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This week, we covered quarterly results from one company across our coverage:

Nvidia (NVDA): Scaling the AI Supercycle

Q2 FY26 delivered another step‑function up as AI capex stayed red‑hot: revenue $46.7B (+56% YoY, +6% QoQ) and record free cash flow (> $26B) with a new $60B buyback authorization. Data Center remained the engine at $41.1B (+56% YoY) with Networking up +98% YoY and an early Blackwell ramp driving billions in first‑quarter sales. Gaming hit a record $4.3B (+49% YoY) on RTX 50‑series; Pro Viz reached $601M (+32% YoY); Automotive $586M (+69% YoY). Q3 guide calls for ~$54B revenue and mid‑70s non‑GAAP gross margins. Valuation was revised slightly upward due to stronger near‑term cash flows balanced by China export uncertainty (which will likely be resolved) & higher opex to support the platform build‑out. Key watch‑items: Blackwell supply, enterprise AI software attach, and networking mix.

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This week, we covered quarterly results from three companies across our coverage:

Global Crossing Airlines: ACMI-heavy mix & record utilization; funding is the swing factor for scaling into 2026

Record Hours, Positive EPS—Capital Still the Swing Factor Q2 2025 delivered $61.4M revenue (+7% YoY), a second straight GAAP profit ($0.6M, $0.01/sh), and a company‑record 8,065 block hours with 0 sub‑service. Mix shifted decisively to ACMI (≈73% of hours) with rising $/hr, supporting better unit economics and $8.8M operating cash flow. Fleet growth is on track—first owned A320 added, four A319s due Sep–Dec, and another A321P2F slated—targeting ~23 aircraft by YE25. Liquidity improved but remains tight (working‑capital deficit, going‑concern language), making external financing the near‑term swing factor. IVT: unchanged pending H2 execution and visibility on funding.

Boston Omaha: Core cash engines steady; fiber nearing inflection while insurance digests a claims bump

Steady Core, Fiber Scaling—Insurance Bump to Digest Q2 2025 revenue rose ~4% to $28.2M with a balanced mix: billboards flat but high‑margin, broadband up mid‑single digits as fiber scales, and insurance +12% on premiums. Adj. EBITDA climbed to ~$6.5M on tighter opex; investment marks (SKYH warrants) added volatility but liquidity remains solid (> $41M cash/Treasuries) with modest leverage and $18.4M of buyback capacity. Broadband is nearing an inflection as fiber subs/passings expand; insurance growth continues despite a temporary claims spike; Link Media preserves margins while adding digital faces. Valuation revised slightly down. We need to watch political‑ad tailwinds, fiber absorption, buybacks/SKYH monetization.

Planet 13: Price down, volume up—Florida rebuild & Q4 BHO lab set the 2H catalyst path

Price Down, Volume Up—Rebuild Mode into 2H Q2 2025 revenue fell to $26.9M (–13.6% YoY) as price compression weighed, and gross margin contracted to 43.4%; adj. EBITDA was –$2.4M. Offsets: Las Vegas SuperStore grew QoQ, early cost actions trimmed cash burn, and Florida quality/yields improved with a Q4 BHO lab set to close key assortment gaps. Liquidity is tight but workable (cash ~$15.9M plus a July asset sale; $9.75M revolver extended), and management is leaning into pricing/loyalty to defend share, prioritizing gross‑profit dollars over % margin near term. Valuation revised slightly down. We need to watch pending 2H volume/mix and Florida execution; catalysts include BHO launch, store rollouts, and any regulatory relief.

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This week, we covered quarterly results from seven companies across our coverage:

Rocket Lab (RKLB): Neutron Is the Hinge

Solid execution on Electron and Space Systems while Neutron’s timeline remains the swing factor for margin inflection. Backlog growth and a healthier mix from Space Systems support 2H momentum, but profitability still depends on Neutron milestones and capex discipline. Our IVT base case remains in line pending clearer Neutron schedule/cost updates; we continue to model upside leverage if first flights de-risk in 2026.

Arrowhead Pharmaceuticals (ARWR): Launch-Ready with Four Phase 3s

Q3 FY2025 (June) marked steady clinical and BD execution: plozasiran NDA accepted (PDUFA Nov 18, 2025), multiple Phase 3 programs fully enrolled/initiated, and a $100M milestone from Sarepta on ARO-DM1 with another $200M likely by year-end if enrollment thresholds are hit. Cash resources of ~$900M support launch prep and late-stage trials. Our IVT fair value stays unchanged; thesis leans on successful plozasiran approval plus durable cardiometabolic expansion.

AVITA Medical (RCEL): Reset Mode, Survival Math

Results and repeated financings reinforce a more conservative “survival-mode” path: slower revenue ramp, delayed breakeven, and dilution risk. We revised the IVT base case (from our Q1 update), reflecting lower near-term growth, higher share count, and a still-valuable platform if execution stabilizes into 2026+.

AST SpaceMobile (ASTS): From Demos to Deployment

Pro forma liquidity >$1.5B funds an aggressive 2025–2026 launch cadence (45–60 satellites targeted) and intermittent U.S. service by late 2025. H2’25 revenue outlook ($50–$75M) plus spectrum wins (L/S-Band paths) bolster the commercial story, but execution/financing sequencing and manufacturing scale remain key watch-items. Our IVT stays in line near term; we’ll revisit as Block-2 satellites deploy and early service KPIs land.

Sky Harbour Group (SKYH): Hangars, Leases, and NOI Ramp

Leasing metrics and campus expansion continue to track: weighted occupancy trending upward across an ~0.9M rentable-SF footprint, with recurring rental revenue driving mix. Development pipeline visibility is improving (more shovels in the ground, clearer timelines), and obligated-group disclosures support a credible path to scaled NOI. IVT unchanged; upside hinges on lease-up velocity and project delivery cadence.

Global-E (GLBE): Borderless Growth, First GAAP Profit

Q2 delivered GMV $1.45B (+34% YoY), revenue $214.9M (+28% YoY), and first GAAP net profit, with full-year guidance raised. Shopify partnership enhancements and the ReturnGo acquisition deepen the moat; margins continue to scale with volume. Our IVT fair value is reaffirmed; risk-reward remains favorable as GLBE approaches a $1B revenue run-rate.

dLocal (DLO): Local Rails, Global Scale

Record TPV $9.2B (+53% YoY), revenue $256.5M (+50% YoY), and adj. EBITDA $70.1M (+64% YoY); 2025 guidance raised across TPV, revenue, GP, and EBITDA. Mix and FX headwinds are moderating, operating leverage improving, and FCF conversion remains excellent—even after a $150M dividend. Our IVT base case moves up.

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This week, we covered quarterly results from two companies across our coverage:

Lemonade (LMND): Squeezing Out Profits, Sweet Turnaround

Lemonade’s Q2 2025 results delivered its seventh consecutive quarter of accelerating growth and meaningful underwriting improvement. In-Force Premium (IFP) hit $1.083 B (+29% YoY), revenue grew 35% YoY to $164.1 M, and gross profit more than doubled to $64.3 M (+109% YoY) as the gross loss ratio improved 12 points to 67%. Positive operating cash flow of $6 M and $25 M in adjusted free cash flow signal the company may be approaching self-funding status. Management also made a bold strategic move — slashing its quota share reinsurance from 55% to 20%, retaining more premium and boosting future margins. The shift will phase in over several quarters but already prompted a guidance raise to $710–$715 M in 2025 revenue. Our updated IVT base-case fair value edges up to roughly $77.50/share (from $73), reflecting stronger-than-modeled growth, faster margin expansion, and reduced dilution risk.

Relay Therapeutics (RLAY): All Eyes on RLY-2608, Patience Is a Must

Relay’s Q2 2025 update was another “no drama” quarter — a calculated pause while funneling nearly all resources into its potential blockbuster PI3Kα inhibitor, RLY-2608, in breast cancer. Cash ended at $656.8 M with runway into 2029, a rare luxury for a mid-cap biotech. Operating expenses fell sharply YoY (R&D –31%, G&A –32%) thanks to cost cuts, keeping burn manageable even as the pivotal Phase 3 trial launched in Q2. Phase 1b data show strong efficacy (10.3-month median PFS, 39% ORR) with a favorable safety profile, and management is running a second trial in vascular malformations — potentially another high-value indication. Secondary assets remain paused or partnered, preserving capital. Our updated IVT model keeps the base-case intrinsic value at $12/share (partnered scenario), or $14 in a go-it-alone case. The market price (~$3) still reflects heavy skepticism; the setup remains binary, but with catalysts over the next 18–24 months, upside is compelling if execution stays on track.

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This week, we covered quarterly results from four companies across our coverage:

TransMedics Group (TMDX): Blockbuster Growth & Raised Outlook

TransMedics delivered a standout Q2 2025, with revenue of $157.4 million (up 38% yoy) and net income of $34.9 million — a +186% surge from a year ago. The strong results were driven by expanding adoption of its Organ Care System technology, as the company set new highs in transplant procedure volumes. Management responded by raising full-year 2025 revenue guidance to $585–$605 million (from a prior $565–$585 million), citing a “new high watermark” in clinical cases fueling growth. Our updated IVT model nudges TMDX’s fair value upward; even after a post-earnings pop, we see the stock as undervalued given TransMedics’ market leadership in organ transplant innovation and its accelerating profit trajectory.

MicroStrategy (MSTR): Bitcoin Windfall Drives Record Profit

MicroStrategy (d/b/a “Strategy”) posted eye-popping Q2 2025 earnings thanks to a surge in Bitcoin’s price. Revenue grew modestly (3% YoY to $114.5 million) in its software business, but GAAP net income skyrocketed to $10.0 billion (from a loss last year) as operating income hit $14.0 billion — driven almost entirely by a $14.0 billion unrealized gain on the company’s 628,000+ bitcoin holdings. This was the second quarter under new fair-value accounting for digital assets, highlighting MSTR’s extreme sensitivity to crypto market moves. Management dramatically raised FY25 guidance (projecting $24 billion net income and $80 EPS, assuming Bitcoin $150k by year-end) and continued aggressive capital raising — collecting over $10 billion via stock sales and a landmark Bitcoin-backed preferred offering. We’ve updated our valuation model to reflect higher BTC assumptions, boosting our fair value estimate. While MSTR shares have rallied, we still see long-term upside as a high-leverage Bitcoin proxy, though with significant volatility and risk.

SoFi Technologies (SOFI): Accelerating Growth Yields Profitability

SoFi reported record Q2 2025 results, accelerating its growth while achieving strong profitability. GAAP net revenue jumped 43% year-over-year to $854.9 million, and net income reached $97.3 million (versus just $17 million a year ago) – marking SoFi’s largest quarterly profit to date. The company added approximately 850,000 new members in Q2, bringing total members to 11.7 million (up 34% YoY), and total products to 17.1 million (also +34% YoY. This robust user growth, along with a 72% surge in fee-based revenues from services like SoFi’s loan referral and brokerage offerings, drove an 81% increase in adjusted EBITDA (to $249 million). Citing broad-based momentum across its lending and financial services segments, management raised full-year 2025 guidance (now targeting ~30% revenue growth and higher EPS). Our IVT model has been updated for SoFi’s improved outlook – we’ve slightly raised our fair value estimate. We remain optimistic about SoFi’s long-term trajectory as the company continues to scale its fintech ecosystem and deepen its profitability.

STAG Industrial (STAG): Steady Performance & Credit Upgrade

Industrial REIT STAG Industrial delivered a solid Q2 2025 marked by stable growth. Core FFO (funds from operations) came in at $0.63 per share, a 3.3% increase from a year ago, and Cash NOI rose about 9%. Occupancy remained high at 96.3%, and leasing activity was strong — STAG achieved rent spreads of +24.6% on a cash basis for new and renewed leases during the quarter, supporting continued NOI growth. While net income (GAAP) was slightly lower year-over-year due to non-cash charges, the company’s operational health is evident in its high tenant retention and consistent cash flow expansion. Notably, Moody’s upgraded STAG’s credit rating to Baa2 (from Baa3) during the quarter, reflecting a strong balance sheet and prudent debt management. We’ve kept our base-case fair value roughly unchanged in our model — STAG’s 4% dividend yield and steady mid-single-digit growth make it a reliable income holding, and we continue to view the stock as a core long-term position in the industrial real estate space.

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This week, we covered quarterly results from two of the most influential companies in the world.

Lockheed Martin (LMT): Fortitude Under Fire

Lockheed Martin (LMT) delivered Q2 2025 sales of $18.2B (flat YoY), but large one-time charges on legacy programs drove a sharp drop in reported earnings. Pre-tax write-offs totaling $1.6B (on a classified Aeronautics project and international helicopter programs) plus other charges cut GAAP EPS to $1.46 (vs $6.85 a year ago). Excluding those items, underlying EPS was around $7.30 — reflecting resilient core profitability. Despite the charges, management reaffirmed full-year guidance for sales and free cash flow, citing robust demand (with allied nations expanding F-35 orders, over $1B in new missile contracts, and additional GPS satellite procurements). Our IVT model indicates LMT shares are now modestly undervalued after the post-earnings dip; we’ve maintained our base-case fair value (with a slight upward revision) and continue to view Lockheed as a long-term core holding on the front lines of defense innovation.

Tesla (TSLA): Ambition Amid Adversity

Tesla matched market expectations in Q2 2025, posting $22.5B in revenue (a slight beat) and non-GAAP EPS of $0.40 (in line with consensus). However, revenue fell 12% YoY — Tesla’s first notable sales drop in years — and earnings slid 23% as earlier price cuts and softer deliveries took a toll. Automotive gross margin narrowed to 17.7%, and operating income shrank 42% YoY (to $0.9B, with nearly half of that from regulatory credits), underscoring near-term profit pressures. Elon Musk cautioned of “a few rough quarters” ahead, but emphasized Tesla’s future opportunities — from the upcoming Cybertruck launch and a new affordable model to expansion in autonomous Robotaxi services — as drivers of reaccelerating growth. We’ve updated our IVT model and trimmed our fair value estimate (now below the current share price); while we acknowledge Tesla’s long-term leadership in EV and AI, we remain selective given the stock’s premium valuation.

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This week, we covered quarterly results from two of the most important semiconductor firms in the world.

ASML (ASML): Precision Under Pressure

ASML delivered a strong Q2 2025, posting record revenue of $8.3B and maintaining margins above 53%. High-NA EUV tools began shipping, while upgrade services and installed base management continued to boost profitability. Despite FX and product mix headwinds, guidance remains intact — and our IVT model shows the stock is modestly undervalued at current levels. We’ve maintained our base-case fair value range (with a slight upward revision) and continue to view ASML as a long-term core holding at the frontier of advanced lithography.

Taiwan Semiconductor (TSMC): Silicon Supremacy

TSMC crushed expectations in Q2 2025, with $30.1B in revenue (+44% YoY) and net income of $12.8B. AI and HPC demand drove 74% of wafer revenue from 7nm and below. Despite FX headwinds and fab ramp dilution, gross margin held near 59% — and management raised full-year guidance to +30% revenue growth. We’ve revised our IVT model upward, raising fair value to the $190s per ADR. With leadership at the 3nm and 5nm nodes, and 2nm taping out soon, we see TSMC as an AI arms dealer with global scale.

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In this edition, we’re covering an important development from Coherus Oncology (CHRS) — a quiet Nasdaq compliance notice that may have bigger implications than it seems on the surface.

Coherus Oncology: Compliance Clock Started Ticking

After the close on July 3rd, CHRS filed an 8-K disclosing that it had received a Nasdaq deficiency notice for trading under $1.00 for 30 consecutive business days. This was widely expected given the prolonged weakness in the stock, but the timing — late on a Thursday before a long holiday weekend — suggests management wanted it to stay under the radar. The company now has 180 calendar days (until December 29, 2025) to get the stock back above $1, or else face delisting unless a reverse split might have to be enacted or an extension is granted.

While this sounds like routine administrative procedure (& it often is), we believe it quietly adds strategic pressure on CHRS management. The company has dramatically restructured over the past year — selling its biosim business, paying down debt, rebranding as Coherus Oncology, & banking cash — yet the stock trades well below cash value; also, valuing their pipeline at zero. With a ticking compliance clock, & clear undervaluation, we believe the buyout thesis gets even stronger here. CHRS is now one of the most attractively positioned oncology targets on the market. If an acquisition doesn’t materialize before year-end, we think a reverse split may be approved as a precaution but not necessarily used. In the meantime, stronger-than-expected Loqtorzi results in Q2 could be the organic catalyst that drives the stock back into compliance.

Either way, this remains a misunderstood & heavily discounted name — & now, time is starting to work in favor of a strategic resolution.

Closing Thoughts & New 7-Day Trial

Finally, a quick reminder: if you enjoyed this abstract, remember that it’s just the tip of the iceberg. Premium subscribers get access to the full, in-depth breakdowns behind these stories — including our detailed research reports on each company, the complete Intrinsic Value Tracker models underpinning our valuations on all 20+ businesses, & our real-time Portfolio Dashboard with all our positions & moves. We’re thrilled to make it easier than ever to try out this premium content.

Again starting now, you can get a 7-day free trial as a new premium subscriber — just use the code “PCRTRIAL” at checkout on our website to unlock a week of full access, on the house. This trial lets you explore everything we offer (from deep-dive analysis to exclusive tools) absolutely risk-free. We hope this helps more of you see the value in our research before committing.

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As always, thank you for reading & for being part of the Pierce Capital Research community. We’ll be back with more insights next week!

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In this edition, we cover two big updates from our coverage universe: AST SpaceMobile’s bold debt reduction move & Lemonade’s major reinsurance overhaul. Let’s dive in with some small abstracts.

AST SpaceMobile (ASTS): $225M Convertible Repurchase Cleans Up Balance Sheet

AST SpaceMobile (ASTS) announced a strategic repurchase of $225M of its 4.25% convertible notes due 2032, roughly half of its outstanding notes. To fund this, the company is issuing 9.45 million new shares in a direct offering to those noteholders. The net effect is remarkably shareholder-friendly: by retiring the notes, ASTS eliminates about 8.3 million potential shares that would have resulted from future conversion, essentially offsetting most of the new equity issuance. In fact, after the dust settles, the transaction results in only 1.04 million incremental shares outstanding. This move also wipes out approximately $63.8M in future interest payments the company would have owed on the debt. The rationale here is clear, clean up the balance sheet & remove a dilution overhang at a price point management deems attractive for shareholders. By cutting its debt load nearly in half & saving on interest, ASTS is strengthening its capital structure at a critical pre-revenue stage.

The implications for ASTS are pretty significant. With $225M of debt off the books, the company’s future cash burn is reduced, giving it more runway to develop its space-based cellular network. Management framed this as a vote of confidence in ASTS’s long-term plans, noting that these transactions substantially reduce obligations & position the company better for growth. It’s a signal of confidence: the company is willing to dilute slightly today (only about a 1%–2% net increase in shares) to avoid much larger dilution later & strengthen its finances. In our Intrinsic Value Tracker (IVT) model, which is inherently speculative for a pre-revenue firm, the reduced debt & interest burden actually improve the base-case valuation modestly — all else equal, less interest expense means a bit more value accrues to equity. To be sure, ASTS remains a high-risk, long-horizon story (still awaiting material revenue to come in), but this debt repurchase is a positive strategic trade-off: it lowers financial risk & removes uncertainty about future conversion dilution.

Investors have interpreted the news as a pragmatic step; it addresses balance sheet concerns even as the company continues to burn cash in development. There is a trade-off (small dilution now versus big liabilities later), but we view it as a slight de-risking. Management’s optimism about long-term cash flows seems stronger, they wouldn’t be restructuring now if they didn’t believe ASTS can eventually monetize its satellite network. Overall, cleaning up debt at this stage slightly boosts our confidence in the base-case IVT valuation & reduces one overhang for AST SpaceMobile going forward.

Lemonade (LMND): Reinsurance Overhaul Speeds Path to Profitability

Digital insurer Lemonade (LMND) is restructuring its reinsurance program, cutting its quota share cession from about 55% to just 20% effective July 1. In plain terms, LMND will now retain 80% of premiums (up from 45% before), significantly increasing the share of business it keeps on its own books. The decision comes on the back of improving fundamentals — management cited stronger diversification, underwriting, & loss ratios as key enablers. Reinsurance “comes at a cost,” as LMND’s President Shai Wininger put it, & the company’s steady improvements mean it can “retain more of the risk ourselves, improve margins, and stay capital-light”. This overhaul should have a meaningful margin impact: by ceding much less premium, they will collect far more in net earned premiums, boosting its top-line & gross profit (assuming claims experience remains favorable). Reasonably, this move is likely to accelerate their path to profitability.

The company has been narrowing its losses — Q1 2025 saw a 27% revenue jump & a GLR holding in the low 70s% — & retaining more premium means more of that improvement flows through to the bottom line. Investors appeared to agree that this is a positive step, as LMND shares rose about 5% on the announcement. By betting on its own underwriting quality (& continuing to partner with top reinsurers for the remaining 20%), LMND is effectively saying it’s confident enough in its pricing & risk management to “bet on itself.” This should improve profit margins going forward, provided that loss ratios stay on their improving trajectory.

We’ve updated our valuation accordingly. Our IVT base-case value for Lemonade was revised slightly higher after this reinsurance update, reflecting the enhanced margin capture & faster projected timeline to break-even. It’s worth noting that our previous analysis already recognized their strong long-term potential — that our previous valuation estimate was based on a decade of growth & margin expansion & vastly exceeded the stock’s then-current mid-teens trading price. Now, with more premium retained, our model attributes even more value to the company’s future earnings power.

Of course, there is a bear case to consider: skeptics argue that LMND might be taking on too much risk too soon, & if underwriting falters or a severe CAT hits, the higher net exposure could hurt. In a scenario where growth stalls or margins stagnate, the pessimists like to tout Lemonade’s value much lower (our bear-case scenario is only in the high-teens per share). We acknowledge those risks, but we disagree with the bears. Why? The data shows consistent improvement — LMND’s trailing loss ratios have improved, & excluding one-off CAT losses (like the California wildfires, which inflated Q1), the underlying loss ratio was around 59% in Q1, an impressively healthy level. In other words, Lemonade’s cortex is working, & the company has a decent reserve ($1B+ in cash) to absorb volatility. By retaining more premium now, LMND stands to reach profitability sooner without relying as heavily on reinsurers, all while maintaining a “capital-light” model. In our view, the upside from improved margins & growth leverage outweighs the incremental risk. The raise in our IVT model reflects that confidence in their trajectory toward sustainable profitability.

Closing Thoughts & New 7-Day Trial

Finally, a quick reminder: if you enjoyed these abstracts, remember that they are just the tip of the iceberg. Premium subscribers get access to the full, in-depth breakdowns behind these stories — including our detailed research reports on each company, the complete Intrinsic Value Tracker models underpinning our valuations on all 20+ businesses, & our real-time Portfolio Dashboard with all our positions & moves. We’re thrilled to make it easier than ever to try out this premium content.

Again starting now, you can get a 7-day free trial as a new premium subscriber — just use the code “PCRTRIAL” at checkout on our website to unlock a week of full access, on the house. This trial lets you explore everything we offer (from deep-dive analysis to exclusive tools) absolutely risk-free. We hope this helps more of you see the value in our research before committing.

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As always, thank you for reading & for being part of the Pierce Capital Research community. We’ll be back with more insights next week!

TSLA’s Robotaxi Launch in Austin: A Foundational Step Toward Autonomous Mobility

On June 22, Tesla officially rolled out its first robotaxi service pilot in Austin, Texas. A fleet of 10 fully autonomous Model Y vehicles is now offering rides within a limited geofenced area of the city, at a flat fare of $4.20 per trip. Notably, there are no drivers in the driver’s seat — marking a true driverless operation — though a safety operator rides in the front passenger seat for oversight during this early phase. Elon Musk hailed this as a “foundational moment” for Tesla’s vision, and the market seemed to agree: the successful pilot launch sent Tesla shares up nearly 10%, as investors embraced the company’s breakthrough in autonomous ride-hailing.

Tesla’s approach differs from rivals like Waymo. Rather than using LIDAR sensors, Tesla relies on its vision-only FSD (Full Self-Driving) AI technology powered by the vast data from its vehicle fleet — a strategy Musk argues will be more scalable and cost-effective. In theory, robotaxis could drive down transportation costs dramatically; Musk has suggested operational costs might reach as low as $0.20 per mile, undercutting traditional ride-sharing and taxi services. If realized at scale, this would enable very attractive profit margins for Tesla while offering cheap fares to consumers. It also positions Tesla to transform from a one-time car seller into a recurring mobility service provider, generating income per ride much like Uber or Lyft (but without drivers). Musk even mused that a successful robotaxi network could someday push Tesla’s valuation to $5T (from about $1T now) – reflecting the enormous potential he sees in this business model.

Why this matters: The Austin robotaxi pilot is an important proof-of-concept that solidifies Tesla as a frontrunner in autonomous driving. It’s a tangible step toward unlocking a new, high-margin revenue stream that could fundamentally reshape Tesla’s financial profile in the long run. However, it’s still early days. The service is limited in scope (small fleet, constrained routes, fair weather only, and a human overseer onboard), & no meaningful revenue is flowing from it yet. Tesla’s team – and its investors – will be watching closely for safety data and regulatory feedback before expanding. In short, this launch validates Tesla’s technology and vision, but the real financial impact will only come once the company can scale this robotaxi network and monetize it. We’re encouraged by the progress, yet we’re holding off on changing any valuation models until Tesla demonstrates that robotaxis can operate broadly and start bringing in cash. It’s a huge opportunity on the horizon, but turning that promise into reality (& profits) will be the next critical challenge to watch for in 2025 and beyond.

Biotech’s Depression Persists into 2025: Opportunity Amid the Gloom

Biotech stocks have been mired in a prolonged slump — a “biotech winter” — over the past few years, and 2025 so far hasn’t broken the trend. Investor sentiment remains near rock-bottom. In fact, roughly a quarter of companies in the Nasdaq Biotech Index now trade with market caps below the value of their cash holdings. In other words, the market is valuing their drug pipelines at zero (or even negative). It’s a clear sign of extreme pessimism: traders are assuming most experimental drugs will never pay off, and even genuinely promising clinical trial results have often been met with indifference. As one veteran biotech portfolio manager put it, “there’s not a lot of tolerance for these small biotechs that are going to be burning cash for years… [investors aren’t] willing to give anyone the benefit of the doubt.” Such despair in the sector is painful for current investors — but for contrarians, it can scream opportunity.

History suggests that when valuations hit these kinds of historic troughs, the biotech sector may be near a bottom. Despite the dour market mood, scientific progress hasn’t slowed: new breakthrough therapies are still emerging from labs and clinics. Indeed, we started seeing glimmers of optimism last year — in 2024, small-cap biotechs collectively added nearly $30B in market value on the days they announced positive trial results, indicating that good news can move stocks again. With dozens of biotech companies now trading at or below the cash on their balance sheets (essentially pricing their science at $0), any sentiment reversal or successful drug trial could trigger outsized gains. As Fidelity’s biotech team recently noted, “This could prove to be an excellent time to invest in biotech.” For investors with patience & strong stomachs, buying quality biotech names during this valley of despair could set the stage for significant upside if/when the sector rebounds.

Big Pharma is bargain-hunting: Large pharmaceutical companies have certainly noticed how cheap biotech has become — & they’re seizing the moment. After a quiet 2022–2023 (when rising interest rates & falling stock prices stifled deal-making), big pharma is back on the acquisition trail in 2024–2025, scooping up promising biotech assets at a discount. There are a few reasons why pharma giants are especially hungry for deals right now: (1) Many big players face looming patent cliffs later this decade (blockbuster drugs losing exclusivity), so they urgently need new drugs in their pipelines to fill future revenue gaps. (2) These companies are flush with cash from strong earnings in recent years, giving them war chests to spend. (3) The macro environment is becoming more favorable — inflation is cooling & interest rates are stabilizing, making deal financing cheaper, and the regulatory climate for mergers (under the current U.S. administration) is seen as relatively business-friendly on antitrust matters. As JPMorgan’s head of healthcare banking put it, “eventually the dam starts to break” on pent-up M&A demand, and it looks like that breaking point may be now.

Notable recent biotech acquisitions: The past year has seen a string of buyouts as pharma companies capitalize on depressed valuations. A few examples:

• Johnson & Johnson acquired Intra-Cellular Therapies (January 2025) for $14.6 billion, targeting the company’s CNS drug franchise (including Caplyta for schizophrenia/bipolar disorder). J&J paid a hefty premium, underscoring it will spend big for the right asset in its portfolio.

• Vertex Pharmaceuticals bought Alpine Immune Sciences (April 2024) for $4.9 billion. Alpine’s promising immunology drugs for lupus and other autoimmune diseases broaden Vertex’s focus beyond its cystic fibrosis stronghold.

• Gilead Sciences acquired CymaBay Therapeutics (February 2024) for $4.3 billion to gain a Phase III drug for a chronic liver disease (PBC), extending Gilead’s reach into metabolic liver disorders.

• Germany’s Merck KGaA (no relation to Merck & Co.) purchased SpringWorks Therapeutics (April 2025) for $3.9 billion. SpringWorks had just won FDA approval for a novel desmoid tumor treatment, giving Merck KGaA a foothold in a rare oncology niche.

• Novartis snapped up Anthos Therapeutics (February 2025) for $3.1 billion. Anthos is developing next-gen blood thinners; notably, Novartis had originally co-funded this startup, and decided to buy it outright once the price was right.

• Eli Lilly has been on a shopping spree: in 2023–24 it paid $1.9 billion for obesity-drug developer Versanis, and in 2025 it agreed to acquire Scorpion Therapeutics (precision oncology) for up to $2.5 billion and SiteOne Therapeutics (pain/migraine drugs) for $1 billion. Lilly also made a bid of up to $1.3 billion for Verve Therapeutics, which is working on gene-editing cures for heart disease. Fueled by booming sales of its diabetes and weight-loss drugs, Lilly is aggressively using its cash to buy growth.

• GSK (GlaxoSmithKline) joined the fray by acquiring oncology biotech IDRx (January 2025) in a deal worth up to $1.2 billion, aiming to bolster its cancer drug pipeline.

• Even smaller deals are ticking up: Checkpoint Therapeutics, a micro-cap with an approved immunotherapy (cosibelimab), was bought by Sun Pharma in May 2025 for roughly $355 million — a notable exit in the small-cap space.

This flurry of acquisitions — after a long lull — sends an important signal: big pharma believes many beaten-down biotechs are undervalued, & it’s willing to pay real premiums to acquire them. Every time a deal is announced at, say, a 50%–100% premium to the prior stock price, it reminds the market (& investors) that these companies do have real worth, and it often sparks speculation about who might be next on the auction block. One particularly interesting player to watch is Merck & Co. (MRK). The U.S. pharma giant has been very vocal that it needs to do deals (it faces a huge Keytruda immunotherapy patent expiration in 2028), yet it was oddly quiet in 2024. Merck’s CEO has indicated they’re ready to act whenever the right science and price align. In April 2025 Merck reportedly even made a ~$3 billion offer for MoonLake Immunotherapeutics (a biotech with an exciting anti-inflammatory drug) ahead of key trial data — a sign Merck won’t hesitate to strike early to snag a bargain. Don’t be surprised if one morning we hear Merck announce a major biotech takeover; the company has the cash and the motive, so it’s likely only a matter of time.

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ASTS Joins the Russell 1000 Index: Visibility Upgrade

Effective after the market close on June 27, AST SpaceMobile is set to join the Russell 1000 Index — a benchmark tracking the largest 1,000 U.S. companies by market cap. That’s not just a badge of honor. Roughly $10.6T in assets are benchmarked against Russell indexes, meaning ASTS could see meaningful passive inflows from index funds and increased liquidity. This inclusion marks a new phase of recognition for the company as it matures from moonshot to mainstay.

Why this matters: Gaining entry into the Russell 1000 expands ASTS’s audience — institutional investors, large-cap indexers, and momentum allocators now have to take notice. It adds structural visibility to the story, right as the company shifts from R&D mode to commercial-phase execution.

The 45 MHz Spectrum Deal: Mid-Band Muscle

In one of the biggest announcements in ASTS’s history, the company unveiled a term sheet agreement with Ligado, Inmarsat, and Viasat that gives ASTS long-term access to up to 45 MHz of premium mid-band spectrum across the U.S. and Canada — the largest nationwide block available. If finalized, this spectrum will complement ASTS’s low-band holdings and supercharge throughput to 120 Mbps speeds (yes, that’s broadband from space, directly to regular smartphones). The financing? A $550M non-recourse institutional loan backed by spectrum value, not dilutive to the business — and already fully committed.

Why this matters: This isn’t just “more spectrum.” It’s the spectrum ASTS needed to unlock a high-capacity, revenue-generating network that can support full data, video, and voice applications. Combined with their existing low-band footprint, it gives ASTS the backbone for U.S. and Canada coverage at scale — and a cleaner story to take to regulators and commercial partners. The deal is subject to court and regulatory approvals, expected by end of June, but it’s a fundamental piece of ASTS’s monetization roadmap.

India Partnership: Real-World Deployment Starts Now

ASTS also announced a strategic partnership with Vodafone Idea (Vi) to bring satellite-based broadband to India — one of the largest and most underserved telecom markets in the world. The partnership will align with India’s “Digital India” initiative, targeting remote and rural areas. ASTS will handle the satellite side, Vi will manage ground infrastructure, spectrum, and regulatory coordination. The goal? Seamless 4G/5G connectivity to unmodified phones, from the sky — no apps, no special hardware, no local towers.

Why this matters: India has 1.1B mobile subscribers, but coverage gaps remain a huge challenge across vast rural areas. This is ASTS’s first announced operator-led deployment in a Tier-1 global telecom market — and a clear proof point that its model is being adopted by major incumbents. It also signals a commercial path forward: once coverage is in place, expect IoT, enterprise, and government verticals to emerge as monetizable use cases. This is not pilot-phase anymore — this is ecosystem buildout.

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Canada’s F-35 Deal: Sticker Shock, But Commitment Intact

Canada’s plan to buy 88 F-35 fighters is turning out far pricier than expected, though the deal remains on track. Key highlights from the update:

• Ballooning Cost: An Auditor General report found the program will cost C$27.7B ($20B USD) — roughly 50% higher than initial estimates. The overruns come from add-ons needed to make the jets fully operational (advanced weapons, upgraded infrastructure) & pandemic-era inflation that wasn’t factored into older estimates.

• Delays in Deployment: Infrastructure projects for the F-35 bases are behind schedule. Permanent hangars & training facilities won’t be ready until 2031, meaning the Royal Canadian Air Force will rely on temporary setups when the first F-35s arrive (expected around 2028). A fighter pilot shortage in Canada is another hiccup, potentially affecting readiness.

• Still Moving Forward: Despite the cost spike & a defense spending review by Canada’s government, there’s no sign of backing out. Officials note many NATO allies saw similar F-35 cost growth. The commitment shows that Canada views the F-35 as essential for its future fighter fleet. For LMT, Canada’s order remains a substantial long-term contract — now potentially larger in value, albeit with revenue spread over a longer timeline due to the delays.

Why this matters: Canada’s steadfast commitment (even at a higher cost) is a relief for LMT, cementing a decade-long revenue stream. The budget increase could mean a bit more money for LMT (covering added weapons/support), though much of those overruns go toward infrastructure that doesn’t directly boost LMT’s sales. The delays might push some deliveries & payments further out, but ultimately Canada’s 88 jets will keep LMT’s production lines busy & highlight the F-35’s continued international demand.

U.S. F-35 Orders: Budget Cuts Looming

In the U.S., the F-35 program faces a potential near-term slowdown. The Pentagon’s FY2026 budget proposal, unveiled this week, delivered an unwelcome surprise for LMT:

• Halved Order in 2026: The U.S. Air Force requested only 24 F-35As for FY2026 50% fewer than the 48 jets it had planned to buy. The Navy & Marine Corps also trimmed their asks (to 12 & 11 F-35s, respectively). These cuts align with a directive to reduce defense spending by 8% over five years & indicate a belt-tightening that even the F-35 program isn’t immune to.

• Criticism & Debate: The F-35’s price tag (an estimated $2T total lifecycle cost) & recurring technical issues have drawn fire. High-profile figures like Elon Musk have said in the past that manned fighter jets such as the F-35 are becoming “obsolete” in the drone era, while other politicians have blasted the program as “dysfunctional” & wasteful. This skepticism is adding pressure on the Pentagon to justify the F-35’s costs & actually consider unmanned systems as an alternative path.

• Not Final Yet: Importantly, the budget proposal isn’t set in stone. This is a proposal. U.S. Congress will review it, & Lockheed Martin has historically benefitted from the support on Capitol Hill. It wouldn’t be surprising to see lawmakers push those F-35 numbers back up before final appropriations. The Pentagon’s move, however, sends a message that even strong programs like the F-35 are under scrutiny. Investors should watch the congressional debate closely — any sustained slowdown in F-35 purchases could slow LMT’s growth in coming years, even if the overall program remains intact.

Why this matters: The U.S. is by far the F-35’s largest customer, so a cut or stretch-out in American orders could ripple through LMT’s outlook. Fewer jets in the near term might mean slightly lower revenues for Lockheed’s Aeronautics segment in the late 2020s. That said, we suspect any “lost” orders now may just be deferred rather than canceled — especially given geopolitical tensions & the F-35’s central role in U.S. & allied defense strategy. In short, the F-35 isn’t going away, but this budget drama is a reminder that even top-tier defense programs face political & fiscal headwinds. (In our premium report, we dive into whether these developments warrant changes to our LMT valuation model, or if they simply amount to timing adjustments. We also discuss what to watch next — from congressional negotiations to international F-35 sales — to gauge LMT’s trajectory.)

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Coherus’s Oncology Pivot – An Undervalued Gem & M&A Candidate?

Coherus BioSciences (now Coherus Oncology) has completely transformed itself from a biosimilar-focused firm into a pure-play cancer therapeutics company — & the market still doesn’t want to budge. In April 2025, CHRS sold off its last biosimilar (the Udenyca franchise) for $558M (with $483M upfront), using the proceeds to wipe out $230M in convertible debt. Post-deal, CHRS is flush with cash (around $250M, maybe higher) & now focused on immuno-oncology.

The stock has been crushed over the years: recently trading around $0.80 (market cap around $90M), which is actually lower than the cash on its balance sheet. Translation? The market is effectively valuing Coherus’s drug portfolio & pipeline at less than $0 — implying investors think all that cash will be burned with nothing to show. That makes no sense with the runway of cash until 2027 & a growing FDA-approved franchise. This disconnect sets the stage for a special situation: at current prices, investors buying CHRS stock are essentially getting its oncology assets for free. Our take is that the pessimism is overdone, & it’s exactly the kind of deep-value dislocation that can create an arbitrage-like opportunity if the company delivers even modestly on its plans.

Why are we optimistic? Coherus’s remaining arsenal is small but potent. Its flagship drug LOQTORZI (toripalimab) is an FDA-approved PD-1 immunotherapy for a rare cancer (nasopharyngeal carcinoma). Granted, that’s a niche (2,000 U.S. patients), but LOQ is already showing 200%+ YoY growth & gaining traction even in this tiny market. More importantly, the drug’s potential goes far beyond that niche: in China, toripalimab is approved in 8+ indications (demonstrating remarkable versatility), and Coherus is partnering with other firms to expand its U.S. label into bigger cancers (through combo trials funded by the partners, not CHRS). In other words, CHRS is smartly broadening LOQ’s use at minimal cost — any new indications could unlock a much larger revenue stream down the road.

On top of that, they have two promising clinical-stage immunotherapies: a cutting-edge CCR8 antibody (CHS-114) targeting regulatory T-cells in tumors, and an IL-27 cytokine inhibitor (casdozokitug/casdozo) that’s already shown eye-opening early results (including some complete responses in tough-to-treat liver cancer when combined with other agents). These are hot areas in immuno-oncology, & Coherus is among the leaders pushing them forward. In fact, CHS-114 has delivered proof-of-concept in humans – it depletes immunosuppressive T-cells in tumors & even notched a confirmed tumor response in a PD-1–resistant patient — a clear signal that it’s working as designed. Big Pharma is acutely aware of these kinds of assets; there’s a reason we’re seeing a wave of acquisitions in biotech, even for mid-stage programs. Coherus, uniquely, isn’t a pre-revenue shot in the dark like many small biotechs — it’s already generating revenue with an approved product, has cash in hand, and possesses two differentiated pipeline drugs. That combo makes CHRS stand out as a potential takeover target. In our premium report, we explore why this isn’t just idle speculation: from industry trends (pharma’s shopping spree for innovative cancer drugs) to Coherus management’s own moves, the clues are adding up that an acquirer could swoop in while the stock is absurdly cheap.

Management’s actions are certainly hinting at something big. Over the past year they have methodically streamlined/de-risked its profile — a playbook we often see from companies positioning for a buyout. They’ve rebranded to emphasize oncology, shed all non-core businesses, & aggressively cleaned up the balance sheet (no debt, no confusing convertible notes, just cash). They even made intriguing leadership tweaks: the Chief Commercial Officer resigned after the pivot but is sticking around as an advisor through 2026 with a generous retention package — a move that suggests CHRS wants to stay lean while keeping expertise on deck (often a sign of “sale mode” readiness). Meanwhile, management is striking cost-efficient partnerships to advance the pipeline (for example, letting partners sponsor costly trials using LOQ in new combos) instead of burning cash themselves. And here’s a telling detail: CEO Denny Lanfear is nearly 70, which makes him one of the oldest biotech CEOs in the game -– & he owns a sdecent chunk of CHRS stock. After founding the company & orchestrating this big pivot, it wouldn’t be surprising if he’s looking to seal his legacy with a successful sale rather than spend another 5+ years fighting the market’s skepticism.

All these factors point in the same direction: Coherus is making itself as attractive & acquisition-ready as possible. If a larger oncology player is eyeing assets to strengthen their pipeline, CHRS offers a rare package — cash (which effectively subsidizes the deal), an FDA-approved immunotherapy that can slot into combination regimens, & two clinical assets in high-interest targets (CCR8 | IL-27) that could be future blockbusters. And at this valuation, any buyer would be getting a fire-sale price. For instance, even a $3–4 per share buyout (several times the current price) would value Coherus around $350M–$450M, yet the company comes with $250M cash in hand, so the net cost to acquire its pipeline & commercial asset could be barely $100M–200M. We’d bet that more than a few business development teams out there have Coherus on their radar right now.

One more interesting twist to this story: the massive short interest hanging over CHRS. Roughly 30% of the float (about 33 million shares) has been sold short, a carryover from the old Coherus days when bears were betting on biosimilar woes & debt fears. That short thesis is now outdated & flawed, CHRS reinvented itself, but the shorts haven’t left. In fact, by standard metrics the stock’s “days to cover” is off the charts (it could take weeks for all shorts to buy back shares at typical volumes). This pent-up buying pressure could act like rocket fuel if any positive catalyst hits. A solid clinical update, a big partnership, or especially any whiff of a buyout could send CHRS skyrocketing as shorts scramble to cover their positions.

In a takeover scenario, it’s not crazy to imagine a chain reaction where the stock overshoots the buyout price in the short-term, squeezed by the sheer urgency of 33 million shorted shares trying to close out. The bottom line here, their current valuation looks like an anomaly. We see a company with real assets & cash being treated as if it’s on life support — & a management team that’s taking all the right steps to prove the market wrong (or perhaps cash out via M&A). It’s a classic case of deep value in biotech, with multiple ways to win. If a buyout materializes, great, you catch a big pop (& possibly a squeeze). If not, & CHRS simply executes on its oncology strategy, the stock still has significant upside to close the gap toward its intrinsic value. It’s not often you find a dollar selling for pocket change, especially not in a sector where big fish are hungry to snap up bargains. CHRS might just be one of those rare situations, & that’s exactly why we dug in with this special report.

Valuation Overview: Given the extreme disconnect, we revisited our model for CHRS. As of our latest update (after Q1 2025), we estimate Coherus’s intrinsic value below our original target $7.50. After trimming some assumptions, we revised this down in light of slightly slower initial sales ramp for LOQ & a more conservative timeline (we pushed certain label expansions out by 1 year & assumed a modest capital raise in late 2026 to ensure funding). Even with those cautious tweaks, the valuation remains orders of magnitude above the current share price. The market’s gloominess has, in our view, swung the pendulum too far into fear. Their cash runway is secure (they guide over two years of funding), & they’re keeping expenses lean. If their oncology franchise delivers even baseline success, the upside is substantial. In short, our model reflects optimism balanced with realism — & still lands below our original $7.50 range which is still 6–7 times the recent trading price. That kind of gap is highly unusual for a profitable, revenue-generating biotech with an FDA-approved drug. It signals just how deeply undervalued CHRS has become, & why it wouldn’t surprise us to see a strategic acquirer take notice.

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The Race to Robotaxis: Tesla vs. Waymo – & Why Uber's Clock Is Ticking

Tesla has officially entered the robotaxi race with its new Austin pilot — but how does it stack up against Waymo, the U.S. market leader in autonomous ride-hailing? In this premium report we published, we compare Tesla’s vision-only AI model to Waymo’s lidar-heavy precision mapping & explore why Uber / Lyft may end up as middlemen (or casualties) in this next evolution of mobility.

Our take? This isn’t a winner-takes-all market. With trillions of miles driven annually, several models can thrive — but only if they scale. Tesla’s distributed fleet idea is bold. Waymo’s early execution is real. Uber’s relevance? Under pressure if they don’t adapt.

dLocal’s $150M Africa Expansion Could Change the Game

DLO just announced plans to acquire AZA Finance, a leading African payments and FX startup, in what could be a $150M deal (based on Bloomberg-sourced figures). This move instantly expands DLO’s reach across 17 African nations, enhances its stablecoin & FX capabilities, & plugs them into one of the fastest-growing digital payments ecosystems in the world.

We walk through the strategic rationale, the balance sheet implications, and the potential financing structures — whether it’s an all-cash hit, a stock-based deal, or a performance-based earnout.

Until terms are confirmed (DLO did not give the financing arrangements yet), we’re holding off on revising the IVT model — but the upside case is taking shape if integration goes well & we will make revisions either downward/upward depending on how the deal is structured. For a company already producing strong profits & paying out a $150M special dividend, this is a bold but calculated swing.

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Intrinsic Value Tracker – Subscriber View

In addition to in-depth reports, subscribers get access to our Intrinsic Value Tracker. This tool provides an up-to-date intrinsic value per share for each company we cover, alongside the current market price — so you can instantly see which stocks are trading below/above their fair value. Below we show two example snapshots from the tracker:

Figure: SoFi Technologies (SOFI) – Intrinsic Value vs. Market Price. Our model currently estimates SoFi’s intrinsic value at $16.20 per share, which is roughly 14% higher than its recent market price ($14.17). The green highlight (+14.33%) indicates that SoFi is undervalued (deviation) by about 14%. Notably, this gap has been narrowing — SoFi’s stock has been “rapidly coming up” toward our intrinsic value estimate as the price rallied in recent weeks. Subscribers can monitor such changes in real time with the tracker, helping identify opportunities before the market fully catches up.

Figure: AST SpaceMobile (ASTS) – Intrinsic Value vs. Market Price. In contrast, AST SpaceMobile appears to be trading right around its fair value. Our model has ASTS’s intrinsic value at $28.00 per share, very close to the current price (around $28ish). The small difference (3.18%, shown in red) suggests the stock is hovering around at fair value, within a few percent of our estimate. In cases like ASTS, the tracker helps confirm that the market has largely priced the company appropriately — or alerts us if it drifts too far above/below what we calculate as its true worth.

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Relay Therapeutics: Encouraging Cancer Trial Results

Relay is making waves in oncology with new data from its ongoing trial of RLY-2608, a precision-designed PI3Kα inhibitor. The data, presented at ASCO 2025, suggest that Relay’s asset, given with standard therapy fulvestrant, is delivering meaningfully improved outcomes for a tough-to-treat breast cancer population. It’s the kind of progress these patients haven’t seen in over a decade, & it shows the potential of Relay’s computationally guided drug design approach. In short, Relay just took a confident step toward its first approval. Key highlights from the update:

• Prolonged Progression-Free Survival: Patients with PI3Kα-mutated, HR+/HER2- metastatic breast cancer (who had already been through the usual CDK4/6 inhibitor therapy) achieved a median progression-free survival (PFS) 10–11 months on RLY-2608 plus fulvestrant. This is notably high for second-line treatment & actually hints at a real improvement over the standard options.

• Consistency & Tolerability: The latest results were consistent with earlier findings, reinforcing that the benefit isn’t a fluke. Importantly, RLY-2608 appears well-tolerated — a big deal, since the existing PI3Kα inhibitor in this setting (the current standard of care) is notorious for side effects. Relay’s asset is mutant-selective, aiming to hit cancerous cells hard while going gentler on normal ones.

• Pivotal Trial on Deck: Buoyed by these positive data, Relay is gearing up to launch a Phase 3 pivotal trial (nicknamed ReDiscover-2) by mid-2025. This will be the first trial of a mutant-selective PI3Kα inhibitor to reach Phase 3. Success there could pave the way for regulatory approval & a new treatment option for patients. (Relay is also exploring next-gen combo therapies — imagine adding RLY-2608 to targeted CDK4 inhibitors for a one-two punch. Those efforts are obviously still early, but they show Relay’s ambition to push the envelope.)

Why this matters: Relay’s clinical progress not only validates its technology-driven approach to drug discovery, but it also edges the company closer to a commercial therapy. For investors & biotech watchers, this is a story of high unmet need meets promising science. We’re keeping a close eye on how RLY-2608 might compete with or even displace the current standard treatment if all goes well. (In our full report for subscribers, we dig into how RLY-2608’s results compare to the incumbent drug & what that could mean for Relay’s intrinsic value.)

Verses AI: A New “Digital Brain” Architecture

Meanwhile, on the tech front, Verses AI (I microcap uplisting to the NASDAQ) just pulled back the curtain on an AI breakthrough that has the industry buzzing. The company introduced AXIOM, its codename for a next-generation AI architecture —essentially a “digital brain” inspired by how natural intelligence works. And AXIOM isn’t just a cool concept on paper; it’s already outperforming one of Google DeepMind’s top AI models in a demanding challenge. Verses’ approach leans on active inference (think of it as an AI that learns by modeling the world’s cause-and-effect, rather than simply crunching big data with brute-force neural networks). The result? An AI that can learn faster, using far less data. Here are the highlights:

• Beating a Google AI at Its Own Game: In a head-to-head evaluation called Gameworld 10K — a sort of decathlon of classic video games used to test general AI smarts — Verses’ AXIOM model outscored DeepMind’s famed DreamerV3 by about 60% in overall performance. This is impressive, given DreamerV3 is renowned for its ability to generalize across multiple games.

• Efficiency Over Power: AXIOM achieved this feat with a fraction of the resources. We’re talking roughly 90% less data & dramatically lower computing needs. In fact, Verses’ “digital brain” learned the games in minutes on a standard CPU, whereas DeepMind’s model took hours on power-hungry GPUs. Translation: Verses’ AI is not only smarter in this test, but also leaner and faster — a potential game-changer for real-world applications where data & computing power are at a premium.

• No Neural Networks Required: Perhaps the most intriguing part is that AXIOM does all this without relying on massive neural network training. Instead of the usual backpropagation & mountains of parameters, it uses that active inference approach. This could mean more explainable & reliable AI decisions, addressing some pain points of today’s black-box AI systems.

• Path to Commercialization: Verses isn’t just trophy-hunting on benchmarks — it’s folding these advancements into its product roadmap. The company’s flagship platform, Genius, is set to move from beta to a commercial launch in 2025. These new research wins will likely boost Genius’s capabilities, allowing enterprise customers to deploy AI agents that make smarter decisions in real time with far less data. From logistics optimization to robotics, Verses is positioning Genius (powered by AXIOM’s brains) as a disruptive alternative to the big-tech AI offerings that require enormous data centers.

Why this matters: At a time when traditional AI models are running into limits of scaling (& skyrocketing costs), Verses is showing a possible new path forward. For a smaller player to outclass a Google DeepMind model on efficiency raises eyebrows & expectations. It suggests Verses’ bio-inspired, “small data” approach might carve out a niche in the AI market, especially for applications that need agility over sheer brute force. (Our premium analysis digs deeper into how Verses’ technology could be applied commercially & how we model its intrinsic value trajectory in the emerging AI landscape.)

Enjoyed this snapshot? We hope these bite-sized insights give you a flavor of the exciting moves by Relay Therapeutics & Verses AI without spilling all the secrets. If you’re curious about the full story — including our detailed breakdowns, Portfolio Dashboard, & Intrinsic Value Tracker models for each company — you might consider joining us as a premium subscriber at Pierce Capital Research. We dive into the nuances & numbers behind updates like these to help you understand their real impact.

As a thank-you for our early supporters, we’re offering a discount code “PCRLAUNCH” for new subscribers. It’s a little nudge to welcome you into the fold. 😊 With premium access, you can explore the complete reports and see how we’re projecting the value of innovations from Relay, Verses, & many others (20+ companies).

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Here’s the best part (Only until July 1st):

For a limited time, you can access it all at a discounted rate! 🎉

Many have already taken advantage of this offer because you are locked in at the discounted price. By signing up, you’ll get full access to the detailed analyses we’ve published in our coverage, including Rocket Lab, AST SpaceMobile, Coherus BioSciences, and Nvidia this past week, along with our updated Intrinsic Value Tracker (IVT) models.

This week, we’ve also made moves in the portfolio: we’ve added positions in Coherus BioSciences & Relay Therapeutics while also slightly increasing our valuation for Nvidia—showing the accuracy of our models and how they help guide investment decisions.

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Rocket Lab’s Payload Power Move

Rocket Lab (RKLB) isn’t just launching rockets anymore — it wants to build what goes on those rockets too. In a bold step, RKLB agreed to acquire a company called GEOST that makes high-tech sensor payloads for satellites (the kind used in missile tracking and spycraft). Why does this deal matter? It positions Rocket Lab as a one-stop shop for national security space missions, muscling into territory long held by the big defense contractors. In our report, we went over on how this is a disruptive move that’s flying a bit under the radar, & exactly the kind of strategic leap we love to analyze in depth.

AST SpaceMobile Dials Up Defense

Remember the company building cellphone service from space? AST SpaceMobile (ASTS) just quietly snagged a defense contract that could be a game-changer. The U.S. Space Force (via the Space Development Agency) wants to see if AST’s tech — basically giant satellite-cell towers in orbit, can shore up military communications. This under-the-radar win actually gives ASTS a foot in the door with defense agencies (& not just in the U.S., either). In our full report, we discuss why this small contract could signal much bigger things ahead for AST SpaceMobile’s ambitious vision.

Coherus Stirs Up a STORM in Oncology

Who says small biotechs can’t make big waves? Coherus BioSciences (CHRS) teamed up with UK-based STORM Therapeutics to test an entirely new one-two punch against cancer. They’re combining Coherus’s immunotherapy drug toripalimab (brand name LOQTORZI) with STORM’s novel drug STC-15 in a Phase 1b/2 trial. Why is this intriguing? It’s an unlikely pairing that could unlock new treatment possibilities if it pans out. This story is flying under Wall Street’s radar now (CHRS as a whole for a while now), but we’re watching closely — and we’ll tell you why this combo might be more promising than it appears at first glance.

Nvidia’s Hot Quarter

Nvidia (NVDA) just reminded everyone that the AI boom is very real — and it’s lining Nvidia’s pockets. The company reported Q1 FY2026 earnings that can only be described as jaw-dropping, driven by very strong demand for its AI-focused chips. We break down what the numbers are signaling behind the scenes. (Spoiler: It’s not just “gaming is up” – it’s a whole shift in where the growth is coming from, and it could have longer-term implications for the tech industry.) Nvidia is an AI money machine right now, but how long can they keep it up? Our analysis dives into the data and the outlook, separating the hype from the real indicators you need to know.

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Management’s execution in this Q reflects the “steady and sure” approach that long-term investors expect from BOC. There were no splashy surprises or dramatic shifts in strategy, instead, we saw incremental progress in each business unit & continued investment in future growth. Cash flow from operations remained positive (about $2.6M for the quarter), indicating that the core businesses are self-sustaining even as the company reinvests in new opportunities. Overall here, BOC delivered a decent start to the year, underlining the stability of BOC’s model & the ongoing build-out of its various segments.

Key Highlights

• Moderate Revenue Growth: Total revenues reached $27.73M in Q1 2025, an increase of roughly 8.5% from $25.55M in the year-ago period. Growth was well-distributed among their operations, hinting at the benefit of its diversified revenue streams.

• Narrower Losses: The company nearly achieved breakeven profitability. Net loss attributable to common shareholders was approximately $0.67M for the quarter (a loss of $0.02 per share), a pretty big improvement versus the $2.8M loss (-$0.09 per share) in Q1 2024. On a consolidated basis (including non-controlling interests), the net loss was about $2.4M, also much smaller than a year ago however down widening QoQ. The markedly reduced loss reflects both higher revenue & disciplined cost management.

• Diversified Segment Gains: All three core operating segments expanded in Q1. Billboard advertising revenue was essentially flat YoY at $10.76M (holding steady after strong growth last year). Broadband services revenue grew 6.6% to $10.32M as the company continued to add subscribers/network capacity. The surety insurance segment stood out with premiums earned jumping 39% to $5.56M, alongside $0.58M in insurance commission revenue, strong growth as that business scales up. This shows that each of BOC’s business lines is contributing to growth, with insurance in particular providing a nice boost.

• Positive Cash Flow & Stable Book Value: Operating cash flow came in around $2.6M for Q1, indicating that the company’s businesses collectively generate cash even while investing in expansion. Book value per share was approximately $16.95 as of March 31, 2025, essentially unchanged from $16.99 at year-end 2024. In other words, BOCs intrinsic equity value held steady during the quarter. The slight dip in book value seen last year has leveled off, aided by the improved earnings and the fact that the company’s asset values remain solid (even if some investments are carried below market value on the books).

• Strong Balance Sheet: BOC closed the quarter with over $44M in unrestricted cash and marketable securities on its balance sheet. Total assets stood at $730.8M, supported by a large base of equity (over $559.8M in total equity, including minority interests). This healthy financial position gives them plenty of flexibility to fund growth initiatives and absorb short-term fluctuations. The company carries relatively modest debt & has excess liquidity, which is a key advantage as it evaluates new investments or opportunities to buy back stock under its previously authorized $20M repurchase program.

Segment Performance

BOC is a unique holding company with four primary areas of operation. Its performance in Q1 2025 reflects steady or improving trends in each operating segment:

• Billboard Advertising (Link Media Outdoor): The outdoor advertising segment produced $10.8M in net billboard rental revenue in Q1, essentially flat (+0.6%) compared to the prior year period. While growth was minimal this quarter, Link Media continues to provide stable cash flows and solid operating margins. The billboard business is more mature, so its gains tend to be modest, but it remains a reliable profit center. Management has been selectively acquiring/developing new billboard locations over time (Link now operates thousands of billboard faces nationwide), which should support slow-but-steady revenue growth. In Q1, occupancy and pricing held up well even amid a mixed advertising environment, and the segment’s Adjusted EBITDA and cash generation stayed strong. Billboards remain BOC’s cash cow, not high-growth, but a steady contributor that funds investments elsewhere.

• Broadband Services (Fiber/Wireless Internet): The broadband segment generated $10.3M in Q1 revenue, up about 6.6% YoY. This moderate growth reflects ongoing expansion of the company’s fiber/fixed wireless internet services. BOC’s broadband operations (which include subsidiaries like AireBeam in Arizona & InfoWest/Utah Broadband in Utah) have been integrating past acquisitions and extending their network reach. Customer subscriptions are rising as new neighborhoods are connected to fiber and as service offerings improve. It’s worth noting that the broadband unit is still in investment mode, the company continues to incur significant capital expenditures to lay fiber infrastructure (“future-proofing” these networks). As a result, current earnings are slim to none in this segment, but that’s expected at this stage. The upside is that revenue has a long runway to grow (demand for high-speed internet is strong in the communities they serve), & over time I anticipate improved operating leverage. Q1 showed that the broadband business is scaling gradually; even with heavy upfront costs, the segment’s growth & incremental efficiency gains are moving it toward profitability. This segment represents BOC’s biggest long-term growth engine, albeit one that requires patience as the fiber build-out continues.

• Surety Insurance (General Indemnity Group): BOCs insurance subsidiary had an excellent quarter, highlighting the value of this often-overlooked part of the business. Premiums earned were $5.56M in Q1, a 39% surge from a year ago, thanks to increased demand for the surety bonds & related insurance products that General Indemnity Group (GIG) provides. Including commission income of about $579,000, total insurance revenue was roughly $6.14M for the quarter (+36% YoY in combined insurance revenues). This growth far outpaced the segment’s expense growth, implying improved underwriting scale. While we don’t have the exact quarterly profit for GIG, last year the insurance segment earned roughly $2.7M in net income, and Q1’s strong top-line suggests it continues to contribute positively to earnings. GIG has been expanding its geographic footprint and product reach in the surety niche, all while maintaining conservative underwriting standards (historically their loss ratios have been low). The result is a steadily scaling insurance operation that complements BOC’s portfolio with high-margin, recurring revenue. In Q1, the insurance segment demonstrated its role as a quiet but powerful contributor, delivering growth & profits that help offset the heavier investment spending in other segments.

(Note: Boston Omaha’s fourth area of business is asset management and minority investments, which doesn’t show up as a large revenue line but does impact overall results. We discuss these activities in Strategic Developments and Valuation, since they relate more to investment strategy and balance sheet value than to “segment” operating revenue.)

Strategic Developments

During Q1 2025, BOC made several strategic moves & continued to refine its investment portfolio in ways that should enhance shareholder value over time:

• Partial Sale of Sky Harbour Stake: BOC owns a significant minority stake in Sky Harbour Group (SKYH), a developer of private aviation hangar campuses, which it originally helped take public via SPAC. In Q1, management opted to monetize a small portion of this investment. The company sold 220,889 shares of Sky Harbour Class A stock, realizing approximately $1.3M in gains. This sale is relatively minor given BOC’s remaining position (it still holds a 16.1% stake in Sky Harbour as of March 31, 2025, along with warrants), but it was a timely move to capture some profit after Sky Harbour’s stock price appreciated. The proceeds fortify BOC’s cash reserves and could be redeployed into other opportunities or simply strengthen the balance sheet. Importantly, despite selling a slice of Sky Harbour, BOC continues to see great value in the stake it retains, as evidenced by the fact that it also recorded an unrealized gain of about $1.2M on its Sky Harbour warrants during Q1. Management is effectively trimming the position at the margins while still participating in Sky Harbour’s upside. This approach balances risk/reward I look at it like: take some money off the table after a run-up, but hold on to the majority of the investment for longer-term gains.

• Managing Investment Volatility: The flip side of the Sky Harbour story is the accounting impact on earnings. Because BOC uses the equity method for this investment (it must recognize its share of Sky Harbour’s income or losses each quarter), the significant non-cash losses from Sky Harbour’s operations flow through to BOC’s income statement. They recorded roughly $2.3M of losses from its affiliates, mainly due to Sky Harbour’s ongoing development-phase expenses. Additionally, within its Asset Management division, they saw about $2M in investment losses tied to fair value changes in its real estate funds (the 24th Street funds and the Build for Rent fund). These losses are largely mark-to-market adjustments and do not reflect core operating performance, but they did weigh on GAAP earnings. The key point for investors: management is willing to accept short-term earnings volatility from these investments in exchange for potential long-term value creation. The Sky Harbour stake, for instance, has a much higher market value (somewhere around $180M) than its carrying value on BOC’s books ($92M), a gap that represents hidden value. Similarly, the company’s real estate venture investments could pay off in the future even if they produce some accounting noise today. The strategic decision to hold such investments (& to consolidate the real estate funds on the balance sheet) reflects a long-term horizon. Management is focused on growing intrinsic value, even if quarter-to-quarter reported earnings are a bit lumpy due to these factors.

• Continued Expansion/Vertical Integration: The core businesses continued to invest in growth during the quarter. In broadband, the company pushed forward with fiber network construction projects in its Arizona /Utah markets, aiming to extend service to new customers. In billboards, Link Media remains on the lookout for tuck-in acquisitions of billboard assets and land under its signs to strengthen its footing in key regions. On the insurance front, GIG is entering new states and broadening its agent network to sustain its rapid growth. A strategic theme is BOC’s effort to bring more capabilities in-house to support these expansions. In fact, the company has indicated interest in vertical integration moves, like for example, exploring the acquisition of a construction/services company to assist with broadband network build-outs & possibly real estate development. While no specific deal was completed in Q1, this intent shows management’s proactive approach to controlling costs and ensuring quality in its projects. By owning expertise (rather than outsourcing everything), BOC could improve efficiency as it scales its infrastructure-heavy businesses. This is a long-term strategic consideration that aligns with the company’s hands-on, value-driven philosophy.

• Asset Management Initiatives: Boston Omaha’s Asset Management arm (Boston Omaha Asset Management — BOAM) continues to evolve. In recent years, the company raised and managed investment funds in areas like real estate development (the 24th Street Real Estate partnerships) and residential homebuilding for rent (the BFR Fund). During Q1, there were no new funds launched, but management did update investors on the status of existing ones. The Build for Rent (BFR) Fund is being wound down after completing its development cycle, and BOC has been gradually monetizing those real estate assets and returning capital. Meanwhile, the 24th Street funds (which invest in commercial properties) are now fully consolidated on BOC’s balance sheet after the company acquired the remaining interest in its asset management subsidiary last year. While BOAM’s contributions to revenue are currently small (&, as noted, some funds saw valuation markdowns this quarter), this business gives them a platform to earn fee income and performance gains on external capital. It’s a strategic complement to their own balance sheet investing, allowing them to pursue larger opportunities than they could alone, and to potentially earn asset management economics over time. So, they are steadily building an investment management capability that could become a more meaningful part of the company in the future. For now, the focus is on successfully managing &exiting the projects in these funds and establishing a track record that could attract more third-party capital down the road.

BOC is staying active on multiple fronts: pruning and optimizing its investment portfolio (Sky Harbour), laying groundwork for future operational efficiency (vertical integration, internal capabilities), and advancing its role as an asset manager. Each of these moves is aimed at increasing the long-term value of the enterprise, even if the immediate impacts are subtle. Management has communicated a patient, opportunistic strategy, and the first quarter’s actions were very much in line with that.

Valuation

From a valuation standpoint, Boston Omaha’s stock continues to trade at a noticeable discount to the company’s intrinsic value, in my view. The current share price in the mid-teens does not fully reflect the sum-of-the-parts value of BOC’s diverse assets and businesses. A quick breakdown using Q1 updates and recent figures illustrates this value gap:

• Book Value vs. Market Price: Book value per share is around $16.95 as of the end of Q1. The stock has been trading below that level for much of the year, implying investors can buy into Boston Omaha at or even under the value of its net assets on the balance sheet. And recall, that book value is calculated using conservative GAAP accounting, for instance, it carries the Sky Harbour equity stake at cost minus losses, which significantly understates the true market value of that stake. Adjusting for such hidden value, the economic book value of BOC is higher than $16.95. The fact that the market price has been roughly $14–$16 (as recently as early 2025) suggests a classic “conglomerate discount” is at play. In other words, because BOC is a holding company with several parts, and some of those parts are early-stage or not fully understood by the market, investors are pricing the whole at less than the sum of the parts.

• Sum-of-the-Parts (SOTP) Assessment: If we value each of their main components separately, we arrive at an intrinsic value comfortably above the current market cap. For example, the Link Media billboard segment produces strong cash flows; applying a reasonable EBITDA multiple (in line with other outdoor advertising companies) to its earnings would yield a valuation well over $150M for that segment alone. The Broadband segment is growing fast, similar fiber broadband businesses have been valued at around 2x revenue in M&A transactions, which would imply perhaps $80–$90M for BOC’s communications segment (given its $40M annual revenue run-rate). The Insurance segment, which earned a few million dollars last year, could be worth on the order of $30M–$40M (or more) applying a typical 10x–15x earnings multiple that small insurance companies command, especially considering its growth rate. Adding to these the value of BOC’s investments: the Sky Harbour stake (currently worth roughly $180M+ at market prices), plus other holdings (like a minority stake in Crescent Bank, valued around $19M, and the various real estate ventures we can roughly peg at $40M–$50M combined), and finally net cash of around $27M, the sum-of-parts quickly approaches and even exceeds $550M in total value. On a per-share basis, that equates to an intrinsic value in the high teens (upper $17–$18+ per share by my estimate). This aligns with my prior valuations and is higher than where the stock is currently trading.

• Reasons for the Discount: So why is the stock cheaper than that intrinsic value? Part of it is the conglomerate structure, multi-industry holding companies often trade at a discount until one or more of their parts becomes big enough to attract focused attention. Another factor is the early-stage nature of some segments: the broadband business, for instance, is still ramping up and not yet throwing off significant profits; the asset management ventures are nascent. The market may be taking a “wait and see” approach, assigning low multiples until these units prove themselves. Additionally, BOC is relatively small (market cap in the mid hundreds of millions) and not widely covered by analysts, which can lead to mispricing. Lastly, the company’s accounting earnings have been minimal or negative due to heavy investment and some one-time charges, investors who screen just on EPS might overlook BOC’s value. That said, these are temporary or perception-related issues in our view. As their underlying earnings power becomes clearer (for example, if broadband swings to profit, or insurance profits continue to grow), and as the company potentially monetizes or highlights the value of its investments, the stock’s discount could narrow.

To sum up this valuation picture: BOC trades below what we believe it’s worth, and the company’s financial results and asset values support that belief. The stock is around or under book value, and my analysis suggests a fair value per share that is materially higher than the market price. This gap may require patience to close, but it provides a favorable risk/reward opportunity, the downside is cushioned by hard assets & stable businesses, while the upside could be substantial if the company’s growth plans bear fruit. BOC’s co-CEOs, being significant shareholders themselves, have a clear incentive to narrow this valuation gap over time, whether through continued execution, share repurchases, or other strategic actions.

My Take

This was not a flashy quarter by BOC, it was about steady execution and laying more groundwork for the future. In my view, the Q1 results reinforce the investment thesis for BOC as a long-term value compounder. The company delivered a bit of growth where it counts, tightened up its losses to nearly breakeven, and demonstrated that each of its business segments is pulling its weight. For a conglomerate of this size and age, that’s exactly what I want to see: consistent progress without taking undue risks. There were no signs of distress or strategy drift; instead, BOC is sticking to its playbook of gradual expansion, careful capital allocation, and opportunistic investment moves (very boring, but working). As a long-term investor, my conviction in BOCs trajectory remains strong after this quarter.

It’s important to set reasonable expectations for a company like this. This isn’t a get-rich-quick story, it’s more of a “get rich slowly” story (although I hate using this terminology but best lens to look at it thru). The management is building brick by brick, and sometimes that means certain parts (like broadband or new ventures) won’t show big profits right away. Q1 is a good reminder of this: the numbers were solid but not mind-blowing, which is fine. In fact, the quarter’s stability is a positive indicator that the underlying businesses are healthy. We saw the insurance arm shooting ahead with impressive growth, the fiber broadband unit steadily adding revenue even as it invests, and the billboard division reliably churning out cash. Those are fundamental positives that can get overlooked by investors who might have been hoping for, say, a surprise profit or a huge jump in revenues. In my opinion, patience will be rewarded here. The value here tends to reveal itself over a multi-year timeframe, for example, as fiber build-outs translate into subscriber revenue or as investment stakes like Sky Harbour mature and potentially get monetized.

I also like how management is navigating the current environment. Being pragmatic capital allocators. Trimming a small piece of the Sky Harbour position for a gain shows they’re willing to realize value when the market offers it, yet holding the bulk of it shows they still believe in the long-term upside. That balance is thoughtful. At the same time, they’re not shying away from investing in their own businesses: spending on fiber networks, growing the insurance portfolio, and exploring ways to vertically integrate are moves that may hurt short-term earnings a bit but should increase long-term value. This is unique thinking, focus on the long run, even if reported earnings are bumpy. I am more confident Mr. Peterson will continue to allocate capital in shareholders’ best interests, whether that means investing in new opportunities or buying back stock if it remains undervalued.

Ultimately, the Q showed that the company is doing the right things: growing at a steady pace, keeping expenses in check, investing for the future, and taking actions to enhance long-term value. There were no red flags in the results, if anything, there were green shoots (like the insurance surge and the near-breakeven earnings). Yes, external factors like economic conditions or execution challenges in broadband could pose risks, but those are manageable in my opinion. BOC remains a company that requires patience and a long-term outlook from its investors. I continue to view BOC as a compelling long-term holding, a smaller-scale compounder that is gradually turning its diversified ventures into tangible shareholder value. My strategy is to stay the course with BOC until I see a dead end, and even consider adding on dips, because I believe the company’s best days are ahead as its investments mature and its earnings power comes to the forefront.

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Q1 2025 Key Financials

• TPV (Total Payment Volume): $8.1B, up 53% YoY (72% growth in constant currency) a record high, reflecting stronger demand.

• Revenue: $216.8M, up 18% YoY, and up 6% sequentially from Q4.

• Gross Profit: $84.9M, up 35% YoY, on gross margin of 39.2% (vs 34% a year ago).

• Net Take Rate (Gross Profit/TPV): 1.05%, down from 1.19% in Q1 2024 (indicating some yield compression on volume).

• Adjusted EBITDA: $58M, up 57% YoY, with Adjusted EBITDA margin rising to 27% (from 20% a year ago).

• Net Income: $46.7M, up 163% YoY (more than doubling last year’s profit). Diluted EPS came in at $0.15 (vs $0.06 a year ago).

• Free Cash Flow: $39.7M, up 200% YoY, representing 85% conversion of net income complimenting a strong cash-generative model.

• Cash Balance: $512M as of quarter-end, strengthened by Q1 earnings.

• Dividend: Declared a cash dividend of $0.525/share (totaling $150M) and signaled a plan to initiate annual dividends going forward.

This performance marks DLO’s strongest quarter ever in terms of scale & profit. Revenue growth of 18% lagged TPV expansion, which points to a lower blended take rate; however, the quality of revenue improved, more cross-border volumes (which carry higher fees) helped revenue outpace volume on a sequential basis. Meanwhile, operating expenses grew only 8% YoY, far below gross profit growth, pointing to operating leverage. As a result, Adjusted EBITDA and net income climbed sharply, and margins expanded notably from last year. It’s also worth noting that on a constant-currency basis (excluding FX swings in volatile emerging market currencies), revenue growth would have been 36%, indicating underlying business momentum is even stronger than the headline USD figures suggest.

Key Operational Highlights

• Merchant Relationships: DLO continues to deepen its role with major global merchants. In Q1, management said they strengthened partnerships with fast-growing players like Temu, Rappi, and Zepz. Temu, the popular global e-commerce marketplace, is leveraging DLO to reach customers in 15+ emerging markets, exposing their appeal as a one-stop solution for local payments. Latin American super-app Rappi expanded its integration with the company (for instance, enabling Brazil’s PIX payments for Rappi users), signals their importance in regional fintech plumbing. And on the pay-out side, Zepz (parent of remittance platforms WorldRemit and Sendwave) is now partnering with DLO to streamline cross-border payouts. These wins demonstrate their strong value proposition for both pay-in and pay-out use cases, attracting marquee clients in e-commerce, digital services, and fintech verticals.

• Geographic Dynamics: LatAm remains the growth engine for DLO, contributing the majority of volume & revenue. The company saw especially strong results in markets like Argentina and Chile in Q1. In Argentina, they benefited from increased volumes (partly inflation-driven) and wider FX spreads, boosting gross profit. Chile and other “Other LatAm” markets also delivered growth as more merchants and payment methods were added. On the other hand, a couple of factors tempered the overall picture: Brazil experienced a take-rate headwind as some large clients were migrated to a new Payment Orchestration model (offering merchants a unified gateway to multiple providers), which comes with lower fees for DLO. This strategic move should help retain and capture high volumes in Brazil long-term, but it did pinch margins in the short run (along with some one-off implementation costs). Meanwhile, Mexico saw a seasonal dip after a strong holiday quarter and even a partial volume loss from one large e-commerce client, a reminder of competitive pressures in that market. Africa and Asia (the “Other” regions) delivered growth in payment volumes, but FX depreciation and higher processing costs (notably in South Africa and Nigeria) meant that in USD terms these regions contributed less to profit growth. S, currency volatility was a theme this Q, with many emerging market currencies weaker vs a year ago, creating an FX drag on reported growth. Even so, dLocal’s broad geographic reach (30+ countries) and multi-currency operations provide diversification, and LatAm’s outperformance more than offset softer spots this quarter.

• Vertical Trends & Product Mix: Their expansion remains broad-based across sectors and use cases. On the pay-in side (merchant payments from consumers), online retail/marketplaces and on-demand services continue to drive volumes, for example, international merchants like Temu, as well as streaming, ride-hailing, and travel companies using DLO to localize payments. On the pay-out side (mass payouts and remittances), the company is gaining traction with digital platforms that need to disburse funds to users in emerging markets, Zepz being a prime example in remittances, and other clients in areas like freelance marketplaces and gig economy payouts. The balance between pay-ins and pay-outs provides them with multiple growth levers: cross-border e-commerce flows, local alternative payment methods (like Pix in Brazil), & global remittance/cash-out flows are all part of its network. Also, cross-border transactions increased as a share of the mix in Q1, which helped boost revenue per volume on a sequential basis. As they integrate more local payment methods and offers value-added services (like its orchestration platform), it aims to capture a greater share of each transaction flowing through its system, albeit sometimes at the expense of a lower percentage take rate. The overall trend is of scale with diversification, more countries, more verticals, and a healthy mix of pay-in & pay-out, which together contributed to the record $8.1B TPV this quarter.

Valuation & Outlook

With this strong quarter, management sounded optimistic about sustaining growth while continuing to invest efficiently. Although the company hasn’t provided formal full-year guidance, the Q1 results set a positive tone for 2025. Profitability is ramping faster than expected, Adjusted EBITDA margin of 27% is already ahead of where the company was a year ago, and net income margins have improved substantially (net profit was 22% of revenue in Q1). This profitability, combined with strong cash flows, allowed them to initiate a new dividend policy without hampering its ability to fund growth. The decision to pay out $150M to shareholders and plan for annual dividends suggests that management is confident in the stability and trajectory of future earnings. It’s a noteworthy development for a high-growth tech company, essentially balancing growth with shareholder returns.

From a valuation perspective, I am reaffirming my intrinsic value estimate in the mid-teens ($14-$15 per share) for DLO. This is based on growth rates, margins, and risk profile. My model’s outputs following Q1 remain roughly in the same range as before, if anything, the stronger cash generation and profit uptick slightly bolster the valuation, while the moderation in take rate and continued FX volatility temper excessive optimism. At the time of writing, DLO shares trade in the low-teens, which is in line with, or at a modest discount to, this intrinsic value range. That implies the stock is reasonably valued relative to fundamentals, with some upside if they can continue executing well. In short, Q1’s performance supports the $14–$15/share fair value assessment, and I feel comfortable sticking with that target for now, perhaps with a bias toward the upper end if current trends persist.

My Take

As an investor watching/holding DLO, I come away pretty optimistic. The company delivered what I hoped it would: accelerating volumes, improving profitability, & tangible signs of business momentum across clients/regions. That said, it’s important to remain clear-eyed about the challenges and risks that come with DLO’s growth story, especially in the complex markets it operates in. Let’s break down the picture:

The “Bad”

One flag from the quarter is the continued compression in take rates. Gross profit as a percentage of TPV (around 1.05%) has edged down both yoY & sequentially. This trend isn’t entirely unexpected, as DLO scales with large merchants and enters more competitive segments, the pricing (fee %) can come under pressure. We saw a bit of that in Mexico, where the loss of some volume from a big client hints that either a competitor stepped in or the merchant negotiated better terms. Similarly, in Brazil the shift to the orchestration model, while strategic for keeping volumes, means they are passing through more of the transaction value to partners (hence a lower cut for itself on those flows). In essence, they are betting that it can make up for a lower take rate with much higher volume and stickier merchant relationships, which is a reasonable trade-off, but investors should watch this metric. If TPV growth were to slow without a stabilization in take rate, revenue growth could disappoint.

Another risk factor is FX and obvious macro volatility. By nature, their business is tied to emerging markets, which is a double-edged sword. These regions offer high growth, but their currencies and economies can swing unpredictably. Q1’s constant-currency growth of 36% (vs 18% reported) tells the story: sharp devaluations in places like Argentina and Turkey, or economic hiccups in Africa, can materially drag on the USD results. While DLO has navigated these headwinds well so far (and even benefits from some inflation-driven volumes in countries like Argentina), there’s no guarantee that won’t become a bigger issue in the future. A sudden currency restriction, regulatory change, or economic crisis in a key market could impact transaction volumes or profitability. The company does mitigate some risk by being diversified geographically, but it’s something to keep in mind here, investing in a payments provider across 30+ emerging economies is not going to be a smooth, linear ride every quarter.

Also, competitive pressure looms in the background. DLO has a unique niche connecting global merchants to local payment methods, but it’s not without rivals. Regional players (for example, domestic payment processors in Brazil or Asia) and global fintechs (like Adyen, Stripe, PayU, etc.) are all eyeing emerging market flows. There’s also the possibility of large merchants attempting in-house solutions or local integrations to bypass third-parties. So far, the company’s one-stop platform and deep local expertise have been key differentiators, a Temu or Netflix would rather plug into DLO than juggle dozens of local integrations themselves. However, as the opportunity grows, we should expect more competition on price and features. The fact that their opex only grew 8% YoY in Q1 suggests disciplined management, but also one that must continue investing in tech, compliance, and sales to stay ahead. Any slowdown in innovation or service quality could open the door for competitors, so I’ll be watching how they continue to differentiate its offerings (for instance, its move into orchestration, value-added services, & perhaps additional financial products for merchants).

The “Good”

On the brighter side, their execution this quarter was excellent, and it reinforces my confidence in the long-term thesis. The company proved that its growth is not just flash-in-the-pan post-COVID rebound, but rather a sustained trend. TPV growth above 50% YoY, on an ever-larger base, is truly impressive. It tells me that global merchants are seeing strong consumer demand in these markets and that DLO is capturing more of that flow. Even more encouraging, profits are rising even faster. Net income more than doubled YoY, which indicates the business model can scale profitably. The fact that Adjusted EBITDA grew 57% on 35% gross profit growth means they kept a tight handle on costs while expanding, another sign of operational discipline. This kind of margin expansion (EBITDA margin up to 27% from 20% YoY) is exactly what you want to see as an investor in a fintech growth story: as volumes surge, the incremental cost to process each additional dollar is low, and that operating leverage is now flowing through to the bottom line.

I’m also very encouraged by management’s shareholder-friendly moves and what they signal. Initiating a substantial dividend (roughly a 5% yield at the time of announcement) is not common for a young high-growth fintech. They didn’t need to do this, they’re already profitable and had plenty of cash, so the decision to return $150M to shareholders speaks volumes. To me, it shows that the leadership (under CEO Pedro Arnt) is confident in the predictability and durability of the company’s cash generation. They’re effectively saying: “We’re generating more cash than we need to reinvest at the moment, and we want to reward investors without compromising growth.” That’s a great position to be in. Even after the dividend, their balance sheet is very strong (over $350M in corporate cash remains, aside from merchant float). This means they have room to pursue strategic investments, geographic expansion, or even targeted acquisitions, all while keeping shareholders happy. It’s a delicate balance to strike, and so far they’re doing it.

The strategic trajectory looks very promising. The addition of high-profile clients like Temu, Rappi, and Zepz in Q1 isn’t just about name-dropping, it shows DLO is becoming an indispensable partner for the new wave of global businesses expanding into emerging markets. These relationships tend to be sticky and volume-rich. For example, Temu’s expansion could bring a flood of transactions through DLO’s pipes as the platform gains popularity in places like LatAm, Southeast Asia, and Africa, exactly their wheelhouse. Each new merchant or use-case also adds to their network effects: more local payment methods and payout corridors get built out, which in turn attracts more merchants who need that coverage. It’s a virtuous cycle. Moreover, the company’s willingness to adapt, exemplified by rolling out the orchestration model and continuously adding payment alternatives like Pix, digital wallets, local cards, etc., bodes well for keeping its edge.

Bottom line here, the company is growing rapidly, becoming more profitable, and building partnerships that could unlock even more growth ahead. Yes, there are macro bumps and competitive pressures to navigate, that’s par for the course in this space, but DLO has shown it can execute through them. At around $11-$12per share (after a post-earnings jump), the stock reflects much of this progress yet still trades at a valuation that leaves reasonable upside if the company continues on its current trajectory. I remain bullish in the long run, with the caveat that I’ll be watching those take rates and external risks closely. For now, the combination of growth, profitability, and prudent management makes it one of the more compelling fintech stories in emerging markets. After a rocky period over a year ago, it’s great to see the company hitting its stride, and as an investor, I’m looking forward to what comes next, albeit with eyes open to the challenges we’ve discussed.

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