TIP825: Meta, Adobe, Booking Holding w/ Stig Brodersen, Tobias Carlisle & Hari Ramachandra

Hari Ramachandra pitched Meta while its share price was down roughly 20% from its peak. Meta has grown revenue at an 18.5% CAGR over five years, carries a 41% operating margin, generated $46 billion in free cash flow in 2025, and is forecast to produce $243 billion in ad revenue by 2026, exceeding Google's projected ad revenue by $3 billion. TIP's internal model valued Meta at $775 against a trading price of around $600, implying 46% upside in Hari's base case.

The central debate on Meta was whether $135 billion in planned capex on data centers and AI infrastructure will generate returns above what the business was already producing organically. Tobias Carlisle argued the key risk is not a single large drawdown but a multi-year period of underearning on that capex with multiple compression, and noted that AI chips age faster than traditional infrastructure like railways or fiber optic cables. Hari countered that AI model quality is commoditizing, shifting the advantage toward distribution, where Meta's walled garden data and scale are durable. Stig raised the counterpoint that if computing becomes essentially free, Meta's data advantage could be neutralized because everyone could collect and process equivalent data at minimal cost. Hari acknowledged current constraints around power, real estate, and GPU supply but pointed to specialized inference chips and model optimization as forces driving costs down.

Tobias Carlisle presented Booking Holdings, owner of Booking.com, Priceline, Agoda, Kayak, and OpenTable, valuing it at roughly $220 against a trading price of about $167 on a DCF basis. The discount partly reflects fears of LLM disintermediation. Booking's asset-light model, which avoids holding hotel inventory, protected it relative to competitors during 2020. Tobias's bull case is that LLMs will need to access travel inventory through Booking.com rather than bypass it, and his base case is steady growth in line with historical travel trends, with bull and bear cases roughly canceling out.

Stig was more skeptical about Booking's long-term position, arguing that an LLM could plausibly book a hotel directly given user criteria, eliminating Booking.com as an intermediary. He noted Booking.com is one of the largest spenders on Google advertising, making it an attractive monetization target. Hari agreed Booking could function as a headless API plug-in to ChatGPT in the near term but raised concern about gradual loss of direct customer relationships and cross-selling ability over time. Stig noted that independent hotels in Europe, which lack large brand chains, are heavily dependent on Booking.com, giving it a durable foothold in that specific market.

Stig Brodersen presented Adobe, which was trading near a seven-year low and close to its 52-week low at the time of recording. Adobe has a market cap of roughly $100 billion, $23 billion in revenue that is 96% subscription-based, 41 million paying users, 22,000 large enterprise customers including government bodies and Hollywood studios, and 850 million monthly active free users. The digital media segment representing Creative Cloud and Document Cloud accounts for 76% of the business. Stig identified switching costs as Adobe's most important moat, reinforced by professional inertia and the fact that entire teams are trained on the software. He also noted that software is a negligible fraction of total creative production costs, with a company generating $5 million in turnover spending roughly $3,000 annually on Adobe Suite, making churn unlikely for business customers even if the $70 monthly individual subscription is more meaningful for freelancers.

Tobias values Adobe in the range of $350 to $400 per share and considered $200 an attractive entry point, with the stock recently trading around $224. He sees Adobe's strength in precision creative control, arguing that AI can generate content but professionals need to constantly tweak results, and that precision document editing will likely still require a suite of tools resembling Adobe. Both Stig and Tobias agree the lower end of the market, exemplified by Canva, is most ripe for disruption, while the more pressing structural risk is at the top of the funnel, where new users may never enter the Adobe ecosystem at all. Stig cautioned that if AI improves by an order of magnitude, switching costs may eventually be overcome despite Adobe's entrenched position.

Tobias provided an update on a prior pitch, Bellring Brands, purchased at approximately $27 and since fallen to just above $8. Revenue grew only around 6% year over year against a much higher historical rate, and the company carries meaningful debt relative to its now much smaller market cap. He attributes the decline to growth missing expectations, compounded by consumer health concerns over seed oils and soy in its products in an increasingly commoditized category. His valuation range spans $20 at the low end to $70 at the high end, making the current price roughly half his low-end scenario, and he plans to hold through the next few quarterly reports. Tobias described the spread between deep value small and mid cap stocks and the broader market as extreme, with many small cap businesses beginning to inflect operationally even though their stock prices have not yet reflected the improvement.