Meta Rises on Earnings while Peloton Declines on Earnings
Last week, the Opportunity Equity Strategy's representative account rose 0.84%, underperforming the S&P 500’s 1.41% rise. (Exhibit 1). The strategy ended the week up 0.81% YTD, 325 basis points behind the S&P 500.Exhibit 1: Performance of Opportunity Equity Representative Account Net of Fees, Versus S&P 500, Through 2/2/241
| Time Period | Opportunity Equity Representative Account | S&P 500 |
| Last Week (1/26 - 2/2) | 0.84% | 1.41% |
| MTD | 1.87% | 2.34% |
| QTD | 0.81% | 4.06% |
| YTD | 0.81% | 4.06% |
| 1 Year | 9.70% | 20.59% |
| 5 Year | 6.68% | 14.80% |
| 10 Year | 7.58% | 12.88% |
| Inception (annualized since 6/26/00) | 7.02% | 7.35% |
Source: Bloomberg, Patient Capital Management.
Meta Platforms, Inc. (META) rose after reporting strong 4Q 2023 results. Revenue of $40.1B came in ahead of consensus estimates at $39.0B. Monthly active users (MAUs) were also ahead at 3.07B vs. 3.06B expected, and average revenue per user (ARPU) of $13.12 beat estimates of $12.64. EPS of $5.33 exceeded expectations of $5.04. The company guided for Q1 FY 24 revenue of $34.5B-$37B, ahead of the street at $33.7B. Management guided to FY24 expenses of $94B-$99B, and CapEx guidance of $34.5B-$37B. In addition to a new $50B share repurchase authorization bringing the total up to $80.9B (6.7% of shares outstanding), management initiated a $2.00 annual dividend (0.4 yield), the first in company history. Truist raised its price target to $525 from $405 (11% upside), while Wells Fargo raised its price target to $536 from $438 (13% upside).
Amazon.com, Inc. (AMZN) rose after the company reported better than expected 4Q results. Revenue of $170.0B and EBIT of $13.2B beat consensus estimates of $166.2B and $10.5B, respectively. The company guided for 1Q FY 2024 revenue of $140.8B at the midpoint, behind consensus at $142B, with EBIT of $10B at the midpoint vs. consensus of $9.2B. JP Morgan raised its price target to $225 from $190 (31% upside), while Truist raised its price target to $195 from $180 (13% upside).
General Motors Company (GM) reported strong 4Q results. Revenue came in at $43.0B vs. $39.1B expected, while EBIT was in-line at $1.75B. EPS of $1.24 beat estimates of $1.06 while Automotive FCF of $1.3B beat consensus of -$0.4B. The company boosted its dividend to $0.12/share (1.2% annualized yield) and repurchased 215M shares of common stock (15% of shares outstanding). Management laid out FY 2024 guidance for EBIT of $13B at the midpoint vs. consensus of $11B, and automotive FCF of $9B at the midpoint, well ahead of consensus at $6B. Barclays raised its price target to $50 from $44 (29% upside), while RBC raised its price target to $54 from $52 (39% upside).
Citigroup Inc. (C) rose as Morgan Stanley upgraded the name to overweight with a $65 price target (17% upside).
Exhibit 2: Significant2 Contributors to Opportunity Equity Representative Account Performance, 1/26/24 - 2/2/24
| Name | Type | Net Return |
| Meta Platforms, Inc. | Equity | 20.5% |
| Amazon.com, Inc. | Equity | 8.0% |
| General Motors Co. | Equity | 10.6% |
| General Motors Co. | Equity | 4.5% |
| *New Security* | Equity |
8.4% |
Source: Patient Capital Management. See below for additional information.
Peloton Interactive, Inc. (PTON) fell through the 100-day moving average after announcing mixed FY 2Q results. The company reported revenue of $744M ahead of $734M expected and adjusted EBITDA of -$82M behind consensus of -$77M. 3Q revenue guidance of $700M-$725M came in below consensus at $756M, while EBITDA guidance came in behind at ($30M)-($20M), vs consensus expectations of $1.9M. Bernstein lowered its price target to $8 from $10 (89% upside), while Truist lowered its price target to $6 from $7 (42% upside).
Alphabet Inc. (GOOGL) fell after the company reported mixed 4Q 2023 results. Revenue of $72.3B beat expectations of $71.0B. Google Advertising revenues of $65.5B missed consensus of $65.8B, while Google Cloud beat at $9.2B in revenue vs. $9.0B expected. Adjusted operating income came in-line at $23.7B, but EPS of $1.64 missed consensus estimates of $1.72. Piper Sandler raised its price target to $160 from $150 (12% upside), while Citi raised its price target to $168 from $153 (18% upside).
Western Alliance Bancorp (WAL) fell through the 50-day moving average after New York Community Bancorp reported a large loan loss provision in commercial real estate, despite reporting strong 4Q earnings during the week prior. The bank’s adjusted revenue came in at $718M vs. $711M expected, while EPS beat at $1.91 vs. 1.87 expected. The company missed on net interest income (NII), coming in at $592M vs $598M expected while non-interest income missed at $91M vs $111M expected. The bank’s Common Equity Tier 1 (CET1) ratio rose 20bps to 10.80%, in-line with expectations. For FY 2024, Western Alliance guided for net interest income growth at 7.5% at the midpoint vs. 6% for consensus. Management also guided for a CET1 ratio of at least 11%, in line with consensus, and net charge-offs of 12.5 bps at the midpoint, below consensus of 15 bps. DA Davidson raised its price target to $85 from $80 (41% upside), while Wedbush lowered its price target to $74 from $80 (23% upside).
Kosmos Energy Ltd. (KOS) followed commodity prices lower over the course of the week.
Seadrill Limited (SDRL) fell through the 50 and 100-day moving averages, also on lower commodity prices.
Exhibit 3: Significant2 Detractors from Opportunity Equity Representative Account Performance, 1/26/24 - 2/2/24
| Name | Type | Net Return |
| Peloton Interactive, Inc. | Equity | -26.9% |
| Alphabet Inc. | Equity | -6.4% |
| Western Alliance Bancorporation | Equity | -10.6% |
| Kosmos Energy Ltd. | Equity | -7.8% |
| Seadrill Limited | Equity | -7.3% |
Source: Patient Capital Management. See below for additional information.
As of prior week's market close unless otherwise stated.
1The performance figures for the representative Opportunity Equity account reflect the deduction investment management fees and certain other expenses. Returns greater than 1 year are annualized.
Patient Capital Management, LLC completed its acquisition of the Opportunity Equity Strategy from Miller Value Partners, LLC on May 26, 2023. Patient Capital Management served as the investment adviser to the Opportunity Equity Strategy for the majority of the week referenced herein. Additionally, prior versions of this weekly blog posting refer to Miller Value Partners as investment adviser to the Opportunity Equity Strategy.
For additional information about Opportunity Equity Strategy performance, please click on the Opportunity Equity Strategy Composite Performance Disclosure. Past performance is no guarantee of future results.
2Significant Contributors and Detractors are based on holdings that had the greatest effect on representative account performance for the week. Holdings that have been in the portfolio since the end of the most recent calendar quarter are identified by name. The net return shown above for each individual security represents the change in market price of the security during the week, according to a third-party pricing service, or for the partial period held in the portfolio during the week. Net returns also include any purchases or sales that were made during the week. For information on how Contributor/Detractor data were calculated and a list showing the contribution to the Strategy’s weekly performance of each investment held at such quarter end, contact us.
Any views expressed are subject to change at any time, and Patient Capital Management disclaims any responsibility to update such views. There is no guarantee that market trends discussed herein will continue. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results, and there is no guarantee dividends will be paid or continued. References to specific securities are for illustrative purposes only. Portfolio composition is shown as of a point in time and is subject to change without notice. Content may not be reprinted, republished or used in any manner without written consent from Patient Capital Management.
©2023 Patient Capital Management, LLC
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