TIMING READ IS FALSE, AND WE TESTED IT: product and service revenue fell 48.26% ($98.8m) while licence and other revenue GREW 4.37%. Product is 104.8% of the entire decline. The manufacturing story management tells is the true one.
    - BUT THE LICENCE LINE ONLY GREW ON A RELATED PARTY: $39.75m was recognised AT A POINT IN TIME under an agreement signed the same quarter with an entity under common control, zero prior-year comparable. Ex that, licence fell 34.88% and total revenue 43.78%.
    - THE OPERATING LINE IS AN ACCOUNTING ELECTION: reported R&D fell 50.08% ($92.9m to $46.4m) while capitalised development went $15.2m to $56.0m under IAS 38. TOTAL development spend fell only 5.30%. Restore the swing and the $2.0m operating loss is $42.8m.
    - THE CASH SAYS OTHERWISE: adjusted EBITDA $46.9m against cash USED in operations of $80.2m - a $127.1m gap of working capital ($56.8m, 83% contract assets) and interest paid ($72.2m vs $8.0m). Free cash flow -$171.2m, MORE than the $156.1m raised in June.
    - THE CALL: EV $2,889.7m on the FILED 356,817,038 shares, guidance converted to a peer-comparable basis (0.8876). Bear $0.14 / base $4.29 / bull $7.96, weighted 25/50/25 = FAIR VALUE $4.17 vs $4.43, -5.86%. HOLD 3/5. The tape needs $270.8m of EBITDA.
    What to watch: UP: product revenue back near the prior-year run rate in November AND the three US decisions landing in Q4. DOWN: any guidance revision, or a second half nearer the first than the range.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min
  • Lowe’s (LOW) Q2 FY2026: Sales +8.3%, Comps +0.2%, And A Bought Beat
    Lowe's (LOW) Q2 FY2026 — Q2 FY2026 (quarter ended July 31, 2026): net sales $25.96bn, UP 8.34%, but $176m BENEATH the $26.13bn bar. Comparable sales +0.2%. GAAP diluted EPS $4.27, flat to the cent. Adjusted $4.40 vs a $4.22 bar. Full year cut to the bottom of the range: $92.0bn of sales, GAAP EPS ~$11.75 and adjusted ~$12.25, both BENEATH last year.
    Lowe's grew net sales 8.34% and comparable sales 0.2%. Two tenths of one per cent on a $23.96bn base is about $48m, so 97.60% of the $2.00bn increase came from outside the comparable base - it was bought, not earned. Foundation Building Materials closed 9 October 2025 for $8.8bn cash and Artisan Design Group took $1,314m, paid for by cutting buybacks 94.79%. And the beat is the adjusted figure, which adds back $96m of amortisation and keeps an $0.11 tariff windfall inside it.
    THE CALL: SELL (3/5, AN EXCELLENT FRANCHISE, BOUGHT GROWTH, AND EARNINGS GUIDED BENEATH LAST YEAR) — base-case value ~$184.93 vs ~$216.09 today.
    KEY METRICS:
    - THE SPINE: net sales +8.34% (+$1,997m) against comparable sales of +0.2%. Two tenths of one per cent on a $23,959m base is about $48m, so 97.60% of the increase came from outside the comp base. The comp itself is transactions -2.1% offset by ticket +2.3% - price, not demand.
    - THE BEAT IS ADJUSTED, AND WE PROVED THE BASIS: the four filed GAAP quarters of fiscal 2025 sum to $11.85, exactly the filed annual figure; the vendor's four sum to $12.29. So the $4.22 bar is adjusted. GAAP EPS was flat to the cent at $4.27, and revenue MISSED by $176m.
    - THE WINDFALL IT LEAVES IN: the release states both the GAAP and adjusted figures include an $0.11 IEEPA tariff-refund benefit. Ex that, adjusted EPS is $4.29 against $4.33 - DOWN 0.92%. What it DOES exclude is $96m of intangible amortisation, which recurs.
    - WHAT THE GROWTH COST: $8,800m for Foundation Building Materials plus $1,314m for Artisan Design Group = $10,114m of cash. Foundation was bought at 13.86x its disclosed 2024 EBITDA of $635m - above the 12.46x the market pays for Lowe's - on a 9.77% margin vs Lowe's 13.79%.
    - WHAT PAID FOR IT: repurchases went from $4,053m in fiscal 2024 to $211m in fiscal 2025, a 94.79% cut. Since fiscal 2021 net earnings are -21.18% but EPS only -1.50%; the gap is a share count down 19.89%. This quarter diluted shares were 560m against 560m.
    - THE GUIDANCE BRIDGE, AND IT FOOTS: $92.0bn at a guided 11.2% margin is $10,304m of operating income - $151m more on $5,714m more sales, a 2.64% INCREMENTAL margin. Guided interest of $1,600m is $194m more, LARGER than that, so pre-tax earnings are guided DOWN $43m.
    - THE CALL: owner earnings $6,452m discounted at a 7.25% WACC on a 0.851 beta. Bear $121.83 / base $182.27 / bull $253.34, weighted 25/50/25 = FAIR VALUE $184.93 vs $216.09, -14.42%. SELL 3/5. The tape needs 5.97% growth; sales have compounded at -2.70% since fiscal 2021.
    What to watch: UP: comparable transactions turning positive AND the incremental margin on acquired sales above 5%. DOWN: a second consecutive guidance cut with net interest above $1.70bn.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • ScanSource (SCSC) Q4 FY2026: 10 Cents vs 99 Cents, And A $220M Cheque
    ScanSource (SCSC) Q4 FY2026 — Q4 FY2026 (quarter ended June 30, 2026): net sales $953.1m, UP 17.3%, against an $814.4m bar. Gross profit $119.8m, up only 14.0% - the gross margin FELL 35bp to 12.57%. Non-GAAP EPS $1.46 against a $1.14 consensus set by two analysts; GAAP $1.24. Full year: net sales $3.23bn, GAAP EPS $3.64, non-GAAP $4.24, free cash flow $113.8m.
    ScanSource runs two businesses through one revenue line. Its distribution arm turns a dollar of net sales into 10.8 cents of gross profit; its Intelisys agency arm turns the same dollar into 98.6 cents. In the June quarter the 10-cent half grew 17.6% and the 99-cent half grew 7.2%, so net sales rose 17.3%, gross profit rose only 14.0%, and the gross margin FELL 35bp. In the same 8-K, management agreed to pay $220.5m cash for MicroAge to buy the margin it cannot grow.
    THE CALL: BUY (3/5, CHEAP AGAINST ITS PEERS, WITH A MIX PROBLEM IT HAS JUST PAID $220.5M TO FIX) — base-case value ~$61.14 vs ~$54.35 today.
    KEY METRICS:
    - THE SPINE: two segments, one revenue line, two recognition bases. Specialty Technology Solutions turned $3,124.9m of net sales into $337.6m of gross profit = 10.80 CENTS per sales dollar. Intelisys & Advisory turned $101.1m into $99.7m, because its ENTIRE cost of sales was $1.4m = 98.60 CENTS. A 9.13x gap, off segment note 16.
    - THE MIX: Q4 net sales +17.3% to $953.1m, but Specialty Technology grew 17.6% and Intelisys 7.2%. Gross profit rose only 14.0% and the margin FELL 35bp to 12.57%. For the full year it ROSE, 13.44% to 13.56%, on the opposite mix. The company's own sub-headline: 'Hardware Demand Drove 17% Net Sales Growth for Q4.'
    - THE COMPLICATION: Intelisys operating income is $28.6m in FY2026 vs $30.6m in FY2024 - DOWN 6.57% - on revenue UP 9.62%. Its margin fell 489bp, 33.16% to 28.26%, as costs grew 16.22% against gross profit up 8.62%. That is the segment the $220.5m is meant to enlarge.
    - THE DEAL: $220.5m all cash for MicroAge on the revolver, in Item 1.01 of the same 8-K as the results. 20.1% of market value, 1.079x the last TWO YEARS of buybacks. Net debt $13.0m to about $233.5m = 1.54x adjusted EBITDA (covenant 3.50x). FY27 guidance EXCLUDES it, and no MicroAge financials are disclosed.
    - VALUATION: fair value $61.14 vs $54.35, +12.50%, BUY 3/5. Enterprise value $1.11bn from the filed balance sheet = 8.27x unadjusted EBITDA vs a 12.24x peer median (SNX, ARW, AVT, NSIT, CNXN, all share counts checked). A 32.4% discount on a 10.40% free cash flow yield. Bear $48.47 / base $60.77 / bull $74.57.
    - FALSIFIED: NOT a record quarter. SEC XBRL puts $953.1m FIFTH - December 2018 printed $1,046.0m - and FY2026 net sales are 1.03% BELOW FY2024. The 12-month CLOSING high is $58.89 on 4 August, BEFORE the print, so even the +9.67% reaction closed 4.25% under it.
    - THE TAPE AND THE STREET: 8-K accepted 08:30 ET, an hour before the open. It OPENED +26.10%, printed +29.87%, CLOSED +9.67% - keeping 32.4% of its best level - on the largest volume session of all 266 (5.54x median), then -3.62%. The high came in the first five minutes, half the gap gone by 10:00, BEFORE the 10:30 call. And there is exactly ONE live published target: Barclays $43.00, dated 8 October 2025, older than three of the four quarters just reported and 20.9% BELOW the tape.
    What to watch: UP: the Intelisys operating margin turning back up through 30%, and MicroAge closing with disclosed revenue and margin that justify the price. DOWN: the gross margin falling again while free cash flow tracks toward the guided $85m floor rather than through it.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • Youdao (DAO) Q2 2026: A Record Quarter, Negative Equity, 92x Earnings
    Youdao (DAO) Q2 2026 — Q2 2026 (quarter ended June 30, 2026): total net revenues RMB1,466.9m (US$216.2m), UP 3.48%, against a RMB1,560m consensus. Income from operations RMB111.5m, UP 287.33% - the highest quarter Youdao has ever disclosed and its eighth consecutive profitable one. Gross margin 48.9% from 43.0%. Non-GAAP RMB0.76 per share against a RMB0.26 bar; GAAP RMB0.62.
    Youdao printed the best operating quarter in its history - income from operations RMB111.5m, up 287.33%, an eighth straight profitable quarter - and both superlatives survive testing against the filed series. But revenue grew only 3.48%: learning services alone contributed 118.77% of the entire gross-profit increase while smart devices took RMB24.2m back out. And the balance sheet still carries a TOTAL SHAREHOLDERS' DEFICIT of RMB1.81bn (US$266.3m). At the RMB127.3m it closed in the half - a half containing that record quarter - reaching zero book value takes 7.10 years.
    THE CALL: SELL (4/5, A REAL TURNAROUND, NO EQUITY BEHIND IT, AND A PRICE ABOVE EVERY PUBLISHED TARGET) — base-case value ~$11.21 vs ~$18.34 today.
    KEY METRICS:
    - THE SPINE: total shareholders' deficit RMB1,806.8m (US$266.3m) at June 30, against total assets of RMB1,956.6m. It narrowed RMB127.3m in the half - 7.10 YEARS to zero book value, and that half held the best quarter in company history. Cross-checked on H1 net income: 7.45 years.
    - THE RECORD, TESTED: income from operations RMB111.5m vs RMB28.8m, UP 287.33% (3.87x). Prior peak was Q3 2024 at RMB107.3m, so the record is real by 3.98%. Streak counted off the filed series: exactly 8 quarters.
    - HOW IT WAS MADE: revenue UP 3.48% but gross profit UP 17.64%. Learning services added RMB127.7m of gross profit = 118.77% of the whole RMB107.5m rise; smart devices took RMB24.2m out. Two of three segments shrank.
    - THE FUNDING: every borrowing is owed to NetEase - RMB878.0m short term plus US$118.9m long term of a US$300.0m revolver = US$248.3m, or 1.98x the company's US$125.2m of liquidity. The release carries a going-concern dependency sentence.
    - THE PRICE: US$2.18bn market cap on US$23.7m of trailing earnings = 92.1x, and 44.2x even on the record quarter annualised. At the 17.80x of New Oriental and NetEase, today's price needs US$122.5m a year - 5.17x trailing, 1.99x the Street's own 2028 forecast.
    - THE VALUATION: fair value $11.21 vs $18.34, a gap of -38.86%. SELL, conviction 4/5. Bear $7.47, base $10.37, bull $16.64. The tape sits +38.31% above the six-analyst average target of $13.26 and +23.09% above the highest at $14.90.
    What to watch: UP: contract liabilities turning up alongside learning-services growth, plus the deficit closing materially faster than RMB127.3m a half. DOWN: the parent revolving facility drawn harder while the deficit stops narrowing, or learning services decelerating from 20.94% with two of three segments already shrinking.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min
  • Navios Maritime Partners (NMM): Earnings Up 147% And Still 0.71x Book
    Navios Maritime Partners L.P. (NMM) Q2 2026 — Q2 2026 (quarter ended June 30, 2026): revenue $410.2m, UP 25.22%, on available days DOWN 1.76% and a fleet six vessels smaller. Earnings per common unit $5.78 GAAP and $4.65 adjusted, against a $4.35 bar. Adjusted EBITDA $242.2m, UP 40.30%. Fleet utilisation 99.4%.
    Navios Partners grew earnings per common unit 147.01% to $5.78 and its units still change hands at 0.71x the book value of its own ships - $88.78 against $124.23 a unit. The enterprise is priced at 0.94x the depreciated cost of the fleet alone. The reason sits in the company's own flagship disclosure: $843.5m of newbuild tankers contracted to earn $700.2m of revenue, which is 69.88% of their cost back as profit inside the firm charters.
    THE CALL: HOLD (3/5, A REAL DISCOUNT TO BOOK, AND A REINVESTMENT RATE THAT SPENDS IT) — base-case value ~$86.72 vs ~$88.78 today.
    KEY METRICS:
    - THE SPINE: $843.5m of newbuild tankers, 7 vessels, chartered 6.1 years at $45,224/day for $700.2m of contracted REVENUE - 83.01% of cost. Net of the filed $7,152/day running cost the firm charters return $589.5m, or 69.88%.
    - THE DISCOUNT: partners' capital $3,593.5m over 28,925,804 units = $124.23 book a unit vs $88.78. EV $4,306.3m is 0.94x the $4,575.0m of vessels at net book.
    - THE QUARTER: revenue $410.2m UP 25.22% on available days DOWN 1.76%. All rate: dry bulk TCE UP 53.1%, tankers UP 25.0%, containerships FLAT at -0.4%.
    - THE REVERSE SOLVE: at $88.78 the EV pays for $1.01bn of adjusted profit at a borrowed 4.28x, 12.81% more than the $892.6m run rate - roughly the newbuild programme, paid for in advance.
    - THE VALUATION: fair value $86.72 vs $88.78, a gap of -2.32%. HOLD, conviction 3/5. Bear $61.43, base $87.32, bull $110.81.
    What to watch: UP: the new $200.0m repurchase actually running near this price, which retires 7.96% of the units and books $79.9m of value at 0.71x book; or newbuild charters struck at rates that repay the hull inside the firm period. DOWN: dry bulk mean reverting from a rate that rose 53.1% in twelve months while the order book is still being funded with debt.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min
  • The Buckle (BKE): The 10% Dividend Yield That Nobody Actually Promised
    The Buckle (BKE) Q2 FY2026 — Q2 FY2026 (13 weeks ended August 1, 2026): net sales $319.8m, UP 4.60% and the biggest second quarter in a decade, comparable store sales UP 2.1%, gross margin 47.43% to 47.85% - and operating profit still FELL 0.96% to $55.8m. Diluted earnings $0.87 against an $0.81 bar. The shares rose 2.74% on the reaction session, the 15th best of 252, after giving back 48% of their intraday high.
    Buckle's screen yield is 10.04%, and it is two different numbers wearing one ticker. The rate the board has actually committed to is $0.35 a quarter - $1.40 a year, a yield of 3.20%. The other 6.85% came from a $3.00 special dividend declared on December 8, 2025, paid on January 29, 2026, and re-decided by the board every December. It has NOT been declared for this year. Meanwhile the engine that pays for it just stalled: sales hit a record $319.8m and operating profit still fell 0.96%.
    THE CALL: HOLD (3/5, AN EXCELLENT RETAILER, A HALF PROMISED YIELD, AND A PRICE THAT ALREADY PAYS FOR TODAY) — base-case value ~$43.09 vs ~$43.81 today.
    KEY METRICS:
    - THE SPINE: $4.40 a share was paid over the last twelve months - a 10.04% yield - but $3.00 of it was a SPECIAL dividend. The committed rate is $1.40 a year, or 3.20%.
    - THE PROOF, TO THE THOUSAND: retained earnings FELL $4.505m (from $261.868m to $257.363m) on net income of $220.837m, so $225.342m was charged out - a payout of 102.04%.
    - THE ENGINE STALLED: net sales UP 4.60% to a record $319.8m and gross margin UP 0.42 points, yet operating profit FELL 0.96%, because SG&A rose $8.551m against $8.012m more gross profit.
    - PRICE, NOT UNITS: average unit retail UP about 4.5% and transaction value UP 3.5%, while units per transaction FELL about 1%, on comparable sales of UP 2.1%. Online grew just 2.3%.
    - THE VALUATION: enterprise value $2.39bn is 9.35x clean trailing operating profit of $255.6m. Fair value $43.09 against $43.81, a gap of -1.64%. HOLD, conviction 3 of 5.
    What to watch: UP: a fourth consecutive special dividend at the December board meeting, which would confirm the pattern the price quietly assumes; or two quarters with SG&A growth back below gross profit growth. DOWN: inventory up 13.28% against sales up 4.60% failing to clear at full price, putting markdowns in the very quarter the special is decided; average unit retail up 4.5% with units per transaction down 1.0% is a price led comp, and price led comps stop when the customer stops accepting the price.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • Telix Pharmaceuticals (TLX): The $40 Million Cheque That Made The Profit
    Telix Pharmaceuticals (TLX) H1 2026 — H1 2026 (half-year ended June 30, 2026): revenue US$477.4m, UP 22.28%, gross margin 53.44% to 54.54%, and profit after tax of US$38.3m - more than any full year Telix has ever reported. Diluted earnings US$0.1074 a share against a US$0.0447 bar. The ADS rose 2.48% on the reaction session, then fell 8.78% the session after.
    Telix just earned more in six months than in any full year of its life - and almost all of it arrived in one envelope. A single initial, non-refundable US$40.0m payment from Regeneron covers 94.7% of the US$42.2m Telix added to research spending this half, and is larger than the whole US$38.3m net profit it helped produce. Take that one line out and profit before tax, adjusted EBITDA and operating cash flow ALL cross back below zero.
    THE CALL: HOLD (3/5, A REAL BUSINESS, A BOUGHT PROFIT, AND A PRICE THAT ALREADY ASSUMES THE TRANSITION WORKS) — base-case value ~$11.1 vs ~$11.33 today.
    KEY METRICS:
    - THE SPINE: profit before tax was US$29.2m and contained a US$40.0m Regeneron payment. Without it the half was a US$10.8m pre-tax LOSS.
    - THE SAME ITEM, THREE WAYS: adjusted EBITDA +146.40% as reported becomes -43.35% without it; operating cash flow of US$23.0m becomes a US$17.0m outflow.
    - THE SPEND: gross profit rose US$51.7m and operating costs rose US$62.4m - US$1.21 spent per extra dollar of gross profit, so core operating profit fell 93.15% to US$0.8m.
    - THE SEGMENTS: Precision Medicine earned US$131.9m on US$388.6m of revenue, a 33.94% margin; Therapeutics, Manufacturing Solutions and head office consumed US$120.4m, or 91.32% of it.
    - THE VALUATION: enterprise value US$4.11bn is 4.29x guided revenue; at 12x EBITDA the price needs a 35.71% group margin against 2.50% delivered. Fair value US$11.10 against US$11.33.
    What to watch: UP: Pixclara's FDA goal date of September 11, 2026, which would add a third selling product to a Precision Medicine engine already earning a 33.94% segment margin; or gross profit growth moving back ahead of cost growth. DOWN: another half like this one, in which operating costs grow US$62.4m against US$51.7m of extra gross profit; Manufacturing Solutions deteriorating further; or any use of the undrawn at-the-market equity facility.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min
  • KE Holdings (BEKE): The Revenue That Left Was Carrying Almost No Profit
    KE Holdings (BEKE) Q2 2026 — Q2 2026 (quarter ended June 30, 2026): net revenues RMB 24.54bn, DOWN 5.66%, yet segment contribution rose 16.56% to RMB 8.22bn and net income doubled to RMB 2.62bn. Adjusted earnings of $0.42 per ADS beat a $0.31 bar by 35.5%. Results were released before the open on Friday August 21; the shares rose 4.47% to $17.75, with the overnight gap accounting for 124% of the whole move.
    KE Holdings' revenue fell RMB 1.47bn and the profit its own segment table says those revenues generate ROSE RMB 1.17bn. The two lines that shrank - home renovation and home rental - gave up RMB 2.22bn of revenue between them and earned RMB 61m MORE than a year ago. Renovation surrendered RMB 1.37bn of revenue and only RMB 203m of contribution, a marginal 14.78% against a 39.60% segment average. The mechanism is an accounting basis change: Carefree Rent is migrating from a principal (gross) model to an agent (net service fee) model, so units under management passed 790,000, up about 34%, while the revenue they book fell 14.83%.
    THE CALL: HOLD (3/5, AN EXCELLENT QUARTER THAT THE PRICE HAS LARGELY ALREADY COLLECTED) — base-case value ~$18.72 vs ~$17.75 today.
    KEY METRICS:
    - THE SPINE: net revenues fell 5.66% to RMB 24.54bn while total segment contribution ROSE 16.56% to RMB 8.22bn. Contribution margin 27.10% to 33.49%.
    - THE SHED REVENUE: renovation and rental gave up RMB 2.22bn of revenue and earned RMB 61m MORE contribution. Renovation's marginal margin on the revenue it lost was 14.78% against a 39.60% average.
    - THE MECHANISM: Carefree Rent units under management above 790,000, up ~34%, on revenue down 14.83%. Lease obligations fell 28.17% to RMB 12.66bn as rentals went asset-light.
    What to watch: UP: the net-fee migration finishing (more than half of Carefree Rent is already across), which stops revenue falling for accounting reasons; or Chinese home prices stabilising, which matters more to a percentage-of-price business than any cost programme. DOWN: management put existing-home transaction VOLUME up about 25% against transaction VALUE of +7.95%, implying the average home sold was about 13.6% cheaper; mobile monthly users fell 6.16% and active agents 7.5%; G&A carries a roughly RMB 280m bad-debt provision on developer receivables; and there is no guidance of any kind.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • NetEase (NTES): The 23% Miss Never Touched The Games Business
    NetEase (NTES) Q2 2026 — Q2 2026 (quarter ended June 30, 2026): net revenues RMB 30.11bn (+7.94%), about 2.3% ahead of consensus, while adjusted earnings of $1.77 per ADS missed a $2.31 bar by 23.4%. Operating profit rose 33.42% to RMB 12.09bn. Results were furnished before the open on Thursday August 20; the shares fell 5.85% that session on 2.1x median volume and then rose 6.98% on Friday August 21 to close at $128.17, leaving the two sessions +0.72% together.
    The games segment sold RMB 2.22bn more and paid RMB 0.82bn LESS to deliver it, because self-developed titles displaced licensed ones. Gross profit therefore grew RMB 3.03bn - 137% of the revenue it grew on - and games gross margin went 70.22% to 76.13%, which Macquarie called a record. Group operating profit rose 33.42% on revenue of 7.94%. The entire 23% earnings shortfall happened below that line.
    THE CALL: BUY (3/5, THE OPERATING LINE HAD ITS BEST QUARTER IN YEARS AND EVERY BIT OF THE MISS SAT UNDERNEATH IT) — base-case value ~$149.31 vs ~$128.17 today.
    KEY METRICS:
    - THE COST LINE: games and related value-added services revenue rose 9.72% to RMB 25.02bn while the COST of that revenue FELL 12.05% in absolute renminbi, from RMB 6.79bn to RMB 5.97bn. Gross profit rose RMB 3.03bn on RMB 2.22bn of extra revenue, which is 137%. Games gross margin 70.22% to 76.13%, the highest of the three quarters shown; self-operated titles were 97.7% of the segment against 97.1%. Group operating margin 32.49% to 40.16% on operating expenses that rose just 1.52%.
    - WHERE THE MISS CAME FROM: other income and expenses swung RMB 4.05bn against the company, from RMB 1.59bn of income to RMB 2.46bn of expense, on RMB 2.02bn of fair-value declines and RMB 1.28bn of impairments - RMB 3.31bn against RMB 0.22bn a year ago, and every yuan of it added straight back as non-cash in the cash flow statement. The effective tax rate went 14.66% to 25.54%, worth RMB 1.05bn or RMB 1.58 an ADS, 43% of the whole distance to the bar.
    - THE BASIS, PROVEN: one ADS is five ordinary shares and NetEase reports in renminbi. Its non-GAAP excludes exactly ONE item, share-based compensation of RMB 0.77bn. The four 2025 quarters in renminbi sum to RMB 58.00 against a filed RMB 57.99 - one fen; the same four quarters in US dollars sum to $8.12 against a filed $8.29, 2.05% short, because each is translated at its own quarter-end rate. Net cash of RMB 167.5bn is $38.31 an ADS, 29.9% of the share price.
    What to watch: UP: contract liabilities stop shrinking while the margin holds, or the effective tax rate returns toward last year's 14.66% - worth RMB 1.05bn a quarter, and nothing at all to the operating line we value. DOWN: contract liabilities fell 5.93% across the half to RMB 19.30bn and operating cash flow fell 8.18% in the quarter while operating profit rose 33.42%; NetEase publishes no guidance of any kind, so there is nothing forward to check either against.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • COTY Stock Q4 FY2026: Coty Earnings - USD741M Went To A Buyback Hedge
    Coty (COTY) Q4 FY2026 — Coty reported Q4 FY2026 on an 8-K accepted 20:31:43 UTC, which is 16:31 ET, on Wednesday August 19, so Thursday August 20 is the reaction session and Friday August 21 is the last settled one. Shares ran plus 10.58 pct into the print with no company disclosure behind it, gapped to USD2.55 the next morning at minus 15.84 pct, closed minus 9.24 pct at USD2.75, then finished the week at USD2.74 - exactly the Tuesday close. FMP changePercent printed plus 7.84 for that session; it is the open-to-close move and the sign is inverted.
    Coty Inc. (NYSE: COTY) is one of the largest beauty groups in the world. Its Prestige division sells designer fragrance under licence from Burberry, Hugo Boss, Gucci, Calvin Klein, Chloe and Marc Jacobs, and its Consumer Beauty division sells mass cosmetics under CoverGirl, Rimmel, Max Factor and Sally Hansen. It is controlled by JAB Beauty B.V., which holds roughly 54 pct of the stock.
    THE CALL: HOLD (3/5, MODERATE - THE CASH DRAIN IS ENDING AS THE PROFIT BASE SHRINKS) — base-case value ~$2.70 vs ~$2.74 today.
    KEY METRICS:
    - Q4 FY2026 net revenue USD1.2692B against USD1.2524B, up 1 pct reported and minus 1 pct like-for-like, beating a USD1.1936B forecast by 6.34 pct and beating the company's own guide of a mid-single-digit LFL decline. Adjusted EPS minus USD0.02 against a minus USD0.006 bar; statutory EPS minus USD0.16. Adjusted operating income USD39.5M, down 42 pct, and adjusted EBITDA USD93.6M, down 26 pct. Free cash flow USD72.6M against USD34.9M.
    - FY2026 net revenue USD5.8066B, down 2 pct reported and 5 pct like-for-like. Adjusted EPS USD0.21 against USD0.22; statutory EPS minus USD0.70. Adjusted EBITDA USD846.9M, down 22 pct. Operating cash flow USD537.8M and free cash flow USD348.2M, up 25.4 pct. Financial net debt USD2.9121B on leverage of 3.4x. Consumer Beauty adjusted operating income minus USD43.2M against plus USD79.7M a year earlier.
    - The forward repurchase contracts: USD690.0M of buybacks hedged in 2022 and 2023 with three banks, of which one completed in February 2024 for USD200.0M cash and 27.0M shares, recorded at USD350.6M or USD12.99 each and worth USD74.0M today. Cash paid FY2024 to FY2026 was USD242.6M, USD288.4M and USD210.1M - USD741.1M in total, or 30.7 pct of market value. Margin calls alone were USD191.1M and USD194.4M. Remaining notional USD104.5M, maturing January 2027.
    What to watch: The Q4 FY2026 8-K accepted 16:31 ET on 19 August 2026 and its Exhibit 99.1, read against the Form 10-K filed the following morning - specifically Note 20, which describes three forward repurchase contracts written on Coty's own shares, and the consolidated statement of cash flows, which shows what they have cost. Revenue USD1.2692B beat by 6.34 pct; adjusted EPS was minus USD0.02.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min

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