To The Moon

• VICI Properties keeps growing from strength to strength through M&A as they deliver on the top and bottom lines.
• T Mobile US reported a mixed quarter after a record FY2022 as they remain the viable telecommunication provider.
• Enphase Energy reported a subpar quarter despite showing growth as management does not seem to be executing well.
• Leidos Holdings reported an outstanding quarter and raised guidance for the fiscal year.
• Cameco Corporation is looking at the biggest winners of the energy transition, with nuclear demand set to rise.

VICI Properties (VICI): The REIT company reported funds from operation of $0.69/share (beat Wall Street estimates by $0.07) and revenue of $898.2 million (beat Wall Street estimates by $23.8 million). VICI reported revenue growth of 36% primarily through M&A activity as the company looks to expand internationally. The quarter completed three acquisitions as the leisure-focused REIT looks to diversify its portfolio into sports training facilities and resorts. The company’s latest acquisition is in Canada where management purchased four properties in Alberta in a lease-back deal. We like how management diversifies the property portfolio into spaces with stable growth, making those assets cash generators.

Looking at the balance sheet (which is very important during monetary tightening environments) VICI Properties has ample liquidity of $738 million cash and a borrowing capacity of $2.4 billion. This liquidity can help VICI expand its footprint in Vegas. Management raised guidance for the year as they integrate the new acquisitions and produce synergies. We would like to add more shares to our position on a major sell-off, but as long as the stock price is above $30/share, we will continue to hold the shares. The stock is yielding above 5% in dividends as REITs are currently out of favor for US Treasury bills and bonds at a risk-free rate above 5% month Treasury bills.

T Mobile US Inc. (TMUS): The number one telecommunication company in the United States reported earnings of $1.86/share (beat Wall Street estimates by $0.15) on revenue of $19.2 billion (missed Wall Street estimates by $160 million). Revenue was a bit lackluster despite a record of 2022, so the bar was pretty high as investors expected significant revenue growth. Based on that basis we expected T Mobile to earn $1.90/share on revenue of $19.2 billion. The company reported net account adds of 299,000, which indicates that T Mobile keeps gaining market share from AT&T and Verizon. In addition to the net account adds, management reported that the company had a low churn of 0.77% down three basis points.

Besides the cellphone user accounts, T Mobile is growing a healthy internet segment with 500,000 accounts signed up. The company is diversifying its revenues as it increases its economic moat. This can be signaled by the net income which came in at $2.22 billion up from a loss of $108 million in the same period last year. T Mobile had good cash flow numbers as the company generated free cash flow of $2.9 billion up 64% from the prior year. Increased free cash flow gives management to buyback shares in which close to $3.5 billion was purchased during the quarter. Management raised its FY2023 guidance on the back of additional synergies from its Sprint acquisition which will total close to $7.5 billion.

The stock sold off on the company's mixed results, but we think investors did not factor in that the company had a record year in 2022, and their comparisons will be tough to beat. We would like to add to our position especially if the stock gets into the $130–135/share because we like the execution at T Mobile. We think they will be one of the winners of 5G networking, especially with their growing internet segment.

Enphase Energy (ENPH): The solar-micro inverter manufacturer and energy storage company reported a below-par quarter given the secular growth tailwinds. Enphase Energy reported earnings of $1.47/share (beat Wall Street estimates by $0.20) on revenue of $711.12 million (missed Wall Street estimates by 14.9 million). The revenue number was a big disappointment given the renewable energy push the U.S. government has incentivized through tax credits for solar. The company has an untapped market overseas and up north in Canada. The company has a lofty valuation and expectations are pretty high.

Gross margins expanded by 4.2% to end the quarter at 45.5% while the net income doubled despite higher operation expenses. The free cash flow generated by the company increased from $202.1 million to $225.2 million. The company has a solid cash balance of $1.8 billion on the balance sheet as management looks to fund its expansion. The company has an authorized buyback of $1 billion which we think is unnecessary and management should look at funding its growth. The company gave okay quarterly guidance for Q3 2023 and showed some waning demand, which is not good for a growth stock like Enphase. This was a dismal quarter for Enphase Energy given the secular growth tailwinds of the transition to renewable. It seems like the company has some execution; because of this, we have decided to exit our entire stock position.

Leidos Holdings Inc. (LDOS): The information technology company focusing on aviation, defense, and intelligence reported an outstanding quarter. Leidos reported $1.80/share (beat analyst estimates by $0.23) in earnings from a revenue base of $3.8 billion (beat analyst estimates by $70 million). The company reported revenue growth of 7% and this quarter reflects that the company is one of the infrastructure winners. Leidos had demand across its business segments as digital modernization took hold in healthcare and defense. The company had a net income margin expansion of 70 basis points from the same period a year ago. This is very significant because Leidos’ business has low profit margins. After all, government contracts are open to changes and cost reductions.

Regarding order backlog, Leidos has $34.2 billion worth of orders, of which 24.3% is funded. The company has won numerous contracts from Homeland networking to hypersonic missile systems. Management has been paying its debt, which is prudent given our high-interest environment. The company generated $124 million in free cash flow, a sign that despite paying down its debt Leidos can generate cash. To wrap up this strong quarter, management raised its outlook regarding revenue and margins. The company’s stock spiked from this earnings report, and we would like to add more to our position on any market-wide sell-off.

Cameco Corporation (CCJ): Cameco Corporation is a fairly new position for us and is a play on nuclear energy play as uranium demand increases. We also see this position as a renewable energy play as countries start warming up to nuclear energy as an alternative to fossil fuels. However, nuclear has been considered risky due to its radioactive nature; it must be delicately stored. The increased demand for uranium has been a tailwind boost for Cameco’s business. The company reported it delivered 15.2 million pounds of Uranium which helped Cameco earn a profit of $14 million. Management raised its 2023 financial guidance as they expect to generate up to $300 million as they hint at increased demand.

The company’s balance seems intact with close to $2.5 billion in cash and has a borrowing capacity of up to $2 billion. This can help the company make bolt-on acquisitions as it sets itself apart as a pure play for nuclear energy. Overall, this was a good quarter from Cameco; we have started a small position in the name and are looking to add more over the next three months. The company’s stock trades at 23 times next year’s earnings which seems steep for a mining company. However, Cameco commands this as a premium multiple because they directly affect nuclear energy demand.

Disclosure: Cresco Investments is long Vici Properties (VICI), T Mobile US Inc. (TMUS), Leidos Holdings Inc. (LDOS), and Cameco Corporation Inc. (CCJ).

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is intended for information, engagement & entertainment purposes only and is not to be construed as investment advice or direction. Investors are strongly encouraged to perform due diligence and consult with their financial advisor(s).