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October Update: COIN, CRLBF, ASML
Plus, insight into what's on our radar.
Good morning, investors!
We’ve got a handful of things to cover in today’s installment of Due Diligence:
A few updates for previously covered companies (Coinbase, Cresco Labs, and ASML)
Insight into stocks on the Due Diligence radar (for future reports)
A summary table of DD stock movements dating back to our inaugural report in March
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Without further ado…
Here’s what’s new from a few of the companies we’ve covered.
Coinbase NFT on the horizon
Coinbase wants to extend beyond cryptocurrencies. On Tuesday, Coinbase announced its very own marketplace for non-fungible tokens (i.e., NFTs). If you aren’t familiar, the “non-fungible” aspect means it’s unique and irreplaceable. It’s like trading old baseball cards, except with virtual assets. NFTs use blockchain technology to publicly validate proof of ownership — hence why it’s popular for items like digital paintings, photographs, videos, and even tweets.
The new marketplace will allow users to mint, showcase, discover, and purchase this burgeoning digital artform. Presumably, Coinbase will profit from trading activity. For instance, OpenSea — an existing NFT marketplace — receives 2.5% of every NFT sale. Coinbase’s fees will likely be similar.
Last quarter, NFTs generated $10.7 billion of trading volume. So, the revenue opportunity is there for Coinbase, but we’ll see if its marketplace can gain traction.
Cresco Labs expands market share in Pennsylvania
Cresco Labs continues to scoop up cannabis companies left and right. Today, Cresco announced the acquisition of Laurel Harvest Labs in Pennsylvania. With the purchase, Cresco gains an additional 52,000 square feet of indoor grow/processing space, as well as two dispensaries (one operational, the other in construction) with permits for four more.
This comes after Cresco announced the acquisition of Cure Penn on September 23, which added three operational dispensaries to Cresco’s Pennsylvania retail footprint.
ASML investor day spotlights bright future
During its business model segment, ASML outlined sizable growth expectations from now until 2030. Here’s an excerpt from the presentation:
Based on different market scenarios, we have an opportunity to achieve an annual revenue for 2025 between approximately €24 billion and €30 billion with a gross margin for 2025 between approximately 54% and 56%.
We see significant growth opportunities beyond 2025. Assuming a 1 trillion dollar semiconductor market by 2030, with litho intensity and our market share constant from 2025, we expect an annual revenue CAGR for 2020-2030 of around 11%.
We expect to continue to return significant amounts of cash to our shareholders through a combination of growing dividends and share buybacks.
The future of ASML is bright (pun 100% intended).
Much of ASML’s growth prediction is derived from more and more lithography unit sales, particularly the release of the next generation of semiconductor equipment (High-NA). Naturally, as ASML sells and installs more lithography systems, its revenue from equipment services and upgrades will grow as well.
This is already apparent from ASML’s operations over the last decade. In the following chart, focus on the “Installed base management” revenue growth. In 2010, this line item accounted for $0.6 billion; last year, it was up to $3.7 billion. ASML expects Installed base management revenue to be $6-7 billion by 2025.
Stocks we’re eying
Stocks on the Due Diligence radar for upcoming reports:
How wild is it that TMHC closed yesterday at the exact same price it did a year ago?
Due Diligence Stock Performance
Since launching in March, Due Diligence has deeply analyzed 19 different companies. Here’s how they’ve performed since their respective reports were released. Note that our reports aren’t necessarily “buy” or “sell” recommendations, so don’t take the below list as investment advice or an indication of our stock picking accuracy.
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