1 00:00:00,040 --> 00:00:02,400 Welcome back, everyone. We have an exciting week ahead 2 00:00:02,400 --> 00:00:03,960 of it. It's earnings season. 3 00:00:03,960 --> 00:00:07,200 It's officially started. We have the busy week where all 4 00:00:07,200 --> 00:00:10,320 these great companies give us a report card of how things are 5 00:00:10,320 --> 00:00:12,280 going. That's all earnings season is. 6 00:00:12,280 --> 00:00:14,600 We get to see how things are going compared to what we 7 00:00:14,600 --> 00:00:17,200 expect. If companies beat their earnings 8 00:00:17,200 --> 00:00:19,920 and they're doing better than expected, that's a good thing. 9 00:00:19,920 --> 00:00:21,360 Typically, the stock will do better. 10 00:00:21,680 --> 00:00:24,480 If they have disappointing earnings, especially with prices 11 00:00:24,480 --> 00:00:26,920 being where they're at, well that could mean trouble for 12 00:00:26,920 --> 00:00:29,200 these companies. So this earnings season is 13 00:00:29,200 --> 00:00:30,600 important. What's going on with these 14 00:00:30,600 --> 00:00:33,720 companies and their fundamental developments are very important. 15 00:00:33,920 --> 00:00:36,520 We have a couple big companies reporting this week. 16 00:00:36,760 --> 00:00:40,920 We have Netflix and Tesla both charging for this week. 17 00:00:41,120 --> 00:00:43,800 They're two of the first big important companies to report 18 00:00:43,800 --> 00:00:45,840 earnings, but they're not the only ones. 19 00:00:46,120 --> 00:00:48,880 We also have a whole list of here of the most anticipated 20 00:00:48,880 --> 00:00:51,760 earnings this week. We have Procter and Gamble 21 00:00:51,760 --> 00:00:54,440 reporting earnings Tuesday before market open. 22 00:00:54,880 --> 00:00:57,640 We have Netflix reporting earnings Tuesday market after 23 00:00:57,640 --> 00:01:01,360 close and I have personally a large amount invested in Netflix 24 00:01:01,360 --> 00:01:04,000 so I'm looking at that one. I have a lot to say about it. 25 00:01:04,239 --> 00:01:06,640 We have AT&T. This is a company that I 26 00:01:06,640 --> 00:01:09,480 followed for years. I at one point my investing 27 00:01:09,480 --> 00:01:13,200 history owned AT and TI even managed to eke out a profit in 28 00:01:13,200 --> 00:01:15,200 it. But AT&T has been struggling. 29 00:01:15,480 --> 00:01:17,680 I have some thoughts on this company will be looking at their 30 00:01:17,680 --> 00:01:22,600 upcoming earnings and then after AT&T market close on Wednesday, 31 00:01:22,760 --> 00:01:25,720 we have probably the most anticipated earnings of the week 32 00:01:25,960 --> 00:01:29,840 which is Tesla. The debate goes on, is Tesla a 33 00:01:29,840 --> 00:01:32,520 car company? Is Tesla a tech company? 34 00:01:33,040 --> 00:01:35,440 I've been on the side where I think it's a car company. 35 00:01:35,440 --> 00:01:36,920 I think it leans towards that way. 36 00:01:37,360 --> 00:01:40,120 But I want to look at the data, I want to look at the numbers. 37 00:01:40,280 --> 00:01:43,560 I want to look at what the expectations are for Tesla this 38 00:01:43,560 --> 00:01:46,480 week, then moving on to Thursday before market open. 39 00:01:46,480 --> 00:01:49,280 We have Union Pacific. I'm invested in this company and 40 00:01:49,280 --> 00:01:51,640 I have a very specific story for this stock. 41 00:01:51,800 --> 00:01:55,280 What I think it needs to have happen for Union Pacific to give 42 00:01:55,280 --> 00:01:57,760 really good returns. We're going to be looking 43 00:01:57,760 --> 00:02:00,520 Thursday after market close at Intel. 44 00:02:00,720 --> 00:02:03,040 We know this is a big one passed around the value investing 45 00:02:03,040 --> 00:02:04,720 sphere. So I'll be giving some thoughts 46 00:02:04,720 --> 00:02:06,920 on this one as well as their earnings predictions. 47 00:02:07,280 --> 00:02:10,600 And then we have Visa. This is one that I really like. 48 00:02:10,600 --> 00:02:13,000 I think Visa is a top tier compounding machine. 49 00:02:13,200 --> 00:02:15,640 It's a great company. I own the counterpart 50 00:02:15,640 --> 00:02:18,680 MasterCard, but Visa is one that I also think is is amazing. 51 00:02:18,960 --> 00:02:22,000 So I'll be giving my predictions on Visas and I'll throw in 52 00:02:22,000 --> 00:02:25,120 MasterCard earnings as well going into Thursday. 53 00:02:25,400 --> 00:02:29,400 Then finally on Friday before market open, we have American 54 00:02:29,400 --> 00:02:31,320 Express. We'll be looking at that one as 55 00:02:31,320 --> 00:02:33,640 well. Eight companies in total is what 56 00:02:33,640 --> 00:02:36,080 I'll be reviewing. This is a very busy week and 57 00:02:36,080 --> 00:02:38,480 we're going to see a lot of fireworks as earnings season 58 00:02:38,480 --> 00:02:41,200 plays out. Expectations are very high. 59 00:02:41,400 --> 00:02:44,880 The market has been racing up. These companies need to perform 60 00:02:45,200 --> 00:02:47,160 to keep their valuations where they're at. 61 00:02:47,160 --> 00:02:49,640 So with that said, let's go ahead and jump in now let's go 62 00:02:49,640 --> 00:02:51,280 ahead and start off. We're going to kick things off 63 00:02:51,280 --> 00:02:55,360 Tuesday market opening with Procter and Gamble, the consumer 64 00:02:55,360 --> 00:02:58,040 staple king. They make products like this. 65 00:02:58,040 --> 00:03:00,160 This is a picture of just some of them. 66 00:03:00,160 --> 00:03:01,760 This isn't even all of the products they make. 67 00:03:02,240 --> 00:03:05,800 It's a lot of these cleaning products, chemicals, you know, 68 00:03:05,800 --> 00:03:07,720 when you want to clean your kitchen floors, that type of 69 00:03:07,720 --> 00:03:09,920 thing. And it's extremely diversified. 70 00:03:09,920 --> 00:03:14,160 So this is a company where they sell a lot of little things and 71 00:03:14,160 --> 00:03:17,120 this type of company is exactly the type of company that that 72 00:03:17,120 --> 00:03:19,160 Terry Smith likes. So you'll see it in Terry 73 00:03:19,160 --> 00:03:21,440 Smith's portfolio. He considers these very 74 00:03:21,440 --> 00:03:25,480 defensive, diversified brand franchise companies as really 75 00:03:25,480 --> 00:03:28,040 good investments. Now I've gone ahead and I've 76 00:03:28,040 --> 00:03:31,880 made slides for each company that show you the projected 77 00:03:31,880 --> 00:03:34,880 earnings and the revenue for this upcoming quarter. 78 00:03:35,200 --> 00:03:37,960 For example, with Procter and Gamble here, we have earnings 79 00:03:37,960 --> 00:03:43,560 per share expectations for Q4 of last year of $1.70, which would 80 00:03:43,560 --> 00:03:48,960 be an increase of 6.88%, so a nice increase in earnings per 81 00:03:48,960 --> 00:03:50,560 share. And then they're expecting 82 00:03:50,560 --> 00:03:55,280 revenue of 21.5 billion, which is only a 3.48% increase. 83 00:03:55,800 --> 00:03:59,000 So this shows what I think is a a pretty mature company. 84 00:03:59,280 --> 00:04:03,000 You're getting 3 to 4% revenue growth, 6 to 7% earnings per 85 00:04:03,000 --> 00:04:05,240 share growth. They'll pay out a little bit of 86 00:04:05,240 --> 00:04:08,880 a dividend, so you might get like an 8 to 9% return if they 87 00:04:08,880 --> 00:04:10,360 hit their earnings per share estimate. 88 00:04:10,760 --> 00:04:13,520 When I look at Procter and Gamble, I actually think this is 89 00:04:13,520 --> 00:04:15,600 a great company. It's a defensive one. 90 00:04:15,600 --> 00:04:18,320 It's steady. It's at a a reasonable 91 00:04:18,320 --> 00:04:20,920 valuation. It trades at a 4% free cash flow 92 00:04:20,920 --> 00:04:23,440 yield. So there's not a ton baked into 93 00:04:23,440 --> 00:04:27,160 the price here. the PE ratios out of 23, which I think might 94 00:04:27,280 --> 00:04:31,240 actually be a little bit low for a company this diversified that 95 00:04:31,240 --> 00:04:32,720 has this predictable of earnings. 96 00:04:33,000 --> 00:04:35,280 When we look at the financials of it, it also looks really 97 00:04:35,280 --> 00:04:36,400 good. The tool that we're using here 98 00:04:36,400 --> 00:04:38,160 is Qualtrum. This is included as part of the 99 00:04:38,160 --> 00:04:40,600 Patreon. We look at the revenue and this 100 00:04:40,600 --> 00:04:42,680 is the issue I have with this type of company. 101 00:04:42,800 --> 00:04:45,520 Terry Smith really loves these type of companies and I agree 102 00:04:45,520 --> 00:04:47,520 with him that these are really defensive companies. 103 00:04:47,520 --> 00:04:50,720 Consumer staples are very good bets for long term compounding 104 00:04:50,720 --> 00:04:52,840 machines. The issue is they're not growing 105 00:04:52,840 --> 00:04:55,520 quite fast enough. So I like looking at consumer 106 00:04:55,520 --> 00:04:57,360 staples that are growing a bit faster. 107 00:04:57,560 --> 00:04:59,920 I consider Microsoft a consumer staple. 108 00:05:00,120 --> 00:05:02,360 I consider Intuit a consumer staple. 109 00:05:02,600 --> 00:05:04,680 I consider Costco a consumer staple. 110 00:05:04,920 --> 00:05:07,560 All of those companies are growing much faster than Procter 111 00:05:07,560 --> 00:05:10,240 and Gamble, and they're all very defensive as well. 112 00:05:10,400 --> 00:05:13,560 The free cash flow is also pretty stagnant over the past 113 00:05:13,560 --> 00:05:15,920 decade. You can see that in 2009 it was 114 00:05:15,920 --> 00:05:18,760 13 billion, now it's 13.7 billion. 115 00:05:19,040 --> 00:05:21,480 So you're getting virtually no growth in free cash flow. 116 00:05:21,480 --> 00:05:24,040 If we look at the free cash flow per share, you're getting a 117 00:05:24,040 --> 00:05:26,800 slight amount of growth here, but it's not strong. 118 00:05:26,800 --> 00:05:29,960 It's around 3 to 5%. I don't find this as an 119 00:05:29,960 --> 00:05:31,840 attractive situation to invest in. 120 00:05:32,080 --> 00:05:34,520 The company is simply growing too slowly. 121 00:05:34,520 --> 00:05:37,120 So I'm not going to be investing in Procter and Gamble, but I do 122 00:05:37,120 --> 00:05:39,720 believe that this company will be earnings. 123 00:05:40,040 --> 00:05:41,760 I think that's going to happen this quarter. 124 00:05:41,960 --> 00:05:44,920 I'd be very surprised if they don't beat their earnings per 125 00:05:44,920 --> 00:05:46,680 share estimate and their revenue. 126 00:05:46,840 --> 00:05:49,000 Now I could be wrong, so don't bet on this. 127 00:05:49,200 --> 00:05:51,680 But from what I can see, the consumer is very strong. 128 00:05:51,680 --> 00:05:53,960 They're spending on lots of small products like this. 129 00:05:54,360 --> 00:05:56,960 Unless Procter and Gamble is losing a lot of market share 130 00:05:56,960 --> 00:06:00,240 from competitors, I believe the overall market is growing. 131 00:06:00,480 --> 00:06:03,320 I believe the company has pricing power and consumers are 132 00:06:03,320 --> 00:06:06,360 very strong right now. So I'd be very surprised if they 133 00:06:06,360 --> 00:06:08,480 came in under their earnings per share estimate. 134 00:06:08,640 --> 00:06:11,120 Now moving on from Procter and Gamble Tuesday after market 135 00:06:11,120 --> 00:06:15,000 close, we have Netflix. This is a company that I do have 136 00:06:15,000 --> 00:06:17,080 a large investment in. If we go over to this story 137 00:06:17,080 --> 00:06:19,120 fund, this is my secondary portfolio. 138 00:06:19,440 --> 00:06:23,120 It has just a handful of high growth tech companies, one of 139 00:06:23,120 --> 00:06:26,200 them being Netflix, and I currently have a total value of 140 00:06:26,200 --> 00:06:32,000 $50,700 in this company with 4800 of that being gains. 141 00:06:32,000 --> 00:06:34,400 Now there's a lot going on with Netflix, so let's go ahead and 142 00:06:34,400 --> 00:06:36,320 just take a look at some of the things going on with it. 143 00:06:36,360 --> 00:06:38,520 First of all, we can look at the earnings per share estimate 144 00:06:38,520 --> 00:06:40,560 here. The average analyst expects 145 00:06:40,560 --> 00:06:48,360 Netflix to earn $2.20, which is an increase of 1760% from a year 146 00:06:48,360 --> 00:06:50,400 ago. Now I'd love to just look at 147 00:06:50,400 --> 00:06:53,080 that and say that Netflix is growing their earnings per share 148 00:06:53,240 --> 00:06:57,680 by 1700%, but obviously something is a little bit off or 149 00:06:57,680 --> 00:06:59,960 a little bit uneven with that number. 150 00:07:00,240 --> 00:07:03,720 So when I see these outlandishly huge earnings per share growth, 151 00:07:04,000 --> 00:07:07,560 I like to go back another year and look at it compared to just 152 00:07:07,560 --> 00:07:10,680 two years ago. When you do that, it looks quite 153 00:07:10,680 --> 00:07:14,720 different. It's only up 65% from 2022. 154 00:07:14,720 --> 00:07:16,840 So let's go ahead and take a look at what this looks like 155 00:07:16,840 --> 00:07:18,960 visualized on the earnings per share chart. 156 00:07:18,960 --> 00:07:21,800 Now I've brought up Netflix here because it's Netflix and I think 157 00:07:21,800 --> 00:07:23,520 it's appropriate. Let's go ahead and move into 158 00:07:23,520 --> 00:07:24,920 dark mode. It just makes sense. 159 00:07:24,920 --> 00:07:27,960 Netflix is a night time company. Let's go ahead and move into 160 00:07:27,960 --> 00:07:30,480 dark mode and look at the earnings per share and we can 161 00:07:30,480 --> 00:07:33,480 see the issue right here. If we switch into quarterly, we 162 00:07:33,480 --> 00:07:37,480 can see the earnings per share the previous quarter of the 163 00:07:37,480 --> 00:07:42,240 previous year was $0.12 and as you can see it was unusually 164 00:07:42,240 --> 00:07:44,400 low. So Netflix had some extra 165 00:07:44,400 --> 00:07:47,600 expense or tax expense or something go on to 'cause this 166 00:07:47,600 --> 00:07:51,840 earnings per share to be much lower than their normal EPS and 167 00:07:51,840 --> 00:07:55,040 because of that it's artificially boosting the year 168 00:07:55,040 --> 00:07:57,200 over year gain. This is the reason why you want 169 00:07:57,200 --> 00:07:58,840 to open up the historical charts. 170 00:07:58,840 --> 00:08:01,840 You want to get context to what these earnings per share year 171 00:08:01,840 --> 00:08:04,720 over year gains are Now again, when we go back two years, when 172 00:08:04,720 --> 00:08:11,680 we go back 1234, it was $1.33. So it's no longer going down, 173 00:08:11,680 --> 00:08:13,800 it's going up. And I would say that this is 174 00:08:13,800 --> 00:08:16,960 still a pretty good earnings per share gain over a two year 175 00:08:16,960 --> 00:08:20,240 period. They're gaining 65% EPS over 2 176 00:08:20,240 --> 00:08:23,640 years and Netflix is expected to gain around that cadence for the 177 00:08:23,640 --> 00:08:27,640 next couple of years around 30 to 35% earnings per share gains 178 00:08:27,640 --> 00:08:30,480 per year. The revenue which I also think 179 00:08:30,480 --> 00:08:32,840 is very important. In fact I would argue that for 180 00:08:32,840 --> 00:08:36,240 Netflix the revenue gain is probably more important than the 181 00:08:36,240 --> 00:08:39,240 earnings per share gain because the story of Netflix has been a 182 00:08:39,240 --> 00:08:43,240 slowdown A halting the competitors raced into to 183 00:08:43,280 --> 00:08:45,800 streaming. They slowed down Netflix's games 184 00:08:46,120 --> 00:08:48,440 and they're re accelerating their revenue back to double 185 00:08:48,440 --> 00:08:50,960 digits which is an incredibly important part of this story. 186 00:08:51,360 --> 00:08:55,760 That would bring the revenue to 8.71 billion which is a 10.96% 187 00:08:55,960 --> 00:09:01,760 increase over the previous year. So that is a big increase 10.96% 188 00:09:01,760 --> 00:09:05,480 for Netflix which was supposed to be a no growth company and 189 00:09:05,480 --> 00:09:07,360 this is what investors are getting behind. 190 00:09:07,560 --> 00:09:10,760 This is the reason that Netflix's valuation traded back 191 00:09:10,760 --> 00:09:14,320 up to such a high PE ratio. Remember when it dropped down to 192 00:09:14,320 --> 00:09:18,440 around a 15 PE? It was around a 14 to 15 four 193 00:09:18,440 --> 00:09:21,000 PE. That was when it was all doom 194 00:09:21,000 --> 00:09:23,520 and gloom. Netflix lost subscribers, the 195 00:09:23,520 --> 00:09:26,560 revenue slowed down, everybody became very bearish and the 196 00:09:26,560 --> 00:09:29,400 stock got re rated, which means that the valuation got chopped 197 00:09:29,400 --> 00:09:32,040 in half. Now the valuation has doubled 198 00:09:32,040 --> 00:09:34,760 again because investors are seeing that they re accelerated 199 00:09:34,760 --> 00:09:37,720 growth, they're gaining subscribers and it doesn't look 200 00:09:37,720 --> 00:09:40,440 like things were so bad as investors were treating it. 201 00:09:40,560 --> 00:09:43,480 So we have an expanding of a multiple back into the premium 202 00:09:43,480 --> 00:09:48,320 territory of the 34 PE and this brings up other challenges for 203 00:09:48,320 --> 00:09:51,120 Netflix for example, we have this from the Wall Street 204 00:09:51,120 --> 00:09:52,440 Journal here. Let's go ahead and take a look 205 00:09:52,440 --> 00:09:55,560 at this article. Netflix has its own tough act to 206 00:09:55,560 --> 00:09:57,400 follow. In this article, the Wall Street 207 00:09:57,400 --> 00:10:01,120 Journal highlights the conundrum of having this high rating going 208 00:10:01,120 --> 00:10:03,640 into earnings. To be Netflix these days is to 209 00:10:03,640 --> 00:10:07,440 occupy the strange dichotomy of being a company that has won the 210 00:10:07,440 --> 00:10:09,840 war but still has plenty of battles to fight. 211 00:10:10,040 --> 00:10:12,440 Now, this is something that I've argued for for years. 212 00:10:12,440 --> 00:10:15,120 I've even come out with videos saying Netflix has won. 213 00:10:15,360 --> 00:10:17,240 I'm referring to the streaming wars. 214 00:10:17,480 --> 00:10:20,920 They won the streaming wars years ago, but to the victor 215 00:10:21,000 --> 00:10:25,400 might have gone too many spoils. Netflix shares have jumped 40% 216 00:10:25,400 --> 00:10:28,320 since the company's strong third quarter results three months 217 00:10:28,320 --> 00:10:31,800 ago, which also includes the announcement of price bumps on 218 00:10:31,800 --> 00:10:34,840 certain Netflix streaming plans. That has some on Wall Street 219 00:10:34,840 --> 00:10:38,480 worried that even good results won't prove good enough this 220 00:10:38,480 --> 00:10:41,880 time. That is the key line for Netflix 221 00:10:41,880 --> 00:10:46,040 going into earnings season. Investors are concerned that the 222 00:10:46,040 --> 00:10:49,120 bar is so high for Netflix. They're expecting so much. 223 00:10:49,440 --> 00:10:52,960 Everything is so high of an expectation that if Netflix has 224 00:10:53,040 --> 00:10:56,080 any disappointment in the earnings results, stock is going 225 00:10:56,080 --> 00:10:58,800 to drop. The stock will drop 10 to 15%. 226 00:10:59,200 --> 00:11:01,920 So this is the conundrum with Netflix right now. 227 00:11:02,040 --> 00:11:05,400 Citigroup analyst Jason Bazinet downgraded the stock to a 228 00:11:05,400 --> 00:11:09,240 neutral rating on January 9th. Across 2024 and 2025. 229 00:11:09,800 --> 00:11:13,120 The Street has lofty expectations for Netflix, he 230 00:11:13,120 --> 00:11:14,680 wrote. Now we can take a look at these 231 00:11:14,680 --> 00:11:17,880 lofty expectations. Analysts estimate that Netflix 232 00:11:17,920 --> 00:11:21,240 added 8.8 million paying subscribers in the fourth 233 00:11:21,240 --> 00:11:25,040 quarter, and this comes after another quarter before it where 234 00:11:25,040 --> 00:11:26,800 they gained 9 million subscribers. 235 00:11:27,200 --> 00:11:30,400 So Netflix said in their last quarterly report, we gained 236 00:11:30,400 --> 00:11:33,240 around 9 million and we expect around the same amount next 237 00:11:33,240 --> 00:11:36,080 quarter, and that's what the analysts are tying in. 238 00:11:36,440 --> 00:11:38,640 But they also said that it could be off by a few million. 239 00:11:38,920 --> 00:11:42,720 So Netflix could come in with 7 million or 10 million. 240 00:11:43,040 --> 00:11:45,840 We don't know. They're expecting 8.8 million. 241 00:11:46,040 --> 00:11:49,160 If Netflix comes in with six million, 7,000,008 million, will 242 00:11:49,160 --> 00:11:50,840 that be enough? Maybe not. 243 00:11:50,840 --> 00:11:52,040 The stock will probably sell off. 244 00:11:52,040 --> 00:11:54,280 If that's the case. That would equate to more than 245 00:11:54,280 --> 00:11:58,920 17.5 million additions in a six month period, which Netflix 246 00:11:58,920 --> 00:12:02,360 hasn't done since the first half of 2020 with the onset of the 247 00:12:02,360 --> 00:12:05,200 pandemic. So Netflix is growing so fast 248 00:12:05,240 --> 00:12:08,760 and as such high growth expectations that the last 249 00:12:08,920 --> 00:12:13,040 comparable time was during the COVID pandemic in 2020. 250 00:12:13,480 --> 00:12:16,400 That was a time period of unusual growth and we're 251 00:12:16,400 --> 00:12:18,560 expecting the same unusual growth now. 252 00:12:18,800 --> 00:12:21,200 Longer term, both account sharing and advertising are 253 00:12:21,200 --> 00:12:23,160 expected to revive Netflix revenue. 254 00:12:23,160 --> 00:12:26,480 Even if subscriber growth stalls, analysts expect Netflix 255 00:12:26,480 --> 00:12:31,160 revenue to grow 14% this year and 11% next year compared with 256 00:12:31,160 --> 00:12:35,280 6% growth estimated for 2023. So Netflix is now expected to 257 00:12:35,320 --> 00:12:38,200 over double their revenue growth year over year. 258 00:12:38,640 --> 00:12:41,160 These are very lofty expectations for the company. 259 00:12:41,160 --> 00:12:44,400 So overall, the issue with Netflix is that the valuation in 260 00:12:44,400 --> 00:12:47,920 the multiple has risen up to meet these lofty expectations. 261 00:12:48,120 --> 00:12:51,040 Investors are excited about the future, about the momentum, 262 00:12:51,040 --> 00:12:53,400 about all the great things that are happening with Netflix 263 00:12:53,400 --> 00:12:56,880 stock, and they're now paying up to buy the company to match that 264 00:12:56,880 --> 00:12:59,000 excitement. But that does create this 265 00:12:59,000 --> 00:13:01,640 scenario where you have a bit more downside. 266 00:13:02,000 --> 00:13:05,520 When Netflix was trading at a 15 PE, it was being priced like 267 00:13:05,520 --> 00:13:08,840 your average company, just any company in the S&P 500, even 268 00:13:08,840 --> 00:13:11,200 cheaper. Netflix was really just thrown 269 00:13:11,200 --> 00:13:13,640 out. Investors completely underpriced 270 00:13:13,640 --> 00:13:16,560 it, and now there's a chance they could be overpricing it a 271 00:13:16,560 --> 00:13:19,200 little. When I look at this overall, am 272 00:13:19,200 --> 00:13:21,560 I going to sell out of Netflix for fear of it trading down 273 00:13:21,560 --> 00:13:24,360 after earnings? No, I'm not, because I look at 274 00:13:24,360 --> 00:13:28,160 things very long term. Right now we have to separate 275 00:13:28,360 --> 00:13:31,120 short shelf life stuff from long shelf life stuff. 276 00:13:31,600 --> 00:13:35,360 Short shelf life are the current multiples of the company being a 277 00:13:35,360 --> 00:13:38,200 little bit stretched and expectations this quarter being 278 00:13:38,200 --> 00:13:41,240 a little high. That is short shelf life stuff. 279 00:13:41,560 --> 00:13:45,320 Next quarter will be moving on. They'll either miss a little bit 280 00:13:45,320 --> 00:13:47,360 or hit, it doesn't really matter. 281 00:13:47,560 --> 00:13:51,920 What matters is that long term, the next 5 to 10 years, Netflix 282 00:13:51,920 --> 00:13:54,040 has way more subscribers than they do today. 283 00:13:54,400 --> 00:13:55,960 They continue their global dominance. 284 00:13:56,120 --> 00:13:59,760 They March towards 500 million subscribers, they generate 10 285 00:13:59,760 --> 00:14:02,920 plus billion dollars of free cash flow per year and they do 286 00:14:02,920 --> 00:14:05,720 massive amounts of buybacks. All of that type of stuff 287 00:14:05,720 --> 00:14:09,040 developing over a longer time period will cause this stock to 288 00:14:09,040 --> 00:14:12,120 gain in value. So when I look at this, Netflix 289 00:14:12,120 --> 00:14:15,520 in the short term is very risky, lofty valuation, high 290 00:14:15,520 --> 00:14:18,680 expectations that's been known to cause sell offs if they have 291 00:14:18,680 --> 00:14:21,600 any disappointment which is a real possibility. 292 00:14:21,920 --> 00:14:25,200 Long term, I'm still incredibly bullish on the company as I 293 00:14:25,200 --> 00:14:28,360 think that the long term expectations are still not fully 294 00:14:28,360 --> 00:14:31,040 priced in. So I look at this company and I 295 00:14:31,040 --> 00:14:33,480 see a lot of positive things moving forward. 296 00:14:34,000 --> 00:14:37,160 Revenue momentum, I see free cash flow going to all time 297 00:14:37,160 --> 00:14:39,040 highs. The next quarter free cash flow 298 00:14:39,040 --> 00:14:41,840 is going to be absurdly high compared to this and I think 299 00:14:41,840 --> 00:14:44,400 they're even going to have good free cash flow in 2024. 300 00:14:44,720 --> 00:14:46,920 When I look at the margins of the company, they're also 301 00:14:46,920 --> 00:14:49,760 expanding over time. Even as Netflix has increased 302 00:14:49,760 --> 00:14:52,560 their budget over the past decade, their operating margins 303 00:14:52,560 --> 00:14:55,000 continue to climb. So currently, even though 304 00:14:55,000 --> 00:14:57,320 there's a high degree of uncertainty in the short term, 305 00:14:57,520 --> 00:15:00,120 Netflix I believe still has a very predictable long term 306 00:15:00,120 --> 00:15:02,240 trajectory. I'm going to hold it and chill. 307 00:15:02,360 --> 00:15:04,840 Now we move on to Wednesday before market open and we have 308 00:15:04,840 --> 00:15:06,400 AT&T. Let's go ahead and take a look 309 00:15:06,400 --> 00:15:09,200 at this one. The expectations for AT&T this 310 00:15:09,200 --> 00:15:12,760 quarter are earnings per share of $0.56, which is a decline of 311 00:15:13,040 --> 00:15:17,800 8 1/2% and revenue of $31.42 billion. 312 00:15:18,000 --> 00:15:19,800 That's so much money. This company has so much 313 00:15:19,800 --> 00:15:22,280 revenue. Unfortunately that's an increase 314 00:15:22,280 --> 00:15:26,040 of only .26%. So they're predicting a decline 315 00:15:26,040 --> 00:15:28,760 in earnings per share year over year and completely flat 316 00:15:28,760 --> 00:15:31,520 revenue. That's actually revenue decline 317 00:15:31,520 --> 00:15:34,200 if you're factoring in real revenue due to inflation because 318 00:15:34,200 --> 00:15:35,480 inflation has happened year over year. 319 00:15:35,760 --> 00:15:37,960 So they're actually earning a little bit less revenue if you 320 00:15:37,960 --> 00:15:40,640 want to factor that in. But regardless, if we look at AT 321 00:15:40,640 --> 00:15:43,080 and TI have a couple thoughts about this company. 322 00:15:43,400 --> 00:15:46,160 The reason I want to point this one out is because I feel like a 323 00:15:46,160 --> 00:15:49,520 lot of investors are either trapped into this company 324 00:15:49,520 --> 00:15:52,400 because of the value of it or they're trapped into it because 325 00:15:52,400 --> 00:15:55,280 of the dividend of it. That is two things that attracts 326 00:15:55,280 --> 00:15:59,000 people to this company, which I believe is not a great company 327 00:15:59,000 --> 00:16:00,920 to invest in. Let's go ahead and take a look 328 00:16:00,920 --> 00:16:03,000 at the valuation and at the dividend. 329 00:16:04,080 --> 00:16:05,520 Let's first start with the valuation. 330 00:16:06,000 --> 00:16:11,480 AT&T has a ridiculously low valuation of a Ford PE of 6.7. 331 00:16:12,400 --> 00:16:16,360 That is such a low valuation that the commodity multiple, 332 00:16:16,640 --> 00:16:19,800 which is the multiple company trades at, if it's neither 333 00:16:19,800 --> 00:16:23,760 growing nor destroying value, is somewhere around 12. 334 00:16:24,320 --> 00:16:25,840 That's around the commodity multiple. 335 00:16:25,840 --> 00:16:28,080 That means a company really has no expectations. 336 00:16:28,400 --> 00:16:32,400 It's just at a steady state multiple 6.7 means that the 337 00:16:32,400 --> 00:16:34,880 company's priced to destroy wealth. 338 00:16:35,320 --> 00:16:37,280 It's priced as if it's in decline. 339 00:16:37,520 --> 00:16:40,120 It's priced as if it's a huge opportunity cost. 340 00:16:40,480 --> 00:16:44,480 So this thing is priced so low, the investors are expecting it 341 00:16:44,480 --> 00:16:47,280 to be a bad bet. That's how low the multiple is. 342 00:16:47,720 --> 00:16:50,720 When we look at the dividend of the company, the dividend yield 343 00:16:50,760 --> 00:16:56,960 is currently 6.66% almost, you know, 7% dividend, very high 344 00:16:56,960 --> 00:16:58,640 yield that you're getting for the company. 345 00:16:59,160 --> 00:17:03,360 So a novice investor might come in to the stock market and they 346 00:17:03,360 --> 00:17:07,000 say I want to follow Buffett, which he invests in companies 347 00:17:07,000 --> 00:17:08,800 when no one else wants to, right. 348 00:17:08,800 --> 00:17:10,839 We want to invest when everyone else is fearful. 349 00:17:11,079 --> 00:17:14,920 Nobody wants to buy AT&T. That's why the multiples at 6.7. 350 00:17:15,400 --> 00:17:17,480 And we want to invest in companies that pay a very high 351 00:17:17,480 --> 00:17:19,000 yield. You're getting a high dividend 352 00:17:19,000 --> 00:17:21,040 on them, right, especially for a dividend investor. 353 00:17:21,319 --> 00:17:24,720 So you want to get that juicy 6.7% dividend yield. 354 00:17:25,280 --> 00:17:27,960 And both of these are the wrong takeaways for the company. 355 00:17:28,760 --> 00:17:31,960 Investors like Warren Buffett made the majority of their gains 356 00:17:31,960 --> 00:17:35,560 investing in companies that had incredibly high qualities, 357 00:17:35,600 --> 00:17:37,840 incredibly good qualities. They had high returns on 358 00:17:37,840 --> 00:17:40,680 tangible assets, high returns on capital employed. 359 00:17:40,920 --> 00:17:43,880 They have very good brand value. They have pricing power and they 360 00:17:43,880 --> 00:17:48,040 have a deeply entrenched Moat. AT&T has none of these intrinsic 361 00:17:48,040 --> 00:17:50,480 value drivers. So when we look at the company, 362 00:17:50,800 --> 00:17:52,800 the revenue is not growing at all. 363 00:17:53,120 --> 00:17:55,880 They've sold off some stuff like Warnermedia, which has caused 364 00:17:55,880 --> 00:17:58,360 the revenue to go down. But even outside of that, the 365 00:17:58,360 --> 00:18:01,160 revenue isn't growing. We look at the cash flow of the 366 00:18:01,160 --> 00:18:03,280 company. It generates a lot of cash flow, 367 00:18:03,280 --> 00:18:06,240 but it hasn't grown in over 15 years. 368 00:18:06,560 --> 00:18:09,720 So you have flat free cash flows, you have flat revenue. 369 00:18:09,720 --> 00:18:11,360 You have no growth of this company. 370 00:18:11,560 --> 00:18:14,800 You have earnings that are also completely stagnant for decades. 371 00:18:15,200 --> 00:18:19,560 So this is, it's like buying a bond, but there's also risk with 372 00:18:19,560 --> 00:18:21,440 it because of the amount of debt they have. 373 00:18:21,880 --> 00:18:24,960 This company has an enormous amount of debt and the interest 374 00:18:24,960 --> 00:18:27,320 payments on this debt eat into their profitability. 375 00:18:27,560 --> 00:18:30,760 The higher the interest rates go, the worse it is for AT&T. 376 00:18:31,080 --> 00:18:34,280 They can't afford to do that much in way of share buybacks. 377 00:18:34,680 --> 00:18:36,360 So they can't increase value that way. 378 00:18:36,800 --> 00:18:38,840 So they have to rely on paying the dividend. 379 00:18:39,040 --> 00:18:41,960 But because their financials have been so poor recently, they 380 00:18:41,960 --> 00:18:46,080 cut the dividend by about 40%, about 50%. 381 00:18:46,080 --> 00:18:47,640 You can see it cut in half right there. 382 00:18:48,680 --> 00:18:51,280 This isn't a good company. It's not a good investment. 383 00:18:52,360 --> 00:18:54,920 If you're investing in this company, you're hoping for a 384 00:18:54,920 --> 00:18:57,960 value trap to suddenly become a good company. 385 00:18:58,240 --> 00:19:00,400 And history shows that that rarely happens. 386 00:19:00,760 --> 00:19:03,400 It can happen, but it just happens very rarely. 387 00:19:03,400 --> 00:19:05,360 It's not a bet that I think it's worth taking. 388 00:19:05,760 --> 00:19:10,240 So when I look at AT&T, we can look at this earnings estimates 389 00:19:10,240 --> 00:19:13,120 and this revenue as a guide of what to expect for the future. 390 00:19:13,720 --> 00:19:17,000 More flat quarters, more up and down earnings per share. 391 00:19:17,280 --> 00:19:21,480 Overall, a stagnant, large, mostly saturated company that 392 00:19:21,480 --> 00:19:25,720 has very little growth ahead. If they could turn the story 393 00:19:25,720 --> 00:19:28,800 around and somehow come out with a new product or technology that 394 00:19:28,800 --> 00:19:31,440 spurs growth forward, that would change the story. 395 00:19:31,760 --> 00:19:34,880 But doing so is betting against all the historical past of the 396 00:19:34,880 --> 00:19:38,320 company, which in my experience is a bad bet to do. 397 00:19:38,400 --> 00:19:41,160 Investors like Warren Buffett find companies that are already 398 00:19:41,160 --> 00:19:44,040 on a good path, They're already doing really well, and they 399 00:19:44,040 --> 00:19:46,840 invest in those companies and join the ride as they continue 400 00:19:46,840 --> 00:19:49,760 to compound. Lots of other investors dive 401 00:19:49,760 --> 00:19:51,520 into value traps. They get caught up into 402 00:19:51,520 --> 00:19:54,720 companies like AT&T and they burn a lot of capital and 403 00:19:54,720 --> 00:19:57,720 opportunity cost when they could be investing in better bets. 404 00:19:57,840 --> 00:20:00,360 So for me personally, I think there's better opportunities 405 00:20:00,480 --> 00:20:04,040 than AT&T now moving on after market close on Wednesday, we 406 00:20:04,040 --> 00:20:07,480 have Tesla, the most anticipated earnings report of the week. 407 00:20:07,760 --> 00:20:09,920 Tesla's always a highly debated stock. 408 00:20:09,920 --> 00:20:11,520 There's many opinions on this one. 409 00:20:11,960 --> 00:20:15,240 I still am on the debate of whether or not Tesla. 410 00:20:15,680 --> 00:20:19,600 It is an automaker, a car company or a tech company, and I 411 00:20:19,600 --> 00:20:21,960 know many people feel that that's crazy to even debate 412 00:20:21,960 --> 00:20:23,560 that. Look at all Tesla does with 413 00:20:23,560 --> 00:20:26,680 batteries and insurance and their full self driving and all 414 00:20:26,680 --> 00:20:29,040 of that. But the numbers don't lie. 415 00:20:29,040 --> 00:20:32,120 For me that continues to be the same debate and I want to show 416 00:20:32,120 --> 00:20:34,040 examples of this. Now let's go ahead and take a 417 00:20:34,040 --> 00:20:36,000 look at the earnings estimates for Tesla. 418 00:20:36,280 --> 00:20:40,840 We have the EPS estimate of .74 cents per share, which is a 419 00:20:40,840 --> 00:20:46,120 decline of 38%, the revenue of 25.76 billion, which is an 420 00:20:46,120 --> 00:20:50,160 increase of almost 6%. So we have a decline in earnings 421 00:20:50,160 --> 00:20:53,320 per share and small increase in revenue and I say small for 422 00:20:53,320 --> 00:20:55,000 Tesla. For most companies that's a 423 00:20:55,000 --> 00:20:57,640 decent increase. For Tesla, that's a little shy 424 00:20:57,640 --> 00:20:59,720 6%. Let's go ahead and take a look 425 00:20:59,720 --> 00:21:02,600 at what what things were like last quarter after they 426 00:21:02,600 --> 00:21:05,120 reported. If we rewind back to October 427 00:21:05,120 --> 00:21:07,960 18th of 2023, The Wall Street Journal has an article 428 00:21:07,960 --> 00:21:10,920 highlighting what was going on at this time period, so we're 429 00:21:10,920 --> 00:21:13,040 going to just do a little blast from the past here. 430 00:21:13,040 --> 00:21:16,640 Chief executive Elon Musk warned Wednesday that Tesla would face 431 00:21:16,640 --> 00:21:19,840 enormous challenges scaling up factory production for its long 432 00:21:19,840 --> 00:21:23,320 delayed cyber truck, signalling profits could remain under 433 00:21:23,320 --> 00:21:26,280 pressure in the coming quarter. So that must be where the 434 00:21:26,280 --> 00:21:30,040 decline in EPS came from. The electric car maker reported 435 00:21:30,040 --> 00:21:33,760 a 44% decline in the third quarter of net income, a steeper 436 00:21:33,760 --> 00:21:37,080 drop than Wall Street expected, as price cuts from the company's 437 00:21:37,080 --> 00:21:39,360 lineup continue to take a toll on the bottom line. 438 00:21:39,920 --> 00:21:43,320 So Tesla's done a lot of price cuts over the past year, and 439 00:21:43,320 --> 00:21:45,680 that's dropped their earnings per share, even though they're 440 00:21:45,680 --> 00:21:48,200 gaining more in revenue. On Tesla's earnings call, Must 441 00:21:48,200 --> 00:21:51,520 struck A cautious tone about the year ahead, expressing concerns 442 00:21:51,520 --> 00:21:54,400 about the broader economy, including higher interest rates 443 00:21:54,400 --> 00:21:57,520 and their impact on consumers. Now, I've said before that I 444 00:21:57,520 --> 00:22:00,480 don't invest in car companies. I don't like the industry, the 445 00:22:00,480 --> 00:22:04,000 boom and bust nature, the low returns on capital and the low 446 00:22:04,000 --> 00:22:06,080 operating margins. I don't like the fact that it's 447 00:22:06,080 --> 00:22:08,800 a very competitive industry with lots of well capitalized 448 00:22:08,800 --> 00:22:10,760 competitors. I also don't like the fact that 449 00:22:10,760 --> 00:22:14,120 the product requires consumer financing, which becomes more 450 00:22:14,120 --> 00:22:16,320 expensive during times of higher interest rates. 451 00:22:16,720 --> 00:22:20,160 So I've said before many times that I don't invest in car 452 00:22:20,160 --> 00:22:23,120 companies and that has caused a lot of Tesla investors to point 453 00:22:23,120 --> 00:22:26,560 out to me that Tesla's not a car company because they have the 454 00:22:26,560 --> 00:22:29,320 full self driving tech. They have cameras in it, They 455 00:22:29,320 --> 00:22:33,160 have software subscriptions, they have insurance, right. 456 00:22:33,160 --> 00:22:35,880 They have the battery network, they have all of this type of 457 00:22:35,880 --> 00:22:37,360 stuff. They have the advanced 458 00:22:37,360 --> 00:22:40,480 manufacturing. All of this makes them not a car 459 00:22:40,480 --> 00:22:43,120 company. But to me, I'm still not 460 00:22:43,120 --> 00:22:45,480 convinced. I'm still not fully believing 461 00:22:45,680 --> 00:22:47,880 that Tesla's far more than a car company. 462 00:22:48,080 --> 00:22:50,240 Let's go ahead and take a look at an example here. 463 00:22:51,160 --> 00:22:54,560 Apple isn't just a phone company, they're a tech company, 464 00:22:55,000 --> 00:22:57,520 and we can look at the financials to determine what a 465 00:22:57,520 --> 00:23:00,000 tech company looks like. The most important chart I 466 00:23:00,000 --> 00:23:02,640 believe illustrating this point is the operating margins of the 467 00:23:02,640 --> 00:23:05,040 business. The operating margins of a tech 468 00:23:05,040 --> 00:23:09,640 company, even a hardware tech company should be at 25 to 30% 469 00:23:09,760 --> 00:23:12,520 or at least above that. Most tech companies have much 470 00:23:12,520 --> 00:23:15,800 higher operating margins, but even ones like Apple that sell 471 00:23:15,800 --> 00:23:20,520 enormous amounts of hard goods devices still have 25 to 30% 472 00:23:20,520 --> 00:23:22,760 operating margins. And we can see the Apple has 473 00:23:22,760 --> 00:23:26,720 kept these operating margins around 30% for the past couple 474 00:23:26,720 --> 00:23:29,360 of years. So that is the operating margin 475 00:23:29,360 --> 00:23:32,400 of a hardware tech company. Now if we compare this to Tesla, 476 00:23:32,400 --> 00:23:34,440 we can see what their operating margins look like. 477 00:23:34,840 --> 00:23:38,840 We open it up and there was a time period where this looked 478 00:23:38,960 --> 00:23:41,920 pretty convincing. Tesla sales were exploding, 479 00:23:42,280 --> 00:23:45,440 their car prices were going up and the operating margins were 480 00:23:45,440 --> 00:23:49,240 going up in lockstep quarter after quarter, higher and higher 481 00:23:49,240 --> 00:23:51,640 operating margins. And this looked like it was 482 00:23:51,640 --> 00:23:56,080 becoming a tech company elevated from the realm of a car company. 483 00:23:56,760 --> 00:24:01,280 Right here in this category is where you have tech company like 484 00:24:01,280 --> 00:24:06,080 operating margins and Tesla was achieving that in 2021 and very 485 00:24:06,080 --> 00:24:10,560 early 2022 due to their huge price increases, selling lots of 486 00:24:10,560 --> 00:24:13,760 cars, their operating leverage, everything was coming together. 487 00:24:14,520 --> 00:24:17,800 But then look what quickly happened, Interest rates went up 488 00:24:18,280 --> 00:24:21,360 and subsequently Tesla has lowered prices on all of their 489 00:24:21,360 --> 00:24:24,080 vehicles, Their operating margins have been slashed in 490 00:24:24,080 --> 00:24:25,640 half. If we look at this over the past 491 00:24:25,640 --> 00:24:30,160 five years, we can see this even clearer. 2021-2022 operating 492 00:24:30,160 --> 00:24:33,600 margins of a 19%. Then last quarter the operating 493 00:24:33,600 --> 00:24:38,320 margins were 7.55%. Tesla's margins are going down 494 00:24:38,520 --> 00:24:41,080 closer to the average of a car company. 495 00:24:41,120 --> 00:24:43,840 So the reason that I'm not currently invested in Tesla is 496 00:24:43,840 --> 00:24:46,440 because it not only has a high valuation, there's a lot of 497 00:24:46,440 --> 00:24:49,320 expectations in it. But for me personally, I'm just 498 00:24:49,320 --> 00:24:53,080 not confident in its ability to break out from the metrics, from 499 00:24:53,080 --> 00:24:55,600 the operating metrics of the car industry. 500 00:24:56,080 --> 00:24:58,840 It might do it in the future and I'll be happily proved wrong. 501 00:24:58,840 --> 00:25:02,040 I want Tesla to be successful. I have no problems with this 502 00:25:02,040 --> 00:25:05,120 company doing well, but for me it's not one that I'm confident 503 00:25:05,120 --> 00:25:07,560 in, so I'm staying out of it. Now we move on to the rail 504 00:25:07,560 --> 00:25:10,920 company Union Pacific, which is reporting earnings Thursday 505 00:25:10,920 --> 00:25:13,920 before market open. I have a smaller holding in 506 00:25:13,920 --> 00:25:16,600 Union Pacific, but it's one of my positions in my main 507 00:25:16,600 --> 00:25:18,960 portfolio. So I am bullish on this company. 508 00:25:19,400 --> 00:25:22,280 The analyst estimates are little, Well, they're negative 509 00:25:22,280 --> 00:25:24,400 this quarter. They're expecting earnings to go 510 00:25:24,400 --> 00:25:26,920 down and revenue to go down. The earnings per share should 511 00:25:26,920 --> 00:25:31,200 drop around 3.78% and the revenue should drop around 2%. 512 00:25:31,200 --> 00:25:33,920 Now there's a specific story with Union Pacific and it's 513 00:25:33,920 --> 00:25:37,600 unlike any other company I own. This company's not growing its 514 00:25:37,600 --> 00:25:40,040 top line growth. It's the only company in My 515 00:25:40,040 --> 00:25:42,360 Portfolio that does not have top line growth. 516 00:25:42,640 --> 00:25:46,720 When I look at this longer term, it still does not have much top 517 00:25:46,720 --> 00:25:49,960 line growth. We go back to 2012 and it has 518 00:25:49,960 --> 00:25:52,680 around the same amount of revenue as they do today, so 519 00:25:52,680 --> 00:25:55,600 very little growth overall. I don't consider this a growth 520 00:25:55,600 --> 00:25:59,360 company. Union Pacific story is all about 521 00:25:59,400 --> 00:26:02,840 margins, about efficiency, about becoming a more efficient 522 00:26:02,840 --> 00:26:06,800 railroad like Canadian Pacific. If Union Pacific's operating 523 00:26:06,800 --> 00:26:10,160 metrics become closer and closer in efficiency to Canadian 524 00:26:10,160 --> 00:26:13,000 Pacific, the stock will increase in price. 525 00:26:13,000 --> 00:26:16,000 It will move upwards because the big thing holding this one down 526 00:26:16,000 --> 00:26:18,240 right now is its operating metrics. 527 00:26:18,480 --> 00:26:22,480 They are the worst ran railway of any of them, any of the class 528 00:26:22,480 --> 00:26:24,600 one. Now there's a new CEO, Jim 529 00:26:24,600 --> 00:26:27,240 Vayner that joined and he's trying to turn things around. 530 00:26:27,400 --> 00:26:29,080 He's trying to increase the operating metrics. 531 00:26:29,080 --> 00:26:32,840 So we'll see how he does. I am giving this company one 532 00:26:32,840 --> 00:26:34,960 year to make progress on this goal. 533 00:26:35,320 --> 00:26:37,880 If they don't increase their operating metrics, notably by 534 00:26:37,880 --> 00:26:41,640 the end of 2024, I'm moving out of this company because if they 535 00:26:41,640 --> 00:26:44,120 don't have the increasing operating metrics, I don't 536 00:26:44,120 --> 00:26:46,200 believe they're going to have substantial revenue growth. 537 00:26:46,440 --> 00:26:49,440 So the entire story is reliant on the operating metrics 538 00:26:49,440 --> 00:26:52,160 increasing, but I'm not going to give them forever with this 539 00:26:52,160 --> 00:26:54,760 company. By the end of 2024, all 540 00:26:54,760 --> 00:26:57,480 determine the progress and I'll make a decision whether or not 541 00:26:57,480 --> 00:26:59,800 to hold this company. Now we move on to Intel, which 542 00:26:59,800 --> 00:27:01,920 is reporting earnings Thursday after market close. 543 00:27:01,920 --> 00:27:04,840 Let's go ahead and take a look at the earnings estimates by the 544 00:27:04,840 --> 00:27:07,280 analysts. The average analyst estimate for 545 00:27:07,280 --> 00:27:13,520 Intel's EPS is $0.46, which is a 168% gain over the previous 546 00:27:13,520 --> 00:27:16,360 year's quarter. Now of course, that seemed a 547 00:27:16,360 --> 00:27:19,280 little on the high side. For a company like Intel, that 548 00:27:19,280 --> 00:27:23,280 seems like an anomaly. So I tried to average it out, or 549 00:27:23,280 --> 00:27:26,840 at least normalize it a bit by going back even a year further 550 00:27:27,120 --> 00:27:29,920 and seeing how the earnings per share compares to two years ago 551 00:27:30,280 --> 00:27:34,320 compared to two years ago. It's not an increase of 168%, 552 00:27:34,560 --> 00:27:38,760 it's a decrease of 59%. So that's from 2022 on the same 553 00:27:38,760 --> 00:27:40,560 quarter. To look at this visualize, we 554 00:27:40,560 --> 00:27:43,640 can bring up the earnings per share chart here and we can zoom 555 00:27:43,640 --> 00:27:45,640 in over the past 10 years to make this clear. 556 00:27:45,960 --> 00:27:48,640 We have the earnings per share right here, the negative quarter 557 00:27:48,640 --> 00:27:52,480 that they're comparing to. If we go back 1234, we can see 558 00:27:52,480 --> 00:27:56,040 that it was $1.13. So we're going from a dollar 559 00:27:56,040 --> 00:27:59,040 13-2 years ago to $0.46 this year. 560 00:27:59,520 --> 00:28:02,560 Now on a longer timetable, we know that Intel ran into a lot 561 00:28:02,560 --> 00:28:05,280 of trouble and they're trying to get back on track. 562 00:28:05,480 --> 00:28:08,960 So this is a recovery play. We want to see Intel steadily 563 00:28:08,960 --> 00:28:12,680 grow earnings, which is exactly what they're doing. $0.46 is an 564 00:28:12,680 --> 00:28:16,080 increase over the past year. The story of the recovery is on 565 00:28:16,080 --> 00:28:17,800 track. I believe Intel's going to be 566 00:28:17,800 --> 00:28:19,080 earnings. I think they will. 567 00:28:19,080 --> 00:28:20,720 We've seen AMD, we've seen NVIDIA. 568 00:28:20,720 --> 00:28:23,960 These companies are going nuts right now and Intel should gain 569 00:28:23,960 --> 00:28:26,320 from the secular trends in this industry. 570 00:28:26,720 --> 00:28:29,600 If they don't, if they don't beat earnings, if they don't do 571 00:28:29,600 --> 00:28:32,560 well this quarter, then that's a very tough situation to be in 572 00:28:32,560 --> 00:28:34,960 when their pairs are doing so incredibly well. 573 00:28:35,440 --> 00:28:38,560 So my prediction is that Intel beats earnings, but we'll see. 574 00:28:38,640 --> 00:28:41,640 Now after Intel, we have Visa reporting earnings Thursday 575 00:28:41,640 --> 00:28:44,840 after market close as well. Visa, I believe, is one of the 576 00:28:44,840 --> 00:28:47,360 best companies in the world. I own the counterpart 577 00:28:47,360 --> 00:28:49,760 MasterCard. There's a few differences. 578 00:28:49,760 --> 00:28:52,320 MasterCard has a bit more value add services. 579 00:28:52,320 --> 00:28:54,600 MasterCard has a bit more growth internationally. 580 00:28:54,840 --> 00:28:58,200 But Visa has a huge market share in the US and both of them 581 00:28:58,200 --> 00:29:00,760 equate to a very powerful duopoly. 582 00:29:01,320 --> 00:29:04,480 Now the earnings estimates from the analysts are that Visa is 583 00:29:04,480 --> 00:29:09,920 going to earn $2.31 in EPS, which is a 7.3% increase year 584 00:29:09,920 --> 00:29:12,720 over year. The revenue is going to be 8.55 585 00:29:12,720 --> 00:29:16,280 billion, which is a 7.69% increase year over year. 586 00:29:16,560 --> 00:29:17,960 These are both very strong numbers. 587 00:29:18,440 --> 00:29:21,160 It shows that the company grows and grows and grows. 588 00:29:21,360 --> 00:29:25,080 On the full year. Visa should grow 12 to 14%. 589 00:29:25,120 --> 00:29:28,000 I think it's going to be a very good growth year for Visa in 590 00:29:28,000 --> 00:29:31,000 2023. So this is wrapping up a 591 00:29:31,000 --> 00:29:34,160 compounder once again, growing every single year. 592 00:29:34,720 --> 00:29:37,200 This is what I believe constitutes a great company at 593 00:29:37,200 --> 00:29:41,160 not too demanding of evaluation and I believe Visa will beat 594 00:29:41,160 --> 00:29:42,680 their earnings. I think they're going to beat it 595 00:29:42,680 --> 00:29:45,360 by a sizable amount based on consumer spending. 596 00:29:45,360 --> 00:29:48,760 And what I see when I visit Costco's, when when I go out, 597 00:29:48,760 --> 00:29:50,600 there's people spending a lot of money. 598 00:29:50,760 --> 00:29:53,520 Consumers are really excited about spending money. 599 00:29:53,640 --> 00:29:56,440 The economy's been good. Inflation might come down a 600 00:29:56,440 --> 00:29:59,640 little bit, which hurts Visa. But overall, I think the strong 601 00:29:59,640 --> 00:30:02,960 spending trends, the strong consumer, I think is going to 602 00:30:02,960 --> 00:30:06,000 lift the stock further. So I have very high expectations 603 00:30:06,000 --> 00:30:08,080 for Visa. And then finally, Friday before 604 00:30:08,080 --> 00:30:11,120 market open, we have another credit card company, but it's a 605 00:30:11,120 --> 00:30:12,880 bit more, which is American Express. 606 00:30:13,680 --> 00:30:16,200 When we look at American Express, there are some notable 607 00:30:16,200 --> 00:30:19,320 differences between this company and Visa and MasterCard. 608 00:30:19,640 --> 00:30:21,800 And there's a reason I have a small preference for Visa, 609 00:30:21,800 --> 00:30:23,920 MasterCard over American Express. 610 00:30:24,360 --> 00:30:27,240 American Express tries to do a lot more than their digital 611 00:30:27,240 --> 00:30:29,280 network. They've tried creating an entire 612 00:30:29,280 --> 00:30:32,760 ecosystem of finances and wrapping in the top spending 613 00:30:32,760 --> 00:30:37,200 Americans into that ecosystem. Normally I like ecosystems. 614 00:30:37,200 --> 00:30:40,360 I like them in Apple, I like them in Microsoft or different 615 00:30:40,360 --> 00:30:43,520 companies, but in the digital payment network, I believe the 616 00:30:43,520 --> 00:30:47,880 real value is how vast and how large their payment network is, 617 00:30:48,040 --> 00:30:51,200 which Visa, MasterCard have the largest market share. 618 00:30:51,520 --> 00:30:54,880 So I have a preference over the large market share than I do 619 00:30:54,880 --> 00:30:57,240 over the ecosystem. Now looking at the analyst 620 00:30:57,240 --> 00:30:59,680 estimates for this quarter, American Express is supposed to 621 00:30:59,680 --> 00:31:05,640 report $2.65, which is a 27% increase over the previous year. 622 00:31:05,960 --> 00:31:08,000 That's a huge increase. I bet there's a little bit of 623 00:31:08,000 --> 00:31:09,640 lumpiness in the earnings per share. 624 00:31:10,080 --> 00:31:13,520 The revenue is going to be a 12.51% increase. 625 00:31:13,920 --> 00:31:16,920 So we're expecting a big recovery, a big increase in 626 00:31:16,920 --> 00:31:18,840 American Express. Let's go ahead and take a look 627 00:31:18,840 --> 00:31:21,360 at some of these numbers. Let's bring up American Express 628 00:31:21,360 --> 00:31:24,000 and look at the earnings per share chart to give it context. 629 00:31:24,240 --> 00:31:26,760 Looking at a singular quarter sometimes can be a bit 630 00:31:26,760 --> 00:31:28,960 misleading if you don't have proper context. 631 00:31:29,320 --> 00:31:31,680 And when we look at this, we can see the issue right here. 632 00:31:31,880 --> 00:31:36,680 If we go back 1234, it was $2.07. 633 00:31:37,160 --> 00:31:41,440 So next quarter they're expecting $2.65, which is at 30% 634 00:31:41,440 --> 00:31:43,480 increase. That's really strong. 635 00:31:43,480 --> 00:31:46,880 But if we look at this, we notice this was an unusually low 636 00:31:46,880 --> 00:31:48,720 quarter. It was the lowest of the 637 00:31:48,720 --> 00:31:51,960 previous two years. So it's a good increase. 638 00:31:51,960 --> 00:31:54,640 But when we normalize it and we go back a little bit further 639 00:31:54,680 --> 00:31:59,440 1234, it was actually higher two years ago than one year ago. 640 00:31:59,920 --> 00:32:02,400 So their earnings per share is growing and I think it's growing 641 00:32:02,400 --> 00:32:06,480 steadily, but not quite as fast as this quarter would imply. 642 00:32:06,560 --> 00:32:08,640 So the earnings per share is growing and the revenue is 643 00:32:08,640 --> 00:32:12,880 growing quite nicely as well. We're expecting I believe $15.95 644 00:32:12,880 --> 00:32:15,560 billion in revenue. We zoom in over the past 10 645 00:32:15,560 --> 00:32:19,040 years, we go up to 15.34 in the previous quarter. 646 00:32:19,440 --> 00:32:22,680 So we're expecting 12% revenue growth which is really strong. 647 00:32:23,040 --> 00:32:26,240 American Express is a great company that's expected to have 648 00:32:26,240 --> 00:32:29,320 very strong growth and like Visa with all the spending that 649 00:32:29,320 --> 00:32:32,400 consumers are doing, I believe this company will be an 650 00:32:32,400 --> 00:32:34,640 assessments. I'd be surprised if they didn't. 651 00:32:34,680 --> 00:32:37,200 So there you have all eight companies, my expectations for 652 00:32:37,200 --> 00:32:39,120 them we have this busy week ahead. 653 00:32:39,120 --> 00:32:41,400 If you like this type of content make sure you subscribe to the 654 00:32:41,400 --> 00:32:44,160 channel because I'll be doing follow-ups on many of these 655 00:32:44,160 --> 00:32:46,040 earnings reports after they happen. 656 00:32:46,400 --> 00:32:48,320 So I hope you enjoyed. See you in the next one.