Welcome back everyone. It's time that another busy earnings season has officially started. We're just past halfway through the year, which means companies are going to start updating us on what happened in Q2 of 2025 and what their plans are of the future. This is like a ongoing report card for these companies and this week kicks things off. Now, if we take a look at the earnings calendar here, this gives us a full overview of the
week. We have the biggest companies, the most important ones in the market reporting earnings Monday through Friday. The top group are companies reporting before market open. The bottom group reports after market close. Now, Monday, today we don't have that many interesting companies, basically just Schwab. It gets a little bit more exciting tomorrow, but we do have JP Morgan, Wells Fargo, BlackRock and Citibank all
reporting tomorrow morning. Wednesday of this week is where things get interesting for me because that's when we have a SMLASML, of course, is that dominant monopolistic company that many high quality investors have in their portfolio. Notably Dev Kantasaria owns ASML and it's one that I really like. I have it in My Portfolio as well. You can see here that I have $53,000, almost $54,000 of value in this company. So of course, we're going to be
going over ASML. And then moving into Thursday, that's the biggest day of the week. We have TSM, which is one of the most important companies in the world, not just the markets. They're reporting earnings Thursday before market open. Thursday after market close. We have Netflix, the juggernaut itself, the unstoppable stock. Netflix. I, of course, have Netflix in the story fund. It is the top position, the best performing company in My Portfolio.
It's now a $146,000 position. We'll be going over my expectations going into Netflix this week and American Express will be reviewing as well. So we have a ton to get to in this episode. Let's go ahead and get started starting things off tomorrow morning. We have a row of banks and investment companies that are reporting earnings, the biggest of which is JP Morgan Chase.
Now if we look at JP Morgan, let's bring it up here on on Qualtrum Insights. I look at this company and I really like it. I've always liked JP Morgan. In fact, this is one of the banks that I invested in in My Portfolio. If you go back to around 20/20/2019, I held a lot of JP Morgan Chase. It was a company that I just really like. A lot of investors today are focused on fintech companies, so they invest in things like Sofi, Ally Financial, Robin Hood, All
those are great as well. But many people discount, or at least they don't give proper credit to JP Morgan as being a tech first company. This company has thousands of developers and engineers. Their app is really, really good. The tool set they have is incredibly good. They're venturing into fintech in lots of different spaces and areas. So Jamie Dimon has LED this bank aggressively to compete with the likes of Apple, to compete with the likes of different tech
companies. So I would not view JP Morgan as some old stodgy bank that's not updated with the times. They are very forward thinking and aggressive with this company. The performance of it has also been really, really good. We look at JP Morgan over the past year up 37%, the past five years up 189%, not counting dividends, of which they pay pretty hefty dividends. So this is a by far market beating return. And when we look at this company on the earnings calendar, we can
bring it up here. JP Morgan is also on track to continue doing really well. For example, if we look at their historical performance, they don't miss on earnings that often. They've done it three times since 2023, times out of every quarter since 2020. So they have a very high success rate. I don't expect them to miss on earnings and they're also beating estimates by a wide margin on most of these.
When we're looking at what to watch for going into this earnings, we can highlight a couple things here. We have macro uncertainty and credit quality. This is the discussion primarily with banks. The biggest thing is basically their loans and the quality of their loans. If people are paying them back, that's the biggest question for banks. If everybody paid back their loans, banks would be incredibly wealthy. They lose money when they lend out money that people aren't paying back.
So Simply put, the quality of their loans, the credit quality is incredibly important. The previous quarters management commentary emphasize elevated macroeconomic uncertainty, particularly due to policy changes like new tariffs and ongoing global domestic risk. This prompted JP Morgan to increase the weightings for downside scenarios in its credit risk modeling, driving a $973 million allowance for credit
losses. So in the last quarter, JP Morgan decided because of all these uncertainties, to give themselves a bit more margin of error, to give themselves a little bit more downside scenario with their credit losses. That doesn't mean they're going to lose money. That just means that they're modeling it in, they're preparing for it.
Investors should closely watch weather actual credit performance to rates or remains in line with expectations and how further economic geopolitical developments influence the bank's reserve and loan portfolio quality. So this is again the top thing we'll be looking at, at not just JP Morgan, but every single bank. If you bring up Bank of America or any of them, it's going to go over these as well. Now, I don't believe this is going to be as bad as the downside scenario.
Banks are modeling in their position for the worst. They're a bank. They always have to be on edge, they always have to be a little bit anxious, a little bit terrified. Jamie Dimon is always warning about hurricanes in the future, about big problems that could happen. And that's the right type of attitude you have to have to run the world's biggest bank. So I think they're doing the right thing, being very cautious, being conservative, even being a little bit anxious
about the future. But overall, they're likely to come in more profitable and better than expected. So Tuesday's all about the banks and the financial institutions, which I believe, again, they're going to do better than expected. When we get into Wednesday, we have another bank, Bank of America. We'll know how that one's going to do by all the reports on Tuesday. So there's going to be no surprises with Bank of America. But then things start to get
interesting when ASML reports. Now ASML is a very interesting company in and of itself. I'm AUS based investor, so I invest in a lot of US tech companies. I really like the companies we have here. Many of them are right in Silicon Valley. They're based out of Washington or California or Texas or different areas around here. So I'm familiar with those
areas. ASML, on the other hand, is from the Netherlands. When I think of the Netherlands, I think of, for some reason in my head, I think of cow pastures and Greenlands and those old homes that are really pointy. They have the pointy roofs, right?
Windmills, that type of thing. It just seems like an area that there's not much high tech happening, but in the Netherlands they have one of the most sophisticated science experiments ever of humankind going on, and that's the creation of their ultraviolet lithography machines. These are incredible machines. They're massive, and they cost hundreds of millions of dollars. And ASML is the only one that's
capable of doing this. Other people are trying to copy them, and so far they haven't been able to do it. ASML is now trading with a bit of momentum. It's actually not doing that. In fact, this company continues to move up 15 now almost 16% year to date, beating out the indices and IT it got as low as $595 during the April lows because of the tariff dip. Now one thing I'll note with this company is that it is a bit more lumpy in its sales than
most other companies. For example, if we look at the trailing 12 month metrics, you can see that the free cash flow spiked in 2022. Then it went down to $2.7 billion. It went down like 70% and then it spiked again. They got a bunch of receipts. They basically accumulated all the money that they've been selling these devices for. And this just means that the cash flow is not a subscription based cash flow.
There is some service oriented cash flow, but most of it is from selling these devices and then collecting payments and sometimes more of those payments are collected in one quarter than the other. But that doesn't mean that the business is unpredictable because these customers have to buy these devices. So even though the cash flows make the company appear highly volatile and unpredictable, the underlying company is very predictable. They have a device that people have to buy.
Whether they buy them today or tomorrow is up for debate, but they do have to buy them on a trailing basis. It trades at a healthy 3 1/2% free cash flow yield, A25 4PE ratio. In the meantime, they're growing their earnings per share rather fast. You can see the EPS growth here. I like everything I'm seeing fundamentally with the company going into these earnings. Now we can bring up ASML hair on the calendar. We can take a look at how they do historically during earnings.
The blue dots are where they beat their earnings per share estimates and since Q3 of 2020, they've missed on earnings 2 times. They are highly likely to be earnings. If we switch over to the revenue. They have far less control over their revenue. Again, a lot of this comes down to the lumpiness of their sales. O, the earnings can be accounted for with the net income. The top line revenue is far less
predictable. O we could see a situation where they have a slight miss on revenue and they be on their earnings per share. When we look at things to watch for with this one, it highlights a couple of the biggest points here, the EUV system sales and productivity milestones. SM LS first quarter showed strong performance in EUV system sales, contributing to 3.2 billion and 5.7 billion net
system sales. Notably, gross margins exceeded expectations at 54%, driven by productivity milestones, already installed EUV systems and favorable mix. Investors should keep an eye on how these factors affect the upcoming quarters, margins and overall profitability. Now we have a metric for how many systems are actually selling in. We go down. It's this brown graph right here. And keep in mind, these systems are dramatically more expensive today than they were two years ago.
The other thing that they're going to be commenting on in this earnings report is tariff and macro uncertainty, especially with just this past week with President Trump launching a set of new tariffs threatening Europe with a 30% tariff. They're certainly going to have some commentary on it. My guess is that they're not going to be as concerned about it as they once were.
We know how this works. There's a reason that the market is not concerned about it. There's a reason that ASML investors are not selling out of the company out of threat of Trump's tariffs. It's because investors are realizing how Trump does deals. He does a lot of big, bold moves. He uses his negotiating tactics.
We know that that's part of his strategy and investors aren't quite as concerned about it. The other big thing we'll hear about with ASML in particular is part of the huge growth of this company is reliant on artificial intelligence. Now my thoughts are AI is not overstated. It's not reaching an end. We are just getting started with AI. I believe that we're literally just getting ramped up with it. We're in the first or second ending with it. I think that this is going to be
a massive long term trend. It's like the beginning of the Internet. If you didn't get through the Internet after year 2, that's just getting started. ASML realizes that growth in artificial intelligence is one of their key drivers of revenue, they say, with memory and manufacturing playing substantial roles. ASML forecasted install base management revenue to exceed 2024 levels due to its increase in service demand. So ASML is going to install more devices this year than last
year. So if you think things are slowing down, it's just not the case. Another thing I'll highlight about ASML is their financial position in cash flow management. This is a company that's incredibly profitable. They generate far more money than they know what to do. So it's not a CapEx heavy business where they're constantly making money, throwing it all back in capital
expenditures. Although CapEx and R&D is a significant expense, they have more than enough money, so much so that they do buy backs and boy, does ASML love buybacks. Let's take a look at the balance sheet here. We'll look at it over the past five years and we can look at the cash balance. Again, this is in USD, so we have $10.62 billion USD. If we convert that, we can look at it. It's $9.1 billion in euros. Now this is going to go down for a third quarter in a row.
So you'll see the cash balance step down and step down every quarter, and that's intentional. That's a good thing. The reason why is what they're doing is buying back shares every single day. The share count decline should speed up, not slow down. Overall, looking at ASML this week, I believe it's a good week to be a shareholder. The company could trade up or down a little bit with some headline news of a slight miss or a slight beat on earnings per
share. But the longer story, the bigger picture here, is that ASML is incredibly well positioned to be a key component in the overall AI sphere. It's a company that will continue to grow, gain market share, and even, as would be competitors, China working on their EUV machines. Even if they do catch up to some degree, FML has massive distribution. Technological superiority is only one part of their overall dominance. There's other aspects to it.
So I'm still invested in ASML. I'm not selling a single share. Moving further down the week, we get into Thursday, which is the biggest day of the week, and we have TSM to kick things off. Let's go ahead and take a look at this one. TSM is a company that's had incredible performance over the past five years. In the past five years, they've returned 246%. So massive outperformance by holding this one. And investors may be asking if the ride is over for TSM, if the best days are behind it.
I don't believe so. I believe that TSM is well prepared for the future. TSM is again similar to ASML, one of the most fundamentally strong companies in the world. If we look at some of the metrics here, for example, the past year, they've grown revenue by 40%. So massive growth in overall revenue. Just incredible to see the EBITDA and the financial metrics follow. They even have faster growth here, 42% EBITDA growth, net income growing 52%.
We have free cash flow. This has also grown substantially, 72%, so it's a bit more lumpy, but again, over the long term it's highly predictable. TS Ms. earnings per share growth are growing at 52% over the past five years. It's a bit slower at 26%, but you can see the trends. In a lot of ways, ASML and TSM are similar in their investment thesis. They both are uniquely positioned to manufacture the hardware required for AI to do its thing.
For companies to build lots of AI devices, they have to go through TSM. It is the bottleneck to creating the hardware to run it. Now TSM has a couple competitors. So ASML actually has fewer competitors than even TSM. But TSM is not in a highly competitive market. It is very concentrated, leading TSM to have incredible financials. When we look at the company again, many of the things that we look at are very similar to ASML. TSM almost never misses on their earnings per share.
They've missed one time since Q3 of 2020. You'll see that they miss a little bit more frequently on the revenue. So again, we could see a situation where they beat on their earnings per share, they miss slightly on the revenue. That's not a problem. If you see that headline, there is nothing wrong. They've done so in the past and they still have incredible gains. We look over the biggest things to watch for going into this earnings and it's a lot of the
same points. We'll look at the AI related demand projections. We've already heard a lot of commentary from ASML, but we'll get a second opinion on it with TSM. We'll look at their capital expenditure plans. We'll look at the geopolitical risks and tariff impacts. They're, of course, going to have commentary on that as well. But overall, my thoughts are the same on TSM as they are on ASML. These companies are
indispensable. There is an AI wave that's continuing to happen, and I don't think you should bet against it. These companies will continue to live up to the hype. Now moving throughout the week, we have GE reporting earnings. This is one that I I was never going to invest in this company. It's so far out of my wheelhouse. It's so far out of what I focus
on, what I know. GE seems like a company that would have lots of struggles and operational complexity, lots of issues, and they're proving just the opposite. This company has done incredibly well. Look at their actual performance compared to their estimates. They're beating almost every single time and they're beating by a wide margin. When we look at the performance of this company's stock price, it's also just astounding. GE has been an astounding investment over the past five
years. One of the investors to highlight this is Chris Hohn, one of my favorites. He is an incredible super investor. I've done a lot of content on Chris Hohn, but he invested in GE knowing that they're creating these engines that in many cases no other companies doing. So it's the same type of thing, a little bit like ASML. They have this unique, very advanced manufacturing process that no other company has the time or wherewithal to even invest in or create themselves.
When we look at the performance of GE over the past five years, it's up 631%, just remarkable. Year to date, it's up 54%. And congratulations, every GE investor that realized this is going to happen before the market did. But I don't feel bad for missing this one because it was really
one I was never going to get. This is one that I could never see myself investing in. Now moving on to Thursday after market close, we get to a company that I have invested in that's also done incredibly well, Netflix. Netflix's stock price today is $1269. It's up 1.9% on the day. If we look at the performance of this company year to date, it's up 42.6%. The past one year it's up 92%. So it's one of the the best performing, outperforming basically all the big tech
companies over the past year. And then in the past five years, if we look at Netflix, at the Lowe's, it got below $200 per share. And again, today it's near $1300 per share, making Netflix A6 X from the Lowe's. So an incredible performer buying it during almost any time period. You don't have to time the actual dip. You could have bought it all along the way, which is precisely what I did.
It is true that I did some buys during the very lowest point of Netflix. I was still optimistic during that time period, but I also bought it all the way up when investors said, oh, I missed the dip in the recovery. Netflix kept recovering. Now it's at nearly $1300 per share. Netflix is the largest position in My Portfolio. Overall, it's around a 12% position, and it's the biggest gain in My Portfolio. And I felt strongly about this company for a long period of
time. I've made so many videos outlining Netflix, trying to get investors interested in this company, and there's always been a bit of resistance. People always seem to underestimate the Moat the company has, how powerful the earnings could be, and even professional investors, some of the biggest ones in the world, are very skeptical of it. In December of 2022, I authored a paper on Netflix and went through the overall state of Netflix. At this time.
Netflix traded at $316.00 per share, so it was still at a remarkable deal. Looking back, and this is right after Bill Ackman had sold out of the company, stating that it was too unpredictable for his concentrated portfolio. I stated that I strongly disagree with both the market and Bill Ackman. I don't think things are so bad for Netflix and I don't think that the company is unpredictable. In fact, I believe Netflix is one of the most predictable companies in the market.
I ended this note by saying that the business is more stable and predictable than it's ever been before. That was at $300 per share. Over the course of a year or so, Netflix stock price doubled from $300 per share up to $718. This was in August of 2024. I wrote another note.
This one is another five page summary going over my ongoing thesis of Netflix. And at the end of all of this, I summarized it by saying that I believe Netflix stock would still need to rise significantly to make the long term future expected returns in line with the market. IEI believe it's undervalued. After doubling from the lows, this company is still dramatically undervalued. Since August of 2024, Netflix stock has almost doubled again, going from 718 to now $1300 per share.
And it might be time for me to write my third note on Netflix because once again, I believe the stock is not fully valued. In fact, I believe there's still more upside for this company. The overall thesis on Netflix relies on some simple assumptions. When we look at Netflix, it's really easy. As humans, one of the the biggest mistakes we make is anchoring bias. It's a killer of returns. Anchoring bias is where you will not buy a stock because you could have previously bought it
for a cheaper price. Why would you buy it today when you could have bought it then, or then, or then or then? It stings to know you could have gotten a better deal and you're not getting the best deal possible. That bias is not present in ETFs. It's not present in disciplined or sophisticated investors, and in many cases, that's why ETFs outperform humans. ETFs have a total lack of anchoring bias. Investors should behave the same way.
We shouldn't judge Netflix based off of how far it's come. We should judge it where it's going. Netflix today trades at roughly $1300 per share, let's say. Well, if we look at the company, where is it going to be in five years? My thesis remains that the management team of Netflix is mostly correct in saying that the company will roughly double in revenue over the next five
years. Management stated that their internal goals are to double the revenue, triple the operating profits of the company, and gain an extra 100 million paying subscribers in the process, all in a five year period. And I believe that that's practical and achievable.
They also stated that if they accomplish those goals, the company could be worth around a trillion dollar market cap in 2030 or 2031 around that time period, which right now it's at $540 billion market cap, meaning that Netflix could roughly double in returns over the next five years if the management team executes well. Doubling the market cap in five years is also not the only way you get returns. They're doing share buybacks as well, meaning the total return
would likely be higher. So even as we see the aggressive share price moves, we see Netflix move up like crazy. We see investors get a little wary that it's gone up so fast, so quick. So while it's true that Netflix trades at a high PE ratio based on next year's earnings, it's also true that investors should not be valuing companies just
based on one year out. We're investing in them based on the next 20 years, the next 30 years and Netflix is uniquely positioned to make a lot of money over a long period of time. So when I look at this company, it's one of these ones that stuck in this difficult situation where today it looks expensive. And I could certainly see some short term volatility.
If Netflix has any weakness in this report, if they say the ad tears growing slower than expected, if revenue estimates are a little bit below expectations, they give any semblance of weakness whatsoever. The stock is down 7 to 10%. So we have a 7% drop with any weakness in this report and I think that's fine. Again, I look at the long term potential of the company, not this quarter or the next quarter, but even looking at the long term potential, it's good to be prepared for different
outcomes. This is a highly volatile stock. The move will likely be 7% up or 7% down. They show any weakness in revenue in the ad care, in any part of their business. That's a core part and the stocks down 7%. And if things go really well, if Netflix continues to show more strength, which I believe is a high likelihood, we could see another day where this thing is up 7%. Now it is true that Netflix previously dropped 75% when they lost subscribers.
They lost the confidence of Wall Street and investors. And I think that that's very unlikely to ever happen again for a couple of reasons. One reason is that Netflix transitioned from a company that was valued based on subscriber editions now to a company that's valued based on revenue growth and free cash flow, operating margins, their actual financial metrics of which they have a lot more control.
The subscriber numbers have stopped being reported since Q4 of 2024. So we don't know them Q1 of 2025 or Q2. They're not going to report them this quarter either. They'll probably give us an update when they reach 350 million, which I don't believe they're going to get to this quarter. So my prediction is no updates on the subscriber metrics. The thing that I believe gives a lot of downside protection is the free cash flow. We look at the free cash flow
over the trailing 12 months. It's nearly $8 billion and it's also remarkably consistent. I believe this is going to be the case going forward. Netflix is not going to go down in free cash flow. They'll continue to generate more and more money, more cash flow for investors every quarter. Now, top of mind for every Netflix investor is the ad tier. And this is important because Netflix found out a way to basically double dip. They get you to pay a small amount.
So you're paying 7-8 dollars a month, right? It's the cheapest amount. But then you're also seeing ads, which if you watch a lot of Netflix, if you watch a couple hours a day, those ads throughout the day, every day throughout a month add up to around an extra $10 per month. So you're paying $8 in just money, and then you're paying another $10 in your time for watching ads. Netflix earns a total of $18.00 from you as a user, which is more than many of their paid tears.
So Netflix would rather have you on an $8 ad tear than a $12.00 non ad tear. It's just far better for them and they're doing a lot of things to make their ad tear even better for the user, more targeted ads. They're building out proprietary ad tech suite and we're going to see if this boosts their capabilities and their commentary around it. But this is going to be one of the biggest things that we look at. The other thing is content slate and engagement and retention
trends. Simply put, Netflix has to continue making great content all the time. Not everything's going to be a hit. Netflix will certainly miss with a lot of content, and with any type of content, there is some risk to it. The Osama bin Laden documentary from Netflix was incredibly well done. It was one of the best documentaries I've seen. Then you have Squid Game season 3, which wasn't so good. I don't believe it was their
strongest piece of content. O With Netflix, you're going to have some stuff that does really well, some stuff that's really highrated and lowrated, some that just doesn't hit quite as well. That is the inherent risk of creating creative content and that's not a problem for the company. I believe that going forward, they're going to have so much content that they will have enough things that hit and that's really what matters.
Now. We do want to see commentary on what they plan on doing throughout the year. Their content slate. The upcoming quarters will see a return of major titles and heavier film slate in Q4, an additional live events such as high profile sports broadcast all expected to bolster engagement. Investors should monitor whether these content investments Dr. sustained growth in members and other Netflix continues to outpace competitors and securing and retaining audience share.
On the operating margins, I believe they just need to grow their operating margin. Simply put, we need to see year over year growth 2 to 3% at least. If Netflix is able to continue growing their operating margin becoming more profitable, I do not see the stock price moving down for long. So while the short term valuation leaves Netflix in a bit more risky of a position on a day-to-day basis, I believe the long term price for investors willing to wait is still massive.
Netflix represents again, one of the most unique investments in the market, a fully subscription based company with a huge total addressable market that is one in the streaming war and created a business that's nearly impossible for anybody else to replicate. So it's one-of-a-kind and I'm still holding every share. Now to cap off the week, we move to Friday before market open. We have American Express
reporting earnings. I went for the more pureplay with MasterCard. The difference here is if you want to have more of an ecosystem, we have a bank and you have a network. It has seamless integration with each other. It caters to high end clients. It's really remarkable business. It's kind of like the Apple of a credit card that's American Express.
So it's a really good company. But then you have the other end of the spectrum where you have Visa MasterCard, which have the bigger share of the dominant network effect. MasterCard is a more pureplay tech company and I went for that network effect. Now, either way, American Express is still a great company.
We're going to get more insight into how this one performs based on JP Morgan and Wells Fargo. So they'll kind of give us a little bit of a heads up of what's going to happen with American Express, but just to give some general thoughts. I think it's going to be good. You have consumers on the high end and you have consumers on the low end. If you're investing with consumers on the low end, I think you have more reason to be concerned than the ones on the
high end. I would tell you if I could find any real reason to be concerned about this one, but I just don't. I would be shocked if they show any huge weakness. And that's an overview of the entire week. And make sure you subscribe to the channel because next week it gets even crazier. We have companies like Google and Tesla reporting earnings. I'll be going over those in depth as well. That's gonna be it for this episode. See you in the next one.