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

Hari Ramachandra pitched Meta after its share price fell 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 holds a 30% net margin. Hari projects Meta's ad revenue will reach $243 billion in 2026, exceeding Google's projected ad revenue by $3 billion. His base case implies 46% upside from the pitch price, and TIP's internal model valued Meta at $775 against a trading price of roughly $600.

The central risk Tobias Carlisle identified is Meta's projected $135 billion in capex for data centers and AI infrastructure. His concern is not a single large drawdown but a multi-year period of underearning on that investment combined with multiple compression. He noted AI chips depreciate faster than traditional infrastructure like railways or fiber optic cable, and it remains unclear whether AI capex will generate revenue above and beyond what Meta's existing advertising business already produces. He also observed that all major AI players are spending massive capex simultaneously, potentially causing each other to overspend. Hari countered that AI model commoditization shifts the advantage toward distribution, where Meta's proprietary data gives it a durable edge as compute costs fall, enabling better ad targeting and potential subscription features, though those are excluded from his base case. Stig Brodersen raised a tension: if computing becomes essentially free, the same condition that lets Meta exploit its data could allow competitors to collect and process equivalent data, eroding that edge.

Tobias Carlisle pitched Booking Holdings, which owns Booking.com, Priceline, Agoda, Kayak, and OpenTable. He described the business as capital light because it does not purchase hotel inventory upfront, a structure that protected it relative to competitors during 2020. He cited high return on invested capital, steady long-term revenue growth, strong free cash flow, and low asset intensity as core qualities, and estimated intrinsic value at roughly $220 per share against a trading price of approximately $167, a discount of about 30% to his DCF estimate. His base case is that Booking continues growing in line with historical travel rates, with bull and bear cases roughly offsetting. He acknowledged travel is cyclical and that a weaker economy could slow revenue growth.

On AI disruption, Carlisle argued that LLMs will need to access travel inventory through Booking.com rather than disintermediate it, potentially accelerating growth in the bull case. Hari partially agreed on the moat through supplier relationships but raised the concern that acting as a headless API for LLMs gradually erodes Booking's direct customer relationship and its on-site cross-selling surface. Stig said he used LLMs more on a recent Paris trip than on any previous trip and would prefer to book hotels entirely through an LLM, citing too many options on the platform. He noted Booking.com is one of the largest spenders on Google advertising and that Google previously attempted direct hotel and flight booking without stopping Booking's growth. He also observed that independent European hotels are heavily dependent on Booking.com given fewer large brand chains than in the United States, and suggested LLMs may ultimately need Booking.com because travel advertising is an obvious monetization avenue for expensive AI businesses.

Stig Brodersen presented Adobe, which trades near a seven-year low with a market cap of roughly $100 billion, revenue of approximately $23 billion, 96% subscription-based, 41 million paying Creative Cloud users, and 22,000 large enterprise customers including Hollywood studios, government bodies, and universities. He underwrote the stock at $350 to $400 per share and viewed $200 as an attractive entry, with the stock recently trading around $224. Stig argued switching costs are higher than they appear because entire teams are trained on the software, the annual cost is negligible relative to salaries and equipment, and professional designers have little incentive to adopt tools that level the playing field with entry-level workers. He noted that at Investors Podcast Network, 15 of 20 team members use Adobe and the total cost is well under 1% of total costs. Carlisle agreed AI is the primary risk but noted precision editing likely still requires a suite resembling Adobe, and that a slow-decline cash cow with active buybacks can still be valuable. The primary risk Stig identified is top-of-funnel disruption, where tools like Canva or LLMs prevent new users from entering the Adobe ecosystem, threatening the future pipeline of corporate users since students adopting Adobe cheaply is a key driver of long-term enterprise adoption.

Carlisle provided an update on Bellarmine Brands, whose stock has fallen from roughly $27 to just above $8 over approximately 12 months. The business grew only around 6% year over year versus historically faster rates and carries meaningful debt. The company makes ready-to-drink protein drinks facing criticism for containing seed oils and soy in an increasingly crowded and commoditized category. Despite this, management continues aggressive buybacks, which Carlisle interprets as a signal of undervaluation. His valuation range runs from $20 at the low end to $70 at the high end against a current price of roughly $8, with a forward earnings multiple just above five times, and he stated he will hold through the next few quarterly reports. He noted that spreads between deep value and the broader market are as extreme as they have been since he began running his funds, with small and mid-cap stocks broadly declining while AI-related names have rallied.