So let's talk about Arm. Not this one. I Just banged on my notebook. But the company.

We start off with some breaking news on the RM IPO Leslie Picker's got the details Leslie Hey Melissa Arm pricing. It's IPO At 51 per share, that is at the high end of the range, implying an offering size of about 4.9 billion dollars and a fully diluted valuation of 54.5 billion dollars. So it's not necessarily unusual to close the order book early. But what this is really tell us about demand.

It really tells us that the demand is very strong. so it's right now 10 times and the orders are still coming so it takes a bit of time to actually kind of like gather all the information and for them to actually allocate. And also like closing it early is really just telling the investors hey, get your act together, send in the order before is too late obviously in every one of my videos I Want two things: number one I Want you to click nothing, Smash nothing, Buy nothing and number two I Want you to listen to the bottom line first because some of you may may not have the time to stay for the entire video. So I respect your time.

And here comes the bottom line First Now Arm is a terrific company with a great business. They design CPUs which is a terrific business. They have awesome relationships with Apple with Nvidia and every single company out there. they dominate the mobile market.

They dominate the wearables market. They make a very nice living doing that, but the attempt to kind of package them or repackage them as an AI Company by SoftBank smells very similar to me to what they did with Wework. So SoftBank owned Wework like they own this company and they try to repackage it as a tech company even though it's a shared office space company. The same thing with this company trying to repackage arm as an AI play is very weird and doesn't make any sense.

It doesn't mean that the company is bad. quite the opposite. The company is quite terrific, but they're currently being sold at a very very Hefty valuation at about 20 times sales. Now that's doubled in Tesla and it's the same as Nvidia right now, especially given the fact that you the retail investors will probably not get it at the IPO price.

At about 50 bucks per share, it's probably going to be way higher by the time you are allowed to get in an action and take the breadcrumbs. Nobody has ever made money buying at the day. One highs of an IPO never. That's why Warren Buffett never does that.

Now the bottom line here is very, very simple: I Like the company I would love to potentially add it to my portfolio I'm not gonna buy that at the IPO price I Think this is about a 15 to 20 dollar stock. it's gonna go public. At 50, it's probably much much higher. I'm gonna weigh out the noise I'm gonna wait to see it at 15 to 20 bucks if it happens.

If it does, I'm gonna check it out I'm going to analyze it and see if I want to add it to my portfolio. So that is the bottom line. Now if you don't have time, thank you so much for staying. Do nothing.

Don't click nothing. That's much. nothing. Don't buy nothing.

You are free to go. Now if you want to stay for the full analysis, let's talk about it. So the IPO happens tomorrow. September 14th 50 per share is about where you're gonna get it if you're Banker or if you're a VIP if you read an investor God knows.

So they're currently going at 50 billion dollars market cap which is absolutely insane as I'll show in a second look. Arm is a 100 subsidiary currently of SoftBank Not a huge fan of SoftBank after what happened with rework as I mentioned in the opener I Don't like them dressing this as an AI play I think it's absolutely not and I'll show you in a second why. The reason it's not is because what this company does is they design CPUs now CPUs if you have a computer. If you have a gaming computer you have a CPU and a GPU the graphics and the processor.

The graphics. They do a lot of things at once at crazy speeds. They make the 3D Stuff Etc. The CPU drives your machine so one does one job, the other does a different job.

One may say that the GPU does a more complex job and there's some truth to that, but these guys design. CPUs They license out the technology to companies like Apple like Nvidia, etc etc. They're not a competitor of Nvidia. They're not a competitor of Apple.

They're a technology company that builds IP Yeah, now they have about 6 000 employees over eight countries, which is insanely impressive. But the process with working with them would be for Apple for example, to design a new chip. They're going to pay these guys a fee. They're going to give Psmc the permission to start building these with the licensed technology from Arm and then they're gonna get the chip from Tsmc and then Arm is going to get paid for the technology.

Now That is exactly why Nvidia tried to buy this company to kind of buy the supply chain. But here's the thing. The reason that the Anti-Trust authorities around the world denied Nvidia buying this company is because they own the mobile market. If Nvidia would have bought Arm, then the entire mobile industry that is currently driven by 100 Armchips is going to be owned by Nvidia and nobody wanted that to happen.

But that just goes to show you how important Arm is now as far as AI Exposure, Artificial Intelligence. What? Arm is a CPU designer now in the smartphone aspect of it. The other problem with this company is that you know mobile is pretty much tapped out. This company is making a lot of money, but it's not growing.

As I'll show you, by glancing at the financials, you see that they're stagnating. Massive Market But no more growth at the end of the day. If you're buying this company, Does it mean that it's not going to benefit from the air? Revolution Not necessarily. Here's why let's go to the next page.

Even though they don't have direct exposure, what they do have is indirect exposure. Now if Nvidia sells a whole bunch of Gpus to drive AI like we talked about in the data center business, what do you think is going to happen to CPU sales. They're going to go through the roof. Everybody knows it.

There's no GPU without CPU it comes together. You know it's like love and marriage loving marriage go together like a horse and carriage. If you watch people think I'm talking about Frank Sinatra but I'm talking about Married with Children which was the show I Like to watch as a kid so Arm definitely has secondary exposure to AI but it doesn't have direct exponent to a which means it's going to benefit but it's not gonna go ballistic explosive like Nvidia and go through the stratosphere when SoftBank is trying to sell you this as if this is an AI play. Just make sure you listen to what I gotta say and tell them to off.

Now let's talk about the financials of the company because this is not a bad company, but it's definitely not what it's being marketed as. So The company generated Revenue in the past year of 2.7 billion dollars. now it's pretty much flat. Last year they did 2.68 Now if you take away the related party transactions basically deals that were done within the group, then they're actually down on revenues 10.

So it's not only not growing, if you take away the related party stuff, they're pretty. They're down 10 now. Net income is about 550 million dollars, which is not bad. Cash position is very, very strong.

One and a half billion dollars, virtually no debt and double assets and liabilities. Seven billion of assets, three billion availabilities. but their margins have been eroding. As I mentioned earlier, the smartphone mobile market is pretty much stagnating.

Lots of competition, lots of commodity commoditization. sorry so the margins are going down. So currently their margins went all the way down from 50 to currently 25 operating margin. So these guys, yes, they used to operate, you know, almost 50 operating margin currently down to 25.

Still a very nice margin. Now at the end of the day when I'm looking at this company I'm saying to myself, look, there's no growth here. It's still a great business though. The margins are not as good as they used to be, but 25 operating and 550 million of net income from 2.7 billion dollars of sales.

This is a great business. But and here's the big part here. Sorry Sir Mix A Lot Warren Buffett always says do not buy on the IPO day, he never buy stock on the IPO day. Why? Well that is because statistics show one simple thing: every single IPO that happened in the last five years.

If you bought it at the peak of the IPO day to this day in 2023, you have not recouped your money. You're down from 15 to 80 percent on those Insanity Now I'm gonna show two examples that show you how great companies can be insanely overpriced. On IPO day, snowflake came out hot like a bat out of hell 2020. if you bought a day one Peaks you're still down right now.

50 Rivian Shut up like a bat out of hell. If you bought review and on IPO day at the peak you're down 80. Even though Snowflake and Rivian are arguably some of the best companies in their category, every single time you buy at IPO picks you get screwed. And that is why I'm also looking at the valuation here.

Look, it's currently being traded at least in theory. Assuming you can get it at 50 bucks, which probably you can, you're probably looking at much much higher, but even at 50 bucks per share, you're looking at 20x sales. This is double the Tesla Tesla's country trading at Nine Time sales. These guys are marketed at twice the price of Tesla at the same price level as Nvidia Nvidia is currently 20 time sales.

so do you want to pay for arm the same as Nvidia and doubled in Tesla I Wouldn't I would wait till the drop. Now this is not to say that the company is bad, it's not. It's a great business which I personally would love to own, but would I want to overpay like crazy for this? No. I look at the history I look at the financials and I see something that is about to drop.

Yes, it will probably shoot up like crazy because of the retail frenzy on day one and my go-to crazy valuations. I don't know 200 300 I don't know and I don't care. The price point where I think it's reasonable to own this stock and it's not a bad stock to own. it's from 15 to 20 and maybe you have to wait a year for this to happen.

and maybe it never happens if it stays overvalued, so be it. Don't jump on every single hype cycle you see. Now, if you stay this long in the video and you want to learn our process of how to become a better investor, a better long-term investor, hear me out here. We have a few spots left in our Academy Our Academy is a very exclusive group.

I Do one-on-one calls with every single member to onboard them I do a zoom meeting with a little group and they teach a course on how to evaluate companies how to build your own DCF How to DCA into companies smart How do not overpay How to reach financials Now if you have the desire to learn the skill and how to fish and you don't want to be, you know Fed trade alerts I Would love for you to join us and check out the academy. We have no questions asked. 30-day money-back guarantee. If you don't like it, don't find Value money back right away.

no questions asked. no problem. In any case, thank you so much for joining me! I'm going to put a video right here on the screen for you guys to check out. This is a video I made showing you how to not overpay for very very good stock which is very relevant for this company by the way.

So check it out and I'll see you in the next video.