I studied Navitas like a month ago. The main issue I see with it is that their architecture has to be chosen by Nvidia in order for them to have the competitive advantage. If, for whatever reason, that 1 stage voltage reduction ends up not working as expected and a 2 stage voltage transformation is finally adopted, their competitors will eat their lunch. If their arquitecture is chosen, they have the advantage, but we don’t know for how long.
When analysing the metrics of the company, much of the future sales are already anticipated in their market cap. I did some models with the help of chatgpt and, taking into account the guidance given by the management in their company presentation (25 - 35 kUSD / MW), they would have to sell to approximately 5GW of power at 50k USD/MW (250M USD of revenue) and with a P/S of 10 to have a market cap of 2.500 M USD, which is a bit less than their current market cap. Notice that 5GW is a lot of power to feed and that I am using a price/MW higher than the one given by the management. Management may be sandbagging, but it’s worth taking that into account.
I understand that the technology looks attractive and that it may be a breakthrough, but much of the future growth is already anticipated in the stock price. This is why I didn’t take a position in the end in the company.
Definitely useful and they certainly need to execute to grow into their MC. I'd say they likely would get a premium P/S multiple in the early stages (~25-40x) because if they get that level of adoption, it's fair to reason we could see them take serious market share. It's speculative as shit, but if their tech is as good as it appears, it feels like the industry will eventually head that direction, very similar to how a lot of players are beginning to adopt Aehr's wafer level burn-in after a slow two year adoption and qualification phase.
Say they do $35k/MW for 5 GW, that's $175M in rev. At 25x, $4.4B MC and at 40x that's $7B MC. We have to assume market will be forward looking, so any major hyperscaler win or Nvidia adopting their architecture can get this thing into high gear and fast.
It's high risk, high reward for sure. I don't have a position yet. Still trying to wrap my head around the math as well because your point is very real.
It's really do you believe that Navitas can get 20%+ market share of their SAM by 2030 with their technological advantage? If yes, I think risk is worth the payoff. If you think that's too fast to scale to that level, then it's likely too rich at these levels.
Happy to have helped. The valuation you have considered is as if you are pricing the company for perfection, which is something that may happen, but it may not. To make a proper valuation, I would consider 3 scenarios: a bear case, a base case and a bull case, being the one you have mentioned the bull one. I would assign a probability to each scenario, make an estimation for the future enterprise value for the company in each one and then calculate the expected enterprise value multiplying the chances of each scenario happening by its EV and adding it all. That should help you decide what to do. Speaking about myself, I don’t see it as an asymetric oportunity so I’m going to pass. I run a very concentrated portfolio (5 stocks in total right now) and I believe that there are other companies that suit better to my style of investing.
It’s been nice having this talk with you. Thank you for sharing your ideas.
Yeah, I don't own it right now. I might take it for a trade just given how explosive that set up looks. If orders begin developing (Similar to Aehr), I'd re-evaluate my long-term outlook. I agree what I outlined is a bull case. Base case and bear case both don't align with a higher near term valuation.
Feel free to share any other names you're looking at. I've been trying to find some new merch and it's not so easy😅
It’s not easy at all. All the photonic stocks have run up a lot to the point that I don’t see any margin of safety to start a position. If you like the data center sector, IREN has a few catalysts ahead in the near term and is reasonably valued, you can give it a look. Tungsten companies, such as EQ Resources or Tungsten West, look promising too in the next couple of years. I’ve been thinking about opening a position in Tungsten West, but haven’t done it yet. I do have a position in IREN.
Photonics seems a bit overdone at this point, doesn't mean they can continue higher, but the meat of that move is done. I own $TSEM, as I still think there's good room there, but most names are starting to reach stretched valuations.
When you take into account the $6B ATM for $IREN, I don't believe it's cheap at all. Lots of execution risk still baked in.
I'll have to look into this Tungsten trade. What's the thesis there in a few sentences?
China has shut down the rest of the world from their tungsten (70% of what is produced today), and on top of that they have become an importer. There are only a few operative mines in the west (Almonty and EQ Resources mainly), which is not enough to satisfy demand. On top of that, there will be an increase in demand due to defense expenditure. There are only a few mines that will open in the next few years. In the end, there will be a lack of supply and higher demand, something that will drive tungsten prices higher (it has already run up a lot), therefore making tungsten mines more profitable.
Are any of them not OTC, on foreign exchanges, or ADR's😅. I don't usually trade OTC tickers / illiquid ADRs and have missed out on tons of money watching Serenity rip these things to the moon
American Tungsten will be listed on Nasdaq soon. Tungsten West is listed in London Stock Exchange and EQ Resources in Australian stock exchange. Almonty is listed in Nasdaq, though that one has gone up a lot, too much in my opinion.
I studied Navitas like a month ago. The main issue I see with it is that their architecture has to be chosen by Nvidia in order for them to have the competitive advantage. If, for whatever reason, that 1 stage voltage reduction ends up not working as expected and a 2 stage voltage transformation is finally adopted, their competitors will eat their lunch. If their arquitecture is chosen, they have the advantage, but we don’t know for how long.
When analysing the metrics of the company, much of the future sales are already anticipated in their market cap. I did some models with the help of chatgpt and, taking into account the guidance given by the management in their company presentation (25 - 35 kUSD / MW), they would have to sell to approximately 5GW of power at 50k USD/MW (250M USD of revenue) and with a P/S of 10 to have a market cap of 2.500 M USD, which is a bit less than their current market cap. Notice that 5GW is a lot of power to feed and that I am using a price/MW higher than the one given by the management. Management may be sandbagging, but it’s worth taking that into account.
I understand that the technology looks attractive and that it may be a breakthrough, but much of the future growth is already anticipated in the stock price. This is why I didn’t take a position in the end in the company.
Hope this information was useful.
Definitely useful and they certainly need to execute to grow into their MC. I'd say they likely would get a premium P/S multiple in the early stages (~25-40x) because if they get that level of adoption, it's fair to reason we could see them take serious market share. It's speculative as shit, but if their tech is as good as it appears, it feels like the industry will eventually head that direction, very similar to how a lot of players are beginning to adopt Aehr's wafer level burn-in after a slow two year adoption and qualification phase.
Say they do $35k/MW for 5 GW, that's $175M in rev. At 25x, $4.4B MC and at 40x that's $7B MC. We have to assume market will be forward looking, so any major hyperscaler win or Nvidia adopting their architecture can get this thing into high gear and fast.
It's high risk, high reward for sure. I don't have a position yet. Still trying to wrap my head around the math as well because your point is very real.
It's really do you believe that Navitas can get 20%+ market share of their SAM by 2030 with their technological advantage? If yes, I think risk is worth the payoff. If you think that's too fast to scale to that level, then it's likely too rich at these levels.
Appreciate your take.
Happy to have helped. The valuation you have considered is as if you are pricing the company for perfection, which is something that may happen, but it may not. To make a proper valuation, I would consider 3 scenarios: a bear case, a base case and a bull case, being the one you have mentioned the bull one. I would assign a probability to each scenario, make an estimation for the future enterprise value for the company in each one and then calculate the expected enterprise value multiplying the chances of each scenario happening by its EV and adding it all. That should help you decide what to do. Speaking about myself, I don’t see it as an asymetric oportunity so I’m going to pass. I run a very concentrated portfolio (5 stocks in total right now) and I believe that there are other companies that suit better to my style of investing.
It’s been nice having this talk with you. Thank you for sharing your ideas.
Yeah, I don't own it right now. I might take it for a trade just given how explosive that set up looks. If orders begin developing (Similar to Aehr), I'd re-evaluate my long-term outlook. I agree what I outlined is a bull case. Base case and bear case both don't align with a higher near term valuation.
Feel free to share any other names you're looking at. I've been trying to find some new merch and it's not so easy😅
It’s not easy at all. All the photonic stocks have run up a lot to the point that I don’t see any margin of safety to start a position. If you like the data center sector, IREN has a few catalysts ahead in the near term and is reasonably valued, you can give it a look. Tungsten companies, such as EQ Resources or Tungsten West, look promising too in the next couple of years. I’ve been thinking about opening a position in Tungsten West, but haven’t done it yet. I do have a position in IREN.
Photonics seems a bit overdone at this point, doesn't mean they can continue higher, but the meat of that move is done. I own $TSEM, as I still think there's good room there, but most names are starting to reach stretched valuations.
When you take into account the $6B ATM for $IREN, I don't believe it's cheap at all. Lots of execution risk still baked in.
I'll have to look into this Tungsten trade. What's the thesis there in a few sentences?
China has shut down the rest of the world from their tungsten (70% of what is produced today), and on top of that they have become an importer. There are only a few operative mines in the west (Almonty and EQ Resources mainly), which is not enough to satisfy demand. On top of that, there will be an increase in demand due to defense expenditure. There are only a few mines that will open in the next few years. In the end, there will be a lack of supply and higher demand, something that will drive tungsten prices higher (it has already run up a lot), therefore making tungsten mines more profitable.
Are any of them not OTC, on foreign exchanges, or ADR's😅. I don't usually trade OTC tickers / illiquid ADRs and have missed out on tons of money watching Serenity rip these things to the moon
American Tungsten will be listed on Nasdaq soon. Tungsten West is listed in London Stock Exchange and EQ Resources in Australian stock exchange. Almonty is listed in Nasdaq, though that one has gone up a lot, too much in my opinion.
I'll keep my eye out for American Tungsten.