In the Loop – February 21, 2025
Starting today, every Friday we will send out a short update reflecting major developments, earnings, and investment trends across some of our key holdings. All clients should be aware that individual buy/sell recommendations will be conveyed directly to you on an individual basis. This report is designed to improve our communication and keep you “In The Loop”.
Cisco reported strong fiscal Q2 2025 results, exceeding revenue and earnings estimates. The company raised its fiscal Q3 and full-year revenue and EPS guidance, driven by robust demand for AI infrastructure. AI-related orders in FH1 2025 reached approximately $700 million, with expectations to surpass $1billion by year-end, fueled by investments from hyperscalers in AI and cloud networking. Additionally, Cisco’s security segment saw substantial growth, largely due to the acquisition of Splunk.
Following its strong performance, Cisco increased its dividend by 2.5% and expanded its stock repurchase program by $15 billion. Wall Street analysts raised their price targets, with some suggesting even the revised guidance remains conservative given Cisco’s growth trajectory.
Howmet Aerospace exceeded Q4 2024 revenue and earnings expectations, with record-high EPS, free cash flow (FCF), EBITDA, and EBITDA margin. Growth was primarily driven by strong demand in all end markets, particularly in the commercial aerospace segment. The company announced a 25% dividend increase following the results.
Looking ahead, Howmet projects 2025 revenue growth of 8% at the midpoint of its guidance range, up from the previous 7.5% estimate. Free cash flow is expected to exceed $1 billion, with an 85% net income conversion. Analysts from Truist, Susquehanna, and JPMorgan raised their price targets, indicating the potential for continued outperformance.
Microsoft plans to invest $700 million in Poland by June 2026 to expand its hyperscale cloud and AI infrastructure and collaborate with the Polish army on a national cybersecurity framework. This follows a prior $1 billion investment, which led to the 2023 launch of a data center supporting Polish businesses and government institutions.
Alphabet has also intensified its investments in Poland, signing a memorandum with the Polish government to advance AI applications in energy and cybersecurity. This follows its $700 million investment in 2022 to acquire and develop The Warsaw HUB, a major Google Cloud operations center in Europe.
Uber is suing DoorDash, alleging unfair business practices that pressure restaurants into exclusive delivery agreements, limiting competition with UberEats.
Berkshire Hathaway made significant Q4 2024 portfolio adjustments. The firm increased its stakes in Occidental Petroleum, nearly doubled its position in Domino’s Pizza, and acquired a substantial holding in Constellation Brands. Berkshire also expanded investments in Pool Corporation and Heico while reducing positions in Bank of America, Citigroup, and Capital One Financial. Notably, the conglomerate fully exited Ulta Beauty but retained its large Apple stake, valued at over $75 billion.
Reports suggest Broadcom and TSM are discussing splitting Intel into two separate entities for acquisition. Broadcom is interested in Intel’s chip design and marketing division, while TSM may take over Intel’s factories,potentially partnering with U.S. investors to secure regulatory approval.
Meanwhile, the U.S. government is reassessing CHIPS Act agreements, putting semiconductor firms with U.S. operations, including TSM and Intel, on high alert over potential funding and tax incentive revisions.
Oracle was recognized as a Leader in the 2024 Gartner® Magic Quadrant™ for CRM Customer Engagement Center, marking its 12th consecutive year receiving this honor.
At a Bank of America conference, JPMorgan Chase COO Jenn Piepszak projected that the bank’s trading revenue would increase in the “low double digits” year-over-year in Q1, while investment banking fees are expected to rise by a “mid-teens” percentage. This follows a 49% YoY surge in investment banking fees during Q4.
Meanwhile, JPMorgan has reportedly begun significant layoffs, cutting around 1,000 employees in February, with additional workforce reductions anticipated throughout the year.
Dell’s stock surged following reports that the company is close to securing a $5 billion+ contract to supply AI-optimized servers to Elon Musk’s xAI, featuring Nvidia GB200 chips.
Ahead of its FQ3 2025 earnings release on February 27, analysts have mixed outlooks. Morgan Stanley lowered its price target, citing potential for lower-than-expected FY 2026 guidance. However, Citi remains bullish, highlighting rising demand, improved supply capabilities, and expected profitability from AI server sales. Citi believes Dell’s long-term growth will exceed industry averages despite near-term uncertainties.
Diamondback Energy agreed to acquire private oil producer Double Eagle for approximately $5 billion in a cash-and-stock transaction. The deal adds 40,000 net acres in the Midland Basin, strengthening Diamondback’s Permian Basin position. The acquisition is expected to close on April 1,2025, pending regulatory approval.
Charles Schwab’s January 2025 report showed a 75% YoY increase in core net new assets and a 21% rise in total client assets, with brokerage account openings up 18% YoY.
TD Cowen upgraded Schwab to “Buy,” raising its price target to $103 from $88, citing strong fundamentals and earnings growth potential. Barclays and Truist Financial maintained “Buy” ratings, with Barclays setting a $96 price target.
U.S. Defense Secretary Pete Hegseth is drafting plans to cut the Department of Defense budget by 8% over five years, reallocating funds toward Trump administration priorities. While targeting bureaucratic inefficiencies, climate change, and DEI programs, the shift could impact several portfolio companies:
Arista Networks posted strong Q4 2024 results:
Arista Networks posted strong Q4 2024 results:
The company also raised its full-year 2025 revenue growth outlook to 17%, up from 15-17% previously.
Arista benefits from ongoing AI infrastructure investments by key customers Microsoft, Meta, Oracle, and Alphabet. In 2024, 48% of total revenue came from the cloud and AI segment, driven primarily by Microsoft and Meta’s increasing demand for high-performance networking solutions.
Formidable Asset Management (“Massey Romans Capital”) is an investment adviser registered under the Investment Advisers Act of 1940. The information presented in the material is general in nature and is not designed to address your investment objectives, financial situation or particular needs. Prior to making any investment decision, you should assess, or seek advice from a professional regarding whether any particular transaction is relevant or appropriate to your individual circumstances. Although taken from reliable sources, the Firm cannot guarantee the accuracy of the information received from third parties.
The opinions expressed herein are those of the Firm and may not actually come to pass.
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