March 2023 1D0-435 Exam Dumps

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By Christian Aboujaoude, chief technology officer at Keck Medicine, USC

In the pre-pandemic days, security solutions could be more basic. Securing the perimeter could be likened to locking the door of your house. But with remote workers taking devices off premises and sometimes using their own, securing the workplace requires a new approach. Sophisticated threats come from every angle, and preparing a complete defense is vital.

We are in an environment of constant change and unexpected events. Just when many people began welcoming a post-pandemic world, cases started rising again, and the need to apply proper controls, governance, education, and tools for remote workers once more became top of mind for many cybersecurity leaders.

For CISOs and their teams, the challenge is to build a culture that facilitates the ability to adapt to change on an ongoing, continuous basis. This requires a new mindset in securing all users — remote users, in particular. It also means evolving your approach so that cybersecurity is no longer viewed by business management as a cost center, but rather as a means of competitive differentiation and innovation for the organization.

In my view, there are three critical aspects to changing the culture and mindset to adapt to current and future cybersecurity challenges, particularly as remote work becomes more deeply ingrained as a business requirement:

1. Education: Develop a deep understanding of every aspect of your organization and spend a lot of time and attention on education – for everyone, whether they are on your security teams, in your executive suite, front-line workers on-premises, remote workers, or anywhere else in your ecosystem.

2. Technology: Even in some larger organizations, basic technologies – such as multi-factor authentication or secure VPN – are not given the priority necessary to allow remote workers to operate in a more controlled environment. It is important to have the basics under control before adding innovations, such as Zero Trust.

3. Procedures and practices: It is vital to maintain a philosophy of ongoing education along with continuous evaluation of the technology your organization is using or, in some cases, not using. From a procedural perspective, you must understand everything in your environment. Once you understand it, you can assess and address its impact on your current risk and overall risk profile.

1. Leveraging education to secure remote workers

The reason education tops my list is that over 80% of cybersecurity events relate to people. Everyone needs to truly understand what cybersecurity is — and that it’s not just a password or two-factor authentication. Cybersecurity is an approach — a mechanism. It’s how you go about conducting work. Achieving a strong cybersecurity posture takes cultural change, behavioral change, and constant learning.

When users were largely on premises, most organizations could compensate for potentially dangerous behavior by having multiple controls to help protect them. However, when those same people go remote, there’s a bit of a loss of control and governance. There are technologies to help cover user behavior, but it is better when the behavior doesn’t exist in the first place.

This means that we must educate folks on cyber hygiene, making sure they understand that the steps they take at work may not be the steps they take when they are working remotely or from home. This is especially critical in this very open-ended environment, where a user’s device may be used by other people in the home.

2. Leveraging technology to secure remote workers

Strong foundations are also important from a technological perspective. You must make sure you have controls, processes, and governance for multi-factor authentication and secure VPN. It’s those things that pave the way for Zero Trust.

My best advice is to approach everything from the bottom up, understanding not just your inventory but every single behavior that takes place from a public-facing standpoint. This is especially important for remote workers. I good place to start is by asking yourself and your team key questions:

• Do we know what our environment actually contains?
• Are we aware of all the devices and services running in our environment?
• Do we have an inventory of all of our IoT devices?
• Do we understand the needs and potential risks of all of our users?
• Do we know the needs of each application and user based on key criteria such as performance, availability, resilience, data usage, and, of course, security?

Fundamentally, you need technology tools that can exist on your network and identify all connected devices. I’m talking about tools that are able to actually interrogate the network, understand packets, and capture specific metadata for each device to determine how it lives on the network.

3. Leveraging procedures and practices to secure remote workers

If you haven’t figured it out by now, I’m a huge stickler for inventory. From a process standpoint, you must understand your inventory: what it is, what it means, and why it matters — as well as its impact on your business and your security posture. 

So, from a procedure standpoint, you need something in place that is able to identify what you have in your environment. Then you must relate and correlate that information to any situation, to the point where you can say about any device: “This device is connected to this application that lives here and does that.”

From there, you can build a configuration management database (CMDB) approach to really understand your environment and have processes in place to integrate with your ITSM tool so you can execute the specific actions you need to take.

Maintaining ongoing processes also relates back to my first point: education. CISOs need to ensure training and education are continuing when people work from home or remote locations, and they need to have tests, controls, processes, and governance to continuously identify and correct non-malicious but potentially dangerous behavior. Quick-hit training without repetition rarely are effective.

My advice for CISOs and other cyber leaders

If I could leave CISOs and other cybersecurity leaders with a key takeaway from this article, it would be this: Every CISO should figure out how to balance the business operations of their organization with a security mindset that is not destructive to the business but is, in fact, built into the fabric of the business. In order to do that, I urge all security professionals to take the time to understand as much as they can about the business in which they work.

Note the emphasis on the business, not cybersecurity. Most security professionals know security exceptionally well. But if they don’t have an equally exceptional understanding of their business or organizational needs, they are potentially setting themselves — and their organizations — up for failure.

Whether you are the CISO or anyone on the security team, you need to be able to go to the people in any department and have detailed conversations with them related to their protection and their business needs. It may start with something simple: “We saw that you have these devices. They are not in compliance with our security posture, and we need to take this action or we will be forced to put it offline.”

Of course, the immediate reaction will be: “You can’t do that!” And the response is: “Yes, we know. That’s why we have to fix the problem.” A solution-focused and service-focused mindset is key.

The opportunity ahead

Remote work is here to stay. To make it successful, you have to make it secure. Cybersecurity leaders and their teams have an opportunity to make huge contributions to their organizations over the next few years by developing cyber-aware cultures that are both agile and responsive to the changing needs of their organizations.

By focusing on the fundamentals, CISOs can prepare themselves, their teams, and their organizations to be ready for whatever comes next. As we’ve learned all too well over the past few years, change is the only constant in cybersecurity. Be ready.

For more perspectives on cybersecurity, visit us online.

About the author:

Security Roundtable author, Christian Aboujaoude, is the chief technology officer at Keck Medicine, USC.

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GoPro's (NASDAQ:GPRO) success in pivoting toward a subscription-based model will help it grow revenues after the company becomes profitable for a fourth consecutive year on a non-GAAP basis. Moreover, as GoPro's paying subscribers exceeded 2 million in 2023 with $100 million in annual recurring revenue at 70%-80% gross margins, the company has succeeded in building brand recognition that will create competitive advantages. Accordingly, my recommendation for investors with shares of GoPro in their portfolio is to hold them; for investors who do not, my recommendation is to buy them for the long term.

About GoPro

GoPro, headquartered in San Mateo, Calif., develops and sells cameras and wearable accessories, subscription services, and software in the U.S. and globally. The company was founded in 2002 as Woodman Labs and changed its name to GoPro in February 2014.

GoPro targets consumers and professional users interested in capturing high-quality photos and videos for personal or professional use. The company's primary business model is selling its hardware products, such as cameras and accessories, directly to consumers through its website and retail channels. GoPro also generates revenue from licensing its technology and user-generated content to third-party companies. Additionally, the company offers cloud services and subscription plans for accessing and sharing footage captured on its cameras.

In the last 30 days, GoPro's share price has witnessed an appreciation of 10.9%. However, the share price declined by 11.9% on Friday, Feb. 3, after the earnings report.

On Feb. 2, the company released its earnings summary for Q4 2023. It posted impressive subscription revenues that went from $20.9M in Q3 2023 to $21.9M in Q4 2023, which was growth of 20.6% in subscription revenues. Furthermore, it had subscriber growth of 8% QoQ from Q3 2023 to Q4 2023.

The company shipped 850,000 cameras in Q4 2023, an increase of 29.4% from 797,000 cameras in Q3 2023. Additionally, GoPro posted impressive 22.5% QoQ revenue growth, from $305.1 million in Q3 2023 to $321 million in Q4 2023. Though the company's gross margins declined from 38.2% in Q3 2023 to 35.1% in Q4 2023, its revenue mix from GoPro.com as a percentage of overall revenues has improved from 32.3% in Q3 2023 to 39.9% in Q4 2023. The Americas continues to be GoPro's biggest market, with 47.6% of its revenues coming from the U.S.

However, its revenues across geographies decreased this year, with Europe decreasing by 24%, the Americas decreasing by 21%, and APAC decreasing by 4% annually due to macroeconomic factors and a strong U.S. dollar. Nevertheless, on an annual basis, APAC was the shining light growing at 9% as most regions in APAC emerged from 2021 lockdowns.

GoPro's D2C revenues are 40% of its overall revenue in Q4 2023 and 38% in 2023, up from 33% and 34%, respectively. Another positive factor is that its GoPro.com business posted 5% growth in 2023 over 2021, driven primarily by 52% growth in subscription and services revenues.

GoPro closed 2023 with revenues of $1.09 billion with 9% EBITDA, generating $95 million in EBITDA. In addition, the company plans to utilize $40 million of its EBITDA proceeds for share buybacks to cover its stock compensation expense.

Despite the strong USD, GoPro's latest results demonstrate the strength of its subscription-based business model's strong execution. According to the Founder, CEO, and Chairman of GoPro Nicholas Woodman:

Our high-margin subscription business is a powerful financial engine, contributing meaningfully to our bottom line and, significantly, building LTV into our model as the GoPro subscription is becoming increasingly synonymous with being a GoPro camera owner.

For GoPro, driving subscriber engagement is their crucial focus, supporting retention and LTV. Again, as per the CEO:

New features that enhance capability and convenience are key drivers of engagement - like automatic highlight videos sent to subscribers after their footage auto-uploads to their GoPro cloud accounts and the automatic clearing of the camera's SD card once that upload is complete.

These new features helped subscribers connect their HERO11 cameras to the cloud and have contributed to an increase in camera usage among its customer base, resulting in a 58% increase in subscribers annually. As per Woodman:

We believe these features also contributed to increased camera usage amongst our broader customer base - in 2023, camera usage increased 15% year over year to approximately 15 million unique cameras connecting to our app.

The company managed to grow its subscriber base by 43% last year, with its subscriber count exceeding 2.25 million. Thus, GoPro's subscription currently generates more than $100 million in annual recurring revenues with an impressive gross margin of 75%. The company believes its future lies in a subscription-based business model and is laser focused on pursuing this significant high-margin growth opportunity.

Furthermore, its Quik model subscription that serves non-GoPro-owning customers has grown 26% annually, reflecting the company's commitment to engaging and retaining customers that don't own a GoPro. The company treats these customers as an important TAM-expanding opportunity and plans to target them further with its upcoming premier-tier desktop app launch.

The company has also done a restructuring exercise by closing its camera production facilities in Mexico, incurring an $8 million restructuring charge. The company expects its production facilities in Thailand and China to meet future demand.

The company's balance sheet is healthy as it ended Q4 2023 with $367 million in cash reserves and $224 million net of debt. In addition, as the company pivots to the subscription model, its DSO outstanding has been reduced to 22 days. Furthermore, the company has shown prudence in managing its supply chain and inventory by ending its inventory days at 55 days.

In the future

As the macroeconomic environment remains challenging, forecasting growth for GoPro becomes difficult. Still, I will put forward my best estimate by looking at the firm's current business model and accounting for the possibility of a global recession in 2023, leading to cautious customer spending. From a demand perspective, the first quarter generally is the weakest for GoPro, and I assume that will not change in Q1 2023. The company forecast $165 million in Q1 2023, which is 45% of Q4 2023 revenues. As revenues decline, it will also result in a contraction of gross margin to 36% due to a stronger USD.

In the future, GoPro's management has decided to focus on the following priorities:

• Maintaining profitability and higher commitment to cash generation.
• Investments in quality skill force, technology and innovation to drive subscriber growth, retention and LTV.
• Growing the subscriber base leading to subscription and service revenues surpassing $100 million.

Risks

GoPro's revenues outside the U.S. are more than 50%, and any further strengthening of the U.S. dollar will impact its future earnings growth on a constant currency basis.

The subscription attach rate, which refers to the percentage of customers who subscribe to the additional product when they purchase a primary product, is a crucial metric that will determine GoPro's growth. At the current subscription attach rate of 90%, GoPro has increased the number of customers who buy cameras at GoPro retail stores and later subscribe via its app. However, any reduction in the subscription attach rate will adversely impact their subscription revenues and future profitability.

GoPro Valuation

I value GoPro looking at its recent financial numbers and going with its story of pivoting toward the subscription model. Thus, the story behind my DCF valuation will incorporate these estimates.

Before I value GoPro using DCF, I will compare GoPro with its peers to see how it performs against them. I have identified the following companies as its peers:

• Avid Technology (AVID)
• Canon (CAJ)
• Nikon Corporation (OTCPK:NINOY)
• Eastman Kodak (KODK)

First, I looked at the critical market multiples to understand how GoPro looks relative to its peer group.

GoPro's ROE looks better vs. its peers and has reasonably low leverage, with its debt to total capital at 17.3%.

From an operational perspective, GoPro's ability to generate free cash flows is better than its peers. Its lower cash-to-conversion cycle is a testament to its pivot to the subscription model.

Before arriving at the intrinsic value of GoPro using discounted cash flow, I plotted a graph to understand how GoPro's gross margin and non-GAAP EBIT margin have evolved in the last five years.

GoPro's non-GAAP EBIT margins became positive in 2021, and although the margins declined in 2023, the decline is due to the challenging macroeconomic factors and the strengthening of the USD. Furthermore, it's evident from management commentary that GoPro focuses on profitability and free cash flow generation.

GoPro's asset efficiency has improved due to its pivot toward the subscription model, as the asset efficiency improved from 12% in 2021 to 26% in 2023. This increase in asset efficiency implies that GoPro has effectively used its assets to generate profits and is earning a high return on its assets relative to its investment.

I use the non-GAAP financial measure of GoPro's financials for operating income and net income numbers for my valuation because it gives a better picture of the company's operating performance and an accurate representation of its underlying cash flows. So, in my DCF valuation, I forecast the following value drivers:

Revenue growth of 10% in the next five years and 7.1% in the next ten years. I base my estimate on the management's commentary on expanding its TAM to target non-GoPro users.

As GoPro continues to pivot toward a subscription model, its EBIT margin will expand, and I forecast GoPro's EBIT to expand from 8.3% in the current year to 10% in the next 10 years.

As GoPro continues to Improve its asset turnover, I estimate its sale/invested capital to move to the industry average of 2.23. In addition, management's move to restructure its operations and close production facilities with poor utilization gives me confidence that GoPro will succeed in achieving this target.

Before I value DCF, I capitalize the R&D expenses because R&D expenses have future economic benefits. For example, GoPro has incurred $139 million in R&D expenses. First, I convert these R&D expenses from operating expenses to capital expenditures. Then, I amortize the R&D expenses for three years. After that, I add the unamortized portion of $280 million to the balance sheet. By capitalizing on R&D expenses, I get an accurate representation of the resources GoPro have devoted to future growth and their investment in intangible assets that will help me to determine the ROIC and conclude whether GoPro earns excess returns.

My cost of capital for GoPro is 13%, taking into account the risk-free rate of 3.86%. As GoPro gets more than 50% of its revenues outside the U.S., I account for the country's risks to arrive at equity risk premiums. As a result, my weighted ERP for GoPro is 5.92%.

GoPro has $185 million in debt, and at an effective interest rate of 4.6%, my pre-tax cost of debt for GoPro is 4.93%. At an effective tax rate of 23%, my after-tax cost of debt for GoPro is 3.79%.

The unlevered beta for GoPro is 1.61, and with 16.05% in debt to capital, the levered beta is 1.85. I derive a cost of equity for GoPro as 14.8% and a cost of capital at 13.04%.

My 10-year valuation for GoPro is below:

I arrive at the Enterprise value for GoPro at $6.15 per share. After adding GoPro's current cash reserves of $367 million and subtracting its total debt of $184 million, I derive the equity value at $1.141 billion and $7.32 per share.

As of Feb. 3 2023, GoPro trades at $5.69 per share. Thus, the stock has a potential upside of 28.6% to reach its fair value of $7.32 per share, according to my DCF calculations. Below are my estimates:

As a next step, I ran a Monte Carlo simulation to determine at what percentile my valuation lies. The following are my value drivers for that:

1. Revenue growth
2. Target operating margin
3. Sales to invested capital

I used a truncated normal distribution for revenue growth with a mean of 10% and a standard deviation of 34%. I used a triangular distribution for EBIT with a minimum margin of 3% and a maximum of 10%. For sales to invested capital, I use a uniform distribution with a minimum value of 0.96 and a maximum of 2.

The r-square is high between equity value and target operating margin, implying that improving margin is more important than growth for GoPro's valuation to improve. GoPro's management, with its focus on profitability and cash generation, is focused on the same metric.

Below is my distribution of values for equity values at different percentiles using the Monte Carlo simulation.

The median or 50th percentile for GoPro is $5.8/share, and its maximum price at the 100th percentile is $13.5/share. My valuation of GoPro at $7.32/share puts it between the 75th and 80th percentile, implying that my estimate of GoPro is above the median.

Furthermore, when we look at GoPro's price/book value over the last 10 years and plot it against ROIC, I see that its P/B value is decreasing and ROIC is improving.

At the current market price, GoPro's P/B value is the lowest it's been in the last 10 years. At the same time, the company's ROIC has improved from -6.7% in 2019 to 9.1% in 2023. Thus, at the current market price of $5.69, GoPro looks undervalued and underpriced from an investment perspective.

While the current macroenvironment is challenging, economists predict that growth in the U.S. will rebound in 2024 as inflation ebbs further and the Fed begins to loosen monetary policy. GoPro has an effective business model and good products. Thus, GoPro's performance should improve, resulting in better earnings once the U.S. economy recovers. Furthermore, as more than 50% of GoPro's revenues come from outside the U.S., as the strength of the USD comes down, it will reflect better earnings performance in the future.

Option Care Health (NASDAQ:OPCH) has had a rough three months with its share price down 16%. However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. Particularly, we will be paying attention to Option Care Health's ROE today.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

View our latest analysis for Option Care Health

How To Calculate Return On Equity?

The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Option Care Health is:

13% = US$178m ÷ US$1.3b (Based on the trailing twelve months to September 2023).

The 'return' is the amount earned after tax over the last twelve months. That means that for every $1 worth of shareholders' equity, the company generated $0.13 in profit.

What Is The Relationship Between ROE And Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

A Side By Side comparison of Option Care Health's Earnings Growth And 13% ROE

To start with, Option Care Health's ROE looks acceptable. And on comparing with the industry, we found that the the average industry ROE is similar at 13%. Consequently, this likely laid the ground for the impressive net income growth of 71% seen over the past five years by Option Care Health. However, there could also be other drivers behind this growth. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

Story continues

As a next step, we compared Option Care Health's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 16%.

Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock's future looks promising or ominous. What is OPCH worth today? The intrinsic value infographic in our free research report helps visualize whether OPCH is currently mispriced by the market.

Is Option Care Health Making Efficient Use Of Its Profits?

Option Care Health doesn't pay any dividend currently which essentially means that it has been reinvesting all of its profits into the business. This definitely contributes to the high earnings growth number that we discussed above.

Conclusion

On the whole, we feel that Option Care Health's performance has been quite good. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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Introduction

Altria (NYSE:MO) is a well-established company in the tobacco industry with a long history of growth and resilience. The company recently released its Q4 2023 earnings report, with earnings per share coming in at $1.18, beating forecasts by $0.02. The company now projects a growth rate of 3-6% for 2023 earnings per share and has approved a $1 billion share repurchase program.

The stock's valuation and returns from dividends, share buybacks, and net income growth make it a strong investment option with a projected annual return on investment rate of ~12%. The stock price of Altria appears to be holding strong near its moving averages, making it attractively valued based on fundamentals and its stock chart.

Q4 2023 Earnings

Altria recently released its quarterly earnings report.

Earnings per share came in at $1.18, beating forecasts by $0.02 for the company. However, $5.08 billion in revenue fell short of projections by $66.37 million, or a 0.06% YoY decline. Lower net sales in the category of smokeable products was the main cause of the miss on revenue. Despite this, the adjusted diluted earnings per share grew by 8.3% to $1.18.

Compared to the adjusted diluted EPS base of $4.84 in 2023, the business projects 2023 adjusted diluted EPS in the range of $4.98 to $5.13. This indicates a growth rate of 3% to 6%. Reduced outstanding shares, increased adjusted operating cash inflow, and favorable interest expenses are the main forces behind this growth.

A fresh $1 billion share repurchase program was further approved by the company, and it is expected to be finished by the end of 2023.

Fundamentals

As its net income keeps increasing, Altria continues to show its moat. The average growth rate has been in the low single digits and has largely been attributed to price hikes. The company has not reinvested much of its earnings back into its operations. The ability to grow its bottom line without significant reinvestment is remarkable and a testament to the robustness of its products. Based on expense reductions and the support of inflation-driven price increases, it is plausible that Altria will maintain its trend of low single-digit growth in net income in the future.

As the firm prioritizes dividends and share buybacks over reinvesting earnings, the intrinsic growth and capital gains are closely tied to the stock's valuation.

The company is boosting intrinsic growth by executing share buybacks that enhance its EPS. These buybacks are currently taking advantage of a favorable valuation, and are estimated to contribute ~2.45% a year at its current earnings multiple. The remaining intrinsic growth will stem from the net income growth, which, as previously discussed, has been and is projected to remain in the low single digits.

When considering the returns from the dividend, share buybacks, and net income growth, a projected annual return on investment rate of around 12% appears plausible. This estimate is based on the assumption that the business will maintain its current earnings multiple and that dividends will be reinvested at a similar rate.

Valuation

Altria continues to demonstrate strength, as shown by its most recent quarterly financial performance. Since 2005, the stock has grown by 8.65% on average each year without seeing a decrease, which is a strong testament to the company's resilience. Analysts agree with my projection of mid-single-digit EPS growth in the upcoming years.

Altria's current trading multiple of 9.71 is significantly below its historical average of 14.46. While I do think that the stock deserves a higher multiple, I do not believe that a fair value would be its historical average multiple. The company has a substantial amount of net debt, which is currently at $22 billion.

If a standard 15 earnings multiple were applied, which would also be close to its historical average, the market capitalization of the company would be around $130 billion. Adding the net debt to the market cap, the price per share at the new 15 earnings multiple would be approximately $62. Despite the debt, the modest net income growth, combined with the dividend and share buyback payments, and the low net income growth, an annual return of around 12% should be attainable in the future.

Contrary to my previous article about Altria, I no longer believe that an earnings multiple of 15 is appropriate. This is mainly due to the need for a lower multiple to stay competitive and the significant level of net debt. However, the stock still appears very attractive, with a price of ~$62 per share being reasonable.

Stock Chart

Quick disclaimer: A technical analysis in itself is not a good enough reason to buy a stock, but combined with the company's fundamentals, it can greatly narrow your price target range when you buy.

The stock price of Altria seems to be holding strong near its 200-month moving average, just as I had previously mentioned in a past article. This trend has only become more evident following the announcement of an increased share repurchase program and the company's outstanding performance in their latest earnings report, which has lifted the stock since the announcement.

Given that the stock is still near its 50- and 200-day moving averages, I maintain the belief that it is attractively valued. The fundamentals that have been discussed only strengthen this view.

Final Thoughts

Altria is a strong company with a strong history of growth. The primary source of expected capital gains from investing in Altria will come from its dividend payments, which are tied to the stock's valuation. Share buybacks are also boosting intrinsic growth by enhancing its earnings per share. The company is expected to maintain a low single-digit growth rate in net income in the future, which combined with dividends and share buybacks, should result in an annual return on investment rate of around ~12%.

Altria is currently trading at a lower multiple compared to its historical average, which I believe largely is due to its significant level of net debt. Despite this, the stock still appears attractive, and its strong support near its 200-month moving average, combined with the fundamentals of the company, make it a strong investment opportunity.

Based on the company's fundamentals and attractive valuation, I adjust my price target to ~$62 per share and supply it a "buy" rating.

Avalanche (AVAX) witnessed a meteoric start to 2023, gaining 98% in 30 days, and traders are now curious about whether the rally will extend throughout February. AVAX’s year-to-date gains for 2023 have outpaced those of Bitcoin (BTC) and Ether (ETH).

Recent reasons for AVAX’s rally can be attributed to an Amazon partnership announcement on Jan. 11. The partnership is meant to easily deploy nodes on the Avalanche blockchain with Amazon Web Services (AWS). Ava Labs, which supports the Avalanche ecosystem, hopes the partnership increases blockchain usage for enterprises and governments.

While AVAX price has benefited from the news, some analysts predict that the move could have been a bull trap.

Let’s dig into the fundamentals to see if on-chain network activity supports the recent AVAX rally.

AVAX fees from DeFi are up

After the AWS news, AVAX price was not the only metric seeing a quick rise. On Jan. 14, Avalanche network hit a year-to-date high of $31,218 AVAX fees received. The increase in fees compared to the previous 30 days is 59%, signaling that positive price appreciation helped boost the fees that the network received.

While the Avalanche fee base is increasing, it still lags behind top EVM-compatible blockchains like Ethereum, Binance Chain (BNB), Optimism (OP) and Polygon (MATIC). Over the past 30 days, the fees Avalanche has generated rank 9th out of all blockchains.

Notably, layer-2 competitor Polygon earned close to four times the amount of fees compared to Avalanche. Even with the astounding growth thaAvalanche has experienced in 2023, the network will need to substantially increase fees to overtake more blockchains.

Active addresses and users are down

A sign of blockchain health is the number of active addresses, users and transactions. Despite reaching a year-to-date high on Jan. 18 of 1.84 million transactions, Avalanche’s transaction count is trending down.

A similar downtrend is witnessed when looking at active addresses in the Avalanche ecosystem. Active addresses denote transactions taking playing on unique wallets for a given day. After reaching a year-to-date peak of 54,978 active addresses on Jan. 31, only 34,624 active addresses were registered the following day.

The downtrend in Avalanche activity is creating further separation between other blockchains. According to TokenTerminal, Avalanche’s all-time high (ATH) number of daily active users is 131,000, which is dwarfed by Polygon’s ATH of 737,000. Avalanche is now far from its all-time high of daily users, registering only 44,000.

For blockchains to create sustainable fees, there needs to be daily active users participating on the network.

AAVE dominates Avalanche DApps

The active users on Avalanche seem to have a preference for using Aave (AAVE) on the AVAX blockchain. Over 36% of all Avalanche transactions flow through the Aave protocol. Investors have staked over $353 million on Aave’s Avalanche version, far surpassing the second-most popular protocol by Tested total locked value (TVL), the Trader Joe decentralized exchange (DEX).

While Aave and Trader Joe are leading the Avalanche blockchain, when looking at DEX activity on other blockchains, they witness far less trading volume. DEX volume directly correlates to the fees that a protocol receives.

Ethereum DEX activity leads the way with over $1.6 billion in daily volume, whereas Avalance only sees around $104 million.

While Avalanche is currently witnessing immense growth from the AWS announcement, the blockchain is still small compared to competitors. The goal of the AWS partnership was to help increase network activity by reducing barriers to entry. Reaching the goal may increase Avalanche adoption but other ecosystems seem to be out to a large and early lead.