Barlow’s Research Roundup: Formula One racing a top stock pick at Morgan Stanley

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Own a piece of a global racing series

Liberty’s Formula One racing series (FWONK-Q) is a top pick at Morgan Stanley, according to Morgan’s head of research Katy Huberty,

“We believe the scarcity, urgency, and interactivity of sports and live experiences should drive superior monetization and pricing power. We argue that markets are currently underpricing these advantages in shares of our ‘Live 5′: Liberty Formula One, TKO, Disney, Live Nation, and Sphere (all rated OW). FWONK is our Top Pick in U.S. M&E, as we have increased conviction in the company’s growth outlook: It has a young, affluent, highly engaged, and growing global fan base of over 800 million (growing up 12 per cent year-over-year) while still remaining under-penetrated and under-monetized in the US and Asia. Interestingly, the aggregate value of the F1 teams (according to Forbes) is 25 per cent greater than FWONK’s current market value. Given the significant cash flow generation of Liberty F1 compared to the average team and FWONK’s ownership of MotoGP, the stock’s discount versus the teams is unwarranted, in our view”

They should offer perks, like tickets and good hotel rooms in Montreal, for stockholders. Undervaluation problem solved. Interesting for fans, the series is on the verge of announcing new engine changes that will end the hybrid era in favour of ICE engines with sustainable fuels.

Whose winning the AI race?

BofA Securities analyst Justin Post provided a scorecard for the major AI players,

“April global daily avg. web visits to Google increased 4 per cent year-over-year to 2.8 billion, ChatGPT was up 7 per cent year-over-year to 183 million, Gemini was up 572 per cent year-over-year to 92 million, and Claude was up 745 per cent year-over-year to 27 million. On month-over-month basis, Google traffic was up 1 per cent, ChatGPT was down 1 per cent, Gemini was up 9 per cent and Claude was up 33 per cent. U.S. web visits to Google were up 2 per cent year-over-year to 546 million, ChatGPT was up 30 per cent year-over-year to 34 million (6 per cent of Google), Bing was down 6 per cent year-over-year to 44 million. On month-over-month basis, Google traffic was up 1 per cent, ChatGPT was up 1 per cent, Claude was up 28 per cent, and Gemini was up 8 per cent. DAUs [daily average users] : Gemini up 13 per cent month-over-month, ChatGPT flat, Google up 1 per cent In Apr, per Sensor Tower, Google global mobile DAUs increased 12 per cent year-over-year (up 1 per cent month-over-month) to 2.2 billion, ChatGPT up 88 per cent year-over-year to 429 million (flat month-over-month), Gemini up 336 per cent year-over-year to 101 million (up 13 per cent month-over-month), Claude up 1,252 per cent to 14 million (up 41 per cent month-over-month), Perplexity up 104 per cent year-over-year to 9million, & Grok was at 11million. In Apr, Gemini added 11 million DAUs month-over-month, ChatGPT was up 2 million, and Claude up 4 million … n Apr, Google traffic and user growth was largely stable while ChatGPT growth has decelerated, possibly due to growing traction of Claude & Gemini”

This strategist is very bullish

Evercore ISI strategist Julian Emanuel outlines his bull case,

“Navigation – All Rise, Especially Earnings: “Buy at the sound of cannons” has been prescient advice. For equities, the ferocity of the rally off the 3/30 low (only exceeded by August 1982) has been aided by a Fed which isn’t going to hike, $7.6-trillion in money market stockpiles and $1-trillion in AI Capex. The Investment implications are rippling across Corporate America.S&P 500 1Q26 EPS is set to grow 20 per cent plus year-over-year. And it isn’t just AI exposed Info Tech, Comm. Svcs. and Cons. Disc. (EVR ISI Strategy O/P sectors). Financials, Industrials and Energy are also strong. Raise 2026 S&P 500 EPS to $310 (from $304) and in 2027 to $333 (from $327). 2026e EPS at up 13.6 per cent YoY reinforces forecast for SPX 7,750 at YE 2026. Stocks are higher 10/11 years with double digit EPS growth, averaging 13 per cent.

“Remain fully invested, tilted to large cap tech as NDX multiples remain attractive vs SPX, Tech has outperformed off the 3/30 trough; Info Tech and Comm Svcs are the only two sectors to outperform since the “AI Revolution” Bull began. As in 1999, the sectors which led the Structural Bull are set to do so again in 2026 Yet unseen “full on FOMO chase” consistent with prior peaks, could catalyze an overshoot to SPX 9,000 Bull Case Some of the most explosive price action lies ahead as Generational IPOs could further rouse the Animal Spirits. That said, continue to hold QQQ June Put spreads against a fully invested portfolio.”

Bluesky post of the day

Diversion

“Scientists Say They’ve Figured Out What Causes “Ghosts”" - Futurism