Welcome back everyone. Today on the Joseph Carlson
Show, we have a very exciting video ahead of us.
We're entering into Week 3 of earnings season and this is by
far the biggest week. This is where the majority of
the market, the majority of the market cap of the US is
reporting earnings all this week.
In fact, just to put this in perspective, we have 37
companies, 37 that exceed $100 billion market cap reporting
earnings this week. We have many multi trillion
dollar market cap companies reporting earnings and the week
is stacked. It's full of companies.
Let's go ahead and just take a look at the ones that I'll be
covering and doing analysis on in this video.
We have companies like Google reporting tomorrow on Tuesday
before market open. We have McDonald's before market
open again on Tuesday after market close.
We have Visa reporting earnings, another one that I'll be
covering. These companies are all going
through a lot of different things.
For example, Google has a lot of uncertainties.
There's a lot of questions about their Moat around search.
Is perplexity killing Google's business?
McDonald's, for example, has lots of questions about the food
scare. There's an E coli outbreak.
One person has already died. And then we have Visa, which
doesn't have a lot of controversy or questions.
Visa's just doing a thing as as usual, but we'll be looking at
all three of these companies. I'll be giving some thoughts on
them moving on to Wednesday. The schedule also is very
packed. Wednesday before market open.
We have a couple companies that are somewhat interesting,
pharmaceutical companies. We have Caterpillar, but we
really get into the meat of it. After market close on Wednesday,
we have Microsoft reporting their earnings.
Meta, booking.com and Starbucks, all of these companies have a
lot going on. Microsoft, the question over the
cloud growth. Meta, the company that's been on
fire for the past couple of years, can it keep up with its
momentum? booking.com had a huge recovery
over the past three months. There's rumors that Uber might
be buying their main competitor, which is Expedia.
How would that affect their business?
How is AI affecting their business?
Then we have Starbucks. We have the ongoing theme of the
caffeine bubble, the caffeine wars.
More and more companies go into this.
We also have at Starbucks, the new CEO giving a big warning
over the slowdown in sales. Moving on to Thursday before
market open, we have MasterCard. We also have Uber, both
reporting earnings. MasterCard of course, reports
their earnings very similar to Visa most of the time, but there
are some differences. MasterCard continues to
outperform Visa and I'll be explaining why Uber as the
questions over the robo taxi, the continued growth of their
business. But we really get into the
bigger, more important companies Thursday after market close,
which is ALE and Amazon, two more big juggernauts reporting
their earnings. Apple's trading at a lofty
valuation. There's still questions over AI
and how that's going to impact the company.
And Amazon, of course, is one of my most bullish positions, one
of my top picks. It's one that I'm really, really
looking forward to the earnings. And I'll be covering each of
these with the goal of giving context and insight and some
predictions of what to expect with these earnings reports.
So let's go ahead and jump in. We have a big video to get into
and I have an announcement here. Before I start, I realize I
forgot. I forgot to turn on this light.
Let me get that turned on there. We got to set the mood.
We have a long video to get into, but again, I want to go
into this and I have a major announcement.
That's something that we've been working on in Qualtrim.
As you know, as I've done these earnings videos in the past,
these earnings prediction videos, I've used a static
image. It's just an image of a five day
week. And I thought that that could be
enhanced and improved. And we've been working on
integrating a calendar into Qualtrum.
So you know, Qualtrum, this is the website I use.
It has all the information, the charts, it has all the
fundamentals of a company on Qualtrum Insights.
And there's some other stuff that you can look at the dip
Finder in different tools. But now we added in something
new. This is in beta right now, but
it's going to live tonight. It is the earnings page.
So if you go to earnings here, it pulls up a brand new page and
you see a 5 day schedule right at the top.
We have Monday, Tuesday, Wednesday, Thursday, Friday.
You can change any week and it will show you the five day
schedule. It'll load in all of the images
and icons. You can go back to today.
Now the current day will be highlighted in blue just like
Google Calendar. And then it not only has the
icons every day, but it has it broken up into two categories
before market open and after market close.
In fact, if we zoom in a little bit on this, make a little bit
clearer there, you can see right there it says before market open
and then after close. So we have it organized like
that. So this makes it really easy at
a glance to look at different companies reporting earnings.
Another thing that we built into this is a sort by market cap.
So I can say any companies above a $100 billion market cap and
boom, we have all the $100 billion plus market cap
companies reporting earnings this week.
And it's sorted nice every single day before market open
and after market close. But not only that, I can also
sort it by my specific watch list.
So I can go and sort it by the Story Fund.
We have three companies from the Story Fund reporting earnings
and I have the exact day after market close or before market
open. I can sort it by every company
that I currently own. This is my currently own watch
list. So these are all my companies,
my holdings that are reporting earnings this week.
I can look at Dev Kantasaria's portfolio or different super
investors, Very cool stuff. I can look at my watch list.
This is my watch list reporting earnings this week.
So we have all these different filters that you can filter it
by to make it really easy at a glance.
Another thing we did is we made it so you can click on any of
these companies, like Eli Lilly, for example, and it has this
little slide drawer that comes out and it gives you some
historical data on their historical earnings.
First of all, it has the earnings when they're coming
next, what the estimates are for the next upcoming earnings.
It has the earnings per share in revenue.
If it's red, that means that they missed.
If it's blue, that means that they made it.
You can see the estimated earnings there.
The same thing for the revenue. If it's blue, that means that
they beat their earnings estimates.
If it's red, that means that they came in with a miss of Wall
Street's analyst estimates. So you can see that at a glance
in a visual format. We have a a QikLink to their
last transcript. So you can see their last
earnings transcript. You can read the whole thing
here and so on and so forth. We have their historical
previous earnings all laid out easy to see in this panel.
So this is to give just some more information about each of
these companies, help give better context to what's going
on in their upcoming earnings. And we have even more stuff
planned, a lot of stuff that we're going to be doing with
Qualtrum over the next month. But this is one big upgrade,
again, that's releasing tonight. So if you want to try out
Qualtrum, you can always try it out for free with a free trial.
You just join the Patreon and Qualtrum is included as part of
the Patreon. Qualtrum is $10 a month after
the Patreon, and the price is not going up because of this
feature or anything else we're adding.
It's going to stay $10 a month. Now, having said all of that,
let's go ahead and jump in and we'll start off with Tuesday.
Again, Monday, today, we don't have too many companies or any
ones that I really think are that interesting.
It really starts tomorrow. Tomorrow before market open, we
have a very important earnings report, which is Google.
Let's go ahead and just take a look at some historical data for
Google. We'll bring it up here.
We have earnings estimates of revenue of $86.3 billion.
Now if we look at the historical revenue, 86.3 is higher than
their, well, it's just higher than their Q1 of 2024, which was
the previous highest revenue ever.
So what we're predicting here, what the estimate is, is the
highest revenue Google has ever had in a single.
Quarter, which right off the bat I like to see.
Google's going to new highs with revenue, so the company is
growing overall. Now, if we look at this revenue
estimate historically, you can see that they haven't missed
their revenue estimate for the past five or six quarters.
So they're on a bit of a streak here.
They're on an earning streak. If we look at the earnings per
share, their earnings per share estimate is $1.83.
That is right up, right around here where it was the past two
quarters. These were $1.89 a dollar 89.
So they beat on their earnings estimates the past two times.
In fact, last time they beat. By a good margin.
So Google's on a streak here. We can look at this streak right
here. Google went on a miss streak
back in 2022. This is where they're missing a
lot of their estimates. But now they're on a streak of
beating on their revenue and beating on their earnings
estimates, in some cases by a wide margin.
What I've noticed when looking at companies like this is that
they do tend to go on streaks of beating and missing.
In this case, since Google's on a streak of beating its earnings
and revenue estimate, I have to believe there's a good chance
they're going to continue that streak tomorrow.
I think that it's more than likely.
Of course, there's no guarantees, but just looking at
this, it follows the pattern of many companies when they're on a
roll, when momentum is going their way, they tend to just
beat over and over again. So this could be the one that
breaks the streak, but I think that that's unlikely.
So even though I think Google will beat on the revenue and
earnings, they do have very high expectations this quarter.
We're expecting very high earnings per share and high
revenue, record high revenue. So this is going to be a
challenge for Google to meet those expectations.
Now, Google is facing a lot of challenges.
We know the challenges with the Department of Justice.
We know the challenges with their search market share being
taken. And that leaves a lot of
questions for investors. One of the analysts covering
Google that I think is very thoughtful and has a decent
perspective on the company is Mark Mahaney.
And here's his thoughts on the most important thing to look at
with Google. I think it starts with search
and it probably ends with search.
So can they maintain search revenue growth kind of double
digit, solid 12/13/14 percent search revenue growth year over
year. Does the outlook continue for
that? Second is YouTube, if there was
one weakness in the June quarter and like generals, investors
always battle the the last quarter that the softness last
quarter had to do with YouTube, which came in a little light.
So does that turn around or not? If it doesn't, why hasn't it
turned around? But it's not like it's
declining, but the growth did come in light and so that would
be the secondary issue. And then third, there is a broad
expectation in the market that the cloud companies will be able
to print accelerating revenue growth in the back half of this
year because industry cloud demand is accelerating.
So Google Cloud should show that.
By the way, show should Microsoft Azure and so should so
should AWS. He says first and foremost that
search is the most important part of Google's earnings
report. We need to see healthy growth in
search, and I believe that he's looking at that with good
reason. Search makes up still the
majority of Google's operating income and revenue, and there's
big question marks around search.
Is perplexity taking their market share?
Is Bing taking their market share?
Is Google search really on a big decline?
There's lots of questions about that, and Google can answer
those questions by posting strong.
Revenue growth, giving update on search features, pushing more
into artificial intelligence, making sure that they keep their
dominance with search. If we actually take a look at
Google Search and see how this is grown, you'll notice that it
does make up the majority of Google's revenue.
Still, it's around 60% of their overall revenue.
And when we break it down, we can see that Google Search is
continuing to grow. And this is a point that I've
made over and over again. Investors continue to have
concerns about Google search, that the market share is being
taken away. We have all these different
scary headlines. But then we look at the data
here, the actual historical data on a quarterly basis and we see
it growing, growing 10% plus last.
Quarter year over year search grew by 13.8%.
That's very strong growth. So I look at the real data,
what's actually going on with Google's business, and I see
that this search business continues to grow.
If they post another strong quarter of search growth, it'll
be undeniable that this company is not facing as many challenges
as the news and headlines. Would lead you to believe.
Now the other thing that the analysts brought up, of course,
was YouTube. He said that YouTube growth has
been a little bit weak. So we're looking at strength
there and YouTube growth came in at 13% year over year.
I guess that's a little light. It's slower growth than Netflix.
Netflix grew at around 1516 percent, 20% on a constant
currency basis. YouTube is growing around 13%,
probably a little. Higher on a constant currency
basis as well. But either way, if YouTube does
grow a little slow, a little fast, it doesn't concern me
either way because YouTube has no competitors.
I do not consider Netflix as much of A competitor to YouTube
as the analysts do. Sure they're both fighting for
watch time, but they both run very different businesses.
You can't swap one for the other.
Netflix can't compete in what YouTube does.
YouTube has proven that they can't compete in what Netflix
does. So they're very different
businesses. When I look at the actual true
competitors to YouTube, whether it's TikTok or Meta, I don't see
them taking any market share from long form video content and
that's YouTube score business. So what I see with YouTube is
still a resilient Moat, an asset that is incredibly unique that
so far remains dominant. So if it grows a little slower
or a little faster, I don't really have any concerns either
way. And then finally, the part that
he mentioned last, but I also think it's the most important
part is Google Cloud if we look at the quarterly.
Growth of this, it's just incredible.
Look at the consistency of the cloud business every single
quarter. It started off as a small
business, $4 billion. Now it's doing over $10 billion
per quarter. A-40 plus billion dollar run
rate and it grew at 28% year over year, outgrowing any other
cloud business. So it's growing very quickly and
it's growing very consistently. Another thing I'll mention with
Google's cloud business is the margins of IT.
Margins are going up. While we're seeing increased
revenue growth, we have margins going from the negative round
2019. It was -62% this is when they're
doing major CapEx investments, hiring people like crazy.
Tons of employees work in Google Cloud.
So it's a very popular, popular portion of the business.
But you can see the steady March upwards in operating margins.
And this is something that I think is such a good storyline
for this business. Google Cloud is growing in
revenue and margins. The combination of the two means
huge operating leverage. When you have a company that has
any significant portion of its business with massive operating
leverage, you're going to have greater amounts of free cash
flow. Greater amounts of free cash
flow mean more buybacks. More buybacks.
Means the stock price goes up. So we have a lot of good things
going on with Google. I own Google stock.
It's a company that I've been very bullish on for a while, but
I continue to believe it's undervalued.
I continue to be bullish on this stock.
When we look at the company even facing the challenges that it
does, which I don't think are going to be quite as bad as
people are predicting with the Department of Justice
potentially breaking up Google, Even so, Google trades at a very
low valuation on a Ford PE basis.
We can see that this company trades at around a 19 Ford PE.
When I do my estimates of it, I think the company will have
around $8.50 of earnings in 2025.
That puts the Ford PE today around a 19.
So this is very accurate. When we look at Google right
now, they also have $100 billion in cash.
So they're a cash rich, cheap company with a strong Moat, a
diverse business and a long growth path.
When I look at any type of asset like this that is both cheap and
has a lot of growth ahead of it and has a lot of cash on hand,
and I have to believe that eventually the fares will fade
with Google, the Department of Justice and the scary headlines
about them breaking up Google will be a thing of the past.
Meanwhile, Google will continue to grow their earnings and their
revenue. And right now, frankly, the
valuation is very forgiving. Google doesn't have to be
perfect. They just have to keep growing
at all. If the company remains at the
exact same multiple, they continue to grow 10 to 15%
earnings per share per year. You're still getting a very
attractive return at this point. So aside from the fact I think
the company's undervalued, I think Google should be over $200
today. I think Even so, even if it's
undervalued and it remains undervalued, it will still.
Be an attractive return profile from here.
Now, at the same time as Google, we have McDonald's reporting
their earnings before market open tomorrow morning.
If we look at McDonald's Mickey D's and what's going on with
this company, this report comes right after it was revealed from
the FDA, EU s s Food and Drug Administration, the McDonald's
had a bit of an issue with food quality, with their their safety
of their food. And there was an E coli outbreak
that got a lot of people sick, like 50 plus people sick.
One of them actually died from it.
E coli is incredibly dangerous. And of course it was with one of
the food products, usually one of the greens, it was with the
onions. So they think they've tracked
down the problem. They know the the food producer
that has the onions that had the problem.
They think it's under control now, and so far investors are
not really punishing the stock. I've looked at it.
It had a little bit of a dip and then it came right back up.
Even today, it's up $1.50 or sorry, $4.30.
One point 5%. We've seen this type of thing
before. We just saw it with Chipotle.
Their E coli outbreak was much worse.
They had a series of outbreaks over and over again that really
concerned and scared customers and it caused their same store
sales to decline for months and then they finally had it recover
over time. But eventually Legendary brands,
ones like McDonald's do eventually recover and that is
what investors are pricing in today.
The pricing in a full recovery like this isn't an issue at all.
And I think that's the correct thing for investors to do.
So looking at McDonald's and any prediction on this company, this
is a company that does have a history of missing on their
earnings per share in revenue rather frequently.
They did last quarter. So it's a company that can miss
here and there, but it's one that's still on track and
growing over time. I think that the restaurant
industry is still in good shape, especially for top quality
brands. McDonald's is one of those
brands. So when I look at McDonald's, I
view it through the lens of something like Shake Shack and
Texas Roadhouse and these restaurants that have it
together. They know what they're doing.
And I still believe there's ample demand for these type of
restaurants. So overall, I'm not sure if
they'll hit on their earnings per share revenue.
They might have a slight miss, but I think that McDonald's is
still in good shape. I think people are still buying
their burgers. I don't think it's going to stop
anytime soon. Now moving on from Tuesday
market open, we get to Tuesday after close and we get to some
big companies here as well. We have Visa.
If you want to talk about a company that quite literally
never misses earnings is just incredible.
They never miss earnings. Knock on wood, this might be the
quarter that they finally do. But looking at the data here,
statistically it is incredibly unlikely that Visa misses on
their earnings per share estimates.
And that is because Visa has tools to basically control
whether or not they meet their earnings per share estimate.
It is a choice for Visa. It is not just an outcome.
Now the revenue, they don't have as much control.
They can't control for revenues the same way they can control.
For earnings. So they do miss on their revenue
sometimes, but it's still rather rare.
Over the past 30 earnings, they've missed three times.
So you have around a 10% chance of missing in revenue.
And again, they've missed on none of their recent earnings
per share. There's always a chance they
will, but it's still unlikely. Analysts are expecting $2.58 of
earnings per share, which would be the highest ever in a single
quarter for Visa. So the company continues to
grow. Overall, they're expecting
around 9 1/2 billion dollars of revenue, which is another record
high for this company. Going into this earnings, I
think that Visa is going to be fine.
The valuation is not that concerning.
They trade at a 25 Ford PE ratio.
It's in the premium category, but it deserves it.
The free cash flow yield is also not too low.
It's actually decent for Visa. If we look at the growth of this
company in the profile of it, they have incredibly consistent
revenue growth. They are a hedge against
inflation. They have growth in their total
Visa cards, their credit cards and debit cards over time.
They have incredibly consistent growth in their free cash flow,
their free cash flow per share. And if we look at the earnings
per share, again, they have a lot of controls over their
earnings per share. It's growing rather fast.
So this is a company that has growth everywhere.
They have a strong balance sheet.
They pay a dividend, they buy back shares.
They do everything right with a lot of predictability and
consistency. I don't own Visa, but I'd feel
very comfortable holding it here.
We're finally through Tuesday into Wednesday.
Wednesday before market open, we have Eli Lilly and Abby
Caterpillar. These are ones that I am not too
interested in. The ones that I'm really focused
on are the ones reporting aftermarket close.
On Wednesday, we have Microsoft, Meta Booking and Starbucks.
Let's go ahead and jump in. We'll start off with Microsoft.
This is a company that, like Visa, rarely ever misses on
their earnings per share and revenue.
Just take a look at the history here.
Again, the red dot means that they missed on their earnings
per share. So from 2020 to 2024, every
single quarter, four times a year, they've only missed one
time. That is an incredible track
record of beating earnings per share.
This is a company that really knows how to grow at a
predictable pace on the revenue front.
They've also missed only one time on the same quarter.
So again, this is from 2020 to 2024, four quarters per year.
They've had revenue beats and earnings per share beats over
and over again. This is something that I've long
known and loved about Microsoft. When you buy the stock, you can
count on them reliably in most cases to come in above what
analysts expect. Typically when they do that, you
have a great outcome and I think it's going to be the same this
quarter. I think the odds are heavily in
favor of Microsoft to beat on both the earnings per share and
the revenue. Of course, there's no
guarantees. There's the chance they miss.
There always is a chance they miss.
But the statistics are behind us.
The data is behind us. Microsoft is likely to be on
both. I've made a lot of money on
Microsoft stock. I've held it in the passive
income portfolio and the Story Fund for a number of years.
I bought it at decent times and it continues to be one of my
core positions because I think the future is yet brighter with
this company. The fact remains, and this is
what's remained with Microsoft for year after year after year.
This is the poster child of the perfect fundamentals.
It is difficult to construct a company that is better in so
many different ways. They have a credit rating that's
better than the US government. They have an impeccable balance
sheet. They have diversification both
through their products, their revenue streams by different
segments, each of which have different revenue streams in sub
segments. Then within this they also have
geographic diversification. They're a worldwide dominant
company. They're deeply entrenched with
the S&P 500. They have products that are
impossible to uproot, like Microsoft Excel and every
accounting firm using it. So this company is so deeply
entrenched in the US. It's deeply entrenched
worldwide. It has so much diversification.
The huge majority of the revenue is subscription based.
They're expanding into cloud and AI and every other good thing to
get into. And of course, there is the
storyline that Microsoft is growing Bing.
Bing is highly profitable for the company and any weakness in
Google is strength in Microsoft. They have a huge holding in open
AI and they have being which is powered in part by open AI.
The free cash flow is so strong, consistent, reliable, it's tough
to find any asset like this. This is why Microsoft should be
at the top or near the top of every growth investors
portfolio. When I look at Microsoft going
into this earnings report, I view it as two different parts.
We have the fundamentals of the company and the valuation.
Right now. I believe Microsoft's
fundamental are as strong as ever.
Cloud growth, artificial intelligence, diversification,
all of that looks incredibly strong.
Where I see the weakness in the stock is the valuation.
The valuation risk has increased as the PE ratio has climbed and
the free cash flow yield has dropped.
So right now Microsoft is not at a deal.
It's not at a steal. I wouldn't be just throwing
money at this company hand over fist or pounding the table right
now. I was buying the stock when it
was trading for around 2/20. It was at such an attractive
deal at at the time. Now it's at 4:30.
So investors have really bought this company up to now what I
think is a more fair value range.
And again, if I look at Microsoft, this upcoming
earnings, I think they're going to be fine.
Now moving on from Microsoft, we're still Wednesday after
market close. We have Meta reporting at the
same time. Let's take a look at Meta's
history. This company has been on fire
for a couple of years. Mark Zuckerberg really turned
around the story with the efficiency, the focus on
artificial intelligence. A little bit of forgetting.
About the metaverse, you kind of dropped that and talked more
about AI and that was the right decision.
When we look at the earnings estimates, we see that the
earnings per share estimate is $5.17.
That brings them all the way up to here where it has been the
past 3/4. I think Meta can easily hit
that. It's right in range of where
they've been for the past 3/4. And each time they beat those
estimates by a wide margin. These aren't small beats.
They beat them by a decent margin, 20%, eight percent, 9%
beats. So we're looking at an earnings
per share estimate that I think is on the easier side for Meta
to beat. If they don't beat it, I'll be a
little bit surprised when we look at the revenue.
This is a record high revenue estimate at $40.27 billion.
That just beats out any highest quarter they've had previously.
And again, I think they're likely to beat on the revenue as
well. Fundamentally, Meta looks really
strong here. They're printing a lot of cash
flow. They have consistent earnings
per share growth. They're running an efficient
business and they're investing heavily into artificial
intelligence, so they're doing a lot of right things.
The concerning part of this story is the valuation, and this
is something that Mark Mahaney also commented on.
He believes the valuation is getting to that tipping point of
where it could start to revert. It's probably more the latter
than the first. There's this mean reversion
trade that you know, I think it's a probability with this
name. Look, I think fundamentals are
well intact with Meta. Is it actually the best
performing of the Mag 7? I guess it probably is.
I don't know, probably not with NVIDIA, but I don't, I don't
cover some of the other names, but but in the Internet space,
you know, the fundamentals have been amongst the most and
probably the most impressive in the in the advertising space.
I mean, especially at their scale, they're doing well over
20% revenue growth that is truly impressive.
I think there's a lot of kind of untapped areas, threads, Click
to message ads, WhatsApp, Facebook marketplace that they
can still kind of lean into to sustain what I would call
premium growth mid teens, maybe even high teens over the next
couple of years. Margins are rising.
So the expectations are high for this stock.
I think they'll be able to deliver against them.
I like the stock. It's not one of my top picks
because it's not that dislocated right now.
It's not dislocated at all. It's probably the most consensus
long in in large cap Internet. But maybe the one trick, one
thing if there if the stock were to trade off, probably because
the company were to announce surprise people with a really
aggressive CapEx outlook for next year.
I think that's a possibility. I don't think that's the
probability, but I think it's a possibility that that happens.
He mentions that Meta's fundamentals look strong.
There are untapped areas of growth.
They'll probably hit their metrics, but Meta has become the
most consensus lung of the mag 7 meaning out of all the analysts
that do his job that cover this stock, everyone's long meta.
So obviously that that means that the stock is probably less
priced with any type of dislocation, as he calls it or
any type of undervaluation. So meta is in one of those
categories where again, I think if you're holding the stock, I
probably wouldn't sell it. Now reporting at the same time
Wednesday after market close, we also have booking.com booking
holdings. This is a company that I stole
the idea from one of my discord members.
One of them posted research on the company.
He did a write up. I read through it and I thought
that this is a really solid bet, and then I waited patiently for
a dip in the company and I bought shares of it.
So Booking Holdings went through a rather large dip right here.
It's sold down a lot and that's really when I piled in cash
around $3400 and it just raced up.
I didn't expect it to race up like it did, but it really raced
up after the dip and that's what we try to do.
We try to buy dips when we get chances in great companies.
Mark Mahaney calls that dislocation when a stock becomes
dislocated from its fundamentals and you want to find high
quality companies that that happens to.
So this has become a pretty big winner in a short amount of
time. Booking Holdings now has $8300
in gains and only holding it a couple of months and that's just
due to buying the dip on it and having this this big stock price
increase up to $4300. Now, again, this one is
reporting their earnings Wednesday after market close.
When we look at the history of this one, it's very good at
beating its earnings per share and its revenue estimate.
You can see that it's done that for most of the previous
quarters except for Q2 of 2022. They had a pretty big miss
there. And then they've had some
misses, of course, in 2020. When you take out the 2020
quarters and the pandemic, the impact of that, overall, they
have a very strong track record. Seeing as things are more
normalized now, people are going on vacations, they're spending
more leisure time. I've had this overall thesis
that as people grow with their per capita income levels, as the
US becomes wealthier and wealthier on a per capita basis,
that there's going to be more leisure time.
People buy the homes they want, they'll buy the cars they want,
and then the excess cash beyond those physical goods will mostly
be spent in experiences. Experiences like going out to
eat at restaurants, experiences like going out on vacation using
services like booking.com. So you see a common thread here
behind a couple of my holdings. People buy the physical goods
they need to live, then beyond that they have experiences.
When I look at the leader in experiences, it is Booking
Holdings. This is a company that does
compete with Expedia, but they're very different in their
Moat and their dominance, especially in Europe, which is
the biggest vacation market in the world.
So my expectations going into this quarter is I'm expecting a
beat on the earnings per share and a beat on the revenue.
There's a chance they missed every single time.
There's always a chance, but my expectation is they're going to
beat. Now, the other stock reporting
at the same time on Wednesday after market close is Starbucks.
We can bring up that one. This one has gone through a
really difficult time. They had ACEO that came from
Mackenzie. Seems like a nice guy, so
nothing personal against him, but he wasn't a good fit for
Starbucks. He was bringing a very corporate
attitude to a company that needed to focus on its long
standing brand value and being a third place, a nice place to sit
down. The problem with Starbucks is
they shifted from being a brand where you could sit down at a
nice atmosphere, enjoy some coffee, to a place where now
you're rushed through this drive through and mobile app
experience and it's very busy and it feels more industrial.
So they really shifted the brand in a negative way.
And the new CEO, Brian Nickel, the previous CEO of Chipotle,
who is as good as it gets of Aceo, he is the best.
He's the best chance that Starbucks has.
He's now in charge of the company.
And Brian Nickel, the new CEO that is taking over the issues
with Starbucks, just recently posted a 6 minute video on the
Starbucks Newsroom explaining how the company's in trouble,
explaining the challenges they're facing, the problem with
their branding, the problem with their apps.
And he said all the right things, all the right things.
There's no way. I think he could have made a
better press release and coverage of what's going on with
Starbucks than he did. He's focusing in all the right
areas. He wants to focus again on
building this legendary brand back to where it needs to be.
Starbucks investors today have the best CEO leading the
company. This is the best shot you have
of getting this company back under control.
So if Brian Nichol can't fix it, I don't think there's anyone
that can at this point. Now, having said that, when I
look at Starbucks today, I think a lot of the fix is already
being priced into the stock. When we look at the PE ratio,
it's still out of 25. The free cash yield is at a 3%.
This isn't priced with a lot of despair or gloomy outcome.
Google's cheaper than Starbucks and even when they just
announced Brian Nickel, the stock price moved up
dramatically. So a lot of his effect is
already being priced into the stock.
Investors got it just by the announcement, not by any changes
he's actually making. So I do think that Brian Nickel
can make real progress in turning around this brand and
bringing it in the right direction.
My only problem with Starbucks today is a lot of that is
already priced in the stock right when he was announced as
the CEO. Now moving on further down the
week, we get to Thursday before market open, we have MasterCard.
A lot of my thoughts about Visa carry over with MasterCard.
This is likewise a company that has an incredible amount of
control over their earnings per share.
So we look at the earnings per share history here.
You may notice that they almost never miss.
They have one miss back in Q4 of 2020 and looking at the
estimate, they also missed by just a couple pennies.
So it was a slight miss as well. The same thing with the revenue,
the revenue, they have almost no misses, just one hair on the
same quarter. This is a company that beats on
their earnings per share, beats on their revenue over and over
again. So statistically speaking, if
you own these companies, you are expecting an earnings per share
beat and a revenue beat. It is the unlikely scenario by a
huge degree that they miss on both of them.
Now MasterCard is outperforming Visa and it has for the past
couple of years and I think that's for a few reasons.
First of all, it's growing slightly faster than Visa most
quarters. It grows a little bit faster
because of its international expansion.
MasterCard is growing more internationally than Visa as
well. So they have ample growth pass
ahead. I like seeing that from
MasterCard. Their free cash flow looks very
similar to Visa, very fast growth quarter over quarter.
The free cash flow per share is growing around 15 or 16%, very
fast growth from these companies.
My expectations going into this quarter with MasterCard is an
earnings per share, a revenue beat, growth in their revenue,
growth in their free cash flow, a decline in their share count
and overall business as usual for this company.
As of right now, I have no plans on taking gains or selling.
Now moving on with Thursday before market open, we also have
Uber. This is a company that I've been
following for about a year now. It's one that I'm very
interested in. And frankly, I still think
there's a lot of upside in this stock.
A lot of people look at it and they're concerned about the
robotaxi future. But even if a a few brands like
Tesla, Waymo, a few others maybe develop robotaxi, some of them
are going to work with Uber because of the demand and
network that Uber's built. That's not going to go away.
So I view Uber is one that can survive even in the wake of
different robotaxi networks. Now looking at the earnings per
share, it's all over the place. There is no guarantee.
If they beat their earnings per share, statistically, it's like
a coin flip. So this is one where you cannot
count on with any degree of predictability.
They're going to come in above their EPS estimate.
The revenue is a little bit more dependable.
They typically come above on the revenue.
But again, earnings per share could go either way.
What I'd look at with this company is the free cash flow
trends. We see a company that has a lot
of operating leverage. They're pushing up margins,
they're taking more market share.
We see the free cash flow going from the negative in 2020 all
the way to the positive and current day.
And we see this nice line being drawn when the CEO said he was
focusing on free cash flow, he meant it.
He meant it and he really made it happen.
I love seeing CEOs that really follow through with their word.
I'm bullish going into this earnings.
I'm bullish going into the rest of this year.
I think over the next year and a half, this one's going to be
higher. Now we move on to Thursday, this
time moving to aftermarket close and we get to a couple other big
tech companies here, Apple and Amazon.
Let's first start off with Apple.
This is a company that's done better than I expected this
year. If we look at the stock price,
it's up 26%, outperforming the market.
The stock price is now up to 234, so Apple seems to know no
limits. The stock just continues to go
up. When we look at the expectations
for Apple, analysts are expecting $1.55 in earnings per
share. This is well within the
territory that Apple can beat. So I'd expect a beat on earnings
per share or very close to hitting that target.
The revenue was $94.42 billion, which is an increase of around 4
billion year over year. This is pretty high for Apple.
This is the one that I think that they're more likely to miss
if they are going to miss. Now, Apple is working on some
new AI updates. They want to be a part of the
conversation with AI. They want to be an AI company
like everyone else. But instead of being one of the
big cloud providers that's investing a lot in CapEx,
building out AI servers, Apple's taking the route of just
building AI tools that their customers use.
And here's a look at their release schedule for those AI
tools. If you were hoping, though, to
get that update today and to get a better and smarter Siri,
you're going to be disappointed. Only two main features are
coming AI summaries of all your notifications and a new look for
Siri. But Siri is just as bad as it's
always been. But at least the screen is going
to kind of glow when you activate it.
So we don't get AI Siri with the update that's that's out today.
It's not going to be the smart Siri that's coming later, but
right now we're still stuck with the the really poor Siri.
For AI features like the Chachi BT integration, generating
custom emojis, those are several weeks away from launching by the
end of the year. And then that big Siri update
and integration with all your apps using AI, that's not
expected until next year, but that still hasn't stopped Apple
from marketing those features to prospective iPhone 16 buyers.
In fact, that's pretty much all the ads talk about.
But if you want to summarize your emails like Bella Ramsey's
doing here, you're going to have to wait.
I look at that and it's just not a lot.
There's not a lot there. ALE has some small updates with
their user interface and some AI tools mingled into the iPhone.
That's the big innovations from them.
When I look at Apple and the metaverse with the Apple Vision
Pro, that product to me feels a bit like a flop.
Maybe I'm calling it a bit early, but I wasn't ever too
excited about that product. I wasn't excited with Meta and
the metaverse. I didn't buy one myself, and now
it's almost never talked about. We can also look at commentary
from the telecom providers which so far they say demand isn't
that strong. Sour commentary recently on
iPhone 16 demand so far. Last week, you had the CEOs of
AT&T and Verizon saying iPhone demand isn't as strong as last
year and they're unsure how long it's going to take for this AI
rollout to change that. Meantime, analyst Ming Ching Quo
of TF International Securities He said Apple has cut iPhone 16
orders by 10 million. Given the fact that we have some
negative commentary about the demand, we have a slow rollout
of their AI features, and I personally don't know anyone
talking about Apple's AI features, I don't see a lot of
people having a lot of buzz with it or a lot of excitement about
it. Maybe that's just because they
haven't seen it in person yet, but I don't think it's driving
above average sales of this new iPhone cycle.
When I look at that in combination of the heightened
valuation, the fact that the stock trades in the 30s Ford PE
ratio, a 2 1/2% free cash flow yield, Apple's more expensive
than it typically has been. So right now, overall, I don't
love the risk reward profile going into earnings for Apple.
Now, of course, at the same time, Thursday after market
close, we not only have Apple, but we have Amazon dropping
their earnings at the same time. Let's go ahead and take a look
at what analysts are expecting for this upcoming quarter in two
days. First of all, the earnings per
share, $1.14, so $1.14, I think they can beat that.
They've done it for the past three quarters.
They've been right at a dollar two quarters and three quarters
ago. Last quarter was $1.26, so we're
asking for a range between the last three quarters, I think
doable for Amazon revenue of $157.17 billion.
Again, this is around the range they've been for the past year.
So I think that they can beat on both the revenue and the
earnings per share. Statistically, they have around
a 70% chance on beating on their earnings per share in revenue.
Now, let's go ahead and take a look at the major focus that
analysts are looking at for Amazon this quarter.
I think Amazon can go higher if AWS growth continues to
accelerate high margin business, this large Tam market leading
position if they can kind of prove that two years ago the the
narrative was they were losing share to Microsoft.
If they if that narrative changes and it would change if
they continue to show accelerating revenue growth, I
think that helps takes the stock, takes the stock higher.
If retail sales growth for Amazon kind of around 10% kind
of stays consistent, there's no real sign of consumer softness
at Amazon. And if retail margins continue
to rise, the trick here? There is, there's, they're
investing a lot in this new satellite communications
initiative called Kuiper, which is kind of a competitor,
Starlink. So investors are going to want
to know what's happening to the core retail margin trans ex
Kuiper. If they can show those to be
steadily, consistently, solidly rising.
Like if you put those two or three elements together, the
stock goes higher. That's why it's one of our top
picks. It's why it's why it's our top
pick. And I also currently have Amazon
as one of my largest holdings. In fact, it's my largest one
right now in the story fund. It is an $80,000 position,
$21,000 in the green. Netflix so far has been
outperforming Amazon. It's really been doing a
fantastic job with the recovery. Netflix has had just an epic
recovery from the lows. Amazon has recovered quite a bit
as well, going up double, but there's more room in this stock.
I believe that there's more room to go.
When we look at Amazon right now, it trades at 190 and I
think the stock today is worth at least 220.
That's what my fair value estimate of it is around a a mid
range. So I think it has room to trade
up above 220, but that's my expectations.
I believe that Amazon will continue to go higher, well
above the two hundreds for a couple of reasons.
Like you mentioned, there's a story of AWS, and this of course
is super important to Amazon. If we look at all the different
segments and we cross them out, aside from AWS, this is of
course the massive cloud provider, bigger than Azure,
bigger than Google Cloud Pro. AWS is massive.
When we look at the past four quarters, it's doing $98.85
billion in revenue. When we just look at 1/4 and we
look at AWS, the most recent quarter, let's take a look here,
We can cross the rest of these out.
The most recent quarter did 26.28 billion.
So the run rate is in excess of $100 billion.
To put that in perspective, if we flip over to Tesla here, AWS,
just that portion of Amazon has higher revenues and is growing
faster than Tesla and has higher operating margins.
And that is why Amazon's AWS is a crown jewel.
It's growing so fast. It has such high margins, it
continues to have ample growth path, and if they can prove once
again to have steady demand and steady growth in this, it's
going to push the stock higher. One of the potential downsides
of Amazon is if AWS comes in below annual assessments and if
the customer commitments continues to trend downward or
flat, that would be a bummer for the stock.
So I'll be looking first and foremost at the AWS number.
When we just look at the high margin portions of Amazon, these
4 segments, it's growing at 18.09 percent, 17% over the past
two years on average. I like seeing this development.
I don't see a world where this continues and the stock remains
at its current price. If that continues where those
portions of the business continue to grow like they are
for any amount of time, this stock should move up.
Amazon also has a story of rapidly increasing free cash
flow, going from heavily in the negative now to the extreme
positive. It's slowing down a little bit
because they're doing these surprise Capek investments in
the Kuiper and into AWS with AI. So that's eaten away at the free
cash flow growth. If we look at the CapEx line
item here, you can see what I'm talking about over the past 10
years. It went up to its peak in 2022.
And then we thought that the CapEx was going to go down as
they were no longer building out their fulfillment centers.
But now it's starting to trend back upwards, which of course
has a huge impact on the free cash flow because the free cash
flow is cash flow from operations minus CapEx.
So when CapEx goes up, free cash flow goes down, Hopefully these
investments from Amazon and their CapEx is worth it.
But right now, the increase there is weighing down the
stock. So as of right now, I'm excited
for Amazon's earnings. I know that they're always a bit
volatile, but this company has ample growth opportunity, a very
long runway of growth, very good businesses, concentration in
very key industries. I like everything I see from it
so far. So I'm excited going into this
Thursday. And with that, that wraps up the
entire busy week. We have a lot of companies.
It's going to be really interesting to see how this
turns out. If you want to see commentary on
the results of these companies, just make sure you're following
the channel. And again, if you like this
earnings calendar, we're releasing it on Qualtrim
tonight, so it's not live yet. It's going to go live tonight.
You can Sign up today with the free trial.
If you haven't tried out Qualtrim, I think you're going
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See you in the next one.