I Can’t Believe These 3 Massive Stocks Are This Cheap

Three massive companies just reported earnings. One dropped 10%. One near its 52- week low, and one just proved every doubter wrong. All three are trading at prices that I think you're going to look back on years from now and wish you'd paid more attention. We're going to go through each one, bullcase, bare case, and run the actual numbers so you can decide for yourself. All right, so let's start with the first stock, and it's a name everybody knows, Meta. Meta recently reported earnings and the stock dropped 10% right after. And when you see a headline like that, most people panic. But that's not what we do here at Everything Money. Let's actually look at what happened. Revenue came in at 60.8 billion. Are you ready for this? Up 28% year-over-year. That actually crushed expectations. The top line is growing, and it's growing very fast, especially for a company of this size. But here's where it gets messy. Earnings per share came in at $6.18 and Wall Street was expecting somewhere around $7.15. That's a big miss. Expenses jumped 55% year-over-year to 42 billion partly because of legal charges and severance costs and free cash flow basically fell off a cliff down to $784 million from over $8.5 billion just one year ago. On top of that, Meta raised the low end of its capital spending guidance to somewhere between 130 and $145 billion for the year. Guys, that is an absolutely massive number. And the revenue outlook for next quarter came in a little lighter than what analysts wanted to see. So, you've got a company that's growing revenue like crazy, but spending even faster. And the real question here is, is the spending going to pay off or not? So, let's look at the bull cases to start. Bull case number one, valuation. After that drop, Meta is trading at roughly 17 to 19 times forward earnings. That's low, especially for a company that just grew revenue 28% year-over-year. And all indications are revenue is going to grow at a more than doubledigit clip for quite a few years. A lot of analysts are calling this a dislocation, meaning the price doesn't match the business. And when that happens with a company this strong, that's where long-term investors start to pay attention. Bull case number two, Meta is not just spending money on AI for fun. They are building out a whole new business around it. Zuckerberg recently talked about leasing out excess AI computing capacity to enterprise partners. Those are business partners of theirs. They just announced a massive data center deal with Black Rockck in Texas. So Meta is not just an ad company anymore. They're becoming an infrastructure company that could compete directly with the big cloud players in a very high margin business. That changes the math incredibly. And bullcase number three, the user base. 3.6 billion daily active people across the family of apps. That grew 3% over 120 million year-over-year. And the AI improvements are making the recommendation engine much better, which means more engagement, more ad impressions, and stronger pricing power. That flywheel is still spinning and it's actually accelerating. Now, here are three bare cases that analysts are pointing to that we need to make sure we talk about because nothing's ever all good and nothing's ever all bad. Barecase number one, the spending. Meta raised the floor of its capital expenditure guidance to between 130 and 145 billion. That is an enormous number. And the problem isn't that they're investing in AI. The problem is nobody knows exactly when that investment starts to pay off in a real measurable way. It could be years, it could be never. And until it does, that spending is a direct drag on their cash flow. Fair case number two, that free cash flow has fallen off a cliff. Meta went from generating 8.5 billion in free cash flow last year in the same quarter to 784 million, a drop of order over 90%. But that was expected with all these capital expenditures. It isn't a small dip, guys. It is a collapse and Meta has always been treated like a cash machine. So when that cash flow dries up, it limits what they can do with buybacks, dividends, and all the other things you do with cash flow. And of course, that makes a lot of investors nervous because a lot of times they're looking in the short run, not the long-term potential benefits of that reinvestment. And bare case number three, the guidance. Even though revenue grew that monster 28%, the outlook for next quarter came in light. Metag guided for about 62.5 billion at the midpoint and Wall Street wanted closer to 63 billion. Now, that's not a huge miss, but when you're spending like crazy and the top line starts showing any sign of slowing down, people start to wonder if the growth may be peaking right when the bills are getting better. Now, that's not a huge miss, but when you're spending like crazy and that top line starts showing any sign of slowing down, people start to wonder if the growth is peaking right before the bills are getting bigger. So, those are both sides, the bull and bear. Now, let's do what we always do. We're going to run the numbers on Meta. So, guys, the stock price is 551, but that's not the real price of the business. The real price is a $ 1.4 trillion market cap. I immediately go from there to our enterprise value of 1.5 trillion. This difference between the two is about hundred billion. And that's essentially the net debt they have on hand when you offset with cash and all that stuff. Now, they generated 41 billion in free cash flow last year, 68 billion in net income. So, this 100 billion isn't isn't a bad number. Yes, it's a lot in terms of total dollars, but what matters to us is can they afford it? And it's pretty clear based on current free cash flow and current net income that they can. Next, returns on capital. This is a great metric to look at for what's the quality of the business. and they have 17% for the last 5 years, almost 15% last year. I like that. North of 9 or 10%, you're getting into better quality businesses which deserve a premium. Now, one thing I have a concern about is they do pay this dividend of about4% which eats up $5.4 billion. If they go to negative cash flow, how do they pay that? They got to pay that by borrowing money or using their cash reserves. So, when they're spending all this money, I don't know the purpose of this. Now, one small area of concern for me, and I don't know if it's really a big deal, but look at their profit margin. 32% for the last 10 years, 31% for the last five. Last year was under 30%. You see a decline. We talked about earlier a 55% increase in their expenses. Now, it should kill it could still pay off down the road, but right now, we're seeing a downward trend in expenses in profit margin. So, just make sure you pay attention to that. Now guys, something I will say this gross margin of 82% very high. This means as they add more and more revenue, 82% of it's going to go to the bottom line before that overhead and and income taxes they pay. So that can really drive their profit fast once they stop the spending increases that they're doing now. All right, let's go check out their eight pillars real quick. All right, we love this. This is where we get six checks and two X's. And the two X's are the five-year PE and the 5-year price of free cash flow. Now remember guys, when a company grows 28% year-over-year, this might be cheap. If they're still able to grow 15 20% for the next three or four or five years on revenue, this is nothing. This is fine. So that's something to keep in mind that these X's don't necessarily mean they're bad. Just like buying back shares isn't always a good thing if they're paying too high a price. That's something to also remember as you look at these numbers. But high returns on capital, cash flow is up, net income's up, revenue up, debt is low. Going to remind you guys, this is going to go to an X pretty soon. If these capital expenditure numbers go up, capital expenditures decreases cash flow. That's going to be an X very soon. Now, I threw a lot at you. If you feel overwhelmed, I want to remind everybody, you're not alone. Everybody in the history of the world who became a good investor was overwhelmed at some point. I created this channel in order to simplify all of it for you. And the best way to do that is download our free key metrics PDF. It'll explain all of these stats to you so we can be speaking the same language. [snorts] Before I get to the price I want to pay for the stock, I really want you to remember that we're here to teach you this process and the words we speak have to be fluid with each other. I want to make sure that you're understanding what I'm saying. So, click the link in the description below and download our key metrics PDF right away and it's absolutely free. So, let's take a look at what analysts think about this. So, analysts have a $33 per share earnings this year, growing to $58 over the next five years. Look at that growth rate. It's pretty solid. It's definitely in the double digits per year. And as for revenue growth, look at that. 26% 19 16 12 and a half 13 15 and then it falls to single digits. So again, three to five years of well into double digits revenue growth. And if they're able to do that and keep their expenses reasonable, they're going to absolutely skyrocket their earnings and free cash flow. So what do we do now? We're now at the stage where we put our numbers together into our stock analyzer tool. And guys, for this first company, I'm going to take it a little bit slower so that you can understand the process of which I'm following. First off, I'm picking how many years of analysis. I tend to do 10 years. Next, the first the first line is what is the revenue growth you're going to assume for the next 10 years. Guys, as companies get bigger and bigger, it is harder to grow at higher rates. Yes, we're in this new AI boom and it's going great right now. The question is, what's reasonable to assume for the future? When people look at the last 10 years and they see 26% revenue growth for the last 10 years, year-over-year, you get excited about that. You might put high numbers in, I caution against that. And the reason being is 26% for 10 years is basically doubling every two and a half years. So they've doubled four times in the last 10 years. Is it possible they do the same thing? It's possible. Is it probable? I'm trying to teach a method of investing where you focus on what's probable and mispricings on those kind of numbers. So, I put in seven, 10, and 14%. Do I think seven is really low? Yes. Do I think 14% is high? Yes. Do I think somewhere in the middle makes sense? I do. Now, keep in mind, analysts believe there's going to be double digit well over double digit revenue for the next four or five years. But what about thereafter? I could be very conservative here and that's exactly why people use the stock analyzer tool so much in our community because they want to put their own numbers in. Next, profit margin and free cash flow. Because of all their capital expenditures, I'm going to focus on profit margin because eventually this will pay off. Remember, capital expenditures affects the free cash flow day one, but it affects the profit, the net income over many years because they're depreciating that number out over. So if they build a building for $und00 billion on the cash flow it hits immediately. It's $und00 billion less. But on net income they depreciate it over 10 20 30 years whatever the accounting rules are. So it takes a lot longer to expense that building. That's the difference between these two numbers. So I actually did 29 31 and 33%. I think it'll be higher at the end of 10 years but remember this is an average over 10 years. Next. What PE would I assign to Facebook to Meta 10 years from now? It's not today's PE. All I sit there and tell people is guys, the market historical average is 15 or 16. You should go higher for better good companies, lower for bad. This is a good company. They still have great growth. They have high returns on capital. So, I'm giving it a premium. I put 18, 22, and 26 times earnings 10 years from now. And then finally, my desired return of 9%. Now, I don't actually want 9%. I want much higher. But when I make these videos, I'm trying to find what do I think the company's worth based on my assumptions today. Just what is it worth right now? Remember, you still need a margin of safety because if you're only looking for 9% return, just buy a lowcost ETF. You'll get that over decades long time. So, I encourage people to go for a higher return. How much higher? It's all up to you. your knowledge of Meta and your personal situation. So, I hit the analyze button. The stock is currently at 551. I have a low price of 600, a high price of$,530, and a middle price of 925. If I paid today's price and all my low assumptions occur, I'll make 9.6%. If my middle assumptions occur, I'll make 15 and a half. If my high assumptions occur, I'll make 22%. This does not include the balance sheet. But as you can tell, there may be some meat on the bone here for Meta at these prices. But remember, we're not here to give stock tips. We want to teach a process that you can then go apply yourself. And before we analyze our next stock, which is Microsoft, always a reminder, never take our title and thumbnail literally. We're here to teach that process so that one day you can apply it to your own investing and sleep better at night because you're going to make better assumptions about the stock's future and understand the price you're paying. So, let's break down Microsoft. Now, Meta's earnings spooked people. Microsoft's did the exact opposite. The stock jumped nearly 10% after reporting revenue. $90 billion in revenue, up 18%. Net income grew 31%. Earnings per share was 481, which crushed expectations. And total cloud revenue hit 59.3 billion in a single quarter, up 27%. Guys, I believe Microsoft ended up having the largest 1-day gain in market cap history on an individual company. Now, what really calmed Wall Street down was the spending. Capital expenditures came in at 41 billion, actually below what analysts had expected. So, Microsoft is spending big and showing the returns. Now, the one soft spot was personal computing. Windows and Xbox both declined. But nobody's buying Microsoft for Xbox. They're buying it for cloud and AI and commercial remaining performance obligations hit $678 billion, up 84%. This is what they still have to bill out and do for clients out there. And as that number goes up, it feeds that future pipeline of revenue. This means that companies out there are locking in longterm contracts at a pace we've almost never ever seen. So, here are three bull cases that analysts are making for Microsoft right now. Bullcase number one, AI is already making a ton of money for this company. This is the big difference. Microsoft Copilot has scaled to 30 million paid company seats. They're not burning cash on something speculative. They're cross-selling premium AI upgrades into the Office 365 ecosystem that's already everywhere. The AI investment is paying off right now, not someday. Why? Cuz they already had the users built into their system. Bull case number two, the backlog. As I said above, their remaining commercial obligations hit $678 billion, jumping up 84%. That means that Fortune 500 companies are locked into massive multi-year contracts for Azure and Microsoft software. That's not hope. That's committed future revenue. And that kind of visibility is unmatched by anyone in tech as we speak. Bull case number three, Azure is accelerating. Cloud revenue grew 43% year-over-year, which actually beat the 40% Wall Street was expecting. Azure just crossed a hundred billion dollars in annual revenue for the first time ever and it is not slowing down. It is speeding up. When your biggest growth engine is getting faster, not slower, that tells you something. So those are the bull cases. Now let's look at the flip side. Here are three bare cases that analysts are pointing to with Microsoft. Bare case number one, the spending is still massive. Even though this quarter looked great. Microsoft's infrastructure commitments are tracking somewhere between 175 and $190 billion. That's an enormous bet. And the concern is simple. What if the returns on all that invested capital don't keep up with how fast the assets are growing? Just because it's working now doesn't mean the math works forever at the scale. Remember fiber optics 25 26 years ago with the internet? everyone [snorts] was doing it and then it end up being a struggle for a while. Barcase number two, what they're buying doesn't last. A huge chunk of that spending goes into GPUs and hardware that depreciate very quickly. These are not 20-year assets, guys. They lose value quickly and need to be replaced because technology changes very quickly. That cycle creates constant margin pressure because they're always having to replace these chips very quickly. And obviously it's already weighing on current free cash flow relative to their operating income, which is the income the business itself makes. The cash is not flowing as freely as the headline numbers may suggest. And bare case number three, the long-term disruption risk. This one's more philosophical, but it does matter. As AI agents get smarter, they could start replacing the actual software people use, including Microsoft own products. So if users stop interacting with apps and start interacting with bots, the traditional software model gets threatened and Microsoft would essentially be funding the thing that disrupts its own business. So those are both sides. Now let's run the numbers on Microsoft. So $450 share price, but the actual price of the company $3.4 trillion and their enterprise value is 3.6. So roughly $200 billion in net debt. Last year's free cash flow 67 billion. Guys, look at this. Their net income was 133 billion over the last 12 months. So, they can easily afford this debt level they're talking about. Very high returns on capital. 25% for the last 5 years, 17.4 last year. Increasing profit margin. Look at this. 34% a year for the last 10, 37% a year for the last five, 40% for the last one year. It's selling for 25 times earnings, which guys isn't as expensive as some of these other companies out there as long as they can keep that net income going up and up. And look at this revenue growth over the last 10, five, and three years. 13.8, 14.5, and 16%. And they do have that very big dividend. The yield's only.77% because of how big the market cap is, but it eats up $26 billion of their dividend of their cash flow. So, if they're going to spend a ton of money on these capex, where is that dividend going to get paid from? Let's go check out their eight pillars. Something tells me it's going to be a lot like Meta. And it is two X's here. Remember guys, don't forget if you have our software, you can make your own custom eight pillars above it, but everything else is great. They haven't bought back many shares, which it's kind of funny because they were selling as low as 350 and we did a video on them at 350 and it was quite an interesting proposition for the future. Guys, I hope you can see the way we make our videos that this is exactly why I teach on YouTube. Everyone just attaches themselves to the story. And a story is an important part of your investment. But if you pay too much for that story, you're going to end up with a bad investment. The story could be right or even better than you think. But if you pay too much, you will lose. So, let's go check out what analysts think about this company. Well, guys, earnings per share of 17 growing to 40 over the next seven years. That's over 10% per year of growth. And one of the years they have is a decline here according to analysts. And look at that beautiful line going up for revenue. 335 more than doubling to 760. Again, 11 or 12% increases in revenue every single year. So we have some story, we have some numbers. Let's put them together in our stock analyzer tool and determine if we should spend any more time on Microsoft. So, I go to stock analyzer. Here are my 10-year assumptions for Microsoft. Again, could be a little light, but as you can tell, their revenue growth historically is not as high as Meta, but it is getting better. I did 7, 10, and 13%. Profit margin and free cash flow, I did 34, 37, and 40. For PE 10 years from now, I did 19, 23, and 27. And again, my 9% no margin of safety intrinsic value return. Now, what we just did on Microsoft and Meta, looking at both sides, making conservative assumptions and figuring out the price to pay, that's exactly what our community does every single day with thousands and thousands of stocks. One of our members named Adam, he used this exact process. He found ASML when nobody was talking about it. He built a position with a cost basis around $650. That stock is already up over $1,600. He didn't follow a tip. He ran the numbers. He found a price he was comfortable paying and he bought with conviction. That's the difference between having a process and having hopes and dreams. That's called speculating. That's exactly what our tools and community are for. You get all of our tools, including our stock analyzer. You get to see what stocks you're personally buying and what the stocks in the community are buying. You get access to thousands of members all doing this together every single day. It's the process that gives you the confidence to not only pull the trigger when a stock hits your price, but also if the stock falls, you trust that process on why you bought the company and you can wait it out. So instead of sitting on the sidelines watching it run, you can sit there and make actionable decisions. So if you want to try it, go to everythingmoney.com. Guys, if I asked you before all this what it was worth, I'm quite sure you'd have said more than a dollar per day. But right now, we can you can try it out for just $7 for seven days. If it's not for you, cancel. No hard feelings. But if you're the kind of person who actually wants to learn how to do this the right way, you're going to absolutely love it. So, let's take a look at Microsoft numbers. I hit the analyze button. Boom. A low price of 363, high price of 8.83, middle price of 571. So guys, can you see how when it was at 350, it was below this low number? A much different investment return than at 450. That's what we're here to teach you. That the price you pay is going to largely determine the return you get. The more you pay, the less return. The less you pay, the more return. The question is, are you going to believe the loudest story on the market at any given point? So our third and final stock is heavily debated inside our community right now. It's Oracle. This stock is trading right near it 52- week low. And the reason it's so debated is because the bull case and the bare case are both very extreme. On one hand, Oracle just landed a 10-year deal with the Department of Defense worth up to $7 billion. Their cloud backlog is massive, and Wall Street's average price target is still over $265, more than double where it's trading today. On the other hand, they're planning to spend 90 to 95 billion on AI infrastructure this year alone. Free cash flow is negative. S&P just downgraded their credit rating and they're looking to raise $40 billion in new debt and equity, which means potential dilution and a bigger strain on cash flow and net income. So, you've got a stock that analysts love long-term, but the financials right now are under real pressure. So, let's break down both sides. So bold case number one, cloud infrastructure is exploding. Oracle cloud has quietly become a real alternative to AWS and Microsoft's Azure. Their AI infrastructure is optimized for training massive models. And companies like Nvidia and XAI are already using it. And Oracle's network architecture actually lets AI workloads run faster and cheaper than a lot of competitors. And that's why demand is surging. Bull case number two, the backlog is staggering. Oracle's remaining performance obligations hit 638 billion, up 363% year-over-year. That's not projected revenue. That's committed contracted future revenue from multi-year commercial deals. Governments, regulated industries, massive corporations, they're all locking in. That kind of visibility is rare for any company at any size. And bullcase number three, the software business is a cash machine. Products like Netswuite and Fusion ERP are missionritical. Companies don't rip those out. Retention rates are extremely high. And as legacy database customers migrate to Oracle's cloud, margins will go up. On top of that, the Cerner Healthcare integration opens up a whole new recurring revenue vertical. So, while everyone's focused on the cloud infrastructure story, the software side is quietly printing money and growing that money. Now, three bare cases analysts are pointing to with Oracle. Barecase number one, the spending is crushing. Oracle's projecting 90 to 95 billion in capital expenditures for 2027. That's so aggressive, it's pushing free cash flow negative. And to fund it, they're planning to raise that $40 billion from debt and equity, which means dilution and lower earnings long-term. So, you're not just spending more than you make, you're borrowing and diluting to cover the gap. And if you're not right on those bets, that $40 billion is wasted money. Barecase number two, the balance sheet is under duress. S&P just downgraded Oracle's credit rating to BBB. Credit default swap costs have climbed around 200 basis points, which tells you the bond market is getting a little nervous. And as they refinance older cheap debt at today's higher rates with a lower rating, interest expense goes up and that eats directly into current margins. The debt load is real and it's growing. Barecase number three, Oracle Cloud is growing fast, but they're still the smaller player next to AWS, Azure, and Google, all of which have way more cash on hand. And as AI hardware supply loosens up, pricing wars could start. On top of that, Oracle's legacy database business, which has been a high margin cash cow for years, is structurally declining. So, those are both sides. Now, let's run the numbers on Oracle like we did all along. Their stock price is 127, but the real company price is 370 billion. Now guys, I've said this in many videos about Oracle. Look at this enterprise value. $540 billion. Now, compared to the other companies, it's a lower total amount, $170 billion of debt. But guys, this is not a company. This company only has $370 billion market cap. Microsoft is magnitudes bigger in size with a little bit more debt. And look at that free cash flow. negative23 billion. Decent returns on capital, good returns on capital for the last five years, 11% last year. They've got increasing margins, 22% for the last 10 years, 20% for the last five, but 25% for the last one year. Great revenue growth, 6% a year for the last 10, 10% for the last five, 10 and a half for the last three. And this dividend, they're now in the negative cash flow territory. In fact, in the last 5 years, they're basically break even. So, how's that dividend getting paid? Now, I will say this for the software business, this is a very low price to sales ratio. So, there might be some upside here because you're looking at 21 times earnings. Now, let's go look at their eight pillars. I think it's going to be uglier than the other two. It is only three checks here. High returns on capital, net income's up, revenue is up. Debt is huge, but mostly because it's compared to their five-year free cash flow, which has basically been nothing. Same with the um five-year PE price of free cash flow and the 5-year PE is 33 and they've already increased shares outstanding. So, a lot of negatives there. Let's check out those analyst estimates. Now, here's where it gets exciting. 760 in profit jumping to $33 over the next seven years. That's more than 4x over the next seven years. Guys, if you believe this number is going to happen, even if you assign a 20 PE to this, this is a $660 stock in seven years. It's currently 120. That would make it a 5x 5 and a halfx growth over the next seven years. If these analysts are correct and you get a 20 PE on this, that's a lot of upside potential. So, analysts are sitting here saying, "Hey, this company could really skyrocket its profit and that would be huge for them." Meanwhile, look at revenue growth. Insane. 68 billion to 340. So guys, this one has the most growth potential out of the three companies we've looked at, right? And that's something really important to understand. Now, let me go run that stock analyzer. And you're probably going to look at my numbers and say Paul's being too conservative. So 10-year analysis, I did 8, 13, and 18% revenue growth. I did 20, 22, and 24% profit margin. I did 17, 20, and 23 times earnings 10 years from now. and my 9% return. Before I hit the analyze button, I want to comment here. Analysts would laugh at me about this. You can see that above. To grow your revenue and profit four or five times over the next seven years, this is 30 40% revenue growth a year. Guys, it's hard for me to do that, especially with a company with that credit rating. That's my personal opinion. I'd rather wait until it's a more obvious buy. But let's hit the analyze button and we'll see. Funny thing is, look at this. We have a low price of 111, high price of 360, middle price of 200. The stock's at 130. So, it still might be a decent buy with on my reasonable assumptions. So, I think this company has the more most upside. The question is, do I feel comfortable with those debt levels and they're beating down cash flow? That's the question I have to ask. Now look, we just went through these both these three stocks, both sides of it, and ran the numbers on all of them. But there's some stock on my watch list that looks really interesting right now at current prices. I think it might surprise you. So that video is right here on your screen. Go check it out. I'll see you in there. Thank you for your time.