Charged Alpha Stock Encyclopedia

Charged Alpha Stock Encyclopedia

By Colton ThomasBusinessInvesting
Download on the App Store

Charged Alpha Stock Encyclopedia episodes

  • CDW (CDW): It Beat Both Lines - And Fell 9%. Here’s What Broke.
    CDW Corporation (CDW) Q2 2026 — Net sales $6,572.2M UP 10.0% beat a ~$6.21B bar and non-GAAP EPS $2.91 beat $2.80. Then the cascade: gross profit +6.3%, operating income +2.0%, gross margin 20.1% vs 20.8%. CDW opened at $115.45, traded to $113.00 (-26.6%), and closed down 9.03% at $140.10.
    CDW beat on revenue and on earnings - and the stock still closed down 9%. Here is why: revenue grew 10.0%, gross profit grew 6.3%, operating income grew 2.0%. Every step down the income statement the growth halves, because the growth arrived as low-margin hardware that CDW books GROSS while netting down software. And in the same release where the CEO called CDW 'services-led', services net sales grew 1.1%.
    THE CALL: HOLD (3/5, A GOOD BUSINESS AT AN HONEST PRICE, WITH NO MARGIN OF SAFETY) — base-case value ~$145.0 vs ~$140.1 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$145 vs the $140.10 close (+3%) - within a dollar of the Street's $144 average, and we still DIFFER because they call that a Buy. Base $136 (owner earnings ~$1.15B compounding 5% then 3.5% at an 8.5% discount rate), bear $72 (hardware mix keeps winning, gross margin slides toward 19.5%), bull $198 (services and Geared for Growth land, margin stabilises). Cross-checks: 5x gross profit = $153, 14x non-GAAP EPS = $152.
    - THE SCREEN MULTIPLE LIES. At $140.10 CDW trades at ~12.9x non-GAAP EPS (~$10.85 FY26E), which looks cheap against its own history. But that figure excludes roughly $255M a year of acquisition-intangible amortisation and ~$100M of stock compensation. On GAAP EPS near $8.45 it is 16.6x - a normal multiple for a distributor with mid-single-digit gross profit growth. On EV of ~$23.2B against ~$4.96B of 2026 gross profit it is 4.7x.
    - THE REVENUE BEAT WAS A MARGIN DOWNGRADE. Net sales $6,572.2M (+10.0%, +9.9% cc) on 64 selling days, both years. Gross profit $1,319.8M (+6.3%), gross margin 20.1% vs 20.8% - the company's own words: 'mix into and lower margin in certain hardware categories'. SG&A $891.2M (+8.6%) grew faster than gross profit, so operating income was $428.6M (+2.0%) and operating margin fell 7.0% to 6.5%. GAAP EPS $2.15 (+5.1%); GAAP net income +1.2%.
    - THE MIX MOVED BACKWARD. Hardware net sales +10.4% to $4,905.0M (booked GROSS); software +12.5% to $1,114.3M (much of it netted down); SERVICES +1.1% to $520.7M from $515.2M - 7.9% of net sales versus 8.6%. Government is the cleanest proof: net sales +13.6% to $848.0M while Government gross profit FELL 2.7% to $163.7M, margin -320bp to 19.3%. Commercial $3,965.4M +9.2% (GPM -40bp); Education $933.1M +0.7%; UK/Canada $825.7M +22.9%.
    - CASH FLOW HALVED WHILE BUYBACKS DOUBLED. 1H26 operating cash flow $219.7M vs $443.1M; free cash flow $165.8M vs $393.7M (-58%); adjusted FCF $278.4M vs $458.9M. Yet CDW spent $544.7M on buybacks (vs $350.1M) plus $160.9M of dividends - $705.6M returned on $278.4M generated. Total debt rose to $5,817.0M, cash fell to $361.8M, net debt $5,455.2M. HONEST REBUTTAL: receivables $7,343.7M (+30.5%) and DSO 93 vs 80 look alarming, but netted-down revenue and multi-year software inflate DSO and DPO together (DPO 77 to 88), so the cash conversion cycle stretched only 16 to 21 days. Guidance was HELD: full-year non-GAAP EPS growth at the high end of high-single-digit.
    What to watch: UP: services growth back above 5%, gross margin stabilising near 20.5%, or free cash flow conversion recovering in 2H as management expects. BEAR: gross margin below 20% in Q3, another quarter of SG&A growing faster than gross profit, or the full-year EPS guide finally coming down.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • Western Digital (WDC): It Beat, It Raised - And The Stock Fell 16%.
    Western Digital Corporation (WDC) Q4 FY2026 — Revenue $3,747M UP 44% and non-GAAP EPS $3.56 beat a $3.29 bar. Non-GAAP gross margin 54.4%, up 1,310bp. Guidance came in ABOVE consensus. And the stock closed down 5.36% at $519.17 pre-print, then fell 11.12% after hours to $461.42.
    WD beat on both lines, guided ABOVE consensus and printed a 54.4% non-GAAP gross margin - and the shares still fell about 16%. Here is why: at $519.17 the market pays ~$201B for a company that produced $3.5B of free cash flow in its best year ever. That is 57x free cash flow and ~32x the earnings management itself just guided to, for a hard-drive maker whose gross margin was 41% twelve months ago.
    THE CALL: AVOID (4/5, A SUPERB BUSINESS AT A PRICE THAT NEEDS A DECADE OF PERFECTION) — base-case value ~$155.0 vs ~$519.17 today.
    KEY METRICS:
    - CALL: AVOID 4/5, fair value ~$155 vs the $519.17 close (-70%), far below the Street's $641.25 average (+24%). Base $113 (FY27-28 stay at peak, then pricing mean-reverts and free cash flow settles near $3.4B), bear $64 (the drive cycle breaks the way it always has), bull $252 (the oligopoly holds, nobody builds, free cash flow compounds to $8.5B with no down year). Cycle-adjusted cross-check: normalised earnings power ~$9.84 a share at 15x = $148. Today's price sits at roughly DOUBLE the top of our range.
    - REVERSE-DCF: WHAT $519.17 REQUIRES. On the 388M diluted shares in management's own Q1FY27 outlook, market value is ~$201.4B and EV ~$200.9B - 15.6x FY2026 revenue and 57x FY2026 free cash flow, a 1.7% FCF yield, and ~32x the ~$16 of annualised earnings WD just guided to. To justify that at a 10.5% discount rate, free cash flow must compound ~28% a year for five straight years to ~$19.2B by fiscal 2031 - roughly $48B of revenue at these margins, against $12.9B today, from a company that spent $418M of capex all year.
    - THE QUARTER WAS SUPERB - THAT IS NOT THE ARGUMENT. Revenue $3,747M, up 44% y/y and 12% q/q, against a ~$3.69B bar. Non-GAAP EPS $3.56 vs a $3.29 estimate, up 109% from $1.70. Non-GAAP gross margin 54.4% (+1,310bp), operating margin 44.2% (+1,610bp), opex just $382M (~10% of revenue, DOWN 4% q/q). Operating cash flow $1,389M less $108M capex = $1,281M of free cash flow, a 34% margin. Guidance beat too: Q1FY27 revenue $4.0-4.2B vs ~$4.02B, EPS $3.85-4.15 vs ~$3.82, gross margin guided HIGHER to 55-56%.
    - DO NOT USE THE GAAP NUMBER. GAAP diluted EPS was $8.21 against non-GAAP $3.56, GAAP net income $3,195M against $1,382M. The gap sits in GAAP interest and other income of POSITIVE $1,684M, which holds a $2,050M NON-CASH mark-to-market gain on the retained Sandisk interest less $362M of debt and equity transaction costs - strip both and non-GAAP interest expense is MINUS $10M. GAAP tax was $52M on $3,247M of pre-tax income, a 1.6% rate. Full-year GAAP EPS $24.28 vs $10.22 non-GAAP; the FY Sandisk gain was $6,498M.
    - UNIT ECONOMICS AND A TRANSFORMED BALANCE SHEET. 231 exabytes shipped, up 22%, ~209 of them nearline, cloud ~90% of revenue. $3,747M over 231 exabytes is $16.22 of revenue per terabyte against $13.76 a year ago, up 17.9% - so roughly 45% of the 44% revenue growth is PRICE, not volume. 40TB ePMR drives ship now, 44TB HAMR in 1H CY2027, 50TB in 2H. Debt fell from $4,711M to $1,052M with ZERO long-term debt; $1,579M of cash makes $527M NET CASH; $2,592M of buybacks and $184M of dividends, funded by the Sandisk stake.
    What to watch: UP: dollars per terabyte still rising in the December quarter, or gross margin holding above 55% into fiscal 2028. BEAR: revenue per terabyte flat or down, gross margin guidance below 53%, or any of the three suppliers announcing new capacity.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • Coeur (CDE): A Record $1.1B Quarter. Earnings Per Share Fell 25%.
    Coeur Mining, Inc. (CDE) Q2 2026 — Revenue $1,085.6M UP 126%, adjusted EBITDA $478.3M UP 124%, free cash flow $387.5M UP 165% - all company records. Adjusted EPS $0.12 against $0.16 a year ago: DOWN 25%. The share count rose 61% and a $140M non-cash charge took $0.10.
    Coeur posted record revenue, record adjusted EBITDA and record free cash flow - and adjusted earnings per share FELL 25%, from $0.16 to $0.12. The 'updated' 2026 guidance is a cut: gold output down 7.7% at the midpoint, Rainy River costs up 27%, capex up 17%.
    THE CALL: HOLD (3/5, A RECORD QUARTER, A CUT GUIDE, AND ONLY TWELVE PERCENT OF UPSIDE) — base-case value ~$19.5 vs ~$17.43 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$19.50 vs the $17.43 close (+12%), far below the Street's $27.42 average (+57%). We hold the exit multiple at 7.5x EBITDA and run three metal-price decks on 800,000 oz of gold, 20.5Moz of silver and 65Mlb of copper: bear $3,400 gold / $45 silver = $13.21 a share, base $4,000 / $60 (Coeur's OWN updated deck) = $20.14, bull $4,600 / $80 = $26.68. Free-cash-flow-yield cross-check: $18.20.
    - REVERSE-DCF: WHAT METAL PRICE $17.43 ALREADY ASSUMES. At a 7.5x exit multiple the close embeds roughly $3,650 gold and $55 silver - BELOW what Coeur itself now assumes, which is why this is not a sell. Our ~$19.50 embeds about $3,920 and $59. The Street's $27.42 needs about $4,940 gold and $74 silver, a deck the company just walked away from: it cut its own assumption from $4,550/$77.50 to $4,000/$60.00.
    - THE RECORD WENT BACKWARDS PER SHARE. Revenue $1,085.6M (+126%), adjusted EBITDA $478.3M (+124%), operating cash flow $513.2M, free cash flow $387.5M (+165%, 35.7% of revenue) and record gold production of 163,490 oz. Yet adjusted EPS was $0.12 against $0.16 a year ago. Weighted shares went from 643.1M to 1,034.4M (+60.9%) to pay for New Gold in stock, and a $140M non-cash purchase-price charge on Rainy River stockpiles took $0.10 a share. GAAP EPS $0.12 vs a compiled bar near $0.26, revenue ~$153M light.
    - THE 'UPDATED' GUIDANCE IS A CUT. 2026 gold production 680-815k oz cut to 630-750k (midpoint -7.7%); copper 50-65Mlb cut to 40-50Mlb (-21.7%). Rainy River cost per gold ounce raised from $2,150-2,350 to $2,700-3,000 (+27%); New Afton gold cost +32% and copper cost +69%. Capex $437-526M raised to $520-605M. All five legacy mines - Las Chispas, Palmarejo, Rochester, Kensington, Wharf - were reaffirmed unchanged. And 430,053 of the 690,000 guided gold ounces, 62% of the year, still sit in the second half.
    - THE BULL CASE IS THE BALANCE SHEET, AND THE HIDDEN TAX IS THE STREAM. Cash $1,052.3M against total debt $705.3M is NET CASH of $347.0M, from $269.1M of net DEBT a year ago - a $616M swing; leverage is negative 0.2x and year-end cash is guided near $2.0B. Coeur has bought back $121M of stock (6.7M shares) and paid a first dividend. Adjusted cost per gold ounce was $2,442 including $834 of non-cash accounting, so ~$1,608 underlying against $4,140 realised. But 10,084 oz - 51% of Palmarejo's gold sales - went to Franco-Nevada at $800/oz while the market paid ~$4,400.
    What to watch: UP: September-quarter gold production above 200,000 oz, Rainy River's underground confirmed at 5,000 tonnes a day, or year-end cash tracking above $1.9B. BEAR: a third guidance revision at the Canadian mines, September gold below 190,000 oz, or capex guidance above the $605M top end.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • Axon (AXON): Revenue Up 35%. Free Cash Flow: Minus $1 Million.
    Axon Enterprise, Inc. (AXON) Q2 2026 — Net sales $904.4M UP 35.3% and guidance RAISED to 32-34%. Adjusted EBITDA $242.0M - but $144.3M of that is stock compensation added back. Non-GAAP EPS $1.88 beat a $1.83 bar and still fell 13.8%. Free cash flow: NEGATIVE $1.0M.
    Axon grew revenue 35.3%, raised guidance and beat both lines - and the stock fell 6% after hours. Free cash flow was NEGATIVE $1.0M, 60% of Adjusted EBITDA is stock compensation added back, and trailing GAAP operating margin is 0.74%.
    THE CALL: SELL (4/5, THE ADJUSTED PROFIT IS MOSTLY STOCK, AND THE CASH IS ZERO) — base-case value ~$310.0 vs ~$609.49 today.
    KEY METRICS:
    - CALL: SELL 4/5, fair value ~$310 vs the $609.49 close (-49%), far below the Street's $658.56 average (+8%). Base $289 (revenue compounds 17% a year for a decade to $13.6B, free cash flow ramps to 20% of revenue), bear $112 (growth halves to the low teens, cash settles at 14%), bull $481 (nearly 20% compounding and a 25% terminal cash margin, better than Axon has ever earned). Exit-multiple cross-check on 2029 post-stock-compensation EBITDA: $240. Today's price sits ABOVE the top of our entire three-case range.
    - REVERSE-DCF: WHAT $609.49 ALREADY REQUIRES. At a 9.5% discount rate the market is asking Axon to compound revenue at roughly 25% a year for ten straight years - to $25.9B, nine times today's revenue - AND to end that decade converting 24% of revenue into free cash flow. At a still-outstanding 20% growth rate the required cash margin is about 36%. Axon converted MINUS 0.1% in the June quarter and MINUS 3.2% across the first half. The Street's $658.56 needs roughly 26%.
    - THE ADJUSTED PROFIT IS MOSTLY STOCK. Stock-based compensation was $144.3M in the quarter - 16.0% of ALL revenue and nearly five times the $29.4M of GAAP net income ($71M in SG&A, $62M in R&D, $11M in cost of sales). That is 59.6% of the $242.0M of Adjusted EBITDA. Strip it out and the quarter earned about $98M of EBITDA. Full-year 2026 guidance is $590-620M of stock compensation against roughly $940M of Adjusted EBITDA, including ~$280M for the broad employee stock plan and the CEO performance award. Diluted shares rose only 0.6% (82.1M to 82.5M) - the dilution is deferred, not absent.
    - THE FIRST OPERATING PROFIT LEANED ON A TARIFF REFUND, AND THE CASH NEVER ARRIVED. GAAP operating income of $46.8M rose $47.8M year on year and the company says it was driven by higher revenue AND global tariff refunds - $47M of cash refunds landed in the quarter. Connected Devices gross margin improved 330bp to 51.9% (refund-driven) while Software & Services gross margin FELL 430bp to 71.3%; total gross margin was exactly flat at 60.4%. Inventory rose 42.3% to $486.6M and contract assets 37.7% to $1,047.4M in six months, both faster than revenue, while cash plus short-term investments fell $1.03B to $673.4M against $1.1B of net debt.
    - THE BULL CASE IS REAL AND IT IS THE BACKLOG. Annual recurring revenue $1,639M, up 38.5% - faster than the 35% total. Net revenue retention 126%, up from 124%, with what management calls de minimis attrition. Future contracted bookings $15.1B, up 41%, with 20-25% expected to convert in the next twelve months. Platform Solutions revenue up 123% to $149.8M with Dedrone past $100M, AI Era revenue up nearly 700%, and two nine-figure city contracts including the largest single TASER order in company history. Trailing twelve months: $3,219M of revenue and $23.8M of GAAP operating income - a 0.74% margin - against a $49.1B market value.
    What to watch: UP: a September quarter with free cash flow above $100M, contract assets growing slower than revenue, or Software & Services adjusted gross margin back above 78%. BEAR: another negative-cash quarter, inventory above $550M, or 2026 stock-compensation guidance above $620M.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • MercadoLibre (MELI): Revenue Up 50%. Operating Profit Down 17%.
    MercadoLibre, Inc. (MELI) Q2 2026 — Net revenues $10,169M UP 49.8% (up 43% FX-neutral), the fastest in four years. Income from operations $683M DOWN 17.2% - a 6.72% margin against 12.15%. EPS $9.19 beat a ~$8.69 bar but fell 10.9% from $10.31. Incremental operating margin on $3,379M of new revenue: NEGATIVE 4.2%.
    MercadoLibre grew revenue 49.8% - the fastest in four years - and beat the bar. Operating profit still fell 17.2%, and the margin has gone 12.66% to 11.08% to 8.26% to 6.72% across four periods. At $1,922.57 the market underwrites a 13% margin this company has never earned for a full year.
    THE CALL: HOLD (3/5, FIFTY PERCENT GROWTH THAT DOES NOT REACH THE OPERATING LINE) — base-case value ~$1675.0 vs ~$1922.57 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$1,675 vs the $1,922.57 close (-13%), below the Street's $2,166.67 average (+13%). Base $1,582 (margin recovers to 11.0%, below the FY2024 peak), bear $1,197 (margin never recovers past 8.5%), bull $1,890 (13.0% margin, above the FY2024 peak, revenue still compounding 28%). Exit-multiple cross-check $1,928. Run backwards: $1,922.57 already requires ~13% operating margin; the Street's target needs ~15% - a margin MELI has never earned for a full year against a best-ever 12.66% in FY2024.
    - THE MARGIN IS A STAIRCASE, NOT A STUMBLE. Income from operations as a share of revenue: FY2024 12.66% ($2,631M on $20,777M), FY2025 11.08% ($3,201M on $28,893M), trailing twelve months 8.26% ($2,907M on $35,182M), Q2 2026 6.72% ($683M on $10,169M). That is 594bps of compression over two years while revenue nearly doubled. This quarter alone the margin fell 543bps year on year, from 12.15%.
    - THE CREDIT BOOK IS THE STORY - ARITHMETIC, NOT CREDIT QUALITY. The portfolio is $16B, up 75%, and almost half is now the credit card (a fifth four years ago). Asset quality is fine: the 15-90 day non-performing ratio is 4.6%, near an all-time low. But the provision for doubtful accounts was $1,276M, up 84.9% against revenue growth of 49.8%, and is now 12.55% of ALL revenue vs 10.16%. Net interest margin after losses fell to 20.7% from 23.0%, and the credit card's own margin went from breakeven to NEGATIVE 2.5% - 2.6M new cards issued this quarter against 1.6M, and fresh cohorts are dilutive before they season.
    - THE CASH IS THINNER THAN THE PROFIT. Adjusted free cash flow was $214M on $10,169M of revenue - 2.1% of sales, and less than half the $466M of reported net income, after $441M of capex and $2.1B put into the credit portfolio (partly offset by $560M of fintech funding). First-half operating cash flow of $5,737M flatters badly: $2,456M is funds payable to customers and $1,209M is amounts payable on card transactions - float, not earnings - while the $4,069M that went into loans sits down in investing. Total assets $51,356M against $7,834M of equity: equity is 15.25% of assets.
    - THE BULL CASE IS REAL, AND IT IS THE ENGAGEMENT. Items per buyer rose ~15% to 8.93 from 7.75, and 19% in Brazil where the free-shipping threshold was cut. The daily-to-monthly active user ratio hit an all-time high. Users engaging with BOTH the marketplace and Mercado Pago grew 37% - they generate 70% more GMV, 55% more items, nearly 90% more payment volume per user. Advertising grew 62% FX-neutral and passed 10% of the whole LatAm digital ad market. AUM $23B, up 68%. Active sellers up 29%. That is what the spending buys - the question is whether it converts to margin.
    What to watch: UP: a September quarter with operating margin back above 9%, a provision line growing slower than revenue, or credit-card net interest margin back to breakeven. BEAR: a Q3 below 6.5% operating margin, gross margin under 40%, or the 15-90 day non-performing ratio breaking above 6% as the 2026 card cohorts season.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min
  • Everus (ECG): A 44% Beat, A Record Backlog - And It Closed At The Low.
    Everus Construction Group, Inc. (ECG) Q2 2026 — Revenue $1,231.5M UP 33.7% (organic UP 30.0%). EBITDA $128.6M UP 52.7%, a 10.4% margin. GAAP diluted EPS $1.64 vs $1.14 consensus - a 44% beat, no adjusted number. Record backlog $4.55B, UP 52.8%. FY26 EBITDA guide RAISED to $410-425M. Stock closed $140.75, up 3.4% - but $6.41 BELOW its own open.
    Everus beat by 44%, posted a record $4.55B backlog and raised guidance a third time - then opened up 8%, ran to $155.99 and closed at $140.75, near the low. The beat is clean GAAP. But the guide they just raised implies a second half of exactly $200M against a $217.5M first half.
    THE CALL: HOLD (3/5, AN EXCELLENT BUSINESS AT A PRICE THAT ALREADY KNOWS IT) — base-case value ~$130.0 vs ~$140.75 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$130 vs the $140.75 close (-8%), against the Street's $169.60 (+20.5%). Base: revenue compounds 15/12/10% off the company guide, margin eases to 10.0%, 2029 EBITDA $652M on a 15.0x exit at 10.5% = $133.58. Bear $66.79 (capex digests, 8.5% margin, 11.0x). Bull $160.63 (today's 18.0x holds). Weighted 30/50/20 = $128.34. Run backwards: the $7,307M enterprise needs $684M of 2029 EBITDA at a 15x exit - 18% a year for three more years.
    - THE GUIDE THEY JUST RAISED IMPLIES A SMALLER SECOND HALF. FY26 revenue went to $4.5-4.7B (from $4.3-4.4B) and EBITDA to $410-425M (from $345-360M) - $65M at the midpoint, the third raise this year. But 1H EBITDA was $217.5M and the new midpoint is $417.5M, so the implied 2H is exactly $200.0M - BELOW the first half. In 2025 the 2H ($173.8M) was 19% BIGGER than the 1H ($146.0M). Implied 2H growth 15.1% vs 49.0%; implied margin 8.6% vs 10.4% this quarter.
    - THE RECORD BACKLOG IS NOT A GAAP NUMBER, AND IT IS 12 MONTHS LONG. Backlog $4,551.6M, up 52.8% - but Everus discloses it can include letters of intent, notices to proceed and probable claims. The audited measure is remaining performance obligations: at Dec 31 backlog was $3,228.3M against RPO of $2,800M, 15% higher. Of $3.09B of RPO at Mar 31, only $492.6M (16%) runs beyond 12 months, and most contracts have an original duration under one year.
    - ONE CUSTOMER IS 19.1% OF REVENUE, AND ALL THE GROWTH IS ONE SEGMENT. In the March quarter a single customer was 19.1% of total revenue (up from 13.3%), 23.6% of E&M revenue, and 19.7% of ALL trade receivables. E&M backlog is $4,163.2M (up 62.1%, 91.5% of the total) while T&D backlog is $388.4M - DOWN from $410.1M a year ago. E&M added $1,595M while T&D lost $22M, so E&M is MORE than 100% of the growth. Beta 2.47.
    - THE BEAT IS SHRINKING - AND THE BALANCE SHEET IS THE BEST PART. Beats since the spin: +67%, +69%, +79%, +50%, +50%, now +44% - the smallest yet. The stock rose 24.7% into the print (from $109.17 on Jul 29). At $140.75 the $7,307M enterprise is 17.5x the FY26 EBITDA guide and 18.7x trailing, against EMCOR 16.5x, MasTec/MYR 18.5x, IES 26.1x, Comfort Systems 30.4x. 1H free cash flow $167.0M vs $6.5M; net leverage 0.3x; ROIC ~21%.
    What to watch: UP: Q3 EBITDA above $105M, backlog above $5B, another FY26 raise above $440M. BEAR: backlog DOWN sequentially, the top customer above 25% of revenue, or any hyperscaler trimming capex. We would buy $105-$118.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • Medline (MDLN): They Beat By 52%. The Beat Was A Tariff Refund.
    Medline Inc. (MDLN) Q2 2026 — Net sales $7,685M UP 11.6% (organic UP 11.5%). Adjusted EBITDA $1,060M UP 13.4% - but $243M of it is an IEEPA tariff refund. Adjusted EPS $0.50 vs $0.33 consensus; GAAP EPS $0.07. FY26 EBITDA guide CUT to $3.3-3.4B. Stock closed $35.86, DOWN 14.7%.
    Medline beat by 52% and raised its sales guide - and closed down 14.7%. The $0.50 contains a $243M tariff refund excluded from guidance; strip it and it was ~$0.36 vs a $0.33 bar. And the FY EBITDA guide was CUT $200M, to below what Medline earned last year.
    THE CALL: SELL (4/5, ELEVEN PERCENT GROWTH THAT DOES NOT REACH THE EBITDA LINE) — base-case value ~$29.29 vs ~$35.86 today.
    KEY METRICS:
    - CALL: SELL 4/5, fair value ~$29 vs the $35.86 close (-19%), far below the Street's $51.14 (+43%). Base: 7% revenue growth, margins to 11.9%, 2029 adjusted EBITDA $4.54B on a 14.0x exit discounted at 9% = $29.29. Bear $17.55 (10.5% margin is structural, 6% growth, 11.5x). Bull $40.49 (margins back to FY25's 13.0%, 16.0x). Run backwards: $35.86 already needs a 16.5x 2029 exit against a 15.1x med-surg peer median; the Street's $51.14 needs 22.4x - above every peer.
    - THE BEAT WAS A TARIFF REFUND. After the Feb 2026 Supreme Court IEEPA ruling Medline booked $332M of refunds against cost of goods sold, less $89M of customer repayments against net sales - $243M net, sitting INSIDE adjusted EBITDA. Strip it: adjusted EBITDA $817M vs $935M, DOWN 12.6% not up 13.4%; margin 10.5% vs 13.6%, DOWN 310bps not up 20. Tax-effected at the company's own 25%, $243M is $182M, or $0.136 on 1,340M adjusted shares - so adjusted EPS was ~$0.36 vs a $0.33 bar. A 3-cent beat, not 17.
    - THE FY EBITDA GUIDE NOW SITS BELOW LAST YEAR. Management RAISED organic sales guidance to 9.0-10.0% (from 8.5-9.5%) and CUT adjusted EBITDA guidance to $3.3-3.4B (from $3.5-3.6B) - $200M off the midpoint, 5.6%. FY2025 off their own tables: TTM adjusted EBITDA $3,500M less 1H26's $1,836M = 2H25 $1,664M; plus 1H25's $1,803M = FY2025 $3,467M. The new $3,350M midpoint is 3.4% BELOW it, on revenue guided to grow 9-10%. Implied 2H26 is $1,757M, +5.6%. Cited: Middle East inflation, operational investment, quality remediation, retail softness.
    - EVERY SCREENER PRICES THIS COMPANY $16.7B TOO SMALL. Medline is an Up-C: 877M Class A plus 437M exchangeable Class B = 1,314M economic shares, and Medline's own adjusted EPS uses all of them (1,339,884,394). At $35.86 that is $47.1B of equity, not the $30.4B providers show. Add $10,073M net debt and the enterprise is $57.2B - 17.1x the FY26 guide, not the 14.9x screeners print. Add the $4,392M tax receivable agreement (from $3,542M in six months; Medline keeps just 10%) and it is $61.6B, 18.4x. Peers: Henry Schein 13.8x, Cencora 13.8x, McKesson 15.1x, Becton Dickinson 16.7x, Cardinal Health 20.1x.
    - SEGMENTS, THE FIRE AND THE LOCKUP. The entire $243M refund landed in Medline Brand: reported adjusted EBITDA $1,067M, +19.9%, a 30.1% margin - strip it and it is $824M vs $890M, DOWN 7.4%, a 22.7% margin vs 26.8%: 410bps of COMPRESSION reported as 330bps of expansion. Supply Chain Solutions grew sales 16.3% and profit 1.5%, margin 4.9% vs 5.6%. Corporate cost +35.3%. GAAP net income fell 58.3% on a $336M Tracy, California distribution-centre fire loss before insurance. And the 75-day lockup from the May 21 secondary (72.6M shares at $37.00, now under water) expired Aug 4, 2026 - one day before this print.
    What to watch: UP: a Q3 adjusted EBITDA margin back above 12% ex-tariff, a booked Tracy insurance recovery, or the FY guide back above $3.5B. BEAR: a Q3 missing the implied $1,757M second half, Supply Chain margin below 4.5%, or large Class B sales now the lockup has expired. We would buy $26-$30.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • CVS Health (CVS): They Beat By 71 Cents. They Raised By 60.
    CVS Health Corporation (CVS) Q2 2026 — Revenue $106,096M, UP 7.3% YoY, about $5.0B ahead of the bar. Adjusted operating income $5,157M, UP 35.4%. Adjusted EPS $2.58 vs a $1.87 consensus - a 38% beat, adjusted against adjusted. GAAP EPS $2.31 vs $0.80. Aetna MBR 87.4% vs 89.9%. FY26 adjusted guide RAISED to $7.90-$8.10 from $7.30-$7.50. Stock opened DOWN 10.4% and closed the day near $99.90, off 4.3%.
    CVS beat the adjusted consensus by 38% and raised full-year guidance for the second time this year - and the stock opened down 10.4%. The reason is one subtraction: the beat was $0.71, the raise was $0.60, so the implied second half was trimmed by eleven cents. Then management put a preliminary 2027 floor of $8.44 on the call, exactly where consensus already sat.
    THE CALL: HOLD (3/5, THE TURNAROUND IS REAL, IT IS FINISHED, AND IT IS ALREADY IN THE PRICE) — base-case value ~$100.28 vs ~$99.9 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$100 vs $99.90 (level), BELOW the Street's $108.86 average (+9%). Base case: 2028 adjusted EPS of $9.30 on a 12.5x exit multiple discounted at 9% plus dividends = $100.28. Bear $67.55 (Aetna's recovery stalls, Caremark leaks members, 10x on $7.60). Bull $121.87 (full return to peak earnings power, $10.20 on 14x). Run backwards, $99.90 already requires 2028 adjusted EPS of $9.26 - 7.6% a year. Management's own preliminary 2027 floor is 5.5%. The Street's $108.86 needs 12.6%.
    - THE RAISE WAS SMALLER THAN THE BEAT, AND THAT IS THE WHOLE STORY. CVS beat by $0.71 ($2.58 vs $1.87) and raised the FY adjusted guide by $0.60 at the midpoint ($7.30-$7.50 to $7.90-$8.10). So the implied second half was CUT by $0.11. Three independent checks: H1 adjusted EPS was $5.16, so the implied H2 is $2.84 - 55% of H1, against 66% last year ($4.06 then $2.69). And $2.84 vs last year's $2.69 is +5.6% growth, after a first half that grew 27%.
    - THE BEAT IS NOT A RESERVE GAME - WE CHECKED, AND IT IS CLEANER THAN LAST YEAR. Favourable development on prior years' claims was $1.2B in H1 2026 against $1.9B in H1 2025 - $700M LESS release. Premium deficiency reserves went from $902M to $15M. Days claims payable were 41.7 at June 30 against 40.9 a year ago - UP. The one genuine flatterer is the absence of last year's $471M Group Medicare Advantage deficiency reserve: strip it and Aetna's adjusted operating income still grew 36.4%, not 85.5%.
    - ONE SEGMENT DID 83% OF THE WORK. Of the $1,349M of additional adjusted operating income, $1,118M came from Aetna alone, on an MBR that fell from 89.9% to 87.4% with membership flat at 26.0M. Caremark added $158M on $5,342M of extra revenue - a 3.0% incremental margin, with claims flat at 473.0M and its operating margin slipping from 3.4% to 3.3%. Retail added $137M on revenue up 0.7%. Management has guided Caremark MEMBERSHIP DECLINES for 2027, plus 340B headwinds.
    - THE CASH IS REAL AND THE GUIDANCE IS SANDBAGGED. First-half operating cash flow was $10,594M against $6,453M a year ago, up 64%, on $1,540M of capex. Full-year guidance is 'at least $11.5B' - but H1 alone was $10.6B, implying under $1B in the back half. Total debt is $61,410M ($59,452M long-term plus $1,958M current) against $11,329M of cash - $50,081M net, 39% of the market cap. In the half: $1,725M of dividends, $3,287M of debt repaid, and zero buyback.
    What to watch: Changes our mind UP: a Q3 that beats the implied $2.84 second half, an MBR holding below 88% through December, or the start of a share repurchase. Confirms the bear: Caremark membership losses larger than guided, days claims payable back below 40, or PBM legislation with teeth. We would buy $80-$88.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • Paramount Skydance (PSKY): They Raised Guidance. Q3 Is Guided DOWN.
    Paramount Skydance Corporation (PSKY) Q2 2026 — Revenue $6,913M, UP 1.0% YoY, ahead of a ~$6.88B bar. Adjusted EBITDA $1,099M, UP 27%, a 15.9% margin vs 12.6%. Adjusted EPS $0.18. But GAAP EPS was $0.04 vs $0.08 - net earnings fell 28% while the share count rose 65%. DTC +9%, Studios +16%, TV Media -9%. FY26 adj EBITDA guide RAISED to $3.8-3.9B. Stock +4.6% to $8.77.
    Paramount raised its full-year adjusted EBITDA guide to $3.8-3.9B and the stock rose 4.6%. But Q3 is guided to $875-975M against a $997M comparable base - a decline of 2% to 12%. The full-year raise is built on two quarters that have already happened.
    THE CALL: HOLD (3/5, A GENUINELY BETTER BUSINESS, PRICED ABOUT RIGHT, ON A BALANCE SHEET WITH NO ROOM FOR ERROR) — base-case value ~$9.3 vs ~$8.77 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$9.30 vs $8.77 (+6%), BELOW the Street's $11.79 average (+34%). Base case: 2028 adjusted EBITDA of $4.15B on a 6.25x exit multiple with net debt paid down to $12.3B, discounted at 12% = $9.31. Bear $4.64 (TV decline accelerates, synergies stall, 5.5x). Bull $15.27 (full synergy capture, 7.25x). Run backwards, $8.77 only requires 2.2% annual EBITDA growth - an undemanding bar. The Street's $11.79 requires 10.9%, and management just guided Q3 DOWN.
    - THE MARKET CAP EVERY SCREENER SHOWS IS WRONG - THIS IS DUAL CLASS. The 10-Q cover page at July 31 2026: Class A 31,500,087 shares PLUS Class B 1,090,445,692 = 1,121,945,779 total. At $8.77 that is $9,839M, not the ~$9.53B the data feeds publish from the Class B line alone. Then add $15,200M of gross debt less $1,627M of cash = $13,573M of net debt. Enterprise value $23,412M - so the equity is only 42% of what you are analysing, and net debt is 1.4x the market cap.
    - EVERY YoY COMPARISON IS SUCCESSOR vs PREDECESSOR. The Skydance merger closed Aug 7 2025 and established a NEW ACCOUNTING BASIS. Both Q2 columns are clean three-month periods, so the lengths compare - but the basis does not. Proof in one line: depreciation and amortisation went from $87M to $364M, a 4.18x step-up, on revenue that grew 1%. That is purchase accounting, and it is most of the gap between $0.04 GAAP and $0.18 adjusted. Paramount's own letter says the +44% DTC profit growth includes 'a benefit related to the change in accounting basis'.
    - ADJUSTED EBITDA IS NOT CASH - ONLY ~10% OF IT CONVERTS. Management guides FY26 adjusted EBITDA of $3.8-3.9B and free cash conversion of AT LEAST 10% - roughly $385M of actual cash on $3,850M of EBITDA. Interest expense ran $255M in the quarter (~$1.0B a year, a 6.7% cost on $15.2B of gross debt), which alone eats 27% of adjusted EBITDA. H1 free cash flow was $354M, already beating the floor. Net leverage 3.5x. Operating income bridge ties exactly: 6,913 - 4,443 - 1,443 - 364 - 188 = 475.
    - THE WARNER BROS. DISCOVERY FINANCING IS STRUCK FAR ABOVE THE SHARE PRICE. The Ellison Parties and RedBird signed subscription agreements for up to $46.7B of new Class B stock at $16.02 a share - an 83% premium to $8.77. Syndication prices off a 20-day VWAP with a $16.02 CEILING and a $12.00 FLOOR, so the stock trades 27% BELOW the floor of its own financing range. If the deal is blocked on antitrust grounds Paramount owes a $7.0B regulatory fee plus the $2.8B already paid to Netflix - both sponsor-funded at $16.02, or ~612M new shares, taking the count to ~1.73B and the same equity value to about $5.68 a share.
    What to watch: Changes our mind UP: a September quarter that beats the guided decline, cash conversion materially above 10%, or TV Media declines moderating toward 5%. Confirms the bear: the WBD deal blocked with the $7.0B fee triggered, or net debt still above 3.5x at year end. We would buy $7.00-$7.80.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • TeraWulf (WULF): A $19 Billion Anthropic Lease. The Stock Fell Anyway.
    TeraWulf Inc. (WULF) Q2 2026 — Revenue $44.8M, DOWN 6.0% YoY, against a $46.0M FactSet bar. HPC lease revenue $31.9M - 71% of the top line, up from ZERO. Bitcoin mining revenue $12.8M, down 73%. GAAP diluted EPS -$1.94 vs a -$0.31 bar, but $755.7M of the $939.9M net loss is a non-cash warrant mark; ex-warrants it is -$0.36. Adjusted EBITDA -$18.3M, negative for the first time. Stock -1.8% to $18.55.
    TeraWulf signed a 20-year, ~$19 billion lease with Anthropic on July 6 - roughly twice its market capitalisation in contracted revenue. The stock closed at $22.21 that day. It is $18.55 now, 36% below the June high.
    THE CALL: AVOID (4/5, A REAL ASSET, A GREAT CONTRACT, AND A PRICE THAT BANKED THE NEXT ONE) — base-case value ~$11.75 vs ~$18.55 today.
    KEY METRICS:
    - CALL: AVOID 4/5, fair value ~$11.75 vs $18.55 (-37%), far BELOW the Street's $38.50 (+108%). We value it as a landlord, not on earnings - there are none. The 839 MW contracted (438 MW Lake Mariner + 401 MW Justified) produce ~$1,740M of stabilised 2028 lease revenue, ~$1,218M of NOI at a 70% margin, less $150M of corporate overhead and ~$550M of cash interest on ~$7.3B of debt = ~$518M of levered free cash flow. Bear $2.85, bull $19.80.
    - THE $755.7M LOSS IS GOOGLE'S PENNY WARRANTS, TO THE DOLLAR. TeraWulf issued Google warrants over 73,580,000 shares at a $0.01 strike for the Fluidstack backstop, so the warrant liability IS the share price times 73.58M. Dec 31: 73,580,000 x $11.48 = $844,698k - the balance sheet exactly. Jun 30: x $24.69 = $1,816,690k - again exactly. The difference, $971,992k, is the six-month charge. None of it is operational.
    - AND THE NEXT PRINT RUNS IN REVERSE. The stock has fallen from $24.70 to $18.55, so on the same arithmetic Q3 carries a non-cash GAIN of roughly $452M. The headline will likely read 'TeraWulf swings to a profit'. It will not be a profit - it will be the share price falling, booked as income, with the cash position unmoved.
    - DILUTION IS THE STORY MOST COVERAGE MISSES. Shares outstanding went from 420,065,944 to 498,932,431 in six months - up 18.8% - funded by $1,199.8M of stock sold net. Screens show a $9.25B market cap; the true fully diluted figure is $10.62B on 572,512,431 shares once Google's penny warrants are counted, and the 2030/2031 converts strike at $8.48 and $12.43. Total liabilities $7,900.9M against $147.5M of book equity.
    - WHAT $18.55 REQUIRES. Every contracted megawatt creates about $11.7M of value (~$20.7M of asset value for ~$9M of build cost). The 839 MW signed is worth ~$4.1B to shareholders today; the equity is priced at $10.62B. Grossed up over four years at 12%, the $6.5B difference implies 869 MW of brand-new contracts at full value with no risk discount - a third of the 2,570 MW uncontracted pipeline, banked in advance.
    What to watch: Changes our mind UP: a second hyperscale lease at Muskie or Chesapeake, or project debt on Justified raised WITHOUT new equity. Confirms the bear: another equity raise above $1B, a slip in CB-4 or CB-5 rent commencement, or data-centre operating margins still under 50% once 438 MW are live. We would buy $9-$12.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min

About Charged Alpha Stock Encyclopedia

From the publisher's feed

⚡ Charged Alpha — The S&P 500 Stock Encyclopedia Data-driven deep dives into every stock in the S&P 500 after every earnings report. Each episode breaks down one company from open to close:…