Charged Alpha Stock Encyclopedia

Charged Alpha Stock Encyclopedia

By Colton ThomasBusinessInvesting
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Charged Alpha Stock Encyclopedia episodes

  • Shopify (SHOP): A 4% Beat Moved The Stock 17%. It Was The Guide.
    Shopify Inc. (SHOP) Q2 2026 — Revenue $3,583M, UP 33.7% YoY, against a ~$3.45B bar. GMV $115.6B, up 31.6%. Operating income $488M, up 67.7%, margin 10.9% to 13.6%. Free cash flow $654M, an 18% margin. GAAP diluted EPS $1.16 - but $1,063M of the $1,502M net income is equity investments marked to market. Stock +17.0% to $144.22.
    Shopify beat by about 4% on revenue ($3.583B vs ~$3.45B) and 2 cents on adjusted EPS ($0.42 vs $0.40) - and the stock rose 17%. The move is the GUIDE: Q3 revenue is guided to grow at a low-thirties rate, roughly $3.73-3.78B, against a Street near $3.59B. And Q2 itself beat all five of management's own May guidance items.
    THE CALL: HOLD (3/5, ELITE BUSINESS, PRICED FOR A DECADE OF IT) — base-case value ~$125.0 vs ~$144.22 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$125 vs $144.22 (-13.3%), BELOW the Street's $154 (+6.8%). We value the cash, not the marks: start from ~$2.89B of 2026 free cash flow ($1.13B already banked in H1), grow it 24%/yr for five years then 13% for five more, discount at 9.5% with 3% terminal growth = $150.9B for the operating business. Add $5.47B of cash and securities and $5.41B of equity stakes = $161.8B over 1,297,940,958 diluted shares = $125. Bear $77, bull $176.
    - WHY A 4% BEAT MOVED THE STOCK 17% - THE GUIDE. On May 5 management guided Q2 to high-twenties revenue growth, mid-twenties gross profit growth, opex 35-36% of revenue, SBC $145M and a mid-teens FCF margin. Delivered: revenue +34%, gross profit +31%, opex 34.0% (below the range), SBC $128M, FCF margin 18%. Five for five. Then Q3 was guided to LOW-THIRTIES growth - roughly $3.73-3.78B against a ~$3.59B consensus, 4-5% above the Street.
    - THE OPERATING LEVERAGE IS REAL. Total opex fell from 37.7% of revenue to 34.0% - 367 basis points in twelve months - which is why operating income grew 67.7% on 33.7% revenue growth. And it is not a cut: R&D dollars rose 13% ($445M) and sales and marketing rose 20% ($498M); revenue simply outran them. S&M 15.5%->13.9%, R&D 14.7%->12.4%, G&A 4.6%->3.8% of revenue.
    - THREE THINGS UNDER THE HEADLINE. One: 71% of net income is a mark - $1,063M of the $1,502M is equity investments revalued net of tax; the core figure is $439M (+30%), and last quarter the same portfolio marked DOWN and GAAP EPS was MINUS $0.45. Two: gross margin fell 48.6%->47.7% on mix, because merchant solutions (38.4% GM) grew 37% while subscription (79.7% GM) grew 22% - and the Q3 guide widens that wedge to ~5 points. Three: transaction and loan losses hit $141M, UP 76%, the fastest-growing line on the P&L, on a loan book of $2,184M (15% of assets).
    - WHAT $144.22 REQUIRES. Market cap $187.2B less $5.47B of cash and securities and $5.41B of equity stakes = a $176.3B core enterprise - 61x the ~$2.89B of free cash flow it will make this year. At a 9.5% required return with 3% terminal growth that enterprise must throw off ~$11.45B a year, so ~$8.56B is still to be found: free cash flow has to roughly quadruple, 14.7% a year for a decade. Balance sheet: $5,472M of cash and securities, $1,786M of total liabilities, no debt, and a first-ever buyback of $1,911M in H1 against ZERO in 2025.
    What to watch: Changes our mind UP: gross margin stops compressing, or free cash flow margin holds above 20% for two straight quarters. Confirms the bear: loan losses through 4.5% of revenue, GMV growth below 25%, or a September quarter at the bottom of the low-thirties guide. We would buy $100-$115.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min
  • United Therapeutics (UTHR): $7.27 Beat Consensus. Operating Income Fell 9%.
    United Therapeutics Corporation (UTHR) Q2 2026 — Revenue $783.3M, DOWN 1.9% YoY (it beat a $765.9M bar). Operating income fell 9.2% to $330.8M, margin 45.6% to 42.2%. Net income still rose 7.6% and diluted EPS rose 13.4% to $7.27 - because tax expense fell from $98.9M to $39.7M and the share count fell 5.4%. Stock +1.0% to $524.05.
    United Therapeutics reported GAAP diluted EPS of $7.27 against a consensus near $6.85 and the wires called it a 6% beat. Look one line up: revenue FELL 1.9%, operating income fell 9.2%, pre-tax income fell 8.7%. All the earnings growth came from a tax rate that went 24% to 11% and a 5.4% smaller share count.
    THE CALL: HOLD (3/5, GREAT BALANCE SHEET, ALREADY PAID FOR) — base-case value ~$543.0 vs ~$524.05 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$543 vs $524.05 (+3.6%), 15% BELOW the Street's $635.20. We rebuild 2026 on a repeatable tax rate: revenue $3,133M (H1 run-rated) at H1's 42.0% margin = $1,316M EBIT, plus $114M other income = $1,430M pre-tax. At 19% tax not 11% that is $1,158M, or $25.17/share - not the $27.91 TTM shows. Franchise 11x EBIT $14.5B + $3.8B net cash + $5.0B risk-adjusted pipeline, over 42,890,692 shares = $543. Bear $365, bull $734.
    - WHERE THE BEAT CAME FROM - THE TAX LINE. Pre-tax income FELL $35.7M, $408.4M to $372.7M. Net income ROSE $23.5M, $309.5M to $333.0M. Only tax sits between: it fell $59.2M, $98.9M to $39.7M, 11% vs 24% - a saving 2.5x the rise in net income. Tax that same $372.7M at last year's 24% and diluted EPS is ~$6.19, BELOW the $6.41 earned a year ago and below the $6.83 consensus. Like-for-like, this was a MISS.
    - BASIS: $7.27 IS DILUTED, $6.86 IS A COINCIDENCE. $7.27 is GAAP DILUTED on 45.8M shares; BASIC was $7.82 on 42.6M. Last year: $6.41 diluted, $6.86 BASIC. So '$7.27 vs $6.86' sets this year's diluted against a figure identical to last year's basic. Correct YoY: $7.27 vs $6.41 (+13.4%); correct consensus ~$6.83-6.86 diluted. That +13.4% = net income +7.6% x a 5.4% smaller share count - buyback ~40% of it, tax the rest.
    - THREE ARITHMETIC CHECKS. One: $783.3M less cost of sales $99.5M, R&D $146.3M, SG&A $206.7M = $330.8M EBIT vs $364.5M (-9.2%). Two: net income $333.0M plus tax $39.7M = $372.7M pre-tax, LOWER than last year's $408.4M. Three: 42,890,692 cover-page shares x $524.05 = $22.5B, matching the tape. Tyvaso DPI $326.6M (+4%), nebulized Tyvaso $126.0M (-18%), Remodulin $126.3M (-6%), Unituxin $65.2M (+12%).
    - WHAT $524.05 REQUIRES. Equity $22.5B but enterprise only $18.7B - $3,803.4M of cash comes off and there is NO debt. At 9% with 2% growth it must throw off ~$1.31B a year forever; taxed at 19%, 2026 EBIT is ~$1.07B, and after ~$418M/yr of xeno-organ capex it throws off ~$0.74B. The price needs ~$560M/yr that does not exist yet: ralinepag (PAH) and nebulized Tyvaso (IPF), both filed, 2027 calls. Margin: 50.9% (2023) to 42.2%.
    What to watch: Changes our mind UP: total Tyvaso back to growth in a quarter, or an approval on either filing. Confirms the bear: nebulized Tyvaso down another 15% in September, or operating margin below 40%. We would buy $420-$450.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min
  • Flutter (FLUT): FanDuel’s Parent Reported 49 Cents. It Lost $1.57.
    Flutter Entertainment plc (FLUT) Q2 2026 — Revenue $4,326M, up 3.3% and a small beat. But group adjusted EBITDA fell 45% to $508M, the US segment fell 70% to $119M, and GAAP was a $296M NET LOSS - $1.57 a share. The $0.49 the wires ran is adjusted, struck after $2.06/share of add-backs, and it still missed. Stock -9.8% to $94.71.
    Flutter, FanDuel's parent, reported adjusted EPS of $0.49 against a ~$0.54 consensus and the wires called it a small miss. It was not. Flutter LOST $1.57 a share under GAAP - a $296M net loss against a $37M profit - and the $0.49 only exists after $2.06 of add-backs.
    THE CALL: HOLD (3/5, CHEAP ENOUGH TO WATCH, TOO LEVERED TO BUY ON THE DAY OF A CUT) — base-case value ~$109.0 vs ~$94.71 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$109 vs the $94.71 price (+15%), and 32% BELOW the Street's $160.36 average. We build 2027 group adjusted EBITDA off Flutter's own guide: 2026 midpoint $2,655M, plus $135M as half the H2 US investment stops, plus $210M for US revenue +8% at a 35% incremental margin, plus $95M for International +4%, less $10M corporate creep = $3,085M. At 10x that is $30.9B of enterprise value, less $10.0B of net debt, over 173.5M shares, discounted a year = $109. Bear $53 (8x $2.60B), bull $167 (12x $3.45B). We add NOTHING for the new $500M cost programme - Flutter says it offsets inflation and tax.
    - WHAT THE $0.49 ACTUALLY IS. Not earnings. GAAP loss per share was $1.57. The release reconciles it: -$1.57, plus $0.06 transaction fees, $0.46 restructuring, $0.54 legal loss contingencies, $1.22 acquired-intangible amortisation, $0.39 share-based comp and $0.01 financing fees, less $0.23 of Fox Option gain and $0.39 of tax = exactly $0.49. That is $2.06 of net add-backs supporting a $0.49 figure - four times the number they produce. And Flutter earned $2.95 on this basis a year ago: the Street had already modelled an 82% collapse, and Flutter came in UNDER it.
    - THREE ARITHMETIC CHECKS OFF THE FILING. One: the segments tie - US $119M plus International $476M less $87M of corporate overhead = $508M group adjusted EBITDA exactly, and US $1,683M plus International $2,643M = $4,326M (+3.3% on $4,187M). Two: 173,539,102 ordinary shares on the 10-Q cover page (July 31, 2026) times $94.71 = $16.43B, matching the market cap on the tape - no float-only error. Three: net debt reconciles to $10,480M from $11,978M of total debt less $1,563M of cash, giving 4.3x leverage against 3.7x at December 2025.
    - THE GUIDANCE CUT IS 100% AMERICAN. Group revenue guidance fell from a $18.305B midpoint to $17.91B - a cut of $395M. US revenue guidance fell from $7.795B to $7.4B - a cut of $395M. The identical number. Group adjusted EBITDA guidance fell $210M to $2.655B; US adjusted EBITDA guidance fell $210M to $0.76B. International was untouched at $10.51B and $2.205B. And $270M of the cut is investment Flutter CHOSE to make behind FanDuel. US revenue fell 6% (sportsbook -15%) while US adjusted EBITDA fell 70%.
    - WHAT $94.71 REQUIRES, RUN BACKWARDS. The equity is $16.4B and the enterprise $26.9B because $10.5B of net debt sits in front of it. To earn 9.5% with 2.5% terminal growth that enterprise must throw off about $1.88B a year forever. Flutter's own 2026 guide gets to $1.20B - $2.655B of adjusted EBITDA less $640M of guided interest and $815M of guided capex - before cash tax and before $500M of restructuring. The price already assumes the restructuring ends AND the whole cost programme reaches the bottom line. Two honest methods, two answers: that gap is why this is a 3/5 HOLD.
    What to watch: Changes our mind UP: US adjusted EBITDA back above $250M in a quarter, or leverage under 4.0x by December. Confirms the bear: a fourth straight guidance cut in November, or leverage above 4.5x. We would buy $78-$85.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    17 min
  • Eli Lilly (LLY): They Called It A 39% Beat. Both Numbers Were Wrong.
    Eli Lilly and Company (LLY) Q2 2026 — Revenue $22,974M vs ~$20,490M expected, up 48% YoY - a $2.5B beat. Non-GAAP EPS $8.38 vs a REAL consensus near $8.81, not the $6.01 on the wires. But $8.38 is struck AFTER $3.03/share of acquired IPR&D. Like-for-like: $11.41 vs $8.81, a 30% beat.
    Eli Lilly grew revenue 48% to $23.0 billion and the wires called it a 39% beat against a $6.01 estimate. That estimate never existed - Lilly earned $8.55 the prior quarter. The real bar was ~$8.81, making the reported $8.38 look like a 43-cent MISS. Both are wrong: $8.38 is struck after $3.03/share of acquired IPR&D. Like-for-like, Lilly earned $11.41.
    THE CALL: HOLD (3/5, A MUCH BIGGER BEAT THAN THE TAPE SAID - AND THE PRICE ALREADY KNEW) — base-case value ~$1140.0 vs ~$1163.84 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$1,140 vs the $1,163.84 intraday price (-2%), and 14% below the Street's $1,322 average. We build 2027 from Lilly's own guide: revenue $102B (+19%), 51% performance margin = $52.0B, less $1.4B net interest, plus $1.2B other income = $51.8B pre-tax; tax 18.5% = $42.2B; over 885M shares = $47.70 underlying EPS. At 27x, discounted back at 9%, that is $1,142. Bear $819 (EPS $42.00 at 22x), bull $1,429 (EPS $52.00 at 31x). The model reproduces Lilly's own 2026 guidance to within 40 cents.
    - WHAT THE $8.38 ACTUALLY WAS. The 8-K states it twice: Q2 2026 reported AND non-GAAP EPS both include $3.03 of acquired IPR&D, against $0.14 in Q2 2025. Acquired IPR&D charges were $2,776M versus $154M, from four completed acquisitions - Orna, Ajax, Centessa and Kelonia. Sell-side models carry no unannounced M&A, so the ~$8.81 consensus is an ex-IPR&D number. Like-for-like: $8.38 + $3.03 = $11.41 against $8.81, a beat of $2.60 or 30%. Versus $6.45 a year ago (the $6.31 plus $0.14), underlying EPS grew 77%.
    - THREE ARITHMETIC CHECKS OFF THE FILING. One: non-GAAP net income $7,493M over 893.671M diluted shares = $8.385, ties to the reported $8.38. Two: the $2,776M IPR&D charge over that share count is $3.107 pre-tax against $3.03 reported after tax - only ~2.5% tax relief, confirming the charges were largely non-deductible. Three: add the charge back and pre-tax income is $12,023M against $2,152M of tax, a 17.9% rate - right on the 18-19% guided range, versus the 23.3% reported. The tax blowout IS the acquisitions.
    - THE GUIDANCE BRIDGE - A RAISE THAT READS LIKE A CUT. Revenue guidance rose from $82-85B to $85-87B (+$2.5B at the midpoint) and performance margin from 47.0-48.5% to 49.0-50.5% (+200bp). But headline EPS guidance went from $35.50-$37.00 to $35.50-$36.50. The bridge: old midpoint $36.25, plus $2.78 of underlying improvement, minus $3.03 of Q2 acquired IPR&D = $36.00, exactly the new midpoint. A 25-cent decline containing a $2.78 improvement. That is the spike to $1,216.94 and the fade back, in one paragraph.
    - THE TRAP BUILT INTO THE GUIDE. Footnote 3 states guidance does not include acquired IPR&D incurred after June 30, 2026 - and the same release discloses three completed infectious-disease acquisitions plus an agreement to buy AtaiBeckley, all after quarter end. Lilly booked $3,360M of acquired IPR&D in H1 2026 and $1,726M in H1 2025; it is the business model, not an event. So the $35.50-$36.50 range is by construction a number Lilly is unlikely to report, and a Q3 headline 'miss and cut' is the most likely route to our $980-$1,040 buy zone.
    What to watch: Changes our mind UP: Foundayo (orforglipron) clearing ~$1.5B in a quarter, or realised price stabilising better than -5%. Confirms the bear: volume growth under +25% while price keeps falling double digits. We would buy $980-$1,040.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min
  • Kraft Heinz (KHC): A 3-Cent Beat, An 18.8% Earnings Drop, And A $7.4B Write-Off
    The Kraft Heinz Company (KHC) Q2 2026 — Adjusted EPS $0.56 beat the $0.53 estimate - and fell 18.8% from $0.69. GAAP EPS was -$4.60 on a $5.46B net loss driven by $7.35B of impairments. Net sales $6,262M, -1.4%. The print landed PRE-MARKET; $26.64 is the prior session's close, not a reaction.
    Organic sales fell 1.3%: price +1.3 points, volume/mix -2.6. Kraft Heinz raised prices and gave back two points of food sold for every point of price. And the split everyone still talks about was PAUSED in February.
    THE CALL: HOLD (3/5, A COVERED SIX PERCENT YIELD, AND NOT MUCH ELSE) — base-case value ~$25.0 vs ~$26.64 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$25 vs the $26.64 close (-6.2%). Base: $2.4B of clean free cash flow capitalised at an 8.0% cost of equity, 0% terminal growth = $30.0B equity over 1,186M shares = $25. Cross-check at 9.0x our $4.95B of 2026 adjusted EBITDA = $44.5B EV less $16.3B net debt = $24. Dividend discounted at 8% = $25. Bear $21, bull $36. Street: Hold, $22.80 avg (35 analysts, 4 buy/20 hold/11 sell), high $25, low $18 - 14.4% BELOW the price. We ALIGN on the rating, $2 above their target.
    - A BEAT AGAINST A BAR THAT FELL. Adjusted EPS $0.56 vs a $0.53 estimate, a 5.7% beat on the same adjusted basis. But a year ago the same measure was $0.69 - so adjusted EPS fell 18.8%. GAAP diluted EPS was -$4.60 on a $5,460M net loss. Net sales $6,262M vs $6,352M, -1.4%, ahead of the $6.12B consensus. Gross margin 32.4%, down 200bp. Adjusted operating income $1,041M vs $1,276M, -18.4% - profit fell more than ten times faster than sales.
    - PRICE UP, VOLUME DOWN. Organic net sales -1.3%: price +1.3 points, volume/mix -2.6. The filing attributes the price to cost pass-through in coffee and ready-to-drink beverages, not pricing power. By segment: North America $4,626M (three quarters of the company) organic -2.7%, volume/mix -3.8; International Developed $865M organic -0.7%; Emerging Markets $771M organic +8.5%, balanced price +4.5 / volume +4.0. North American segment adjusted operating income fell $1,173M to $988M, -15.8%.
    - THE SPLIT IS PAUSED - THE SPENDING IS NOT. The September 2025 plan to separate into Global Taste Elevation (Heinz, Philadelphia) and North American Grocery (Oscar Mayer, Lunchables) was paused on February 11, 2026 by new CEO Steve Cahillane. This filing's risk factors still cite 'the current pause on work related to the separation'. $66M of separation costs were expensed anyway. Incremental investment rose from $600M to ~$700M; FY26 guidance is constant-currency adjusted operating income DOWN 16-18%, adjusted EPS $2.03-$2.09.
    - THE CASH IS REAL AND FLATTERED, THE BALANCE SHEET IS NOT. Half-year operating cash flow $2,088M (+8.2%), capex $429M, free cash flow $1,659M (+10.3%), conversion 123% vs 96%. But working capital added ~$402M (payables +$392M on 'improved payment terms'). Clean half-year FCF is ~$1,257M, ~$2.4B annualised, against a $1.9B dividend - 79c of every clean cash dollar. Impairments were $7,352M this quarter after $9,266M a year ago. Goodwill $19,714M plus intangibles $32,372M = $52.1B, 71% of a $73.1B balance sheet and ABOVE the $47.9B enterprise value. Tangible book is -$16.1B.
    What to watch: Changes our mind UP: two quarters of North American volume/mix improving toward zero, or net leverage back under 3.0x. Confirms the bear: another Q4 impairment, a dividend exceeding clean free cash flow, or Berkshire actually selling. We'd buy at $21-$23.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min
  • GlobalFoundries (GFS): Adjusted EPS Beat, Reported EPS -27% - And Free Cash Flow Of Minus $3M
    GLOBALFOUNDRIES Inc. (GFS) Q2 2026 — Non-IFRS EPS $0.46 vs a consensus near $0.43, on revenue of $1,786M, +6%. Both revenue and gross margin beat the high end of guidance. But reported IFRS EPS was $0.30, DOWN 27%, and adjusted free cash flow was -$3M vs +$277M. The last close was $52.02, +4.0% - the session BEFORE the print.
    A foundry grows two ways: more wafers, or a higher price per wafer. GF shipped 8% more wafers and grew revenue only 6% - so the implied price per wafer FELL 1.6%. The beat was volume, not price, and volume-driven margin is the fragile kind.
    THE CALL: SELL (3/5, A REAL BEAT, ON A NUMBER THAT IS NOT THE CASH) — base-case value ~$40.0 vs ~$52.02 today.
    KEY METRICS:
    - CALL: SELL 3/5, fair value ~$40 vs the $52.02 close (-23.1%). Base DCF: 2026 revenue $7,255M compounding at 5.5%, TRUE operating margin (share-based pay expensed) reaching 18%, capex normalising 23%->12% of revenue, at 10.0% with 2.5% terminal = $17.47B EV; +$2.18B net cash = $19.65B equity; /556M shares = $35. Cross-check 22x our 2027 non-IFRS EPS of $2.15 = $47. Weighted 60/40 = ~$40. Bear $18, bull $54. Street: Buy, $78.25 avg (19 analysts, 11/7/1), high $125, low $50 - implying +50%. We DIFFER.
    - THE BEAT IS REAL, BUT IT IS NON-IFRS. Non-IFRS diluted EPS $0.46 vs consensus near $0.43 - both adjusted, so the bases match; a genuine ~7% beat. Revenue $1,786M vs $1,688M (+6% YoY, +9% QoQ vs $1,634M) and IFRS gross margin 28.3% vs 24.2% (+410bp) BOTH beat the high end of guidance. But reported IFRS EPS was $0.30 vs $0.41, DOWN 27%. The IFRS-to-non-IFRS gap widened from $0.01 a year ago to $0.16 - sixteen-fold. Share-based comp is $0.15 of it: $86M vs $54M, +59%, 4.8% of revenue vs 3.2%.
    - VOLUME, NOT PRICE - THE CALCULATION NOBODY RUNS. Wafer shipments 625k 300mm-equivalent vs 581k, +8%, while revenue rose only 6%. Revenue grew SLOWER than volume, so implied revenue per wafer fell from ~$2,905 to ~$2,858, -1.6% YoY (+1.3% QoQ). A foundry beat usually comes from mix or pricing; this one came from pushing 8% more wafers through the same fabs - and volume-driven margin reverses with the same violence it arrived.
    - THE MARGIN CAME FROM ABSORPTION. Cost of revenue $1,281M vs $1,280M - FLAT - while shipping 44k more wafers. Cost per wafer $2,050 vs $2,203, -7.0%. Gross profit per wafer $808 vs $702, +15.1%. Revenue rose $98M, gross profit rose $97M: a 99% incremental gross margin. Two deductions: depreciation FELL $28M ($307M vs $335M), ~29% of the gain, an ageing asset base not a better factory; and sequentially the incremental margin is 36%, not 99%. Operating profit still FELL to $174M from $196M as opex went $212M->$331M, +56% (SG&A doubled, $78M->$157M).
    - FREE CASH FLOW WENT TO ZERO IN THE QUARTER THEY STARTED A DIVIDEND. Operating cash flow $405M vs $431M, but capex $411M vs $159M (+158%; 23.0% of revenue vs 9.4%) - so non-IFRS adjusted free cash flow was -$3M, vs +$277M a year ago and +$233M last quarter. Adjusted EBITDA $587M vs $585M: FLAT, margin -180bp. GF still paid its first-ever dividend ($0.12, ~$267M/yr) and spent $440M on acquisitions (Synopsys ARC, Photeon IVR); $2.18B net cash carries it. Mubadala sold 22M shares at $86.30-$86.80 on May 27, the day after the $89.96 high, and still owns ~73%.
    What to watch: Changes our mind UP: two consecutive quarters where revenue grows FASTER than wafer shipments (pricing has turned), or silicon photonics credibly tracking the $1B exit-2028 run-rate. Confirms the bear: a second straight quarter of negative adjusted free cash flow, or gross margin missing the 29.5% Q3 guide. We'd buy at $34-$42.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min
  • Uber (UBER): Bookings +24%, Revenue +12% - And 8 Points Of That Gap Is Accounting
    Uber Technologies, Inc. (UBER) Q2 2026 — Gross bookings $58.0B, +24% (+22% cc). Revenue $14.19B, +12% - but Uber's own release says business model changes cost 8 points of that growth. Adjusted EBITDA $2,819M, +33%, 4.9% of bookings vs 4.5%. GAAP EPS $1.17 includes a $1.6B equity revaluation; non-GAAP EPS $0.81. Last close $71.99.
    Every headline read Uber's 24% bookings growth against 12% revenue growth as a collapsing take rate. Uber's own release says business model changes cut reported revenue growth by 8 percentage points. Put them back and revenue grew about 20%.
    THE CALL: BUY (4/5, THE HEADLINE NUMBERS ARE WRONG AND THE BUSINESS IS NOT) — base-case value ~$90.0 vs ~$71.99 today.
    KEY METRICS:
    - CALL: BUY 4/5, fair value ~$90 vs the $71.99 close (+25%). Owner earnings: Q2 free cash flow $2,792M less $550M stock comp less the $387M insurance reserve build = $1,855M, annualised $7.42B, or $3.62 per diluted share - so the market pays 19.9x. Base DCF: $7.42B compounding at 16% fading to 4%, terminal 3%, discounted at 10% = $182.4B enterprise value, plus $2.9B net cash = $185.3B over 2,050.2M shares = $90. Bear $60, bull $131.
    - THE ANGLE: Uber disclosed that business model changes cut reported revenue growth by 8 percentage points. Proof from the segment tables: Mobility revenue grew 1% on bookings up 22%, so the Mobility take rate fell from 30.7% to 25.4% - but Mobility segment Adjusted EBITDA still grew 28% to $2,215M and its margin on bookings ROSE from 7.28% to 7.64%. Real take-rate erosion cannot raise segment margin. The revenue line moved; the economics did not.
    - TWO WRONG HEADLINES: GAAP diluted EPS $1.17 (+85%) includes a $1.6B pre-tax net benefit from revaluing Uber's equity investments, against a $17M headwind a year ago - a ~$1.6B swing on a company whose entire GAAP operating income was $1,890M. Non-GAAP EPS $0.81 vs an $0.81-$0.83 consensus reads as a small miss but strips out stock comp. The honest numbers: GAAP income from operations +30%, Adjusted EBITDA +33%.
    - THE FLOAT: trailing twelve-month free cash flow topped $10B for the first time, but quarterly FCF grew just 13% ($2,475M to $2,792M) while Adjusted EBITDA grew 33%. The gap is the insurance reserve build, which fell from $812M to $387M year on year ($1,487M to $830M over six months). Uber carries $13.3B of insurance reserves - genuine float, and a genuine liability. We strip it out of owner earnings entirely.
    - QUALITY + SCALE: gross bookings $58,022M, trips 3,867M (+18%), MAPCs 208M (+16%). Delivery Adjusted EBITDA +38% to $1,055M on bookings +26% - now the fastest-growing profit pool, with Delivery bookings ($27,463M) within 6% of Mobility ($28,988M). Diluted shares fell 3.5% (2,125.6M to 2,050.2M) despite $550M/qtr of stock comp. Capex was $70M on $58B of bookings. Q3 guide: bookings $58.25-60.25B, Adj EBITDA $2.86-2.96B, non-GAAP EPS $0.84-0.88 - below consensus, which is why the stock has de-rated 28% from its October high.
    What to watch: Changes our mind UP: a second straight quarter of Delivery segment margin expansion, or disclosure quantifying how much revenue the business model changes moved. Confirms the bear: two quarters of Mobility segment Adjusted EBITDA margin ON BOOKINGS falling (not the revenue line, which is noise), or an insurance reserve build that turns negative. We'd buy $66-$72 and trim at $90.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    17 min
  • Arrowhead (ARWR): A 70% Revenue Beat - And Only $2.4M Of It Was Actual Medicine
    Arrowhead Pharmaceuticals (ARWR) Q3 FY2026 — Revenue $75,253K vs ~$44,170K expected - a 70% beat, +171% YoY. But the diluted loss was $1.36 vs $1.28 expected, an 8c MISS, on a $194,280K net loss. Of that $75.3M, $72.9M was collaboration revenue; REDEMPLO product sales were $2.4M.
    Arrowhead beat revenue by 70% and missed on earnings in the same release. Of $75.3M of revenue, $72.9M came from four partners - $25M of it a one-time Madrigal licence cheque booked in full. Actual REDEMPLO sales were $2.4M. The stock closed at a 52-week high the day it reported, up 462% in twelve months.
    THE CALL: HOLD (3/5, THE SCIENCE WORKED - THE PRICE ALREADY ASSUMES THE NEXT ONE DOES TOO) — base-case value ~$74.0 vs ~$89.59 today.
    KEY METRICS:
    - CALL: HOLD 3/5, risk-adjusted fair value ~$74 vs the $89.59 close (-17%). No DCF - Arrowhead has never earned a full-year profit. We sum programmes and haircut each: plozasiran $5.50B ($2.5B 2033 peak at 85% odds), partnered $2.00B, obesity/MASH $1.80B ($4B peak at 22%, it is Phase 1), rest $0.90B. Pipeline $10.20B + $1.60B cash - $1.27B debt = $10.53B / 143.4M shares = $73. Bear $38, bull $126.
    - WHAT THE $75M ACTUALLY WAS. The 10-Q disaggregates it: Sarepta $26,395K + Novartis $20,232K + Madrigal $25,000K + Sanofi $1,241K = $72,868K of collaboration revenue. Total revenue $75,253K. The $2,385K difference is every dollar of REDEMPLO sold. Madrigal was a single upfront on a licence signed May 4, booked in full. The estimate was $44.2M; the beat was $31.1M; Madrigal was $25M of it.
    - THE REAL BURN AND THE RUNWAY. Nine-month operating cash flow is only -$79.5M - until you find the $475M of partner cash inside it ($200M Novartis, $200M Sarepta DM1, $50M Sarepta fee, $25M Madrigal). Ex-partner cash the burn is ~-$554M, or ~$185M a quarter. Cash and investments are $1,602M: 8.7 quarters gross, but the Sixth Street covenant strands $250M, so 7.3 spendable - to ~March 2028.
    - THE CAPITAL STACK. Nine months of financing: $700M of 0.00% converts due 2032 (conversion price $87.07 - the stock is ABOVE it, 8.04M shares), a January offering of 2,015,505 shares at $64.50, and $76.1M of ATM stock. The Sixth Street term loan bears 15.0% PAID IN KIND, $181.4M left. Plus a $392.5M Royalty Pharma liability. Claims ahead of equity: ~$1.26B.
    - WHAT $89.59 REQUIRES. Enterprise value is $12.32B ($12.64B cap + $0.70B converts + $0.18B loan + $0.39B royalty debt - $1.60B cash). Add the cash still to burn and discount 7 years at 13%: ARWR must be worth ~$31.7B in 2033, or ~$6.3B of revenue at 5x sales. Nine-month revenue is $0.41B; product sales $3.5M. The most bullish plozasiran model is ~$3B.
    What to watch: Changes our mind UP: a broad severe-hypertriglyceridemia label on the sNDA due before year-end, or REDEMPLO revenue clearing $15M a quarter. Confirms the bear: a label restricted to the prior-pancreatitis subgroup, or another equity raise below $80. We would buy $58-$68.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    14 min
  • Expeditors (EXPD): Revenue +32%, Net Revenue +21% - And 40 Cents Of It Is A War
    Expeditors International of Washington, Inc. (EXPD) Q2 2026 — Diluted EPS $2.03 vs a $1.68 consensus that had been RAISED 5.7% in 60 days. Revenue $3,502M, +32% - but net revenue, what Expeditors keeps after paying the carriers, was $1,085M, +20.8%. The stock closed +6.4% at $181.48.
    A freight forwarder books the whole freight bill as revenue, then books what it pays the airlines and shipping lines as a cost. That cost was $2,417M of the $3,502M. And ~40c of the $2.03 traces to an airfreight rate spike.
    THE CALL: SELL (3/5, AN EXCELLENT QUARTER, PRICED AS IF IT REPEATS FOREVER) — base-case value ~$139.0 vs ~$181.48 today.
    KEY METRICS:
    - CALL: SELL 3/5, fair value ~$139 vs the $181.48 close (-23.4%). Base DCF: $880M of normalised free cash flow compounded at 5% for ten years, terminal growth 2.5%, discounted at 9.0% = $16.75B enterprise value; plus $1.03B net cash = $17.79B equity; over 130.0M shares = $137. Multiple cross-check at 21x normalised EPS of $6.77 = $142. Weighted 60/40 we take ~$139. Bear $101, bull $192. The Street: Hold, $160 average (33 analysts, 5 buy / 20 hold / 8 sell), high $191, low $145 - their own average target is 11.8% BELOW the price.
    - GROSS REVENUE +32% BUT NET REVENUE ONLY +20.8%. Revenues $3,502.3M vs $2,651.9M. Directly related cost of transportation $2,416.8M vs $1,753.4M - up 38%, FASTER than revenue. Net revenues $1,085.5M vs $898.5M, +20.8%. Net revenue as a share of gross fell from 33.9% to 31.0%, down 289bp. The $557M revenue beat vs the ~$2,945M estimate is roughly two-thirds money that went straight back out to airlines and ocean carriers. Every check ties: 3,502.3 - 2,416.8 = 1,085.5; 349.6 / 1,085.5 = 32.20%; $266.226M / 131.372M diluted shares = $2.0265.
    - FORTY CENTS OF THE $2.03 IS AN AIR-RATE SPIKE. Airfreight net revenue $360.1M vs $253.4M, +42.1% - on kilos up only 14% (Apr +13%, May +14%, Jun +15%). Volume explains $35.5M of the $106.7M increase; the other $71.2M is yield. Taxed at the quarter's 25.4% over 131.4M shares that is about $0.40 a share, against a beat of $0.35 vs the $1.68 consensus. Management's own explanation: air rates were 'highly elevated' on 'constrained belly capacity due to the conflict in the Middle East'. Ocean net revenue FELL 6.9% ($179.0M vs $192.3M) on flat containers.
    - THE OPERATING LEVERAGE IS REAL - AND THE BAR WAS RAISED, NOT CUT. Operating income $349.6M, +41%, on salaries and other operating expenses up just 13%. Operating efficiency (operating income / net revenue) 32.2% vs 27.6%, +463bp - 33.0% once a $25M Global Technology restructuring charge and a $16M property gain are cleaned out. Headcount 20,389, +3.7%, flat vs Q1; net revenue per employee $53,239 vs $45,690, +16.5%. And the Zacks consensus had been revised UP 5.7% in the 60 days before the print. They cleared a raised bar by 21%.
    - THE CASH DID NOT FOLLOW THE EARNINGS. Net earnings +45% but operating cash flow was $178.6M vs $179.2M - flat - because accounts receivable rose $575.9M in the quarter (vs $58.0M a year ago). Over six months OCF was $487.9M vs $521.8M, DOWN 6.5%, while net earnings rose 28%. Capex $24.6M, so H1 free cash flow ~$463M - against $748M returned ($643M buybacks, $106M dividends), 1.6x what the business generated. Cash fell from $1,314M to $1,031M. No debt, and the buyback is well executed (4.3M shares at an average $148.87).
    What to watch: Changes our mind UP: two quarters of airfreight net revenue growing in line with kilos rather than 3x faster, or customs holding above 20% after the IEEPA filing surge. Confirms the bear: operating efficiency back under 30%. We'd buy at $130-$145.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    13 min
  • Emerson (EMR): A 3-Cent Beat, A 5-Cent Raise - And $82M Of It Was A Tariff Refund
    Emerson Electric Co. (EMR) Q3 FY2026 — Adjusted EPS $1.71 vs Emerson's own $1.65-$1.70 guide and the Street's $1.68. Net sales $4,873M, +7%. Free cash flow $1,323M, +36%. Orders +7%. GAAP EPS $1.28 - but $0.11 of that is a tariff refund.
    Emerson beat and raised - and both moves are smaller than the headlines suggest. The $1.71 cleared the top of Emerson's OWN $1.65-$1.70 guide, issued 91 days earlier, by one cent, and the full-year raise took adjusted EPS to ~$6.55 - the top of the old range, not above it.
    THE CALL: HOLD (3/5, AN EXCELLENT QUARTER, AND A RAISE THAT IS MOSTLY THE QUARTER) — base-case value ~$142.0 vs ~$158.84 today.
    KEY METRICS:
    - CALL: HOLD 3/5, fair value ~$142 vs the $158.84 close (-10.6%). Base DCF: $3.60B of guided FY2026 free cash flow compounded at 6% for ten years, terminal growth 2.5%, discounted at 8.0% = $88.2B enterprise value; less $10.93B net debt = $77.3B equity; over 561.1M diluted shares = $138. Multiple cross-check at 20.5x our FY2027E $7.15 = $147. Weighted 60/40 we take ~$142. Bear $99, bull $184. The Street: Buy, $161.56 average (41 analysts, 22 buy / 16 hold / 3 sell), high $185, low $144 - their MOST BEARISH published target is $2 above our fair value.
    - WHAT WAS THE BAR - AND HOW BIG WAS THE RAISE. On May 5 Emerson guided Q3 adjusted EPS to $1.65-$1.70 and net sales growth of ~5.5%. It printed $1.71 and +7%. Against its own guidance: one cent. Against the Street's $1.68: three cents. Then the full-year adjusted guide went from $6.45-$6.55 to ~$6.55 - the TOP of the old range, not above it. Midpoint +$0.05. The quarter itself beat its own midpoint ($1.675) by $0.035. The May framework implied ~$1.835 for Q4; the new guide says ~$1.85. Emerson raised the year by roughly the amount it had already banked, plus about a cent and a half.
    - THE GAAP GUIDANCE ACTUALLY WENT DOWN. The GAAP range went $4.79-$4.89 to ~$4.89, also a five-cent midpoint raise. But the new framework contains a line the May one did not: ~$(0.11) of IEEPA tariff refunds. Strip it out and GAAP guidance fell ~6 cents, because the restructuring line inside it went from ~$0.18 to ~$0.24 and acquisition costs from ~$0.06 to ~$0.09. Bridge check: 4.89 + 1.39 amortisation + 0.24 restructuring + 0.09 acquisition + 0.05 discrete taxes - 0.11 IEEPA = $6.55. Adjusted up, GAAP like-for-like down, both in the same table.
    - $82M OF THE PRETAX IMPROVEMENT IS A REFUND. Pretax earnings went $734M to $916M, up $182M - and $82M of that, 45%, is a one-time IEEPA tariff recovery, disclosed in Table 5 (corporate and other: -$72M to -$1M) and Table 6 (subtracted as $0.11). Take the eleven cents out of GAAP EPS and it is $1.17, up 14%, not $1.28 and 24%. To Emerson's credit, it EXCLUDED the refund from adjusted EPS - the conservative treatment. On the cleaner adjusted line, EBITA rose $120M ($1,183M to $1,303M).
    - THE SOFTWARE SEGMENT EARNED LESS ON MORE. Control Systems & Software - where AspenTech sits, the asset the re-rating story rests on - grew sales 7% ($1,120M to $1,199M) and its adjusted EBITA FELL $2M, $393M to $391M; margin 32.6% vs 35.2%. Meanwhile Test & Measurement (National Instruments) grew 23% ($360M to $445M) with adjusted EBITA $81M to $132M - 29.6% vs 22.4%, a 60% incremental margin - and GAAP EBIT turned positive at $11M vs -$26M. The asset with the software multiple grew earnings by nothing; the one everybody wrote off carried the quarter.
    What to watch: Changes our mind UP: two straight quarters of Control Systems & Software growing adjusted EBITA in DOLLARS (it fell $2M on 7% more revenue), or FY2027 guidance above $7.30. Confirms the bear: orders below 4%, or Europe negative a fourth quarter. We'd buy at $128-$138.
    Also on YouTube: @ChargedAlpha
    DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.
    15 min

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⚡ 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:…