1 00:00:00,040 --> 00:00:01,840 Welcome back, everyone. Today on the Joseph Carlson 2 00:00:01,840 --> 00:00:03,040 Show. We're about to get into the 3 00:00:03,040 --> 00:00:05,360 busiest earnings week of the entire season. 4 00:00:05,520 --> 00:00:09,160 This is a monster week full of juggernaut companies, ones like 5 00:00:09,160 --> 00:00:12,360 Microsoft and Meta and Apple and Amazon. 6 00:00:12,600 --> 00:00:15,480 They're all reporting this week. Plus we have a lot more. 7 00:00:15,680 --> 00:00:18,760 There's just simply a ton of companies reporting earnings 8 00:00:18,760 --> 00:00:20,560 this week that are notable, meaningful. 9 00:00:21,040 --> 00:00:23,640 This is by far, I think the one that's going to move the market 10 00:00:23,640 --> 00:00:26,360 the most. Either the S&P 500 goes up as a 11 00:00:26,360 --> 00:00:30,280 result of this or it pulls back. Now going into Monday, we don't 12 00:00:30,280 --> 00:00:33,120 have anything too notable today, but Tuesday's where it all 13 00:00:33,120 --> 00:00:35,200 begins. Tuesday morning, we have Sofi, 14 00:00:35,200 --> 00:00:37,880 we have Spotify, and we have United Health Group. 15 00:00:38,280 --> 00:00:39,600 We'll be looking at all of those. 16 00:00:39,920 --> 00:00:41,840 I love Spotify, it's a great company. 17 00:00:42,040 --> 00:00:44,480 United Health Group is going through a massive sell off. 18 00:00:44,520 --> 00:00:46,560 We'll look at what to expect with United Health Group. 19 00:00:46,600 --> 00:00:49,920 We have Visa reporting earnings aftermarket close on Tuesday. 20 00:00:50,240 --> 00:00:52,480 This is 1 where we've already seen American Express, but 21 00:00:52,480 --> 00:00:56,160 Visa's the biggest, most notable credit card company, so we'll be 22 00:00:56,160 --> 00:00:58,280 looking at that one. Then at the same time, we have a 23 00:00:58,280 --> 00:01:00,640 personal position of mine, booking holdings. 24 00:01:00,640 --> 00:01:02,680 This is a company that I've already made some money on. 25 00:01:02,920 --> 00:01:04,920 What are they going to be reporting tomorrow after market 26 00:01:04,920 --> 00:01:07,040 close? Well, I have some predictions. 27 00:01:07,440 --> 00:01:10,480 We have Starbucks, Big Food chain, we have Cheesecake 28 00:01:10,480 --> 00:01:13,520 Factory, both reporting earnings after market close tomorrow. 29 00:01:13,960 --> 00:01:17,080 So just on Tuesday, we have a whole list of companies. 30 00:01:17,080 --> 00:01:19,760 It's a big day tomorrow, but moving into Wednesday, it 31 00:01:19,760 --> 00:01:22,480 doesn't slow down. We have Microsoft, Meta. 32 00:01:22,560 --> 00:01:25,120 I'll give you a playbook of what I expect from each one of these 33 00:01:25,120 --> 00:01:28,040 companies. When we go into Thursday before 34 00:01:28,040 --> 00:01:31,400 market open, we have MasterCard. We'll already know a little bit 35 00:01:31,400 --> 00:01:33,880 about that one through Visa. So we have a little bit of 36 00:01:33,880 --> 00:01:35,520 insight into MasterCard at that point. 37 00:01:35,520 --> 00:01:38,040 Then we have another holding of mine, S&P Global. 38 00:01:38,280 --> 00:01:40,360 This is in fact one of my largest holdings in My 39 00:01:40,360 --> 00:01:42,880 Portfolio, so I'll be sharing some thoughts on that one. 40 00:01:42,880 --> 00:01:45,480 Then we get to Thursday after market close, which I believe is 41 00:01:45,480 --> 00:01:48,120 the biggest of them all. We have Apple and Amazon both 42 00:01:48,120 --> 00:01:50,400 reporting earnings. I've owned both of these 43 00:01:50,400 --> 00:01:53,560 companies significantly at one point or the other, I was a Big 44 00:01:53,560 --> 00:01:55,960 Apple investor. I've sold most of my stake. 45 00:01:56,080 --> 00:01:58,960 We'll be going over that company and how I view it now and of 46 00:01:58,960 --> 00:02:01,840 course, Amazon. This is growing to become one of 47 00:02:01,840 --> 00:02:04,400 my biggest, if not my biggest bet in My Portfolio. 48 00:02:04,400 --> 00:02:07,000 I'm extremely bullish on Amazon going into these earnings and 49 00:02:07,160 --> 00:02:08,960 I'll be sharing why. So we'll be going through the 50 00:02:08,960 --> 00:02:11,880 week Monday through Friday, company by company and what to 51 00:02:11,880 --> 00:02:14,320 expect for each of them. This is going to be a jam packed 52 00:02:14,320 --> 00:02:15,920 episode. Let's go ahead and get started 53 00:02:15,960 --> 00:02:17,440 Now. We start things off looking at 54 00:02:17,440 --> 00:02:20,520 Tuesday before market open, tomorrow before market open. 55 00:02:20,520 --> 00:02:23,600 We have United Health Group, we have Spotify, an we have so OFI 56 00:02:23,600 --> 00:02:25,800 reporting earnings. Let's go over all three of these 57 00:02:25,800 --> 00:02:27,200 companies. We'll start things off with 58 00:02:27,200 --> 00:02:29,880 Spotify. Spotify is one of the companies 59 00:02:29,880 --> 00:02:31,640 that I wish I had in My Portfolio. 60 00:02:32,120 --> 00:02:34,440 You know those companies that you wish you owned, but you just 61 00:02:34,440 --> 00:02:37,320 never made the leap to actually building a position. 62 00:02:37,520 --> 00:02:40,200 There's a couple of those. There's Spotify and DoorDash and 63 00:02:40,200 --> 00:02:43,640 Shopify, Uber, you know those type of companies where they're 64 00:02:43,640 --> 00:02:45,600 great companies. You kind of knew they're great 65 00:02:45,600 --> 00:02:46,960 companies, but you never owned them. 66 00:02:47,280 --> 00:02:50,400 That's Spotify for me. I've always loved Spotify. 67 00:02:50,640 --> 00:02:52,880 I have tons of people that I know that you, Spotify and their 68 00:02:52,880 --> 00:02:56,080 lifelong customers. The lifetime value of a customer 69 00:02:56,080 --> 00:02:59,520 of Spotify must be massive. People never cancel it. 70 00:02:59,520 --> 00:03:02,760 They just use it for year after year and I love that 71 00:03:02,760 --> 00:03:06,680 subscription based revenue. Now, the problem with Spotify, 72 00:03:06,880 --> 00:03:09,880 or at least the perceived problem years ago, is that the 73 00:03:09,880 --> 00:03:11,640 operating margins would never move up. 74 00:03:11,720 --> 00:03:15,560 They would just always be poor operating margins going 75 00:03:15,560 --> 00:03:17,280 negative, you know, never positive. 76 00:03:17,600 --> 00:03:20,680 And then all of that changed in 2024 when they rapidly went to 77 00:03:20,680 --> 00:03:23,200 11%. So you've seen this with some 78 00:03:23,200 --> 00:03:27,920 platform based businesses like a Netflix, like a Uber, like a 79 00:03:27,920 --> 00:03:29,640 Spotify, you're seeing the same thing. 80 00:03:30,240 --> 00:03:34,280 The lesson here is it companies that can hold lifetime value of 81 00:03:34,280 --> 00:03:36,920 a customer for a a long period of time. 82 00:03:36,920 --> 00:03:38,880 They can just hang on to customers forever. 83 00:03:39,080 --> 00:03:42,920 Whether it's Costco, Netflix, Spotify, Amazon, these companies 84 00:03:42,920 --> 00:03:46,280 typically can find out ways to turn a profit in the exercise 85 00:03:46,280 --> 00:03:48,480 operating leverage. And you're seeing that here. 86 00:03:48,760 --> 00:03:51,600 The free cash flow is just going parabolic. 87 00:03:51,680 --> 00:03:55,800 It went from basically nothing up to around $3 billion in free 88 00:03:55,800 --> 00:03:57,840 cash flow over the trailing 12 months. 89 00:03:58,160 --> 00:04:00,320 If we look at this in the euro, it's 2.6. 90 00:04:00,320 --> 00:04:03,360 So so we have massive free cash flows from this company. 91 00:04:03,360 --> 00:04:05,600 Spotify's also growing in a lot of important ways. 92 00:04:05,600 --> 00:04:08,160 They're growing in premium users, ad supported. 93 00:04:08,360 --> 00:04:11,200 They're being led by Daniel Eck, I believe, in a really good way. 94 00:04:11,480 --> 00:04:14,200 They're growing in engagement, the amount of consumption hours 95 00:04:14,200 --> 00:04:16,200 on the platform. They're moving into different 96 00:04:16,200 --> 00:04:19,920 verticals of audiobooks and podcasts, video formats of 97 00:04:19,920 --> 00:04:22,760 podcasts on their platform. They're integrating comments. 98 00:04:23,000 --> 00:04:25,440 They're doing more and more. The company's on the move all 99 00:04:25,440 --> 00:04:28,160 the time. They're hyper focused on audio. 100 00:04:28,440 --> 00:04:31,720 So huge opportunity here. The monthly active users last 101 00:04:31,720 --> 00:04:35,640 quarter was 678,000,000. So we're getting close to that 102 00:04:35,640 --> 00:04:39,760 billion user mark and I believe this is going to go up another 8 103 00:04:39,760 --> 00:04:42,120 to 12%. We'll see it up likely another 104 00:04:42,120 --> 00:04:44,880 10% just like it has been. I don't think we're going to see 105 00:04:44,880 --> 00:04:47,280 much of A change of trajectory, which is a good thing for 106 00:04:47,280 --> 00:04:49,280 Spotify. When we go back to the calendar 107 00:04:49,280 --> 00:04:52,160 and we bring up the what to watch for, this takes a look at 108 00:04:52,160 --> 00:04:54,600 their latest earnings reports and it tries to gauge what are 109 00:04:54,600 --> 00:04:57,560 the most important KPIs and metrics to look at with this 110 00:04:57,560 --> 00:04:59,640 business. With Spotify, it's a subscriber 111 00:04:59,640 --> 00:05:01,320 based company. So that's of course the big 112 00:05:01,320 --> 00:05:03,840 metric. Investors want to see continued 113 00:05:03,840 --> 00:05:07,360 subscriber growth, continued engagement, and I think they're 114 00:05:07,360 --> 00:05:08,960 going to get it. I believe investors are going to 115 00:05:08,960 --> 00:05:11,080 keep getting this because I see nothing changing. 116 00:05:11,440 --> 00:05:14,120 There's no notable new entrance of a competitor. 117 00:05:14,480 --> 00:05:17,120 There's no one venturing in. There's no real disruptive risk 118 00:05:17,120 --> 00:05:19,480 right now. Do you see any disruptive risk 119 00:05:19,480 --> 00:05:20,840 to Spotify? I don't. 120 00:05:21,120 --> 00:05:23,320 YouTube's existed for a long time, TikTok has. 121 00:05:23,320 --> 00:05:26,280 These companies have been around and Spotify continues to grow. 122 00:05:26,600 --> 00:05:29,680 I don't see any change to their subscriber growth or engagement 123 00:05:29,680 --> 00:05:31,680 trends. We have advertising revenue 124 00:05:31,680 --> 00:05:34,840 momentum in market dynamics, they're growing and advertising 125 00:05:34,840 --> 00:05:36,640 as well. We're going to see them continue 126 00:05:36,640 --> 00:05:39,160 to do that. Profitability and operating 127 00:05:39,160 --> 00:05:41,280 margin expansion. This is where I'm most 128 00:05:41,280 --> 00:05:43,520 interested. Spotify got a big boost in their 129 00:05:43,520 --> 00:05:46,200 cash flows by cancelling some of their podcast investments. 130 00:05:46,560 --> 00:05:48,960 Is that going to continue? Outside of that, we have 131 00:05:48,960 --> 00:05:51,400 different formats in different AI enabled tools. 132 00:05:51,640 --> 00:05:54,800 Overall, I expect a solid report from Spotify. 133 00:05:54,880 --> 00:05:57,480 I believe the stock is going to put up huge numbers. 134 00:05:57,680 --> 00:06:00,080 I think they're going to be on their subscribers and engagement 135 00:06:00,080 --> 00:06:02,040 trends. I don't know about the revenue 136 00:06:02,040 --> 00:06:03,920 or earnings per share. Sometimes they miss on that, 137 00:06:03,920 --> 00:06:06,280 sometimes they don't. But I believe overall the core 138 00:06:06,280 --> 00:06:09,800 business is really strong. My suspicion is we could have a 139 00:06:09,800 --> 00:06:13,720 scenario similar to Netflix where Spotify reports decent 140 00:06:13,720 --> 00:06:16,800 earnings, but the stock trades down a little bit simply because 141 00:06:16,800 --> 00:06:19,320 evaluation. The stock is up huge like 142 00:06:19,320 --> 00:06:23,720 Netflix this year, up 53%. So I wouldn't be surprised if 143 00:06:23,720 --> 00:06:26,240 there's a bit of a fade after earnings, but that wouldn't 144 00:06:26,240 --> 00:06:29,480 concern me as an investor. If I own Spotify right here, I'd 145 00:06:29,480 --> 00:06:31,120 be happy just holding on to it now. 146 00:06:31,120 --> 00:06:32,520 Next up, we have United Health Group. 147 00:06:32,520 --> 00:06:33,880 Let's go ahead and take a look at this one. 148 00:06:34,000 --> 00:06:36,400 The simple story of United Health Group is this is a 149 00:06:36,400 --> 00:06:39,720 company that decided to cover too many things for too low of a 150 00:06:39,720 --> 00:06:42,160 price. They underpriced their services. 151 00:06:42,160 --> 00:06:45,560 They try to gain too much market share, and then more people use 152 00:06:45,560 --> 00:06:47,440 their services. They use the insurance more than 153 00:06:47,440 --> 00:06:50,160 expected, which cause immense losses. 154 00:06:50,440 --> 00:06:52,600 So that's the way to kind of dumb down what's going on. 155 00:06:52,960 --> 00:06:56,160 There's also Department of Justice investigations and other 156 00:06:56,160 --> 00:06:59,200 litigations going on, as there often is in this industry. 157 00:06:59,280 --> 00:07:01,840 If you look at some of the metrics here, we have people 158 00:07:01,840 --> 00:07:04,360 served. This is declining over time. 159 00:07:04,360 --> 00:07:06,920 So the past couple of quarters is actually going down. 160 00:07:07,160 --> 00:07:09,080 Never a KPI you want to see go that way. 161 00:07:09,400 --> 00:07:12,240 The revenue continues to go up are offering more crossover of 162 00:07:12,240 --> 00:07:15,920 services, but the number of people, the volume continues to 163 00:07:15,920 --> 00:07:18,080 decline and it's going to be tough to grow revenue on a 164 00:07:18,080 --> 00:07:20,720 consistent basis with the number of people they're serving going 165 00:07:20,720 --> 00:07:22,040 down. When we look at the what to 166 00:07:22,040 --> 00:07:24,800 watch for, the biggest problem here, the top thing highlighted 167 00:07:25,280 --> 00:07:28,600 was United Health reported that care activity in its Medicare 168 00:07:28,600 --> 00:07:32,560 Advantage MA business increased at twice the expected rate in 169 00:07:32,560 --> 00:07:35,800 the first quarter with physician and outpatient services most 170 00:07:35,800 --> 00:07:38,120 notable. Investors should closely watch 171 00:07:38,120 --> 00:07:41,960 whether this trend persists or abates in the next quarter, as 172 00:07:41,960 --> 00:07:44,920 sustained elevated care utilization could continue to 173 00:07:44,920 --> 00:07:47,440 pressure medical ratios and earnings. 174 00:07:47,960 --> 00:07:51,360 So basically it's highlighting here that the number one thing 175 00:07:51,360 --> 00:07:53,600 we should be looking at is whether or not people continue 176 00:07:53,600 --> 00:07:57,040 to use their health insurance at the same rate that they're doing 177 00:07:57,040 --> 00:07:59,600 last quarter. If they are, it's bad news for 178 00:07:59,600 --> 00:08:03,600 UNH, at least in the short term. The problem with this company 179 00:08:03,600 --> 00:08:05,800 again, is too many people are using the services. 180 00:08:06,160 --> 00:08:08,480 They underbid it. They wanted to gain market 181 00:08:08,480 --> 00:08:11,240 share, so they gave way their services at a lower price than 182 00:08:11,240 --> 00:08:13,520 their competitors. And now everybody's using their 183 00:08:13,520 --> 00:08:16,600 health insurance and this is a retroactive problem. 184 00:08:16,600 --> 00:08:21,000 You can't go back and fix it. So if we have a situation here, 185 00:08:21,160 --> 00:08:24,440 which I believe is very likely that this upcoming quarter, 186 00:08:24,720 --> 00:08:27,960 people are still using their medical services and physician 187 00:08:27,960 --> 00:08:30,440 outpatient services as much as they were the previous quarter. 188 00:08:30,880 --> 00:08:33,720 I think that's likely that's going to hurt earnings in the 189 00:08:33,720 --> 00:08:35,760 short term. The stock will likely fall, at 190 00:08:35,760 --> 00:08:38,960 least in the short term, or you won't see a rapid recovery as 191 00:08:38,960 --> 00:08:42,159 it's already fallen. But I want to highlight here 192 00:08:42,159 --> 00:08:44,240 that this is a temporary problem. 193 00:08:44,240 --> 00:08:47,160 Over time, over the next couple of years, they're going to 194 00:08:47,160 --> 00:08:49,720 reprice these plans. You'll have the rollout and 195 00:08:49,720 --> 00:08:52,680 initial fallout of the previously priced plans, but 196 00:08:52,680 --> 00:08:55,680 those will slowly fizzle out. So I believe we're going to see 197 00:08:55,680 --> 00:08:59,760 a situation where United Health Group may not recover as fast as 198 00:08:59,760 --> 00:09:02,600 investors like it might not be a thing where you see a recovery 199 00:09:02,600 --> 00:09:04,760 in a month. So maybe we don't see that 200 00:09:04,760 --> 00:09:07,600 happen, But I still believe this stock is undervalued. 201 00:09:08,040 --> 00:09:10,560 I think that over the next three or four years, you'll see a 202 00:09:10,560 --> 00:09:14,840 gradual recovery back up to the four hundreds to four 50s back 203 00:09:14,840 --> 00:09:17,360 up to where it was previously. So on United Health Group, you 204 00:09:17,360 --> 00:09:20,200 could call me short term concern, but long term bullish 205 00:09:20,200 --> 00:09:22,120 on the stock. I think that's a way of putting 206 00:09:22,120 --> 00:09:23,600 it. Now another one we have here is 207 00:09:23,600 --> 00:09:25,480 Sofi. I get asked about this stock all 208 00:09:25,480 --> 00:09:27,680 the time. Investors want to know what I 209 00:09:27,680 --> 00:09:30,400 think of this company. Sofi is a classic fintech 210 00:09:30,640 --> 00:09:32,840 technology company and bank mixed together. 211 00:09:33,120 --> 00:09:35,520 You get Sofi. When I look at this company, it 212 00:09:35,520 --> 00:09:39,440 has some incredible KP is for example, the members, just the 213 00:09:39,440 --> 00:09:42,760 amount of members they have on their platform, it increases 214 00:09:42,760 --> 00:09:45,080 every single quarter. It's incredible to see this to 215 00:09:45,080 --> 00:09:47,960 10.92 million. I don't think this quarter 216 00:09:47,960 --> 00:09:50,360 should be any different. I don't see any big changes in 217 00:09:50,600 --> 00:09:52,840 the competitive landscape. When we look at the amount of 218 00:09:52,840 --> 00:09:55,520 products, we also see that they're doing a lot more 219 00:09:55,520 --> 00:09:58,680 financial service products basically every quarter, another 220 00:09:58,680 --> 00:10:01,080 basically linear graph going up over time. 221 00:10:01,680 --> 00:10:03,720 They have a minority of that being lending products. 222 00:10:03,720 --> 00:10:06,120 So I like that the majority of this is service based. 223 00:10:06,240 --> 00:10:08,920 I see a lot of competitors in the fintech space. 224 00:10:09,280 --> 00:10:12,840 You have Sofi, you have Ally Financial, you have Robin Hood, 225 00:10:13,120 --> 00:10:15,400 you have all these companies competing for the same 226 00:10:15,400 --> 00:10:18,520 incremental dollar, the same wallet of everyone. 227 00:10:18,960 --> 00:10:21,800 And I think it's a little bit too diverse of a competitive 228 00:10:21,800 --> 00:10:24,840 landscape where I like owning one of the companies that's a 229 00:10:24,840 --> 00:10:27,040 huge winner in the category. And I have a hard time 230 00:10:27,040 --> 00:10:28,400 predicting what this one will do. 231 00:10:28,400 --> 00:10:31,600 The valuation is elevated, but this is the type of stock that 232 00:10:31,600 --> 00:10:34,440 if investors get a little bit of good news on it, it could rock 233 00:10:34,440 --> 00:10:37,240 it up another 5 to 10%. Now after we get through Tuesday 234 00:10:37,240 --> 00:10:40,800 before market open, we have Tuesday after market close, we 235 00:10:40,800 --> 00:10:42,640 have a couple big companies reporting earnings. 236 00:10:42,640 --> 00:10:45,680 Then now we're going to get to the big tech companies, Meta, 237 00:10:45,680 --> 00:10:48,520 Microsoft, Apple, and Amazon later, but we have to get 238 00:10:48,520 --> 00:10:49,760 through these smaller ones first. 239 00:10:50,080 --> 00:10:52,960 Tuesday after market close, we have Visa, Booking Holdings and 240 00:10:52,960 --> 00:10:54,880 Starbucks all reporting earnings. 241 00:10:55,120 --> 00:10:56,840 Let's go ahead and start off with Visa. 242 00:10:56,840 --> 00:10:58,960 When looking at Visa, I'm going to go ahead and group MasterCard 243 00:10:58,960 --> 00:11:01,520 with this one because they have so much overlap in their 244 00:11:01,520 --> 00:11:04,240 business model and Mastercard's going to trade. 245 00:11:04,240 --> 00:11:07,040 However Visa does. So Visa posts really good 246 00:11:07,040 --> 00:11:10,480 earnings and Tuesday MasterCard will likely move up. 247 00:11:10,800 --> 00:11:13,360 If Visa posts a little bit underwhelming, MasterCard will 248 00:11:13,360 --> 00:11:15,760 likely move down. They trade very similar. 249 00:11:15,760 --> 00:11:18,200 When we look at both of these companies, my simple prediction 250 00:11:18,200 --> 00:11:21,360 is you're going to see very steady, predictable earnings. 251 00:11:21,680 --> 00:11:24,040 Simply put, they're going to be business as usual. 252 00:11:24,320 --> 00:11:27,560 I see no reason to believe in any of the data that Visa or 253 00:11:27,560 --> 00:11:30,840 MasterCard are going to blind side us with terrible reports. 254 00:11:31,240 --> 00:11:33,600 I look at companies that have reported earnings, companies 255 00:11:33,600 --> 00:11:37,240 that give up monthly updates, and so far it just looks like 256 00:11:37,240 --> 00:11:40,040 people are spending money. Netflix reported great earnings, 257 00:11:40,280 --> 00:11:43,080 Costco shares their monthly revenue update, and people are 258 00:11:43,080 --> 00:11:47,200 spending money at Costco. Costco only accepts visas, so 259 00:11:47,200 --> 00:11:49,400 this company should buy the consumer. 260 00:11:49,400 --> 00:11:52,600 And some of the data points we have post steady predictable 261 00:11:52,600 --> 00:11:55,880 earnings. Now, I also expect to see on the 262 00:11:55,880 --> 00:11:59,080 calls of these two companies, a lot of commentary about stable 263 00:11:59,080 --> 00:12:02,360 coins as a competitive potential disruption. 264 00:12:02,480 --> 00:12:05,400 They're both overwhelmingly going to embrace stablecoin and 265 00:12:05,400 --> 00:12:08,080 they're going to embrace crypto. I don't see stablecoin being a 266 00:12:08,080 --> 00:12:09,880 disruptive risk for these companies, and I believe 267 00:12:09,880 --> 00:12:12,600 investors can sleep well owning Visa, MasterCard. 268 00:12:12,680 --> 00:12:14,600 Now, we also get into another one here that's been under a 269 00:12:14,600 --> 00:12:17,000 little bit more debate, which is Booking Holdings. 270 00:12:17,120 --> 00:12:20,000 I own a fairly large stake of Booking Holdings in my consumer 271 00:12:20,000 --> 00:12:22,360 category. It's currently a $77,000 272 00:12:22,360 --> 00:12:24,920 position, around $26,000 in the green. 273 00:12:25,240 --> 00:12:28,640 I bought this one looking hindsight at a really good time. 274 00:12:28,640 --> 00:12:31,360 It dipped for what I believed was no reason whatsoever. 275 00:12:31,640 --> 00:12:34,600 They posted a great earnings report, then the stock dipped by 276 00:12:34,600 --> 00:12:36,720 10%. I bought a big stake in the 277 00:12:36,720 --> 00:12:39,880 company and it since recovered. Now I want to be very clear with 278 00:12:39,880 --> 00:12:41,280 my prediction on Booking Holdings. 279 00:12:41,640 --> 00:12:44,240 I believe that their report's going to be incredibly strong, 280 00:12:44,440 --> 00:12:47,400 likely better than expected, because I believe the travel 281 00:12:47,400 --> 00:12:50,520 industry is far more resilient than what investors are 282 00:12:50,520 --> 00:12:52,720 expecting. This is usually considered one 283 00:12:52,720 --> 00:12:55,440 of the weaker industries. Like you'll hear old analysts 284 00:12:55,440 --> 00:12:59,440 say that when the economy goes, travel's the first thing to go. 285 00:13:00,000 --> 00:13:02,760 But really what we've seen with the numbers is that that whole 286 00:13:02,760 --> 00:13:06,360 narrative doesn't really add up. I look at the quarterly revenue 287 00:13:06,360 --> 00:13:10,160 of this company and maybe some segments of travel struggle, but 288 00:13:10,160 --> 00:13:13,640 the only time this company has ever really ran into trouble is 289 00:13:13,640 --> 00:13:16,280 during COVID when people are literally locked down. 290 00:13:16,920 --> 00:13:19,920 So I guess if you literally imprison people in their own 291 00:13:19,920 --> 00:13:23,360 homes, make it illegal to travel, require them to get 292 00:13:23,360 --> 00:13:26,040 vaccinations and go to that extremes, yeah, their product 293 00:13:26,040 --> 00:13:29,200 may take a hit. But outside of that, just look 294 00:13:29,200 --> 00:13:31,280 at the chart. There's nothing that keeps 295 00:13:31,280 --> 00:13:33,920 people in their houses forever. People want to go out and have 296 00:13:33,920 --> 00:13:36,160 experiences. Booking holdings is a 297 00:13:36,160 --> 00:13:39,440 representation of that wrapped up in an incredibly profitable 298 00:13:39,440 --> 00:13:42,040 business model. So I look at this and whether or 299 00:13:42,040 --> 00:13:44,800 not it's it's slowing down a little bit, we can look at the 300 00:13:44,800 --> 00:13:47,800 past five years. So I guess it's tapering down a 301 00:13:47,800 --> 00:13:50,880 little bit in revenue, but we still see continual all time 302 00:13:50,880 --> 00:13:53,160 highs. We still see continual all time 303 00:13:53,160 --> 00:13:55,800 highs in their merchant and agency. 304 00:13:56,000 --> 00:13:58,360 They're moving to a Better Business model over time. 305 00:13:58,600 --> 00:14:02,080 We see all time highs in their room nights sold, meaning total 306 00:14:02,080 --> 00:14:05,040 volume of people traveling and booking rooms is growing. 307 00:14:05,440 --> 00:14:07,160 And I think we're going to see more and more of this in the 308 00:14:07,160 --> 00:14:09,920 future. Again, outside of a one time 309 00:14:09,920 --> 00:14:13,080 pandemic that will never be repeated again in my lifetime, 310 00:14:13,280 --> 00:14:15,920 outside of that type of event, this company is growing like 311 00:14:15,920 --> 00:14:17,840 crazy easy. If we look at the ratios of this 312 00:14:17,840 --> 00:14:19,720 company, let's go ahead and just take a look at their gross 313 00:14:19,720 --> 00:14:21,640 margins. This isn't a lie. 314 00:14:21,640 --> 00:14:26,320 It's literally 100%. Sometimes it bounces down to 96% 315 00:14:26,320 --> 00:14:29,160 or 97%. We have operating margins that 316 00:14:29,160 --> 00:14:33,840 beat the gross margins of most companies, 31% operating margins 317 00:14:34,200 --> 00:14:36,560 and then profit margins which are 25%. 318 00:14:37,080 --> 00:14:41,280 So not quite as good as a Visa or MasterCard, but incredibly 319 00:14:41,280 --> 00:14:43,000 good. And the margins are recovering 320 00:14:43,000 --> 00:14:45,080 from 2020. They're going to get better over 321 00:14:45,080 --> 00:14:47,000 time as they keep optimizing their service. 322 00:14:47,040 --> 00:14:50,280 What we expect to see in this upcoming calls is commentary on 323 00:14:50,280 --> 00:14:53,320 the macroeconomic environment. And I've listened to enough of 324 00:14:53,320 --> 00:14:55,600 these calls that I know what the CEO is going to say. 325 00:14:56,160 --> 00:14:59,320 He's going to say that we've operated during pandemics and 326 00:14:59,320 --> 00:15:03,000 wars and financial crises and recessions. 327 00:15:03,560 --> 00:15:05,440 We've we've operated during all of it. 328 00:15:05,560 --> 00:15:08,080 And look at our company record high profits. 329 00:15:08,360 --> 00:15:10,880 People still want to travel. He believes that travel is 330 00:15:10,880 --> 00:15:14,000 innate to humans. It's just a part of our DNA. 331 00:15:14,000 --> 00:15:16,080 We don't want to stay in the same place forever. 332 00:15:16,080 --> 00:15:17,720 We want to go out and have experiences. 333 00:15:18,120 --> 00:15:21,240 So if you believe that that's true, if you believe the 334 00:15:21,240 --> 00:15:24,480 narrative that people are always going to travel, then you're not 335 00:15:24,480 --> 00:15:27,520 as concerned with the macroeconomic uncertainty or 336 00:15:27,520 --> 00:15:30,000 geopolitical uncertainty. That type of stuff has always 337 00:15:30,000 --> 00:15:32,040 happened. Yet this company continues to 338 00:15:32,040 --> 00:15:33,960 grow. You're going to see direct 339 00:15:33,960 --> 00:15:36,400 booking and loyalty trends. They'll show off how many people 340 00:15:36,400 --> 00:15:39,120 are now using their apps instead of using the website. 341 00:15:39,400 --> 00:15:41,440 One of the big efforts of booking is getting people more 342 00:15:41,440 --> 00:15:44,360 accustomed using the mobile app, and that usage has gone up. 343 00:15:45,000 --> 00:15:46,880 You have more partnerships that they're doing. 344 00:15:47,120 --> 00:15:49,840 You have alternative accommodations, connected trip 345 00:15:49,840 --> 00:15:51,640 expansions. They're trying to make their 346 00:15:51,640 --> 00:15:54,800 service more robust, connect to different companies. 347 00:15:54,800 --> 00:15:57,400 The last thing is artificial intelligence integration. 348 00:15:57,680 --> 00:16:00,280 Management has noted that they're integrating AI into 349 00:16:00,280 --> 00:16:02,320 their service. That can be looked at as a 350 00:16:02,320 --> 00:16:05,800 threat to Booking Holdings or a benefit to this company, but 351 00:16:05,800 --> 00:16:09,200 management is leaning in on AI. When I look at Booking Holdings, 352 00:16:09,200 --> 00:16:12,440 the big threat that I see down the road is the potential for 353 00:16:12,440 --> 00:16:15,480 artificial intelligence to completely book a trip for you, 354 00:16:15,480 --> 00:16:19,280 do it in a Safeway, do it in a way that people enjoy, and do 355 00:16:19,280 --> 00:16:22,000 that at scale. I think that could potentially 356 00:16:22,000 --> 00:16:24,480 be a threat, but I don't believe we're there right now. 357 00:16:24,800 --> 00:16:27,760 I think people like the rewards, they like the system, they like 358 00:16:27,760 --> 00:16:30,760 the UI of booking Holdings, and they have a huge advantage in 359 00:16:30,760 --> 00:16:33,480 advertising. So right now, I don't see that 360 00:16:33,480 --> 00:16:36,040 as a present thread. I'm holding all my shares going 361 00:16:36,040 --> 00:16:38,360 into these earnings now. Next on Tuesday after market 362 00:16:38,360 --> 00:16:41,640 close, we also have Starbucks and Cheesecake Factory reporting 363 00:16:41,640 --> 00:16:43,640 earnings. We'll group these two together 364 00:16:43,640 --> 00:16:45,440 as well because they're both food companies. 365 00:16:45,440 --> 00:16:48,760 They're in similar industries even though they they are a bit 366 00:16:48,760 --> 00:16:51,200 different. Starbucks is QSR quick service 367 00:16:51,200 --> 00:16:53,600 restaurant. Get in and out with your coffee. 368 00:16:53,960 --> 00:16:57,320 Cheesecake is to go and have an experience, go and have fun, sit 369 00:16:57,320 --> 00:16:59,960 down with some family and friends and enjoy their huge 370 00:16:59,960 --> 00:17:01,600 menu. When I look at each of these 371 00:17:01,600 --> 00:17:03,960 companies, they both have different risks. 372 00:17:04,200 --> 00:17:08,000 The risk with Starbucks is luck and coffee and every other 373 00:17:08,000 --> 00:17:09,880 coffee joint that's popping up left and right. 374 00:17:10,160 --> 00:17:12,599 I see Starbucks is having an increase in the amount of 375 00:17:12,599 --> 00:17:14,520 competition over the upcoming years. 376 00:17:14,560 --> 00:17:16,319 I think the company still has brand value. 377 00:17:16,319 --> 00:17:19,839 I think it will be fine over time, but I do see it as a more 378 00:17:19,839 --> 00:17:24,000 highly competitive place. And I see Starbucks at a point 379 00:17:24,200 --> 00:17:26,319 where they don't have as much pricing power. 380 00:17:26,640 --> 00:17:29,920 They've extended and exhausted all of their pricing power. 381 00:17:30,440 --> 00:17:32,040 You just can't raise prices anymore. 382 00:17:32,240 --> 00:17:35,240 And in fact, Starbucks is trying to win back customers by 383 00:17:35,240 --> 00:17:39,280 offering discounts and offering different app benefits to try to 384 00:17:39,280 --> 00:17:40,880 get people to use their app again. 385 00:17:40,920 --> 00:17:43,240 We want to see the amount of stores increase over time, as 386 00:17:43,240 --> 00:17:46,280 well as the amount of rewards member and overall the revenue. 387 00:17:46,280 --> 00:17:48,800 We've had flat revenue over the past year. 388 00:17:49,080 --> 00:17:52,120 So Starbucks hit a wall. They price people out of their 389 00:17:52,120 --> 00:17:53,960 stores. There's an increase in 390 00:17:53,960 --> 00:17:57,480 competition, and it still trades at a relatively healthy 391 00:17:57,480 --> 00:17:59,880 valuation. So this isn't some super 392 00:17:59,880 --> 00:18:01,960 undervalued company. When we look at Cheesecake 393 00:18:01,960 --> 00:18:04,960 Factory, this one has some risks, but I believe they're a 394 00:18:04,960 --> 00:18:06,800 little bit lesser than Starbucks. 395 00:18:06,880 --> 00:18:09,560 But the thing that I don't love in Cheesecake Factory and the 396 00:18:09,560 --> 00:18:12,760 thing that's kept me out of the company is simply the revenue 397 00:18:12,760 --> 00:18:14,960 growth. It's typically anywhere from 4 398 00:18:14,960 --> 00:18:17,080 to 7%. Most of the gains from this 399 00:18:17,080 --> 00:18:19,560 company, which I've been quite good over the past couple years, 400 00:18:19,840 --> 00:18:21,640 have come from multiple expansion. 401 00:18:22,040 --> 00:18:24,800 So this company is volatile. It goes down into big dips. 402 00:18:24,800 --> 00:18:27,720 You see it going back up to a spike right now, and a lot of 403 00:18:27,720 --> 00:18:30,080 that is the multiples moving back up because the company's 404 00:18:30,080 --> 00:18:31,920 been trading at a cheaper PE ratio. 405 00:18:32,120 --> 00:18:34,320 Out of the two, I'd rather own Cheesecake Factory than 406 00:18:34,320 --> 00:18:36,520 Starbucks. I believe it has less disruptive 407 00:18:36,520 --> 00:18:38,920 risk, even though it's slower moving, it's at a better 408 00:18:38,920 --> 00:18:41,240 valuation. All right, now we finally got 409 00:18:41,240 --> 00:18:43,520 here. We have our first big Tech 410 00:18:43,520 --> 00:18:47,000 company of the week Wednesday after market close. 411 00:18:47,240 --> 00:18:50,080 We have Microsoft and Meta both reporting earnings at the same 412 00:18:50,080 --> 00:18:51,880 time. Let's go ahead and start things 413 00:18:51,880 --> 00:18:53,920 off with Microsoft. Now, the first thing I have to 414 00:18:53,920 --> 00:18:56,560 say about Microsoft is I've owned this company for a long 415 00:18:56,560 --> 00:18:58,640 period of time. I've been super bullish on 416 00:18:58,640 --> 00:19:00,720 Microsoft. It's always been one of my top 417 00:19:00,720 --> 00:19:02,640 positions. If we look at the weighting of 418 00:19:02,640 --> 00:19:06,520 my combined portfolio, we have S&P Global at the top, Amazon, 419 00:19:06,600 --> 00:19:12,160 Netflix, then in fourth place at 8.6%, we have Microsoft and this 420 00:19:12,160 --> 00:19:16,720 one is around a $109,000 position with 51,000 of that 421 00:19:16,720 --> 00:19:20,080 being gains. So it's around an 89% gain 422 00:19:20,080 --> 00:19:21,840 overtime. Even though I've been dollar 423 00:19:21,840 --> 00:19:24,720 cost averaging up, I have been buying more of this company. 424 00:19:25,080 --> 00:19:29,440 The most recent buy I did was around 22230I continued to buy a 425 00:19:29,440 --> 00:19:31,520 little bit trailing up, and then I tapered off. 426 00:19:32,040 --> 00:19:36,440 So I've bought recently, just in 2022, but then I've held the 427 00:19:36,440 --> 00:19:38,400 company and I haven't trimmed at all. 428 00:19:38,760 --> 00:19:42,000 Even though Microsoft is trading at a share price of 513. 429 00:19:42,280 --> 00:19:46,160 I refuse to trim this company. I won't do it for a couple of 430 00:19:46,160 --> 00:19:47,960 reasons. First of all, I've continually, 431 00:19:47,960 --> 00:19:51,120 throughout the history of my channel, referred to Microsoft 432 00:19:51,120 --> 00:19:54,640 as the poster child for the perfect fundamentals, meaning 433 00:19:54,640 --> 00:19:58,160 that this company represents some of the perfect fundamentals 434 00:19:58,160 --> 00:20:01,600 you'll ever see in a company. Long term revenue growth 435 00:20:01,600 --> 00:20:06,000 overtime, it's just gorgeous. The diversification of revenue 436 00:20:06,160 --> 00:20:09,760 both through segment and geography, highly diversified in 437 00:20:09,760 --> 00:20:12,720 every way possible, but it's all good. 438 00:20:13,120 --> 00:20:16,160 So it's not diversification, it's high quality 439 00:20:16,160 --> 00:20:18,800 diversification. All of these are great revenue 440 00:20:18,800 --> 00:20:20,720 segments. You have a highly profitable 441 00:20:20,720 --> 00:20:22,840 business model that's been software. 442 00:20:23,120 --> 00:20:26,400 Software has been such a good place to be, highly recurring 443 00:20:26,400 --> 00:20:29,840 lock in, high lifetime value and high margins. 444 00:20:30,360 --> 00:20:32,160 Then you have cash flow generation. 445 00:20:32,520 --> 00:20:35,920 Now the free cash flow just went parabolic over the past couple 446 00:20:35,920 --> 00:20:38,400 of years from 2018 to current day. 447 00:20:38,960 --> 00:20:41,720 And even though they're doing massive CapEx investments, which 448 00:20:41,720 --> 00:20:44,920 is directly subtracted out of their free cash flow metric, 449 00:20:45,000 --> 00:20:47,720 their free cash flow is growing. So Microsoft is great. 450 00:20:47,720 --> 00:20:50,560 And even though most people understood that Microsoft is a 451 00:20:50,560 --> 00:20:53,240 great company, they didn't understand it enough. 452 00:20:53,240 --> 00:20:56,480 They didn't know how good it was that it would really persevere 453 00:20:56,480 --> 00:20:59,160 this much and grow this much. When we look at Microsoft, the 454 00:20:59,160 --> 00:21:02,120 big problem or at least the question right now is evaluation 455 00:21:02,120 --> 00:21:04,120 of the company. If we look at the valuation over 456 00:21:04,120 --> 00:21:06,560 the past five years and we look at the free cash flow yield, 457 00:21:07,080 --> 00:21:10,200 this means that the lower this goes, the more expensive 458 00:21:10,200 --> 00:21:12,560 Microsoft is. So this is the cash you're 459 00:21:12,560 --> 00:21:16,200 getting per $100 you're invested, represented in a yield 460 00:21:16,200 --> 00:21:19,040 form. So out of $100 I'm investing, I 461 00:21:19,040 --> 00:21:21,880 get $1.83 back over the trailing 12 months. 462 00:21:22,520 --> 00:21:26,520 Just a couple years ago in 2022, I was getting $4.00 back. 463 00:21:26,920 --> 00:21:31,240 So Microsoft trades at roughly 100%, almost double the 464 00:21:31,240 --> 00:21:34,840 valuation it did just a couple years ago on a price to earnings 465 00:21:34,840 --> 00:21:36,880 ratio. This is inverted, where the 466 00:21:36,880 --> 00:21:39,360 higher this chart is, the more expensive Microsoft is. 467 00:21:39,760 --> 00:21:43,840 Again, in 2022, the stock was at around $220 per share. 468 00:21:44,480 --> 00:21:48,160 It was trading at a 26 PE ratio. That was the cheapest Microsoft 469 00:21:48,160 --> 00:21:51,440 has traded for a long time. We look at it and it typically 470 00:21:51,440 --> 00:21:54,400 trades in the high 30s based on the quality of the company. 471 00:21:54,560 --> 00:21:57,240 And then more recently, we look again and it's the most 472 00:21:57,240 --> 00:21:59,320 expensive. It's been right at the peaks 473 00:21:59,320 --> 00:22:02,720 over the past five years. So Microsoft is trading at a 474 00:22:02,720 --> 00:22:06,000 higher valuation today than almost anytime throughout its 475 00:22:06,000 --> 00:22:08,160 history. Microsoft does have more 476 00:22:08,160 --> 00:22:11,880 fundamental differences today to justify the valuation than it 477 00:22:11,880 --> 00:22:15,600 even did a couple years ago. This company is transforming for 478 00:22:15,600 --> 00:22:17,440 the better, and this transformation is being 479 00:22:17,440 --> 00:22:20,640 highlighted by the CEO of the company, which is Satya Nadella. 480 00:22:21,240 --> 00:22:24,360 He recently released a memo just a couple days ago called 481 00:22:24,480 --> 00:22:27,440 recommitting to our Why, What, and How. 482 00:22:27,560 --> 00:22:29,840 Now, this memo is a couple pages long, so I'm not going to read 483 00:22:29,840 --> 00:22:32,360 through it here, but I'll summarize some of the things 484 00:22:32,360 --> 00:22:34,920 that he talked about in the overall theme of this memo. 485 00:22:35,000 --> 00:22:38,200 The big thing that Satya Nadella argues for in this memo is that 486 00:22:38,200 --> 00:22:41,000 Microsoft has always been known as a software company. 487 00:22:41,440 --> 00:22:43,960 They build software, they build user interfaces, they build 488 00:22:43,960 --> 00:22:47,440 applications, and they sell them on this residual license that 489 00:22:47,440 --> 00:22:50,280 you pay every single month, a typical software company. 490 00:22:50,560 --> 00:22:53,120 But he's saying that their identity is transforming, that 491 00:22:53,120 --> 00:22:55,480 they're no longer going to be viewed as a software company. 492 00:22:55,680 --> 00:22:58,440 They're no longer going to be even work as a software company. 493 00:22:58,800 --> 00:23:02,520 Instead, they're an intelligence engine powering the rest of the 494 00:23:02,520 --> 00:23:04,880 world with AI solutions and tools. 495 00:23:05,360 --> 00:23:08,760 They're now going to be primarily an AI company, AI 496 00:23:08,760 --> 00:23:12,160 first, not a software company. Everything that they're doing 497 00:23:12,160 --> 00:23:15,560 with Azure and all of their, the things that they're building are 498 00:23:15,560 --> 00:23:19,280 built specifically with AI to power other companies with AI. 499 00:23:19,280 --> 00:23:21,080 It also changes their list of priorities. 500 00:23:21,080 --> 00:23:24,240 Now they're a lot more focused on security and quality of their 501 00:23:24,240 --> 00:23:27,680 tools and transforming from the software company to the AI 502 00:23:27,680 --> 00:23:29,840 company. In the process, they're doing 503 00:23:29,840 --> 00:23:32,440 layoffs, so they're restructuring and Microsoft 504 00:23:32,440 --> 00:23:35,160 regularly does this. Overtime they'll do layoffs and 505 00:23:35,160 --> 00:23:37,040 then they'll hire a lot of people in the future. 506 00:23:37,200 --> 00:23:39,960 This is what they do, but you can see the transformation 507 00:23:39,960 --> 00:23:42,160 happening. They're no longer trying to view 508 00:23:42,160 --> 00:23:44,440 themselves as an old fashioned software company. 509 00:23:44,680 --> 00:23:46,520 They're now an AI engine company. 510 00:23:46,640 --> 00:23:49,600 I believe that's the right vision for the company and that 511 00:23:49,600 --> 00:23:52,080 Satya Nadella is still transforming this company in a 512 00:23:52,080 --> 00:23:55,120 positive way. He first did this by going head 513 00:23:55,120 --> 00:23:58,800 first into Microsoft Azure. This was the main direction of 514 00:23:58,800 --> 00:24:01,200 the company that he took it, and that was the right direction. 515 00:24:01,480 --> 00:24:04,400 Now transforming from software into artificial intelligence is 516 00:24:04,400 --> 00:24:08,560 another good move for Microsoft. With Azure growth and dynamics 517 00:24:08,560 --> 00:24:12,400 and AI integration being top of mind for investors, investors 518 00:24:12,400 --> 00:24:15,240 should closely watch the growth trajectory of Azure. 519 00:24:15,240 --> 00:24:19,560 The evolving blend of AI and non AI workloads on Azure means 520 00:24:19,560 --> 00:24:22,000 demand trends and revenue benefits may be increasingly 521 00:24:22,000 --> 00:24:25,520 difficult to disentangle and the continued success of both 522 00:24:25,520 --> 00:24:28,480 components will be important. This is something that Andy 523 00:24:28,480 --> 00:24:31,840 Jesse also highlights. He says, yeah, AI is great and 524 00:24:31,840 --> 00:24:34,920 all it's, it's great to be going that direction, but there's 525 00:24:34,920 --> 00:24:37,760 still just a lot of basic IT stuff that hasn't been into the 526 00:24:37,760 --> 00:24:39,600 cloud. So he's saying we're, we're 527 00:24:39,600 --> 00:24:43,240 pushing full steam ahead in AI, but there's so much workloads 528 00:24:43,400 --> 00:24:45,880 that are still being done locally that should be done in 529 00:24:45,880 --> 00:24:47,920 the cloud. So you see that growing with 530 00:24:47,920 --> 00:24:50,160 Azure. We want to see strong AI growth 531 00:24:50,160 --> 00:24:51,720 and we want to see growth overall. 532 00:24:52,120 --> 00:24:54,120 The next thing is cloud infrastructure investments and 533 00:24:54,120 --> 00:24:57,360 capacity constraints. We just saw that Google upped 534 00:24:57,400 --> 00:24:59,240 the amount that they're investing in cloud. 535 00:24:59,520 --> 00:25:01,200 This puts a lot of pressure on Microsoft. 536 00:25:01,200 --> 00:25:03,720 To give you a reminder, we can look up Google Cloud here and 537 00:25:03,720 --> 00:25:07,000 take a look at one of the KPIs, which is their cloud backlog. 538 00:25:07,400 --> 00:25:12,920 This grew by 37 1/2%, almost 38% to $108 billion. 539 00:25:13,360 --> 00:25:16,120 So they have a massive backlog that they're growing really 540 00:25:16,120 --> 00:25:18,400 fast. Microsoft will have the pressure 541 00:25:18,400 --> 00:25:22,000 on investors want to see this continued capacity constraint. 542 00:25:22,240 --> 00:25:24,960 They want to see the continued investment in Microsoft Azure. 543 00:25:25,000 --> 00:25:28,880 We want to see Copilot and AI product monetization tracking 544 00:25:28,880 --> 00:25:31,960 adoption rates of customer engagements on Copilot and other 545 00:25:32,000 --> 00:25:36,960 AI driven products across Microsoft 365, Dynamics 365 and 546 00:25:36,960 --> 00:25:40,080 Security Solutions. A lot of people will be critical 547 00:25:40,080 --> 00:25:44,880 of Copilot as kind of an addon AI, but the truth is that many 548 00:25:44,880 --> 00:25:47,560 people already using a lot of Microsoft services are just 549 00:25:47,560 --> 00:25:50,600 going to sign U with whatever integrates easiest, whatever's 550 00:25:50,600 --> 00:25:52,360 already kind of included in the package. 551 00:25:52,840 --> 00:25:55,280 And that's copilot. So Microsoft is again using 552 00:25:55,280 --> 00:25:58,600 their bundling and their huge offering to enhance one of the 553 00:25:58,600 --> 00:26:00,040 other products, which is copilot. 554 00:26:00,200 --> 00:26:02,680 Microsoft will continue to balance keeping their margins 555 00:26:02,680 --> 00:26:04,720 high while making the meaningful investments. 556 00:26:05,040 --> 00:26:07,400 They're really good at this. They're only going to invest 557 00:26:07,400 --> 00:26:10,960 where they see a high return. So if Microsoft bumps up their 558 00:26:10,960 --> 00:26:13,200 CapEx, I will look at that as a good thing. 559 00:26:13,520 --> 00:26:17,040 I'm not going to sell my stock or be concerned because CapEx is 560 00:26:17,040 --> 00:26:19,800 going up and I believe margins will take a temporary hit. 561 00:26:19,960 --> 00:26:22,480 I'd be OK if Microsoft has to do more CapEx. 562 00:26:22,840 --> 00:26:25,360 We've already seen how good the cloud business is overall, 563 00:26:25,360 --> 00:26:29,440 despite the share price of $513, despite the fact this company 564 00:26:29,440 --> 00:26:33,440 trades at a five year high valuation, I'm still not selling 565 00:26:33,520 --> 00:26:35,680 because it's in such a good situation. 566 00:26:35,680 --> 00:26:37,520 The price may ebb and flow a little bit. 567 00:26:37,520 --> 00:26:40,000 I could see it going up or down a couple percentage after 568 00:26:40,000 --> 00:26:42,120 earnings. But overall this company is so 569 00:26:42,120 --> 00:26:44,360 fundamentally strong that even though I don't think it's the 570 00:26:44,360 --> 00:26:47,360 best time to be buying into Microsoft, I'm certainly not 571 00:26:47,360 --> 00:26:49,720 selling my shares and I think that it will continue to have 572 00:26:49,960 --> 00:26:52,520 incredibly strong fundamentals. Now Next up, reporting at the 573 00:26:52,520 --> 00:26:55,960 same time we have Meta, which is the company that no matter how 574 00:26:55,960 --> 00:26:59,000 big it gets, it always has room to get bigger. 575 00:26:59,200 --> 00:27:02,040 This is one of the companies that always, it always impresses 576 00:27:02,040 --> 00:27:05,120 me how many people there are out there to continually use their 577 00:27:05,120 --> 00:27:07,720 services. The family daily active people 578 00:27:07,720 --> 00:27:11,920 metric for example, was at 2 billion in 2019 and it just 579 00:27:11,920 --> 00:27:15,560 continues to grow quarter after quarter now to 3.43 billion. 580 00:27:15,720 --> 00:27:18,640 I believe it's going to continue to go up and it shows you the 581 00:27:18,640 --> 00:27:21,080 total addressable market for these types of companies. 582 00:27:21,600 --> 00:27:23,920 They have free applications that are ad supported. 583 00:27:24,080 --> 00:27:27,040 Virtually everyone on planet earth can use them, anybody that 584 00:27:27,040 --> 00:27:29,680 has a mobile device. So Meta's continually growing 585 00:27:29,680 --> 00:27:32,200 the amount of people using their service, and then they're 586 00:27:32,200 --> 00:27:35,040 growing the revenue with the users they already have year 587 00:27:35,040 --> 00:27:39,080 over year, causing the company to grow the top line around 20% 588 00:27:39,080 --> 00:27:41,320 year over year. It's one of the fastest growth 589 00:27:41,320 --> 00:27:44,160 rates of any big tech company. Like all of these big tech 590 00:27:44,160 --> 00:27:47,000 companies, they have to involve AI into every part of their 591 00:27:47,000 --> 00:27:49,160 business. With Meta, they've obviously 592 00:27:49,160 --> 00:27:52,080 done this to optimize their advertisements, but now they're 593 00:27:52,080 --> 00:27:55,280 going a step further, doing some similar things to Amazon, where 594 00:27:55,280 --> 00:27:58,800 you have generative ads recommended with their model 595 00:27:58,800 --> 00:28:01,000 GEM. So basically what Zuckerberg 596 00:28:01,000 --> 00:28:04,640 trying to do here is make it so an advertiser can click a button 597 00:28:04,920 --> 00:28:07,520 or type in what they want the advertisement to be about. 598 00:28:08,240 --> 00:28:11,840 The gem. GEM will make an ad for that 599 00:28:11,840 --> 00:28:14,480 advertiser and then they can sell it on Meta. 600 00:28:14,560 --> 00:28:17,280 And I like the thought here. If an advertiser can save money 601 00:28:17,280 --> 00:28:20,240 and time on building the ad, then they can spend more money 602 00:28:20,240 --> 00:28:22,760 and time on actually paying for ads to be ran. 603 00:28:22,960 --> 00:28:26,440 Meta is trying to automate part of the advertiser's job so that 604 00:28:26,440 --> 00:28:27,920 they can spend more money on Meta. 605 00:28:27,920 --> 00:28:29,640 And I think overall that's a great plan. 606 00:28:29,760 --> 00:28:32,360 The other big thing, like any of these big tech companies, is 607 00:28:32,360 --> 00:28:34,320 going to be looking at their infrastructure. 608 00:28:34,880 --> 00:28:37,880 This company used to be looked at as just a social media 609 00:28:37,880 --> 00:28:40,840 company, but now it's more looked at as the rails of 610 00:28:40,840 --> 00:28:43,640 communication across the globe. They own so many assets. 611 00:28:43,640 --> 00:28:45,360 They're building such huge infrastructure. 612 00:28:45,520 --> 00:28:47,400 They're wrapping all of this with AI. 613 00:28:47,880 --> 00:28:50,680 There's become a lot more high MO of a company. 614 00:28:50,680 --> 00:28:54,800 It has a durable logistics mode now, even a technological mode. 615 00:28:54,840 --> 00:28:57,440 Now in terms of how the stock will trade, it's always a coin 616 00:28:57,440 --> 00:28:59,360 flip. But with Meta, you have reason 617 00:28:59,360 --> 00:29:01,440 to believe that it might cool off a little bit more than 618 00:29:01,440 --> 00:29:03,400 expected. The company trades at a 619 00:29:03,400 --> 00:29:07,400 valuation of a 27 PE ratio, where you have other companies 620 00:29:07,400 --> 00:29:11,280 like Google trading at around an 18 right now. 621 00:29:11,280 --> 00:29:13,440 I believe that Google's the undervalued 1. 622 00:29:13,440 --> 00:29:17,240 I think Meta's at more of a full valuation and if anything, I 623 00:29:17,240 --> 00:29:20,040 believe that Google should get up to around the same valuation 624 00:29:20,040 --> 00:29:23,400 as Meta, around a 25 to 26 Ford PE ratio. 625 00:29:23,720 --> 00:29:26,840 That leaves more upside for an advertising giant like Google 626 00:29:26,840 --> 00:29:29,080 than there is for Meta. But you're buying with Meta at 627 00:29:29,080 --> 00:29:30,680 this point is that you never know. 628 00:29:30,720 --> 00:29:33,800 This company has wildly outperformed investors and 629 00:29:33,800 --> 00:29:36,720 analyst expectations before, so there is a chance they do it 630 00:29:36,720 --> 00:29:39,160 again and they come in way above expectations. 631 00:29:39,160 --> 00:29:42,400 After Microsoft and Meta report earnings on Wednesday, it's not 632 00:29:42,400 --> 00:29:44,600 done yet. We move on to Thursday and 633 00:29:44,600 --> 00:29:47,080 before market open on Thursday, we have one important company, 634 00:29:47,160 --> 00:29:49,200 company. This is my largest holding in My 635 00:29:49,200 --> 00:29:52,720 Portfolio, which is S&P Global. If we look at this here, we can 636 00:29:52,720 --> 00:29:55,880 take a look at S&P Global. It's barely my largest holding, 637 00:29:55,880 --> 00:29:58,960 just above Amazon and just above Netflix. 638 00:29:59,120 --> 00:30:01,680 When we look at S&P Global, there's a reason that this is my 639 00:30:01,680 --> 00:30:04,960 largest position and frankly it's just because I believe it's 640 00:30:04,960 --> 00:30:07,760 an indestructible company. Out of all the companies that 641 00:30:07,760 --> 00:30:11,120 could run into problems and disruptions and regulations and 642 00:30:11,120 --> 00:30:14,120 different things that could hurt them, I believe that S&P Global 643 00:30:14,120 --> 00:30:17,760 is one of the most insulated. It's one of the the widest Moat 644 00:30:17,760 --> 00:30:20,160 companies in the entire market. With this one, what we're 645 00:30:20,160 --> 00:30:23,320 looking at this week is we want to see progress on the mobility 646 00:30:23,320 --> 00:30:25,280 division spin off. They announced that they're 647 00:30:25,280 --> 00:30:27,240 spinning off that business. We want to see what's going on 648 00:30:27,240 --> 00:30:29,680 with it, how much money they're going to earn, when that will be 649 00:30:29,680 --> 00:30:31,520 completed. We also want to see bond 650 00:30:31,520 --> 00:30:33,240 issuance and rating revenue trends. 651 00:30:33,640 --> 00:30:36,280 The rating business, even though it's super wide mode, it's a bit 652 00:30:36,280 --> 00:30:38,560 more cyclical than other businesses. 653 00:30:38,840 --> 00:30:41,680 But after a robust Q1, management foresees A 654 00:30:41,680 --> 00:30:44,080 moderation. And then this company is a tech 655 00:30:44,080 --> 00:30:45,840 company. They're constantly launching new 656 00:30:45,840 --> 00:30:48,120 products, new database products all the time. 657 00:30:48,400 --> 00:30:50,600 We want to see the new types of things they're coming out with 658 00:30:50,880 --> 00:30:53,120 and the overall pace of product innovation. 659 00:30:53,640 --> 00:30:56,400 SNP Global's another one that causes me no anxiety. 660 00:30:56,400 --> 00:30:58,200 There's no stress in holding this company. 661 00:30:58,480 --> 00:30:59,960 I think the report's going to be great. 662 00:30:59,960 --> 00:31:01,440 I continue to hold all my shares. 663 00:31:01,560 --> 00:31:03,880 Now finally, we get to Thursday after market close. 664 00:31:03,880 --> 00:31:07,200 This is where we get to another huge after close day. 665 00:31:07,440 --> 00:31:09,640 We have Apple and Amazon both reporting earnings. 666 00:31:09,640 --> 00:31:11,640 Let's go ahead and start things off with Apple. 667 00:31:11,680 --> 00:31:14,160 I owned a lot of Apple stock. In fact, it was one of my 668 00:31:14,160 --> 00:31:16,920 biggest positions for a long period of time on my channel. 669 00:31:17,160 --> 00:31:19,600 I've made dozens of videos around the company. 670 00:31:19,920 --> 00:31:22,120 So this is a stock that I've studied for a long period of 671 00:31:22,120 --> 00:31:24,000 time. And I really like ALE. 672 00:31:24,000 --> 00:31:26,120 I love the products. I'm a fanboy of the company. 673 00:31:26,320 --> 00:31:29,400 I like their designs. But I sold ALE early this year 674 00:31:29,400 --> 00:31:31,600 for a couple concerns. If we look at the revenue over 675 00:31:31,600 --> 00:31:34,360 the past three years, quarter by quarter on a trailing basis, 676 00:31:34,360 --> 00:31:37,800 this is what it looks like. This is 3 full years we have 677 00:31:37,800 --> 00:31:43,680 from Q32022 to Q1 of 2025 and the revenue is almost the exact 678 00:31:43,680 --> 00:31:45,920 same. So we have stagnant revenue. 679 00:31:46,120 --> 00:31:49,600 I just don't own businesses that have flat or no growth revenue, 680 00:31:49,880 --> 00:31:51,720 especially on a multi year basis. 681 00:31:52,000 --> 00:31:56,000 It's very difficult to get solid returns from a company that has 682 00:31:56,000 --> 00:31:58,640 flat revenue. You can sometimes do it if they 683 00:31:58,640 --> 00:32:01,960 squeeze out a tremendous amount of margin, but in most cases the 684 00:32:01,960 --> 00:32:05,360 returns aren't going to be good. Now when we look at Apple, it 685 00:32:05,360 --> 00:32:09,040 has flat revenue while trading at a premium valuation. 686 00:32:09,480 --> 00:32:13,080 So you have a near 30 PE ratio on a forward basis. 687 00:32:13,360 --> 00:32:17,200 You have a 3% free cash flow yield 2 1/2% while having flat 688 00:32:17,200 --> 00:32:19,280 revenue. When I look at what to watch for 689 00:32:19,280 --> 00:32:23,440 with this company, you have some macro concerns like the tariff 690 00:32:23,440 --> 00:32:26,240 and supply chain impact. I don't find that quite as 691 00:32:26,240 --> 00:32:28,960 interesting as other investors. None of that stuff feels 692 00:32:28,960 --> 00:32:31,640 intrinsic to the company. Even though it may be a short 693 00:32:31,640 --> 00:32:34,200 term concern. I wouldn't sell Apple solely 694 00:32:34,200 --> 00:32:36,320 because of tariffs or supply chain impacts. 695 00:32:36,800 --> 00:32:38,520 They're really good at figuring that stuff out. 696 00:32:38,880 --> 00:32:41,560 The part that I have more of a problem with with Apple, the 697 00:32:41,560 --> 00:32:45,600 bigger concern is their lack of AI integration into the iPhone. 698 00:32:45,760 --> 00:32:49,080 Apple Intelligence and AI integration into the iPhone has 699 00:32:49,080 --> 00:32:52,080 been a massive let down. The roll out and consumer 700 00:32:52,080 --> 00:32:55,160 adoption of Apple Intelligence features, including on device 701 00:32:55,400 --> 00:32:59,000 cloud based AI remain pivotal. The March quarter data showed 702 00:32:59,000 --> 00:33:02,120 stronger year over year iPhone 16 performance in markets where 703 00:33:02,120 --> 00:33:03,560 Apple Intelligence was available. 704 00:33:03,920 --> 00:33:07,160 So even with their current Apple Intelligence, it's boosting 705 00:33:07,160 --> 00:33:09,200 sales and they can see that in the numbers. 706 00:33:09,600 --> 00:33:12,280 But I'd say that the current version of Apple intelligence is 707 00:33:12,280 --> 00:33:15,840 still not that intelligent. They advertised it like it's 708 00:33:15,960 --> 00:33:18,680 like having ChatGPT built into your phone. 709 00:33:19,000 --> 00:33:21,600 Your phone is now this incredible personal assistant 710 00:33:21,600 --> 00:33:23,080 that can intuitively understand you. 711 00:33:23,600 --> 00:33:27,280 But what we got was text summaries that after using it 712 00:33:27,280 --> 00:33:29,400 for some time, I disabled because I didn't really like 713 00:33:29,400 --> 00:33:31,000 them. That's not the Apple 714 00:33:31,000 --> 00:33:33,080 intelligence that we had advertised to us. 715 00:33:33,480 --> 00:33:37,360 So I believe they're falling behind in Apple intelligence in 716 00:33:37,360 --> 00:33:40,840 this new growth path for them. Now they have a lot of time 717 00:33:40,840 --> 00:33:43,920 because Apple still has a huge Moat, so they have a lot of time 718 00:33:43,920 --> 00:33:46,480 to figure this out, but right now they're not figuring it out. 719 00:33:46,480 --> 00:33:48,920 The other thing that we're always watching for with Apple 720 00:33:48,920 --> 00:33:51,080 is that this is now a service based company. 721 00:33:51,520 --> 00:33:53,800 They've outgrown just the hardware sales portion. 722 00:33:54,120 --> 00:33:57,120 They're now growing in Apple TV, they're growing in Apple 723 00:33:57,320 --> 00:34:00,400 Insurance and Apple Care, they're growing in Apple Music 724 00:34:00,400 --> 00:34:01,760 and all these different services. 725 00:34:01,760 --> 00:34:05,120 And we want to see continued growth because again, outside of 726 00:34:05,120 --> 00:34:08,000 that, they're not growing that much in just pure device sales. 727 00:34:08,159 --> 00:34:10,679 Now the service business is still growing and it's growing 728 00:34:10,679 --> 00:34:13,239 at a decent pace. But I will note that the pace of 729 00:34:13,239 --> 00:34:17,440 services is also slowing down 12% year over year growth. 730 00:34:18,120 --> 00:34:22,880 It used to be growing at 1718%. So we even see this important 731 00:34:23,120 --> 00:34:25,480 revenue line of Apple slowing down a little bit. 732 00:34:25,600 --> 00:34:28,760 Apple is still a high quality, high margin company with a wide 733 00:34:28,760 --> 00:34:31,120 Moat. It's not in any type of huge 734 00:34:31,120 --> 00:34:33,040 trouble. There's no big concern for 735 00:34:33,040 --> 00:34:35,120 Apple. The biggest concern for me is 736 00:34:35,120 --> 00:34:37,960 that I'm a growth investor. I like investing in companies 737 00:34:38,199 --> 00:34:41,400 that strong fundamentals growing at a brisk pace, faster than the 738 00:34:41,400 --> 00:34:43,400 market. Apple's now growing slower than 739 00:34:43,400 --> 00:34:45,199 the market. It's moved into more of a 740 00:34:45,280 --> 00:34:48,960 mature, slow growing, high quality company, company that 741 00:34:48,960 --> 00:34:51,719 will produce earnings per share growth and free cash flow per 742 00:34:51,719 --> 00:34:54,639 share growth purely through share buybacks and financial 743 00:34:54,639 --> 00:34:57,000 engineering more than top line revenue growth. 744 00:34:57,000 --> 00:34:59,480 For that reason, even though I don't believe that this earnings 745 00:34:59,480 --> 00:35:01,920 will be bad for Apple, I think they'll do just fine. 746 00:35:02,240 --> 00:35:04,680 It's not a particularly interesting stock for me today. 747 00:35:04,720 --> 00:35:07,160 Now finally, we get to Amazon reporting earnings at the same 748 00:35:07,160 --> 00:35:09,400 time as Apple Thursday after market close. 749 00:35:09,400 --> 00:35:12,200 This is going to be a highly anticipated one, especially for 750 00:35:12,200 --> 00:35:15,720 me because Amazon as a company, I've continually built up my 751 00:35:15,720 --> 00:35:18,200 position. I've been bullish on Amazon for 752 00:35:18,200 --> 00:35:20,840 years and this stock has gone through a lot. 753 00:35:20,840 --> 00:35:23,920 But I feel like Amazon is really showing its strength over the 754 00:35:23,920 --> 00:35:26,600 past couple of years. We look at it today in My 755 00:35:26,600 --> 00:35:29,960 Portfolio and both the story fund and the passive income 756 00:35:29,960 --> 00:35:33,480 portfolio combined, this is $1.2 million combined. 757 00:35:33,800 --> 00:35:35,600 Amazon is the second largest position. 758 00:35:35,960 --> 00:35:39,200 So I've built it up even past even past Netflix, even though 759 00:35:39,200 --> 00:35:42,120 Netflix has a lot more gains. Amazon is starting to move up 760 00:35:42,120 --> 00:35:47,000 with $49,000 in the green. Overall, I have around $140,000 761 00:35:47,000 --> 00:35:49,600 invested in this company. If we zoom out a little bit with 762 00:35:49,600 --> 00:35:52,080 Amazon here just past this quarter and we look into the 763 00:35:52,080 --> 00:35:55,600 future, there's a reason that I'm excited about Amazon and 764 00:35:55,600 --> 00:35:57,120 I'll include Google on this as well. 765 00:35:57,120 --> 00:35:59,800 I know Google reported earnings already, but this will make 766 00:35:59,800 --> 00:36:02,560 sense in a minute. When we look at Amazon and 767 00:36:02,560 --> 00:36:05,480 Google and we compare these two companies to other tech leaders, 768 00:36:05,480 --> 00:36:08,080 companies like Tesla and many of the thoughts that investors 769 00:36:08,080 --> 00:36:11,360 have, I believe that these companies are better positioned 770 00:36:11,680 --> 00:36:14,400 in a couple different ways. For example, when I look at 771 00:36:14,400 --> 00:36:18,560 Amazon, I view Amazon as the best position company in the 772 00:36:18,560 --> 00:36:22,840 world today for humanoid robots. Robots in the human form, 773 00:36:22,840 --> 00:36:26,440 powered by AI, they could feasibly accomplish all sorts of 774 00:36:26,440 --> 00:36:28,840 different tasks. The reason that the humanoid 775 00:36:28,920 --> 00:36:32,160 form is so important is because our world is built around 776 00:36:32,160 --> 00:36:33,720 humans. We're the ones that build it. 777 00:36:33,720 --> 00:36:36,800 So if a robot has the same form factor as us, it can do all 778 00:36:36,800 --> 00:36:39,360 sorts of stuff that humans could do, but it could do it for 779 00:36:39,360 --> 00:36:41,840 longer hours, It could do a lower pay, right? 780 00:36:41,840 --> 00:36:44,640 It does it without having to take healthcare, without taking 781 00:36:44,640 --> 00:36:47,680 vacation, without complaining, without going on strike, and so 782 00:36:47,680 --> 00:36:49,720 on and so forth. The company that could tackle 783 00:36:49,720 --> 00:36:52,240 humanoid robots could feasibly be worth a lot. 784 00:36:52,640 --> 00:36:55,560 Elon Musk continually talks about how the company that 785 00:36:55,560 --> 00:36:58,880 figures out humanoid robots could be worth trillions or have 786 00:36:58,880 --> 00:37:02,280 trillions of dollars in revenue, not just be worth trillions but 787 00:37:02,280 --> 00:37:04,960 have trillions in revenue. And while that's true, I again 788 00:37:04,960 --> 00:37:08,480 believe that Amazon is better positioned than Tesla for 789 00:37:08,480 --> 00:37:11,600 humanoid robots. Now, Tesla likes to share a lot 790 00:37:11,600 --> 00:37:12,920 of things they do in development. 791 00:37:13,320 --> 00:37:16,720 So with their humanoid robot, they have it like making popcorn 792 00:37:16,720 --> 00:37:19,800 and serving people popcorn. It's later revealed that that's 793 00:37:19,800 --> 00:37:21,880 people controlling it. They're controlling it through 794 00:37:21,880 --> 00:37:24,760 like AVR system. So it's not really AI 795 00:37:24,760 --> 00:37:27,080 controlling it yet. It's basically just the robot 796 00:37:27,080 --> 00:37:30,800 and it's being teleoperated. Amazon so far doesn't advertise 797 00:37:30,800 --> 00:37:32,240 their technology in the same way. 798 00:37:32,440 --> 00:37:35,960 They don't have like these type of PR stunts or whatever you 799 00:37:35,960 --> 00:37:38,240 want to call them, different things that Tesla does to excite 800 00:37:38,240 --> 00:37:40,880 investors. Instead, Amazon's reportedly 801 00:37:40,880 --> 00:37:43,480 testing this type of technology silently. 802 00:37:43,800 --> 00:37:45,720 They're testing it behind closed doors. 803 00:37:45,720 --> 00:37:48,680 The publication called The Information actually blew the 804 00:37:48,680 --> 00:37:52,040 lid on this when someone reported to them in Amazon. 805 00:37:52,440 --> 00:37:55,560 The Amazon is preparing to test humanoid robots for delivering 806 00:37:55,560 --> 00:37:58,240 packages. Reportedly what's going on here 807 00:37:58,560 --> 00:38:02,240 is Amazon has a whole warehouse where they've set up different 808 00:38:02,240 --> 00:38:06,880 tests for a a robot that walks. It's bipedal, it walks on 2 feet 809 00:38:07,280 --> 00:38:10,560 and it's trying to pick up a package that's under like 20 lbs 810 00:38:10,920 --> 00:38:13,760 and bring it from a truck to someones doorstep. 811 00:38:14,160 --> 00:38:16,240 And they create all sorts of obstacles and different things 812 00:38:16,240 --> 00:38:17,880 that can happen, different interactions. 813 00:38:18,160 --> 00:38:20,280 And they're trying to test how well it can accomplish that 814 00:38:20,280 --> 00:38:21,800 task. Because if of course they can 815 00:38:21,800 --> 00:38:24,840 figure that out and they can do it at scale, they could replace 816 00:38:24,840 --> 00:38:27,400 feasibly around 400,000 delivery drivers. 817 00:38:27,840 --> 00:38:30,400 That's something that could happen long into the future. 818 00:38:30,800 --> 00:38:34,080 So this gives you the idea that Amazon is testing this out. 819 00:38:34,080 --> 00:38:36,760 They're working on it. Tesla's not the only company 820 00:38:36,760 --> 00:38:38,680 that's trying to test out humanoid robots. 821 00:38:38,720 --> 00:38:42,520 We have big juggernauts in tech like Amazon working on this 822 00:38:42,520 --> 00:38:45,080 problem. But Amazon's also really unique 823 00:38:45,080 --> 00:38:47,400 in the fact that they have an immense amount of employees. 824 00:38:47,400 --> 00:38:49,760 Let's go ahead and just take a look at some of the figures 825 00:38:49,760 --> 00:38:51,400 here. This moves around a little bit, 826 00:38:51,960 --> 00:38:57,160 but Amazon has around 1.56 million employees. 827 00:38:57,160 --> 00:39:00,200 If we look at Tesla and we compare the amount of employees 828 00:39:00,200 --> 00:39:03,480 that Tesla has that they could feasibly automate with humanoid 829 00:39:03,480 --> 00:39:08,840 robots, it's around 125,000. Amazon not only could develop 830 00:39:08,840 --> 00:39:11,320 humanoid robots, but it's a company that will dramatically 831 00:39:11,320 --> 00:39:14,080 benefit in their margins if they're able to pull it off. 832 00:39:14,480 --> 00:39:17,360 They have hundreds of thousands, if not millions of employees. 833 00:39:17,360 --> 00:39:20,400 They could replace or at least reduce the need for all this 834 00:39:20,400 --> 00:39:22,720 physical labor with humanoid robots. 835 00:39:22,760 --> 00:39:25,720 So Amazon has far more to gain than most companies in the world 836 00:39:25,720 --> 00:39:29,920 by cutting down on all this routine repetitive tasks that 837 00:39:29,920 --> 00:39:32,720 these employees do by building out humanoid robots. 838 00:39:33,360 --> 00:39:36,840 And we also know that Amazon is not new to robotics. 839 00:39:36,840 --> 00:39:38,240 They've done this for a long period of time. 840 00:39:38,240 --> 00:39:41,480 They have over reportedly 1,000,000 active robots working 841 00:39:41,480 --> 00:39:43,240 in their facilities. And although they're not 842 00:39:43,240 --> 00:39:45,840 humanoid, they do use artificial intelligence. 843 00:39:46,080 --> 00:39:48,760 They're just in form factors best used to serve their 844 00:39:48,760 --> 00:39:51,240 specific purpose. But they're using all sorts of 845 00:39:51,240 --> 00:39:53,360 different AI. They're not just using pre 846 00:39:53,360 --> 00:39:56,440 programmed rule sets. They're using actual artificial 847 00:39:56,440 --> 00:39:58,640 intelligence to learn and to solve problems. 848 00:39:59,040 --> 00:40:02,800 So Amazon has already been doing AI enabled robots for some time. 849 00:40:03,040 --> 00:40:05,640 They're just going to try to bring this to the humanoid form 850 00:40:05,640 --> 00:40:07,800 factor. So I believe that Amazon is a 851 00:40:07,800 --> 00:40:09,960 better humanoid robot play than Tesla. 852 00:40:10,520 --> 00:40:14,200 And when we look at Google, I view Google as a better robot 853 00:40:14,200 --> 00:40:16,720 taxi play than Tesla. That's why I'm invested in both 854 00:40:16,720 --> 00:40:19,200 of these companies. The different long shot 855 00:40:19,200 --> 00:40:22,160 disruptive tech bets. These companies both have 856 00:40:22,160 --> 00:40:25,000 optionality. They both have the ability to 857 00:40:25,000 --> 00:40:26,920 invest in these given categories, and I believe 858 00:40:26,920 --> 00:40:29,760 they're leading in them. For example, with Google, I 859 00:40:29,760 --> 00:40:32,920 believe that they're best set up with Waymo to capture a huge 860 00:40:32,920 --> 00:40:36,480 portion of the robotaxi network. They're going to be, I think, a 861 00:40:36,480 --> 00:40:39,480 huge player, if not the biggest. Right now, they're by far the 862 00:40:39,480 --> 00:40:41,680 biggest. Sure, Tesla's trying to roll 863 00:40:41,680 --> 00:40:44,840 this out, but so far they have safety drivers in the passenger 864 00:40:44,840 --> 00:40:47,720 seat of every vehicle. Google's doing this without any 865 00:40:47,720 --> 00:40:50,040 safety drivers. So right now we have this 866 00:40:50,040 --> 00:40:53,560 interesting situation where the narrative for Tesla is that it's 867 00:40:53,560 --> 00:40:56,040 going to be the humanoid robot play and it's going to be the 868 00:40:56,040 --> 00:40:58,920 robotaxi play. But you look at Amazon and I 869 00:40:58,920 --> 00:41:01,240 believe they're a better humanoid robot play. 870 00:41:01,560 --> 00:41:04,080 And you look at Google and I believe they're better robotaxi 871 00:41:04,080 --> 00:41:06,560 play. But in the case that I'm wrong 872 00:41:06,640 --> 00:41:10,280 on either of these companies, I'm still in a better situation 873 00:41:10,640 --> 00:41:13,680 with Google. Even if Waymo feasibly went to a 874 00:41:13,680 --> 00:41:17,000 zero, it wouldn't really matter too much for Google's future. 875 00:41:17,280 --> 00:41:20,080 The Other Bets is such an insignificant amount of revenue 876 00:41:20,160 --> 00:41:23,800 right now that Google will be just fine without Waymo. 877 00:41:24,160 --> 00:41:26,960 The company will thrive. The core businesses that you 878 00:41:26,960 --> 00:41:30,640 fall back on if this other bet doesn't work out are 879 00:41:30,640 --> 00:41:33,840 tremendously profitable businesses at a low valuation. 880 00:41:34,240 --> 00:41:37,400 Google set up well whether or not Waymo does well or not. 881 00:41:37,840 --> 00:41:41,080 So even if they lose in robotaxi, my investment in 882 00:41:41,080 --> 00:41:43,400 Google's just fine. We look at Amazon and what 883 00:41:43,400 --> 00:41:45,800 happens if I'm wrong with Amazon and they're really not the 884 00:41:45,800 --> 00:41:49,000 winner in humanoid robots? In that case, I'm still fine 885 00:41:49,000 --> 00:41:51,400 with Amazon. This company, like Google, has 886 00:41:51,400 --> 00:41:54,160 many incredible core businesses to fall back on. 887 00:41:54,600 --> 00:41:58,160 You have first party online sales, which is low margin, but 888 00:41:58,160 --> 00:41:59,480 they're the dominant share of it. 889 00:41:59,560 --> 00:42:03,000 They have this gigantic logistics network that can be 890 00:42:03,000 --> 00:42:06,360 incredibly profitable with just a few margin percent increases. 891 00:42:06,800 --> 00:42:09,080 You have third party seller services. 892 00:42:09,360 --> 00:42:12,240 You have advertising, which they layer upon their first party 893 00:42:12,240 --> 00:42:14,440 sales. You have subscription businesses 894 00:42:14,440 --> 00:42:16,360 through things like Amazon Prime Video. 895 00:42:16,360 --> 00:42:18,360 They're the second biggest in streaming video. 896 00:42:18,600 --> 00:42:21,960 Then of course, you have Amazon Web Services, the biggest cloud 897 00:42:21,960 --> 00:42:25,760 hosting platform. Amazon will be just fine even if 898 00:42:25,760 --> 00:42:27,520 they don't win in Humanoid Robots. 899 00:42:27,880 --> 00:42:30,560 Humanoid robots is just a call option on the company. 900 00:42:30,960 --> 00:42:33,880 It's a different optionality that investors can look forward 901 00:42:33,920 --> 00:42:35,040 to. And even though they're well 902 00:42:35,040 --> 00:42:37,600 positioned for it, they have ample experience in robotics. 903 00:42:37,840 --> 00:42:40,480 They have their own manufacturing plant for robots 904 00:42:40,480 --> 00:42:42,000 that they've made over a million of them in. 905 00:42:42,520 --> 00:42:44,560 They're testing out new humanoid robots. 906 00:42:44,920 --> 00:42:47,880 Even if all of that doesn't work out, the company's still fine. 907 00:42:47,920 --> 00:42:50,640 So in either case, if Amazon doesn't win in humanoid robots, 908 00:42:50,640 --> 00:42:52,440 it's fine. If Google doesn't win in 909 00:42:52,600 --> 00:42:55,400 robotaxi, it's fine. Both of them have incredible 910 00:42:55,400 --> 00:42:57,040 core businesses to fall back upon. 911 00:42:57,440 --> 00:42:59,200 But what happens with the Tesla investor? 912 00:42:59,520 --> 00:43:03,640 If they're not right in robotaxi or humanoid robots, what happens 913 00:43:03,640 --> 00:43:06,880 to that business? You have a car business to fall 914 00:43:06,880 --> 00:43:09,720 back upon, one that has increasing levels of competition 915 00:43:09,720 --> 00:43:12,440 from China and it's losing a tax credit. 916 00:43:12,640 --> 00:43:14,680 The car business is a very tough business. 917 00:43:14,920 --> 00:43:17,200 That's not a great core business to fall back upon. 918 00:43:17,600 --> 00:43:20,360 So Tesla investors are in a situation that they need these 919 00:43:20,360 --> 00:43:22,680 things to work out. Tesla has to have these newer 920 00:43:22,680 --> 00:43:25,280 business models work out because the core business to fall back 921 00:43:25,280 --> 00:43:29,080 upon isn't as strong and the valuation already implies huge 922 00:43:29,080 --> 00:43:31,040 growth in these new revenue segments. 923 00:43:31,560 --> 00:43:33,520 So when I look at either of these companies, when I look at 924 00:43:33,520 --> 00:43:36,760 going into Amazon, there's a lot of optionality going into this 925 00:43:36,760 --> 00:43:38,360 week. Now when we look at this company 926 00:43:38,360 --> 00:43:41,400 and what to watch for going into this earnings, we have AWS and 927 00:43:41,400 --> 00:43:43,480 generative AI growth and capacity. 928 00:43:43,880 --> 00:43:46,760 Obviously for all three of these companies, whether it's Amazon, 929 00:43:46,760 --> 00:43:49,800 Microsoft or Google, the big question is always cloud, how 930 00:43:49,800 --> 00:43:52,960 much is it going to grow, what you know, what is the operating 931 00:43:52,960 --> 00:43:54,680 margins of it? We're going to be looking at 932 00:43:54,680 --> 00:43:57,040 that top of mind going into Amazon. 933 00:43:57,320 --> 00:44:01,240 The previous quarter highlighted AWS robust performance with a 934 00:44:01,240 --> 00:44:05,080 17% year over year revenue increase and multi billion 935 00:44:05,080 --> 00:44:08,160 dollar AI businesses growing at triple digit rates. 936 00:44:08,680 --> 00:44:12,120 So they're separating just normal on premise to cloud and 937 00:44:12,120 --> 00:44:13,840 then the AI products they have as well. 938 00:44:13,840 --> 00:44:17,840 Now when we look at Amazon and we breakdown the growth rate of 939 00:44:17,920 --> 00:44:20,960 Amazon Web Services, this is what it looks like over time 940 00:44:21,720 --> 00:44:24,400 from 2015. It started off at around 60%. 941 00:44:24,960 --> 00:44:28,280 Obviously that hyper growth rate just is not sustainable. 942 00:44:28,280 --> 00:44:30,800 No cloud company can sustain it for long. 943 00:44:31,240 --> 00:44:34,000 So ebbed and flowed for a while, but they they kept it around 944 00:44:34,000 --> 00:44:36,800 2030% for a while. Back in 2021. 945 00:44:36,800 --> 00:44:40,720 It bounced back up to 40% and then it slowed down dramatically 946 00:44:40,720 --> 00:44:43,120 and a lot of people were really concerned around this when it 947 00:44:43,120 --> 00:44:46,880 slowed down to 12%. This is in early 2023. 948 00:44:47,320 --> 00:44:50,560 Now with artificial intelligence, lots more cloud 949 00:44:50,560 --> 00:44:54,520 momentum, it picked back up from around 12% back up to around 950 00:44:54,520 --> 00:44:57,720 18%. Last quarter it was 17%. 951 00:44:58,040 --> 00:45:01,320 And if I have to predict going into this quarter, I think we're 952 00:45:01,320 --> 00:45:04,800 going to get around 17%. I think it'll be around the same 953 00:45:04,800 --> 00:45:08,080 as it was last quarter. So my guess is, and again, I 954 00:45:08,080 --> 00:45:10,040 don't know for sure, but my guess is it's going to be around 955 00:45:10,040 --> 00:45:12,440 17%. Amazon's redesign and its 956 00:45:12,440 --> 00:45:15,520 inbound network and regionalization of fulfillment 957 00:45:15,520 --> 00:45:18,320 centers are driving record delivery speeds while reducing 958 00:45:18,320 --> 00:45:19,880 costs. I don't know if you've noticed 959 00:45:19,880 --> 00:45:23,640 this, but I have more and more items that I order and they are 960 00:45:23,640 --> 00:45:25,680 at my doorstep the very next morning. 961 00:45:26,120 --> 00:45:27,640 I don't know how Amazon's doing it. 962 00:45:27,640 --> 00:45:29,600 Some of them seem like very obscure items. 963 00:45:30,160 --> 00:45:32,080 These aren't like really, you know, it's not like batteries 964 00:45:32,080 --> 00:45:34,840 that I'm ordering. These are a lot of obscure, odd 965 00:45:34,840 --> 00:45:37,640 items. And they still get there a day 966 00:45:37,800 --> 00:45:40,320 in less than a day, sometimes in like 12 hours. 967 00:45:40,440 --> 00:45:43,560 They say that they're placing an emphasis on better inventory 968 00:45:43,560 --> 00:45:45,600 placement and optimizing packaging. 969 00:45:45,920 --> 00:45:49,360 So I think part of how they get things to you so soon is they 970 00:45:49,360 --> 00:45:52,680 basically predict what you're going to order before you order 971 00:45:52,680 --> 00:45:54,320 it. So they just know what you're 972 00:45:54,320 --> 00:45:56,560 going to buy and they put it in a fulfilment center close to 973 00:45:56,560 --> 00:45:58,560 you. Obviously, artificial 974 00:45:58,560 --> 00:46:00,440 intelligence is playing a big role in this. 975 00:46:00,840 --> 00:46:03,520 They say any progress on these fronts can directly affect 976 00:46:03,520 --> 00:46:06,800 operating margins in unpredictable, unpredictable 977 00:46:06,800 --> 00:46:10,920 macroeconomic conditions. So we want to see efficiencies 978 00:46:11,120 --> 00:46:14,000 with the cost structure and the speed of delivery of their 979 00:46:14,000 --> 00:46:15,960 fulfilment. The other one is the tariff 980 00:46:15,960 --> 00:46:19,360 impact and inventory strategy. Now what I've seen over the past 981 00:46:19,360 --> 00:46:23,600 couple of months is the concern that we had about tariffs. 982 00:46:24,120 --> 00:46:26,120 They basically fizzled out to nothing. 983 00:46:26,600 --> 00:46:28,840 We know that President Trump looks at the market. 984 00:46:28,840 --> 00:46:30,640 He's going to respond if the market drops. 985 00:46:31,080 --> 00:46:32,880 We know that he's made a lot of deals already. 986 00:46:32,880 --> 00:46:34,280 There is just a new one with the EU. 987 00:46:34,560 --> 00:46:37,120 And it seems like a lot of this is more in line with reasonable 988 00:46:37,120 --> 00:46:39,120 expectations. I don't think there's going to 989 00:46:39,120 --> 00:46:42,120 be as much panic around tariffs as there was a couple months 990 00:46:42,120 --> 00:46:43,600 ago. I don't worry about tariffs 991 00:46:43,600 --> 00:46:46,480 because they're not an intrinsic part of this company, just like 992 00:46:46,480 --> 00:46:48,040 I don't worry about them with Apple. 993 00:46:48,280 --> 00:46:51,080 It's not the biggest concern. Everyday essentials now 994 00:46:51,080 --> 00:46:54,120 represent a significant and fast growing portion of Amazon's 995 00:46:54,120 --> 00:46:56,200 sales. Now, again, all of this works 996 00:46:56,200 --> 00:46:59,040 together because if the fulfillment network is getting 997 00:46:59,040 --> 00:47:02,920 stuff to you within 12 hours, you may end up ordering stuff 998 00:47:02,920 --> 00:47:06,560 like toilet paper and toothpaste and batteries, stuff that you 999 00:47:06,560 --> 00:47:08,480 would previously pick up at the grocery store. 1000 00:47:08,760 --> 00:47:11,240 Now if you can just get it at the click of a button, you get 1001 00:47:11,240 --> 00:47:13,960 it within 12 hours, you're going to start ordering more and more 1002 00:47:13,960 --> 00:47:16,120 frequently from Amazon. The next thing that we can look 1003 00:47:16,120 --> 00:47:18,640 at is advertising. Amazons advertising business 1004 00:47:18,640 --> 00:47:23,120 grew 19% year over year last quarter to $13.9 billion in 1005 00:47:23,120 --> 00:47:25,320 revenue. The advertising is often viewed 1006 00:47:25,320 --> 00:47:28,200 by investors as like this separate business. 1007 00:47:28,720 --> 00:47:31,920 We have advertising right here in the green and it's a super 1008 00:47:31,920 --> 00:47:34,120 fast growing segment. Let's cross it out here. 1009 00:47:34,520 --> 00:47:37,120 It grew 19% right year over year. 1010 00:47:37,480 --> 00:47:40,480 We'd like to segment this and silo it off as though 1011 00:47:40,480 --> 00:47:42,480 advertising just exists in a vacuum. 1012 00:47:43,080 --> 00:47:46,000 But in reality it's part of the first party online sales. 1013 00:47:46,120 --> 00:47:48,120 It's part of the third party seller services. 1014 00:47:48,680 --> 00:47:52,200 If you can improve the third party seller services similar to 1015 00:47:52,200 --> 00:47:56,080 how Met is doing having generative AI ads, that's going 1016 00:47:56,080 --> 00:47:58,160 to increase the advertising segment revenue. 1017 00:47:58,440 --> 00:48:02,080 If you sell more items on 1st party online sales, that's going 1018 00:48:02,080 --> 00:48:05,360 to increase the advertising. So this can't be looked at in a 1019 00:48:05,360 --> 00:48:07,320 silo. You have to look at advertising 1020 00:48:07,320 --> 00:48:10,880 as part of third party seller services, as part of first party 1021 00:48:10,880 --> 00:48:14,040 online sales, and as part of the subscription services with 1022 00:48:14,040 --> 00:48:16,960 Amazon Prime Video. All of that plays a role in 1023 00:48:16,960 --> 00:48:18,800 advertising. They note here that the 1024 00:48:18,800 --> 00:48:21,960 expansion of a full funnel advertising solution across 1025 00:48:21,960 --> 00:48:25,040 channel measurement and integration with the company's 1026 00:48:25,040 --> 00:48:28,520 Prime Video, Twitch and other properties are important trends. 1027 00:48:28,840 --> 00:48:31,520 Investors should pay attention to the continued adoption of 1028 00:48:31,520 --> 00:48:34,240 these offerings, competitive positioning against other 1029 00:48:34,240 --> 00:48:37,560 digital ad platforms, and the impact of North American 1030 00:48:37,560 --> 00:48:40,920 international operating margins, a signal of further monetization 1031 00:48:40,920 --> 00:48:43,560 scale in the business overall. There's a lot of things to get 1032 00:48:43,560 --> 00:48:46,040 excited about with Amazon. There's a reason why I love 1033 00:48:46,040 --> 00:48:48,640 talking about this company, why I love investing so much into 1034 00:48:48,640 --> 00:48:51,120 it, why it's my second largest position today. 1035 00:48:51,240 --> 00:48:53,800 They are in a very unique position to become a monstrously 1036 00:48:53,800 --> 00:48:56,160 huge company. Amazon is one of the few that 1037 00:48:56,160 --> 00:48:58,800 has so much optionality baked into the business model. 1038 00:48:59,120 --> 00:49:01,280 I can easily see the stock doubling from here. 1039 00:49:01,680 --> 00:49:05,800 I've talked about it before when the company was at 16170, that 1040 00:49:05,800 --> 00:49:08,520 it's going to 2:20, that it's going to go to 2:40. 1041 00:49:08,760 --> 00:49:11,960 We're already on the way there. I think we could see it at 260 1042 00:49:11,960 --> 00:49:14,840 to 280 at the end of this year. In this earnings report, I 1043 00:49:14,840 --> 00:49:17,680 wouldn't pay attention too much to the after hours trading. 1044 00:49:18,080 --> 00:49:21,800 Amazon is too big of a company to try to figure out what really 1045 00:49:21,800 --> 00:49:24,520 happened just by a couple metrics being reported. 1046 00:49:24,920 --> 00:49:27,480 You have to read over the entire earnings report, look at the 1047 00:49:27,480 --> 00:49:30,040 earnings call to figure out how this business is actually 1048 00:49:30,040 --> 00:49:31,720 evolving. So I'll be a little bit patient 1049 00:49:31,720 --> 00:49:34,240 with Amazon, but I'm very bullish going into this quarter. 1050 00:49:34,240 --> 00:49:36,720 Now that's going to wrap up the busiest earnings week of this 1051 00:49:36,720 --> 00:49:38,800 season. If you want to see my reaction 1052 00:49:38,800 --> 00:49:41,400 and post analysis after these companies report earnings, if 1053 00:49:41,640 --> 00:49:44,240 you want to see some of the KPIs and the different visuals of 1054 00:49:44,240 --> 00:49:46,640 their new financials, just make sure you subscribe to the 1055 00:49:46,640 --> 00:49:48,080 channel. That's all for now. 1056 00:49:48,120 --> 00:49:48,920 See you in the next one.