Happy Sunday to everyone on The Street. 

With the first quarter of 2025 almost in the rearview, here’s an interesting tidbit. Despite the previous year’s ongoing AI boom, since the start of 2024, investors would have been better off buying Berkshire-Hathaway $BRK.B ( ▼ 0.72% ) stock than the Mag 7 index.

The former has risen 46.3% over that period. The latter’s gains sit at 43.4%, after shedding 13% YTD. The Silicon Valley motto was "move fast and break things”. But now it seems slow and steady really might just win the race.

Psyched Up

Mental Health Breakthroughs Spur M&A

Pharmaceutical giants may be turning their attention back to mental health. A Wall Street Journal article argues that recent deals could signal a shift in focus and an increase in neuropsychiatry investments.

Big leaps in psychiatric drugs can bring significant rewards, as we saw with Prozac and Zoloft in the 1990s and 2000s. However, an extremely high failure rate means those breakthroughs are few and far between.

The elusive nature of mental health drug development has caused big pharma companies to pull back, leaving innovation to smaller biotech firms.

Bristol Myers Squibb Game

However, some of those smaller firms have made progress. As a result, after a decade of muted M&A activity, Big Pharma companies may finally be ready to take their medicine. 

Case in point? Bristol Myers Squibb's $BMY ( ▲ 0.19% ) recent $14 billion acquisition of Karuna Therapeutics $KRTX ( ▲ 0.03% ) , which got FDA approval for a new schizophrenia treatment last year. 

Furthermore, a few months ago, Johnson & Johnson $JNJ ( ▲ 0.41% ) announced it would acquire Intra-Cellular Therapies $ITCI ( ▲ 0.08% ) for almost $15 billion. Intra-Cellular Therapies developed a tablet that is being used to treat schizophrenia and bipolar disorders.

Brain Power

J&J described the brain as the "last frontier" in research and development. Neuropsychiatric drugs certainly have huge potential. But from an investor point of view, there's also a lot of risk.

For example, AbbVie $ABBV ( ▲ 0.04% ) acquired Cerevel Therapeutics, only for its promising schizophrenia drug to fail in trials last year. 

In general, analyst views on Big Pharma are mixed. For example, 17 of 25 rate Bristol Myers Squibb a Hold. 7 say it's a Buy or Overweight, and 1 has it at a Sell.

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Could Coinbase Byte Back?

Industry Tailwinds Ahead

Coinbase $COIN ( ▼ 4.74% ) has been under pressure this year, down 23.5% YTD as post-election momentum cooled. But Bernstein sees a major turnaround coming.

Analyst Gautam Chhugani initiated coverage on the stock with an Outperform rating and a $310 price target — implying a potential 63% upside from current levels.

Crypto soared in the wake of the 2024 election, then crashed back down to earth amid tariff threats and accompanying market uncertainty. But recently, bullish signals have emerged again. The SEC effectively ended its long-time battle with the sector, and Binance’s CEO called President Trump “fantastic” for the industry.

Chhugani believes Trump could still follow through on his goal to make America the “crypto capital of the world” — which could benefit an exchange with a dominant 66% US market share.

New Laws, New Opportunities

In his research note, Chhugani mentioned that a stablecoin bill is expected in the first half of 2025, followed by a second bill later in the year addressing digital asset securities and market structure.

While increased regulatory clarity could attract competition from fintech firms, brokers, and banks, Chhugani believes a strong bull market and growing US dominance in crypto will more than compensate for any market share or pricing pressures.

The analyst mentions that Coinbase has done well to diversify beyond trading. The company has been expanding into stablecoins, staking, and crypto yield services. Chhugani expects non-trading revenue to grow at a compound annual rate of 31%, helping to balance out the cyclical nature of crypto trading.

Wall Street Remains Divided

Despite Bernstein’s bullish outlook, analysts remain split on Coinbase’s future. Out of 26 covering the stock, 11 rate it a Buy or Strong Buy, while 15 maintain Hold ratings, according to LSEG data.

Coinbase’s recent struggles haven’t dampened optimism for some. Chhugani believes Coinbase’s entrenched position, coupled with supportive policies, will allow the company to navigate regulatory shifts better than other players.

With expectations of a strong bull market and increased institutional adoption, Chhugani sees long-term growth potential for Coinbase.

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Dynamic Duo

Speaking Investors' Lingo

Citizens says language app Duolingo is a class act. In a note this week, analyst Andrew Boone upgraded the stock from Market Perform to Market Outperform. 

Boone set a $400 price target for the company. That's a 29% upside from Friday's close of $309. Duolingo's gamified approach has made it one of the most popular language-learning platforms in the world. It now offers over 40 languages.

It Takes Duo

Duo has a huge following, with over 115 million active monthly users. Of those, 9.5 million use its paid service. This strong market base is one reason Boone is optimistic.

Boone also thinks we can learn a thing or two from Max, Duolingo’s premium AI offering. Max gives users feedback on their answers as well as interactive video calls.

But the analyst argues Duolingo's prospects go further than languages. He believes the quirky green owl can tap into people's desire to play games and learn more about a wide variety of subjects.

There are around 2 billion language learners and 3.4 billion gamers in the world. As such, Citizens sees significant growth potential for Duolingo — which already offers courses in math and music.

Staying the Course

Duolingo set a new high in 2024, but its price dropped last month after its Q4 earnings per share missed analyst expectations. However, the dip hasn't significantly dampened investor's enthusiasm. 

Analyst sentiment is relatively upbeat. According to MarketWatch, 15 out of 24 rate it a Buy or Overweight. The remaining 9 have it as a Hold. 

Investors will be watching Duo's Q2 results in May to see if Duo's ready to move back to the top of the class.

Last Week’s Poll Results

Which stock do you think will outperform in 2025?

🟩🟩🟩🟩🟩🟩 CrowdStrike $CRWD ( ▼ 2.5% )  

🟨🟨🟨🟨🟨⬜️ Advanced Micro Devices $AMD ( ▼ 2.82% )  

And, in response, you said:

• CrowdStrike — “People with malintent are not going away anytime soon, while chipmakers are ubiquitous.”

• Advanced Micro Devices — “I think AMD & MU are both being underrated on their tech prowess... Both will have a large move when they start mov'n.”

Are you bullish or bearish on Ashtead Group (AHT) over the next 12 months?

🟨🟨🟨⬜️⬜️⬜️ 🐂 Bullish

🟩🟩🟩🟩🟩🟩 🐻 Bearish

And, in response, you said:

• 🐻 Bearish — “Trump-instigated recession will give pause to commercial construction plans; also, a viable competitor (BigRentz) is gaining market share with PE backing.”

Are you bullish or bearish on Uber (UBER) over the next 12 months?

🟩🟩🟩🟩🟩🟩 🐂 Bullish

🟨🟨🟨⬜️⬜️⬜️ 🐻 Bearish

• 🐂 Bullish — “Robotaxi isn’t going to overtake Uber ”

• 🐻 Bearish — “Rising Uber ride prices over the past two years are reaching a red line for many customers.”

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