Snowcap

We are short $STRL, a poster child for the AI bubble. Data center exposure appears exaggerated. Backlog growth is not supported by contract win data. Margins look inflated. The stock is expensive even vs AI darlings like $NVDA. We see 60-80% downside. Report at snowcapresearch.com

One year after @muddywatersre and @SnowCapResearch called out $FTAI's asset-sale-as-revenue model, we revisited the short thesis. The company's own filings, in a way, confirm the short sellers' thesis. Leasing fleet down 35% in 12 months. Inventory up 117%. GAAP OCF still negative. And last night: EPS miss, stock -9.5% after hours. Details below.

16/ For added context, by our calculation, Sterling’s E-Infrastructure segment is trading at an implied valuation of nearly ~29x EV/EBITDA – which is a significant premium to $NVDA, and on par $VRT – a pure play data center infrastructure business with vastly superior EBITDA growth.

15/ Even if investors believe Sterling’s margins are sustainable, a re-rating in line with civil contractor peers implies 60% downside to its stock price alone. We see even further downside should Sterling’s margins normalize in line with industry peers.

We are short $STRL, a poster child for the AI bubble. Data center exposure appears exaggerated. Backlog growth is not supported by contract win data. Margins look inflated. The stock is expensive even vs AI darlings like $NVDA. We see 60-80% downside. Report at snowcapresearch.com

Change of plan. Will now be tomorrow morning.

This morning we will announce a new multi-bn mkt cap short that we believe is a poster child for the AI bubble in public markets. Stay tuned.