Jefferies Initiates Coverage on Pershing Square with Buy and Hold Ratings
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4 days ago
0mins
Source: seekingalpha
- Coverage Initiation: Jefferies has initiated coverage on Pershing Square USA (PSUS) with a Buy rating and Pershing Square Inc. (PS) with a Hold recommendation, as analyst Matthew Hose believes PSUS will benefit from a strong performance track record and attractive valuation.
- Performance Comparison: PSUS is expected to mirror the performance of other Pershing Square core funds, which have outperformed the S&P 500 over the long term, despite PSUS losing approximately 17% from its IPO price, closing at $41.30 last Friday.
- Investment Outlook: Jefferies sees PSUS's long-term net returns bolstered by the absence of a performance fee, improvement in net asset value after full investment of the portfolio, and increased liquidity, while the fund's strong marketability due to its manager and portfolio adds to its appeal.
- Capital Structure Analysis: Jefferies rates PS as Hold with a $40 price target, noting that analyst Daniel Fannon highlights the firm's capital base as structurally different from other traditional and alternative asset managers, with about 96% of its fee-paying capital classified as permanent, indicating a balanced risk/reward profile.
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Analyst Views on PSUS
Wall Street analysts forecast PSUS stock price to rise
0 Analyst Rating
0 Buy
0 Hold
0 Sell
Current: 40.220
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Current: 40.220
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About PSUS
Pershing Square USA, Ltd. (the Fund) is a non-diversified, closed-end investment company. It is designed primarily for long-term investors and is not intended to be a trading vehicle. The Fund's investment objective is to preserve capital and seek maximum, long-term capital appreciation commensurate with reasonable risk. The Fund shall seek to achieve its investment objective by investing principally in common stocks that Pershing Square Capital Management, L.P., a Delaware limited partnership (the Adviser), believes exhibit significant valuation discrepancies between current trading prices and intrinsic business (or net asset) value, often with a catalyst for value recognition. The Adviser expects that the substantial majority of the Fund's investment portfolio shall be invested in 12 to 15 core long-term holdings in large-capitalization, investment grade, free-cash-flow-generative North American durable growth companies. The Fund has no operations.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Jefferies Initiates Coverage on Pershing Square with Buy and Hold Ratings
- Coverage Initiation: Jefferies has initiated coverage on Pershing Square USA (PSUS) with a Buy rating and Pershing Square Inc. (PS) with a Hold recommendation, as analyst Matthew Hose believes PSUS will benefit from a strong performance track record and attractive valuation.
- Performance Comparison: PSUS is expected to mirror the performance of other Pershing Square core funds, which have outperformed the S&P 500 over the long term, despite PSUS losing approximately 17% from its IPO price, closing at $41.30 last Friday.
- Investment Outlook: Jefferies sees PSUS's long-term net returns bolstered by the absence of a performance fee, improvement in net asset value after full investment of the portfolio, and increased liquidity, while the fund's strong marketability due to its manager and portfolio adds to its appeal.
- Capital Structure Analysis: Jefferies rates PS as Hold with a $40 price target, noting that analyst Daniel Fannon highlights the firm's capital base as structurally different from other traditional and alternative asset managers, with about 96% of its fee-paying capital classified as permanent, indicating a balanced risk/reward profile.
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Billionaire Ackman Increases Stake in Microsoft Amid Fears
- Investment Positioning: Billionaire investor Bill Ackman disclosed that his hedge fund, Pershing Square USA, has increased its stake in Microsoft, selling most of its holdings in Alphabet, which reflects confidence in Microsoft's future amidst current market valuation concerns.
- Market Concerns: Microsoft stock has been impacted by fears of a 'SaaS-pocalypse' and its dependence on OpenAI, leading to its valuation dropping to one of the lowest points in a decade; Ackman believes these fears are exaggerated, emphasizing the resilience of Microsoft's M365 suite.
- Strategic Investment: Microsoft's $5 billion investment in Anthropic and its partnership with OpenAI, despite competitive pressures, demonstrate its strategic positioning in the AI sector, which is expected to drive Azure's continued growth, even as OpenAI's market leadership is questioned.
- Technological Innovation: Microsoft has introduced custom AI models and inference chips that reduce costs and enhance performance, with Nadella noting that the new chips outperform competitors in tokens per dollar, indicating Microsoft's competitive edge and viability in the AI landscape.
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Ackman Liquidates Google Stake to Fund Microsoft Investment
- Portfolio Rebalancing: Billionaire investor Bill Ackman clarified that his hedge fund's complete liquidation of its stake in Google parent Alphabet was driven by portfolio rebalancing rather than negative sentiment, demonstrating confidence in the company's long-term prospects.
- New Microsoft Investment: Ackman's Pershing Square used proceeds from the Alphabet exit to establish a massive new $2.4 billion position in Microsoft, indicating a strategic focus on the technology sector.
- Market Response: Amid investor anxiety over Microsoft's $190 billion AI capital expenditure plan, Pershing Square began quietly accumulating Microsoft shares in February, successfully capitalizing on a double-digit decline in the stock price.
- Fund Structural Adjustment: This transaction not only reshapes Ackman's portfolio but also integrates Microsoft as a foundational asset for his newly launched closed-end fund, Pershing Square USA, further enhancing his concentrated investment strategy within the
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Bill Gates' Charity Foundation Fully Exits Microsoft Stake
- Gates Foundation Sells Shares: Bill Gates' charity foundation disclosed the sale of its final 7.7 million Microsoft shares in Q1, valued at approximately $3.2 billion, marking a complete exit from a stock that once heavily anchored its portfolio, impacting its investment diversity.
- Ackman Increases Microsoft Stake: Billionaire Bill Ackman's Pershing Square revealed the acquisition of 5.6 million Microsoft shares valued at around $2.3 billion, indicating confidence in Microsoft's future potential despite a 6.4% decline in stock value over the past year.
- Investment Decision Influence: The sole trustee of the Gates Foundation is Bill Gates, who influences investment decisions, although managed by Cascade Asset Management; the complete exit may affect market confidence in Microsoft.
- Market Sentiment Analysis: According to Stocktwits, retail sentiment on Microsoft is 'neutral' with high message volumes, reflecting cautious investor attitudes towards Microsoft's future performance amid concerns that AI may displace traditional software.
See More
Ackman Increases Microsoft Stake, Focuses on AI and Cloud Business
- Increased Microsoft Stake: Ackman has disclosed that Pershing Square Capital Management has taken a new stake in Microsoft, reflecting confidence in the company's growth potential, particularly in AI and cloud computing sectors.
- Market Rebound Opportunity: Despite a 23% decline in Microsoft's stock in Q1 2023, Ackman views the accumulation of shares at a forward P/E of 21 as a buying opportunity, indicating a market undervaluation of its long-term prospects.
- Cloud and AI Advantages: Microsoft's Azure cloud platform and Microsoft 365 suite account for approximately 70% of its earnings, and Ackman believes these segments will benefit from the accelerating demand for AI as enterprise IT workloads migrate to the cloud.
- Value of OpenAI Investment: Ackman highlights Microsoft's 27% economic interest in OpenAI, valued at $200 billion, which represents about 7% of Microsoft's total market cap, further bolstering investor confidence in Microsoft's future growth.
See More
Ackman Increases Microsoft Stake, Sees Long-Term Value
- Investor Confidence: Billionaire hedge fund manager Bill Ackman revealed that Pershing Square has recently increased its stake in Microsoft, believing that the market underestimates the resilience of M365, which is expected to drive long-term growth for the company.
- Core Business Performance: Microsoft's two core franchises, M365 and Azure, generate approximately 70% of its profits, with M365 regarded as the dominant workplace productivity platform, used daily by over 450 million people, indicating its deep integration within enterprises.
- Market Opportunities: Ackman pointed out that the current market volatility and the rise of passive index investing have created rare dislocations in high-quality stocks, similar to his previous investments in Google, Amazon, and Meta, asserting that MSFT offers compelling long-term value at today's valuation.
- Valuation Analysis: Pershing Square began building its Microsoft position in February at roughly 21x forward earnings, which is close to the broader market multiple and below Microsoft's historical average, reflecting confidence in future growth.
See More
Jefferies Initiates Coverage on Pershing Square with Buy and Hold Ratings
- Coverage Initiation: Jefferies has initiated coverage on Pershing Square USA (PSUS) with a Buy rating and Pershing Square Inc. (PS) with a Hold recommendation, as analyst Matthew Hose believes PSUS will benefit from a strong performance track record and attractive valuation.
- Performance Comparison: PSUS is expected to mirror the performance of other Pershing Square core funds, which have outperformed the S&P 500 over the long term, despite PSUS losing approximately 17% from its IPO price, closing at $41.30 last Friday.
- Investment Outlook: Jefferies sees PSUS's long-term net returns bolstered by the absence of a performance fee, improvement in net asset value after full investment of the portfolio, and increased liquidity, while the fund's strong marketability due to its manager and portfolio adds to its appeal.
- Capital Structure Analysis: Jefferies rates PS as Hold with a $40 price target, noting that analyst Daniel Fannon highlights the firm's capital base as structurally different from other traditional and alternative asset managers, with about 96% of its fee-paying capital classified as permanent, indicating a balanced risk/reward profile.
See More
Billionaire Ackman Increases Stake in Microsoft Amid Fears
- Investment Positioning: Billionaire investor Bill Ackman disclosed that his hedge fund, Pershing Square USA, has increased its stake in Microsoft, selling most of its holdings in Alphabet, which reflects confidence in Microsoft's future amidst current market valuation concerns.
- Market Concerns: Microsoft stock has been impacted by fears of a 'SaaS-pocalypse' and its dependence on OpenAI, leading to its valuation dropping to one of the lowest points in a decade; Ackman believes these fears are exaggerated, emphasizing the resilience of Microsoft's M365 suite.
- Strategic Investment: Microsoft's $5 billion investment in Anthropic and its partnership with OpenAI, despite competitive pressures, demonstrate its strategic positioning in the AI sector, which is expected to drive Azure's continued growth, even as OpenAI's market leadership is questioned.
- Technological Innovation: Microsoft has introduced custom AI models and inference chips that reduce costs and enhance performance, with Nadella noting that the new chips outperform competitors in tokens per dollar, indicating Microsoft's competitive edge and viability in the AI landscape.
See More
Ackman Liquidates Google Stake to Fund Microsoft Investment
- Portfolio Rebalancing: Billionaire investor Bill Ackman clarified that his hedge fund's complete liquidation of its stake in Google parent Alphabet was driven by portfolio rebalancing rather than negative sentiment, demonstrating confidence in the company's long-term prospects.
- New Microsoft Investment: Ackman's Pershing Square used proceeds from the Alphabet exit to establish a massive new $2.4 billion position in Microsoft, indicating a strategic focus on the technology sector.
- Market Response: Amid investor anxiety over Microsoft's $190 billion AI capital expenditure plan, Pershing Square began quietly accumulating Microsoft shares in February, successfully capitalizing on a double-digit decline in the stock price.
- Fund Structural Adjustment: This transaction not only reshapes Ackman's portfolio but also integrates Microsoft as a foundational asset for his newly launched closed-end fund, Pershing Square USA, further enhancing his concentrated investment strategy within the
See More
Bill Gates' Charity Foundation Fully Exits Microsoft Stake
- Gates Foundation Sells Shares: Bill Gates' charity foundation disclosed the sale of its final 7.7 million Microsoft shares in Q1, valued at approximately $3.2 billion, marking a complete exit from a stock that once heavily anchored its portfolio, impacting its investment diversity.
- Ackman Increases Microsoft Stake: Billionaire Bill Ackman's Pershing Square revealed the acquisition of 5.6 million Microsoft shares valued at around $2.3 billion, indicating confidence in Microsoft's future potential despite a 6.4% decline in stock value over the past year.
- Investment Decision Influence: The sole trustee of the Gates Foundation is Bill Gates, who influences investment decisions, although managed by Cascade Asset Management; the complete exit may affect market confidence in Microsoft.
- Market Sentiment Analysis: According to Stocktwits, retail sentiment on Microsoft is 'neutral' with high message volumes, reflecting cautious investor attitudes towards Microsoft's future performance amid concerns that AI may displace traditional software.
See More
Ackman Increases Microsoft Stake, Focuses on AI and Cloud Business
- Increased Microsoft Stake: Ackman has disclosed that Pershing Square Capital Management has taken a new stake in Microsoft, reflecting confidence in the company's growth potential, particularly in AI and cloud computing sectors.
- Market Rebound Opportunity: Despite a 23% decline in Microsoft's stock in Q1 2023, Ackman views the accumulation of shares at a forward P/E of 21 as a buying opportunity, indicating a market undervaluation of its long-term prospects.
- Cloud and AI Advantages: Microsoft's Azure cloud platform and Microsoft 365 suite account for approximately 70% of its earnings, and Ackman believes these segments will benefit from the accelerating demand for AI as enterprise IT workloads migrate to the cloud.
- Value of OpenAI Investment: Ackman highlights Microsoft's 27% economic interest in OpenAI, valued at $200 billion, which represents about 7% of Microsoft's total market cap, further bolstering investor confidence in Microsoft's future growth.
See More
Ackman Increases Microsoft Stake, Sees Long-Term Value
- Investor Confidence: Billionaire hedge fund manager Bill Ackman revealed that Pershing Square has recently increased its stake in Microsoft, believing that the market underestimates the resilience of M365, which is expected to drive long-term growth for the company.
- Core Business Performance: Microsoft's two core franchises, M365 and Azure, generate approximately 70% of its profits, with M365 regarded as the dominant workplace productivity platform, used daily by over 450 million people, indicating its deep integration within enterprises.
- Market Opportunities: Ackman pointed out that the current market volatility and the rise of passive index investing have created rare dislocations in high-quality stocks, similar to his previous investments in Google, Amazon, and Meta, asserting that MSFT offers compelling long-term value at today's valuation.
- Valuation Analysis: Pershing Square began building its Microsoft position in February at roughly 21x forward earnings, which is close to the broader market multiple and below Microsoft's historical average, reflecting confidence in future growth.
See More
