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Adobe is down over -65% from peak.

But profits are at an all-time high and are growing +12% y/y.

Over the last twelve months, Adobe has generated $24.5bn in revenues, up from ~$13bn in 2020, a 13% CAGR, while expanding operating margins 400bps to 37%. With ~$9bn in EBIT, they are currently trading at 11x earnings with an EV of $98bn.

Adobe has executed quarter after quarter, but investors are concerned that AI is hanging over them like a damocles sword.

How big of a threat is AI really to Adobe though? Couldn’t it actually be a beneficiary?

To find out, we are going to talk to the Former Head of Data Science & Analytics at Adobe. He is intimately familar the companies AI products and helped build them.

We will cover:

• How does AI change the competitve landscape?

• Will the AI model companies become competitors?

• Does AI change the threat of someone like Salesforce moving more into creative work?

• What do customers value most when buying Adobe?

• Is AI going to become commoditized?

These are critical topics an investor needs to understand in order to gauge the risk/ reward of an investment.

You can sign-up for this conversation for free in the link below!

The webinar will be on May 5th at 12pm EST/ 9am PST. If you miss this time, you can always watch it later after you sign-up.

Sign Up Here

And for more on ADBE, check out this breakdown on them here.

Thank you again to AlphaSense for making this happen!

This is a podcast announcement of an interview we just published on our podcast feed here: (Apple, Spotify).

We are thrilled to announce the release of our podcast with Square (Block) Cofounder Jim McKelvey.

Find it on Apple, Spotify, or wherever else you listen to your podcasts.

Episode Details.

In this exceptional interview, we talk to Cofounder of Square (Block) Jim McKelvey on competing against Amazon.

From his time at Square, he saw how they were able to outcompete Amazon and he wasn’t sure how that was possible given their superior resources, merchant network, and large base of talented employees.

After better understanding how that was possible, he wrote a book on his insights called “The Innovation Stack”.

In this interview, we touch on some of his key learnings, as well as talk about why it is so hard to copy some businesses.

Show Notes.

(0:00) — Amazon vs Square

(13:22) — Why Amazon Quit Against Square

(24:58) — Southwest

(37:33) — Copying a Company’s Innovation Stack

(40:53) — Advice to Build a Business

**Purchase Jim’s Book, The Innovation Stack, Here

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2Q26 Update.

Copart reported fiscal 2Q26 and the stock sold off -3% the next day, after recovering from being down -10%.

The quarter was bad with revenues down -4% y/y, gross profits down -6% y/y, and U.S. insurance units declining -11% y/y.

While there is no doubt that this was poor performance, it wasn’t quite as bad as it looked after you back out the CAT event in their comp period.

Backing out the CAT event, global gross profits were +0.4% y/y and U.S. insurance units were down -4.8%. While the contraction in U.S. insurance volumes is particularly bad, the reasons they attribute to it are unchanged from the past few quarters.

The fact that they clarified they didn’t lose any accounts and that their ASPs have increased again (U.S. insurance ASPs +6% y/y), does support management’s claims that the volumes losses are from a higher portion of drivers going underinsured and that volumes on the carrier side is driving their poor performance (Progressive in particular is rumored have been gaining share and is an IAA customer).

However, it should also be mentioned that this comes alongside some claims that IAA has stepped up their game and improved their operations. In particular, reducing the amount of time it takes a car to go from picked up to sold has become more competitive with Copart. For years Copart has benefited from IAA’s relatively worse-run operations, which helped push more wins to them. Going forward, it looks like that will no longer be the case.

An AlphaSense expert call with a former VP of Geico said “The last data point I had about three months ago was they were neck and neck. They were both at around 52 days, and they had dramatic improvements”.

While the fear is that these volume losses were the result of IAA becoming a better run business, that thesis doesn’t hold water. There have been no carrier losses and contract renewals are every several years. Unless you believe Jeff Liaw is being misleading saying there have been “no accounts” lost, but not specifying that an account could have lost volumes, it doesn’t seem like IAA’s improved business is the result of volume losses. Nevertheless, this could weigh on future RFPs contracts.

Having said all of that, a competitor catching up, doesn’t mean they will lose volumes. The industry wants a duopoly and so has been more willing to help IAA to stabilize the competitive balance, but that is only to a point. They don’t want IAA to be dominant either, and it still is likely that Copart’s operations are faster to turn cars and could possibly offer slightly higher returns because of their better auction liquidity from more global buyers (although that point is also contended).

In terms of potential future price competition, Jeff Liaw had this to say:

You can read our last update for more on this and the dynamics driving the volume losses.

In short, it is a negative, but is likely a cyclical phenomenon and not secular. But competition intensity in the U.S. is picking up. To the positive, international gross profits for this fiscal year are up 10% y/y and they have a more benign competitive environment in those markets.

Valuation.

At a $34 stock price...

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The Synopsis Podcast.

Follow our Podcast below. We have a Company episode just on Copart (Apple, Spotify)!

For those that are new to our podcast, we have four episode formats: “company” episodes that breakdown in-depth each business we write a report on, “dialogue” episodes that cover various business and investing topics, “article” episodes where we read our weekly memos, and “interviews”.

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We have covered APi Group, Appfolio, Airbnb, Axon, Constellation Software, Copart, Coupang, CoStar Group, Dream Finders Homes, Etsy, Evolution, Floor & Decor, LVMH, Meta, Perimeter Solutions, RH, Shift4, Porsche, and Walker & Dunlop, with many more coming each year!

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*At the time of this writing, one or more contributors to this report has a position in CPRT. Furthermore, accounts one or more contributors advise on may also have a position in CPRT. This may change without notice.

This is a new company episode podcast announcement.

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We are announcing the release of our latest company deep dive episode on Shift4.

Shift4 is a payments solution provider that serves over 80% of stadiums, 40% of all hospitality players, and is the #2 most popular payment processer for restaurants. Whereas other FinTechs were burning money to chase growth, Shift4 took an entirely different strategy: they would acquire mission critical nodes in the payment value chain and “compel” customers to switch payment providers. This strategy means that their customer acquisition costs tends to be lower and they can grow quicker. Revenues have grown at a 30% CAGR since 2019.

This is all the while they have remained strongly free cash flow positive, trading around 17x free cash flow and 3x gross profits. Learn all about the business below!

Find it on Apple, Spotify, or wherever else you listen to your podcasts.

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Company Background.

While nearly every entrepreneur was chasing VC funding for the latest “.com” company in the late 90s, one prescient 16 year old dropped out of high school to disrupt a complicated and unsexy industry: payments.

Jared Isaacman started United Bank Card in 1999 to streamline the payment acceptance process. Instead of 30 page contracts that took a month to set up, he streamlined the process to take just one day.

The company didn’t take a dollar of VC money, which turned out to be its saving grace when the tech bubble crashed. Despite the lack of external funding, they were aggressive in acquiring customers, pioneering the free hardware giveaway to win customers.

They were almost too early though.

They sat in the awkward position of being the best merchant acquirer, but for an antiquated payment system. In 2012 they made their first attempt to beat back faster growing payment peers like Square and Stripe with new touchscreen hardware and a rebrand to HarborTouch. It wasn’t quite enough though.

The big strategy change came after they accepted private equity money and acquired a business called Shift4. Shift4 operated a “payment gateway”, which was the linchpin of any legacy payment process—and very tough to switch out. Instead of winning payment processing revenues by winning new customers, they could just acquire customers and then push a conversion to payment processing.

This opened up a new strategic playbook for Shift4: acquire key nodes in the payment stack, inherit the merchant relationship, and then use the high switching costs of those systems to migrate merchants onto Shift4’s payment processing.

It by and large worked.

The byproduct of this strategy meant they would increasingly move upmarket, focusing on the largest and most complex customers. Today they have an 80% share in stadiums and a 40% share in hospitality.

But not to forget the lower end of the market, they reinvented their hardware and software ecosystem to create a fully integrated platform called SkyTab. This gave them a new weapon to go after SMBs and the likes of Toast, Square, Clover, and other newer products. They now have a #2 position in restaurant.

With dozens of acquisitions, revenues are growing very fast at over a 30% CAGR since 2019. Today they generate $3.9bn in revenues and are still growing 22%, while run-rating about half a billion in free cash flow.

While they have had continued market share gains, strong profitability, and revenue growth, they also just made their largest acquisition ever. They acquired Global Blue, a VAT refund business, for $2.5bn—about 1/3^rd of their market cap at the time. In contrast to other acquisitions, investors fear the cross-sell will be much weaker. Founder Jared Isaacman has also stepped down as Chairman to run NASA. And the payment industry is as competitive as ever.

Is Shift4 going to continue to be able to win business? Was Global Blue a mistake? Is their acquisition model at risk of slowing down? And what assumptions does an investor need to make to get a strong return? Tune in for all of this and more!

Shift4 Show Notes.

In this Company episode of The Synopsis we talk about Shift4, drawing from our 85-page research report to cover everything from their early history, to an overview of the payment landscape, and their unique customer acquisition model, as well as competitive moats.

We hope you enjoy!   

(0:00) — Shift4 Intro

(6:04) — Why Shift4?

(11:36) — Payment Processing Example

(18:34) — Shift4 History

(45:40) — Revenue Breakdown

(57:10) — Gateway Economics

(1:00:00) — Business Overview

(1:02:00) — Competition

(1:10:00) — Value Proposition

(1:15:56) — Capital Allocation & ROIC

(1:27:00) — Valuation

(1:32:16) — Risks

(1:38:00) — Upside

(1:40:50) — Shift4 CEO Interview Announcement

Available on all podcast players today!

Listen Spotify

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We also now have company episodes on Airbnb, Axon, Constellation Software, Perimeter Solutions, Floor & Decor, Meta, Copart, Evolution, Porsche AG, Coupang, Etsy, RH, Dream Finders Homes, and CoStar Group. Just look for the episodes with “Company.” at the begining of the title.

For more on Shift4, you can purchase our extensive research report, or become a Speedwell Member to gain access to all of our content.

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4Q25 Update.

Airbnb reported 4Q25 and the stock was up 4%.

Revenues grew +12% y/y to $2.8bn for 4Q, reaccelerating 100bps sequentially.

This marks the second time in the past year that revenues reaccelerated after slowing and puts them above the “at least double digits” revenue goal they set over a year ago.

GBV was even stronger, growing 16% y/y for 4Q (13% FX-adjusted)

This was the strongest growth they had in two years.

Nights and Seats also grew 10% y/y.

On the earnings call Brian Chesky emphasizes that there were “hundreds of improvements the team shipped driving hundreds of millions of dollars in revenue in 2025 alone. And we believe Project Why will deliver hundreds of millions more this year.”

This level of iteration and product improvement is key to their engineering organization and ability to subtly improve customer experience overtime, which shows up in higher booking completion rates.

They also focused this product iteration on localizing for a specific country like Brazil, where they were able to move from a Top 10 Airbnb market to Top 5.

Among one of their newer innovations was “Reserve Now Pay Later”. The ability to book a place without paying has significantly reduced friction. They noted that this increased booking lead time and also led to more larger homes booked.

Another update changed the way their API interacts with PMSs (property management systems). Many hosts cross-list their homes and use software to do that. The software interacts with Airbnb’s API to keep listings from getting double booked. Because of Airbnb’s history of charging the customers most of the commission with an opaque formula, it has been hard for hosts to ensure like for like pricing across platforms. So, they changed the way hosts set prices so it is easier to match it across platforms. This likely had a positive impact on bookings as Airbnb was commonly more expensive as a result of this pricing confusion.

Operating profits for the year were flat at $2.5bn, despite revenues growing 10%. This is because they have increased their product development and marketing costs for Experiences and AI.

However, CEO Brian Chesky is careful to note that they don’t need massive capital investments to take advantage of AI. They are already in the midst of incorporating AI into their app but note that the experience needs to be more compelling than a chatbot.

Right now, text boxes are the most common way users interact with AI, but travel requires more images, so they are reworking how to think about the UI of that interaction. Historically, they have been very strong on UI and so they could potentially come out with a new and novel way for users to book on Airbnb.

The goal is to help users find a listing they will love quicker, while also potentially cross-selling them on Experiences they can book for their trip. Experiences are still in early innings of being launched and they talked about how they are going to focus on city by city to build up listing density, much like how they originally did with Airbnb over a decade ago.

They briefly mentioned how sponsored ads are still a future potential opportunity, but they will have to do it in a way that is native for AI. A loyalty program could also come in the future, but similarly they want to do something different for that. Both have been long-standing opportunities to increase monetization and user loyalty, but Airbnb hasn’t rolled out a product for either yet. In contrast, Booking’s Genius loyalty program has been a strong tool to increase user retention and direct bookings.

The AI Risk.

The big risk investors are now worried about is AI. However, Airbnb is particularly well insulated against AI. Most of their inventory is exclusive to Airbnb with single hosts picking Airbnb for its ease of use. And AI can’t web scrap Airbnb without it’s permission. So, Airbnb already aggregated millions of listings, often with an on the ground effort to do so and replicating that isn’t trivial. AI may be able to book on Airbnb through an API or the “agentic web”, but they won’t be able to easily reach the host otherwise.

Among the inventory that is cross listed to PMS systems, the risk of agents accessing this inventory and circumventing Airbnb is a bit higher. However, users like booking on Airbnb because of the insurance policies and support network. The host also loses insurances if the booking is off platform.

There also is Airbnb’s repository of reviews and rating, which helps weed out lower quality listings and helps hosts feel more comfortable with their guests. AI would need to replicate this and won’t be able to until it has a high level of bookings across millions of properties.

Lastly, what is the interface for this AI? A chatbot seems unlikely to be a great experience so something new will have to be invented. This is exactly what Airbnb is trying to do. As CEO Brian Chesky notes, the AI models are available to everyone to use. So, they will be able to do everything with AI that this theoretical AI agent would be able to.

Now Airbnb does still have some risk here because a very large portion of traffic is direct to them. So, if in the future most travel journeys start with an AI agent, then they may have to pay to acquire that traffic, or the AI agent may be able to book on Airbnb without the user ever going on the site (using the so called “agentic web”). While Airbnb is still a critical piece of infrastructure, providing aggregated listings, review data, insurance, payment facilitation, and support, it does mean that the user will have less loyalty and their margins might be compressed in this sort of transaction.

However, while this is a risk, it doesn’t seem like the most likely of scenarios. When a user wants an Airbnb type home, they think Airbnb and go to Airbnb. It seems unlikely that this behavior will totally change in the future. Users can start these searches today on Google instead of Airbnb, but they pick Airbnb because it is a better experience. With them solely focused on incorporating AI into the travel experience, and other AI companies like Google focusing on bigger opportunities, it makes sense that Airbnb would be able to create a compelling experience before other AI companies.

That’s not to say OpenAI and Google won’t have something for the travel space, but just that it isn’t likely to be such a superior experience that it weighs on Airbnb’s direct traffic. This is especially true because they don’t have access to their inventory as of now.

With technology changing quickly though, there is still risk here.

Valuation.

Airbnb currently...

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Get smarter on investing, business, and personal finance in 5 minutes.

Hello! I wanted to share a popular recent stock breakdown of mine on Adobe. (Their stock is down ~60% and now trades at 14x free cash flow and is still growing). This post was orginally shared with readers of Five Minute Money weeks ago. We’ve already published over a dozen stock breakdowns and other investing posts on the newsletter. You can join (totally free) below!

Five Minute Money Newsletter

Stock Breakdown

Can a stock drop 50% for seemingly no reason?

What if that sell-off happened while revenue and profits kept increasing…

…and the broader market was up?

Usually when there is a prolonged sell-off of that magnitude there is either: 1) financials deteriorating, or 2) a bear market.

There revenues grew 10% y/y and margins are expanding…

And the market is up +39% over the period it has been down -57%.

So, what is driving this sell-off?

Unsurprisingly, AI.

We know markets tend to overreact.

So, is this a moment of Mr. Market’s irrationality?

Or an opportunity for investors?

In this Five Minute Money, we will break down Adobe stock and argue that the real risks, are not what investors may think…

There are three key factors investors need to think about:

1) A business model transition

2) Competition (especially in their analytics segment which has more “encroachment” risk)

3) And a key AI question.

Let us first start with how the business makes money.

Business.

They have three reportable segments:

1) Digital Media: $17.4 billion in revenues, growing

2) Digital Experiences: $5.4 billion in revenues, growing

3) Publishing and Advertising: $100 million in revenues and shrinking. This is a small legacy business we will ignore

The Digital Media segment is their main money maker.

It boasts incredibly high gross margins of 95%.

This segment includes their flagship apps like Adobe Photoshop, Illustrator, Lightroom, Premiere Pro, and Firefly.

It also houses their Creative Cloud Subscription, which gives users access to all of their apps. (Similar to buying the Microsoft Suite)

Also in here is their PDF editor, Acrobat solutions.

Last disclosed, in 2024 the “Creative” business was 80% of revenues ($12.7bn). and the Document Cloud was the other 20% ($3.2bn).

Document cloud was growing ARR at 22% and Creative was growing at 11%.

The Creative business caters to artists, designers, and developers for photo editing, design, video, animation production, and mobile and game development. They primarily focus on enterprise here, although there is a large swath of “prosumers” who use their products that blur the line.

Competition with creative tools is coming primarily from Canva on the low-end and services that focus on one vertical like Figma in the UI/UX, and Davinci, CapCut, or Apple’s Final Cut Pro for video editing.

Canva offersfree to start design software that can be used for a variety of different design products. They are focused more at the lower end of the market, whereas Adobe profits most at the higher end.

However, Adobe still competes at the lower end because getting broad familiarity with their tools is important because novice designers or students can eventually move up to the professional world.

Canva last raised at a $42 billion valuation and is estimated to have around $3.5 billion in revenues, showing they are taking a real bite out of Adobe’s market.

Their website is very easy to get started on, whereas Adobe is known to be more “intimidating”.

Canva isn’t complacent with their existing market though. They made an acquisition of Affinity which has more complex tools for professionals.

They lack the full integrations that Adobe has though (more on this later).

Adobe also has file advantage in that many enterprises want an Adobe .psd file so they can make changes later. (Yes there are tools to convert files, but they aren’t perfect and then may require more adjustments to make it right.)

Figma is a UI/ UX design application that designs websites, mobile apps, and software.

It is very popular and integrates better with the actual coding of the applications. A designer can turn elements into “pasteable” code.

It was viewed as such a superior product to Adobe’s “XD” product that Adobe tried to acquire Figma for $20 billion.

The acquisitions was blocked though and Adobe ceded this market.

Now Adobe integrates with Figma, who they are trying to treat as just a point solution tool to the Adobe platform.

Video editing is also a fragmented market with Adobe’s Premiere Pro in the lead. Adobe has a good chunk of corporate, ad agencies, prosumer usage.

Apple’s Final Cut Pro is also up there, though, followed by DaVinci Resolve, which has a pretty good free product as well as premier tools. Avid Media Composure is used by most of Hollywood, and then Bytedance’s CapCut is on the low end for social media (especially mobile editing).

Since Adobe Premiere is so popular, many enterprises may request the raw Adobe prproj file format, so they can make changes later (similar to Photoshop). This keeps even freelancers who don’t have a big benefit of being in the Adobe ecosystem on the Adobe Premier video editor.

Others might be good at one task, but Adobe is the best across multiple tasks and integrates everything.

It is similar to how many view Slack as better than Teams, but Teams is a part of the Microsoft ecosystem, which makes it easier to use it.

The other business in the Digital Media segment is the Document Cloud Business, which caters to basically anyone that needs to use PDFs. This has very different end markets including legal and financial industries, as well as widespread business usage.

These two suites of products represent $17.4 billion in revenues or about 75% of total subscription revenue.

They also sell …

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Background.

We decided to look at Ferrari given the large sell-off in shares (-35% from peak) and high quality nature of the business. They may sell only ~13k iconic luxury performance vehicles a year, but generates €7bn in revenues with 28% operating margins.

Whereas a typical car maker like Ford makes $2.5k in operating profits per vehicle, Ferrari makes $142k. The wait list for a Ferrari is 2 years, showing demand predictability that is very uncharacteristic for car manufacturers. They currently trade at 32x TTM earnings, down from a P/E ratio of over 50x.

We hope you enjoy this long excerpt of our report below!

Founding History.

A lover of motor sports racing, Enzo Ferrari started his career at Alpha Romeo as a competition driver and talent scout. Enzo wanted to directly manage a racing fleet though and in 1929 struck a partnership with Alpha Romeo. He would create a business called “Scuderia Ferrari” that managed race cars for wealthy people to compete in races.

Scuderia is Italian for “stable”, referring to a stable of horses. Thus, Scuderia Ferrari would handle all racing aspects for their rich clients and use the funds to purchase Alpha Romeo race cars. In turn, Alpha Romeo would provide Scuderia Ferrari with technical assistance. Ferrari would also try to make a surplus to attract more talented drivers who had a better shot of winning the races, so they could build a name for themselves. Enzo Ferrari pitched this to Alpha Romeo as a win for the Alpha Romeo brand if their cars won, and no downside if they lost because it was attached to the Ferrari name.

In 1933, Scuderia Ferrari became the de facto race team for Alpha Romeo when they abandoned their own racing efforts after financial troubles that led them into state control. The partnership was amended over the years, but eventually the autonomy and lack of control from Alpha Romeo resulted in them reabsorbing Scuderia Ferrari into Alpha Romeo. Predictably, Ferrari couldn’t stand his loss of independence for long and left in 1939. That same year he started Auto Avio Costruzioni because a non-compete prevented him from using his Ferrari name.

Business History.

As WWII ramped up, Enzo’s business was directed away from building race cars and instead had to help the war effort by manufacturing hydraulic grind machines. In 1943 they moved their workshop from Modena to Maranello to comply with the governments mandate to decentralize industry during the war. (This was done to spread out potential allied bomber targets.) It wouldn’t be until 1947 that the first car was manufactured with the Ferrari name, 125S. Initially, Enzo Ferrari described it as a “promising failure”.

In short while though, Ferrari was winning races and getting attention. His real passion lay in winning races, but in order to fund the racing endeavors, he knew he would need to sell cars to the public. In time they moved away from one-off production vehicles to “series production” cars, their first of which was the Ferrari 250GT in 1958. They built around 350 of these over 2 years, a huge ramp up in production for them given the highly bespoke nature of each vehicle and their small shops. The car quickly became a symbol of true wealth, status, and luxury with celebrities like Steve McQueen driving around Hollywood in one.

Despite their success in penetrating the upper echelons of society, the cost of racing weighed on the business and Ferrari contemplated an offer from Ford for $18mn in 1963. At the last minute though Enzo realized this would give Ford control over the racing budget and he stormed out of their meeting—seeding the feud of Ford vs Ferrari. Instead, Enzo turned to Fiat a few years later to buy a 50% stake, while retaining total control of the racing division. With the help of Fiat they were able to triple their production in the 1970s vs the prior decade with about 16k cars produced over the full decade. This was still by all measures an extremely low amount of production.

Part of the brilliance of Ferrari was making it purposefully hard to attain in order to build desire. An anecdote demonstrating the lore was a customer who was impressed with the cars after visiting the factory and wanted to buy one. Despite having ample inventory, Enzo Ferrari refused to sell him any on the spot, believing that: “A Ferrari must be desired. It cannot and must not be perceived as something that is immediately available, otherwise the dream is gone”. (Although, learning more about Enzo, it is also just as possible he didn’t like him as he didn’t love his customers who he referred to as a “necessary evil” in order to support their race department). Nevertheless, this practice of keeping waitlists and making customers jump through hoops to get the Ferrari of their choice was key to building the brand.

In 1988 Enzo Ferrari passed away and Fiat took their stake up to 90%. Despite the group ownership, they were able to maintain their identity and started to dominate again in F1 racing with Michael Schumacher. They also modernized their factories and focused on making their vehicles more drivable and reliable. With Enzo out of the picture, it was also easier for them to start to monetize the brand more with merchandise and licensing. In 2002 they opened the first Ferrari store.

Most impactful to the financials though was the increase in production. In the early 90s they were producing around 2k annually, which increased to over 7k by 2015. Despite this increase in volumes, it corresponded with a rising wealthy class, especially with the development of China, the Middle East and the rest of Asia, keeping demand comfortably ahead of supply.

In 2015, Ferrari was “spun out” of Fiat Chrysler Automobiles (FCA). FCA sold 10% of Ferrari to the public, raising nearly $1bn, and then distributed the other 80% to FCA shareholders (the other 10% was held by Enzo Ferrari’s son, Piero. A holding company called Exor was a large FCA shareholder and currently retains a ~23.5% stake in Ferrari from the distribution). In addition to the $1bn FCA raised, they also settled Ferrari with about $3.2bn in debt.

While FCA may have talked about having Ferrari trade independently from the legacy manufacturer in order to get a higher valuation, they ultimately conducted this transaction to raise money to reinvest back into the Fiat Chrysler business, which was suffering.

Following the spin-off, they increased their production cap of 7k vehicles annually to 10k, feeling that the market could support it and they were leaving too much money on the table. Ferrari also made a push into personalization, which could easily add another $100k to a customers bill.

In the 3Q25 earnings call they noted that personalization now represents 20% of the Car and Spare Parts revenue.

From 2013 to 2017 Ferrari grew revenues 10% annually, but increased shipments by only 5%. They set out the ambitious goal to grow EBIT to €1.2bn by 2022, about 50% higher than the €820mn they would end 2018 with.

They would end 2022 with €1.22bn (the following year they would smash this record, growing EBIT 31% to €1.6bn). Their strategy of focusing on 1) customization, 2) broadening out the models they offered—like with their first ever 4 door Ferrari, and 3) introducing “Icona” vehicles, which are very limited production, but are 5x more expensive than a “regular Ferrari”, did wonders for their financials. Operating margins moved from 19% in 2016 to 29% LTM. EBIT now stands at over €2.05bn on €7bn in revenues.

But while Ferrari still has many loyal fans—and buyers—the question is how careful do they have to be walking the fine balance between volumes and price? Is the increase in models going to eventually confuse customers and work against them? With a focus on financial performance as a standalone company, is there a risk that as they succeed financially, they risk losing the very thing that made people love them?

We will cover all of this and more below, but first we will say more about the business.

Business.

Ferrari is a leading luxury car manufacturer based in Maranello, Italy. They manufacture vehicles in-house and primarily sell them to their authorized dealership network, who then in turn sell the vehicles to the end customer. There are some exceptions for one-off special cars and track cars, which they sell directly to the end customer. At the end of 2024, their network comprised of 180 dealers who operated 200 points of sale. Ferrari does not own any dealerships, but they do have strict selection of dealers to ensure high service levels.

Ferrari has three revenue segments: 1) Cars and Spare Parts, 2) Sponsorship, Commercial, & Brand, and 3) Other.

Cars and Spare Parts. This segment comprised 85% of their revenues or about €6bn LTM. This has been the primary growth driver of the business, increasing revenues about 3x, or about a 11% CAGR since 2015. As the name suggests, this is where they recognize all of the car sales, as well as spare parts. Included in this segment is any revenues generated from personalizing a car.

Since 2016 Ferrari has grown volumes at a 6.5% CAGR. This excludes the limited race series cars and the one-off special cars they produce. They now produce just under 14k cars annually, up from 8k in 2016. Despite this volume growth, there is still far more demand for Ferrari’s than they produce with a waitlist that generally exceeds 20 months (more on this and the “TAM” later).

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Ferrari Table of Contents

1. Founding History.

2. Business History.

3. Business.

4. Ferrari Business Model.

5. ROIC.

6. Valuation.

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4Q25 Update.

Evolution reported 4Q earnings and the stock dropped -6%.

Revenues shrunk -4% y/y, but grew q/q +1.4%. On a constant currency basis, revenues were +4.9%.

Live revenues were -5%, marking the second consecutive quarter of contraction, driven by on-going Asia and EU weakness. RNG was +2%, which is down from the high single digit growth they briefly experienced in 2024 (and have been trying to get back to since). Again though, forex was a material headwind in the quarter.

They made some progress on the Asia cyber situation, but it still is hampering their results and there is no clear timeline when that will reverse. Rather CEO Martin Carlesund frames it as a long and slow battle where they have to continue to adapt to win.

The mildly positive development in Asia was offset by Europe losing regulated market share. As a reminder, Evolution has “ring-fenced” their EU operations which makes it harder for unlicensed operators to offer their games. While on the one hand this greatly ensures compliance with local laws and regulations, it also means that unregulated sites (which haven’t been clamped down on) are simply offering competitors games.

On the call they talked about further “channelization”, which means more players are playing in unregulated markets rather than through regulated sites. This can be because regulated sites have to follow rules like monthly deposit limits that restrict how much a player can bet. The odds can also be better because these operators often skirt gambling taxes. The more onerous the taxes and regulations become, the more players would rather play illegally. This can be solved by either lightening up the restrictions that are pushing players away from regulated markets, or by increased enforcement of unregulated operators. The latter (as we know from Asia) is far harder though.

They also disclosed a new table that shows geographic breakdown by customer’s location (instead of the players). This, unsurprisingly, shows that despite 37% of revenues coming from players with Asian IP addresses, only 3% of customers are officially based in Asia (many used licenses for Malta).

Given the headwinds in Europe and Asia, it is no surprise that Evolution emphasized investing in the United States and South America more. The U.S. grew +9% y/y and Latin America was +12% y/y. They noted that one of their main Live competitors in Argentina decided to shutdown their operations.

Operating margins were 58.2% for the quarter, down 290bps y/y and 30bps sequentially. Despite the growth in expenses (+4% y/y), they noted on the call that they are starting to see the benefits of their focus on operational efficiency: “we are beginning to see the benefits of our initiatives to drive operational efficiency. Several initiatives are ongoing when it comes to optimization of our tables and studios as well as the way we work with our supporting functions”

They also disclosed a new chart that shows total tables.

Below we can see that in the last year revenue per table has fallen after consistent gains since 2020. However, they increased their table count 300 or 17% last year. If we hold the table count steady, the revenue per table would be down -8% (instead of the 15% shown below). This can largely be attributed to the weakness in Asia and Europe.

On the other hand, it does support the claims that they have been making operational efficiency improvements because operating profits for 2025 are -5% versus a much larger drop in revenue per table.

They have not announced a new capital allocation plan yet, but will during the AGM in a couple weeks. They emphasized that between dividends and buybacks, investors received a 9% shareholder yield. Their dividend yield alone stands over 5% now.

Total EPS was €5.24, down from last year’s €5.94. Although a higher tax rate in 2025 explains a good portion of the reduction. At the ADR’s current price of $60 a share, that puts them at 9.5x earnings (after converting the EPS to USD).

Business Commentary.

Big picture this quarter was mixed. Currency headwinds turned a 5% growth quarter into a revenue contracting quarter. Asia was better than feared as last quarter it seemed another revenue contraction wasn’t off the table. However, the tussle between Evolution and the cyber criminals will continue to go on with no clear end in sight.

The EU developments are negative as regulation is pushing more players to play illegally. This is not something that seems like to reverse soon, but unlike the Asia situation, there could be a change to policy which quickly reverses this situation. Whether EU regulators have a desire to is another matter. But in theory if regulators are concerned about protecting players, by them being too draconian with regulations, they are pushing the most vulnerable players out to illegal markets and also helping aid a slew of other criminal activity that tends to come along side illegal gaming.

On the other hand, our fear is that regulators tend to be too idealist and may not be willing to fully accept how their well-intended policies are actually causing net harm. It is important to keep in mind that many of these countries tax gaming and if gaming revenues drop too much, that could be a trigger to reconsider policies. At the very least this will be a head wind for the next 2 quarters as they lap their EU ring-fencing efforts (but possibly longer as players won’t shift back to regulated gaming until a policy shift is enacted).

Outside of that, The United States and Latin America continue to be bright spots. Competition is also not really a factor—the only time a competitor in live casino is really winning is because they are able to offer games illegally (which comes with benefits like better odds from skirting taxes and no player deposit limits).

While few investors would have been happy owning the stock a year ago had they known Evolution would start losing revenues, at this point they now trade at 9.5x earnings. This is a multiple typically granted to companies that are thought to have no growth prospects and possibly are at risk of indefinitely shrinking revenues—a melting ice cube in other words.

Most of their earnings are now being paid out to investors in the form of stock buybacks or dividends. Any growth they do have requires relatively de minimis capex. The key question investors are faced with now is whether they think the Asia situation is likely to get worse from here or if the EU shift to unregulated gaming will continue indefinitely. Because absent of that, an investor can argue a lot of negativity is already priced in.

Below we show our reverse DCF so investors can see exactly what is priced in and the associated returns under different scenarios.

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4Q25 Update.

Meta reported 4Q25 earnings and the stock popped +7% after hours.

Their core business continues to perform very strongly with top line revenues up +24% y/y. While that is a slight 200bps decel from last quarter, it still is impressive.

Daily active people grew +7% y/y to 3.58 billion.

Ad impressions grew +18% y/y, which was an 800bps jump from last quarter’s +10% y/y.

Ad pricing increased by +6% y/y, which was 400bps less than last quarter. This is a positive as the better Meta is with ad targeting, the more ad pricing decreases initially, which improves ROAS for advertisers.

While the business is performing well, their spending has exploded. Total costs and expenses are +40% y/y and operating income was up only +6% y/y.

In 2026 they anticipate another huge jump up in expenses, with guidance calling for $162-169bn in costs, up about +41% y/y at the midpoint. Part of this is because of an increase in depreciation (as readers will recall we anticipated this over the past several write-ups), and also growing infrastructure costs (again).

They also note that the second-largest contributor to total expense growth will be employee compensation, which includes AI hires. (Next year will be the first full year of all of those very high AI researchers pay packages that grabbed headlines).

Unsurprisingly, investors should not expect much earnings growth next year. Meta’s press release noted 2026 operating income would be “above” 2025, suggesting barely any growth.

The discrepancy between cash flow from operations and free cash flow is as large as it’s ever been. On the one hand they have generated an impressive $95bn in operating cash flow in 2025 (after subtracting SBC and despite Reality Lab losses). However, after capex and financing lease payments, free cash flow drops to just $23bn.

Capex is expected to increase even more next year to $115-135bn, meaning free cash flow will likely all but disappear.

Business Commentary.

Zooming out, Meta is killing it. They seem to be one of the clearest beneficiaries of AI and every stat on the call mentions how AI is improving time spent or ad conversion. Instagram Reels watch time was up +30% y/y in the United States. Facebook optimizations resulted in a +7% lift in organic feed and video posts, which resulted in the largest quarterly revenue impact from Facebook product launches in two years. A new ad attribution model drove a +24% increase in incremental conversion vs their standard attribution model. Their “GEM” model drove a +3.5% lift in ad clicks on Facebook and a +1% gain on Instagram. And adjusting the timing of when an ad is shown on Facebook drove a 4x larger revenue impact than just increasing the ad load, suggesting ad optimization can continue on a new vector besides matching the right ad to the right person.

Even outside of content recommendations and ad targeting, AI is benefiting the actual ad copy. Their video generation tools hit $10bn in revenues in 4Q, with q/q growth outpacing the increase in overall ad revenue by nearly 3x, suggesting this will be a new driver to increase advertisers’ willingness to spend.

There also is AI agents, which they think will help them build new products and work more efficiently internally. They noted that they saw a 30% increase in output per engineer with agentic coding.

Zuckerberg also talked about how AI can change the app from an algorithm to a more personalized experience. He was sparse on details (and historically there haven’t been too many changes to the core app that they have invented that users appreciated. The original Feed idea was a Facebook invention, but Stories and Reels were copied).

Zuckerberg is really trying to tie together their family of apps, AI, and their Reality Labs efforts. He noted that: “Glasses are the ultimate incarnation of this vision” with automatic data collection feeding an AI that can create a custom UI for the user. Zuckerberg seems so impressed with his own vision that he commented: “It’s hard to imagine a world in several years where most glasses that people wear aren’t AI glasses.”

While the glasses are more popular than Apple’s VisionPro and they are best positioned for the shift to AR/VR, the existing products have yet to find a compelling use case for consumers with lackluster retention. Of course that could change… and Meta has bet close to hundred billion believing it will.

For the first time this quarter they noted that Reality Lab losses will start to go down after next year (starting in 2027). This will no doubt be more than welcomed by investors, but the $20bn in RL losses are quickly overshadowed by their expenses expected to increase beyond $162bn (at the low end) next year.

The real call option is not Reality Labs, but AI. They are spending as much if not more than any other player to research and build infrastructure for AI. While they have been largely lacking from the AI race leaderboards, Meta spent an incredible amount of money to attract top talent last year to change that. Zuckerberg expects that in the next few months they will start to ship new models. He doesn’t expect the first model to be revolutionary but believes the system (and money) they have in place will allow them to reiterate faster than competitors to eventually push them to the frontier.

It doesn’t seem like many investors (or AI researchers) necessarily believe that, but that would be the real blue sky scenario. If such an outcome happened, they could spin up a new consumer app or increase engagement on their existing family of apps with deep AI integration. Although, out of all the big tech players, it is hard to see people trusting Meta with all of their personal information, and even if they have a better model, competitors have already built a habit with users regularly using ChatGPT and Gemini. That only means that the bar has risen even more for them to displace existing usage.

However, they don’t need a knock out consumer product to be successful here. Even creating better models that are lighter (require less compute and thus money) could be a big win for them. Right now they can’t deploy their biggest models for ad targeting and have to create lighter ones. These are cheaper to use and have a better ROI, but are not as effective.

While AI is no doubt benefiting Meta and they are getting an ROI with revenues reaccelerating to 20%+ from -1% in 2022 and +16% in 2023, it is worth remembering that expenses increased +40% in this quarter (+25% for 2025) and it is unclear how much of this was needed to support this growth. While we suspect a majority of these expenses are “growth” and not “maintenance”, which implies they are not ongoing, it is possible that pinging all of these AI models costs more than their legacy machine learning models. They may be driving revenue growth, but the cost to get that revenue growth is going up too. FOA margins were 60% in 4Q24 versus 52% this quarter—and that is before a lot of the elevated capex runs through as depreciation.

That is not to say that it is a bad ROI or a poor investment, but just something to be aware of. Said another way, they had to increase investment if they wanted to continue to grow. We just don’t know yet how much of this investment can be curtailed with them keeping much—or all—of the benefit.

To understand what is priced in and the growth an investor needs to assume in order to make a return, we turn to our Reverse DCF.

Valuation.

Meta currently…

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Meta 4Q25 Call Notes

FOA

• More than 3.5 billion DAUs. Includes more than 2 billion daily actives each on Facebook and WhatsApp and just shy of that on Instagram.

• Q4 total Family of Apps revenue was $58.9 billion, up 25% year-over-year. Q4 Family of Apps ad revenue was $58.1 billion, up 24%

Ad Impressions & Pricing

• In Q4, the total number of ad impressions served across our services increased 18% Impression growth was healthy across all regions, driven primarily by engagement and user growth and, to a lesser degree, ad load optimizations.

• The average price per ad increased 6% year-over-year, benefiting from increased advertiser demand, largely driven by improved ad performance.

Reality Labs

• We are directing most of our investment towards glasses and wearables going forward while focusing on making Horizon a massive success on mobile and making VR a profitable ecosystem over the coming years.

• I expect Reality Labs losses this year to be similar to last year, and this will likely be the peak as we start to gradually reduce our losses going forward while continuing to execute on our vision.

• Sales of our glasses more than tripled last year, and we think that they’re some of the fastest-growing consumer electronics and history. I think that we’re in a moment similar to when smartphones arrived, and it was clearly only a matter of time until all those flip phones became smartphones. It’s hard to imagine a world in several years where most glasses that people wear aren’t AI glasses.

• The year-over-year decline in Reality Labs revenue is due to us lapping the introduction of Quest 3S in Q4 of 2024 as well as retail partners procuring Quest headsets during the third quarter of 2025 to prepare for the holiday season, which was recorded as revenue in Q3.

• Today, our apps feel like algorithms that recommend content. Soon, you’ll open our apps, and you’ll have an AI that understands you and also happens to be able to show you great content or even generate great personalized content for you. Glasses are the ultimate incarnation of this vision. They’re going to be able to see what you see, hear what you hear, talk to you and help you as you go about your day and even show you information or generate custom UI right there in your vision.

Cloud & Compacity Constrained

• We are compacity constrained. Demands for compute resources across the company have increased even faster than our supply. So we expect over the course of 2026 to have significantly more capacity this year as we add cloud. But we’ll likely still be constrained through much of 2026 until additional capacity from our own facilities comes online later in the year.

Agentic AI

• Our vision is building personal super intelligence. We’re starting to see the promise of AI that understands our personal context, including our history, our interests, our content and our relationships. A lot of what makes agents valuable is the unique context that they can see. And we believe that Meta will be able to provide a uniquely personal experience.

• Today, our systems help people stay in touch with friends, understand the world and find interesting and entertaining content. But soon, we’ll be able to understand people’s unique personal goals, and tailor feeds to show each person content that helps them improve their lives in the ways that they want.

• Our ads today help businesses find just the right very specific people who are interested in their products. New Agentic shopping tools will allow people to find just the right very specific set of products from the businesses in our catalog. We’re focused on making these experiences work across both our feeds and across business messaging, significantly increasing the capabilities of WhatsApp over time.

• I just think the fact that agents are really starting to work now is quite profound. And I think it is going to allow — we’re already starting to see the people who adopt them are just being significantly more productive. And there’s a big delta between the people who do it and do it well and the people who don’t. And I think that’s going to just be a very profound dynamic for, I think, across the whole sector and probably the whole economy going forward in terms of the productivity and efficiency with which we can run these companies

Content Evolution

• People want to express themselves and experience the world in the most immersive and interactive way as possible. We started with text and then moved to photos when we got phones with cameras and then moved to video when mobile networks got fast enough. Soon, we’ll see an explosion of new media formats that are more immersive and interactive and only possible because of advances in AI.

• We’re going to see the generation of media improve the quality of content, which, coupled with the improvements in the recommendation systems, we expect to generally accelerate the quality and effectiveness of the core business, both for people who use it organically and for businesses. So I think that will have a compounding effect.

Flattening Teams

• We’re investing in AI native tooling so individuals at Meta can get more done, we’re elevating individual contributors and flattening teams. We’re starting to see projects that used to require big teams now be accomplished by a single, very talented person

• There are two primary factors that drive our revenue performance

1. Our ability to deliver engaging experiences for our community

   • Instagram Reels had another strong quarter with watch time up more than 30% year-over-year in the U.S.

   • Facebook, video time continued to grow double digits year-over-year in the U.S. The optimizations we made in Q4 drove a 7% lift in views of organic feed and video posts on Facebook, resulting in the largest quarterly revenue impact from Facebook product launches in the past two years.

2. Our effectiveness at monetizing that engagement over time

AI Dubbing

• One area we’re already seeing promise is with AI dubbing of videos into local languages. We are now supporting 9 different languages with hundreds of millions of people watching AI translated videos every day. This is already driving incremental time spent on Instagram, and we plan to launch support for more languages over the course of this year.

Video Creation Tool Traction

• We are also seeing strong traction with our media creation tools. Nearly 10% of the reels people view each day are now created in our Edits app, almost tripling from last quarter. Within Meta AI, the number of daily actives generating media tripled year-over-year in Q4.

• The combined revenue run rate of video generation tools hit $10 billion in Q4, with quarter-over-quarter growth outpacing the increase in overall ads revenue by nearly 3x.

Threads

• Threads is also seeing strong momentum again, benefiting from recommendation improvements. The optimizations we made in Q4 drove a 20% lift in threads time spent.

• Within threads, we’re beginning to expand ads to all remaining countries this month, including the U.K., European Union and Brazil.

WhatsApp

• On WhatsApp, we expect to complete the rollout of ads in status throughout the year with the level of ads remaining low in the near term while we follow our standard approach of optimizing ad formats and performance before ramping inventory.

• Paid messaging within WhatsApp continues to scale as well, crossing a $2 billion annual run rate in Q4.

Business AI

• Click to message ads revenue growth accelerated in Q4 with the U.S. up more than 50% year-over-year, driven by strong adoption of our website to message ads which direct people to a business’s website for more information before choosing to launch a chat.

• We’re seeing good early traction with our business AIs in Mexico and the Philippines, with over 1 million weekly conversations between people and business AI is now happening on our messaging platforms. This year, we will expand availability of our business AIs to more markets, while also extending their capabilities so they not only answer questions on topics like product availability, but can help people get things done right within WhatsApp.

Guidance

• We expect our first quarter 2026 total revenue to be in the range of $53.5 billion to $56.5 billion. Our guidance assumes foreign currency is an approximately 4% tailwind to year-over-year total revenue growth based on current exchange rates. We expect full year 2026 total expenses to be in the range of $162 billion to $169 billion. We anticipate 2026 capital expenditures, including principal payments on finance leases to be in the range of $115 billion to $135 billion, with year-over-year growth driven by increased investment to support our Meta Superintelligence Labs efforts and core business. Despite the meaningful step-up in infrastructure investment, in 2026, we expect to deliver operating income that is above 2025 operating income.

• I expect both full year reported and constant currency revenue growth to be below the levels in Q1 for a few reasons. First, we would expect that currency tailwinds will dissipate later in the year based on current rates. Second, we’ll be lapping stronger periods of growth later in the year that benefited from our 2025 ad performance investments and the strong macro landscape. And finally, we expect there could be some headwinds from our introduction of the revised less personalized ads offering in the EU that begins rolling out later in Q1.

Manus Acquisition

• You have a significant number of businesses that already pay a subscription to basically use their tool to accelerate their business results and integrating that kind of thing into our ads and business managers, so that way we can just offer more integrated solutions for the many, many millions of businesses that use and rely on our platforms is going to be really powerful, both for accelerating their results using the existing products that we have and I think adding new lines as well.

Online Commerce

• The online commerce vertical was the largest contributor to year-over-year growth. That was followed by professional services and technology. So in online commerce, year-over-year growth was strong. It was actually relatively consistent with Q3 levels and that was broad-based across advertiser regions and sizes.

3 Ways Meta is Improving Recommendations

1. Scaling up the models and increase the amount of data we use, including a longer history of content interactions to further improve the overall quality of recommendations.

2. Continue to make recommendations even more adaptive to what a person is engaging with during their session. So the recommendations we surface are more relevant to what they’re interested in at that moment.

3. Deeply incorporating LLMs into our existing recommendation systems, given their capability to more deeply understand content. And so this will, I think, in particular, be useful for content that has been more recently posted since there’s less engagement data to base recommendations off of.

Meta AI

• Now available in over 200 markets.

• Will be available to more advertisers, so each business has an AI assistant they can chat with that remembers their businesses’ goals and provides personalized recommendations on how to improve performance.

Capital Allocation

• Right now, we think the highest order priority for the company is investing our resources to position ourselves as a leader in AI. And so that is really the — that’s kind of the first order of use of capital, but we’ll continue to be opportunistic and evaluate repurchases versus other uses of cash.

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4Q25 Update.

LVMH reported full year 2025 results, which were lackluster, but in line with prior management communications.

Revenues contracted -5% for the year, or about -1% on an organic growth basis. Currency was a negative -4% headwind, but they noted that it started off the year as a positive +3% and ended the year at negative -6%, suggesting that if this current currency paradigm is maintained, sales will have another headwind in 2026.

Within the business breakdown, the most important segment—Fashion & Leather Goods—generated negative -3% y/y growth for 2H25, which was an improvement over the first half of the year of -7% y/y.

Europe and Japan experienced softness, ending 4Q25 with -2% y/y and -5% y/y growth, respectively. United States also softened q/q 200bps to +1% y/y. Asia recovered in the second half of the year, but growth slipped a bit in 4Q, down 100bps to +1% y/y.

Overall, it is not the best macro backdrop for luxury goods, with tariffs and geopolitical strives adding to consumer’s uncertainty and desire to spend. Having said that, they still generated €37.7bn Euros in their Fashion & Leather Goods division, which isn’t much lower than their all time record of €42bn in 2023.

The Wines & Spirits divisions also faced headwinds, down -5% for the year. On the call they noted the only growth market in alcohol is ready-to-drink beverages for €3.50 a pop. They believe this demand softness is cyclical though.

Perfumes & Cosmetics also had an uneventful quarter with flat growth. Watches & Jewelry did a bit better though with +5% y/y organic growth, led by Tiffany’s. On the call they toyed with the idea of Tiffany’s being the leading jewelry brand in 5-10 years.

In Select Retailing, LVMH announced the sale of DFS China operations for an estimated $400mn last week. On the call Bernard noted: “DFS, less interesting. We’ve sold most of it. We’ll continue to exit slowly, but surely.” This business had continued to suffer in the aftermath of Covid with weak international travel from Chinese citizens, who represent a large part of this business’s sales. It only recently returned to break even after plummeting losses.

Overall operating profits for the year were -9%, with a little over half of that due to forex headwinds. In total they generated €17.75bn in operating profit for a 22% margin, down from 23.1% last year. While this may seem like a significant contraction, it is nothing that surprising. They occasionally experience some cyclicality, and it has been clear that post Covid the 3 years of strenth they experienced was at risk of contracting. In the first half of the year Fashion & Leather goods contracted -7% y/y, which already signaled this wouldn’t be a good year. Trends got better in the back half of the year, but it still looks like 2026 won’t be a record breakout year either, unless the current trend reverses.

Zooming out though, this is all part of the normal turbulence of an LVMH investment. Nothing is broken in the business and there is no clear signs that their brands are eroding or becoming more unpopular. The rest of the industry is facing similar headwinds, and in fact LVMH has generally held up better.

We can see that since 2019 they have grown revenues and operating income at a 7% CAGR. With their current margins at 21% versus peak at 27%, they probably are somewhere between the mid to the low end of what their margins could be.

This context is important when looking at their current valuation multiples. While they are not as cyclical as an automaker or miner, they do still experience ups and downs and they are currently undergoing some consumer pressure. Below we can see that they trade at 30x trailing FCF or 27x earnings. However, in a more benign economic backdrop (like 2024) they trade on 23x earnings.

An investor will have to decide if they are comfortable paying today for a recovery and also assuming high single to low double digit operating income growth several years out into the future. On the other hand, they get a conglomerate of some of the most heritaged luxury brands that have a multi-decade history of continuing to grow earnings power (albeit with some cyclicality) that still trade 30% below their 2023 stock price.

If you haven't read it yet, make sure to check out our 121-page Extensive Research Report here.

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We have covered Appfolio, APi Global, Airbnb, Axon, Constellation Software, Copart, Coupang, CoStar Group, Dream Finders Homes, Etsy, Evolution, Floor & Decor, Meta, Perimeter Solutions, Porsche, RH, and Walker & Dunlop, with many more coming each year!

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*At the time of this writing, one or more contributors to this report has a position in LVMH. Furthermore, accounts one or more contributors advise on may also have a position in LVMH. This may change without notice.

Many of the stocks in our coverage have had some of their largest drawdowns in history.

Constellation Software for instance is now down almost 50% from its price just last May!

That is significantly more than their largest prior draw down of 29%.

Many other names we cover also are well off their highs:

CoStar Group: -33%

Copart: -35%

Coupang: -36%

Dream Finders Homes: -38%

Floor & Decor: -43% (after rallying 25% in the past month)

Shift4: -47%

RH: -68% (from their 2021 highs)

Now we are not a stock picking service and do not give recommendations, but we know from history that the best time to own a stock is usually when it is down a lot and the original investment thesis is intact.

Instead of spending hundreds of hours researching these names yourself, if you become a Speedwell Research member today you will get access to our in-depth reports on all of these companies.

These are reports that the companies themselves have told us are among the most in-depth ever produced.

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Coupang is down over -35% from peak.

But gross profits are at an all-time high and are growing +20% y/y.

With $32bn in LTM revenues and a mature margin of 8%, they are currently trading at 15x mature margin earnings with a EV of $38bn (This sssumes they hit their 10% adjusted EBITDA target, and we layer in 2% of D&A and SBC. They already have 8.5% EBITDA margins in their Product Commerce Segment).

Coupang has executed quarter after quarter, so what is giving investors trepidation?

We talk to the Former VP of Strategy & Business at Coupang to understand all of the key risks and opportunities facing them. This is the only conversation with a Coupang executive that has touched on broader geographic ambitions (outside of Taiwan) and the detailed economics of the ecommerce business!

We cover:

• Coupang’s most important growth initiatives and business levers

• How Taiwan is trending—and whether it can ever rival the core South Korea business

• The opportunity (and challenges) of further geographic expansion

• The role of 1P vs. 3P economics in long-term margin structure

• The strategic and competitive risks investors may be underestimating

You can sign-up for this conversation for free in the link below!

The webinar will be today, Janaury 20th at 12pm EST/ 9am PST. If you miss this time, you can always watch it later after you sign-up.

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And for more on CPNG, check out our last recap on them here.

*At the time of this writing, one or more contributors has a position in CPNG. Furthermore, accounts one or more contributors advise on may also have a position in CPNG. This may change without notice.

Get smarter on investing, business, and personal finance in 5 minutes.

Stock Breakdown

For over a decade, Uber was the world’s most famous “bad business.”

As an asset-light, marketplace with no incremental costs to booking an additional ride, their profitability should have come easily.

After all, they simply took a % of each transaction with no cost of goods sold.

Their monetization model wasn’t a lot different from eBay...

Except eBay was surprisingly profitable just 3 years after founding…

Uber would take 14 years!

This long journey led to investors losing faith in the stock, sending it down to $21 a share in 2022, or >50% below it’s IPO price…

However, once they proved their profitability, it jumped +360%.

Why was Uber such a bad business model for so long and what changed to make them profitable in 2023?

And is their business model secure, or are Autonomous Vehicles going to make their profitability short lived?

Business Model.

Let’s back up to talk about the business basics.

Every month, about 190 million people use Uber.

The value of all transactions on the app for the past twelve months was about $184 billion.

Uber generates revenue by taking a cut of each transaction.

For ride-hail, they keep about 25-30% of the transaction value, with the rest going to the driver and to pay city taxes and insurance.

For food delivery, Uber keeps about 20%.

In the last year, they generated about $50bn in revenues and $4.5bn in operating profit.

The beauty of this model is that Uber doesn’t have to pay to have a staff of drivers or fleet of vehicles.

They have very low fixed costs and only pay drivers when there is a ride or order to fulfill.

They also have “dynamic pricing”, which allows them to adjust pricing up when demand is high and lower it when demand is low.

Why did it take over $30 billion in losses to ever make this business model work?

A Decade Long Broken Business.

In 2019 alone, Uber burned a whopping $8.5 billion on $14 billion in revenue.

To understand what changed, just think of these two data points.

$4.6bn was Sales & Marketing expense for 2019.

That same year they did $13 billion in revenues, meaning they spent 35% of all revenues on sales & marketing.

Do you know what Sales & Marketing is today after they increased revenues to $50 billion?

… to read the full breakdown on Uber, click the link below to sign up for the Five Minute Money newsletter for free. There will be no paywall on this newsletter ever!

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Coupang is down over -35% from peak.

But gross profits are at an all-time high and are growing +20% y/y.

With $32bn in LTM revenues and a mature margin of 8%, they are currently trading at 15x mature margin earnings with a EV of $38bn (This sssumes they hit their 10% adjusted EBITDA target, and we layer in 2% of D&A and SBC. They already have 8.5% EBITDA margins in their Product Commerce Segment).

Coupang has executed quarter after quarter, so what is giving investors trepidation?

We talk to the Former VP of Strategy & Business at Coupang to understand all of the key risks and opportunities facing them. This is the only conversation with a Coupang executive that has touched on broader geographic ambitions (outside of Taiwan) and the detailed economics of the ecommerce business!

We cover:

• Coupang’s most important growth initiatives and business levers

• How Taiwan is trending—and whether it can ever rival the core South Korea business

• The opportunity (and challenges) of further geographic expansion

• The role of 1P vs. 3P economics in long-term margin structure

• The strategic and competitive risks investors may be underestimating

You can sign-up for this conversation for free in the link below!

The webinar will be at Janaury 20th at 12pm EST/ 9am PST. If you miss this time, you can always watch it later after you sign-up.

Sign Up Here

And for more on CPNG, check out our last recap on them here.

*At the time of this writing, one or more contributors has a position in CPNG. Furthermore, accounts one or more contributors advise on may also have a position in CPNG. This may change without notice.

This is a new company report announcement. Members can access Speedwell’s Reports here. You can become a Speedwell Member here.

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While nearly every entrepreneur was chasing VC funding for the latest “.com” company in the late 90s, one prescient 16 year old dropped out of high school to disrupt a complicated and unsexy industry: payments.

Jared Isaacman started United Bank Card in 1999 to streamline the payment acceptance process. Instead of 30 page contracts that took a month to set up, he streamlined the process to take just one day.

The company didn’t take a dollar of VC money, which turned out to be its saving grace when the tech bubble crashed. Despite the lack of external funding, they were aggressive in acquiring customers, pioneering the free hardware giveaway to win customers.

They were almost too early though.

They sat in the awkward position of being the best merchant acquirer, but for an antiquated payment system. In 2012 they made their first attempt to beat back faster growing payment peers like Square and Stripe with new touchscreen hardware and a rebrand to HarborTouch. It wasn’t quite enough though.

The big strategy change came after they accepted private equity money and acquired a business called Shift4. Shift4 operated a “payment gateway”, which was the linchpin of any legacy payment process—and very tough to switch out. Instead of winning payment processing revenues by winning new customers, they could just acquire customers and then push a conversion to payment processing.

This opened up a new strategic playbook for Shift4: acquire key nodes in the payment stack, inherit the merchant relationship, and then use the high switching costs of those systems to migrate merchants onto Shift4’s payment processing.

It by and large worked.

The byproduct of this strategy meant they would increasingly move upmarket, focusing on the largest and most complex customers. Today they have an 80% share in stadiums and a 40% share in hospitality.

But not to forget the lower end of the market, they reinvented their hardware and software ecosystem to create a fully integrated platform called SkyTab. This gave them a new weapon to go after SMBs and the likes of Toast, Square, Clover, and other newer products. They now have a #2 position in restaurant.

With dozens of acquisitions, revenues are growing very fast at over a 30% CAGR since 2019. Today they generate $3.9bn in revenues and are still growing 22%, while run-rating about half a billion in free cash flow.

While they have had continued market share gains, strong profitability, and revenue growth, they also just made their largest acquisition ever. They acquired Global Blue, a VAT refund business, for $2.5bn—about 1/3^rd of their market cap at the time. In contrast to other acquisitions, investors fear the cross-sell will be much weaker. Founder Jared Isaacman has also stepped down as Chairman to run NASA. And the payment industry is as competitive as ever.

Is Shift4 going to continue to be able to win business? Was Global Blue a mistake? Is their acquisition model at risk of slowing down? And what assumptions does an investor need to make to get a strong return?

All of this and much more in our 85-page research report!

Read the full report by becoming a member below! You can also just buy the Shift4 report through the link below.

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If you are a member, you can access the Shift4 report here.

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Shift4 Table of Contents

1. Founding History

2. Business History

3. Business

4. Competitive Landscape

   1. LightSpeed

   2. SpotOn

   3. Clover

   4. Toast

5. Shift4 Model

6. Capital Allocation & ROIC

7. Valuation

8. Risks

9. Summary Model

10. Conclusion

    ---

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This is our end of the year memo on the Speedwell Research business.

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Year in Review.

Quite often people will reach out to us for advice on how to write or sell research online. I don’t think my advice is anything special, but I do tell them one thing that shakes a lot of them—if you can’t commit to doing it for at least a year with zero traction, then don’t even bother starting.

The most common reception you get creating content is no reception.

And unfortunately, in the past couple years it has only become more competitive getting investors attentions. I am very happy to say that we have moved well past that phase of writing into the void.

It is wild to say, but this marks the 3^rd full year of Speedwell Research. In our last year’s review we detailed a lot of the struggles of running an independent research firm with a relatively small social media presence that focuses on the most in-depth research, instead of the most viral. I am very happy to say that sticking with it is paying off.

While there are still many writers with a far larger reach than us, I am deeply humbled by the quality of readers and subscribers we have. It is a truly bizarre experience to have investors that have created or manage billions of dollars describe our research as their favorite. We’ve had executives at the companies we’ve written about tell us we were more knowledgeable about the business than most that work there—perhaps not always the most confidence instilling thought haha… but we do try very hard to produce the best research!

With Speedwell Research coming into its own, I started to at the same time. I was very uncomfortable putting anything on social media at the outset. I would “protect” myself by only writing things that were extremely well researched to avoid saying anything that could be wrong. This certainly had a positive outcome as our research reports are (we think) the single best piece of research you can read for a given company—provided you are interested in investing for the long term and not short-term catalysts.

But it also means that I feel very restricted when I am writing through Speedwell because I want to maintain that hard-earned reputation for researched opinions, instead of off-the-cuff takes.

While I do really enjoy the opportunity to go deep on a business and learn an industry thoroughly, I also missed looking at a business for a few hours and then talking about it—with a pretty fair chance I missed something important. This sort of thing though is the opposite of Speedwell Research’s highly produced reports.

I’ve actually struggled with this for a little bit of time now as to how to best solve that. We tried the “Investor Briefing”s under Speedwell for a while, but that content honestly just didn’t suite our brand. It did give me the opportunity to make a few points I didn’t really have a place to otherwise, but overall, it was the wrong product for us.

Expanding.

You may have noticed a few weeks ago I launched a new newsletter called Five Minute Money. This is the place where I will write more freely on all sorts of business and finance topics.

Subscribe to Five Minute Money

It is designed to be sort of the opposite of Speedwell Research. Whereas Speedwell’s writings are long, I wanted this to be short. I will sometimes only spend a handful of hours researching something before writing about it.

The newsletter is also going to be a bit broader than just stocks, as I eventually want to get to other important concepts in finance I don’t usually see covered well. (A lot of investors are focused on making money through investing stocks, but there might be a lot of other “easier fruit” in their life to maximize their wealth).

The benefit of this newsletter for Speedwell readers/ subscribers is twofold: 1) learning about more businesses will help us draw more connections that we may have missed otherwise when we do research for Speedwell, and 2) it gives us more fun topics for the podcast.

More Podcast Content.

One of the issues I’ve been running into with the podcast is that since we really only cover our stocks, we don’t always have topics to talk about. This is in part because we don’t just want to talk about short-term news that won’t matter for the business in the long-term. (We did experiment with this with the Investor Briefing and didn’t love it.)

Even us deciding to do quarterly earnings was a bit of a compromise because most things that happen in a given quarter are easily forgotten a year later. Now though The Synopsis will be able to cover more businesses, which I think our listeners will enjoy. These won’t all be as well researched as our Speedwell covered stocks, but I still think they will be better covered than 95% of what you can get out there.

The other new content that we will bring to the podcast will be some content inspired by my YouTube channel. Since The Synopsis listeners are mostly serious and sophisticated investors, not all topics I cover on my YouTube channel will be appropriate for them—some are far too simple! However, there are some videos like 8 of the Biggest Investing Mistakes I’ve Seen and Common DCF mistakes that I think most listeners will find value in.

We also have a couple of our biggest interviews yet scheduled for 2026 and hope to keep up that momentum!

(If there is an investment manager you think we should interview, feel free to reach out at info@speedwellresearch.com)

Speedwell Research Coverage.

Of course, though, research remains our primary focus with Speedwell and we want to clarify how we are thinking about what to write and who to cover going forward.

Our core product is “Extensive Research Reports” that average 80 pages in length (and have been as long as double that at >160 pages). We will write an Extensive Report when 1) a business has a lot of complexity (like Shift4 or CoStar), or 2) an interesting history that has a lot of business lessons and could help an investor understand the entrepreneur’s mindset more (like Axon or Coupang).

We have a second category of reports called “Exploratory Reports”. We rolled this category out for businesses that we decided we didn’t want to write a longer report on. This can either be because 1) they are newer public businesses with more limited info, 2) are a very simple business that didn’t require a longer report to understand, or 3) the business wasn’t as exciting as we initially thought.

Most companies we write on, we intend to actively cover. If a business doesn’t have much interest from our paying subscribers though, we will put it in the “irregular coverage bucket” (sorry Walker & Dunlop and Casey’s). The only company we dropped from our Active coverage was Etsy and that was because we changed our mind on the business quality and no longer wanted to regularly write about a “meh” company. We will explain our reasoning if we ever do move a company to irregular coverage.

It is getting harder each quarter to write updates on all of our active coverage, so if you do appreciate us writing about a name, hitting like or commenting on some piece of content helps us know who to continue to actively cover. (For paying members, we can monitor what pieces get the most downloads). For the stocks in irregular coverage, we will basically only write on them when something very material or interesting happens with them.

We get a lot of requests for businesses to cover, but if there are some high quality businesses you think warrant Speedwell Coverage, feel free to share some names with us.

There are a ton of businesses we still want to cover. Here are some in no particular order: Mercardo Libre, Pool Corp, Old Dominion, Sea Limited, Cintas, Sherwin Williams, CrowdStrike, Brown and Brown, KKR, MSCI, Watsco, Booking.com, Progressive, TransDigm, TSMC, Applied Materials, Visa, Cava, Circle Internet Group, AutoZone, Chipotle, Heico, ASML, Novo Nordisk, Intuitive Surgical, and many, many more.

Even though we have a long list of businesses we want to cover, more often than not something else pops up and grabs our interest…

Speaking of which, our next company wasn’t actually on our list... but nevertheless, we are happy to announce our next report will be on Ferrari! We expect to release it by the end of January.

Gratitude.

As this year comes to a close, I want to take a moment to express my extreme gratitude for all of our readers, listeners, and subscribers that allow us to write and invest independently. I feel truly blessed that this is my job and I get to interact with so many fascinating people on a regular basis.

Thank you.

If you haven’t already though, you can sign up for the Five Minute Money newsletter and our YouTube channel below!

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Thank you for all of your support and have a happy and healthy New Year! We are very excited for everything we plan on bringing you in 2026!

The Synopsis Podcast.

Follow our Podcast below. We have four episode formats: “company” episodes that breakdown in-depth each business we write a report on, “dialogue” episodes that cover various business and investing topics, “article” episodes where we read our weekly memos, and “interviews”.

We have a lot planned for the podcast in 2025 so be sure to follow us below!

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Speedwell Research Reports.

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This is a business update on a company we have previously written an in-depth research report on. To read the full research report become a member today. Members get access all of our research reports and all prior updates (most of which are paywalled). You can see a list of all the companies we have written on here.

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3Q25 Update.

RH reported 3Q25 results and the stock was up +6% the next day.

Revenues grew +9% y/y to $884mn, up from +8% y/y last Q. As we noted in our last update on RH, they were seeing demand ahead of revenue which suggested that revenues would re-accelerate in the back half of the year, a dynamic that began to materialize this quarter.

In the shareholder letter, they introduce a new table showcasing where RH is gaining market share from. While they have talked about competitors in the past, making a similar point of growth being higher than peers, this is the first time they put numbers around it. The inclusion of this table does make the shareholder feel like Gary has frustration with the stock price and investors not fully appreciating how tough of a market they have been operating in.

Having said that, LTM revenues of $3.4bn are still below peak revenues in 2022 of $3.8bn, despite opening up international, rolling out several new collections, and total galleries growing to 74 from 67. In contrast, Arhaus’s LTM revenues are their highest they’ve ever been at $1.36bn (versus their prior peak in 2023 of $1.3bn). Other competitors show a more mixed picture. Wayfair’s LTM revenues are $12.2bn versus their prior peak in 2022 of $12.6bn. Ethan Allan’s LTM revenues were $600mn vs their 2022 peak of $850mn. West Elm’s LTM revenues are $1.87bn versus a prior peak in 2022 of $2.3bn. This is all to say that no doubt RH isn’t the only player that is down from their Covid peaks. It may look like Arhaus is faring better than peers on a revenue perspective, but their operating margins are less than half what they were in 2022.

They also noted on the call that they are more cyclical than competitors because they have a smaller accessory business. RH originally exited that business to focus on higher end furniture (which typically carries better margins), but Gary noted on this call that they may have gone too far. They are now open to relaunching an accessory business but want to do it in an “RH way”. They won’t go back into items like holiday, which tend to be fairly reliable sales generators but usually carry a negative brand perception. Instead, they talked about stuff like branded candles or blankets. This could be another way for more customers to enter the brand without devaluing it.

RH opened its first freestanding interior design office, called RH Interior Design Palm Desert in California. CEO Gary Friedman stated that it’s already “generating a million dollars a month.” They also opened RH Manhasset in New York, but did not give any details on demand there. However, Gary Friedman did note that the RH Ocean Grill restaurant at RH Newport Beach will be their first $20mn+ restaurant and could reach mid-twenties in its second full year. He also disclosed that their restaurants on average produce enough operating income to cover 65% of the Galleries’ rent expense—this is of course in addition to being a key driver of traffic.

Tariffs were still a nuisance as they continue to shift their supply chain network. They noted that despite increased prices, demand is holding steady. However, at the same time you can find large online sales that reach as high as 60%. They didn’t talk about this on the call, but in the past they noted that only about 1/3^rd of new collections were going to stay long-term and excess items they would discontinue (which often requires discounting). Nevertheless, a 60% promotion is surprisingly high. But the seemingly elevated sales activity did not weigh on gross margins much, which were 44.1% versus 44.5% last year in the same quarter.

Gary Friedman pointed to unexpectedly strong traffic at RH’s Paris design studio (which is attached to the gallery). He noted that traffic in the most recent six-week period averaged 62% higher per week than in the preceding eight weeks. He admitted to staffing issues, particularly in the restaurant where they had to fly staff from the U.S. over who didn’t speak French—which was clearly an issue to win over local French clientele. Nevertheless, they have already started to fix these problems and chalk it up to “learnings” as they launched in their first non-US speaking country.

Moving down the P&L, operating margins contracted slightly to 12%, down from 12.5% last year in the same period. However, interest expense is still consuming operating earnings to the tune of $57mn versus $106mn in operating income. Their debt load including operating leases stood at $3.75bn for the quarter. Long-term debt was $2.4bn, down $75mn from last quarter. They contemplated issuing a new convertible on the call and again noted the excess inventory they are carrying, as well as the potential for a sale-lease back on $500mn of real estate to help work against this debt.

Gary though is unfazed by the debt burden saying on the call: “At some point, we may refinance some of the debt at some point, like, who knows, we’ve got a lot of real estate, and we think we can monetize that overtime and our inventory has been high. We’re turning inventory into cash but-- I’m pretty comfortable, I lived on the edge of bankruptcy in my first 10 years. This is nothing.”

Inventory levels continued to improve, declining $82mn q/q and -11% y/y, as they work through excess inventory. As a reminder, they had $200-300mn in excess inventory from the launch of their new collections.

Looking ahead, for the full year, they expect +9% revenue growth with adj. operating margins of 11.6-12% and free cash flow of $250-300mn. They noted that they will see a -90bps operating margin impact from tariffs for 2025.

Overall, the quarter reflected improving demand trends and continued market share gains, partially offset by margin pressure and elevated interest expense. Revenue growth reaccelerated as anticipated, while inventory reduction efforts continued. At the same time, profitability remained constrained by tariffs, higher operating costs, and a leveraged balance sheet.

Their long-term plan still haven’t changed as they continue full throttle on the international expansion and new collections introduction. They also seemed more positive on the interior design businesses after seeing results from the standalone design studio in Palm Springs. Lastly, they noted they could also have an events business where they rent out their spaces to the right clientele. Initially they were against this, but see the benefit of being associated with strong brands (Chanel was listed by name on the call) in events that are attended by celebrities and well known designers.

In terms of valuation, RH trades at a $162 stock price which puts them at a $3bn market cap or a $6.9bn EV. With $3.4bn in current revenues and an unassuming mature margin of 15%, they trade at 17x mature earnings. However, the real upside is if all of these growth initiatives pan out and the housing market returns. They are targeting $5-6bn in revenues from North America alone, with international eventually being a bigger business than North America. Ultimately, 20% mature margins seem fair (which is less than their peak of 25%). If we just assume $6bn in total revenues, at a 20% margin that is 7x earnings.

No doubt there is a lot of execution risk with RH and the large debt burden could be existential. On the other hand, between the housing market and tariffs, they are already in a very tough economic backdrop, and it is possible this is the low point for them. An investor will have to decide if they believe in the multi-decade trajectory of RH and if RH can achieve at least a good portion of their ambitions.

Call Notes

• The 6 weeks, the average per week is 62% higher than the first 8 weeks. And the first 8 weeks actually had more traffic as we -- I think, it’s still like the fall, and there was a lot of people in tariff and you had a lot of people coming in, and we still have very good traffic

Tariffs

• But I think we’re proud of how we’ve been navigating the tariff situation with pricing, with mitigation, with resourcing, with vendor partnerships, with price increases, everything

Differentiation

• We’ll do hard things and we do things that are unique and differentiated. And I think because we were more ambitious than others, we think more deeply than others and we’re not just managers of something. Managers arrange and organize the status quo. We’re leaders and leaders are leading people somewhere they’ve never been doing things they’ve never done. And leaders have to be comfortable making others uncomfortable

• Necessity is the mother of invention. Our most important innovations were birth during the most challenging and uncertain times. Our strategic separation is a result of innovating and investing during these uncertain times, and this time is no different. Launching the most prolific product transformation in history of our industry and believe the launch of our new concept in the spring of next year will reaccelerate our growth and create another step change in our business. We’re building an iconic global selling platform that will likely never be duplicated in our lifetimes.

Market Share Gains

• We believe most of the share came from the higher end and came from like -- it came to the showrooms and they came from the independents, and they came from the regional furniture stores and they came from the Ethan Allen of the world or people like that

• This is the time to make moves and take market share and create real strategic separation on the upside of it, ready for the turn. And I don’t think anybody is going to be more ready than we are

• We find it fascinating that the market chooses to reward companies that set remarkably low expectations and slightly beat them, versus setting high expectations, as we do, and at times miss them, while still meaningfully outperforming our industry.

Hospitality Progress

• The RH Ocean Grill at RH Newport Beach is our first 20 million-plus restaurant, that we believe will reach the mid-20s in the second full year, and its cash flow next year might cover the rent for the entire 90,000 square foot Gallery

RH Interior Desing Office Opening.

• We opened our first freestanding RH Interior Design Office in Palm Desert, California, with no product except for 2 small sitting areas in front of our designers’ offices. There’s 4 offices in the building and a workspace with clients. It’s a real freestanding customer-facing design firm, which really don’t exist in the world. It’s a real freestanding customer-facing design firm, and is generating $1 million a month in design business in 3,000 square feet with rent of $200,000 a year. You can do the math

How to Build a Luxury Brand in China

• Someone asked the question, how do you build a luxury brand in China and the response was you build great stores in Paris, London and New York. And I heard that years ago, and I’ve always thought about that as -- I thought about RH -- and how do we unveil this brand. We built RH New York, and we opened it in 2018. And we said that was our bridge to Europe. So we did it a little backwards. And as we think about it for our business, it’s really -- probably Paris, London, Milan and New York. Because Milan is really the 1 of the prime capitals of the world, not only for design, but also for fashion. But it’s where the biggest design show in the world is Salone where 500,000 people go once a year, and it’s also the time we’re going to open RH Milan.

Experiences Focused

• We have these unique architectural masterpieces and the ability to bring the right people because we have the right place. And I think it’s even more important -- things like everything is moving online, like I think people are dying for experiences. They’re dying for authentic connections not only with people, but with places and with history and with beauty and with food, and I mean how many nights can you order DoorDash or Grubhub, I mean I led the services when I get on time and I want to get some delivered, I don’t know, about anybody else on the phone, but I’d much rather go somewhere and see people and feel like it somewhere and connected.

• We have created new equally immersive physical experiences that are massively more capital efficient than we plan to unveil on our next call

Long-Term Thinking

• The thing I’ve learned and I’ve observed, I think so many people, they get so focused like a quarterly results that becomes their whole mission as a CEO or a leadership team is like, how do we make the quarter and they do a lot of stupid things to make a quarter that aren’t -- we’re in building or business model building or anything. And I just -- I think it’s not a smart way to build something great.

• That trend should go 15 to 20 years, when you look at the cycles. And this is the first time we’re going to actually kind of lead a cycle. We usually say like don’t go too early on the wave like a surfer, you get a false negative, the wave will go underneath you. Wait until the wave breaks. Let us see people ride that wave, learn from it and then go on the wave

For further reading, check out our RH Extensive Research Report here.

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Hello all!

We are launching a new newsletter that will focus on 1) investing, 2) business analysis, and 3) personal finance.

There is a lot of shorter stock and business thoughts I’ve had, but I have been reluctant to share them through Speedwell.

That is because I consider Speedwell Research a brand and service for high-end, professional investors and I didn’t want to bombard you with all of my shorter takes that may not be as well researched as most of what we publish.

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Welcome to the seventeenth edition of our weekly newsletter: The Investor’s Briefing.

Announcement: 3Q25 Earnings

Published a New Update on Copart! Check it out below

Copart 1Q26 Business Update: Do Volume Slips Threaten Quality Compounder Status?

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Published: Copart, Constellation Software, Airbnb, Appfolio, Axon, APi Global, CoStar Group, Coupang, Evolution, Floor & Decor, LVMH, Meta, Perimeter Solutions

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LVMH Expert Call Interview

LVMH has rallied +40% from summer lows.

Were fears of a paradigm shift in luxury overblown, or are investors overlooking key risks?

To find out, I sat down with Claire Kent, an advisor and former board member of Prada, to discuss how the luxury landscape is evolving and what investors should be paying attention to.

You can watch this conversation for free in the link below!

Watch Here

In Financial News.

Nvidia’s standout earnings initially ignited a global rally, but the enthusiasm quickly faded. Major indexes reversed sharply Thursday, marking the largest intraday swing since April’s tariff-driven market turmoil and extending a difficult stretch for the stocks most closely associated with the AI boom. The pullback underscored how investors have come expect—and price in— ever increasing expectations.

Nvidia grew revenues 62%, adding over $22 billion in revenues y/y for the quarter, their most ever. They enjoyed only a small after hours gain before leading the market into a selloff. Investors started to worry that if such a strong quarter from AI’s bellwether stock could lead to muted reactions, then perhaps the bull market is becoming overstretched.

The cost of credit-default swaps tied to Oracle, a key supplier of computing capacity and purchaser of Nvidia chips, has risen nearly 50% since mid-October, a sign of rising caution over how tech companies are financing the AI build-out. As a result of investor’s skittishness, the Nasdaq sold off almost -4% on Thursday. There was a slight reversal Friday for the Nasdaq to close down -2.25% for the week, with the S&P down less at -1.7%. Bitcoin also had a tough week, dropping 10% to $85k and is now down -31% from its peak price of $124k

The volatility coincided with the release of a long-delayed September jobs report, which ended a weeks-long blackout in economic data caused by the U.S. government shutdown. The report showed the U.S. added 119,000 positions, while the unemployment rate unexpectedly rose to 4.4%. A higher unemployment rate could give the Fed more reason to cut rates in December. On Friday, New York Fed President John Williams seemed to signal a possibility of a further adjustment in the near-term. While his phrasing is purposefully vague, traders believed it meant the Fed it now leaning more towards a December rate cut with the likelihood now priced at 73%.

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Company News.

Dior Executive Sees Luxury Market Returning to Growth in 2026

A former Dior executive says the luxury market is emerging from a difficult reset and could enter a healthier growth phase by 2026, provided brands deliver genuine product innovation, especially in handbags, and manage pricing discipline for aspirational customers.

The expert said the industry is “moving out of the quiet-luxury phase” that followed the post-Covid logo boom. Recent Paris Fashion Week collections, they argued, signaled a shift back toward “bolder but still refined” fashion.

Sentiment is improving ahead of the sales data, they said. Designer changes across nearly every major house have been well received, reigniting anticipation among core and aspirational clients. At the same time, key travel customers are reappearing: Asian demand is strengthening, and high-spending Saudi clients returned to the U.S. this summer after several weak years.

Still, North America’s aspirational buyer remains under pressure. Steep price increases have “self-selected some people out of luxury,” she warned. Chanel classic flaps moved from roughly $2,000 to $12,000 over a decade, the Lady Dior from about $3,000 to $7,000. By contrast, she stated that Louis Vuitton has maintained a more robust entry price architecture and logo canvas business, helping it keep the aspirational consumer in the fold.

For LVMH specifically, the expert cited “mega-flagship” investments, such as Dior’s new 57th Street and Rodeo Drive houses, and Louis Vuitton’s theatrical Asian projects, plus excitement around new creative directors like Jonathan Anderson at Dior, as key reasons the outlook has brightened, even if the macro backdrop and middle-tier customers remain fragile.

LVMH trades at 28x earnings.

This is from an AlphaSense Expert Call Interview.

You can get a free trial of AlphaSense here

AppFolio 2025 Investor Meeting

Appfolio had its 2025 Investor Meeting this week. The main focus of the call was differentiation and adoption. They stated that at the center is the unique AppFolio Performance Platform, which unifies three core layers: a system of record for data, a system of action for automated execution, and a system of growth for monetizing the resident and owner experience.

A key differentiator they emphasized was RealmX Performers, which is an agentic AI solution for leasing and maintenance. This innovation is driving tangible customer success, evidenced by RealmX Flows users reporting 20% higher resident retention and a 30% increase in collection rates for early adopters.

Turning to adoption, they mentioned that units on Plus/Max tiers increased from 10% to 25% since 2022. In addition, 96% customers now use AppFolio’s Realm AI tools, which is up from 40% three years ago. This has led to average revenue per unit (ARPU) growing from $66 in 2022 to $103 today.

Apply a 30% mature margin, Appfolio trades at 39x earnings.

Please note that we are considering discontinuing this weekly news wrap up of the newsletter. So if you do enjoy it, please let us know now. Listen to our Briefing podcast episode for more of an explanation as to why.

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  • Current research report in progress: Shift4, the payment provider. Shift4 caught our attention because it is in a generally sticky industry (payments + software), still has founder involvement, is growing topline over >20%, and is down -46% from peak. Stay tuned for more!

  • Business updates on Casey’s and RH

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1Q26 Update.

Copart reported fiscal 1Q26 (calendar 3Q25) and the stock was down -3% in trading the following day.

It was a bad quarter with revenue growth of just +0.7%. Adjusting revenues for the cost of vehicle sales (which makes revenues agnostic between 1P and 3P sales), revenues were still up just 0.5%. Backing out last year’s CAT event though, revenues were +2.9%. This is still down starkly from last quarter’s +8% y/y growth.

International revenue increased by +1.6% y/y or +6% y/y excluding CAT. International Service revenue was +8% y/y, or +14% y/y excluding CAT. This is slightly higher than last quarter’s +13% y/y growth. (Service revenue is a better barometer of how the international business is trending because total revenue includes 1P revenues from purchased vehicles which is a business that is volatile and they want to transition to the consignment segment).

The absent growth was driven by weak global insurance units, which fell -8.4%. Excluding CAT volumes from last year’s period, units were still down -5.6%.

The US was even worse with insurance units declining -9.5% or 7.3% ex-CAT. We will touch into what is driving the volume loss below.

ASPs offset this weak performance, with global insurance ASPs increasing +6.8% and U.S. insurance ASPs up +8.4%. In fact, they achieved an all-time high in ASPs for U.S. insurance carriers.

The strong ASPs were definitely a bright spot for the quarter, which is why CEO Jeff Liaw spent time on the call to elaborate on their superior marketplace liquidity, which drives the prices. He believes this isn’t just a current competitive differentiator, but one that he thinks is growing.

In contrast to peer IAA, Copart has way more global bidders, which are an important source of bidding that supports stronger ASPs. On they call they noted, “In the first quarter of 2026, international buyers have purchased vehicles that are 38% higher in value than comparable U.S. buyers by comparison.” Global buyers tend to gravitate towards higher value cars and without that global buying base it would be hard for IAA to handle higher end vehicle volume to the same degree.

Jeff Liaw continued that he thought these were long-term trends: “We believe that these are long term durable trends as population growth and mobility, demand growth outside the United States, outside the U.K., Canada and so forth continues to outpace what we are experiencing firsthand in our origin markets.” In addition, he noted that unique bidders per auction have steadily grown since 2022 to all-time highs.

Moving down the P&L, gross profits grew 5% (or 4% ex-CAT) and operating income grew 5% as they had lower CAT expenses and had tight expense control on Yard Operations.

EPS for the quarter ended up +11% to $0.41 per share.

Business Commentary.

The big debate around Copart is what the main driver of their volume loss is. While management has admitted they lost some market share, Copart has a rationale that would lead an investor to believe it will be cyclical and short-lived. Bears in contrast believe this shift could be a permanent headwind from a change in the competitive environment. Furthermore, fears are percolating that accident avoidant technology is finally showing up in the salvage volume numbers, which will be a lasting secular headwind. There are four key things an investor should know...

The rest of this business commentary, the call notes, and valuation is paywalled.

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For further reading, check out our Copart Extensive Research Report here.

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*At the time of this writing, one or more contributors to this report has a position in CPRT. Furthermore, accounts one or more contributors advise on may also have a position in CPRT. This may change without notice.