Four Stocks To Buy After Earnings

Welcome back everyone. Today on the Joseph Carlson show, we just got through one of the busiest earnings week seasons. We had all of the big tech companies report their earnings. Some went up, some went down, and we're going to be looking at the overall results. And of this, I want to highlight four companies in particular that are buys today. We also have a lot of news to get to. For example, we have Warren Buffett giving an interview for the first time in a long time. Buffett gives his view on the market and why he believes part of the market is like a casino today. He also talks about valuations. He's not the only one that's giving valuation commentary. We also have Bill Aman talking about what he believes is going on with the market today and which particular companies he believes are good deals. And we have Tom Lee laying out the more technical side of why he thinks the market will go higher the rest of this year. So, we'll be looking at all of their comments, trying to break them down and make sense of them. And we also have some staggering news as well with the fail of the week. This week we have GameStop led by the infamous Ryan Cohen, the memester himself, saying that they're going to buy eBay for $56 billion. Now, if you run some simple calculations, you'll find that GameStop is significantly smaller than eBay. So, how are they going to pay $56 billion to buy eBay? Well, that question was asked to Ryan Cohen himself in this interview. In this incredibly awkward, weird interview of Ryan Cohen. In the interview, Ryan Cohen is perplexed and frustrated at a simple line of questioning. We're going to be breaking it down. So, we'll be going into this whole mess, whether or not GameStop can really buy eBay, and we'll be looking at the Ryan Cohen interview in the fail of the week. So, we have a ton to get through in this episode. Let's go ahead and jump in. 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Now, there are four companies after these earnings that I believe are worth buying today. And I want to preface this by looking at companies that were worth buying in the past. We can look at one example, which is Google. Google just reported their earnings and it was up even more after earnings. Google is now flirting with $400 per share. There's a very high chance by the end of 2026 it'll be above $400 per share. Google's also a position in my portfolio where in one holding I'm up 411%. I invested 30,000 and it's turned to 90,000. That's $61,000 in gains off of a $30,000 investment. I hold Google in the other portfolio. It's also a 136% gainer in this one. So how did this happen with Google? If we look at Google as an example of a stock that had incredible performance, there's a couple factors that played into it. So, we look at the one-year performance of Google and it's up 128%. And the most important part of that is this chart right here. When we look at this, we have the one-year trailing valuation of Google. And you'll notice that we had a key component here. Google's trailing PE went from around 18 or 19 trailing PE to today being at a 29 trailing PE. And over this same time period, Google's earnings per share have also expanded substantially. For example, if we look at just the trailing 5 years, for example, we can see the growth of the earnings per share. Now, some of this is not organic growth. That jump right there is partially due to equity sales and different things like that. But even stripping it away, Google's earnings per share growing upwards of 15 to 20% per year. That's on top of multiples expanding. When you have those two different factors, earnings per share growth and multiple expansion, that's where you get incredible results in the stock price. Take an example of ASML, and you'll notice a lot of similarities. So, looking at ASML today, this is a position that's up over double in about a year, and you'll notice a common trend. It's very rare to get these type of returns on earnings per share growth alone or free cash flow per share growth alone. You have to have that important part of having a reasonable or low starting valuation. With ASML, we can look at the price to earnings on a trailing basis over the past year. And you can see that it started on a base of 26. It went up to a base of 46. So the earnings per share went up around 80% in multiples. We also have on top of that very strong earnings per share growth. In the past one year, it's grown about 17%. We can also look at an older example of Netflix. This shows the exact same thing. Netflix likewise has those two factors. You have the company trading down to a 17 trailing PE ratio. Now, it traded all the way up to around a 45. It's recently gone down a little bit to a 29, but it's still above that base of where it was the majority of 2022 and early 2023. So, buying it any time period down here, you're getting the company at historically low valuations. If we just look at it since 2023, the earnings per share have clearly doubled. They've gone up literally twice as much. So with Netflix, you're getting a company with a low starting valuation, buying it at a 17 PE, plus the earnings per share grew, plus the valuation has expanded. That's how you turn a $60,000 investment into $50,000 in gains. In those examples of Google, ASML, and Netflix, we had both of those important factors. We had the multiples expand and we had earnings grow at the same time. So you have to have improving sentiment plus fundamental performance and a low starting valuation to get these outsized returns. But that's not always the case with every company. In some cases, earnings per share growth can be so great that the valuation doesn't need to expand. And that's the case with Amazon. Amazon is one of my top two picks for 2026. It's one of the ones that I've outlined that I really I really think it's just one of the best stocks to buy. And so far, it's gone quite well. Amazon is up 20% this year. In just the past month, the stock has risen by 27%. So, it's on quite a run and I think it's set up really well for the rest of this year. But Amazon's a bit unique. With Amazon, the trailing valuation has always stayed around the same. The high 20s to low30s. It's been around there for about a year. Right now, the trailing PE is a 32. The Ford PE is a 32. But for Amazon, the case is still somewhat similar. I expect the stock to continue to go up, the PE ratio to continue to expand, and earnings to continue growing. So, with Amazon, Google, ASML, and Netflix as examples of how this has worked in the past, I want to look at four companies that this could work for in the future. Meta is a company clearly set up for multiple expansion plus earnings growth. And if it has both of those, the stock price will likewise rock it up. If we look at what's going on with this one, we can take a look at the setup. The setup is a stock trading at a 19.6 forward PE ratio. So, there's no funny business here. There's no tricks. Meta is just trading at a 24p. Investors are pricing it with a lot of doubt. Now, it's not trading at a commodity multiple. It's not at like a 10p, but a 20p is low for a company like Meta. We're talking about a large profitable company that's growing its revenue by 33%. It's a very impressive company to be trading at that multiple. In fact, when we compare it with the broader market, we can compare it with the S&P 500. The S&P 500 on a forward basis, this is the weighted PE ratio, is at a 22. So Meta is on average cheaper than the average weighted company in the S&P 500, which the S&P 500 includes a lot of companies like banks, oil companies, utility companies, ones that are known to grow historically much slower than a company like Meta. But it's also trading at a substantial discount to tech companies, which is more in line of where you'd benchmark Meta. So no matter what index you're looking at, the company has a low starting valuation. Now with Meta, this reminds me of a lot of different situations. Again, remember how bearish investors were about Google. It was all sentiment. It was all stories. When we looked at Google's quarterly reports, they were good. Every single one of them was good. In fact, there wasn't a single one that was bad going back 3 years. They're all just great. And we see a very similar trend with Meta. The earnings reports are fantastic. the stock and investor sentiment is still very low because investors aren't convinced of the future. They look at one metric here, the daily act of people and this ticked downwards. Now, this was passed online with a lot of doomsday people saying that this is a sign that Meta is in the decline and social media is in decline. But Meta Management said that's not the case at all. That's not the takeaway you should have. In fact, we know exactly why the daily active people declined is because of a Russia restriction and because of internet outages in Iran. If those two things didn't happen, then our organic usage would have climbed this quarter just like we expected. So they outlined that this isn't really the takeaway you should have. But regardless, investors are still concerned. They're concerned about this as well as the capex spend. And we've seen in every other case the capex spend become increasingly justified. With all the hyperscalers, Amazon and Google, investors question how much money they were laying out. Now they're on board. And I believe we'll see the same thing with Meta. We're already seeing it in the revenue and we're going to eventually see it in the earnings per share in the cash flow growth over time. But with Meta, it may take more time and more convincing. So, this is a stock that I believe is well set up to have multiple expansion and earnings per share growth. So, I could see Meta climbing from this 24 PE up to around a 25. I think it will climb right around to the mid20s over time. Now, sometimes it will take time for market sentiment to change, especially when you're still heavy in an investment cycle. Meta says that it's going to spend a lot of money this year. So, it may trade around the 19 or 20 Ford PE ratio for some time. But, as the earnings reports come in, as you see the plan being laid out, as you see the continued revenue growth, I expect this one to trade at a higher multiple over time, plus grow its earnings, and I think we'll have outsized returns. The next stock that we're going to be looking at is actually combination of two. It's both Visa and Mastercard. These two companies just recently reported earnings in the past week. Visa reported first and that was the giveaway. And while Visa initially jumped up big, it traded away a lot of those gains over the preceding days. Visa is still down 5% year-to- date. When we look at Mastercard, Mastercard's down 11% year-to date. So, the market's still unsure about both of these companies. In fact, when we look at the valuation of either of them, we have Visa at currently a 23.5 Ford PE and we have Mastercard now at currently a 25 Ford PE. Looking over both these earnings reports, what I saw was a ton of strength, no weaknesses. There was zero cracks in either of these companies. The economy is strong. People are spending money. People love credit cards more than ever. Their revenue is growing like crazy. Visa had crazy revenue because of value added services. Mastercard grew 1% slower than Visa, but both of them grew in the high teens. Both of them are dishing out buybacks, buying up their own stock. They're free cash flow generative monsters. These companies are truly staggering. There's always concerns with these companies, whether it be government regulation or the government competing with their own payment systems, but I believe that they'll prove much more resilient than investors expect. And with the numbers these companies are posting on a similar basis, I believe the valuations will expand for both of them. I think there's a high chance that Mastercard and Visa both move up to around a 30 Ford PE given the margins, the earning potential, the network effects, the emotes of these companies, investors pay up for premium predictable quality. And as these companies continue to prove that they're actually beneficial to the economy, they cause more spending, more growth, more commerce. They cause safety in transactions and trust between different parties. There's a very high chance of that valuation expanding along with very fast earnings per share growth. Now, the last one that I'll mention is Microsoft. Microsoft just reported earnings. The earnings overall were good, but Microsoft stock dropped. It's now down to a 22 Ford PE ratio. Looking at Microsoft and comparing it against the benchmark again, that means that Microsoft is right in line with the S&P 500. It's not being priced as a superior company overall. It's also trading much cheaper than the NASDAQ 100. So, we know that Microsoft by the numbers is being discounted. Now granted, I think that there are some advantages to Google over Microsoft, especially when it comes down to the AI race. Google has their own AI models. They have their own TPUs and their vertical integration across their cloud. So Google's in a very advantaged state when it comes to AI. But with Microsoft at a 22 Ford PE, investors really believe that Microsoft has lost the race. And when we look at this company, I think this is an overreaction. Microsoft, after all, has the massive bundle. They are deeply embedded in every single Fortune 500 company. Azure continues to grow incredibly fast. Microsoft Azure is great. We also have Microsoft being a high margin, free cash flow generative machine. Cloud is a high margin business. It's actually a really good business overall. And I think we'll see that after we get through this big investment wave. So with Microsoft, I again believe that this is a situation of buying a very high quality company at a low starting valuation. This isn't the lowest that Microsoft has ever traded. It could go down to a 17 if things got really bad, but I believe we're right now in the lower end at a current 22. And I believe that Microsoft is more than likely to trade up to the mid to high 20s Ford PE ratio with a Ford P of around 25 to 27. Given how fast this company's growing earnings, if you get that multiple expansion plus the earnings growth over the next couple of years, I think it's a very attractive situation. So, these companies, Meta, Visa, Mastercard, and Microsoft are my four favorite buys after earnings so far. Now, let's go ahead and move on. We first have an interview from Warren Buffett, and we haven't seen him in some time, so it's good to hear him talk. He hit on a couple different subjects here, and I just want to highlight a couple parts of this. First of all, he's asked about why Bergkshire doesn't use its massive cash pile. And Buffett tries to frame it to a longer timeline that he's been investing forever, and he doesn't see any truly juicy situations today. I mean, we've been in the of the 60 years I've been in the business, uh, you know, there's probably five of them been really juicy, you know, and, uh, of 60 years, only five are truly juicy. Now, obviously, I don't think that Buffett would advise for 60 years to wait around for those five years. That's timing the market and it's not really what Buffett has done in the past. If you put Bergkshire's cash balance in perspective of the market cap of Bergkshire and the operating earnings, it's actually been more in line. Bergkshire has always kept a lot of cash. Insurance companies do provide float, but you need to have massive capital reserves to make sure that you don't go bankrupt if there's some big event, some big flood or hurricane that can cause huge payouts, and they need to have the money to pay that. So, that's part of the reason why Buffett is more cautious today. Another theme that he hit on was comparing the market to a casino. >> Compared to the markets to a church with a casino attached and and people can move between the church and casino and and I would say there are more people in the church and more people in the casino, but the casino's gotten very attractive to people. you know, if you're buying one day options or selling them, I mean, that is uh that's not investing. It's not speculating. It's gambling, you know, just totally. There's nobody that can explain why they're buying an option for one day unless they have maybe maybe the fellow that that uh you know made the $400 and some thousands from knowing when we were going into Venezuela could do it. But I mean that's pretty and the quantity of those things is just incredible. So we've never had people in a more gambling mood than now. Now, while Buffett's being very cautious talking about holding cash and how a big part of the market is now a casino, we also have Bill Aman who shares a different perspective. He does think that there's a lot of quality companies or at least a number of them that are trading at very attractive valuations and he highlighted that in a recent interview. >> Companies that you own in your other portfolio, for example, example Uber, Meta, they've had a good run and you're already very long them. So, the question might arise, is now the right time to be doubling down? Actually, I think the companies you mentioned are very cheap stocks today. Interestingly, some of the best businesses in the world are trading at the lowest multiples they've traded at in some cases in history. Actually, those multiples bottomed maybe two weeks ago. So, we're a little bit off the uh the all-time bottom, but you know, very bullish on the economy, and you know, there are some amazing businesses available at really cheap prices. He says he believes the stocks that she specifically mentioned, which is Uber and Meta, are particularly cheap today and that we'll see it play out over the next year. Now at the same time we have the market commentator Tom Lee also sharing his view that the United States is where things are happening and it's where this AI story is playing out. That's why he believes that the gains from artificial intelligence which will happen all across the globe will be concentrated within US tech firms. the AI story which is a global productivity story right there. AI is essentially creating productive units uh that actually either help workers uh produce more or even replace workers in some countries. It's primarily taking place in just the US and China. And so I'm not surprised in a way that we could see the US companies actually disproportionately benefiting this because it's not really taking place in Europe. So when we look at all the top models that exist today, we have Chachib, we have Claude, we have Gemini, we have Grock, on and on and most of those are within the United States. Then there's a handful of them that are pretty good coming out of China. When you look at what Western countries are going to use, most companies will naturally trust models within the United States, ones that come from the likes of Google over a Chinese firm. Now, Tom Lee also believes that there's hope for the software sector of the US. This one's been beaten up because artificial intelligence is going to replace all these companies, right? Well, it's not really happening. And Tom believes that there's going to be more evidence that this doesn't really happen in the future. One of the things that's apparent to us around software is I know that investors are correctly thinking that there is that they should question you know the durability of these software models over time but many of these companies are are very well-managed and companies will adapt. So it's become a a sort of a derating story where investors are questioning future earnings but now I think the riskreward is is pretty favorable. So I think for for the right companies and for the best businesses, this is a great riskreward. >> In many cases, these companies have been derisked. They've been derated. All the bare cases have been priced in. And I think we're going to see examples of that in the future. Now, finally, we move on to the fail of the week. In this case, we have to highlight Ryan Cohen. We have the news that GameStop is offering to buy eBay for $56 billion. And this is being led by Ryan Cohen. Now, luckily, Ryan Cohen went on to an interview to explain this, but the interview didn't go well. It was awkward and bizarre. Really weird interview. Let's go ahead and just take a look at it. We have Ryan Cohen off to the right here and then we have Andrew Ross Orcin. And let's just go ahead and and listen to some of this interview. Andrew Rosscin asks him a couple simple questions and you can see how he responds. >> The audience, and I know a lot of people are going to ask, how does the math math for you? uh given the price tag, $56 billion, given the market cap of GameStop, uh which is a fraction of that, I I know you have this $20 billion um financing letter for from TD, but sort of walk us through how how you could get to that price and how it would work. >> So, Sorcin here just asks a very straightforward question. How does this work out mathematically? Can you just walk us through it? And this is the response that Ryan Cohen gives. It's on our website. It's half uh cash, half stock. Uh but but the details are are on our website. >> Now, that's a super lame response. First of all, because why is he referring people to the website when he's there? Like, he's the one that presumably put together the plan that's on the website. So, why can't he explain it or at least simplify it? He could say, you know, here's how it's basically going to work, but you can get all the details on the website. But he doesn't even explain the basic math behind it. He just says half cash, half stock. How does that add up to $59 billion? Where's all the cash coming from? Now, this next part is where the interview really starts to derail. It's where Ryan Cohen acts seemingly obtuse, like he can't understand why nobody else would be able to figure this out. So Andrew Ross lays this out very basically with simple math to illustrate why these numbers don't add up. I think we can start with the idea that the market cap of of GameStop is call it 11 billion. Uh you have $9 billion uh on your balance sheet arguably if you're if you're providing uh effectively all of your stock and then and then the cash that gets you to 20. You have this letter from TD that's another 20. Uh we're now at 40. uh but we're still off uh by call it uh 16 and and the 20 as far as I understand while it's considered a highly confident letter meaning TD saying they're highly confident uh that they would provide the financing it's not locked financing >> yeah we'll see what happens >> that's his response so to get this straight there's a $15 billion gap between the math that they just simply illustrated very straightforward math there's nothing misleading about the question. He just laid out the math. And rather than Ryan Cohen being helpful and addressing it and explaining how the plan will work and they'll make up the the gap, the $15 billion, which is a lot of money, he just says, "We'll see what happens. We'll just see what happens." That's the answer that he gives them uh to a very straightforward, reasonable question. And this continues on and even gets worse. >> I understand that. I'm I'm just trying to understand where the the rest of the money would come from. It's half cash, half stock. >> He looks at the camera, half cash, half stock. Explains nothing. He adds literally nothing to the answer. He He's either playing dumb or I don't know if this is how he normally is. I don't follow him that closely, but that's just a dumb answer. It doesn't explain anything. It's like he's not hearing the actual words coming out of Andrew Osorin's mouth. It's like he doesn't even comprehend the question. Again, this continues on and and uh a couple other people from CNBC try to like help out and maybe ask it in different ways. Uh they try to assume that he's being genuine here. You know, maybe ask the question differently to try to get down to what they're actually asking. >> I'm I hear you. I'm just saying that that math doesn't get you to the to the price that you're offering. >> So, that's a pretty straightforward question. I don't get it. like where's the rest of the money coming from? >> Becky Quick jumps in and she's just saying this is a very straightforward question. Like I don't get what's complicated about this. Like why is this a difficult question? >> Andrew laid it out pretty clearly. >> I I don't understand your question. We're offering half cash, half stock, and we have the ability to issue stock in order to get the deal done. But the full details of of the offer on our are on our website. >> After addressing this and it gets a little awkward, she just moves on from the question and kind of leaves it there assuming that he's refusing to answer that question. Now, a lot of people kind of take the approach of hating legacy TV because so often we associate things like CNBC with NBC or MSNBC or CNN or Fox News, which have such a history of treating their guests poorly, of having very loaded questions, of having gotcha questions, of trying to entrap their guest, of editing their guest interviews to make them look worse than they actually are. There's so many things that legacy television and cable TV have done over the past decades to make people repulsed by them that naturally there's many people that rude against CNBC and they look at his defiance as sticking it to CNBC. Uh they're the legacy uh financial TV and we're showing them a thing or two. But in this case, CNBC didn't do anything like that. They didn't ask any loaded questions. They didn't have any gotchas. They didn't try to entrap them in anything. uh they didn't try to ask him about something that wasn't related to the reason he came on the show. He came on the show, they treated him with respect, they asked very straightforward, simple questions, and he's acting like a petulant child, not willing to answer any of them, completely acting like he doesn't even want to be there. What was the purpose of him coming on to CNBC if he doesn't even want to talk to him or explain anything to the audience, to explain anything to his investors? So, I understand if people normally are disliking cable television and interviews like this, but I can't find one unfair thing that CNBC did here. I really can't. Their questions were completely reasonable, and this is how he's choosing to respond. It's embarrassing to watch. Ryan, um, you mentioned that, you know, GameStop's in a tough business. I mean, revenues are down like 40% in the last four years or something like that. eBay's been a public company for a couple of decades. Where's the evidence that you kind of know how to grow a mature consumer business? >> I don't know. I mean, didn't you guys call for GameStop's demise multiple times? Like, it should be dead. Therefore, you know how to grow it. Is that what you're saying? >> Well, look at our financial performance. Is it better than you guys anticipated? Cuz you guys said it was going to be doing really, really poorly, and it's actually doing okay. >> Ryan Cohen says, "Look at GameStop. Isn't it doing better than you guys said? You guys said it was going to be destroyed and here it is doing okay. Well, we can look at GameStop. Let's go ahead and look at GameStop as an example. Over the past 5 years, GameStop has lost roughly 40% of its stock value. So, the stock has gone down over the past half a decade. During that time period, we also have GameStop's revenue declining every single year, going from $6 billion down to 3.6 billion. But Ryan Cohen says, look at the financials. It's actually making money. You can't just look at the revenue. Look at the money that it's making. The net income did climb from 2024 all the way to 2026. It's now producing $418 million per year in net income. But where's that net income actually coming from? Well, the vast majority of the net income of GameStop actually is not generated by operating profits. It's simply generated by their large cash balance. GameStop has $9 billion sitting in a bank account, sitting in cash. That bank account invested in short-term treasuries generates a lot of interest. That interest makes up for well over 60% of this net income. And where did this cash come from? Well, GameStop didn't generate this cash themselves. They simply just diluted shareholders. They sold off a bunch of the company to generate cash. They sit the cash on the balance sheet and then they earned some net income from that cash balance. So, the improvements with GameStop's financials are not the result of operational excellence, and it's certainly not the result of Ryan Cohen pulling off some big operational feat. He simply took a bunch of cash from investors, put it in a savings account, and now generates net interest off of that savings account. That's something that anybody could literally do with finance. The money that GameStop's generating is from that cash balance. So, when we look at this, this isn't some big evidence of him being able to turn around companies, nonetheless being able to run eBay, a much larger, already profitable company that doesn't need the leverage that GameStop would bring on with this acquisition. So, this point in and of itself is somewhat self-defeating, but Ryan Conn continues on. >> Ryan, you alluded to it before, but there are a lot of people who who sort of uh were betting against you, let's say, um in GameStop. Uh and I know you don't appreciate that. There are some skeptics though surrounding this deal who will say that, oh, that Ryan Cohen, he wants to make sure that he hits a minimum threshold to receive his first trunch of compensation. the minimum threshold being $20 billion market cap for GameStop or uh $2 billion in cumulative IBIDA. Is that the case that this is a bid to make sure that you're going to get paid in that first trunch? >> I obviously want to build something much larger, but I don't benefit unless shareholders benefit. So my compensation package is align with shareholders and I want to I want to build a much larger business. So just larger means successful. Larger means aligned with shareholder interests. >> Larger means um maximizing shareholder value and increasing earnings. >> So Ryan's trying to play this trick uh of just simply saying that he's aligned with his shareholders because if the company's bigger that means better. And to investors that don't know anything about investing, haven't really studied investing at all, which I assume is a lot of Ryan Cohen followers, this may ring true. You may actually just think that a bigger company is better for shareholders and that a company doing a large acquisition makes it bigger, therefore you get higher returns. And that's not true at all. Uh it depends on how the company grows. For example, if GameStop today grew organically just by earnings growth and by opening up more stores and having more customers and generating more profits on a per share basis, yes, that would be good growth for the investor. The investor would be very fully aligned with the CEO in that case and that market cap doubling would be very good. But if a company doubles by diluting the shareholder, taking on debt and just acquiring another company, the per share value goes down. The investor doesn't benefit at all even though the market cap grows. The person that benefits solely independently and uniquely in this case is the executive that has a compensation package that's solely reliant on market cap size and not on per share organic growth. And Ryan Cohen knows this and he knows that a large percentage of his followers, his people don't know about it or don't care about it. They are ignorant to this fact. So we'll see how this works out. if Ryan Conn is really able to trick enough investors to take over eBay as well and get his pay package. But only time will tell in this fail of the week. That's it for this episode. See you in the next one.