FCF

CanYouPleaseChill

A market cap of 34 billion for a company with negative FCF - SBC and whose share count has increased by 14% over the past several years? Good luck with that.

jrex035

Oh I'm well aware. The world has rapidly depleted its petroleum inventories and *strategic reserves* just to buy more time for Trump to NOT resolve the crisis. Brilliant work, no way this will have any profound and lasting consequences. Surely Iran will get bored and give up any day now. $90 oil is a fucking blessing for energy equities, not that this market cares apparently. Most are priced for $70 WTI or less. Better sell your single digit pe energy company with a 15% FCF yield and 8% dividend yield to FOMO into tech companies with triple digit pes that are already up 300% ytd. You dont want to be poor forever do you???

Marsu90

It’s been this convo every single quarter since AI came into the frame and… they’ve beaten guidance and remain a FCF frontrunner.

Tight-Acanthaceae-84

1. I agree valuations seem high from what's public. Without full knowledge of the financials and projections I would concede this point. 2. Sure it's 7 years of profit, but that's not how you would look at it. In 2025 Google have FCF of almost $165bn prior to capex spend. That's closer to 3 years assuming a conservative growth rate. I believe AI tokens are going to become a commodity and so that's where we'll disagree. You're assuming data centers become obsolete and that we will have enough compute in sub 10 years. Creating a model that handles moderate tasks is exactly what I'm expecting and that compute will need to be in place to be able to handle those tasks. If sub 3% of the US market is paying for AI than the TAM has not been accessed. I understand we will likely disagree and that's okay. I'm bullish and putting my money where my mouth is.

Tight-Acanthaceae-84

Nvidia has over a 60% net profit (and growing) with almost $100bn of FCF. They are paying a dividend and announced $150bn in buybacks through 2028. They are literally swimming in money. What should be their alternative in how they spend their funds in your opinion?

Str8rDay

META is getting sued left and right by states for some grotesque manipulation of teenagers’ emotions - and losing. Their FCF in Q2 was 0.8B compared to 12.4B just 3 months ago. Now, Amazon….

PandaDuckMonster

FCF Yield = Free cashflow / Valuation of the company, which the user says is \~2%. If a company has a lower valuation, but the same cashflow, that would increase the FCF yield. That doesn't change the fact that the f**ree cashflow** portion for NVDA's last quarter was \~$20B They can easily pay off their debt with the amount of cash they're sitting on. You have to consider this (in terms of people, but also applies to companies): * The poor NEED debt to survive and pay the bills. * The middle class FEAR debt, because it can easily make them poor again. * The rich USE debt, because they have better rates, and have more avenues to generate money with that debt. Why would they use debt to buy back stocks? There's many reasons, but it fundamentally boils down to this: Because they think buying back the stocks would help them make more money than the interest they have to pay.

FalconAggravating881

**HTZ to $3–$4? What the Last 3 Short Squeezes Suggest** With a strong Q2 2026 print and **more shares short than before any of the last 3 squeezes**, HTZ could reach — or potentially blow through — the $3–$4 range if volume and interest pick up. |Squeeze|Shares Short|Adj. SI % Float|Price Move|Market Cap Added| |:-|:-|:-|:-|:-| |Nov 2025|57M|44%|**+45%**|**+$700M**| |Apr 2026|64M|49%|**+54%**|**+$900M**| |Aug 2026|103M|59%|**+89%**|**+$500M**| |**Current**|**116M**|**\~65–70%**|TBD|TBD| *Adjusted short float excludes CK Amarillo/Knighthead’s strategic stake.* If HTZ adds similar market cap to prior squeezes: **+$500M → \~$3.25** **+$700M → \~$3.75** **+$900M → \~$4.30** There’s also a better fundamental backdrop than during some prior squeezes. **Q2 2026:** * Revenue: **$2.4B** vs. consensus **< $2.3B** * Adj. EPS: **-$0.11** vs. consensus around **-$0.22** * Guided **positive Q3 EPS** * Maintained **$1B 2027 EBITDA target** * Expects **positive 2027 FCF** Obviously short interest alone doesn’t guarantee a squeeze. But HTZ now has **record-high short positioning, improving fundamentals, and a history of adding $500M–$900M of market cap when momentum catches.** If interest picks up, $3–$4 doesn’t look crazy based on prior squeezes.

FalconAggravating881

**HTZ to $3–$4? What the Last 3 Short Squeezes Suggest** With a strong Q2 2026 print and more shares short than before any of the last 3 squeezes, HTZ could reach — or potentially blow through — the $3–$4 range if volume and interest pick up. |Squeeze|Shares Short|Adj. SI % Float|Price Move|Market Cap Added| |:-|:-|:-|:-|:-| |Nov 2025|57M|44%|**+45%**|**+$700M**| |Apr 2026|64M|49%|**+54%**|**+$900M**| |Aug 2026|103M|59%|**+89%**|**+$500M**| |**Current**|**116M**|**\~65–70%**|TBD|TBD| *Adjusted short float excludes CK Amarillo/Knighthead’s strategic stake.* If HTZ adds similar market cap to prior squeezes: **+$500M → \~$3.25** **+$700M → \~$3.75** **+$900M → \~$4.30** There’s also a better fundamental backdrop than during some prior squeezes. **Q2 2026:** * Revenue: **$2.4B** vs. consensus **< $2.3B** * Adj. EPS: **-$0.11** vs. consensus around **-$0.22** * Guided **positive Q3 EPS** * Maintained **$1B 2027 EBITDA target** * Expects **positive 2027 FCF** Obviously short interest alone doesn’t guarantee a squeeze. But HTZ now has record-high short positioning, improving fundamentals, and a history of adding $500M–$900M of market cap when momentum catches. If interest picks up, $3–$4 doesn’t look crazy based on prior squeezes.

Succulent_Rain

Do they really have a lot of FCF? This user thinks that their yield is quite low for FCF and that they’re using a ton of debt to buy back their stock. https://www.reddit.com/r/stocks/s/T6hLMGo5TZ

Succulent_Rain

OK so if they do have a lot of FCF, I agree with you but this user thinks that their FCF yield is low and that they’re raising debt to buy back their shares. Isn’t that a bad sign? https://www.reddit.com/r/stocks/s/T6hLMGo5TZ

Succulent_Rain

I know they had a great profit. I thought that the buyback was funded from free cash flow. But this user thinks that the FCF yield is pretty low and it’s being funded out of debt. That’s not good if it’s the case. https://www.reddit.com/r/stocks/s/T6hLMGo5TZ

Succulent_Rain

I did do some research but this user thinks that their FCF yield is low and that they’re using a ton of debt to buy back their stock. https://www.reddit.com/r/stocks/s/T6hLMGo5TZ

Succulent_Rain

Nothing wrong with investing in another company. But the circular financing whereby they fund a company and that company takes the money to buy Nvidia chips is bad. Paying out a dividend is obviously very good. Buying back a stock with a lot of cash is good but if they’re raising debt, that’s not good. This person thinks that they’re using a ton of debt and that their actual FCF yield is very low https://www.reddit.com/r/stocks/s/T6hLMGo5TZ

Succulent_Rain

It’s not really the case? Do they really have a ton of cash lying around? This person thinks that they’re using a lot of debt to buy back their shares and their actual FCF yield is low: https://www.reddit.com/r/stocks/s/T6hLMGo5TZ

Succulent_Rain

It’s not really the case? Do they really have a ton of cash lying around? This person thinks that they’re using a lot of debt to buy back their shares and their actual FCF yield is low: https://www.reddit.com/r/stocks/s/T6hLMGo5TZ

Succulent_Rain

Based on what? If they have a ton of cash lying around, that’s good, but this person thinks that their FCF yield is pretty low and that they’re using a ton of debt to buy back their shares. https://www.reddit.com/r/stocks/s/T6hLMGo5TZ

Succulent_Rain

But this person thinks that the entire buyback is funded through debt. Isn’t that a bad thing? Apparently their FCF yield is pretty low. https://www.reddit.com/r/stocks/s/T6hLMGo5TZ

Succulent_Rain

OK, but this person thinks that the buyback was funded by a lot of debt. That’s concerning isn’t it, if it did not come out of FCF? https://www.reddit.com/r/stocks/s/T6hLMGo5TZ

Succulent_Rain

See the response here from another person that says that they used a ton of debt to fund their buybacks and that it did not come out of FCF. https://www.reddit.com/r/stocks/s/T6hLMGo5TZ

hydraByte

Personally, I think it's often a red flag and a misallocation of capital when a company uses debt to fund buybacks when they have a low Free Cash Flow Yield. NVDA tripled their Total Debt last quarter and is sitting on a pile of cash in part because of that. Their FCF Yield is only 2.1-2.2%, which I would consider low. Using debt on buybacks when your stock price is at all time highs is foolish in my opinion. If you're looking for an example of why, just look at Charter Communications (CHTR) between 2020 and 2026. They spent \~$31.5B+ on share buybacks between Q3 2020 and Q3 2022, exactly when their stock price was peaking at $500-700 / share. During that same period they accumulated \~$18B+ in new debt. In the following years after their stock price has tanked (recently down to \~$100-160), they have been having to focus more on debt paydown at the time when their stock is at an ideal buying price. I made a model and crunched the numbers and determined that if Charter had just focused on paying down their debt when their stock was at all time highs and their FCF Yield was lower, they could have reloaded back up to the same debt they have today and bought something approaching \~97% of shares outstanding with the same balance sheet capacity. Now is that attractive to shareholders in the short term? No. But a company I'd want to hold for the long term is a company that understands how to get the best returns on every dollar they spend... and I don't think that's what Nvidia is doing here.

bonethug49part2

Dawg they have SO much FCF

Count-to-3

It doesn't actually. PE takes into account share price / market cap. Here is a fact: By end of year 2028, MU will likely have somewhere between 300B-450B generated in FCF. If they buy back their own stock, they will be able to buy back 30-40% of the company at this price by then.

jrex035

Agreed that energy infrastructure in the US (and most of the world) needs upgrading/building out and that companies like PWR and ETN stand to benefit. But looking at their valuations, is this not already priced in? PWR has a TTM pe of 78, forward pe of 37, ps of 3, pb of 10.6, p/FCF of 45, PEG of 1.78, ev/earnings of 82, etc. Its up more than 500% in the past 5 years

Nepalus

>My guess is it won't pop until the money behind it changes. Right now it's mostly paid for out of Big Tech's cash flow, and that's hard to break. Once it shifts to debt, that's when I'd get nervous. I guess someone hasn't been paying attention. You're right that nobody's panic-selling, and the career-risk thing is real. But your sell signal already fired. The shift to debt happened over the last 18 months, and NVDA hit a record on October 2 anyway, nearly 25% off its late July lows. The numbers: * Hyperscaler bond issuance went from about $17B in 2024 to $108B in 2025 to $194B so far in 2026. UBS has full-year 2026 at $270-290B, and Goldman has 2027 around $420B. * FactSet has new debt going from 9% of hyperscaler capex in FY2024 to 32% by mid-2026. * Amazon's trailing FCF fell to $1.2B in Q1 from about $26B a year earlier. Oracle's capex hit 174% of operating cash flow in FY26, its FCF is negative, and S&P cut it to BBB-, one notch above junk. Even Microsoft spent $37.5B on capex against $35.8B of operating cash flow in its fiscal Q2. Epoch AI's trend has aggregate capex passing operating cash flow around Q3 2026, the quarter that just ended. * Nvidia itself sold $25B of bonds, its first in five years. That's before off-balance-sheet stuff like Meta's Hyperion SPV. The bond market noticed even if equities didn't. Cover ratios on hyperscaler deals fell from about 5x in February to about 2x in July. 78 of 91 hyperscaler bonds issued this year were trading at higher yields than at issue by late July. AI issuer spreads sat around 115bp in September vs about 78bp for IG overall. The only thing that is going to make a sell-off start: 1. Hyperscalers start cutting CAPEX guidance significantly. 2. Oracle loses its investment grade. It has one notch left, and IG-only mandates would become forced sellers. Would arguably be the most direct refutation that the AI trade ends in sunshine and rainbows for everyone. Oracle is a big name even if it isn't a leader anymore. If they go under to junk status I think a lot of things in this space get re-valued. 3. A big hyperscaler bond deal getting pulled or pricing way wide. Since none of these has happened, no pop yet.

Disastrous_Rent_6500

Obviously not for the biggest companies in the world with billions of dollars of FCF and no debt

jrex035

I know it's up big today, but its still laughaly undervalued. PE of ~6, forward PE of ~4, 16% FCF yield, 5% dividend yield, PS of 1.26, PB of 1.4, 50% gross profit margin, market cap is well below EV, etc

Sufficient_Habit5091

Yes rock solid FCF of SPCX.

jrex035

Great post, completely agree. I'm sitting in a bunch of equities with great FCF, modest valuations, and strong prospects. Still exposed to the bubble through retirement accounts invested in the S&P, large cap growth, and semis, but limiting my downside risk. I can't believe how many people are just yoloing into *cyclical* equities with absurd valuations that require the unsustainable to be sustained indefinitely and aggressively downvote and harass me just for expressing dismay and discomfort with the absurdity that is the market today. The 10y is up to 5.343% today, it's melting straight up, the 30y is a hair beneath 5.7%, and indices could not care less. Absolutely unreal.

_ehwaz

Due to bond market conditions $1 of FCF can retire more than $1 of debt though so that’s an interesting wrinkle

shiny0metal0ass

Weren't they FCF negative last quarter? No one cares, they still believe this all pays off.

MarthaJulietta

This is exactly the worry but if management is pragmatic its way overblown. Buying debt below par and using the extra FCF from lower interest payments to do more of it will knock this debt down quick and take them out of the danger zone in 2 years flat. This is especially true if they actually see 1B in claimed synergy savings and Capex cycle lowers and offers another 3B per year in FCF.

PenguinOfB00m

Everybody is moving into high FCF stocks because what's next is the clown act of the american circus. Tech is safe haven for now, the rest is in full blown bear market. No matter what, this will end with blood. Plan accordingly.

_ehwaz

With a very conservative model, of 2% operating decline, 2B debt repayments to meet their deleverage targets, and increased FCF with their guided capex reduction I get a DCF price today of $135 with a 5x EBITDA multiple. Closer to 150 with 6x

New_Armadillo_8946

the lawsuit hit the price, but APPlov has bounced back before; if Q3 walks the 30% forecast, the 80%+ margin and FCF will lift the stock long‑term. the only real headache is Unity squeezing the data moat, but the advantage still seems solid. cokerat cramer being bearish is probably a short‑swing view; if you’re comfortable buying near 260–280 before earnings, the upside could be 15‑20% with the risk you’re willing to take.

Not_Sure_68

I'm horrified that the market chose to ignore the force majeure act of god warning from Oracle, which btw is due to a missing gas pipeline permit. Meaning their hideously expensive New Mexico data center will not be receiving fuel cell power anytime soon. The newest warning sign, which will also likely be laughed off by AI tech bros is Amazon(who has gone completely insane btw) is exploring a spinoff to contain their disastrous purchase of $8b in Grace Blackwell chips from Nvidia. Hey yeah, let's spin that off into an SPV so we can warehouse those losses off the balance sheet. Dafuq is amazon even doing?!? It used to be a book store...then it turned into a portal for everything consumers needed delivered quickly and cheaply. Now their prices are soaring, their services are sputtering, and their lunch is being eaten by Walmart. Seems like dumping all their FCF into AI buildouts is likely to cost them dearly. Bizarre behavior indeed.

jrex035

If you want strong q3/4 dividends, invest in tanker stocks and energy stocks they're swimming in FCF

BrobaFett_1

Haha sorry I'm just keeping my question short. But it does seem like compelling case. It's continuing to grow (30% EPS) and trading at a low multiple (15x) and predicts $15B FCF in 2028. If the robotaxi narrative is dragging them down, then I feel like that'll turn around. They're setting up lots of partnerships with AVs and are collecting data for the AVs to train on. I think these AV companies want to focus on the tech while licensing it out for companies like Uber to add to their fleet. They have the moat and all the routing infrastructure. It wants to be the one stop shop for transportation needs. You can rent a car with the app now. They're starting drone deliveries with Uber eats. And the courier service can be pretty cheap when I've used it before. But I don't own it yet. I just read those points a few weeks ago and have been watching the stock since then. Might enter soon though.

Orennji

I stopped getting emotional about weedstocks a long time ago. Added some Cresco today. They've been beaten down and lost a lot of topline the last few years, but gross margins, SG&A efficiency and FCF are trending in a better direction. A fair bet, from my point of view. And if not, I'll just move the money somewhere else to keep it growing. It's just math.

UsefulStooge

The only thing irrational is how high the price still is. Terrible margins + shrinking market share yet they still have FCF only barely above risk free rate, meaning market is still pricing in significant turnaround.  It has a loooong way still to fall. 

shiny0metal0ass

If the people making the investment on these data center decisions no longer understand the technology and have spent the last ten years surrounding themselves with VC money guys and pushing out the tech nerds, and then they flip from profitable, asset light, companies into debt heavy negative FCF behemoths, the fuck do you think my point is?

shiny0metal0ass

It's okay, their FCF will go up and everyone will be happy

MostlyNothingInvests

For context, I have despised the company and stock for awhile, just don't want to touch it. Netflix received a $2.8B termination fee after its Warner Bros. transaction ended. In Q1, management explicitly said the 2026 FCF outlook increased from roughly $11B to $12.5B primarily because of the after-tax impact of that fee Does this acquisition mean management is bad at capital management? Not necessarily, there are definitely worse offenders (Meta, I am looking at you). I did run some numbers a couple of days ago, from today's price I get the following for 5 year cagr: |Scenario|Revenue CAGR|2031 operating margin|Annual share change|Terminal P/E|2031 value|5-year CAGR| |:-|:-|:-|:-|:-|:-|:-| |Bear|6%|30%|0%|20x|\~$77|\~2.3%| |Base|10%|36%|\-1%|25x|\~$147|\~16.3%| |Bull|12%|38%|\-2%|30x|\~$214|\~25.4%| So honestly, you have a pretty solid margin for failure (as long as I didn't fat finger somewhere)

jrex035

You're right bro, clearly ORCL is in great shape. 250% debt to equity? Totally reasonable. -7% FCF yield? Bullish. It's down 50% over the past year, surely it's a great buy now right?

Provolone-Jones

Bought some oil stocks last week since they’ve been FCF machines. Down 10% since I bought. I’m getting really good at this.

jrex035

Most are dumping all of their FCF and thensome, including Google. The company that became what it is today by having an absurd FCF had negative FCF last quarter

The-zKR0N0S

I’ve been looking at the big hyperscalers based on FCF adjusted for my guess at a long-run normalized capex spend assuming that today’s investment in data centers doesn’t continue forever.

_hiddenscout

Kind of an interesting name I was looking into this morning, MITK Fundamentals aren't too bad: [https://finviz.com/stock?t=MITK&p=d](https://finviz.com/stock?t=MITK&p=d) What they do: >Mitek Systems, Inc. provides digital identity verification and fraud prevention solutions worldwide. >The company offers Mobile Deposit, a mobile remote deposit capture solution for retail financial institutions, brokerages, and prepaid card providers; Check Fraud Defender, a cloud-hosted fraud mitigation service; Mitek Verified Identity Platform, an end-to-end identity verification solution; Mobile Verify, an omnichannel identity document verification engine; MiSnap, a software development kit that replaces manual image capture with auto-capture; CheckReader, which enables financial institutions to automatically extract data from checks once they have been scanned or photographed by the application; and Check Intelligence, a check fraud solution. >It also provides IDLive Face, a passive face liveness detection; IDLive Doc, a document liveness detection; and IDLive Voice, an anti-spoofing voice liveness. It's been on a bit of a run this year, but the fundamentals aren't bad by any means. Latest earning presentation: [https://storage.googleapis.com/vendorgroup-assets/site/97b87faa-91f0-4edd-a3ac-ecbbcfffe370/2026/08/06/6a74e6f73a7622ddb47c57a9/Mitek%20Systems%20(MITK)%20-%20Investor%20Presentation%20-%20F3Q26.pdf](https://storage.googleapis.com/vendorgroup-assets/site/97b87faa-91f0-4edd-a3ac-ecbbcfffe370/2026/08/06/6a74e6f73a7622ddb47c57a9/Mitek%20Systems%20(MITK)%20-%20Investor%20Presentation%20-%20F3Q26.pdf) They have been shifting more into SaaS and security with their legacy business offering good FCF.

SuccessfulSir9611

You ain’t smoking good stuff. I had posted this thesis as comment somewhere else. Essentially $ARM is at stake. It’s overvalued as it is, but also leveraged now. The worst part is when it fails, the whole house of cards falls, both the value of their stake, the stock, the company’s FCF, EBITDA, everything all at once. It’s a death loop and I think it’s largely guaranteed.

jrex035

It is hilarious sitting in a bunch of equities that are insanely cashflow positive and watching people fomo into companies dumping all their FCF into capex that are already up like 3000% over the past few years, at the beginning of a new rate hike cycle with inflation pumping and bond yields spiking. It's fine though patience is a virtue and all that, time will tell which decision was the wiser

The-zKR0N0S

FCF yield is more important to look at than earnings yield

SpicyElixer

When people are operating a low FCF just from rent and food it’s hard to blame everyone for not having a reserve. Most people love paycheck to paycheck. And it’s not because of avocado toast.

AmsterdamValueInvest

Agree with the core point, but I'd frame it less as Wall Street hiding things and more as narrative vs. numbers. The numbers are public; most people just don't look at them. I put AMZN and TSLA side by side and it's a pretty clean example: * **Valuation:** AMZN trades at \~19.6x trailing earnings and 3.4x sales. TSLA is at \~299x earnings and 13.5x sales. * **Growth:** AMZN revenue +12.4%, EPS +28.8%. TSLA revenue -2.9%, EPS -47%. * **Profitability:** AMZN operating margin \~12%, ROE \~30%. TSLA operating margin \~4%, ROE \~4.6%. On pure fundamentals it's not close, yet TSLA carries a $1.4T market cap on the robotaxi/AI story. AMZN's free cash flow is slightly negative right now (FCF margin around -1.5%) because of AI capex, same as META. TSLA actually has better liquidity and less debt. So "cheap" AMZN still depends on that capex paying off. The AI rally is basically a bet on whether all this spending turns into cash flow.

Due-Freedom-5968

Highly variable but \~$3bn a year FCF from their investment arm, so they're relying on *rapid* monetisation of investments and given OpenAI is already having it's legs cut off by Claude and Gemini, it's a bit of a crapshoot given how much marketshare they've already lost. As for total interest-bearing debt, this bond issuance is about 15% - overall they're spending \~$5.5bn on interest a year including this recent refinancing. They don't have the cash to pay the interest, so are relying on dividends and bond refinancing to service the debt (hence why they took the shitty junk bond rates). If they reported under GAAP rules (they don't, because Japanese) then they'd have approx. $8bn in annual profit, which is why I'm starting to thing the numbers look more like a casino or that other reddit sub than a stable investment company.

Provolone-Jones

I’ve never seen anything as retarded as oil E&Ps selling off at $89 oil. Apparently FCF is bad for business.

HoldingConversation

I wouldn't really categorize a 2% move as stock manipulation. And to your point, the assumption is that they have enough FCF to even consider a buyback. Which means in general they need to be doing "well", and believe the stock price is worth buying back at current levels (*indicating undervalue*). Buybacks also increases exposure risk at the company's expense, which would incentivize the execs to do better in the coming years, no?

Night_Otherwise

I had to keep looking at the $518B number though. I’m still unsure that is real. We’re certainly a long ways away from when FCF was considered the end-all-be-all metric.

xampf2

I'm getting 12x P/E and 13x FCF. It's definitely cheap now even with a dying moat. I would probably model with flattish revenue growth because price hiking doesn't seem to be that good of a strategy anymore. I don't quite understand their business model (I'm not american), but now its definitely time to dig. I think the interesting part could be that they maybe won't lose any business because their service is a small fraction of stuff like total closing cost. Folks will just use multiple rating schemes concurrently.

jrex035

Exactly, it's driving me nuts. The fundamentals are insanely strong, most of these companies have wildly good fundamentals and strong FCF that they'll use to reduce debt, do share buybacks, and issue strong dividends. But they still cant catch a bid because the market continues to expect the war to end any second and oil to get flushed back to pre-war prices, neither of which will actually happen any time soon

Hacking_the_Gibson

It is terrible.  Someone has to pay those warrants out, and it looks like it's gonna be retail shareholders, lol. Anthropic is a really long way from FCF to buyback shares to keep their dilution in check. 

Hacking_the_Gibson

Lol, losing $8B on $4B of revenue is an absolutely massive loss... Are you serious? If I told you I was running a lemonade stand that was losing $0.50 for every $1.00 of revenue I generated, you'd call me a fucking idiot.  You moved the goal post to talk about stock based compensation, I didn't. Also, you don't get to just handwave away the SBC charge. Arguably, it's even worse than if the company itself pays its own people because what they are literally telling you, Mr. Shareholder, is that you will be paying my people directly out of your share, not mine.  SBC is neutralized with buybacks, which are only possible when the company has FCF.  Look, the whole fucking point of tech businesses from the before time is that they are cash machines because the cost of distribution of their solution approaches zero. Serving one more web page is next to nothing. This shit is obviously more like a standard service business because of the absolutely eye watering capex commitments. Even if we say that by magic, Anthropic is going to reach net income of $100B/year by 2027, you're still talking about five full years of net income as the most profitable business on the planet being exclusively committed to capex. Plus, the 10Y is now over 5%. 

Lootoholic

really? Uber made almost double FCF of tesla in TTM. If you take market cap into account, uber is ten times more profitable than tesla.

Lootoholic

I agree with you. Uber is very cheap. I have a medium size position in there. You know uber has higher FCF than SPCX. lol take that Elon.

idekwutp

They make a lot of money, they’re FCF positive and revenue is up YoY. The stock is moving the other way as financials get stronger. It’s the AV fear, but I’m saying Uber is well positioned to do well in an AV environment

OutOfBananaException

Analysts are modeling 80x revenue by end of 2027, so they expect that sort of outcome. It's difficult to model as the numbers get so large, you don't know if the customers have the FCF to support that kind of spend on tokens (even if they wanted to). $650bn in tokens would exceed the total employee spend of combined mag7.

MarthaJulietta

Easily. They dont even have enough FCF to cover the dividend.

SanDisk_Made_Me_Rich

Key questions for the 9/30 Micron earnings call (1) Can Micron sustain gross margins around the mid 80s through 2027? (2) Once CHIPs Act restrictions expire on 12/9 (next quarter), how aggressively does Micron return its enormous FCF through buybacks. Micron could theoretically buy up to 8% - 10% of its shares based on its cash flow over the past year.

Not_Sure_68

I understand that, and agree that eventually that will be a major factor in corporate earnings...as well as a massive deflationary impulse in the overall economy. I use anthropic's AI in my own work and agree it increases productivity. ...and just like the dot com bubble investors get way way ahead of themselves. The amount of borrowing by AI buildout companies is quite literally competing with fed gov's ability to issue debt. This is driving up rates and that's going to lower those PEG ratios going forward. There is no mechanism in place to account for the massive increase in the time value of money in those estimates which will cause those earnings to disappear. This can be clearly seen in the rising cost of debt service associated with all the companies building out the AI infrastructure as well as their rapidly declining FCF.

Bulky_Jellyfish9012

I think if Microsoft walks away from the consumer AI market, its investment spending could come down, which would likely improve FCF.

BraveSirRobbins

I’m a recent PayPal investor. It’s like free money at these prices. I know you’re hurting but I’d dollar cost average down and wait it out. They are trading for over 10% FCF yield and buying back over 10% of their stock every year at these prices. It can “only” go up.

SpiderWil

The classic trap is cyclicals: they can look cheapest at the top of the cycle because earnings are temporarily enormous, and look expensive near the bottom because earnings collapse. P/E is useful as one input. But without looking at earnings growth, FCF, margins, ROIC, debt, dilution, cyclicality, and the company's expected future earnings, you're basically reading one number and pretending you've done valuation. A 15× P/E company can be far more expensive than a 30× P/E company. The denominator matters

jrex035

Sure, why not? It's got a triple digit PE, forward PE over 55, PB of 15, PS of 25, and a P/FCF of ***121*** as is, clearly fundamentals don't mean anything any more

JabCrossE4E5Quark

Their PE is low because their EPS is artificially inflated by investment gains and shady accounting. Their FCF multiple is extremely high. Q1 and Q2 had a combined 28B FCF. Last time they had FCF that low over 2 quarters was.... Q1 and Q2 in 2023. Their stock is up 150% since then lmao

Slow_Particular3638

It all depends on the FCF.... which is poised to go up 10 billion within the next 2 years... maybe only 8 billion who knows... With a market cap of 19 billion not to shabby.

wrestlerkid

I am considering a short position in META on another spike up but only in consideration of the fact that rampant AI capex spending will almost certainly send FCF negative within the next year despite META being a cash printing machine which they will continue to be as they have tremendous moat in this department, that will be literally affected 0% by negative publications (member the "The Social Dilemma" on Netflix years ago ...yea what you're describing is a remake of that. no one cares. It is like telling a heroin addict that heroin is bad 🫠) Oh, and your thesis about advertising is just absolute nonsense. If your gonna be a doomer, at least study up past doom periods in US history. During the Great depression, the companies that emerged on top were in fact those that doubled down on advertising rather crawling in a ball and focusing on cutting costs. People still need stuff, they just have no choice but to become more selective on the stuff they can buy. Hope whatever type of superior fish brain you have is able to process all of this 😉

CanYouPleaseChill

A market cap of $461B for a company that made 2.5B in FCF - SBC over the past year. Clown market.

throwaway9gk0k4k569

The mechanic is marketing budgets. Consumers are freaked over fuel prices and don't have money to spend. There's no reason to advertise to poor people, so marketers pull their ad budgets. Ad budgets were what was keeping MAG7 stocks FCF up, so now they have to cut CapEx. And it all goes to shit from there. That's the risk right now. Tell me I am wrong, please.

throwaway9gk0k4k569

Thanks. I actually read reddit and know the accounts. It's 98% daycare and morons. I have your account tagged as "interesting". You probably said something smart and useful at some point recently, but your karma is low for the age and there are indicators of finfluencing. You probably had this account in storage for a long time and took it out recently, or bought it on a market. Anyway, there's no doubt the smaller lawsuits will continue to be a drag over time. It's the immediate risks over the next 3 weeks that I am mostly concerened with. The hot PMI this morning means high chance of October FOMC hike, which I had already anticipated. This increases the chance that marketing budgets are going to get cut. There is a bigger risk to the market right now. I'm not the only one watching marketing budgets right now. The question is how this will affect CapEx spend in Q1-2 of next year if marketers don't spend on ads in Q3-4. Google's earnings will be very interesting next. They don't have stock appreciation to lean on this time around and FCF went negative. I don't know how the market is going to react to that.

JabCrossE4E5Quark

Dude, anything other than promoting this clown market, curcular financing, insane bubble, circle jerk gets downvoted. You can have a post about FCF and valuations and accounting gimmicks making EPS look good and it just gets mass downvoted because it isnt "If you arent invested in AI you are a permanent underclass" level dumb fuck comment

Separate_Baker7280

Haha. I guess that evades the fact of zero debt. Zero investment. Moreover, check out ANET. FCF and a load of cash. Check out its growth. So I don’t think that applies.

AdCritical5383

I think we’re going to see more ATHs before the end of the year. Record earnings will continue. I’m generally bearish on our long term prospects…whether that’s seeing AI actually generate the trillions of FCF it needs to justify all the capex, or the affordability of our national debt and deficit spending, But I think for now we’re going up to SPY 850 before we see SPY under 750 again. Now that I’ve said this, shits gonna go down bigly and my leaps will be fuck. 🤌

DM_KITTY_PICS

Complaining about FCF while witnessing the AI buildout is incredibly dumb. Its not like it mysteriously went down and the business is in trouble. A technological breakthrough occurred in 2022 that made the turing test child's play, and now we have matrix mults that are smarter than you and have solved at least 1 millennium problem while you were winging about it being bad at math 2 years ago. Give up. You don't understand the tech and are being left in the dust. You can't make accurate predictions about future capabilities with 4 years of evidence behind you. You can't even see the robot revolution coming.

Clear-Aide1349

66B market cap on 2.4B FCF is 27.5x, and that's price to free cash flow, not a PE. Where's the 26x coming from? Also those 2025 revenue and FCF numbers, is that actual full year or a projection, since we're not through the year.

Consistent-Radio-428

he also has a 6B stake in WM. they are both huge players and i am honestly bullish on both but [moreso on RSG](https://www.athenic.com/share/46705096-65be-4ffb-81bd-41ef26c5dc15) because of faster recent FCF growth, stronger margins and lower cashflow to debt

thenuttyhazlenut

100% I was outperforming pre AI craze being focused on FCF and fundamentals. Lately? Honestly, I'm thinking of just sticking my future deposits into ETFs for the foreseeable future.

JabCrossE4E5Quark

Future FCF will be even worse as Capex apparently is going to grow significantly in 2027. And unlike the internet or railroad buildout, chips depreciate, and need to be replaced and improved. Its not a 1 time cost, its a constant recurring cost.

Preme2

Current FCF or future FCF? We all know capex spending is high for the AI buildout.

JabCrossE4E5Quark

The entire market is now a meme stock. Completely trades based on FOMO and nonsense headlines instead of the most important thing by far for companies: Free Cash Flow. FCF is DOWN YoY for SPY lmao. EV to FCF is like 40:1 or something absurd. Complete detachment from reality and ignoring fundmantels: Meme stock.

JabCrossE4E5Quark

Were totally not in a bubble. Thats why the Price to Free Cash Flow ratio is 99th percentile. Its because we arent in a bubble, thats why. Companies with negative FCF or flat FCF growth being up 50% to 400% in a year is totally not bubble behaviour, thats just healthy market behaviour, totally normal.

JabCrossE4E5Quark

Its a bull market. But its a bull market based on FOMO, fraud, and a bunch of accounting gimmicks to prop up EPS in the short term as FCF gets eviscerated and future EPS gets hurt as the CapEx from today will be hitting the income statements for 5 more years. Who knows how long this nonsense can last, but the admin is gonna do everything in their power to keep it going (and they have been suceeding for 18 months)

Loose-Dream7901

Yes you’re looking at this from a static perspective. Markets price cash flows per share, not cash balances. Buybacks can drive a rerate because they increase FCF/EPS per share and change how that cash flow is priced. You should expand analysis beyond balance sheet and also consider cash flow and income statements which should improved metrics by reducing the denominator.

Loose-Dream7901

This is a dumb comparison as you just outlined a shell company with only cash. That cash example only works because it assumes valuation never changes and the market just passively translates balance sheet cash into price without repricing anything else. That’s not how equities are priced, especially in the institutional space. It’s any buybacks are seen as positive Buybacks change per-share earnings power (EPS/FCF per share), and the market constantly reprices that. That’s why they can matter and why your example of pure cash company with no sales is a fallacy. It disregards repricing of metric compression.

Orennji

>Ben's family connections Can you explain? All I know is the Kovlers got rich selling off Jim Beam (probably and Ben was an 8th grade math teacher before going back to school for a MBA and then starting GTI right after. > GTI balance sheet The other top tier MSOs are FCF positive and will very likely pay off their debt gradually or refinance. But the real advantage is the depth they've built in their markets using that debt. Trulieve makes the majority of it's $1B+ revenue and $200m-ish FCF from just Florida. Just one state. While GTI is running around in small towns near the Iowa border or weird markets like Minnesota. That's not sustainable. Of course there's alternative distribution channels like hemp beverages or Circle K co-locations (which we have never heard about again since it was announced in 2022), but if GTI can do that, why can't the other MSOs do the same?

JabCrossE4E5Quark

But you see, even though the companies that have invested the most into this tech have not shown one hint of it actually driving FCF, the market just prices in that the investments will pay off extremely well. Albeit, they cant be pricing it in too far in the future, because if they did the stocks would crash from rising yields. So apparently, the market expects AI to be monetized into immediate FCF. I dont even know what the fuck is going on other than the biggest bubble in history continuing to get bigger each day.

jrex035

FCF is one of the best ways to analyze stock values, which is ironic since the entire market has apparently forgotten this. Companies with insanely high FCF are being sold right now, this very day, so that people can FOMO into tech stocks with *negative* FCF. Most highly regarded market in history

jrex035

The AI buildout is driving markets higher. But there are numerous headwinds to this buildout the market is straight up ignoring. The rate of data centers coming online is slowing with delays and backlogs growing, all the inputs to building data centers are getting more expensive (chips, memory, energy, raw materials, labor, etc), hyperscalers are already dumping all their FCF and thensome into the buildout with less and less to show for it due to those rising prices and delays, public resistance to data centers and AI more broadly is rising, the list goes on and on. Most of the AI-related equities are cyclicals that are relying on ever-growing investment from hyperscalers, which is going to hit a brick wall sooner or later. Oh and China keeps releasing open source models that are 95% as good as US models, but *free*. Why is none of this risk being priced in? >Will it hurt consumers? There isn't any evidnece of this, all I see is assumptions on your point. It's not an "assumption" that rate hikes and inflation hurt consumers, it's an established fact and we're already seeing the impact. >Agreed, however, impact isn't being felt. Once again I need to see this in earnings report to see a bear thesis play out. Soaring energy prices are a big part of why inflation is rising. Diesel prices are at nominal ATHs and *this* close to inflation-adjusted ATHs as well. Diesel is more than $220 a barrel and gasoline around $150 a barrel with no real relief in sight. You need to wait to see the impact of those prices on earnings before you accept that they're going to hurt? Of course they're going to hurt.

TheKaiserAlpha

$664B in contracted backlog and people are still treating negative FCF like Oracle forgot how to make money.

icydragon_12

It's a good question. I can give you the numerical, rational, objective, financial model driven answer, though it won't be sufficient to explain reality. The TLDR is: there's a lot of runway to spend if we're looking at financial capacity. But much of the pricing power within the ecosystem hinges on whether frontier model training continues to have buy-in. The largest risk isn't running out of funding sources, but rather, investor belief. We've all seen this [alarming chart](https://i.redd.it/6ulgj5hkk0dh1.jpeg) of hyperscalers printing walls of FCF historically which now falls off of a cliff (12 mo forward). From a debt health perspective though, what the chart doesn't show us, is that hyperscalers (ex oracle) are actually levered at \~0.2-0.4x next year (fuck all), and, for the most part, even under dramatically rising capex assumptions, that doesn't change much. The underappreciated reason for this: building data centres is NPV positive, which is increasingly evident in recent cloud operating profits. You can think of it like... the hyperscalers are building little neoclouds within themselves. GOOG even reports its cloud business separately, so we can see that although the returns aren't great (vs ads), they're also not negative, and are in fact growing quite fast. But this brings us back to the Achilles heel. The following is supposition: the reason that neoclouds are economic is because frontier model training represents the marginal buyer willing to consume endless compute without much price sensitivity. Frontier training has very questionable economics.

Evening_Result4070

Expanding potential > Earnings if FCF positive ComputeNeutronRocketDemand<<<1,1>>>(Iridium);

Evening_Result4070

Expanding opportunities > earnings if FCF positive. ComputeNeutronRocketDemand<<<1,1>>>(Iridium);