1 00:00:00,040 --> 00:00:02,480 Welcome back everyone. It's time for an earnings week 2 00:00:02,480 --> 00:00:05,240 preview, and this is for week 3 of earnings. 3 00:00:05,480 --> 00:00:07,520 This is the last really big earnings. 4 00:00:07,520 --> 00:00:09,040 We've made it through week one and two. 5 00:00:09,240 --> 00:00:13,600 The markets held up, but we have a couple big names this week, in 6 00:00:13,600 --> 00:00:17,600 particular Amazon and Apple. Those are two big ones. 7 00:00:17,640 --> 00:00:19,760 I own both of them. So I'm going to be going over 8 00:00:19,760 --> 00:00:22,440 and doing a bit of analysis on each of these companies. 9 00:00:22,480 --> 00:00:25,360 Now as we look through this week ahead, we have a whole list of 10 00:00:25,360 --> 00:00:27,920 companies here. I scanned through them and I 11 00:00:27,920 --> 00:00:30,280 circled the ones that we're going to be going over in this 12 00:00:30,280 --> 00:00:31,800 video. These are the ones that I 13 00:00:31,800 --> 00:00:34,640 believe are the most notable, the most interesting or the most 14 00:00:34,640 --> 00:00:37,300 impactful. And we're going to be doing a 15 00:00:37,300 --> 00:00:39,460 little bit of an earnings preview on each of these 16 00:00:39,460 --> 00:00:41,300 companies. Now to start off the week, we 17 00:00:41,300 --> 00:00:44,460 have Sophie, they just reported earnings this morning and 18 00:00:44,460 --> 00:00:47,820 they're up 15%. So a huge beat by Sophie. 19 00:00:47,820 --> 00:00:50,620 I'll be sharing some opinions on that stock in general. 20 00:00:51,100 --> 00:00:54,180 And then we have tomorrow a whole list of companies. 21 00:00:54,460 --> 00:00:59,300 We have the continued theme of the the recovery in cruise lines 22 00:00:59,300 --> 00:01:02,940 with Norwegian Cruise Line. This is I think a pretty good 23 00:01:02,940 --> 00:01:04,580 cruise line. So we'll be looking at that. 24 00:01:04,940 --> 00:01:07,220 We have Uber. This is a company that I'm 25 00:01:07,220 --> 00:01:09,180 getting more interested in over time. 26 00:01:09,700 --> 00:01:13,380 And then after market closed tomorrow, we have Starbucks, 27 00:01:13,740 --> 00:01:17,140 another food company very similar to Chipotle in my 28 00:01:17,140 --> 00:01:19,870 opinion. Then we move on to Wednesday. 29 00:01:20,190 --> 00:01:24,070 We have two big fintech companies, one of them being 30 00:01:24,070 --> 00:01:26,310 PayPal and the other one being Shopify. 31 00:01:26,710 --> 00:01:29,430 Now a lot of people think that I'm wrong, that Shopify isn't 32 00:01:29,430 --> 00:01:32,790 really a fintech company, it's an online retailer, but I'm 33 00:01:32,790 --> 00:01:35,790 going to explain why. I believe Shopify is a fintech 34 00:01:35,790 --> 00:01:38,830 company like PayPal as well. So we're going to be going over 35 00:01:38,830 --> 00:01:40,950 both of those companies. I'll be giving you my opinions 36 00:01:40,950 --> 00:01:42,670 on what's going to happen in their earnings. 37 00:01:42,750 --> 00:01:45,750 Then we move on to Thursday. Thursdays is a big day. 38 00:01:46,150 --> 00:01:49,430 We have before market opens, Warner Brothers Discovery. 39 00:01:49,630 --> 00:01:52,030 They're dealing with a ton of debt, they're dealing with a 40 00:01:52,230 --> 00:01:55,590 very difficult content slate and they're dealing with the riders 41 00:01:55,590 --> 00:01:58,190 strike along with Netflix and everyone else in the 42 00:01:58,190 --> 00:02:01,910 entertainment industry. So that's a very complicated, 43 00:02:01,910 --> 00:02:05,830 kind of messy company. Right now after market close is 44 00:02:05,830 --> 00:02:09,430 where we really get into it with Amazon and Apple reporting at 45 00:02:09,430 --> 00:02:10,990 the same time. I'm going to be spending the 46 00:02:10,990 --> 00:02:13,310 most time going over Amazon and Apple in this video. 47 00:02:13,310 --> 00:02:14,630 So we'll be looking at those two. 48 00:02:15,100 --> 00:02:18,180 And then we also have Airbnb. That's another company I find 49 00:02:18,260 --> 00:02:20,580 very intriguing. And then to close out the week, 50 00:02:20,580 --> 00:02:25,020 we have Nikola, a company that's infamous for rolling a truck 51 00:02:25,020 --> 00:02:28,060 down a hill and pretending that it was driving itself. 52 00:02:28,460 --> 00:02:31,300 We're going to be looking at Nicholas Financials and doing a 53 00:02:31,300 --> 00:02:34,140 little bit of an update on their upcoming earnings as well. 54 00:02:34,220 --> 00:02:36,500 So we have a lot of stocks to cover in this video and a lot of 55 00:02:36,500 --> 00:02:38,660 analysis to get to. Let's go ahead and jump right 56 00:02:38,660 --> 00:02:40,700 in. We'll start off with Sophie. 57 00:02:40,700 --> 00:02:44,160 Sophie just reported their earnings this morning and as we 58 00:02:44,160 --> 00:02:49,960 can see right here in Qualtram, the stock is up 18.53% today. 59 00:02:50,320 --> 00:02:54,120 This is just today's return, so it's up nearly 20% today. 60 00:02:54,400 --> 00:02:57,120 Sophi Investors are having a very good day today. 61 00:02:57,640 --> 00:03:00,080 Now on Qualtram, we also have something where if there's any 62 00:03:00,080 --> 00:03:03,800 notable change in stock price, it informs you of what's going 63 00:03:03,800 --> 00:03:05,800 on. And Qualtram says that Sophi 64 00:03:05,800 --> 00:03:08,410 Technologies shares are trading higher. 65 00:03:08,410 --> 00:03:11,410 After the company reported better than expected Q2 66 00:03:11,410 --> 00:03:15,010 financial results, it issued 2H adjusted net revenue guidance 67 00:03:15,050 --> 00:03:19,010 and raised the financial year 2023 adjusted net revenue 68 00:03:19,010 --> 00:03:21,650 guidance. So basically they beat their 69 00:03:21,650 --> 00:03:25,010 current estimates and then they raised estimates for the rest of 70 00:03:25,010 --> 00:03:27,610 2023. And that is precisely what 71 00:03:27,610 --> 00:03:30,490 investors are looking for. Investors are bidding up these 72 00:03:30,490 --> 00:03:33,800 companies year to date in hopes that they raise their guidance 73 00:03:33,800 --> 00:03:36,880 for the full year of 2023. But the reason that Sofi stock 74 00:03:36,880 --> 00:03:39,600 is doing so well this year is the company's doing really well. 75 00:03:39,960 --> 00:03:43,280 Every core metric that they track, the amount of customers 76 00:03:43,280 --> 00:03:46,040 they have, the amount of loans they're giving out, the amount 77 00:03:46,040 --> 00:03:48,880 of financial services they're doing, all of that's moving in 78 00:03:48,880 --> 00:03:51,240 the right direction. We have their member count. 79 00:03:51,240 --> 00:03:53,280 This is the amount of customers going up per year. 80 00:03:53,280 --> 00:03:55,400 We see very strong growth with Sofi. 81 00:03:55,480 --> 00:03:59,120 Now I've looked at Sofi. I find this company intriguing. 82 00:03:59,460 --> 00:04:02,940 I think it's one of the better fintechs in existence in my 83 00:04:02,940 --> 00:04:06,740 opinion between Sofi and Ally Financial. 84 00:04:07,220 --> 00:04:11,580 Right now I probably like Sofi a little bit more because if you 85 00:04:11,580 --> 00:04:15,340 look at Ally as a competitor to Sofi, both of them are offering 86 00:04:15,340 --> 00:04:18,459 a lot of financial services. They're offering a lot of 87 00:04:18,459 --> 00:04:22,140 fintech banking like products. But Sofi's doing it in a 88 00:04:22,140 --> 00:04:24,060 category that I think is less risky. 89 00:04:24,500 --> 00:04:28,420 Ally Financial, for example, has most of their loans based around 90 00:04:28,420 --> 00:04:31,880 used cars, which is a market that I don't want a ton of loan 91 00:04:31,880 --> 00:04:34,880 exposure in. Sophie, on the other hand, is 92 00:04:34,880 --> 00:04:37,840 highly diversified. A lot of it is student loans, a 93 00:04:37,840 --> 00:04:40,240 lot of it is mortgage, a lot of it is car loans. 94 00:04:40,520 --> 00:04:42,920 But overall, it's a bigger breadth of product that they're 95 00:04:42,920 --> 00:04:45,240 offering. So I like the diversification of 96 00:04:45,240 --> 00:04:48,200 this company a little bit more. So overall, I like the earnings 97 00:04:48,200 --> 00:04:50,280 report. I like the situation of Sophie. 98 00:04:50,280 --> 00:04:54,080 I like the loan diversification. I like that the company's headed 99 00:04:54,080 --> 00:04:57,030 in the right direction as well. Fundamentally speaking, the big 100 00:04:57,030 --> 00:04:59,510 things I would be looking for at this company continuing from 101 00:04:59,510 --> 00:05:03,070 here is that free cash flow. When are they going to generate 102 00:05:03,070 --> 00:05:06,110 real free cash flows like the bigger, more mature banks. 103 00:05:06,430 --> 00:05:09,350 Now moving on, tomorrow morning, we have Norwegian and Uber 104 00:05:09,350 --> 00:05:11,310 reporting their earnings before the bell. 105 00:05:11,590 --> 00:05:13,630 Let's go ahead and start off with the cruise line here, 106 00:05:13,670 --> 00:05:17,510 Norwegian Cruise Line. Now this is in the category of 107 00:05:17,510 --> 00:05:21,110 company where I think you're better off enjoying their 108 00:05:21,110 --> 00:05:24,430 services and their product than you are investing in the stock. 109 00:05:24,940 --> 00:05:27,860 That's the case in some some companies you're just better off 110 00:05:27,860 --> 00:05:30,460 enjoying what they have to offer instead of putting your money 111 00:05:30,460 --> 00:05:32,460 behind them. In this case, I actually think 112 00:05:32,460 --> 00:05:34,540 Norwegian Cruise Line is a very fun company. 113 00:05:34,740 --> 00:05:37,820 I've only gone on two cruises. One was with Carnival, one was 114 00:05:37,820 --> 00:05:41,140 with Norwegian, and Norwegian was much, much better. 115 00:05:41,420 --> 00:05:45,340 The cruise ships are really fun. They're almost like amusement 116 00:05:45,340 --> 00:05:47,780 parks. On top of the ship, they have 117 00:05:47,900 --> 00:05:51,540 courts and swimming pools and slides and rope courses. 118 00:05:52,030 --> 00:05:54,310 They have a plank that you can walk out the side of the boat 119 00:05:54,390 --> 00:05:56,950 over the edge of it. We were looking down at the 120 00:05:56,950 --> 00:05:59,190 water. I did that and it was incredibly 121 00:05:59,190 --> 00:06:01,270 frightening, but a fun thing to do. 122 00:06:01,590 --> 00:06:03,710 It's just a lot of fun. These are cruise liners that are 123 00:06:03,710 --> 00:06:07,270 made a little bit more modern and updated, and that's a fun 124 00:06:07,270 --> 00:06:09,590 part of it. What's not fun is finding 125 00:06:09,590 --> 00:06:12,590 yourself wrapped up in a cruise line stock because you bought in 126 00:06:12,590 --> 00:06:16,310 hoping to buy the dip. In some cases, that can pay off 127 00:06:16,900 --> 00:06:18,540 if you're able to time it correctly. 128 00:06:18,660 --> 00:06:20,820 For example, if you bought into Norwegian Cruise Line at the 129 00:06:20,820 --> 00:06:24,780 beginning of the year, you'd be up 83%, feeling very good right 130 00:06:24,780 --> 00:06:26,740 now. Even if you bought the company 131 00:06:26,740 --> 00:06:28,660 one year ago, you'd be doing okay. 132 00:06:29,020 --> 00:06:32,180 But if you bought it five years ago, over a longer time horizon, 133 00:06:32,380 --> 00:06:35,660 you're down 55%. If you bought it 10 years ago, 134 00:06:35,740 --> 00:06:39,180 you're down 28%. And then all time with this 135 00:06:39,180 --> 00:06:43,990 stock back to 2013, you're still down 12%. 136 00:06:43,990 --> 00:06:47,270 So this is a stock where you have to time the ups and downs, 137 00:06:47,270 --> 00:06:50,990 you have to buy in on a dip, sell at the top and historically 138 00:06:50,990 --> 00:06:54,790 that's proven to be incredibly difficult for investors near 139 00:06:54,790 --> 00:06:58,910 impossible to do consistently. So my thoughts are to avoid 140 00:06:58,910 --> 00:07:02,350 these type of stocks overall when I look at Norwegian, we can 141 00:07:02,350 --> 00:07:05,390 look at the problems with this type of industry, The revenue 142 00:07:05,390 --> 00:07:08,710 has recovered. So we're back to all time high 143 00:07:08,710 --> 00:07:11,020 revenues and we're probably going to see all time high 144 00:07:11,020 --> 00:07:13,500 revenues this quarter. But the revenues, not the only 145 00:07:13,500 --> 00:07:15,500 thing that matters. We look at the economics of the 146 00:07:15,500 --> 00:07:18,060 company. Since Norwegian had to take on 147 00:07:18,060 --> 00:07:22,460 so much debt during the COVID shutdown, the company literally 148 00:07:22,460 --> 00:07:25,940 doubled its longterm debt. It went from running around $5.7 149 00:07:25,940 --> 00:07:28,660 billion in debt to now running 12 billion. 150 00:07:28,980 --> 00:07:31,180 So we have double the amount of debt, which means double the 151 00:07:31,180 --> 00:07:34,180 amount of interest payments. And this is longterm debt. 152 00:07:34,580 --> 00:07:37,460 Longterm debt needs to be refinanced eventually. 153 00:07:37,830 --> 00:07:40,350 So not only do they have double the debt they had previously, 154 00:07:40,630 --> 00:07:43,350 but the debt they now have is going to have to be refinanced 155 00:07:43,350 --> 00:07:46,710 at a higher price in the future. When those loans mature and the 156 00:07:46,710 --> 00:07:49,470 company has to refinance, that's not going to be a fun time for 157 00:07:49,470 --> 00:07:51,990 this company if interest rates are where they are today. 158 00:07:52,310 --> 00:07:55,990 This is why I try so hard to focus on companies that don't 159 00:07:55,990 --> 00:07:59,750 have much longterm debt exposure and cruise lines have that. 160 00:08:00,310 --> 00:08:03,550 So what we see is a company that has a lot more debt and it's 161 00:08:03,550 --> 00:08:06,500 going to be very difficult to get back to the same earnings 162 00:08:06,500 --> 00:08:08,540 per share they were at previously. 163 00:08:08,580 --> 00:08:12,020 Now, aside from their financial situation, I do expect this to 164 00:08:12,020 --> 00:08:14,740 be good earnings. In terms of the expectations 165 00:08:14,740 --> 00:08:17,780 investors currently have, I expect a beat on the top and 166 00:08:17,780 --> 00:08:19,820 bottom line. I can't say for sure there's no 167 00:08:19,820 --> 00:08:22,980 guarantees, but I would be pretty surprised if they didn't 168 00:08:22,980 --> 00:08:25,260 considering the demand that cruises have right now. 169 00:08:25,980 --> 00:08:29,580 Now moving on, we have Uber. Uber is one that I've looked at 170 00:08:29,580 --> 00:08:32,940 for a long period of time. This company, the only thing 171 00:08:32,940 --> 00:08:36,250 wrong with it has been that it hasn't really made any money 172 00:08:36,250 --> 00:08:39,330 throughout its history. But a couple quarters ago, I 173 00:08:39,330 --> 00:08:44,250 believe around 3/4 ago, the CEO of Uber said that their primary 174 00:08:44,250 --> 00:08:48,730 focus is becoming profitable, becoming free cash flow 175 00:08:48,850 --> 00:08:52,450 positive, focusing on the economics of the business, he 176 00:08:52,450 --> 00:08:55,410 basically made a huge pivot. He went from being a company 177 00:08:55,410 --> 00:08:58,050 that's focused on disruptive growth and market share and 178 00:08:58,050 --> 00:09:01,490 network effects, the profitability, cash flow and 179 00:09:01,490 --> 00:09:04,100 profitability. And when he said that, I really 180 00:09:04,100 --> 00:09:06,100 think he meant it. He really said that they're 181 00:09:06,100 --> 00:09:08,980 shifting the whole company towards profitability. 182 00:09:09,340 --> 00:09:12,980 So that's what we would expect to see this quarter, continued 183 00:09:12,980 --> 00:09:15,060 growth in their free cash flow and profits. 184 00:09:15,500 --> 00:09:19,060 We look at the company so far, right now it's $100 billion 185 00:09:19,060 --> 00:09:24,280 stock, so $100 billion market cap and it has stock based comp 186 00:09:24,280 --> 00:09:26,560 adjusted a negative free cash flow. 187 00:09:26,880 --> 00:09:29,600 So they're just in that inflection point of becoming 188 00:09:29,840 --> 00:09:33,760 economically positive. Uber is up 94% year to date. 189 00:09:33,920 --> 00:09:36,360 It trades out of $100 billion market cap. 190 00:09:36,720 --> 00:09:39,520 Investors have very high expectations for this company 191 00:09:39,800 --> 00:09:43,680 and right now the company is a very risky 1A, risky 1 to be 192 00:09:43,680 --> 00:09:46,720 invested in. If they do not hold up to their 193 00:09:46,720 --> 00:09:49,320 high expectations, this stock is going to trade down 194 00:09:49,320 --> 00:09:51,880 dramatically. If they give very poor or 195 00:09:51,880 --> 00:09:55,040 underwhelming guidance, the stock will trade down as well. 196 00:09:55,320 --> 00:09:59,240 They need to show accelerated continued cash flow growth, 197 00:09:59,560 --> 00:10:02,920 great operating leverage, improvements in the margins and 198 00:10:02,920 --> 00:10:05,720 profitability. Otherwise the stock is going to 199 00:10:05,720 --> 00:10:07,840 go down. So it's at one of those pivotal 200 00:10:07,840 --> 00:10:11,560 moments right now in the stocks transition to profitability. 201 00:10:11,920 --> 00:10:14,840 This was the same situation that Netflix had and their last 202 00:10:14,840 --> 00:10:17,520 quarter, investors had very high expectations. 203 00:10:17,520 --> 00:10:20,040 The stock got bid up, but Netflix told investors they're 204 00:10:20,040 --> 00:10:22,920 going to make $5 billion in free cash flow this year. 205 00:10:23,240 --> 00:10:25,080 That's what kept the stock where it is. 206 00:10:25,160 --> 00:10:27,920 So these type of companies that are transitioning from growth to 207 00:10:27,920 --> 00:10:30,920 profitability, they have a really big task on their 208 00:10:30,920 --> 00:10:32,840 shoulders. They really have to prove their 209 00:10:32,840 --> 00:10:35,480 business model and prove the economics of it. 210 00:10:35,920 --> 00:10:38,880 And if they get it wrong, if for whatever reason they can't grow 211 00:10:38,880 --> 00:10:42,440 profitably, it's going to be, it'll be a bloodbath for these 212 00:10:42,440 --> 00:10:45,430 companies in my opinion. I think Uber will be able to do 213 00:10:45,430 --> 00:10:46,870 it. I think that they'll be able to 214 00:10:46,870 --> 00:10:49,470 meet their guidance and they'll have good cash flows. 215 00:10:49,470 --> 00:10:52,030 Now Next up, we have a company that I really love, which is 216 00:10:52,030 --> 00:10:55,110 Starbucks reporting earnings after market close on Tuesday. 217 00:10:55,110 --> 00:10:56,870 Let's go ahead and take a look at this one. 218 00:10:57,550 --> 00:11:00,310 I used to own Starbucks for a long period of time in my 219 00:11:00,310 --> 00:11:03,310 passive income portfolio. I think it's a great company 220 00:11:03,310 --> 00:11:06,750 that has good brand value, very high returns on capital 221 00:11:06,750 --> 00:11:08,450 employed. When they open up a new 222 00:11:08,450 --> 00:11:12,170 Starbucks location, they get it paid back very quickly within 223 00:11:12,170 --> 00:11:14,370 two years, which is a great payback period. 224 00:11:14,850 --> 00:11:18,250 And then the company sold off because of concerns that I 225 00:11:18,250 --> 00:11:20,690 didn't think would really impact the business. 226 00:11:20,890 --> 00:11:24,770 The big scare with Starbucks just a year ago was the 227 00:11:24,770 --> 00:11:27,090 unionization. We had the New York Times 228 00:11:27,090 --> 00:11:29,130 writing about it. We had a bunch of articles 229 00:11:29,130 --> 00:11:32,290 saying how big and bad Starbucks is, how poorly they treat their 230 00:11:32,290 --> 00:11:35,330 employees, all of the stuff that was completely fictional. 231 00:11:35,590 --> 00:11:39,110 Starbucks is one of the best employers for the food service 232 00:11:39,110 --> 00:11:41,150 industry. They pay the best benefits, 233 00:11:41,150 --> 00:11:44,030 they're an incredibly good employer, but they become the 234 00:11:44,030 --> 00:11:46,070 target because they're very big company. 235 00:11:46,110 --> 00:11:48,950 So that news to me was a great opportunity to buy into this 236 00:11:48,950 --> 00:11:52,190 company at a reduced price. It traded down to $70.00. 237 00:11:52,190 --> 00:11:55,830 Now it's back up to $100 and I've since exited that position 238 00:11:55,830 --> 00:11:58,830 at a decent profit. That's my history with 239 00:11:58,830 --> 00:12:02,310 Starbucks, but I still keep this one on my watch list. 240 00:12:02,740 --> 00:12:06,100 If we get weakness in it, if we get a big sell off in this one, 241 00:12:06,420 --> 00:12:08,700 I could very well reenter the position. 242 00:12:08,780 --> 00:12:11,540 Now when we look at Starbucks's upcoming earnings report, 243 00:12:11,900 --> 00:12:14,300 everyone's going to be focused on the top and bottom line, 244 00:12:14,300 --> 00:12:17,020 whether they be or missed, and that's not what you should be 245 00:12:17,020 --> 00:12:20,180 focused on as an investor. Whether or not the earnings per 246 00:12:20,180 --> 00:12:24,540 share beats by two pennies or misses by two pennies is not a 247 00:12:24,540 --> 00:12:28,020 big impact on the overall story of the company. 248 00:12:28,220 --> 00:12:31,260 It's really not. So try not to focus too much on 249 00:12:31,260 --> 00:12:33,580 that. What I would focus on instead 250 00:12:33,980 --> 00:12:36,940 are the core drivers of the intrinsic value of the company, 251 00:12:37,220 --> 00:12:41,820 one of them being the app. The app is so important to the 252 00:12:41,820 --> 00:12:44,620 story of Starbucks. The more people that are using 253 00:12:44,620 --> 00:12:48,100 the app on a monthly basis, the more money this company's going 254 00:12:48,100 --> 00:12:51,340 to make. The app is incredibly crucial to 255 00:12:51,340 --> 00:12:55,180 the future of of Starbucks. It makes it so that they can get 256 00:12:55,180 --> 00:12:58,900 the money that people upload to it and they can use it as an 257 00:12:58,940 --> 00:13:01,180 interest free loan to open up new restaurants. 258 00:13:01,570 --> 00:13:03,810 So they're getting super high returns with their new 259 00:13:03,810 --> 00:13:06,930 restaurants, with money they're getting from an app for free. 260 00:13:07,290 --> 00:13:10,290 And then to fulfill on that extra revenue, the obligation 261 00:13:10,290 --> 00:13:14,130 from that money uploaded, they simply serve coffee, which is 262 00:13:14,130 --> 00:13:17,650 very inexpensive to make. So Starbucks really has, they've 263 00:13:17,650 --> 00:13:21,210 created something very magical with the rewards program. 264 00:13:21,730 --> 00:13:23,970 Now the rewards program is so important. 265 00:13:24,210 --> 00:13:28,090 When I look at this, they currently have 30.8 million as 266 00:13:28,090 --> 00:13:30,170 of last quarter. This is the previous one. 267 00:13:30,870 --> 00:13:33,390 And I think that there's a chance that they get up another 268 00:13:33,390 --> 00:13:35,830 2,000,000 users. So we'll see. 269 00:13:35,830 --> 00:13:38,310 But I want to see growth with this app. 270 00:13:38,670 --> 00:13:42,110 When I was doing my analysis on Chipotle and part of the reason 271 00:13:42,110 --> 00:13:45,390 that I bought into Chipotle and I sold out of Starbucks is 272 00:13:45,390 --> 00:13:47,950 because of the incredible digital property that Chipotle 273 00:13:47,950 --> 00:13:51,190 has. Chipotle has a fraction of the 274 00:13:51,190 --> 00:13:53,990 locations that Starbucks has, a complete fraction. 275 00:13:53,990 --> 00:13:56,350 They actually have around 10 times less. 276 00:13:56,670 --> 00:14:00,650 So Chipotle is way smaller than Starbucks in size and scale, but 277 00:14:00,650 --> 00:14:04,330 they have around as many people using their app, 30 million 278 00:14:04,370 --> 00:14:08,690 compared against 30.8 million. Right now they're tied and I 279 00:14:08,690 --> 00:14:10,450 believe Chipotle is going to pass them up. 280 00:14:10,850 --> 00:14:14,410 People really for whatever reason love the Chipotle app and 281 00:14:14,410 --> 00:14:16,330 Chipotle has been great at marketing this. 282 00:14:16,330 --> 00:14:19,610 So the fact that Chipotle at the size it is already has 30 283 00:14:19,610 --> 00:14:22,930 million people using its app, I think is a huge positive thing 284 00:14:22,930 --> 00:14:26,070 for the company, encouraging more growth, encouraging more 285 00:14:26,070 --> 00:14:28,110 longterm customers. The next thing that I look at 286 00:14:28,110 --> 00:14:30,750 with Starbucks is the same store sales of the company. 287 00:14:30,990 --> 00:14:34,030 Starbucks is already really big and the amount of restaurants 288 00:14:34,030 --> 00:14:37,830 they have, So same store sales is very meaningful to the 289 00:14:37,830 --> 00:14:40,630 economics of the company. So I want to see strong same 290 00:14:40,630 --> 00:14:43,270 store sales. I also want to see new expansion 291 00:14:43,270 --> 00:14:44,830 and see how things are going in China. 292 00:14:45,310 --> 00:14:49,070 Another reason that right now I felt a little bit more 293 00:14:49,070 --> 00:14:53,500 comfortable with Chipotle over Starbucks is simply because 294 00:14:53,500 --> 00:14:56,220 Starbucks is going head first into China. 295 00:14:56,660 --> 00:14:59,620 They're really making that their major growth path ahead. 296 00:14:59,780 --> 00:15:02,580 And I'd prefer for companies that have lots of ways to grow, 297 00:15:02,580 --> 00:15:06,380 including China, but not have that be their really only major 298 00:15:06,380 --> 00:15:08,260 growth path. But other than that, I believe 299 00:15:08,260 --> 00:15:10,020 that Starbucks is very well situated. 300 00:15:10,100 --> 00:15:12,620 They have a growing dividend, they're doing share buybacks. 301 00:15:12,860 --> 00:15:15,300 They have a balance sheet that's not as good as one like 302 00:15:15,300 --> 00:15:18,090 Chipotle. They do have a lot of debt, but 303 00:15:18,090 --> 00:15:21,010 it's not anything, it's not anything that's troublesome. 304 00:15:21,130 --> 00:15:24,530 Starbucks has ample liquidity. They're a company that has very, 305 00:15:24,690 --> 00:15:27,290 very good economics. So I'd expect to see maybe a 1 306 00:15:27,290 --> 00:15:29,810 to 2% change in price after earnings. 307 00:15:30,010 --> 00:15:31,570 Now moving on, we get to Wednesday. 308 00:15:31,570 --> 00:15:34,050 We're halfway through the week and we have PayPal and Shopify 309 00:15:34,330 --> 00:15:36,450 both reporting earnings after market close. 310 00:15:36,450 --> 00:15:38,890 Let's go ahead and talk about PayPal here for a minute. 311 00:15:39,330 --> 00:15:42,090 PayPal, I think is one of the more popular ones online right 312 00:15:42,090 --> 00:15:43,290 now. A lot of people are betting on 313 00:15:43,290 --> 00:15:45,720 this company and I can see the thesis. 314 00:15:45,720 --> 00:15:49,440 I think it's very simple. PayPal has a low P/E ratio, so 315 00:15:49,440 --> 00:15:51,760 not too much in terms of expectations. 316 00:15:52,160 --> 00:15:53,560 It has a high free cash flow yield. 317 00:15:53,560 --> 00:15:55,960 So they're generating a decent amount of cash, especially in 318 00:15:55,960 --> 00:15:59,240 today's market and the company has been beat up. 319 00:15:59,280 --> 00:16:01,440 So it's a little bit of a recovery play as well. 320 00:16:01,680 --> 00:16:05,560 We look over the past five years, PayPal was at $300.00 per 321 00:16:05,560 --> 00:16:08,080 share and it's down dramatically. 322 00:16:08,080 --> 00:16:13,550 Currently trading at what is it now, $75 per share, so 300 to 323 00:16:13,550 --> 00:16:17,550 75, low P/E ratio, high free cash flow yield. 324 00:16:17,870 --> 00:16:20,510 I get it. It's a very simple thesis and I 325 00:16:20,510 --> 00:16:22,550 don't blame anyone for investing in this company. 326 00:16:22,550 --> 00:16:25,830 When I look at PayPal overall as a business and it's longterm 327 00:16:25,830 --> 00:16:29,350 growth trajectory, there's other bets and Fintech that I like 328 00:16:29,350 --> 00:16:31,830 more. A lot of people, in fact a lot 329 00:16:31,830 --> 00:16:35,910 of people believe that PayPal is like new tech, Visa, MasterCard 330 00:16:35,910 --> 00:16:39,310 or older tech and outdated. And I don't share that viewpoint 331 00:16:39,310 --> 00:16:42,060 anymore. I once did until I studied 332 00:16:42,100 --> 00:16:44,420 MasterCard and Visa and I learned more about their 333 00:16:44,420 --> 00:16:47,100 business models. I think these companies are 334 00:16:47,100 --> 00:16:50,860 every bit as up to date, as technologically advanced as 335 00:16:50,860 --> 00:16:53,660 companies like PayPal. So when I look at them, I see no 336 00:16:53,660 --> 00:16:58,060 difference other than MasterCard and Visa have bigger moats, they 337 00:16:58,060 --> 00:17:01,060 have a wider network and they have better financials. 338 00:17:01,060 --> 00:17:04,510 They run more efficiently. So I view MasterCard and and 339 00:17:04,510 --> 00:17:07,790 Visa as companies that both are incredibly powerful. 340 00:17:08,069 --> 00:17:11,230 They operate in a very similar fashion as a huge network 341 00:17:11,230 --> 00:17:13,190 effect. But I think that they're at the 342 00:17:13,190 --> 00:17:16,030 same valuation and they offer better economics. 343 00:17:16,270 --> 00:17:21,109 In particular, if we look at the PayPal valuation, a 4% free cash 344 00:17:21,109 --> 00:17:26,230 flow yield 4.5%, we can compare that to Visa, and Visa right now 345 00:17:26,230 --> 00:17:29,990 actually has a higher yield, meaning Visa on a free cash flow 346 00:17:29,990 --> 00:17:32,430 basis is selling for cheaper than PayPal. 347 00:17:32,470 --> 00:17:34,790 Here's another thing that I'd look at when comparing these 348 00:17:34,790 --> 00:17:37,870 different groups of companies PayPal may beat on this earnings 349 00:17:37,870 --> 00:17:39,510 report. They might be able to do that 350 00:17:39,510 --> 00:17:42,030 and maybe the stock will run up. But what I'm looking at is 351 00:17:42,030 --> 00:17:45,190 companies that can continually generate shareholder returns and 352 00:17:45,190 --> 00:17:48,030 growing shareholder returns. When we look at the free cash 353 00:17:48,030 --> 00:17:53,470 flow of PayPal notice, however, since 2018, they've been unable 354 00:17:53,470 --> 00:17:56,630 to grow their free cash flow. It's really just stalled out. 355 00:17:57,110 --> 00:18:00,230 It's the same amount that it was all the way back in 2018. 356 00:18:00,630 --> 00:18:04,710 If we compare that the Visa or MasterCard, it paints a very 357 00:18:04,710 --> 00:18:07,750 different picture. Look at Mastercards or Visas 358 00:18:07,750 --> 00:18:11,310 free cash flow in 2018. Here it is in 2018 at 12 359 00:18:11,310 --> 00:18:13,910 billion, today it's at 18 billion. 360 00:18:14,310 --> 00:18:17,230 So they're well on their way of doubling their free cash flow. 361 00:18:17,390 --> 00:18:19,750 They have it going up basically every single year. 362 00:18:20,100 --> 00:18:21,660 We can look at Mastercards as well. 363 00:18:21,700 --> 00:18:25,180 MasterCard has even more linear growth in their free cash flow. 364 00:18:25,500 --> 00:18:29,220 In 2018 it was at 6 billion, now it's at 10 billion. 365 00:18:29,540 --> 00:18:33,740 So they increased it by over 50%, massive increases in free 366 00:18:33,740 --> 00:18:37,300 cash flow and they're doing this without much stock based comp or 367 00:18:37,300 --> 00:18:40,660 dilution in the process. The economics are simply 368 00:18:40,660 --> 00:18:43,060 superior. PayPal has stalled free cash 369 00:18:43,060 --> 00:18:45,780 flow growth while they have a bigger amount of dilution 370 00:18:45,780 --> 00:18:47,420 through stock based compensation. 371 00:18:47,660 --> 00:18:49,660 Both of these are more unattractive trades. 372 00:18:50,020 --> 00:18:53,340 So if you're invested in PayPal, what you're expecting is 373 00:18:53,380 --> 00:18:56,940 continued growth. We have to see some growth in 374 00:18:56,940 --> 00:18:59,620 their free cash flow because even if we look at it on a 375 00:18:59,620 --> 00:19:03,700 quarterly basis, it still looks like it's pretty flat over the 376 00:19:03,700 --> 00:19:06,700 past couple of years. And this is the problem I have 377 00:19:06,700 --> 00:19:09,900 with the story of PayPal. Why are they not growing in 378 00:19:09,900 --> 00:19:12,380 their economics? What is wrong in this company to 379 00:19:12,380 --> 00:19:14,980 make it so they have no operating leverage, They have no 380 00:19:14,980 --> 00:19:18,240 continually increasing margins? Where are they going wrong? 381 00:19:18,240 --> 00:19:21,040 Because when we look at the top line, the top line of the 382 00:19:21,040 --> 00:19:23,960 company has been growing. So that's my big question mark 383 00:19:23,960 --> 00:19:26,000 for this one. When I go into Paypal's 384 00:19:26,000 --> 00:19:28,760 earnings, I'm going to be looking at what are they doing 385 00:19:28,760 --> 00:19:32,120 in terms of transferring their revenue growth into continually 386 00:19:32,120 --> 00:19:34,880 high margins and more free cash flow growth. 387 00:19:35,240 --> 00:19:37,560 That is the big question for the investor. 388 00:19:37,640 --> 00:19:40,840 My thoughts on PayPal are right now I think that there is low 389 00:19:40,840 --> 00:19:43,760 expectations into the stock. I think that it's likely to 390 00:19:43,760 --> 00:19:47,240 outperform this earnings, but longer term there's still some 391 00:19:47,240 --> 00:19:48,800 big question marks with this story. 392 00:19:48,800 --> 00:19:51,080 Now moving on, we also have Shopify that's reporting 393 00:19:51,080 --> 00:19:55,800 earnings at the same time as PayPal and Shopify is I I just 394 00:19:55,800 --> 00:19:59,720 love this company, I really do. I think Shopify is a wonderful 395 00:19:59,720 --> 00:20:02,000 company. I think it's the best company to 396 00:20:02,040 --> 00:20:04,760 ever come out of Canada and I don't say that lightly. 397 00:20:05,040 --> 00:20:08,560 Canada has some great railroads. They have some great banks, but 398 00:20:08,560 --> 00:20:11,440 Shopify is the first company to come out of Canada. 399 00:20:11,770 --> 00:20:15,290 Where I could really see this company becoming a 203 hundred 400 00:20:15,290 --> 00:20:18,890 $400 billion market cap company, something that Canada has been 401 00:20:18,930 --> 00:20:22,890 unable to accomplish before now, but they have a real treasure 402 00:20:22,890 --> 00:20:26,930 here, a real asset in Shopify. Now we can look at the past of 403 00:20:26,930 --> 00:20:30,530 this company and the share price has gone all over the place. 404 00:20:30,530 --> 00:20:35,410 In the past five years it went up to $180 per share around that 405 00:20:35,410 --> 00:20:37,650 price. Now it's back down to around 406 00:20:37,650 --> 00:20:41,870 $6570 per share. Right now it's at 67. 407 00:20:42,150 --> 00:20:45,030 So the share prices come down. We've had a lot of volatility. 408 00:20:45,230 --> 00:20:48,550 Shopify probably got up a little too high like most stocks and 409 00:20:48,550 --> 00:20:50,910 it's trading back down to a better valuation. 410 00:20:51,590 --> 00:20:55,550 But if we ignore all of the price fluctuation underneath all 411 00:20:55,550 --> 00:20:58,790 of that, I believe we have a very good company that will have 412 00:20:58,790 --> 00:21:01,790 very good future economics. The growth over the past five 413 00:21:01,790 --> 00:21:05,790 years has been 43% per year. That is incredible. 414 00:21:06,030 --> 00:21:09,620 Last year it was 16.4%. So it's slowing down a little 415 00:21:09,620 --> 00:21:12,620 bit as we would expect, but we still have a very fast top line 416 00:21:12,620 --> 00:21:14,820 growth. We look at this company and a 417 00:21:14,820 --> 00:21:17,500 lot of people make the mistake when they haven't done a lot of 418 00:21:17,500 --> 00:21:21,620 analysis on Shopify to believe that this company is only online 419 00:21:21,620 --> 00:21:24,140 retail. But Shopify does a lot more than 420 00:21:24,140 --> 00:21:27,180 just online retail. They also have an Apps business 421 00:21:27,180 --> 00:21:31,220 where they sell services and they also are a Fintech company 422 00:21:31,630 --> 00:21:35,630 similar to PayPal or any other fintech company like Sophie. 423 00:21:35,950 --> 00:21:40,950 Shopify is a fintech company. Shopify has products like 424 00:21:41,030 --> 00:21:45,110 Shopify Capital where they give their merchants on their stores 425 00:21:45,150 --> 00:21:48,390 loans and then the brilliant thing about the loans they give 426 00:21:48,830 --> 00:21:51,950 is they know how much money every single merchants making 427 00:21:52,230 --> 00:21:54,710 because it's on their store, their merchant. 428 00:21:55,110 --> 00:21:57,190 So they know how much transactions you're doing, how 429 00:21:57,190 --> 00:21:59,490 much revenue you're doing. They don't know the exact 430 00:21:59,490 --> 00:22:02,730 profitability of every item you sell, but they know your top 431 00:22:02,730 --> 00:22:05,610 line revenue because they're the ones that are servicing your 432 00:22:05,610 --> 00:22:08,650 store now because they know how much revenue you make and how 433 00:22:08,650 --> 00:22:12,690 consistent it is, they can offer Shopify Capital loans this 434 00:22:12,690 --> 00:22:17,050 product to their merchants and they do so based on a payback 435 00:22:17,050 --> 00:22:18,970 through the revenue of the company. 436 00:22:19,370 --> 00:22:24,410 So if I take out a Shopify Loan as a merchant, I pay it back by 437 00:22:24,410 --> 00:22:27,810 them taking a certain percentage of my revenue until the loan is 438 00:22:27,810 --> 00:22:30,880 paid back. So every transaction I do, they 439 00:22:30,880 --> 00:22:34,280 might take back 10% of those transactions until the loan is 440 00:22:34,280 --> 00:22:36,440 paid back. That's an incredibly brilliant 441 00:22:36,440 --> 00:22:39,920 strategy from Shopify. They simply hand out loans and 442 00:22:39,920 --> 00:22:42,880 take the money back through your revenue with every process 443 00:22:42,880 --> 00:22:45,880 transaction on your website. And since they can do it that 444 00:22:45,880 --> 00:22:48,480 way, they don't need to go through banks or an underwriting 445 00:22:48,480 --> 00:22:51,360 process to give you the loan. So they save a huge amount of 446 00:22:51,360 --> 00:22:54,720 hassle and underwriting work to figure out your credibility. 447 00:22:55,120 --> 00:22:58,740 So they're bypassing a lot of administrative work, they're 448 00:22:58,740 --> 00:23:02,740 giving out loans quicker, and a lot of entrepreneurs use Shopify 449 00:23:02,740 --> 00:23:05,980 Capital over banks because of how hasslefree it is. 450 00:23:06,380 --> 00:23:08,940 You can either go to a bank, you can try to give them tons of 451 00:23:08,940 --> 00:23:11,580 information about your company's financials, you can go through 452 00:23:11,580 --> 00:23:13,580 and give all your credit scoring and everything with your 453 00:23:13,580 --> 00:23:16,500 company, and you try to get a loan at a certain interest rate. 454 00:23:16,980 --> 00:23:20,420 Or you can go to Shopify, you apply for a loan and in one 455 00:23:20,420 --> 00:23:23,100 click they'll say here's your loan, here's the interest rate 456 00:23:23,100 --> 00:23:26,360 and here's the loan. No underwriting process, nothing 457 00:23:26,560 --> 00:23:28,000 because they already have all the data. 458 00:23:28,520 --> 00:23:31,720 That is a really advantageous position for Shopify. 459 00:23:32,040 --> 00:23:34,720 So what they bill out here is a nice little ecosystem for 460 00:23:34,720 --> 00:23:37,000 themselves. They have all these retailers 461 00:23:37,000 --> 00:23:39,600 using their website to sell all their merchandise and they're 462 00:23:39,600 --> 00:23:42,880 layering upon more and more services adjacent to online 463 00:23:42,880 --> 00:23:45,240 retail that they can make a lot of money from. 464 00:23:45,320 --> 00:23:48,280 So I really like the situation this company's in with all of 465 00:23:48,280 --> 00:23:51,650 the products they're offering this quarter, I think is going 466 00:23:51,650 --> 00:23:53,650 to be good. I think online retail has been 467 00:23:53,650 --> 00:23:55,450 strong. Consumers are still spending 468 00:23:55,450 --> 00:23:57,810 money. What I'd be worried about with 469 00:23:57,810 --> 00:24:00,490 Shopify is their forecast throughout the rest of the year 470 00:24:00,810 --> 00:24:04,210 because I think that so far consumers have been strong. 471 00:24:04,650 --> 00:24:06,890 But I'm starting to get the sense that consumers are going 472 00:24:06,890 --> 00:24:09,050 to slow down a little bit throughout the rest of the year. 473 00:24:09,290 --> 00:24:11,730 They're going to tighten their belt, focus on their budget a 474 00:24:11,730 --> 00:24:14,610 little bit more. So I would be concerned going 475 00:24:14,610 --> 00:24:17,830 into this earnings more about future forecasts than I would 476 00:24:17,830 --> 00:24:20,790 this previous quarter report. Now moving on, later this week, 477 00:24:20,790 --> 00:24:23,430 we get into Thursday before market open. 478 00:24:23,430 --> 00:24:25,630 We have Warner Brothers Discovery reporting their 479 00:24:25,630 --> 00:24:27,910 earnings. And this is a company that so 480 00:24:27,910 --> 00:24:31,270 far I've avoided because first of all, the entertainment 481 00:24:31,270 --> 00:24:34,150 industry is very difficult. It's tough to make consistent 482 00:24:34,150 --> 00:24:36,190 money in this industry as an investor. 483 00:24:36,390 --> 00:24:38,070 We've seen the troubles that Disney's had. 484 00:24:38,350 --> 00:24:42,550 It's been just complex and difficult and it's been overall 485 00:24:42,550 --> 00:24:45,740 a very difficult investment. I don't like my investments to 486 00:24:45,740 --> 00:24:47,780 be difficult. I like them to be easy, 487 00:24:47,820 --> 00:24:50,580 predictable, simple, non complex. 488 00:24:50,860 --> 00:24:53,220 So complexity to me is not a good thing. 489 00:24:53,540 --> 00:24:56,420 Warner Brothers Discovery is in a complex situation. 490 00:24:56,700 --> 00:24:59,540 They have a ton of debt. They took on a lot of debt from 491 00:24:59,540 --> 00:25:04,020 the AT&T sell off merger. So their debt went up almost 492 00:25:04,020 --> 00:25:07,030 three to four times. They have more cash flows now, 493 00:25:07,030 --> 00:25:09,230 but they also have been scrapping different series 494 00:25:09,230 --> 00:25:12,070 trying to save money. Now we have the writers strike 495 00:25:12,070 --> 00:25:13,870 and the actors strike thrown in the mix. 496 00:25:14,150 --> 00:25:16,670 That's going to make things more expensive when they're trying to 497 00:25:16,670 --> 00:25:19,310 create content. They're going to be able to have 498 00:25:19,310 --> 00:25:22,910 a halt in the content creation. So this will actually make their 499 00:25:22,910 --> 00:25:25,470 free cash flow look better in the next quarter. 500 00:25:25,870 --> 00:25:28,950 But that's a very temporary thing and that's not really a 501 00:25:28,950 --> 00:25:32,190 positive thing. People that are subscribing to 502 00:25:32,190 --> 00:25:35,970 these streaming services want new content, so the fact that 503 00:25:35,970 --> 00:25:39,810 it's going to be halted and the production will be frozen is not 504 00:25:39,810 --> 00:25:42,770 a good thing for these companies overall in my opinion. 505 00:25:42,770 --> 00:25:45,770 When I look at Warner Brothers Discovery, I think the earnings 506 00:25:45,770 --> 00:25:49,210 will be OK this time because they're going to forecast higher 507 00:25:49,210 --> 00:25:51,490 free cash flow. Investors will probably like 508 00:25:51,490 --> 00:25:53,050 that. What I would look for in this 509 00:25:53,050 --> 00:25:55,610 earnings report is a continual debt pay down. 510 00:25:55,770 --> 00:25:58,410 They should be using their free cash flow to get this debt down 511 00:25:58,410 --> 00:26:01,970 as fast as possible because that is a threat to their longterm 512 00:26:02,010 --> 00:26:04,530 business. I do not like holding companies 513 00:26:04,530 --> 00:26:07,650 that have substantial amounts of long term debt and they usually 514 00:26:07,650 --> 00:26:10,450 don't have a great track record. So I want to see pay down on 515 00:26:10,450 --> 00:26:12,930 that. I want to see ample free cash 516 00:26:12,930 --> 00:26:14,570 flow growth. They got to get the free cash 517 00:26:14,570 --> 00:26:18,250 flow positive and I would want to see forecasts of positive 518 00:26:18,250 --> 00:26:20,130 free cash flow. And then finally with this 519 00:26:20,130 --> 00:26:22,770 company, I will be looking at how many Mac subscribers they 520 00:26:22,770 --> 00:26:24,770 gain. The new streaming service from 521 00:26:24,770 --> 00:26:27,330 them is called Max. I want to see how that's doing. 522 00:26:27,600 --> 00:26:30,680 That is I think the most important thing to the future 523 00:26:30,680 --> 00:26:33,160 story of this company. Now moving on to Thursday after 524 00:26:33,160 --> 00:26:36,400 market close, we get to the highly anticipated earnings of 525 00:26:36,400 --> 00:26:39,720 Amazon and Apple. That's going to be an exciting 526 00:26:39,720 --> 00:26:42,280 market close. Let's go ahead and talk about 527 00:26:42,280 --> 00:26:44,600 Amazon for a minute. I'm invested in the company, 528 00:26:44,800 --> 00:26:48,400 very bullish on its future, but Amazon the stock has been acting 529 00:26:48,400 --> 00:26:50,880 differently than Amazon the company. 530 00:26:51,320 --> 00:26:54,720 For example, over the past five years, Amazon stock has been 531 00:26:54,720 --> 00:26:58,050 going every direction. It's had a huge run up and then 532 00:26:58,050 --> 00:27:00,370 it's had a big sell off and then it's had another run up. 533 00:27:00,810 --> 00:27:04,690 Overall it's only up 48%. So it hasn't been great over the 534 00:27:04,690 --> 00:27:08,130 past five years. Meanwhile, the company, the 535 00:27:08,130 --> 00:27:11,890 revenue has been growing, the Amazon Prime business has been 536 00:27:11,890 --> 00:27:14,730 growing, the advertising business has been growing and a 537 00:27:14,730 --> 00:27:17,410 WS has been growing. Every core intrinsic value 538 00:27:17,410 --> 00:27:19,210 driver of the company has been growing. 539 00:27:19,730 --> 00:27:22,050 The big problem that I've highlighted many times with 540 00:27:22,050 --> 00:27:26,260 Amazon is that right now they've had an explosion in temporary 541 00:27:26,260 --> 00:27:29,500 one time CapEx costs as they went through a reinvestment 542 00:27:29,500 --> 00:27:31,820 cycle. Many companies go through this. 543 00:27:32,100 --> 00:27:35,500 They outlay a bunch of money to reinvest in different warehouses 544 00:27:35,940 --> 00:27:38,700 and then they should slow down on that reinvestment. 545 00:27:38,980 --> 00:27:42,220 The savings in CapEx when that reinvestment slows down should 546 00:27:42,220 --> 00:27:44,260 fuel further free cash flow growth. 547 00:27:44,380 --> 00:27:46,420 When we look at this, there's lots of things that you can look 548 00:27:46,420 --> 00:27:49,020 at with Amazon. We can study the free cash flow 549 00:27:49,020 --> 00:27:50,900 history and see how each quarter is doing. 550 00:27:51,200 --> 00:27:53,240 We can look at the amount of dilution they're doing in stock 551 00:27:53,240 --> 00:27:54,880 based comp. We can look at the amount of 552 00:27:54,880 --> 00:27:57,200 CapEx they're doing and R&D they're doing. 553 00:27:57,480 --> 00:28:00,400 They have huge CapEx budget and you can see the explosion there 554 00:28:00,400 --> 00:28:02,760 in 2020. There's all these different 555 00:28:02,760 --> 00:28:06,680 metrics we can look at, but the three biggest ones, to me the 556 00:28:06,680 --> 00:28:10,320 three biggest focuses, the intrinsic value drivers of this 557 00:28:10,320 --> 00:28:15,800 company are first AWS, Amazon's web service is a massive 558 00:28:15,800 --> 00:28:19,480 intrinsic value driver. As that grows, that company 559 00:28:19,480 --> 00:28:22,980 becomes worth more. Then we have ads. 560 00:28:23,300 --> 00:28:25,660 Ads is a fast growing business from Amazon. 561 00:28:25,900 --> 00:28:28,940 They offer ads on their retail website, Amazon.com. 562 00:28:29,100 --> 00:28:31,180 If you go there, you'll see sponsored listings. 563 00:28:31,540 --> 00:28:34,060 And that's just like the end cap of a grocery store. 564 00:28:34,260 --> 00:28:37,060 Lots of companies will advertise and pay extra to be on that end 565 00:28:37,060 --> 00:28:39,060 cap. So Amazon does that in their 566 00:28:39,060 --> 00:28:42,380 online retail store. They also advertise on Twitch. 567 00:28:42,700 --> 00:28:44,860 They advertise on Amazon Prime Video. 568 00:28:45,100 --> 00:28:47,100 They advertise everywhere they can. 569 00:28:47,500 --> 00:28:51,140 So the ads portion is high margin and it's a fast growing 570 00:28:51,140 --> 00:28:54,780 portion of the business. And then finally we get to Prime 571 00:28:54,780 --> 00:28:57,380 Now, the Prime membership encompasses a lot of value 572 00:28:57,380 --> 00:29:00,020 propositions. There's the Amazon Music, 573 00:29:00,020 --> 00:29:02,020 there's photo upload. There's a lot of different 574 00:29:02,020 --> 00:29:04,100 things they throw in there. But overall, the Prime 575 00:29:04,100 --> 00:29:06,980 membership I believe is a big intrinsic value driver of the 576 00:29:06,980 --> 00:29:08,900 company. The more Prime subscribers they 577 00:29:08,900 --> 00:29:12,420 have, the lower churn it is, the better off Amazon is 578 00:29:12,420 --> 00:29:14,930 intrinsically. So these are the big things that 579 00:29:14,930 --> 00:29:18,490 I'd look at how is AWS doing, how is he adds business doing 580 00:29:18,730 --> 00:29:20,850 and how is overall the Prime business doing. 581 00:29:21,250 --> 00:29:25,130 A big driver of these additional businesses is the retail 582 00:29:25,130 --> 00:29:29,050 business as well and Amazon is always improving the retail 583 00:29:29,050 --> 00:29:31,250 business. Amazon says it's delivering more 584 00:29:31,250 --> 00:29:34,850 packages in one day or less after overhauling their delivery 585 00:29:34,850 --> 00:29:37,410 network. So we're seeing the returns on 586 00:29:37,410 --> 00:29:38,970 this investment for the customer. 587 00:29:39,430 --> 00:29:42,110 They invested heavily in overhauling their delivery 588 00:29:42,110 --> 00:29:43,950 network. Now customers are getting their 589 00:29:43,950 --> 00:29:46,870 packages in one day. That is a big Moat between 590 00:29:46,870 --> 00:29:51,390 Amazon and other retailers like Sheen or TIMU that take one to 591 00:29:51,390 --> 00:29:53,870 three weeks to get your package. So what I'm going to be focused 592 00:29:53,870 --> 00:29:56,830 on this Thursday looking at Amazon's earnings report is 593 00:29:56,830 --> 00:30:00,670 looking at these three things, mainly the AWSC ads and the 594 00:30:00,670 --> 00:30:02,990 Prime business. I want to see how all of their 595 00:30:02,990 --> 00:30:05,910 companies doing, but these are the three biggest metrics to me. 596 00:30:06,270 --> 00:30:08,790 The other thing that most investors will be focused on, 597 00:30:09,350 --> 00:30:11,390 it's going to be this. It's going to be AI. 598 00:30:11,750 --> 00:30:15,430 Is Amazon focused on AI or is Microsoft winning or is Google 599 00:30:15,430 --> 00:30:18,830 winning? In my opinion, AI has become too 600 00:30:18,830 --> 00:30:22,870 much of A buzzword right now. Of course, Amazon is focused on 601 00:30:22,870 --> 00:30:24,750 AI. They use it in virtually every 602 00:30:24,750 --> 00:30:26,630 part of their company. They use it in their 603 00:30:26,630 --> 00:30:29,310 recommendations of what type of ads you get. 604 00:30:29,310 --> 00:30:30,990 They use it in the recommendations of what type of 605 00:30:30,990 --> 00:30:32,830 products you get when you visit their page. 606 00:30:33,190 --> 00:30:36,150 It drives all their algorithms. It drives the Prime homepage. 607 00:30:36,530 --> 00:30:39,370 They use it in AWS as well for numerous products. 608 00:30:39,690 --> 00:30:42,250 So Amazon has been using artificial intelligence for a 609 00:30:42,250 --> 00:30:45,090 long period of time, recommendation algorithms and 610 00:30:45,090 --> 00:30:48,490 different forms of it. So they're not only using AI, 611 00:30:48,490 --> 00:30:51,130 but they're also building tools to enable other people to use 612 00:30:51,250 --> 00:30:53,490 AI. That's just not something I'm 613 00:30:53,490 --> 00:30:56,810 very concerned with. So as most investors focus on 614 00:30:56,810 --> 00:31:00,170 this, I'm going to be firmly focused on this. 615 00:31:00,370 --> 00:31:03,370 Overall, my thesis on Amazon is that they can show some real 616 00:31:03,370 --> 00:31:06,830 operating leverage and real margin improvement by winding 617 00:31:06,830 --> 00:31:10,150 down on their CapEx investment. They already expanded their 618 00:31:10,150 --> 00:31:12,230 delivery network. They don't need to do as many 619 00:31:12,230 --> 00:31:13,910 new investments as they did before. 620 00:31:14,150 --> 00:31:16,950 So we should see some real operating leverage from those 621 00:31:16,950 --> 00:31:20,390 investments, but it is a bit riskier of a play. 622 00:31:20,590 --> 00:31:22,630 Amazon is always more unpredictable. 623 00:31:22,870 --> 00:31:25,910 You can't determine whether or not it's going to be up 10% or 624 00:31:26,070 --> 00:31:28,350 under 10%. So it's not a company that I'd 625 00:31:28,390 --> 00:31:30,910 ever make any bets on the immediate earnings. 626 00:31:30,990 --> 00:31:33,870 Next up we have Apple. This one's very simple. 627 00:31:34,110 --> 00:31:35,950 I've owned Apple for a long period of time. 628 00:31:36,230 --> 00:31:38,830 My prediction is that they be on the top and bottom line, they 629 00:31:38,830 --> 00:31:41,510 post good earnings. I think they will be reluctant 630 00:31:41,510 --> 00:31:44,350 to give any type of substantial guidance is Apple usually does 631 00:31:44,350 --> 00:31:46,990 not, but I think the company's going to post very strong 632 00:31:46,990 --> 00:31:49,910 earnings as they usually predictably do. 633 00:31:50,470 --> 00:31:54,590 Apple is a company that as far as I'm concerned, it's business 634 00:31:54,590 --> 00:31:57,200 as usual. The Moat is as wide as it's ever 635 00:31:57,200 --> 00:31:59,120 been. The companies is in a strong 636 00:31:59,120 --> 00:32:02,000 position as it's ever been before because investors 637 00:32:02,000 --> 00:32:05,680 continually under appreciate the Moat that Apple has, that 638 00:32:05,800 --> 00:32:09,040 ecosystem they have and the economics they can generate from 639 00:32:09,040 --> 00:32:12,040 that ecosystem. I remember talks of Apple being 640 00:32:12,040 --> 00:32:16,280 expensive nearly five years ago, and since then the company has 641 00:32:16,280 --> 00:32:21,480 grown its free cash flow per share at 23% substantial growth 642 00:32:21,480 --> 00:32:23,000 in the amount of cash flow they generate. 643 00:32:23,160 --> 00:32:25,840 Nothing in my opinion, makes me believe that the Moat has gotten 644 00:32:25,840 --> 00:32:28,800 weaker for Apple in terms of future outlook and product 645 00:32:28,800 --> 00:32:31,160 development. Again, I think it's business as 646 00:32:31,160 --> 00:32:33,600 usual for Apple. They're going to iterate on 647 00:32:33,600 --> 00:32:36,120 their current product line. They're going to continually 648 00:32:36,120 --> 00:32:39,000 improve it incrementally, year over year and give enough 649 00:32:39,000 --> 00:32:42,520 goodies, just enough little improvements, that you kind of 650 00:32:42,520 --> 00:32:45,170 want to get the new iPhone. You have yours and you're 651 00:32:45,170 --> 00:32:46,370 looking at the features of the new one. 652 00:32:46,370 --> 00:32:50,290 And you're thinking, I spent so much time on my iPhone, I kind 653 00:32:50,290 --> 00:32:52,850 of want to get that new one. In this case, they're doing a 654 00:32:52,850 --> 00:32:56,170 lot to advance towards the perfect phone, what Apple 655 00:32:56,170 --> 00:32:59,010 believes is the perfect phone. Let's go ahead and just take a 656 00:32:59,010 --> 00:33:00,810 look at a couple of the improvements they're doing. 657 00:33:01,290 --> 00:33:04,610 For starters, Apple designers have long dreamed of an iPhone 658 00:33:04,610 --> 00:33:08,450 that is truly all screen, with no borders around the display, 659 00:33:08,450 --> 00:33:10,530 no cutouts and cameras or sensors. 660 00:33:10,880 --> 00:33:14,440 With the iPhone 15 this fall, Apple will take another step 661 00:33:14,440 --> 00:33:17,440 towards that goal. The standard iPhone 15 models 662 00:33:17,520 --> 00:33:20,840 will trade in the notch for the dynamic island, while the Pro 663 00:33:20,840 --> 00:33:25,240 and Pro Max displays will be made with new technology, low 664 00:33:25,240 --> 00:33:29,880 injection pressure over molding, or lipo, as it's dubbed inside 665 00:33:29,880 --> 00:33:32,560 Apple. That new process will shrink the 666 00:33:32,560 --> 00:33:37,080 border size around the display to 1.5 millimeters from about 667 00:33:37,080 --> 00:33:39,840 2.2 millimeters in the current iPhones. 668 00:33:40,410 --> 00:33:45,090 That's a dramatic improvement from 2.2 to 1.5. 669 00:33:45,490 --> 00:33:47,770 We're working with small amounts here, but that's a pretty 670 00:33:47,770 --> 00:33:50,770 dramatic improvement. Now they say that lightbulb was 671 00:33:50,770 --> 00:33:53,530 first used in Apple series Watch seven to make the device borders 672 00:33:53,530 --> 00:33:55,570 thinner and increase the size of the display. 673 00:33:56,170 --> 00:33:59,410 And Apple plans to eventually bring the feature to the iPad as 674 00:33:59,410 --> 00:34:02,170 well. So we have the rumors here that 675 00:34:02,170 --> 00:34:05,650 Apple is basically working on making the screen fill out more 676 00:34:05,650 --> 00:34:08,920 of the actual device, making it seem like there's no bezel at 677 00:34:08,920 --> 00:34:11,960 all from one side to the other, screen to screen. 678 00:34:12,159 --> 00:34:15,239 Think about the situation that competitors to Apple are in. 679 00:34:15,560 --> 00:34:18,400 Are they supposed to create a better phone that has lesser 680 00:34:18,400 --> 00:34:20,239 bezels? How would they even do that? 681 00:34:20,280 --> 00:34:22,120 All the best engineers are working at Apple. 682 00:34:22,440 --> 00:34:24,440 And then on top of that, how are they supposed to compete with 683 00:34:24,440 --> 00:34:26,440 the huge ecosystem that Apple has? 684 00:34:26,600 --> 00:34:29,800 I still think Apple's in such a good position and whether or not 685 00:34:29,800 --> 00:34:32,560 the earnings come in a little bit lower than expected or a 686 00:34:32,560 --> 00:34:35,489 little bit higher than expected, in my opinion, that's very 687 00:34:35,489 --> 00:34:38,050 shortterm stuff. I wouldn't be too concerned on 688 00:34:38,050 --> 00:34:40,130 it. I do think they'll be on the top 689 00:34:40,130 --> 00:34:43,130 and bottom line. But I also think the longterm 690 00:34:43,130 --> 00:34:46,889 story for Apple's very well intact and I see incredibly good 691 00:34:46,889 --> 00:34:48,530 profit growth in this company. Now. 692 00:34:48,530 --> 00:34:51,530 We also have Airbnb reporting earnings on Thursday after 693 00:34:51,530 --> 00:34:53,250 market close. This is a company I've been 694 00:34:53,250 --> 00:34:55,770 falling for a while. I like the business model of it 695 00:34:55,770 --> 00:34:59,610 because it's asset light. It has a very organic growth 696 00:34:59,610 --> 00:35:01,650 product. It just grows based on social 697 00:35:01,650 --> 00:35:04,670 media and more people using it. They have a great balance sheet. 698 00:35:04,670 --> 00:35:06,150 They have a lot more cash than debt. 699 00:35:06,390 --> 00:35:09,390 You know how much I don't like longterm debt and the company 700 00:35:09,390 --> 00:35:11,750 has been taking efforts to move towards profitability. 701 00:35:11,910 --> 00:35:15,030 So we can see free cash flow going up as well way above stock 702 00:35:15,030 --> 00:35:17,310 based comp. I really like the fundamentals, 703 00:35:17,310 --> 00:35:18,670 I like the direction of the company. 704 00:35:19,350 --> 00:35:23,190 I do think that there's a good chance that Airbnb will struggle 705 00:35:23,390 --> 00:35:25,990 over the next six months. When I look at the housing 706 00:35:25,990 --> 00:35:28,910 market and house prices, when I look at the amount of active 707 00:35:28,910 --> 00:35:31,720 listings and and different people that are now going on 708 00:35:31,720 --> 00:35:35,360 vacation looking for places in Airbnb as opposed to a year ago, 709 00:35:35,800 --> 00:35:37,360 I think there's been a general decline. 710 00:35:37,960 --> 00:35:40,440 I don't know for sure. I'm not an expert in these 711 00:35:40,440 --> 00:35:43,840 markets, but I would believe that Airbnb is going to struggle 712 00:35:43,840 --> 00:35:46,760 over the next six months. So I would be concerned going 713 00:35:46,760 --> 00:35:50,120 into this earnings report about their forecast, maybe they can 714 00:35:50,120 --> 00:35:53,840 surprise to the upside, but for me I'm a little bit iffy on this 715 00:35:53,840 --> 00:35:56,240 one. And then finally, Friday, market 716 00:35:56,240 --> 00:35:58,950 close. We have none other than Nikola. 717 00:35:59,030 --> 00:36:01,350 The last time I really covered Nikola as a company was when 718 00:36:01,350 --> 00:36:04,390 they showed a phony marketing video of one of their trucks 719 00:36:04,390 --> 00:36:06,790 driving. But really it was just rolling. 720 00:36:06,870 --> 00:36:09,950 They took it to a small grade hill and they rolled it down the 721 00:36:09,950 --> 00:36:12,510 hill and they filmed it like it was driving itself. 722 00:36:12,830 --> 00:36:15,990 It was a big marketing scheme. They use specific language to 723 00:36:15,990 --> 00:36:19,710 try to trick people. And now the CEO is being charged 724 00:36:19,710 --> 00:36:21,830 with fraud, so he's probably going to get some jail time as 725 00:36:21,830 --> 00:36:24,070 well. Nikola has changed. 726 00:36:24,070 --> 00:36:27,090 The leadership has changed to some extent, but I still believe 727 00:36:27,090 --> 00:36:30,130 this company offers no value to investors and I think there's a 728 00:36:30,130 --> 00:36:33,210 good chance it will go bankrupt. When I look at the financials of 729 00:36:33,210 --> 00:36:35,570 Nikola, there's no real ratios you have to look at. 730 00:36:35,570 --> 00:36:37,650 You just need to look at the fundamentals and understand how 731 00:36:37,650 --> 00:36:40,770 this is going. The revenue is iffy, but that's 732 00:36:40,770 --> 00:36:42,170 not the most important thing here. 733 00:36:42,450 --> 00:36:44,770 We have EBITDA that's continually in the red. 734 00:36:44,810 --> 00:36:47,610 The free cash flow is going negative every single quarter at 735 00:36:47,610 --> 00:36:50,060 an aggressive rate. The net income is always 736 00:36:50,060 --> 00:36:52,540 negative and the earnings per share negative as well. 737 00:36:52,620 --> 00:36:55,460 Now while that's going on, you can see the trends in their cash 738 00:36:55,460 --> 00:36:58,300 balance as well. Just a simple glance at it shows 739 00:36:58,300 --> 00:37:01,940 that the cash on hand is going down and the amount of debt is 740 00:37:01,940 --> 00:37:04,060 going up. And we hit a critical point 741 00:37:04,060 --> 00:37:08,020 here, a critical point where the cash actually went below the 742 00:37:08,020 --> 00:37:12,020 amount of long term debt. So now they are a net zero cash 743 00:37:12,020 --> 00:37:14,740 company that has more long term debt than they do cash. 744 00:37:15,180 --> 00:37:18,860 When I see this trend happen with an unprofitable company and 745 00:37:18,860 --> 00:37:20,980 I see the amount of shares being diluted because they need to 746 00:37:20,980 --> 00:37:24,180 raise more cash to run the business, this puts an enormous 747 00:37:24,180 --> 00:37:26,980 amount of pressure on future profitability. 748 00:37:27,340 --> 00:37:32,180 So Nicola better start posting profitable quarters right away 749 00:37:32,500 --> 00:37:36,060 this quarter, next quarter and they better forecast future 750 00:37:36,060 --> 00:37:37,940 profitability to stay in business. 751 00:37:38,180 --> 00:37:40,660 Otherwise, investors aren't going to give them new capital 752 00:37:40,660 --> 00:37:43,680 via share issuance and the debt markets are going to be very 753 00:37:43,680 --> 00:37:46,440 reluctant as well. My prediction is right now that 754 00:37:46,440 --> 00:37:49,760 within one year Nikola will have filed for bankruptcy. 755 00:37:49,920 --> 00:37:52,440 So we'll see if that happens. We'll look back in a year and 756 00:37:52,440 --> 00:37:55,120 see if this company's still currently in business, but that 757 00:37:55,120 --> 00:37:57,360 is a busy week ahead. We have a lot of earnings 758 00:37:57,360 --> 00:37:59,400 reports to go over. If you're interested in 759 00:37:59,400 --> 00:38:01,520 following up on this content, make sure to subscribe to the 760 00:38:01,520 --> 00:38:04,520 channel hit the Bell icon. You can follow me on my other 761 00:38:04,520 --> 00:38:06,520 YouTube channel as well. I cover a lot of earnings 762 00:38:06,520 --> 00:38:08,720 reports on that one, but that's all for now. 763 00:38:08,760 --> 00:38:09,600 See you in the next one.