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Stocks of the Week!

In this email:

• Did Everyone Just Panic Sell? 😭

• News for Smart Cookies 🍪 

• This Won’t Stay Cheap for Long… ⏳

Did Everyone Just Panic Sell? 😭

The biggest single day loss since 2020. Sound dramatic?

That’s because it is.

Teva Pharmaceutical dropped 13% after dropping Q4 earnings. They must’ve been terrible right?

Well, not exactly. The actual earnings were solid. It’s what’s supposed to happen in 2025 that caused the drop. But are they actually in trouble? Or is this just another overreaction that we’ve seen time & time again?

Only one way to find out, I guess. 🔍️ 

WALL STREET WANTED MORE 📉

Teva’s 2024 results were strong, but its 2025 outlook came in weaker than expected.

• Revenue for 2025: $16.8B - $17.4B (barely up from 2024’s $16.5B)

• EPS estimate: $2.35-$2.65 (below the expected $2.78/share)

• Free cash flow projection: $1.6B - $1.9B (down from $2.07B last year)

Investors don’t love it when companies plan to have an OK year. Where’s the excitement?

And they like it even less when EPS projections get cut. So, they panic sold.

I don’t think you should be doing the same…

2025 MIGHT BE AN EASY BEAT 🚀

Under promise, over deliver. It’s the mantra of looking like a superstar.

Teva’s management set the bar super low for 2025. It means they’re more likely to “over perform” this year.

That might not necessarily be true if the business remained constant. But Teva’s pipeline is stacked with projects that could print cash:

✅ Duvakitug (Crohn’s & ulcerative colitis drug) showed super impressive results in Phase 2b trials. It’s now heading to Phase 3. If all goes well, peak sales could hit $1.5B+.

✅ Biosimilars are coming in HOT. Teva has 18 biosimilars in development & is expecting 11 new launches by 2027. That’ll be something like $27B+ worth of original drug revenue.

✅ Debt is shrinking FAST. Teva cut debt to $14.5B (3x EBITDA) & plans to hit 2x EBITDA by 2027. That free’s up cash for something more productive. Or dare I say, stock buybacks & dividends? 👀 

THE REAL QUESTION…. BUY THE DIP?

Trading at just 7.2x earnings makes Teva one of the cheapest pharma stocks you can put your money in right now.

If the company beats its conservative guidance, a $25 price target (10x 2025 EPS) is very doable. That’s over 40%+ upside from here.

The average target among analysts looks to be something similar at a 38% target. Even the low end of estimates is still around a 20% profit which you don’t often see.

At current levels, Teva looks super tempting. The upside is worth taking on a little risk. I’ll be adding ~1% of the portfolio here on market open. Now fingers crossed for those drug developments. 🤞 

News for Smart Cookies 🍪 

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This Won’t Stay Cheap for Long… ⏳

How often do you get a discount on Microsoft stock?

Not often.

It’s been flat for the past 6 months after a big drop last week. That’s while the S&P 500 & Nasdaq have been clocking double figure gains.

Q2 earnings dropped & it was a mixed bag. But with it being flat for so long it leaves a pretty big question… Is this the consolidation before the next big leg up? 🤔 

THE GOOD, THE BAD & THE AI-UGLY

Microsoft’s Q2 was of wins & losses. Like getting upgraded to a business class flight just to find out you’re sitting next to a screaming baby.

 The Good🔥:

• $62B in revenue (+15% YoY) Growing like a beast 🦍.

• 45% operating margins. Practically a license to print cash.

• EPS of $3.23. Up from $3.11 guidance.

 The Bad💀:

• Azure growth missed by ~$200M. Cloud computing is still booming but AI rollouts are tricky.

• Free cash flow dropped 29%. Big AI spending ain’t cheap & it’s eating up profits.

• $22.3B in CapEx.

Microsoft is still a king of fundamentals. But it is burning some serious cash building out AI infrastructure.

Should it pay off in the long run? For sure. Does that mean you won’t get a little sweaty seeing free cash flow drop? For sure not.

WHY HAS THE STOCK BEEN FLAT? 🤔

Not for the reasons you might expect. Wall street is greedy.

If anyone else pulled off 15% YoY revenue growth, things might be different. But this is Microsoft we’re talking about & analysts expected 17%.

And everyone’s treating AI returns like they’re Veruca Salt from Charlie & the Chocolate factory. “I want it now!” 

Microsoft’s making long term plays which are better for…. the long term. Patience isn’t always a trait investors have but it is a trait the best investors have.

SO…. IS THIS A BUYING OPPORTUNITY?

I think so. Even thought they’re still trading at a premium, Microsoft might be looking like a discount at full price. Here’s why:

✅ Rock-Solid Balance Sheet – Microsoft has $71.5B in cash & zero debt concerns. AI spending isn’t coming from loans. Just raw profits.

✅ Cloud & AI Still Have Room to Run – Even with Azure’s growth miss, AI workloads are growing. Long-term, this will be a goldmine.

✅ Microsoft Rarely Gives You Dips – Other than the 2022 bear market, most MSFT pullbacks last less than 40 days. If you wait for the “perfect” dip, you might be waiting a while forever.

MY PLAN 🗺️ 

Microsoft isn’t cheap but what great things are?

Like Warren Buffet said, “Buy a great company at a fair price instead of a fair company at a great price”

It’s my third largest holding & makes up 7% of the portfolio. I won’t be changing that any time soon. I’m loading up before the next leg up.

Analysts are shooting for $510 which is ~22% gain from current price. I’m in for the long haul with Microsoft so not too fussed about 12 month targets. If you ever wanted an example of up & to the right on a chart, just zoom out on theirs.

My bet is we’ll be laughing at everyone that didn’t buy before the AI boom.

That’s all! See you same time next week 👋 

P.S Hit reply & let me know what you thought of this weeks newsletter. All feedback is welcomed ❤️