Issue #56

One is the brain for your home; the other is the toll-booth for AI chips.

The software revolution isn't just happening in the cloud—it's winning in the places we live and the screens we watch. While the headlines focus on general-purpose AI, the real value is being captured by specialized platforms that own the "last mile" of the consumer experience. As the digital and physical worlds converge, two critical layers have emerged as the new must-own infrastructure: the data that manages the roof over our heads, and the intellectual property that secures the content on our screens.

This is where software shifts from a tool to an essential utility—and where the most resilient, high-margin winners are hiding in plain sight.

👉 One company is transforming the fragmented homeownership industry into a data-driven powerhouse, serving as the digital backbone for everything from inspections to insurance.

👉 The other is the "toll-booth" of the media and chip world, owning the fundamental patents that power global streaming and the next generation of AI semiconductors.

👉 Both have recently de-risked their balance sheets, secured major industry victories, and are currently trading at valuations that Wall Street analysts find impossible to ignore.

In this edition, we break down the software infrastructure of the home and the intellectual property engine of the digital age—and why these two stocks are the quiet foundations of a smarter, more connected economy.

Porch Group (NASDAQ: PRCH)

Porch Group (NASDAQ: PRCH) is a vertical software and insurance platform designed to simplify the homeownership journey. By integrating software solutions for home inspectors, mortgage companies, and title agents with a robust insurance arm, Porch has positioned itself as a "new kind of homeowners insurance company." Its platform provides a seamless experience for consumers moving into new homes while leveraging proprietary data to provide more accurate insurance underwriting.

Business Model and Revenue Streams 📦

Porch Group’s business model has undergone a significant strategic pivot in early 2025, moving toward a more predictable and high-margin "capital-light" structure. The company now earns income through three primary segments:

• Insurance Services: This is the company's core growth engine. Following the formation of the Porch Insurance Reciprocal Exchange (PIRE) in January 2025, the company shifted to a commission and fee-based model. Instead of carrying all the risk of insurance claims, Porch earns management fees and commissions for operating the reciprocal. It also generates high-margin revenue through its proprietary "Home Factors" data, which uses unique property insights (like roof condition or water intrusion signs) to price policies more accurately than traditional carriers.
• Software & Data Solutions: Porch provides critical "back-office" software to home service companies. For example, its Inspection Support Network (ISN) processes roughly 40% of all home inspections in the U.S. These businesses pay subscription fees (SaaS) and transaction fees to use Porch’s tools, providing a steady, recurring base of revenue.
• Consumer Services: When a homebuyer uses a Porch-powered professional (like an inspector), Porch offers them "moving concierge" services—connecting them with movers, security systems, and internet providers. Porch earns a commission from these service providers for every successful referral, effectively monetizing the high-intent window of a home move.

Macroeconomic conditions, particularly interest rates and housing turnover, play a dual role for Porch. A sluggish housing market can reduce the volume of new home inspections and moves, impacting the Software and Consumer segments. However, the company's shift to a fee-based insurance model helps insulate it from the volatility of catastrophic weather events, while its data-driven underwriting allows it to maintain high margins even when competitors are forced to raise prices due to inflation.

Recent Performance and Corporate Developments 📈

Porch reported its Q3 2025 results in November, showcasing a company that is successfully navigating its transition to profitability.

Q3 2025 Financial Highlights: 💰

• Total Revenue: Revenue for Porch Shareholder Interest reached $115.1 million. While the company saw a GAAP net loss of $10.9 million, this was a marked improvement in operational health compared to previous years.
• Adjusted EBITDA: The company delivered a strong Adjusted EBITDA of $20.6 million, an increase of nearly 22% over the prior year, signaling that the core business is generating significant cash.
• Gross Margin: Reflecting its high-value software and data focus, the company reported a robust gross margin of 82% for the quarter.
• Reciprocal Health: The PIRE surplus grew to over $412 million, providing the company with the "dry powder" needed to scale its insurance premiums and profits rapidly heading into 2026.

Strategic Initiatives and Mergers: 🤝

The most critical corporate development in 2025 was the Refinancing Transaction completed in May. Porch successfully retired the majority of its 2026 convertible debt, replacing it with 2030 notes. This move significantly de-risked the balance sheet by pushing out debt maturities and limiting shareholder dilution. Furthermore, Porch expanded its Home Factors data suite to include over 100 property attributes, which it has begun licensing to third-party insurance carriers—a new, high-margin revenue stream that is expected to contribute significantly in 2026.

Profitability and Fair Value 🎯

Porch Group reached a major milestone by achieving positive Adjusted EBITDA in 2024 and 2025. The path to sustained GAAP profitability is centered on the scaling of its data licensing and the expansion of its insurance operations into more states using its advantaged "Home Factors" pricing.

In terms of fair value, Porch appears significantly undervalued according to several metrics. As of early January 2026, the stock trades around $9.22 to $9.50. Many valuation models, including Discounted Cash Flow (DCF) analyses, suggest a fair value closer to $40.00, implying that the market has yet to fully price in the company’s transition from a risky micro-cap to a stable, fee-based insurance tech leader. Its Price-to-Earnings (P/E) ratio sits at roughly 33x, which is considered attractive given its projected EBITDA growth rate of over 100% through 2027.

Analyst Estimates and Ratings 📊

• Consensus Rating: The consensus among analysts remains a "Strong Buy" (9.5/10 rating). Over the last 30 days, several firms have reiterated their bullish stance.
• Price Targets: Wall Street analysts have set a median 12-month price target of $18.50, with high-end estimates reaching $22.00. Even the most conservative targets (around $13.00) suggest an upside of over 40% from current levels.
• Recent Ratings: Firms like Benchmark and B. Riley recently reiterated "Buy" ratings, citing the company's strong growth profile and its successful deleveraging of the balance sheet.

Investor-Focused Takeaway: Is PRCH Right for Your Portfolio?

Porch Group represents a high-growth "PropTech" play that has successfully de-risked its business model. By moving away from direct insurance risk and toward a fee-and-software model, it has created a more predictable path to wealth for shareholders.

What to Watch in the Near Term: 📈

• Data Licensing Revenue: Look for the first reports of third-party carriers paying to use "Home Factors" data in early 2026.
• Housing Market Recovery: Any cooling of interest rates by the Fed could lead to a surge in home sales, which would act as a massive tailwind for Porch's software and moving services.
• 2026 Debt Clearance: The company is on track to retire the final remnants of its 2026 notes using cash on hand, which would remove the last major "debt overhang" from the stock.

Recommendation:

Porch Group (PRCH) is a compelling choice for investors looking for exposure to the insurance and real estate sectors without the typical volatility of those industries. With strong analyst support, a clear path to growing profitability, and a valuation that sits well below its calculated fair value, it remains one of the top software application stocks to watch in 2026.

Adeia (NASDAQ: ADEA)

Adeia (NASDAQ: ADEA) is a powerhouse in the research, development, and licensing of intellectual property (IP) for the media and semiconductor industries. Formerly the IP licensing business of Xperi, Adeia focuses on the fundamental technologies that power how we consume digital entertainment and how modern chips are built. Its portfolio includes over 13,000 patent assets covering everything from content discovery and streaming to advanced semiconductor packaging like hybrid bonding.

Business Model and Revenue Streams 📦

Adeia’s business model is centered on high-margin, recurring intellectual property licensing. Rather than manufacturing hardware or selling consumer software, Adeia creates the "blueprints" and foundational technologies that other companies use. It operates through two main segments:

• Media Licensing: This segment provides IP to pay-TV providers, streaming services (OTT), and consumer electronics manufacturers. Adeia's technology is embedded in the user interfaces, recommendation engines, and streaming protocols used by millions. Most of this revenue is recurring, based on long-term (multi-year) license agreements.
• Semiconductor Licensing: This is the company's high-growth engine. Adeia licenses advanced semiconductor manufacturing and packaging technologies, most notably Hybrid Bonding. As traditional "Moore's Law" slowing makes it harder to shrink chips, Adeia’s technology allows manufacturers to stack chiplets vertically, which is essential for the next generation of AI and high-performance computing (HPC) processors.

Macroeconomic Policy Impact:

Adeia is uniquely resilient to many macro pressures because its revenue comes from existing license agreements rather than new sales cycles. However, global monetary policy and interest rates impact its valuation as a growth-oriented tech stock. Interestingly, the current emphasis on domestic semiconductor manufacturing (CHIPS Act policies) serves as a tailwind; as more chip fabrication facilities are built in the U.S. and Europe, the demand for Adeia’s advanced packaging IP increases. While inflation can impact the operating costs of its partners, Adeia’s fixed-price or per-unit licensing structures provide a stable hedge.

Recent Performance and Corporate Developments 📈

The end of 2025 and the start of 2026 have been a transformative period for Adeia, marked by a major legal and commercial victory.

• The Disney Catalyst: On December 22, 2025, Adeia announced a massive multi-year agreement with The Walt Disney Company. This deal not only grants Disney access to Adeia’s media IP portfolio but, more importantly, resolved all outstanding litigation between the two giants.
• Revenue Guidance Spike: Following the Disney deal, Adeia significantly raised its 2025 revenue guidance to a range of $425 million to $435 million, up 18% from previous estimates.
• Q3 2025 Performance: While the company technically "missed" Q3 estimates due to a delay in a deal with AMD (which led to patent litigation), the underlying health was strong. Non-pay-TV recurring revenue grew 31% year-over-year, proving the company is successfully diversifying away from traditional cable TV.
• Litigation Momentum: Adeia recently filed patent infringement litigation against AMD, specifically targeting their use of hybrid bonding and advanced process nodes. This signals Adeia's aggressive stance on protecting its semiconductor IP, often a precursor to large licensing settlements.

Profitability and Fair Value 🎯

Adeia is an exceptionally profitable business with a non-GAAP gross margin effectively near 100% on its licensing revenue.

• Profitability Metrics: The company delivers an impressive Adjusted EBITDA margin of 58%. For the full year 2025, non-GAAP net income is expected to land between $169.8 million and $175.9 million.
• Fair Value Analysis: As of early January 2026, ADEA is trading around $18.50, having recently touched a 52-week high. Despite the rally, many valuation models suggest the stock remains undervalued. Its PEG ratio of 0.35 indicates that the stock is cheap relative to its expected earnings growth. Some analysts estimate a "fair value" based on discounted cash flow (DCF) models in the $38.00 to $40.00 range, suggesting the market is still catching up to the company’s post-separation potential.

Analyst Estimates and Ratings 📊

• Consensus Rating: The stock maintains a "Strong Buy" consensus. In the last 30 days, analysts have been highly active in raising price targets following the Disney pre-announcement.
• Price Targets: The average 12-month price target has moved up to $22.75, with aggressive targets from firms like Rosenblatt reaching $27.00.
• Sentiment: 100% of the analysts covering the stock in the last 90 days have given it a "Buy" or "Strong Buy" rating, citing the high-margin nature of the hybrid bonding business as a key differentiator.

Investor-Focused Takeaway: Is ADEA Right for Your Portfolio?

Adeia is a "toll-booth" for the digital age. As long as people stream video and AI companies need faster chips, Adeia collects its fees. The resolution of the Disney dispute removes a major cloud of uncertainty, and the aggressive move against AMD suggests another large revenue catalyst could be on the horizon.

What to Watch in the Near Term: 📈

• AMD Litigation Progress: Any settlement or positive court ruling regarding hybrid bonding could trigger a massive re-rating of the stock.
• AI Integration: Watch for new licensing deals with AI hardware startups that require Adeia's advanced packaging to compete with Nvidia.
• Debt Repayment: Adeia has paid down over $312 million in debt since its separation; continued deleveraging will move more value to equity holders.

Recommendation:

Adeia (ADEA) is a top-tier pick for investors seeking high margins and a "moat" built on thousands of patents. With its recent guidance hike and the high-growth semiconductor tailwinds, it remains a standout in the software and licensing space for 2026.

Final Take: The Software of the Home and the IP Toll-Booth of the Digital Age

The next phase of software growth isn't just about cloud efficiency—it's about embedded utility. Real value is being captured by companies that own the data inside our homes and the intellectual property inside our devices.

That’s where Porch Group (PRCH) and Adeia (ADEA) stand apart.

🏠 Porch Group (PRCH) — The Operating System for Homeownership

• Deeply Embedded: Its software powers over 40% of U.S. home inspections, providing a massive, proprietary data funnel.
• Capital-Light Pivot: The shift to the Porch Insurance Reciprocal Exchange (PIRE) removes high-risk volatility while keeping high-margin fees.
• Massive Valuation Gap: With a fair value estimated near $40, the market is just beginning to price in its 80%+ gross margins and path to GAAP profitability.
• ➤ Best for: Investors seeking a high-moat recovery play on the housing market with massive upside as data licensing takes center stage.

📡 Adeia (ADEA) — The Intellectual Property Engine of Media & Chips

• The Disney Catalyst: A massive multi-year deal with Disney has resolved litigation and sent 2026 revenue guidance soaring.
• High-Growth Hardware: Beyond streaming, its "Hybrid Bonding" patents make it an essential partner for the next generation of AI and high-performance chips.
• Cash Flow Powerhouse: Boasts an Adjusted EBITDA margin near 60% and a 14-year streak of dividend payments.
• ➤ Best for: Investors looking for "toll-booth" style recurring revenue and leveraged exposure to the semiconductor boom without hardware manufacturing risks.

Investor Insight

🧩 Want the "SaaS of the Home" with triple-digit EBITDA growth potential? → PRCH ⚙️ Want high-margin IP licensing with a massive AI hardware tailwind? → ADEA

Bottom Line:

Real wealth in software is created by becoming impossible to replace. Porch Group is becoming the essential data layer for the $500 billion home insurance market, while Adeia owns the foundational blueprints for how the world consumes media and builds AI.

As we move into 2026, these aren't just speculative apps—they are the infrastructure of the modern economy.

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Happy Trading
​— Team Premium Stock Alerts