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

Hari Ramachandra presented Meta with its share price down roughly 20 percent from its peak. Meta generated $46 billion in free cash flow in 2025, carries a 41 percent operating margin, and grew revenue at an 18.45 percent CAGR over five years. Forecasted 2026 ad revenue of $243 billion would exceed Google's projected ad revenue by $3 billion. Meta's projected capex for AI infrastructure is $135 billion, and Hari's base case sees 46 percent upside from the price at time of recording. Hari argued that AI models are becoming commoditized, making distribution more advantageous than model quality, and that Meta's walled garden data becomes more valuable as compute costs fall because competitors cannot access it.

Stig countered that a free-compute world could allow everyone to collect and process equivalent data, eroding Meta's advantage entirely. TIP's internal model valued Meta at $775 while it traded near $600, but Stig cautioned that different scenario probabilities make outcomes look obvious only in hindsight and nothing about AI outcomes is currently obvious. Tobias called Meta a world-class business and Zuckerberg one of the best managers in business today, but his primary concern was not a sharp drawdown but a multi-year period of multiple compression while the capex cycle is worked through. He added that AI chips age faster than traditional infrastructure, making the capex bet riskier, and that it remains unclear whether Meta will generate revenue from AI capex above what it already earns.

Tobias pitched Booking Holdings, which owns Booking.com, Priceline, Kayak, and OpenTable. He estimated intrinsic value at approximately $220 per share against a trading price of roughly $167, a 30 percent discount to his DCF-based estimate, though he acknowledged that figure does not account for AI disruption risk. Booking is asset-light, has high return on invested capital, strong free cash flow, high switching costs, and has been buying back stock as the price has traded down. The central risk is AI disintermediation, where users book travel directly through an LLM without visiting Booking.com. Tobias noted this risk is not new since Google tried the same and Booking continued to grow regardless. Booking's counter-thesis is that LLMs will need to access its specialized database and supplier relationships, keeping it inside the purchase journey.

Hari agreed Booking is not disrupted in the short term because it can function as an API behind LLM interfaces, but cautioned that over the longer term Booking gradually loses mind share as users interact with it only through LLM clients rather than landing on its own website. Stig observed that Booking.com is one of the biggest spenders on Google advertising and that LLMs are expensive to run and may need Booking.com's advertising dollars to monetize travel use cases. He also highlighted Booking.com's strong foothold in Europe, where many independent hotels with few rooms depend on platforms like Booking.com to reach customers.

Stig presented Adobe, which has a market cap of roughly $100 billion and trades near a seven-year low. Adobe generates approximately $23 billion in revenue, with 96 percent from subscriptions across more than 41 million paying users. Stig identified switching costs as the most important competitive moat and noted Adobe previously navigated a major transition from CD-based software to cloud subscriptions successfully. He argued AI disruption fears may be overblown because professional designers have pride in their Adobe expertise and little incentive to adopt AI tools that level the playing field with entry-level workers. He acknowledged that if AI becomes ten times better than Adobe products, switching costs would eventually be overcome.

Stig's fair entry price is approximately $200 with an underwritten intrinsic value of roughly $350 to $400 against a current price around $224. The primary risk he identified is top-of-funnel erosion, where new users choose Canva or LLM-based tools and never enter the Adobe ecosystem at all. Tobias agreed the lower end of the market is most ripe for disruption and cited Canva as the most obvious competitor, while noting that precision editing likely still requires a suite of tools resembling Adobe's. Tobias added that in deep value scenarios revenue and earnings declines typically take much longer than the market expects, making sticky businesses like Adobe still valuable even in a slow decline phase, and that buybacks are the correct behavior if the company is transitioning into a cash cow stage.

Tobias provided an update on Building Brands, previously pitched around $27 and now trading just above $8. Revenue grew approximately 6 percent year over year, well below its historical rate, and the stock trades at just over five times forward earnings against his valuation range of $20 to $70. He continues to hold despite the drawdown, citing aggressive buybacks as a signal that management believes the stock is undervalued, though he acknowledged the product is close to being commoditized and the company carries a reasonable amount of debt. He argued that money has rotated away from small and micro cap stocks toward AI and GLP-1 narratives, leaving spreads between deep value and the broader market at extreme levels, and that forward returns from current levels look very compelling.