Weekly Brief #32
Ferrari's first electric vehicle...Tesla sues Mathews International, Truth Social raises $247 million, Stellanis recalls 1.2 million cars, Qualcomm settles for $75 million, IRGC named terror group.
Good morning investors 👋,
Happy Friday and welcome, or welcome back, to the 32nd Weekly Brief.
Nvidia briefly surpassed Microsoft and Apple this week to become the largest company in the world, while Broadcom announced a 10-1 stock split. And in news completely unrelated to finance, it’s Prince William’s birthday today. He’s 42 years old, worth over $100 million, and still, surprisingly, has almost no hair on his head.
However, Prince William’s nearly bald head isn’t the only story I have today1. Unlike the hairs on his head, I have many more stories to cover in this issue.
So, let’s get into it.
In this issue:
🏎️ Ferrari goes electric
🔋 Tesla sues Mathews International
🇺🇸 Biden and Trump raise millions
FEATURED STORY
🏎️ Ferrari goes electric
Ferrari is usually thought of when talking or thinking about sports cars, or better yet, luxury cars. When it comes to investing, I think most investors probably overlook the company as just another car company, when in fact, it is simply a luxury brand that happens to sell cars.
Don’t believe me? Here’s the definition of a luxury brand while you’re here: An expensive product or service provided by a particular company that has a reputation for being of high quality.
I think Ferrari perfectly fits this description, and if I were to add to this definition, it would be “or any product or service that one buys to show off wealth to others.” Ferrari holds some of the best brand power of any brand ever, and coupled with a luxury business model, the company couldn’t be in a fundamentally better position. Comparing Ferrari to the average automaker (AA), look at the difference in fundamentals:
ROCE/ROIC2: AA: 3%, Ferrari: 24%
FCF Margin3: AA: <2%, Ferrari: 15%
Gross Margin4: AA: 9%, Ferrari: 50%
Profit Margin5: AA: 8%, Ferrari: 21%
There’s really no comparison, especially when factoring in Ferrari’s outstanding performance in the past 5 years.
Revenue Growth: AA: 3%, Ferrari: 11%
FCF Growth: AA: <10%, Ferrari: 23%
Earnings Growth: AA: 3%, Ferrari: 11%
If there was a gap in comparison beforehand, it closes after these numbers are shown. Clearly, Ferrari is in its own category. Ferrari is an amazing business with a terrific business model, powerful brand, and impeccable industry-leading growth aspects.
Plus, they’re making a half-million-dollar electric car.
Ferrari EV
Per Reuters, Ferrari this week announced that it will be launching its first electric car late next year and will cost at least €500,000 euros ($535,000). (For comparison, Porsche’s electric Taycan starts at just under €100,000.)
That price tag, which doesn’t even include features and personal add-ons that typically add 15-20% more to the cost, is well above the average sale price of a Ferrari which is €350,000 including extras, as of Q1 2024.
Valuation; Is RACE 0.00%↑ stock a ‘buy?’
Assuming Ferrari grows at the exact rate analysts expect them to grow at, (which is 12% over the next 5 years), using a simple DCF analysis with a discount rate of 15%, terminal multiple of 50, and a 25% margin of safety, we can safely estimate that Ferrari’s fair value is $40 billion or around $210 per share.
Essentially no, by these metrics, it’s probably not a good buy, but this is not financial advice, and valuation is subjective, so take this with a grain of salt. Do proper research and personal due diligence before investing.
FINANCE
📲 Truth Social raises $247 million
Trump Media & Technology Group, the parent company of Truth Social, announced on Tuesday that the Securities and Exchange Commission (SEC) has approved the company’s filing for a resale of shares and warrants, potentially raising up to $247 million in proceeds.
Trump Media shares dropped about 14% in after-hours trading due to potential dilution concerns from investors. The proceeds from the sale would add to the more than $200 million in cash the company currently holds, and $40 million of restricted cash will become unrestricted. Since its Nasdaq listing in March, Trump Media’s stock has fallen 46%, with the company now worth around $5 billion.
🤝 Qualcomm settles for $75 million
Also this Tuesday, Qualcomm agreed to pay $75 million to settle a lawsuit brought by shareholders who claimed the company misled them about its business practices, artificially inflating its stock price.
More specifically, shareholders were concerned about patent licensing, where Qualcomm refused to license essential patents to certain competitors and required buying its chips to get a deal. Despite winning lawsuits from Apple and the FTC over this, Qualcomm’s stock price kept rising. A judge still needs to approve the settlement terms.
BUSINESS
🔋 Tesla sues Mathews International
Last Friday, Tesla filed a seven-count civil lawsuit against Matthews International, its former battery supplier, in U.S. District Court in Northern California, alleging Matthews stole trade secrets about battery manufacturing and shared them with competitors. Tesla says the damages could amount to over $1 billion under the Defend Trade Secrets Act of 2016.
“The claims in this threadbare complaint are utterly without merit, and we intend to vigorously defend the matter. Notably, the complaint vaguely references trade secrets but fails to identify even one that Tesla purportedly disclosed to Matthews.” — spoksperson for Matthews International.
🚓 Stellanis recalls 1.2 million cars
Stellantis is recalling a whopping 1.2 million cars in the U.S. and Canada due to a software glitch after an investigation found that radio software in the vehicles can shut down the cameras.. The recall by model includes 2022-2023 Jeep Compass, Grand Cherokee, Wagoneer, Grand Wagoneer SUVs, Ram ProMaster vans, Ram 3500 chassis cabs, Ram 1500 and 2500 pickups, and 2021-2023 Chrysler Pacifica minivans, Jeep Grand Cherokee L SUVs, and 2021-2022 Dodge Durango SUVs.
Because of this, the J. Nicholas Vroomsday Counter is now at 6.78 million.
What is the vroomsday counter? Vroomsday is doomsday but for car recalls. The vroomsday counter is the total of all cars mentioned in recalls since the inception of the J. Nicholas newsletter.
POLITICS
🇺🇸 Biden and Trump raise millions
Both Joe Biden and Donald Trump ended May with record fundraising numbers for their respective campaigns, according to a CNBC report. Biden’s campaign raised $85 million, ending the month with $212 million cash on hand, while Trump raised $141 million. However, the Trump campaign declined to report its cash on hand.
The $141 million was reportedly raised just days after Trump's guilty verdict in the hush money trial, with a record-breaking $54 million raised the next day, mostly from a $50 million donation from billionaire Timothy Mellon, the largest single campaign donation in history.
🇨🇦 Iran’s IRGC named a terrorist group
Canada has designated Iran’s Islamic Revolutionary Guard Corps (IRGC) as a terrorist organization under the Canadian Criminal Code, following the U.S.'s footsteps after they did the same in 2019. Canada severed diplomatic ties with Iran in 2012 and has debated the IRGC’s terrorist listing due to potential impacts on former conscripts in Canada.
“This action sends a strong message that Canada will use all available tools to combat the terrorist entity of the IRGC. Our government will ensure Iran’s unlawful actions and support of terrorism face consequences.” — Canada Public Safety Minister Dominic LeBlanc.
📚 Book of the Week
Note: I don’t recommend books that I haven’t read or that I would never read. The books I recommend are books I have already read or that I will eventually read.
The 7 Habits of Highly Effective People — Stephen R. Covey
Book Description:
The 7 Habits have become famous and are integrated into everyday thinking by millions and millions of people. Why? Because they work!
With Sean Covey’s added takeaways on how the habits can be used in our modern age, the wisdom of the 7 Habits will be refreshed for a new generation of leaders.
They include:
Habit 1: Be Proactive
Habit 2: Begin with the End in Mind
Habit 3: Put First Things First
Habit 4: Think Win/Win
Habit 5: Seek First to Understand, Then to Be Understood
Habit 6: Synergize
Habit 7: Sharpen the Saw
This beloved classic presents a principle-centered approach for solving both personal and professional problems. With penetrating insights and practical anecdotes, Stephen R. Covey reveals a step-by-step pathway for living with fairness, integrity, honesty, and human dignity—principles that give us the security to adapt to change and the wisdom and power to take advantage of the opportunities that change creates.
✩ This newsletter, along with my weekly Morningstar fair value estimates and PDFs, will always be free of charge. Your support, whether through a donation or by reading this newsletter and following along, is greatly appreciated.
Thank you for reading today’s Weekly Brief! If you enjoyed or learned anything, please spread the word.
— Jacob
You have to admit, this is pretty funny. I myself laughed reading it over again…and I wrote it!
Return on invested capital (ROIC): the amount a business is returning you annually for the dollar amount you’re investing.
Free cash flow (FCF) margin: a measure of profitability for a business found by dividing a company’s revenue by its free cash flow during the same period. This essentially shows the amount of revenue that is converted into free cash flow for the shareholder.
Gross margin: the amount of total revenue that the company retains after deducting direct costs associated with producing the goods and services sold by the company.
Profit margin: the percent of total revenue a company takes home as profit.