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Today’s idea is a moderately speculative bet on two dominant players in the global music industry that, for now, look mispriced relative to the durability of their underlying businesses. The setup is straightforward: high-quality assets, steady cash flows, and a market narrative that may be leaning too far in one direction.

Issuers

Universal Music Group N.V. (Euronext Amsterdam: UMG) — a Dutch music company

Warner Music Group Corp. (NASDAQ: WMG) — U.S.-based music company

Expected Profits

Universal Music Group (UMG): 23.5% profit in 15 months; 159% profit in 10 years, 10% CAGR (including dividends)

Warner Music Group (WMG): 24% profit in 15 months; 136% profit in 10 years, 9% CAGR (including dividends)

Description of the Business

Universal Music Group N.V. was originally an American business, but over time it passed through multiple owners before ending up under the French media conglomerate Vivendi. In 2021, Universal Music was spun off and listed as a standalone company in Amsterdam, although its operational center of gravity remains in California. That split created a cleaner equity story and made its economics more visible to public market investors.

Here’s how the company’s revenue was structured in 2025:

1. Recorded Music — 75.21%. This segment includes licensing UMG-owned recordings (IP) to distributors and digital platforms. While it may appear passive at first glance, it is anything but: Universal signs artists, funds production, manages promotion, and monetizes recordings across a wide range of channels.
   Segment adjusted EBITDA margin: 25.6%.

2. Music Publishing — 17.75%. Revenue from third-party use of copyrights on musical works owned or administered by the company. This is a steadier, rights-driven business that benefits from long-tail monetization of catalog assets.
   Segment adjusted EBITDA margin: 24.3%.

3. Merchandising and Other — 7.05%. Sales of artist-related merchandise, including apparel, accessories, and various branded goods. While smaller and lower-margin, this segment complements the core music business and deepens fan engagement.
   Segment adjusted EBITDA margin: 2%.

Geographically, the U.S. accounts for 50.46% of Universal’s revenue, followed by the U.K. at 9%. Japan at 6.43% and Germany at 5.1%, with the remainder spread across smaller markets.

Universal Music is profitable: in 2025, its gross margin was 38.92%, operating margin 16.78%, and net margin 12.23%.

Warner Music Group Corp. operates with a similar structure, though with some differences in mix and margins. In 2025, the company’s revenue came from:

1. Recorded Music — 80.63%. This includes the sale, marketing, distribution, and licensing of music produced by Warner’s artists. As with Universal, this is the company’s primary revenue driver, anchored in its catalog and artist relationships.

Here’s a more detailed breakdown of this segment:

• Digital — 53.58%. Revenue from streaming and downloads, which continues to dominate consumption trends.

• Physical — 7.85%. Sales of vinyl, CDs, and DVDs — still relevant, particularly among collectors and niche audiences.

• Artist Services and Expanded Rights — 12.44%. Fees and revenue shares from distribution, marketing, and rights management.

• Licensing — 6.43%. Royalties from third-party use of Warner-owned recordings.

Segment operating margin: 15.71%.

2. Music Publishing — 19.37%. Payments received as the copyright owner or administrator of musical works.

Segment operating margin: 17.15%.

Geographically, 42.85% of Warner Music’s revenue comes from the U.S., 12.78% from the U.K., and 7.68% from Germany, with the rest distributed globally. The mix is slightly less U.S.-heavy than Universal’s but still anchored in developed markets.

Warner Music is also profitable, though margins are thinner: gross margin was 45.87%, operating margin 11.16%, and its net margin was 4.43% in 2025. The gap largely reflects cost structure differences and capital allocation choices.

Why the Stocks Are Down

It’s somewhat puzzling that the market has repriced these companies lower without any obvious deterioration in fundamentals. There are no major red flags — just a shift in sentiment that appears to be driven more by narrative than by numbers.

The dominant concern is AI. Investors worry that if AI-generated music becomes “good enough,” record labels could lose relevance. It’s a clean story, and the market tends to price those in quickly.

We think that concern is overstated. Both Warner and Universal own vast catalogs built over decades of cultural relevance and fan loyalty. Replacing artists like Fleetwood Mac, Madonna, Prince, or The Doors with AI-generated equivalents is not just a technical challenge — it’s a cultural one.

AI-generated music will likely grow as a category. But replacing deeply embedded human artists is a different question entirely, and one that seems far less imminent. In that context, current fears look more like a sentiment overreaction than a structural shift — which is often where opportunities emerge.

Pros

Attractive Yields. Both companies generate relatively stable and predictable cash flows, which support consistent dividend payments. While yields are not extraordinary, they are solid enough to matter in a market where income is back in focus.

Relatively Cheap. Valuations are modest both in absolute terms and relative to the quality of the underlying assets. These are effectively oligopolistic businesses with long-lived intellectual property, yet they are not priced as such.

Attractive Acquisition Targets. Given their scale, cash flows, and asset quality, both companies could draw interest from private equity or strategic buyers. There are relatively few assets of this caliber available, which increases their appeal. Even a possibility of M&A — however theoretical — can act as a valuation floor.

Cons

Corporate Governance Issues. Both companies have dominant shareholders, which creates potential misalignment with minority investors. Warner Music’s dual-class structure gives outsized voting power to entities linked to Len Blavatnik, while Universal is controlled by a Tencent-led consortium. This concentration can influence key decisions in ways that don’t always favor public shareholders.

Balance Sheets. Debt levels at both companies are relatively high, particularly in a higher-rate environment. What looked manageable during more accommodative monetary conditions now carries greater risk, especially if refinancing costs rise. Dividend cuts to prioritize debt repayment are a plausible downside scenario.

AI Could Still Be a Threat. While current fears may be overstated, AI is not irrelevant — and it’s worth taking the risk seriously, even if it’s not immediate. AI-generated music could affect these businesses in two ways, both tied to how content is produced and consumed.

Lower Licensing Sales to Third Parties. Some portion of revenue comes from content creators who pay Universal and Warner for the right to use their music in films, ads, games, and other media. As production costs rise, there’s a growing incentive to cut expenses wherever possible — and music licensing is an obvious target. If AI-generated alternatives become “good enough,” some creators may opt for cheaper, custom-made tracks instead of paying for existing catalogs. That said, licensing revenue is meaningful, but it is not the core driver of either company’s business, which limits the immediate downside.

Proliferation of Fan-Made Music. A more structural risk is a shift in how music is created and consumed. If AI tools become cheap, intuitive, and widely adopted, users may start generating more of their own music — or consuming AI-generated content tailored to their preferences. Over time, that could reduce both listening time and spending on established artists, which would directly impact label revenues. This scenario is still highly hypothetical, but it’s not without precedent: two decades ago, it wasn’t obvious that phone cameras would disrupt standalone digital photography — yet that’s exactly what happened.

That said, none of these risks has materialized in any meaningful way so far. For now, this is less a confirmed threat and more a reminder to stay attentive — perhaps even a bit overly cautious.

Verdict

Universal Music — Buy now at €16.97.

The stock traded at €28 in May 2024, which provides a useful reference point for potential upside. From here, there are two reasonable paths:

1. Wait for a move to €21 in the next 15 months, implying a 23.5% profit excluding dividends.

2. Hold for 10 years and target a 10% CAGR, including dividends.

Warner Music — Buy now at $25.76.

The stock reached $49.99 in October 2021, and that prior level helps frame expectations. Again, there are two main scenarios:

1. Wait for a move to $32 in the next 15 months, implying a 24% profit, excluding dividends.

2. Hold for 10 years and target a 9% CAGR, including dividends.

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Our pick today is a moderately speculative bet on an overlooked corner of the market: shares of commodity trading houses, which we expect to have an exceptional financial year.

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Issuers

Glencore (London Stock Exchange: GLEN) — Swiss commodity trading giant specializing in metals and minerals.

Wilmar International Limited (Singapore Exchange: F34) — Singapore-based firm specializing in feedstock and food trading.

Mitsubishi Corporation (Tokyo Stock Exchange: 8058) — Japanese trading house with a highly diversified portfolio spanning chemicals, fuels, electronics, metals, and IT. The company also provides professional services and consulting. One common mix-up worth clearing up: Mitsubishi Corporation does not make cars — that’s Mitsubishi Motors, a separate company.

Expected Profits

Glencore: 17.5% profit in 18 months; ~318% profit in 15 years, 10% CAGR (including dividends)

Wilmar International: 27% profit in 18 months; ~318% profit in 15 years, 10% CAGR (including dividends)

Mitsubishi Corporation: 16.5% profit in 18 months ~318% profit in 15 years, 10% CAGR (including dividends)

Description of the Business

Trading houses are sometimes just called “traders” — which, stripped of jargon, simply means merchant.

Here’s how it works in practice. A U.S. corn farmer wants to sell his harvest. He doesn’t have time to hunt for buyers halfway around the world, and arranging international delivery on his own would be a logistical nightmare. That’s where a trading house steps in. The trader finds a buyer — say, a supermarket chain in Taiwan — and handles everything in between.

The trader buys the corn from the farmer at $5 per bushel (a bushel is a standard U.S. and U.K. unit of volume; in this context, it equals roughly 38.691 kg) and sells it to the Taiwanese buyer at $6.25. That $1.25 spread sounds attractive — until you see where it goes. The trader is responsible for the entire journey: loading the grain at the farm, moving it into dedicated storage elevators, insuring the cargo at every stage, and then transporting it to port and on to the buyer by sea or air.

Of that $6.25 per bushel, roughly $1.10—$1.15 covers logistics: elevator loading and storage, freight, and insurance. With the corn itself costing $5 and delivery running about $1.15, the trader clears about $0.10 per bushel. And that $0.10 still has to cover staff costs (or agent fees, such as the inspectors who certify quality and volume), taxes, and, finally, profit.

In other words, this is an extremely thin-margin business. Gross margins hover around 1.6% of revenue — a figure that would make any software executive weep. Yet that paper-thin margin is by design, and it’s exactly what makes the model resilient.

So why does commodity trading exist at all? Because for most producers and buyers, managing international logistics and supply chains in-house is either too expensive or too complicated. They’re happy to outsource the work — much like the average PC user doesn’t install Windows themselves. In theory, they could. In practice, it’s not worth the time and frustration, so they pay someone who specializes in exactly that.

That said, at sufficiently large scale, the economics can shift. If a company’s production volumes are massive enough, the savings from running an in-house trading desk can justify the investment. Among major agricultural producers, Archer Daniels Midland (ADM) and Cargill both trade actively. Among oil and gas majors, Shell and ExxonMobil do the same. The pattern holds broadly: the larger the business, the stronger the incentive to manage commodity trading internally. Smaller trading firms might operate in the millions; the largest work at the scale of tens or even hundreds of billions of dollars.

Commodity trading also requires enormous amounts of capital. Traders routinely handle volumes worth hundreds of millions — sometimes billions — of dollars, and very few companies have that kind of cash sitting idle. That’s why trading houses depend on constant access to credit lines.

It’s also why some of the world’s largest banks — Goldman Sachs, Morgan Stanley, JPMorgan Chase, and Barclays, among others — participate in commodity trading directly. Big banks already have the balance sheets for it, along with deep industry relationships built through lending and advisory work.

In short, the core functions of a trading house are: matching sellers with buyers, and organizing the storage and transportation of the commodity from origin to destination. Put simply, commodity traders help keep the global economy moving by ensuring goods actually reach the people who need them.

Pros

A Perfect Storm for Profits. This year is shaping up to be a strong one for commodity traders. Following the start of the latest U.S. military campaign in Iran, markets were thrown into turmoil. Commodity prices surged — and not just oil and gas. Agricultural products, fertilizers, and a wide range of industrial inputs all moved sharply higher.

The 2022 playbook is instructive here. When the war in Eastern Europe sent energy prices soaring, commodity trading houses booked record profits — because when prices rise sharply enough and fast enough, traders can typically negotiate wider margins. We think 2026 could be a repeat.

AI-Proof and Competition-Proof. Could trading house customers handle supply-chain logistics on their own, with the help of AI-powered tools? In principle, yes — but it only makes economic sense at a very large scale, where saving half a percentage point translates into tens or hundreds of millions of dollars in value.

And even then, building an in-house trading operation is no small feat. You could deploy hundreds of AI agents, but a significant portion of this work still requires time on the ground and on the road: commodities are often sourced from dozens of producers, and relationships and execution matter enormously. Once you replace an external trader with an internal solution, you’re committed to running it permanently — with all the overhead that implies.

That’s why we believe commodity trading houses will remain relevant for a long time. They specialize in finding markets and organizing supply chains, and they do it professionally and at scale.

Cheap Enough to Notice. All three stocks are relatively inexpensive — and in today’s market, that’s no small thing. Even after a wave of sell-offs across the broader market, genuinely cheap stocks remain surprisingly hard to find.

Dividend Upside. When commodity trading houses have a standout year, they tend to reward shareholders — either by raising the regular dividend or paying a special one-time distribution. Given our expectation for a strong 2026, these stocks could also attract yield-seeking investors looking for income in a volatile environment.

Built for Chaos. A few years ago, we came across a book that reframed how we think about this industry: World for Sale: Money, Power, and the Traders Who Barter the Earth’s Resources, by Javier Blas and Jack Farchy. It’s a collection of stories about how trading houses go to extraordinary lengths to procure essential resources — often striking deals in war-torn regions or under intense time pressure.

After reading it, you stop thinking of trading houses as mere middlemen. They’re more like corporate fixers — companies that can deliver when delivery is hardest. In a world that’s becoming more volatile, that skill set is increasingly valuable.

In-house supply-chain managers can’t always be expected to keep cargo moving when shipping lanes are disrupted or insurance markets freeze up. Commodity traders, with their expertise, experience, and deep networks, often can — and historically have. That’s why we believe today’s instability could put a premium on their valuations.

Cons

Credit Risk Is Always Lurking. Trading houses operate on borrowed money, essentially around the clock. They often control far more in assets than their equity would suggest — selling goods they don’t yet physically hold, financed by credit from banks and counterparties. When markets are calm, that system hums along. But when volatility spikes, credit can tighten fast — and a trading house can be brought to its knees in a matter of days.

Trafigura’s experience in 2022 is a useful reminder. That year was a record-breaker in terms of revenue and profits, yet few remember that in March 2022, rapid commodity price spikes triggered billions of dollars in margin calls, and Trafigura faced a severe liquidity crunch. The company survived by raising a significant amount of emergency funding, but it was a close call.

The current turmoil in the Middle East could trigger a similar wave of stress — or worse, a wave of insolvencies — that restricts the credit lines available to the companies we’re recommending. In a worst-case scenario, it could mean something more serious. This is a permanent structural risk in the sector, and it should be priced into your thinking accordingly.

The risk is particularly relevant right now. The conflict has lifted inflation expectations, and central banks are talking less about rate cuts and more about potential hikes. Higher borrowing costs can set off a chain reaction: defaults, tighter bank risk appetite, reduced credit availability — exactly the conditions that squeeze commodity traders hardest.

The silver lining: the largest trading houses (including the publicly traded ones we’ve selected) are widely considered “too big to fail.” Without them, supply disruptions could reach a scale severe enough to cause rationing-style outcomes even in wealthy countries. In an extreme scenario, some form of government support might be available. But share prices could take a serious hit before any rescue materializes.

The Same Tailwinds Can Become Headwinds. Traders may outperform financially during periods of crisis — but they’re not immune to the disruptions they’re navigating. Border closures, surging freight rates, transportation shortages, and prohibitively expensive cargo insurance can all compress margins and weigh on profits. The very conditions that create trading opportunities can also make them harder and costlier to execute.

Verdict

Glencore — Buy at 518.2 GBX.

A quick note on the currency: GBX (Penny Sterling) and GBP (Pound Sterling) are both used to quote U.K. stocks. 100 GBX equals 1 GBP, so 518.2 GBX equals 5.18 GBP.

The shares are trading near historic highs, but we still see two viable paths forward:

1. Over the next 18 months, we think Glencore can capitalize on current market volatility and reach 610 GBX — a 17.5% gain, excluding dividends.

2. For long-term holders, the target is 10% CAGR over 15 years, including dividends.

Wilmar International — Buy at 3.77 SGD.

The stock is trading at about two-thirds of its 2021 peak, which gives it meaningful room to recover if our profit thesis plays out. Two ways to approach it:

1. Target 4.80 SGD over the next 18 months — a 27% gain, excluding dividends.

2. Hold for 15 years and target ~10% CAGR, including dividends.

Mitsubishi Corporation — Buy at 5,397 JPY.

The stock is at historic highs, so further upside will require more patience and conviction. That said, the company delivered strong revenue and profits in both 2021 and 2022 — two years defined by supply-chain stress — and we expect a similar dynamic to play out under current conditions. Two ways to play it:

1. Target 6,300 JPY over the next 18 months — a 16.5% gain, excluding dividends.

2. Hold for 15 years and target ~10% CAGR, including dividends.
   

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Today’s idea is a classic “fallen tech stock” setup: buy shares of the U.S. ride-hailing app Lyft (NASDAQ: LYFT) after its steep decline. We expect a bounce in the share price because the stock now looks undervalued relative to its position in the market.

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Expected Profits

29% profit in 17 months;

60% profit in 3 years

Description of the Business

Lyft is a ride-hailing app that connects drivers with passengers and earns a commission from each ride. Since many of our readers may not be based in the U.S. (and Lyft operates almost entirely there), the simplest way to think about the company is as an Uber-like service operating at a smaller scale.

Lyft’s revenue comes from two segments:

1. Rideshare Marketplace — 92.73%. The Lyft app matches riders with drivers, and Lyft takes a commission on each ride.

2. Rental — 7.27%. Car rentals for drivers.

Lyft operates primarily in the United States. Other (unnamed) countries contribute just 0.004% of revenue.

Lyft is still operationally unprofitable, and the company’s headline profitability has mostly come from accounting quirks rather than the underlying business.

In 2025, Lyft reported a gross margin of 41.46%, an operating margin of -2.98%, and an eye-popping net margin of 45.03%. That number looks impressive at first glance — but it’s largely the result of a one-time tax benefit rather than actual operating performance. Strip that out, and Lyft is still firmly in the red.

Why the Stock Is Down

There are plenty of reasons Lyft has lost roughly 84% of its market value since its 2019 IPO: ride-hailing is a brutally low-margin business, competition is intense, growth has slowed, and the company has missed earnings expectations more than once. But the situation can also be summarized in a much simpler way: Lyft has ended up as the “second-place Uber.”

After nearly two decades in the market (Lyft launched in 2007), the company still hasn’t achieved sustained operational profitability. Explaining exactly why would take an entire article, but two structural dynamics are worth highlighting.

First, Lyft has historically built a reputation for treating drivers somewhat better than Uber. Second — and more importantly — it has always operated at a smaller scale. That scale advantage turned out to be critical. Without the same market power, Lyft couldn’t raise prices once it gained customers. Uber, meanwhile, followed the classic platform strategy: compete aggressively on price early, dominate the market, and only then start increasing prices. Unfortunately, Lyft never reached that final stage.

Today, Uber controls close to three-quarters of the U.S. ride-hailing market, while Lyft sits at roughly 24%. That gap matters because Lyft simply doesn’t have the same resources to compete with Uber — either domestically or internationally.

Uber has also expanded aggressively into adjacent businesses such as food delivery and freight brokerage. Lyft, by contrast, remains mostly a ride-hailing intermediary. From a strategic perspective, that leaves Lyft in an awkward position: large enough to matter, but not dominant enough to dictate the market.

Still, we think the stock can bounce — just probably not all the way back to its former highs.

Pros

Very Cheap. Lyft currently trades at about 0.88x P/S with a market cap of roughly $5.25 billion. That’s extremely low for a company that still controls nearly a quarter of the U.S. ride-hailing market. At the same time, U.S. retail investors are sitting on unusually large cash balances. If even a portion of that capital rotates back into beaten-down tech names, stocks like Lyft could benefit from simple mean reversion.

A Credible M&A Story. Lyft actually posts slightly higher gross margins than Uber, while trading at a dramatically lower valuation, both in relative and absolute terms. That valuation gap makes it easy to imagine a private-equity buyer taking a serious look at the company.

Uber could theoretically attempt to acquire Lyft again — it reportedly explored the idea years ago before Lyft rejected it. That said, we’re skeptical regulators would approve such a deal. Buying Lyft would effectively give Uber a near-monopoly in the U.S. ride-hailing market. Even under a more permissive antitrust environment, that would be a very difficult transaction to push through.

A Textbook Activist Setup. Lyft is still far below its 2019 IPO price of $72, making it an obvious candidate for activist involvement.

The timing is also favorable. In August 2025, Lyft eliminated its dual-class share structure — which previously allowed management to outvote other shareholders — and transitioned to a one-share-one-vote system. That opens the door for activist investors to push for changes.

An activist could pursue several levers: pushing for deeper cost cuts, placing a representative on the board, forcing management to present a credible profitability plan, or advocating for a sale of the company. Any of these moves could lift the stock. A coordinated push across several of them could move it even faster.

Cons

Middle East War. The U.S. war with Iran has pushed global oil prices higher. What happens next largely depends on whether the conflict escalates, particularly if shipping disruptions persist. Gasoline prices, however, have already begun creeping up.

That matters for Lyft because higher fuel costs make driving more expensive for drivers and riders alike. Even small increases in gasoline prices can reduce ride demand at the margin.

The AI Threat Is Real. Lyft may also be unusually exposed to AI-driven disruption. Unlike Uber, it lacks a global footprint and operates almost entirely within the U.S. That concentration creates an interesting risk. If margins continue to tighten, drivers in large metropolitan areas could theoretically “vibe-code” their own ride-hailing platform with lower commissions. That might sound far-fetched, but it’s not entirely unrealistic. Lyft’s revenue is concentrated in dense urban markets where large driver networks already exist. In those cities, drivers could pool capital, build a simpler alternative app, and offer rides at lower commissions. Such a grassroots platform could spread through word of mouth, local communities, and even in-car advertising — gradually chipping away at Lyft’s revenue base.

Still Losing Money. Lyft remains operationally unprofitable, and that’s never an especially comforting feature — regardless of whether the Federal Reserve is cutting rates. At the same time, lending conditions in the U.S. are tightening. Oil-supply risks linked to the Middle East conflict have pushed some lenders to reassess risk, making credit somewhat harder to obtain.

Lyft also carries a substantial liability load of about $5.76 billion — more than its current market cap. Of that amount, $4.53 billion comes due by the end of 2026, while the company currently holds only $1.84 billion in cash. Given that Lyft is still burning money, the balance sheet does introduce a real bankruptcy risk.

Robotaxi Uncertainty. Lyft is also behind Uber in the race toward robotaxis. Even though the company is trying to catch up, it simply doesn’t have the financial firepower to compete with Uber head-to-head in developing autonomous fleets. Lyft could eventually strike a partnership with a robotaxi operator — but that outcome would largely depend on external partners rather than Lyft itself.

In the long run, robotaxis threaten the entire human-driver ride-hailing model — not just Lyft. The timeline will depend heavily on regulatory approvals, but the direction is fairly clear.

And yes, the most accurate depiction of this transition may still be the one from Cyberpunk 2077: the Delamain AI system is introduced to assist human drivers, only to end up replacing them entirely.

Current Market Sentiment. Even without AI disruption, the market simply isn’t very friendly to software companies right now. Investors have been rotating toward asset-heavy businesses — companies tied to infrastructure, commodities, or physical products — on the theory that those businesses are harder for AI to disrupt. That preference could stick around for a while, particularly after a year of disappointing returns for tech stocks.

Verdict

Buy now at $13.18. From there, we see two possible scenarios:

1. Bounce case: Given the current valuation, a rebound to $17 within the next 17 months looks reasonable. That would be a 29% profit.

2. Extended case: Over a three-year horizon, the stock could reach $21.10, implying a roughly 60% gain.

That said, we’re hesitant to recommend Lyft as a true long-term holding (unlike many of our other ideas). Over time, lower-commission “vibe-coded” competitors and the rise of robotaxi platforms could eventually make the current business model obsolete.

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If there’s one metal quietly sitting at the center of AI servers, electric vehicles, wind turbines, and power grids, it’s copper. And right now, the red metal is behaving like it knows it’s indispensable. Today we’re looking at a basket of copper-mining stocks positioned to benefit from what may be a structural shift in copper pricing — not just a short-term spike.

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Expected Profits

• 28% profit in 19 months (Central Asia Metals)

• 29.5% profit in 18 months (KGHM Polska Miedź)

• 26.5% profit in 18 months (China Nonferrous Mining Corp.)

• 25% profit in 18 months (Nittetsu Mining)

• 19.5% profit in 18 months (iShares Copper and Metals Mining ETF)

Issuers

Central Asia Metals (London Stock Exchange: CAML) is a UK-based mining company operating primarily in Kazakhstan. Just under 57% of its revenue comes from copper; the rest generated by a zinc-lead mine in North Macedonia.

P/S: 2.6

P/E: 15.45

Market Cap: 394.85 million GBP ($533 million)

Dividend Yield: 5.83% (0.18 GBP per share annually; payout ratio 79.89%)

KGHM Polska Miedź S.A. (Prague Stock Exchange: KGH) is a Polish mining company listed in the Czech Republic. It operates mines in Poland, the U.S. and Chile.

P/S: 1.69

P/E: 22.93

Market Cap: 362.29 billion ‬CZK ($17.7 billion)

Dividend Yield: –

China Nonferrous Mining Corp (Hong Kong Stock Exchange: 1258) is a Chinese holding company focused primarily on copper production.

P/S: 2.21

P/E: 17.83

Market Cap: 61.14 billion ‬HKD ($7.82 billion)

Dividend Yield: 2.15% (0.34 HKD per share a year; payout ratio 41.75%)

Nittetsu Mining (Tokyo Stock Exchange: 1515) is a Japanese copper producer with additional exposure to real estate and other businesses.

P/S: 1.43

P/E: 28.71

Market Cap: 293.08 billion JPY ($1.88 billion)

Dividend Yield: 1.37% (44.8 JPY per share annually; payout ratio 40.97%)

iShares Copper and Metals Mining ETF (NASDAQ: ICOP) provides diversified exposure to major global miners. Large Western producers such as Freeport and Newmont make up a significant share of its holdings.

Pros

The Bullish Case for Copper. Copper has climbed nearly 35% over the past year. That kind of move can look speculative at first glance, but the drivers beneath it are structural rather than emotional.

Start with supply. Major copper discoveries are becoming increasingly rare. Copper has always been considered “abundant,” but economically viable, high-grade deposits are harder to find than many assume. The pipeline of new, large-scale discoveries has thinned meaningfully over the past decade. When new supply struggles to keep up, the long-term risk tilts toward shortages — and markets tend to price that in early.

Now layer in demand. Forecasts suggest global copper demand could be roughly 40% higher by 2040 than it was in 2024. That growth isn’t just coming from traditional sectors like housing and heavy industry. It’s being pulled forward by structural themes that aren’t going away:

• AI data centers require enormous volumes of copper wiring and infrastructure.

• Electric vehicles contain substantially more copper than internal combustion cars.

• Wind, solar, battery storage, and grid modernization are all copper-intensive.

In other words, copper is quietly embedded in every “future-facing” industry investors are excited about. When demand expands structurally and supply responds slowly, price floors tend to reset higher.

Valuations Leave Room for Upside. What makes this setup interesting is that many of the miners haven’t priced in perfection. Despite copper’s strength, most of these stocks are not trading at euphoric multiples or historic highs. That provides breathing room. If copper prices stay elevated or climb further, higher realized prices should translate into stronger revenue, healthier margins, and potentially richer dividends.

Rate Cuts Could Amplify the Move. Central banks globally have been leaning towards easing. Lower policy rates make borrowing cheaper, stimulate consumption, and typically accelerate economic activity. Historically, broad rate-cut cycles have coincided with stronger commodity prices. If that pattern holds, copper may not be done running.

Strategic Optionality Is Real. Several of these companies aren’t enormous in absolute dollar terms. In a world increasingly focused on critical minerals and supply security, overseas buyers or strategic investors may find certain copper assets attractive. We’re not betting the thesis on M&A — but in commodities tied to electrification and AI, strategic value is rarely zero.

Cons

Forecasts Are Catching Up — But Not Fully Bullish Yet. Copper currently trades around $12,800 per ton, already above many published forecasts that sit below $13,000. We expect those projections will gradually adjust upward — similar to what happened with gold last year — but until they do, the lack of overtly bullish analyst targets could weigh on sentiment.

There’s also positioning risk. Commodity allocations have increased as the rally gained momentum. If investors decide to lock in gains simultaneously, price pullbacks can be swift.

Scarcity Cuts Both Ways. The same scarcity story supporting higher prices also forces miners to spend more. New copper projects are capital-intensive, and developing them often requires billions in upfront investment. Meanwhile, older mines tend to see declining ore grades, which makes extraction more complex and expensive. Even in a strong copper market, miners may need to reinvest a substantial portion of cash flow simply to sustain production.

Disruptions Boost Prices — But Increase Volatility. Part of copper’s recent strength was event-driven. In 2025, an earthquake hit the Kamoa–Kakula mine in the DRC, triggering flooding. Another earthquake disrupted Chile’s El Teniente operation. Indonesia’s Grasberg mine — one of the world’s largest — suffered a collapse that halted production. In Peru, strikes temporarily shut down the Constancia mine.

Each event tightened global supply and supported prices. But they also highlight how fragile copper production can be. Mining is exposed to geology, labor disputes, weather, and political instability. The same forces that push prices higher can also inject sharp volatility into the market.

Geography adds another layer. Many new projects are concentrated in regions with rising political and security risk. Regulatory changes, logistics bottlenecks, or social unrest can disrupt output with little warning. In copper, volatility is part of the operating model.

High Prices Invite More Supply. When copper trades near record highs, producers respond. Companies ramp up output, accelerate development, and explore aggressively. That can lead to temporary oversupply cycles — and commodities are famous for sharp reversals when supply catches up.

Copper’s long-term case may be strong, but short-term swings are part of the terrain.

Tariff Headlines Can Move the Market Overnight. Copper’s rally hasn’t been driven solely by supply shortages and electrification demand. Trade-war dynamics have also played a meaningful role.

In the summer of 2025, U.S. President Donald Trump announced plans to impose a 50% tariff on copper imports. That announcement alone triggered a noticeable jump in copper prices, as markets quickly priced in tighter U.S. supply. Ultimately, the tariffs that were implemented applied only to semi-finished copper products — not refined metal or cathodes — which tempered the impact.

However, the story didn’t end there. The U.S. Department of Commerce outlined potential tariffs of 15% in 2027 and 30% in 2028 on refined copper and cathodes. That prospect encouraged U.S. buyers to front-run potential duties by building inventories early, effectively pulling forward demand and supporting prices in the short term.

More recently, the Supreme Court canceled most Trump-era tariffs. Copper-related measures, however, remain in place — and there is still room for escalation. Heavier duties could be introduced going forward, particularly if policymakers attempt to compensate for tariffs struck down by the court. If that happens, U.S. copper consumption could decline. That matters, even though the U.S. represents only about 7.85% of global copper demand — a non-trivial share in a tight market.

At the same time, the opposite risk is equally real. If more aggressive 2027–2028 tariff proposals are ultimately not implemented, copper prices could fall. U.S. inventory-building would likely slow or reverse, and the emotional component of the market could amplify the move. In fact, we’ve already seen how sensitive copper is to policy headlines: in late July 2025, when news broke that tariffs would not apply broadly across all copper categories, prices plunged roughly 20% in a single day — wiping out months of gains.

Rotation and Equity-Specific Risk. Capital flows can shift quickly. The same rotation out of software that has recently benefited “hard asset” sectors like mining could reverse just as fast. If the U.S. tech sector continues to look oversold, investors may decide to buy the dip in software — pulling money out of physical-resource stocks, including copper miners. That dynamic could pressure the space, especially given that most of the individual stocks we cover are listed outside the U.S., which may limit their appeal to domestic investors.

The iShares ETF could be particularly sensitive in such a scenario. Its core holdings are large-cap Western miners that already trade at somewhat elevated multiples, often with P/S ratios above 3. If sentiment cools, those names could compress quickly.

Copper Stocks Are Not Copper Itself. Mining shares carry company-specific risks — leverage, operational risks, cost inflation, execution missteps — and they can lag the metal even in a strong commodity environment. Copper prices may rise, but equity performance depends on discipline, capital allocation, and operational stability. Over time, higher copper prices should translate into strong profits for well-managed producers. But the path from metal price to shareholder return is rarely linear.

Verdict

Central Asia Metals — Buy at 234.5 GBX. We expect a move to 300 GBX within 19 months (still below its 2018 peak of 323 GBX). That would be a 28% gain, excluding dividends.

Note: GBX (Penny Sterling) and GBP (British Pound Sterling) are both used to represent UK currency: 100 GBX equals 1 GBP. So 234.5 GBX = 2.34 GBP.

KGHM Polska Miedź — Buy at 1,694.5 CZK. Our 18-month target is 2,200 CZK, below the 2,280 CZK level last seen in January 2026. That implies a 29.5% gain.

China Nonferrous Mining Corp — Buy at 14.99 HKD. Although the stock trades near historic highs, valuations remain reasonable given copper’s backdrop. We target 19 HKD within 18 months — a 26.5% gain, excluding dividends.

Nittetsu Mining — Buy at 4,160 JPY. Despite trading at all-time highs, its valuation is not stretched. We see potential for 5,200 JPY over the next 18 months — a 25% gain, excluding dividends.

iShares Copper and Metals Mining ETF — Buy at $56.05. We expect the ETF to break above prior highs and reach $67 within 18 months — a 19.5% gain.

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Sometimes the best opportunities show up when an entire sector is in the penalty box. Today’s idea is a double feature: buying two beaten-down U.S. software names — Backblaze and Sprinklr — after the recent AI-driven selloff. Both look priced for disappointment. We think at least one (and possibly both) deserves a rebound.

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Issuers

Backblaze (NASDAQ: BLZE) is a cloud provider that allows businesses and consumers to store, access, and protect data.

Sprinklr (NYSE: CXM) makes customer engagement and social media management software for enterprises.

Expected Profits

Backblaze: 31.5% profit in 16 months; ~250% profit in 12 years (11% CAGR).

Sprinklr: 34.5% profit in 2 years.

Description of the Business

Backblaze. It’s a cloud storage company — somewhat like Amazon Web Services, but focused on simpler, lower-cost storage solutions. Businesses and individuals pay Backblaze to back up and protect their data. At its core, it’s a server backup and cloud storage business built around affordability and ease of use.

Here’s how revenue broke down in 2024:

1. Subscription-based arrangements — 51.44%. Customers pay a fixed recurring fee for access.

2. Consumption-based arrangements — 48.15%. Revenue depends on how much storage customers actually use.

3. Physical media — 0.41%. Products such as USB Restore and the Fireball device, which allow customers to move or recover large datasets offline.

Most of Backblaze’s revenue comes from the U.S. (73.9%). The UK follows at 5.25%, then Canada at 4.51%, with the remainder spread globally.

Backblaze is not yet profitable. For the 12-month period ended September 30, 2025, gross margin was 59.12%, operating margin was -23.07%, and net margin was -24.37%. In other words, it’s still in investment mode.

Sprinklr. The company builds enterprise software that helps companies manage customer support and social media presence across multiple channels. Think of it as the digital command center for customer interaction and brand monitoring.

For the fiscal year ended January 31, 2025, revenue looked like this:

1. Subscriptions — 90.15%. Recurring payments for platform access.
   Segment gross margin: 80.4%.

2. Professional services — 9.85%. Consulting and implementation work to tailor the software to client needs.
   Segment gross margin: -3.66% (the segment loses money but supports subscription adoption).

More than half of Sprinklr’s revenue comes from the U.S. (54.46%), followed by EMEA at 33.78%. The rest is spread across the Western Hemisphere and other global markets.

Sprinklr is profitable — at least on paper. For the 12-month period ended September 30, 2025, its gross margin was 68.68%, operating margin 4.35%, and net margin 13.42%. However, the net margin was partly boosted by one-time non-operating gains (we’ll revisit that in the “Cons”).

Why These Stocks Are Down

Neither company committed a catastrophic error, yet both trade near historic lows. Since 2021, Backblaze has lost roughly 62% of its market value, while Sprinklr has dropped about 79%.

Some of that decline was justified. Both companies once grew faster and traded at much richer multiples. When growth normalized, valuations compressed. That re-rating phase is largely behind us.

The more recent pressure comes from a broader wave of anti-software sentiment. The launch of a new AI tool by Anthropic rattled the sector and triggered another round of selling across software stocks. Billions in market cap evaporated in days.

We think that reaction is excessive. AI disruption is real — but its pace, impact, and winners are still uncertain. Historically, when sectors swing from “priced for perfection” to “priced for extinction,” selective bargains emerge.

Many software stocks now trade near multi-year lows. Eventually, active investors begin rotating back into names that look cheap relative to fundamentals.

The selloff also makes M&A more plausible. At current valuations, both Backblaze and Sprinklr could attract strategic buyers or minority investors looking to gain exposure at a discount.

Finally, the current prices don’t fully reflect improving business trends. Both companies traded at much higher valuations when revenue growth and profitability metrics were actually worse. That disconnect — stronger fundamentals, weaker share prices — is often where opportunity hides.

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Backblaze: Pros

Cloud Remains a Structural Tailwind. Even before AI entered the mainstream, global data creation was exploding. AI only accelerates that trend. More data means more storage. Storage doesn’t disappear just because AI gets smarter — in fact, AI models require massive datasets to function.

Extremely Cheap. Backblaze’s market cap is just about $247 million. Its P/S is about 1.6. That’s modest for a cloud infrastructure company, even a small one.

AI-resilient — for Now. Backblaze stores data. AI may change how data is processed, but it doesn’t eliminate the need to store it. Unless the economics of cloud storage fundamentally shift, Backblaze’s core demand remains intact.

Sprinklr: Pros

Relatively Cheap. Sprinklr’s market cap is about $1.37 billion, trading at roughly 1.65x P/S.

A Real Business. Many software companies burn cash. Sprinklr generates operating profit. Customer service and social media management remain core priorities for enterprises worldwide, and that shows up in Sprinklr’s results (though cracks are starting to appear—more on that in the “Cons”).

Weak-dollar Tailwind. Nearly half of Sprinklr’s revenue comes from outside the U.S. A weaker dollar means foreign earnings translate into higher reported USD revenue.

Clean Balance Sheet. Sprinklr holds enough cash to cover nearly all liabilities. In uncertain rate environments, financial flexibility matters.

Backblaze: Cons

NRR is slipping. NRR fell from 123% in December 2024 to 106% by the end of 2025. That’s still healthy, but the slowdown signals intensifying competition.

Note: Net retention rate (NRR) shows how much the company’s existing customers are spending compared to last year. 100% NRR means no change, less than 100% means customers are shrinking or leaving, and more than 100% means customers are expanding their spending.

Backblaze competes against giants. Its direct competitors include the three largest cloud platforms in the world — Amazon, Alphabet, and Microsoft — all with extremely deep pockets. Competing with players of that scale requires heavy spending on infrastructure and innovation.

It’s still losing money. Management expects to reach net profitability within the next two years, but that timeline is not set in stone. A lot can change in two years — especially in software, where sentiment can shift quickly. Investors may grow increasingly impatient with loss-making companies if AI disruption narratives intensify and capital rotates toward firms with stronger balance sheets and visible cash flow.

Competitive pressure could also force Backblaze to overspend. When you’re competing with the “Big Three” — Microsoft, Amazon, and Alphabet — you don’t get to operate casually. These companies have enormous balance sheets, deep engineering teams, and the ability to lower prices strategically to defend market share. For a smaller player like Backblaze, staying relevant may require continuous investment in infrastructure, security, performance optimization, and new features.

Sprinklr: Cons

The “real” P/E is higher. On the surface, Sprinklr trades at 12.98x annual earnings. That sounds inexpensive for a software company. But the underlying picture is more nuanced. Over the past 12 months, operating income was roughly $54 million. On top of that, the company recorded about $7.6 million in one-time non-operating income and a substantial one-time tax benefit of $51 million. If you strip out those non-recurring items and focus on normalized profitability, the effective P/E rises closer to 25x. That’s not excessive by software standards, but it’s far less of a bargain than the headline number suggests. For investors already nervous about AI risk in the sector, that higher multiple could dampen enthusiasm.

AI vulnerability. Management emphasizes AI features within the platform — and that’s encouraging — but the core business model sits closer to the disruption front line than Backblaze’s.

First, customers increasingly have the tools to build their own AI-driven agents to handle tasks like customer service routing, automated replies, and sentiment analysis. These tools are becoming cheaper, more flexible, and easier to deploy.

Second, larger enterprise vendors with much deeper pockets — Adobe, Microsoft, ServiceNow, Salesforce — are embedding AI copilots, automated workflows, and intelligent summaries directly into their ecosystem. Many of Sprinklr’s customers already use those broader platforms. As those vendors expand functionality, Sprinklr faces rising competitive pressure from companies with far greater scale.

We’re already seeing some margin compression at Sprinklr. It’s unclear whether the pressure stems from customers experimenting with cheaper AI alternatives or from Sprinklr itself ramping up spending to remain competitive in AI development. Either scenario weighs on near-term profitability. If clients migrate toward lower-cost AI-driven solutions, revenue expansion could slow. If Sprinklr invests aggressively to defend its position, margins could narrow further.

Verdict

Our reference anchor for both stocks is their IPO pricing.

Backblaze. The stock was priced at $16 at IPO, almost four times its current level. From here, we see two paths:

1. We expect the stock to reach $5.30 within the next 16 months, a 31.5% gain.

2. If it survives and achieves sustained profitability within the next two years, an 11% CAGR over 12 years is plausible.

Sprinklr. Also priced at $16 at IPO — almost three times today’s price.

1. We think it can rebound to $7.50 within two years, a 34.5% gain.

2. That said, we’re less confident in Sprinklr’s long-term durability. AI progress could eventually compress the value of middle-layer customer-management platforms. Over the next two years, however, AI tools remain imperfect — and that gives Sprinklr time.

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Today we’re putting forward a policy-driven, moderately speculative idea: buy selected U.S. pharma stocks — specifically those with meaningful exposure to European sales — to profit from the likely outcome of ongoing U.S.–EU drug price negotiations.

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The Basis of the Idea

A major policy standoff is unfolding between Washington and several European capitals over the future of prescription drug pricing.

One underappreciated reality is that U.S. patients and insurers often pay materially more — roughly 35–45% more — for the same medicines than consumers in other advanced economies. The structural reason isn’t mysterious. Many countries operate national or quasi-national healthcare systems that centralize purchasing power, giving governments substantial leverage to negotiate lower drug prices.

The U.S., by contrast, runs on a fragmented system of private insurers, pharmacy benefit managers, and government programs. That fragmentation disperses bargaining power and generally results in higher list and net prices. Roughly 42% of Americans receive coverage through government-subsidized programs, about 50% through employer-sponsored plans, and roughly 8% remain uninsured. With no single dominant negotiator representing the entire system, pharmaceutical companies have more pricing flexibility domestically.

President Trump’s stated objective is to rebalance this dynamic by pressuring U.S. trading partners to pay more for pharmaceuticals, arguing that if prices rise abroad, it becomes politically and economically easier for U.S. prices to moderate at home. Early signs suggest the strategy may be gaining traction through hard-nosed negotiations, with tariffs reportedly used as leverage. The UK has already signaled willingness to adjust pricing on certain medicines, and similar discussions are underway elsewhere.

If this pattern broadens — and we believe it will, given that the EU has recently conceded ground to Trump on several economic fronts — the implications could be constructive for U.S. pharmaceutical revenues. Overseas markets could reprice upward faster than the U.S. market reprices downward.

Even incremental pricing concessions from large European buyers — particularly France and Germany — could quickly translate into bullish sentiment for the sector. It wouldn’t take much to move shares: a credible negotiation breakthrough could lift U.S. pharma stocks by mid-single to low-double digits in a single session at the sector level, with individual names potentially moving more.

Meanwhile, without a broad U.S. negotiation mechanism, many pharmaceutical companies may not feel compelled to cut domestic prices aggressively or quickly. In fact, they may not even lower them at all — there are limits to what any presidential administration can directly impose. That dynamic could allow earnings to outperform expectations for several quarters.

Our approach is straightforward: select U.S. pharma companies with significant European revenue exposure, add a thematic ETF for broader participation, and position ahead of potential negotiation progress. We believe Trump will extract concessions from EU partners on this issue.

Issuers

Viatris (NASDAQ: VTRS) 

Market cap: $18.37 billion

P/S: 1.29

P/E: —

Dividend yield: 3.08% ($0.48 per share a year)

Sales by region: Developed markets (mostly Europe) 37.4%, U.S. 23.38%, emerging markets 15.32%, China 13.01%, Japan-Australia-New Zealand 9.16%.

Profitability: The company is currently reporting losses. For the 12 months ending October 1, 2025, gross margin was 35.97%, operating margin negative 18.76% and net margin negative 26.13%.

Special note: Recent losses were largely driven by non-operating items — asset impairments, litigation settlements, and substantial non-cash charges tied to acquisition amortization.

BioMarin Pharmaceutical (NASDAQ: BMRN)

Market cap: $11.46 billion

P/S: 3.6

P/E: 21.66

Dividend yield: —

Sales by region: U.S. 32.92%, Europe 29.51%, Latin America 13.46%, rest of the world 17.57%.

Profitability: BioMarin is operationally profitable. For the of 12 months ending October 1, 2025, gross margin was 79.56%, operating margin was 19.89%, and net margin was 16.82%.

iShares U.S. Pharmaceuticals ETF (NYSEArca: IHE) — A thematic ETF holding U.S.-listed pharma stocks. Most of its holdings generate less than 18% of sales in Europe, which technically weakens its fit under our “high European exposure” filter. However, if there is a credible breakthrough in the U.S.–EU drug-pricing negotiations, investors are unlikely to split hairs. Capital typically flows broadly into anything associated with U.S. drugmakers — sector ETFs included.

Expected Profits

Viatris: 31.5% profit in 16 months

BioMarin: 25.5% profit in 16 months

iShares U.S. Pharmaceuticals ETF: 22% profit in 16 months

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Pros

Weak Dollar. Both BioMarin and Viatris generate more than 65% of revenue outside the U.S. A weakening dollar acts as a tailwind: stronger foreign currencies translate into higher reported USD revenue when earnings are converted back. Simple currency math.

This benefit is less pronounced for the ETF’s holdings, since many generate a larger share of revenue domestically.

Stocks Off Their Highs. Viatris trades at nearly one-third of its 2018 valuation, and BioMarin sits roughly 50% below its 2020 peak. That creates room for a rebound. The reasons for their declines are fairly typical in pharma — R&D disappointments, regulatory setbacks. In our view, currency tailwinds and negotiation-driven optimism could outweigh those negatives.

Rotation Out of Software. Capital flowing out of AI-sensitive software stocks needs a new home. Pharma qualifies as “real economy” business — labs, molecules, patents — not code vulnerable to disruption narratives. AI can accelerate drug discovery, but it can’t yet replace the economics of patent-protected therapies. As AI anxiety drives software volatility, pharma could attract defensive and rotational flows.

Dividend Yield. Viatris offers a yield above U.S. and developed-market averages, which adds a layer of income support.

Moderate Chances of M&A. Both companies have reasonable valuations and manageable market caps, making them plausible acquisition targets for larger pharma players.

Cons

Pharma’s Achilles Heel. Drugmakers operate under a built-in expiration date: patents. In the U.S., effective exclusivity typically lasts around 13 years post-launch. Once it expires, generics enter at dramatically lower prices.

When that happens, revenue erosion usually follows. Consumers rarely choose the higher-priced branded option when a cheaper equivalent exists. Ironically, Viatris itself generates about 37% of revenue from generics — a factor contributing to its margin compression.

This reality forces pharma companies into a perpetual R&D race. Drug development is expensive, slow (often seven years or more), and uncertain. Roughly 90% of compounds entering clinical trials fail. The estimated average cost of developing a successful drug is around $2.8 billion.

To stay competitive, companies often acquire late-stage biotech firms — sometimes at eye-watering prices. Roche’s $3.5 billion acquisition of 89bio is one example. These bets can pay off — but they can also miss.

Both Viatris and BioMarin could pursue expensive R&D acquisitions, which may or may not generate shareholder value.

Viatris Balance Sheet. Viatris carries $22.7 billion in liabilities, with $7.36 billion due by September 2026. The dividend could face pressure if debt servicing takes priority.

BioMarin’s balance sheet is significantly stronger, with enough cash to cover most obligations. The iShares ETF, of course, avoids single-name balance-sheet risk.

Political Volatility. Pharma remains a perennial political target. While healthcare costs are heavily influenced by intermediaries who add limited clinical value, drugmakers are the most visible scapegoats. Expect headline-driven volatility.

That said, diversified exposure through the iShares ETF reduces single-company risk — even if the sector broadly reacts to policy rhetoric.

Verdict

We expect material progress in the U.S.–EU drug-price negotiations within the next 16 months, setting our investment horizon.

Viatris: Buy at $15.95. Target $21 in 16 months — a 31.5% gain, excluding dividends.

BioMarin: Buy at $59.66. Target $75 in 17 months — 25.5% gain.

iShares U.S. Pharmaceuticals ETF: Buy at $89.97. Target $110 in 16 months — a 22% gain.

This is a policy-driven trade. If negotiations advance as expected, sentiment could shift quickly — and in markets, sentiment shifts are often half the battle.

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Instead of chasing hype, today’s idea comes from the opposite direction: a high-quality business that the market may have punished too aggressively. We’re looking at Doximity (NYSE: DOCS), an American healthcare technology company whose stock has been hit hard after a guidance reset. In our view, the reaction looks excessive — and that opens the door to a meaningful rebound.

Expected Profits

24.5% profit in 15 months;

52% profit in 3 years;

~11% CAGR over 10 years.

Description of the Business

Doximity is a professional networking and workflow app designed specifically for U.S. healthcare professionals. Think of it as a purpose-built digital hub for clinicians rather than a generic social network. Doctors and other medical professionals use Doximity to stay connected with colleagues, manage parts of their daily workflow, and access job-related tools.

The platform supports telehealth and secure video visits, on-call scheduling, and other routine administrative tasks. It’s also widely used by hospitals and health systems for hiring and recruiting medical professionals.

Clinicians typically use Doximity for free. The company makes money on the other side of the marketplace — by charging pharmaceutical companies and health systems for digital marketing, and by selling hiring, recruiting, and enterprise workflow products to healthcare organizations.

According to Doximity’s 2024 annual report:

1. Subscription — 95.33%. These subscriptions are sold mainly to pharmaceutical companies, health systems, and recruiting firms.

2. Other — 4.67%. Non-recurring revenue such as fees from temporary staffing and permanent placements.

All of Doximity’s revenue is generated in the U.S.

The company is highly profitable: for the 12-month period ended September 30, its gross margin was 90.2%, operating margin was 39.72%, and net margin was 40.72% (The net margin figure is boosted by a one-time non-operating income item).

Why Doximity Stock Is Down

Doximity shares are hovering near all-time lows after a sharp drop. Following its earnings report on February 5, the stock lost almost 40% of its value in a matter of days. What triggered such a dramatic move? Surprisingly little.

The company did two things that markets tend to overreact to:

1. It lowered its full-year sales outlook to a range of $642.5 million to $643.5 million, compared with prior guidance of $640 million to $646 million.

2. For the current quarter, it projected revenue of $143 million to $144 million, below the $150.4 million analysts were expecting.

That sell-off looks harsh on its own, but it makes more sense in context. Before the crash, Doximity traded at a P/S of 11.39 and a P/E of 28.12. That valuation isn’t outrageous for a high-margin software company, but it did leave little room for disappointment. Once expectations slipped — even slightly — the stock was repriced quickly and brutally.

The broader market didn’t help. Software stocks have been under pressure across the board, as investors worry that AI tools will replace large chunks of existing software. This particular wave of selling was partly triggered by the release of Anthropic’s newest AI automation product. In our view, that fear has become indiscriminate — and in Doximity’s case, largely misplaced (more on that in “Pros”).

Taken together, these factors have pushed the stock down to levels that look disconnected from the underlying business. We think Doximity is now dramatically oversold.

Pros

Share Price Decline Looks Excessive. Doximity shares fell below $21, well under the IPO price of $26. Even without any positive surprises, this kind of move sets up a classic rebound scenario.

AI Is Not a Direct Threat — at Least Not Yet. Let’s tackle the biggest concern head on. In our view, Doximity is better insulated from AI disruption than most software companies.

Healthcare is a heavily regulated, compliance-driven environment. That’s where Doximity has a structural advantage over generic “cheap AI.” Its recruiting business, for example, relies on a verified clinician network and structured data on credentials and specialties. Making high-stakes physician hiring decisions based on outputs from an unverified chatbot is not something hospitals are eager to do.

More broadly, the idea that AI will simply “eat software” assumes organizations will abandon trusted platforms and build their own tools. That might happen in some industries. It’s far less likely in U.S. healthcare, where workflows are complex, liability is high, and compliance requirements are constant. If anything, bureaucratic systems tend to gravitate toward established, reputable vendors — not DIY experiments.

Doximity’s management also isn’t ignoring AI. The company has already rolled out several AI-powered features:

• Doximity GPT, a compliance-friendly administrative writing assistant with clinical citations.

• Doximity Scribe, which automates parts of clinical documentation.

• PeerCheck, a physician-led validation layer designed to review and improve AI outputs.

So far, AI appears to be helping rather than hurting. Margins have improved, not deteriorated — no small feat given how expensive AI pivots can be. Based on what we know today, we think Doximity has at least a decade before AI becomes a serious competitive threat.

It’s also an insanely high-margin business. Gross margins above 90% are rare anywhere, and almost unheard of in healthcare-adjacent software. The fact that Doximity has maintained — and even improved — margins over time is a major point in its favor.

A Technical Rebound Looks Likely. From a market-structure perspective, U.S. software stocks look deeply oversold. When sentiment eventually shifts, Doximity has better-than-average odds of bouncing — especially given its strong fundamentals and relative insulation from AI fears.

Valuation Finally Makes Sense. With the share price around $25.69 and annual EPS of $1.19, Doximity now trades at a P/S of 10.1 and a P/E of 21.56. That’s below the average P/E of the U.S. software sector and supports the case for a rebound. Yes, the P/S is still on the high side — but for a business with these margins and defensibility, it’s reasonable.

Revenue Is Sticky Enough. Doximity’s net revenue retention (NRR) stands at 112%. That’s a strong signal that existing customers are spending more over time — not less. If AI were actively displacing Doximity’s offerings, NRR would likely fall below 100% fairly quickly. The fact that it hasn’t is very encouraging.

Note: net retention rate (NRR) shows how much money the company’s existing customers are spending compared to last year. 100% NRR means no change, less than 100% means customers are shrinking or leaving, and more than 100% means customers are expanding their spending.

A Realistic M&A Target. After the sell-off, Doximity’s market cap is about $4.76 billion. Given its margins, defensibility, and healthcare footprint it’s plausible the company could attract an acquisition offer at a meaningful premium.

Cons

Customer Concentration. One unnamed customer accounts for about 12% of revenue. That concentration gives the customer bargaining power and introduces risk if the relationship changes.

A Growth Ceiling Ahead. Doximity is already deeply embedded in the U.S. healthcare system: roughly 80% of U.S. physicians use the platform, along with more than 60% of nurse practitioners and physician assistants, and over 90% of graduating medical students. While the company doesn’t disclose the exact number of paying customers, the business model makes implications clear. Clinician membership is essentially free; monetization comes primarily from organizations. That means Doximity already covers a large share of the available workflow in its niche — management, recruiting, and routine administrative tools in healthcare.

The flip side of that dominance is growth math. When you already “own the room,” revenue growth tends to slow. As a result, Doximity’s top-line expansion is likely to become more muted with each passing quarter, simply because there’s less untouched territory left. That’s not a deal-breaker, but it does mean we shouldn’t expect explosive growth unless Doximity raises prices, expands its product lineup, or pursues acquisitions and/or international expansion. Each of those levers could work, but they also carry risks and could also weigh on margins over time.

Multiple Battlefronts. Doximity doesn’t face a single, obvious archrival. Instead, it competes across several fronts at once. Clinician engagement overlaps with platforms like LinkedIn, Facebook, Google, and X. Marketing budgets compete with health-focused sites such as WebMD and Medscape, as well as offline channels. Recruiting faces traditional staffing agencies. Workflow management overlaps with tools like QGenda, Zoom, and Microsoft Teams. Telehealth competes with players such as Teladoc and Amwell.

So far, competition hasn’t meaningfully dented Doximity’s economics — its margins make that clear. But over time, pressure could increase as more companies roll out AI-enabled tools aimed at pieces of the healthcare workflow. A more subtle risk is internal: management may feel tempted to buy competitors to defend or expand its position. Acquisitions in healthcare tend to be expensive, and they’re not always kind to shareholders. Finally, Doximity’s extremely high margins are a beacon. They signal that this niche is very profitable, which can attract new entrants — including well-funded digital-health startups backed by venture capital.

Slim Chance of a U.S. Medical Administration Overhaul. This is a long-shot risk, but it’s worth acknowledging. U.S. healthcare’s administrative inefficiency is widely recognized, and serious reform is occasionally discussed — even if it’s politically painful and notoriously hard to execute. Cutting red tape, aligning incentives, and resolving congressional gridlock would be a herculean task.

Still, the conversation itself could matter. Companies like Doximity thrive in a system where hospitals and health systems — often lacking the internal expertise to benchmark software costs — end up paying premium prices for “must-have” administrative tools. Doximity’s gross margin north of 90% didn’t appear by accident. Healthcare has historically had a lot of leeway to pass costs along, and that environment supports unusually high software margins.

If policymakers ever made a serious attempt to cap administrative spending, uncomfortable questions would follow: how much are hospitals paying for each layer of software, and why? Even the announcement of a credible reform effort could pressure stocks like Doximity’s. In an extreme scenario, meaningful simplification of healthcare administration could undermine parts of the business model. That said, this remains mostly theoretical. U.S. pharmaceutical companies, for example, have been political targets for decades — often dragging their stock prices around — yet actual structural change has been limited.

Verdict

Buy now at $25.69. From here, we see three scenarios:

1. Base case: A rebound to $32 within 15 months, implying a 24.5% gain.

2. Bull case: A return to $39 over roughly three years as sentiment resets, a ~52% gain.

3. Long-term case: The business compounds steadily and delivers around 11% CAGR over the next decade.

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Today we have one of the most speculative ideas we’ve ever published: buying shares of the deeply distressed French video game publisher Ubisoft Entertainment (Euronext Paris: UBI). The company is hovering uncomfortably close to the edge of bankruptcy — but precisely because of that, we think it may soon attract an outside investor or acquirer willing to step in.

Expected Profits

17% profit in 15 months;

49% profit in 3 years;

10% CAGR profit over 10 years.

Description of the Business

Ubisoft is a video game publisher and developer founded in 1986. Over nearly four decades, it has built some of the industry’s most recognizable franchises, including Far Cry, Assassin’s Creed, and others. This intellectual property portfolio remains Ubisoft’s single most valuable asset — and arguably the main reason the company is still standing today.

According to Ubisoft’s 2024 annual report, revenue is split as follows:

1. Edition / Production / Cloud Gaming — 30.41%. This segment covers game development and the related online infrastructure required to support modern titles, including servers and low-latency networks. Conceptually, this is the IP ownership and franchise-control side of the business. A large portion of segment revenue is intercompany: Ubisoft’s publishing entities pay “royalties” to this division to help offset development costs.

2. Publishing — 69.59%. These entities handle global sales, distribution, and local marketing of Ubisoft’s games.

Speaking frankly, this structure is messy and not especially helpful for investors. A significant share of reported revenue is effectively Ubisoft billing itself, which makes it harder to assess true operating margins. Shareholders would likely benefit more from a cleaner breakdown — by franchise, content type, or lifecycle stage. It’s also telling that most of Ubisoft’s assets are concentrated in the Edition division.

Most of Ubisoft’s sales are now generated online. Consoles account for the largest share at 44%, followed by a still-significant PC contribution of 31%.

Financially, Ubisoft is currently loss-making. For the 12-month period ending September 30, 2025, the company reported a gross margin of 57.14%, an operating margin of 5.82%, and a net margin of -3.86%.

By region, sales are split as follows: North America accounts for 45.63%, Europe for 32.11%, and the rest of the world for 22.26%.

Why the Stock Fell So Much

Over the past decade, Ubisoft has lost roughly 95% of its market value. That kind of collapse doesn’t happen overnight — and it deserves some historical context.

Ubisoft was once regarded as a craft-driven studio with strong creative credentials. In the 1990s and early 2000s, titles such as Prince of Persia and Beyond Good & Evil were critically acclaimed, even when commercial success was uneven. Financially, those years were mixed but manageable: profits fluctuated, debt remained under control, and the business survived.

The inflection point came around 2009, following the success of Assassin’s Creed II. Ubisoft developed a highly scalable open-world formula — large maps, sandbox mechanics, and repeatable design patterns — and applied it across multiple franchises, including Far Cry and Ghost Recon. For a time, this worked. Revenues grew steadily.

But costs grew too. Game development became more expensive across the industry, and Ubisoft’s margins failed to improve meaningfully. Debt increased alongside revenue, and profitability remained erratic: some strong years, some deeply unprofitable ones.

By late 2024, the cracks were impossible to ignore. Gamers showed clear fatigue with Ubisoft’s formulaic output, while financial performance remained underwhelming. In December 2024, GamesIndustry.biz published a 2025 forecast suggesting Ubisoft faced a stark choice: go private or sell itself after years of creative and financial missteps. We found that assessment convincing — and still do.

The forecast quickly proved prescient. In January 2026, Ubisoft announced delays to numerous long-awaited titles and outright cancellations of several high-profile projects, including the Prince of Persia: The Sands of Time remake. The market reaction was brutal. Ubisoft now expects a €1 billion operating loss in fiscal year 2025–2026, driven largely by a one-time €650 million write-down tied to restructuring.

At this point, Ubisoft looks uncomfortably close to bankruptcy. Yet paradoxically, that’s also what makes the stock interesting. Distress often forces change — and that’s where our thesis begins.

UBISOFT results for every financial year ending March 31, in millions of EUR

Pros

Spin-Off Potential. In 2025, Ubisoft created a new subsidiary focused on its most valuable franchises — Assassin’s Creed, Far Cry, and Rainbow Six — with Tencent investing €1.16 billion for a 25% economic stake. The unit, Ubisoft Nova SAS (branded “Vantage Studios”), remains fully owned within Ubisoft’s structure and is not publicly listed. However, a future spin-off is conceivable. If that happens, existing Ubisoft shareholders would receive shares in the new entity — and investor enthusiasm alone could drive a sharp revaluation, given the quality of the underlying IP.

Ubisoft also looks extraordinarily cheap. Its P/S ratio sits at just 0.28, and the entire company is valued at roughly €546 million. We believe Ubisoft’s IP portfolio alone is worth at least €2 billion. That gap suggests substantial upside if the market begins pricing the assets more rationally.

M&A Optionality. Ubisoft’s management has alienated much of its gamer base over the years, so we don’t expect retail enthusiasm to drive the stock. But from a strategic perspective, the company looks like a bargain. For context, Electronic Arts was acquired for $55 billion at a roughly 25% premium, implying a P/S of 7 and a P/E of 50 at the time. Even a similar premium applied to Ubisoft today would still leave the buyer paying a modest price.

We can’t predict who might buy Ubisoft — or when — but the current valuation is almost an invitation. Potential suitors could range from Tencent to other international investors, including Chinese or Middle Eastern capital. Ubisoft is a globally recognized name that could now be acquired for a fraction of its historical value.

The Activist Angle. The Guillemot family, which co-founded Ubisoft in 1986, still occupies key leadership roles. Whether they deserve full blame for the company’s decline is debatable, but many shareholders clearly think change is overdue. This opens the door for an activist campaign demanding new leadership and strategic direction. Despite France’s relatively management-friendly corporate laws, the Guillemots control only about 15% of the shares (and roughly 20% of the votes). That’s not a blocking stake — meaning pressure could work. Tencent, already a strategic partner, could even be the catalyst.

Cons

The Debt Situation Is Severe. In November 2027, Ubisoft must repay a €675 million bond. Given the company’s current condition, refinancing or repayment is far from guaranteed. Investor concern is already visible in the bond market: in January, Ubisoft bonds due in 2031 fell to 73.8 cents on the euro, near record lows.

Overall, Ubisoft carries €2.9 billion in liabilities — nearly six times its market cap. That’s alarming. Short-term liquidity is somewhat better: €990.2 million is due by September 2026, and the company holds nearly the same amount in cash. Still, the margin for error is thin.

We’re Also Skeptical About Internal Reform. Ubisoft has announced layoffs and a new operating structure aimed at streamlining development, but the same management team that led the company into this mess remains in charge. That doesn’t inspire confidence.

Analysts agree. Cantor Fitzgerald’s Edward James noted that delaying seven games and canceling six “is massive” and suggests management lacks control over the development cycle. TD Cowen’s Doug Creutz expressed doubts that the reorg would fix long-standing execution problems. TP ICAP’s Corentin Marty went further, arguing that a return to sustainable cash generation looks unlikely in the near term.

Ultimately, much of our thesis rests on outside intervention — an acquirer, activist investor, or value-focused buyer stepping in to force change. That’s plausible, but it doesn’t leave much credit for current management. Still, there is a longer-term scenario where Ubisoft survives, executes its reorganization, and eventually splits into smaller, franchise-focused companies. That outcome could unlock value and lead to outperformance versus today’s bloated structure.

Verdict

Buy now at €4.70. From here, several paths are possible:

1. Speculative catalysts such as M&A talks or major partnership announcements could lift the stock to €5.50 within 15 months, implying a 17% profit.

2. If Ubisoft survives the next three years and shows tangible improvement from its reorganization, shares could reach €7.00 — a 49% profit.

3. There’s also a slimmer long-term scenario where Ubisoft remains independent for the next decade and delivers roughly 10% CAGR.

Note: If Ubisoft spins off a subsidiary and the new stock outperforms the parent, we would consider that a successful outcome.

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