Welcome back, everyone. I know you think you got through
it that you can pat yourself on the back because you got through
earnings season, but not quite yet.
It's not over yet. It is true that we got through
most of the big companies. So the really big ones, the
Apples and Amazons and Googles and Metas, we got through those
and overall they did great. All of them really did great.
Meta, I think, struggled a little bit.
Netflix got knocked down because of a reporting, you know, a
reporting disclosure change. So there is some, a couple of
them that struggled a little bit.
But overall, the majority of big tech companies did great.
Apple did better than investors expected.
Microsoft, the poster child of perfect fundamentals, did
incredibly well. Amazon knocked it out of the
park. Google as well, did incredibly
well. All of these companies are doing
great, but it's not over yet. I'm sorry to tell you, but
earnings season isn't over yet and we still have a huge list of
companies reporting this week. Although they're not the biggest
companies in the market, these are important companies and many
investors hold many of these individual stocks.
Now I highlighted the list like I usually do of the ones that
I'll be covering in this episode and I may have bit off more than
I can chew. If we look at the list here,
there are I believe 13 that I circled. 13 is the most I've
ever selected. If we go from left to right here
Monday to Friday, we of course have Palantir, highly
anticipated Palantir reporting earnings.
Today I'll share some thoughts on Palantir then.
We also have Realty Income. Now Realty Income Corp is very
similar to Vici. I own Vici, I do not own Realty
income, but I'll be sharing thoughts on both of them.
And then moving on to tomorrow, Tuesday, we have Walt Disney,
Celsius, the drink company. We have Crocs, the shoes
company. We have Nicola, the fraud
company. And we have Ferrari, the high
end luxury car company all reporting earnings.
Then on Wednesday we have Uber, Shopify, Robin Hood, Airbnb and
the meme stock AMC reporting earnings.
That's going to be a huge day come Wednesday.
And then finally on Thursday and Friday, I only highlighted one
company that I thought was interesting enough to go over,
which is Warner Brothers Discovery.
We'll be taking a look at Warner Brothers Discovery in the
streaming wars. So like I said, we have a full
list of companies to go over. It's going to be a very busy
week. Let's go ahead and jump in.
And we'll start off with Palantir reporting earnings
after market closed today. Palantir is at almost $25 per
share. It's up 6.7% today after we have
news that Dan I've from Wedbush has reiterated his
outperformance on the stock. So he's pounding the table on
this one saying it's a great buy, saying it's going to
outperform. And I've listened to Dan Ives
talk about Palantir. His big thing, his focus on it
is that it's an AI stock and it's not just an AI stock.
It's like the best AI stock. It is the Tom Brady of AI
stocks, right? So Palantir is like the number
one AI stock according to Wedbush and Dan Ives.
So a lot of people are investing in Palantir as one of their AI
place, which I think is reasonable.
I agree that I view Palantir is a very strong AI company that
makes real money from artificial intelligence.
I also think there's going to be many companies that benefit from
AI, but Palantir is certainly one of them.
But I think overall, the reason that investors are so bullish on
this earnings report is because Palantir has been seeing
fundamental momentum. The fundamentals have been
moving in the right direction across the board.
We have revenue growth, it's around 16%, so not the fastest,
but it's also not very slow. But overall this is organic
revenue growth. They are growing their revenue
without doing major acquisitions.
We have free cash flow generation.
Last quarter it wasn't the most they've ever generated.
It was above the amount of stock based compensation.
So this is actual real true free cash flow they're generating,
which again is another thing in the right direction.
We have net income moving to the positive.
We have earnings per share moving to the positive.
So we have all the fundamentals moving in the right direction.
If I had one criticism for Palantir, it's that they aren't
in a position to do a lot of buybacks right now.
But like I've highlighted before, specifically with
Palantir, the stock price is at such a high, the company's
richly valued right now. So I don't view the dilution as
much of a problem when companies dilute at very high valuations.
I don't necessarily view that as a negative thing.
I think they're actually creating value when they do
that. I'd like them to do buybacks.
If the stock sells off dramatically, that's a great
time to do buybacks. But either way, the primary
thing that I think investors are looking at is they're looking at
a secular AI play, which Palantir represents and a
company that's moving into the more mature, the more
financially mature situation of all the fundamentals moving in
the right direction. Now if we look at this quarter
specifically, Wall Street is expecting the company to report
its commercial segment revenue of 292 million, which would be
up 24%. So Wall Street's expecting 24%
commercial revenue growth. That's an important segment.
In fact, that's the fastest growing segment.
And then the government segment's going to be growing at
least 11%. So if Palantir can hit these
numbers, they can grow commercial 24% and they can grow
government above 11%. They're golden.
The company's going to do really well, I think, especially if
they can grow the commercial faster.
I think that's what most investors are paying attention
to at this point. The government growth is great,
but investors really want to see this commercial growth growing.
Now the stock is going to produce an adjusted free cash
flow of around $1 billion this year.
That is, the analyst estimates if Palantir produces $1 billion
of free cash flow this year and the company's at a $51 billion
market cap currently, which means the stock today is trading
around 51 times this year's free cash flow, which of course is
expensive. But keep in mind you have to
factor in growth. If the company is able to grow
the free cash flow from 1 billion to 5 billion in just a
short amount of time, then this doesn't look quite as expensive.
So a lot of this comes down to how quickly Palantir can grow,
how quickly it can exercise its operating leverage and increase
its margins. Now overall, I don't see any
evidence of why Palantir should miss earnings.
I see nothing concerning about the commercial revenue or the
government revenue and I think they offer a product that a lot
of companies right now are wanting.
So I would be surprised if Palantir misses earnings now.
Next up, we also have the dividend growth company, Realty
Income Corp reporting earnings. Today.
I don't own Realty Income Corp, but I own a very similar company
called Vici. They're both basically the same.
They take investors capital and then they use that to invest in
real estate and then they, they make money off the real estate
through the rent obligations and they pay that back in the form
of dividends. So both of these companies
function virtually the same except they have different
strategies and what type of properties they buy.
Realty Income Corp owns a lot of like Home Depots and Walmarts
and Walgreens, those type of locations.
And Vici owns basically the entire Vegas Strip.
They own MGM real estate, they own Caesars, they own the
Venetian, they own all of that type of real estate.
So these companies have different strategies and what
their focus is, but they're becoming more similar over time
and both of them are doing poorly over the past year.
If we look at Vici, Vici has done poorly over the past year.
It's down 12%. It's my worst performing holding
in My Portfolio this year, down 12%.
So this one has been a big drag on my performance.
We look at Realty Income Corp again, I don't own this one, but
we can look at the performance very similar.
It's down 12% over the past year, just like Vici.
So both of these companies are struggling and it's for
something that they can't fix. Both of these companies cannot
fix the issue that's causing their stock to go down.
Their stocks are going down because interest rates are
staying higher for longer than expected.
The way these companies earn money is by taking investors
capital at a certain cost of capital.
So they might get money at like 5%, right, and then they
reinvest it and get a 7% return using leverage.
That 2% in between can equate to a lot of money.
That's the way they operate. It's somewhat similar to a bank,
but it's through the mechanism of real estate.
Now when the cost of capital goes up, when interest rates go
up to 5% and it cost them 8% to get money, they have to reinvest
it and get a 10% return to make that make sense and that's a lot
more difficult to do. So the biggest thing that's
changed for these companies is the cost of capital.
That is the biggest differentiator between this year
and years prior. Vici and Realty Income Corp are
having to deal with the reality that the cost of capital is now
higher and it doesn't seem like it's coming down anytime soon,
at least Jerome Powell saying that it may stay higher for
longer and a lot of people think that it may stay higher forever.
The interest rates may just remain at 5% and ultimately we
don't know because we can't predict interest rates.
So that puts these companies in a very difficult position.
They now are dealing with higher interest rates, renewing their
debts more expensive and with the cost of capital, their
future expected returns are more difficult.
So even though Vici's selling off, that's the reason I'm not
buying it more right now. I don't like the fact that the
business is now in a tougher spot.
They're doing everything correctly.
They're they're collecting 100% of rents just like I think
Realty Income Corp will do. I think the company's going to
do fantastic this quarter. But I still think they're
dealing with that big macro concern.
For me personally, even though these are great companies, even
though they're executing well, I can't put more and more money
into a company where the macro environments making it more and
more difficult for them to operate.
So even though I'm bullish on this quarter and I think Realty
Income Corp is great, I'm not going to be buying the dip this
year. Now after Realty Income Corp, we
move into Tuesday, which we have a very full list of companies
and the very top one is Walt Disney.
Now I'm going to go ahead and group together two companies
that are reporting on different days.
We have Disney here and we also have on Thursday Warner Brothers
Discovery. Since they're so similar, since
I'm going to be having very similar thoughts on them, I'll
be grouping these two together. Let's go ahead and just talk
about both of these companies. First of all, my position, the
one that I own a huge position in, is Netflix.
And I have been extremely forthcoming and extremely
transparent and saying repeatedly that I believe that
this battle, the so-called streaming war has been over.
And in my opinion it's been over for over three years.
People are still talking about the streaming wars today as if
they're going on, but they haven't been going on for years
and I think the evidence is in the numbers.
We can take a look at Netflix. Netflix was the so-called leader
of the streaming wars three years ago, and then Disney
Warnermedia, Apple TV, Amazon Prime, all of these companies
tried to take what Netflix had. They threw everything at it,
billions and billions of dollars into streaming.
And what did it do? Well, let's go ahead and take a
look at the damage it actually did to Netflix.
We can start off by looking at the total subscribers.
We have that right here. Again, all these companies
funded their battle against Netflix in 2021 right there.
That's where Disney was putting in $8 billion per year.
We had Warner Warnermedia investing more in the content,
all of them trying to offer discounts and offer everything
they could, enticing subscribers to sign up for months of free
content and look at what it did to Netflix.
This is what happened. Netflix lost a couple
subscribers for two quarters, two quarters, right there and
right there. They lost enough that you can
barely even discern that they lost subscribers.
They lost less than 1% of their subscriber base for 1/4 and then
quickly resumed growth. It's barely visible, and even
though it did slow them down a little bit, it did not stop
Netflix. Once they initiated the password
crackdown and they continue to do their playbook, their global
scale kicked in and Netflix continued to gain market share
and gain subscribers. You can see this again through
the revenue by different regions.
The revenue ticked down for 1/4 and then resumed growth
immediately afterwards. I think it's very clear through
the numbers, there's no longer any chance of Disney winning any
type of streaming wars. That ship has sailed.
It's completely gone. Netflix is dominating and will
continue to dominate that market share.
But there is opportunity for Disney.
The company has gone through a lot and I think there is
opportunity for optimization and to make money.
Disney has a lot of ways of making money that companies like
Netflix don't. They have their parks, they have
their Broadways, they have their cruise ships, they have their
merchandise, They have an ecosystem built out that's still
a money making machine. And it's been mishandled for
years, which means there is a chance for Disney to get back on
track to start making blockbuster animated movies, to
start making free cash flow, and I think that's what investors
are looking for. The goal for Disney has shifted.
No longer, I believe, are they looking to become the streaming
leader and regain the lead from Netflix.
That ship has sailed. But they are looking to generate
at least $8 billion of free cash flow per year.
If we look at their free cash flow in the past year, 2023,
they generated 4.9 billion. Now again, what I think Disney
shareholders should look for is generating around 8 billion this
year. That'd be a very good growth
path for the company. That would put them back close
to all time highs during their Marvel era.
If they can pull that off, I think they're in good shape.
I think the stock will move further up and they can do that
by having good blockbuster movies.
That's one of the main ways they need to regain the box office.
They can do that by optimizing their streaming service to be
profitable at a smaller scale and they can do that by
continuing their parks operation.
So at Disney, I think the goal here is not to win streaming
wars. I don't think it's to have the
most subscribers. I think it's to optimize for
cash flows, optimize the margins of the company.
Now my comments are very similar for Warner Brothers Discovery.
Both of these studios, both Warner Brothers and Disney, make
great content. They come out with great movies
and great shows, but they do so rather infrequently.
They're never going to have the fire hose of continued content
every single day like Netflix because they don't have the
income stream to afford that. So these companies have no
chance of surpassing Netflix's subscribers.
Again, that ship has sailed. That that is not in the cards
for these companies but they have other ways to optimize
their business. For Warner Brothers Discovery, I
believe the primary problem and the reason the stock continues
to go down 30% year to date becoming one of the worst
performers this year is because of the balance sheet.
They have one of the worst balance sheets in the S&P 500.
It's as bad as like cruise lines and companies that have massive
CapEx investments. It just looks terrible.
You can see that in 2022 it went to $48 billion in long term
debt, Horrible, horrible amounts of debt.
Now they're paying that down. They paid down $10 billion over
the past seven quarters and it's now down to 38 billion.
They're on track paying down debt and I think that's exactly
what they should do. I believe this company should
continue to prioritize paying down debt for at least the next
couple of years so that they don't have this massive drag on
their company. They don't have this interest
payment ongoing. So between the two, I'm more
bullish on Walt Disney than I am Warner Brothers Discovery.
But out of all the streaming companies, my pick continues to
be Netflix. Now moving on from Walt Disney
and Warner Brothers Discovery, we go to Celsius, also reporting
earnings before market open Tuesday.
Celsius is the energy drink company and it's kind of
advertised as like the healthier version, right?
You have Monster Energy, which is unhealthy, and look at the
cans, Monster Energy just looks unhealthy.
Then you have Celsius, it's light and it's bright and it's
advertised as healthier. This is the energy drink for
athletes, stars, people that want to be healthy and have
energy. Now whether or not you believe
that as a different thing, but the marketing has worked.
They have a lot of people hooked on Celsius and I'll say this has
been one of the most incredible stories in the market.
There is an insatiable desire for people to have energy
drinks. That is something that is
apparent everyday. We want to have energy, we want
to have a boost and caffeine continues to be the drug of
choice. It is the one everybody wants.
Now I've had my thoughts about the energy drink bubble, the
caffeine bubble as I call it. I made a video on this topic a
month or two ago, but Celsius has been one of the companies
that has really taken market share.
If we look at the performance of the stock over time, we go back
one year up 120%. We go back five years and here's
where it gets crazy, up 5469 percent, 5000%.
This is the type of company that if you bought it, you know, in
2019, you buy it for $1.20 and it's now trading at $78.
So you'd become wealthy buying this company way back in 2019.
Of course, it's very difficult to predict, but there were signs
along the way, especially just in 2021 and 2022, there were
signs that this company was going to be big that I ignored.
One of them was that I sought in Costco.
Now anytime I see a new product from a company that is new,
isn't owned by one of the big companies like Pepsi or
Coca-Cola, it gets my attention. I look at it and I think, wow, I
haven't seen this company in Costco.
I go to Costco rather frequently now with most companies that are
new and they have new products. I see them in Costco for a time
and then I see them go away from Costco because their sales
eventually slow down. And Costco is very quick to
replace you if your sales slow down.
That's what happened to Tattoo Chef.
And a lot of their products, they come in, some of them sell
really well, so they stick around and then some of their
products don't sell, so they go away.
But with Celsius, the products didn't go away.
In fact, Celsius continued to sell very well at Costco pallet
after pallet. And you can ask some of the
employees. One thing you can do is ask them
how much are you selling of this particular item?
Like how many pallets are you moving a week?
And some of them would say that they were selling 1 pallet a day
of Celsius, an incredible amount.
And if you extrapolate that throughout every Costco, you get
an idea of how much this company selling, getting into big, big
places like Costco is a huge advantage.
So this company had a huge advantage a while ago and I
didn't jump in. I still thought it was too
unpredictable, but the stock price raised up going from $13
to now $78. So this has been a huge winner.
A lot of the success has already happened and now the company
trades at, of course, a very high valuation.
Investors are believing it's going to go international and
it's going to continue to gain market share.
We've had some warning signs that energy drinks and the
energy market may be slowing down a bit.
Starbucks has given us those warning signs.
If we look at Starbucks, there are some concerns.
For example, not only did the revenue go down quarter over
quarter by a good amount, you can see it tick down there, but
we can also look at the active reward members, The amount of
reward members dropped as well. So Starbucks had some real
numbers that hurt their company. And the question is, is whether
or not that transfers over to Celsius.
I believe that Celsius earnings are still going to be good.
They're going to be good despite Starbucks is lacking because
Celsius is mostly within the US, which I think has been stronger.
And I think Celsius is simply taking share from Starbucks.
Look at the value proposition. Starbucks is like $6 for a drink
in some cases. If you get a medium or you get a
large drink, whatever they call it, it's like 6 or 7 bucks.
Whereas if you get a Celsius. One can is around $2.00.
So you get around three times the amount of drinks when you
buy a Celsius is when you buy a Starbucks.
Now I know that they're not the same product, but I do believe
they have some overlap. If you look at the Venn diagram,
I believe there is overlap between Celsius and between
Starbucks. So I go into Celsius's earnings
with caution and optimism. I think that more than likely
it's going to be good. Now moving on from Celsius, we
have another really cool company reporting earnings before market
open on Tuesday. Crocs.
Crocs of course, is the Crocs brand.
All the kids are wearing them and a lot of adults, they're
they're supposed to be comfortable shoes.
Now, I have not owned any Crocs myself.
They don't appeal to me, but I do own some Hey Dudes, which is
another brand that Crocs owns. Either way, it is the season to
be buying Crocs. If you have kids, you probably
own some Crocs for them because they're very, very popular.
The reason they're popular for parents buying them for kids.
I'll tell you through personal experience is because the knock
offs of them are not as good. You can buy knock offs that look
just like Crocs at Walmart. They're not as good.
They're made from cheaper plastic that rubs against your
heel causing like Marks and redness on your heels and your
feet. The Crocs material is much
better. They actually have a patent on
the specific type of plastic they use and it's just more
comfortable. It's more flexible, it's more
durable, it's lighter. And so the Crocs really do have
some unique IP causing them to have a really great product.
They're easier to wash, they're easier to clean, kids run around
and they get the shoes muddy. You can just run them under a
hose, wash them off. They're very convenient shoes
for parents and they've established a lot of brand
loyalty. So this company is more than
just a silly shoe company. They own a really good brand.
They own intellectual property with the specific type of
material they make the Crocs out of, and they have a lot of brand
loyalty. There's a lot of people that
will pay 20 or $30.00 for the Crocs shoes over $10 knockoffs
because they want to own the name brand.
And another thing about this company is the margins are very
high because shoe companies like Nike have to put in all these
different fabrics and textures and different things into their
shoes. Crocs uses molds, they just use
a mold of a specific type of plastic.
So it really is a great company. They've they've really figured
out a good thing for their business.
The valuation is also extremely low typically all the time.
For example, right now it trades at a 10 for PE and a 10% free
cash flow yield, very low valuation.
It's probably undervalued at this point.
I still don't own the stock and that's for a specific reason.
The reason is, is that I still believe the company does not
meet my standards of predictability.
When I look for companies, I need to have a high degree of
predictability. I need Costco like
predictability, right? Companies like Salesforce that
can grow and grow and grow because they have incredible
pricing power with Crocs. After all, after everything is
said and done, it's still a style company.
It's still a company where people have tastes and
preferences and that's what drives their sales.
And if those tastes and preferences shift or they change
over time, which in many cases they do, the sales could
plummet. So for that reason, I think it's
less predictable. An example I would give is VF
Corporation. This is a company that owns many
household name brands. They own Vans, North Face,
Timberland, Dickies, Ultra E Park, Icebreaker, Jansport, all
these great companies, you see them all over the place and
shopping malls and different retail locations.
This stock has been all over the place because tastes and
preferences changed over time. If we look at the 10 year graph
of it, you can see the huge decline as they went out of
style. That's the big concern here is
if Crocs simply go out of style, if another brand comes in and it
trends on TikTok and it trends on on social media and Instagram
reels and YouTube, it could rapidly change the landscape of
competition. So in terms of right now, I
believe Crocs is going to do well.
I think they're going to beat on these earnings with the Crocs
brand. I think the Hey Dude brand will
come in weaker, but I think their name Crocs brand is going
to do well. And I think the company's likely
to see continued momentum throughout this year.
But still I'm not going to be buying the stock because I think
it's too dependent on consumer preferences which are quick to
change. Next up we have Nikola.
I thought it would be fun to just go over this company.
I haven't talked about it in a long time and Nikola and I go
way back. They are, after all, the only
company or the only one ever to strike one of my videos.
They did a copyright strike on one of my videos years ago
because I used a clip, one clip of their own marketing material
in one of my episodes, which of course is completely legal to
use. It's completely protected under
fair use. But Nicola didn't want what they
were doing exposed. So they copyright strike me and
a number of other Youtubers now. I called them, I called the
business saying I was going to bring sue against them.
I was going to challenge this copyright strike and fight it,
because if you're not aware, 3 copyright strikes on a channel
and the channel's deleted and I had every legal standing to use
that clip in my video. But it didn't need to go to
court because Nikola quickly removed the copyright strike
after the Financial Times wrote about them trying to censor
Youtubers. So the problem kind of resolved
itself very quickly. But either way, Nikola is a
company that I haven't talked about in a while.
We know that the founder has been arrested and charged and
convicted of fraud on multiple levels.
I can't remember exactly how many years he got, but it's like
7 or 8 years I think. Because what he was found doing
was misrepresenting Nikola's current technology to investors,
which of course is illegal. Now of course they've done
changes. They no longer have the same
CEO. They've changed management so
companies can evolve and change over time.
One company that's a great company today but historically
did fraud was waste management. You can read about the
accounting fraud they did in 2002.
They did a lot of things that were highly illegal.
They basically lied to investors through their accounting
statements to a huge degree. There's some people that I
believe went to jail. Their accounting team was
switched over. They have new auditing systems
and the companies changed. Waste Management's now a great
company. So things can change and I
believe that Nikola can change as well.
But when we look at this company and I was looking over the
financials, I still believe the most likely outcome for Nikola
is to either be purchased for a small sum by another company or
to go to zero. I think that's the most likely
outcome. Let's go ahead and take a look
at some of the financials here. First of all, revenues declining
and they really don't have any real revenue to speak of.
This is mostly fake revenue where they've like done some
specific deals to try to generate revenue.
So they only have $35 million of revenue in 2023.
But you also look at the other financial metrics, the EBITDA is
negative. They're losing money every every
year, every quarter. The free cash flow is negative.
They're losing hundreds of millions of dollars per year.
Their earnings and net income are both negative.
And the reason they're able to afford this, the reason they can
continue to have negative cash flow and still be alive today is
because they're issuing more and more shares.
I don't know who's buying these shares.
I don't know who's scooping them up or who's, who's adding to
their cash pile, but they're doing it.
They increased their share count from roughly 480 million to
around 1 billion in one year. So they over doubled their share
count, diluting investors by double in a single year.
So they're trying to raise as much cash as they can because
cash is the only thing keeping them alive.
So going into earnings with Nikola, I'm going to be seeing
if they actually make any money. They have to eventually because
the cost of capital has gone up. They no longer can survive
indefinitely with cheap capital. So they're either going to have
to continue to dilute shareholders until finally that
no longer works because the stock price tanks too much or
they have to really make money. One of those two outcomes so
far, I think they're more likely to try to continue to dilute,
but we'll see. Either way, it's going to be an
interesting earnings from Nikola now.
Next up, also reporting earnings at the same time is Ferrari.
Now a lot of people misunderstand Ferrari.
They believe it's a car company, but I would actually categorize
this company as more of a luxury company than a car company.
I put it in the same category as Louis Vuitton, the same type of
thing. Even though Louis Vuitton sells
bags, it's not a bag company, it's a luxury company.
So even though Ferrari sells cars, it's not a car company,
it's a luxury company. And that's because of the way
that the company strategically prices and evaluates its
vehicles. If you looked at Ferrari and you
asked them what is a Ferrari? What are you really selling?
They would not just say they're selling cars, they'd say that
they're selling something that's a prized asset.
It is something that's like a spectacle, something that you
own that you're proud of. It's different than just a
utility that has certain metrics that gets you from point A to
point B. And we can see this illustrated
in the numbers. For example, if we look at a
normal car company, we can look at some of the margins of the
company. Normal car companies have
margins of around 2 to 8% operating margins, They're very,
very low. When we look at race, which is
Ferrari, the operating margins are all the way up to 25%.
These are incredibly high operating margins.
This is unlike any car company. This is higher than Tesla,
higher than Ford, higher than GM, higher than any other car
company you can name off. There's not really any other car
companies that have operating margins reaching 30% on a
consistent basis. That just is not happening
anywhere else. And again, this is what happens
when you can charge an extreme amount for your vehicle, way
more than the cost of creating the actual vehicle.
When we look at the profit margins, again this is
incredibly high profit margins of 20% For a car company, that
doesn't make sense because what they're selling is not just a
car, they're selling an experience.
They're selling an item that wealthy people use to signal to
other wealthy people how wealthy and great they are.
Whenever you buy an item that's used for signaling to others how
wealthy you are, that is a luxury item.
So I'm looking at Ferrari. I actually find this company
rather attractive. I think it's a great stock now,
trades at a very high valuation and that's the downside of it.
As investors have caught on, they've bid the company up to a
54 PE ratio, a free cash flow yield of 1%.
So it's very expensive on any way that you're looking at it,
but it has the metrics to back it up.
From everything I can see Ferrari's earnings are going to
be good. There's still so many wealthy
people that want these vehicles. They have enormous demand.
They have enormous pricing power.
And I think at this point they can basically pick what their
bottom line is going to be. Now moving throughout the week,
we move on to Wednesday before market open, we have Uber and
Shopify. Let's go ahead and start off
with Uber. This is another one that I view
very positively right now. I think the earnings this season
are going to be good for Uber because they have a lot of
positive fundamental momentum, their revenues growing, the CE
OS focused on profits. The business I believe is doing
really well. They do have some competitors
down the road, but so far that isn't manifesting itself today.
I think the company's earnings are going to be very strong this
quarter. In terms of the valuation.
It's at a valuation now where investors are expecting a lot of
growth. So I think there's more room for
downside, disappointment if they are weak on any part of it.
But again, overall with Uber right now, I'm bullish on it.
I think the company's going to do really well now with Shopify.
This is another company that I think is fantastic.
It's another great company from Canada.
Shopify is secretly growing into different business segments and
a lot of investors aren't quite paying attention to this, I
think as much as they should. For example, Shopify is becoming
a little bit of a secret. PayPal, They're doing this by
offering their customers, people that have built their businesses
on Shopify, lines of credit. They're offering them different
ways of paying using Shopify Pay.
One example is if you have a business that's doing millions
of dollars in revenue on Shopify, Shopify of course has
all the analytics. They'll identify your business,
the revenue that you're doing, and then they'll just contact
you and say, hey, you need a line of credit.
We'll give you a loan. Since they know how much you
make on a continual basis, they can underwrite the risk better
than a bank. A bank doesn't really know your
business. A bank has to take your word for
it in different financial documents you provide.
Shopify already knows your business because you built your
business on their platform. So Shopify can more confidently
loan their customers money and know what to expect in return.
And they do this by repaying themselves, not with you going
and paying them back, but by siphoning off some of your
revenue. So Shopify will give a loan of
like $500,000, but then they'll say they'll take 3% of your
revenue until that loan is paid back.
So as you run your business that you already have on Shopify,
they pay themselves back by taking a portion of your
revenue. That way they can basically
ensure that they get paid back as long as you're using your
same business on their website. It's a pretty incredible little
niche they've carved out. I think it's incredibly smart
what they're doing and I think it's a good revenue generator
for the company. And this is not the only thing
they're doing. Shopify has really moved into
this fintech category. I view Shopify as a little bit
of an e-commerce company and then a fintech company on top of
that. So I really like Shopify.
I think it's a great company. The reason that I still choose
to invest in Amazon over Shopify is for a couple of reasons.
One of them is whenever you're trying to sell something to a
customer, it's always more important to have an active
audience, an active customer base, than it is to have your
own flexibility and control. For example, with Amazon, if you
sell on Amazon as a third party seller, sure, they take some of
your fees and it costs more to sell on Amazon.
But with Amazon, you have access to hundreds of millions of
active shoppers already searching products already right
there ready to buy. They're ready to go.
You have the customer base already built in.
That customer base from Amazon is insanely valuable.
There's nothing else like it with Shopify, even though you
have lower fees, even though you can build your own, even though
you can do it yourself and you have more flexibility and you
don't have to deal with big bad Amazon.
The truth is, with Shopify, you have to have your own customer
base. You don't simply just inherit it
from Amazon's fulfilment center. You don't inherit it from
Amazon's website. You have to build your own.
And doing that is very, very difficult.
Shopify stores have to find advertising.
They have to advertise on Meta and Google to get people to
their store. Amazon sellers don't really have
to advertise. They just have to have a great
product that does well and it trends well and they make sales
and if they do advertise, they can advertise to an already
existing customer base on Amazon.
So I think that Amazon even on online retail has a massive
advantage over Shopify and Shopify sellers and I think
that's because of the existing customer base on Amazon.
So that's the reason that I prioritize Amazon along with a
couple other reasons. I really like the AWS business
and other things. But I think that Shopify is
second place with online retail. I think it's the 2nd place
company to be. I'm a little more concerned
about this quarter with Shopify. We've heard from Amazon that
people are trading down from expensive items to cheaper ones
and Shopify in many cases I think sells more expensive
items, more unique ones. So I'm a little bit more
concerned about Shopify, this earnings report, but I'm not
concerned. Overall, I think the business is
going to continue to do fine. Now moving on, we get to another
very popular company, Robin Hood's reporting earnings
Wednesday after market close and Robin Hood has been on A roll
with new product development. They came out with their gold
credit card. I think that that was a
brilliant move. I think they implemented it
really well. They advertised it and built it
up really well. I would have no complaints as a
shareholder of how they rolled out these new products.
I also think that their Roth IRA and their brokerage matches are
very smart. They're basically saying that if
you put your money in Robin Hood, they're going to give you
a little bonus, like a little 1% bonus or a 3% bonus on your
money. And that's big.
It entices a lot of people to move their money over to Robin
Hood, and I do believe this earnings is going to be good.
I don't think they're going to have strong financial
performance because they're not at that phase of focusing on
profitability. But I think what Robin Hood is
going to have is strong user engagement and performance.
They're going to have a lot of people using their platform, a
lot of new people moving to their platform, a lot of people
signing up for their credit card.
They're going to have a lot of these specific performance
indicators for the company that are all moving in the right
direction. And I think that's going to give
investors in Robin Hood increased confidence in the
company. So as far as I can tell right
now, Robin Hood's doing a wonderful job competing with the
bigger brokerages, stealing customers from Fidelity and
Schwab. And I think if they continue to
execute this way, I see a lot of momentum moving towards this
stock. So I feel very bullish about
this quarter. Now after Robin Hood, we get to
another company that I really like, which is Airbnb.
This company has a lot of qualities of a compounder, it's
capital light, it has huge network effects, it has organic
revenue growth, It has a lot of things I find very attractive.
And I have been very positive on Airbnb for a while.
I view this company as a long term secular trend winner and I
view the biggest advantage that Airbnb has as its long term
network effects. So let me go ahead and just talk
about those network effects for a while.
When we look at Airbnb and we look at competitors like Expedia
or whatever companies offer a similar service, you'll notice
that Expedia's earnings are continually a little bit
disappointing and Airbnb's earnings are usually good.
They're usually growing faster than the competitors, which
doesn't make sense to most people.
When you look at that, you think, why can't the smaller
companies take more market share from Airbnb?
They offer more perks. They offer more gimmicks and
freebies. Why can't they compete with
Airbnb? And the truth is network
effects. We see this with other large
scale companies like Uber, and we've seen it historically with
companies like Meta. Meta is one of the poster
child's of network effects. Look at Facebook, there's many
alternatives to Facebook. Early on, there was Google's
social circle. Whatever it was, they were
competing with meta and it didn't work out.
There's a lot of competitors trying to take market share from
Facebook, and they never could because everyone used Facebook,
which caused everyone else to use Facebook.
That is network effects, and we still see those with Airbnb.
The way that everyone uses Airbnb is a reinforcing Moat of
everyone else being forced to use Airbnb.
So even though they do have a list of competitors, companies
that are trying to edge away at their lead, I don't think
they're going to be able to. I think Airbnb is going to
continue to grow organically and have a continued dominant
network effect mode. So when I look at this earnings,
I don't know if this specific quarter will be great.
My opinion is that I think it will do well.
But I think what you're going to continue to see is Airbnb
continue to protect its market share from competitors, continue
to gain overall scale and size because it's already the
commanding leader in this category and it's very difficult
to uproot and disrupt the current leader with an industry
that has this huge of network effects.
Now after Airbnb, we also have another stock reporting earnings
after market close on Wednesday, AMC, the Meme stock itself.
I thought it would be fun to just check up on this one and
I'll be honest, I have not looked at this stock or the
fundamentals of it in a very long time.
So I thought it would be fun to just look at it together to see
what we're looking at here and what to expect from AMC.
We'll see if any of the the apes as they call themselves are
still holding on to this stock. We can take a look at the stock
price here, down 45% year to date, not off to a great start,
right. That's a a little bit of a hit.
It seems like the apes are having a a tough time this year,
go out a year and it's down 94%. That's rough.
If we zoom back five years, it's only down 97.77%, so not bad.
You still have 3% of your invested capital.
Not bad. It could have been worse.
It could have gone to 0. So at least be grateful that you
still have 3% of your money. Ultimately though, we can take a
look at the financials and see if there's any upside in the
stock. It doesn't look good at first
glance. There's no PE ratio, which means
the company isn't earning any earnings and the free cash flow
yield is negative, which is never a great sign as well.
We look at this and the revenue stagnant over the past couple of
years. I personally think theaters are
are are going to have a little bit of a comeback, but not much.
I think that we're we're getting some good movies but streaming
is just so convenient. It's it's difficult to go to a
theater and pay like 50 bucks to see a movie when you can just
wait a couple months and have it come out on your big TV at home
and much, much cheaper. So a lot of people are still
waiting for big movies to come out on streaming.
For me personally, the movies that I see in person are either
ones that I go to see with my kids or they're ones like a dune
where they're so big and epic I have to experience it in IMAX.
But other than that, a lot of the movies I see are ones that
I'm seeing at home. The free cash flow is negative,
but I will say it's moving in the right direction.
Maybe in another two or three years it can become positive.
Overall, they can be making money.
So there is something to look up to there.
Overall, this is the tale, another tale and a long list of
tales of how meme stocks eventually end.
The market is a voting machine in the short term.
We had the portion of it that was driven by votes.
People voted right there. They're buying it because they
wanted to be a part of something, a part of a movement,
a part of something that was bigger than themselves.
And this is normal. With investments, investors find
comfort in being invested along with other investors.
So when you have that social proofing, when you have other
investors saying buy, buy, buy on social media, it makes you
feel safer. Buying the same thing, even when
buying it, is not supported by the fundamentals and is a very
dangerous thing to buy from this point.
The stock of course had its epic collapse and it's getting closer
and closer to its intrinsic value as overtime stocks go from
the voting machine to the weighing machine.
Now that's going to be it for this earnings season.
If you like this type of content, would like to see more,
you can check out the Patreon. It comes with a free trial.
It's money back guaranteed. I think you'll really like it,
and it also gives you access to qualtrum.com, which is the
analysis tool I use. Other than that, I'll see you in
the next one.