1 00:00:00,200 --> 00:00:03,300 This has been such a crazy week. We have so much news to get 2 00:00:03,300 --> 00:00:05,300 into. Of course, we have Microsoft 3 00:00:05,300 --> 00:00:08,000 reporting their earnings, the stock is up huge. 4 00:00:08,000 --> 00:00:09,500 This is one of my biggest Holdings. 5 00:00:09,500 --> 00:00:11,900 It's a company. I'm incredibly bullish on and 6 00:00:11,900 --> 00:00:15,000 we're going to be going through in detail, their earnings report 7 00:00:15,000 --> 00:00:17,800 because they lay out everything that they've done everything 8 00:00:17,800 --> 00:00:19,500 that they're forecasting for the future. 9 00:00:19,700 --> 00:00:22,300 And we get an inside look of how this business is doing. 10 00:00:22,500 --> 00:00:25,100 So I'll give you what I think. Are the biggest takeaways from 11 00:00:25,100 --> 00:00:27,500 Microsoft's earnings report, but then, of course, we can't forget 12 00:00:27,500 --> 00:00:29,900 about Google, this company reported earnings as well. 13 00:00:30,000 --> 00:00:33,400 Well, it's up a little bit. The market is, is treating it 14 00:00:33,400 --> 00:00:37,100 with a little 1.3 percent stock rise today. 15 00:00:37,200 --> 00:00:39,200 But I thought there is a lot in Google's report that was 16 00:00:39,200 --> 00:00:41,300 actually encouraging. So we're going to be looking at 17 00:00:41,300 --> 00:00:44,100 some of my biggest concerns about Google that is the 18 00:00:44,100 --> 00:00:47,200 excessive amount of employees the wasteful spending. 19 00:00:47,300 --> 00:00:50,400 And then, of course, the cloud growth will be looking at all of 20 00:00:50,400 --> 00:00:52,800 these different things. And I'll be highlighting why I 21 00:00:52,800 --> 00:00:54,900 think this report was encouraging. 22 00:00:55,300 --> 00:00:58,000 And then finally, we have met a reporting their earnings as 23 00:00:58,000 --> 00:00:59,600 well. We're going to be diving into 24 00:00:59,600 --> 00:01:01,100 that. Detail as well. 25 00:01:01,200 --> 00:01:03,700 So huge earnings reports with Microsoft Google and meta. 26 00:01:04,000 --> 00:01:08,000 But then we also have some bonus news, Microsoft's deal with 27 00:01:08,000 --> 00:01:10,600 Activision. Blizzard has reached a roadblock 28 00:01:10,600 --> 00:01:13,500 by the UK government. This is a frustrating piece of 29 00:01:13,500 --> 00:01:16,600 news for Microsoft because they're blocking this deal out 30 00:01:16,600 --> 00:01:19,400 of reasons. That don't make any sense and 31 00:01:19,400 --> 00:01:22,200 I'm going to go through this report and the UK's arguments 32 00:01:22,200 --> 00:01:23,700 and why they have this one wrong. 33 00:01:23,800 --> 00:01:25,200 Then we also have the news at Apple. 34 00:01:25,200 --> 00:01:28,500 One, the case with epics game, this is a bit forecasted but 35 00:01:28,500 --> 00:01:31,900 they finally declared victory. You and then we have some some 36 00:01:31,900 --> 00:01:35,700 troubling news here. There is a Reddit user who bet 37 00:01:35,700 --> 00:01:40,000 over 100,000 dollars of his savings on Bed Bath & Beyond. 38 00:01:40,200 --> 00:01:42,400 And he lost one hundred percent of that money because the 39 00:01:42,400 --> 00:01:45,900 company went bankrupt and he's basically distraught like his 40 00:01:45,900 --> 00:01:48,500 life is over. So I wanted to respond to this 41 00:01:48,500 --> 00:01:51,500 post and offer my advice to this Reddit user. 42 00:01:51,500 --> 00:01:53,600 Now before we get into the news, let's take a quick. 43 00:01:53,600 --> 00:01:56,800 Look at my portfolio, we have the passive income portfolio, 44 00:01:56,800 --> 00:01:59,500 reaching a value of four hundred and twenty six thousand dollars. 45 00:02:00,000 --> 00:02:02,600 Sixty thousand, nine hundred, and gained so far. 46 00:02:02,900 --> 00:02:06,500 And it's performed really well. So far this portfolio. 47 00:02:06,500 --> 00:02:09,199 I've been, I've been very pleased with the performance. 48 00:02:09,400 --> 00:02:12,000 It's up around 10 percent year-to-date. 49 00:02:12,200 --> 00:02:15,200 It's been doing really well and I can't complain about it. 50 00:02:15,500 --> 00:02:18,100 In fact, what I'm looking at buying companies and I'm 51 00:02:18,100 --> 00:02:19,800 searching for ones that are in a dip. 52 00:02:19,800 --> 00:02:23,700 In my portfolio, I'm struggling to find any companies in a dip 53 00:02:23,800 --> 00:02:26,300 generally speaking. All of them are at least flat or 54 00:02:26,300 --> 00:02:29,100 going up. We have in the financials SP 55 00:02:29,100 --> 00:02:32,000 Global and Card. These companies have performed. 56 00:02:32,000 --> 00:02:33,900 Okay. This year they haven't done 57 00:02:33,900 --> 00:02:37,800 terrible but they also haven't reported earnings so far. 58 00:02:38,100 --> 00:02:41,000 So we'll see how these ones do when they report earnings, my 59 00:02:41,000 --> 00:02:44,000 guess is because Visa already reported earnings and the 60 00:02:44,000 --> 00:02:46,200 earnings were good, that MasterCard is fine. 61 00:02:46,500 --> 00:02:50,600 So I'm not too concerned about this one but we have SP Global I 62 00:02:50,600 --> 00:02:53,600 think the earnings will be fine because Moody's has reported 63 00:02:53,600 --> 00:02:57,200 earnings they did okay and then msci reported earnings and 64 00:02:57,200 --> 00:03:00,600 there's were in line as well. So I think SP Mobile will do 65 00:03:00,600 --> 00:03:02,800 well, but it's still some unknown. 66 00:03:02,800 --> 00:03:05,100 They have other segments of their business that could be 67 00:03:05,100 --> 00:03:08,400 struggling. If this one does dip, if SP, 68 00:03:08,400 --> 00:03:12,300 Global goes down after its earnings report, I have cash set 69 00:03:12,300 --> 00:03:15,400 aside to buy that dip. That's why I'm sitting with 70 00:03:15,400 --> 00:03:18,500 12,000 dollars of cash. Just in case, one of my key 71 00:03:18,500 --> 00:03:21,600 Holdings cells off big after their earnings, the other 72 00:03:21,600 --> 00:03:24,300 categories that have been doing okay, but not great are the 73 00:03:24,300 --> 00:03:26,400 Industrials. Canadian Pacific and Union 74 00:03:26,400 --> 00:03:28,300 Pacific have not caught a bid this year. 75 00:03:28,300 --> 00:03:31,000 They've been trading flat, they Haven't been going anywhere. 76 00:03:31,200 --> 00:03:33,300 And that's okay with me. Not every company. 77 00:03:33,300 --> 00:03:36,500 You hold is going to go up every single day and these ones are 78 00:03:36,500 --> 00:03:38,300 doing fine. So we'll see what the earnings 79 00:03:38,300 --> 00:03:41,200 reports are this year. I think that Canadian Pacific's 80 00:03:41,200 --> 00:03:43,600 going to have a lot of positive developments, so I'm very 81 00:03:43,600 --> 00:03:46,300 excited about that company. And I believe that if Union 82 00:03:46,300 --> 00:03:50,200 Pacific can find a good CEO one that can really increase the 83 00:03:50,200 --> 00:03:52,400 margins and operating efficiency of the business. 84 00:03:52,700 --> 00:03:55,400 This could be a very, very good play for the future. 85 00:03:55,600 --> 00:03:58,300 So I'm still very optimistic about both of these companies. 86 00:03:58,400 --> 00:04:01,900 The restaurant category An insanely good investing category 87 00:04:01,900 --> 00:04:05,600 so far Starbucks has done. Well I've earned decent gains on 88 00:04:05,600 --> 00:04:08,000 that company. Buying it low and then selling 89 00:04:08,000 --> 00:04:10,500 most of my steak when it went up and then we have Texas 90 00:04:10,500 --> 00:04:13,100 Roadhouse. This is one that I have not sold 91 00:04:13,200 --> 00:04:16,399 any of I've continued to hold it, but I'm no longer adding to 92 00:04:16,399 --> 00:04:19,600 this position because it's raised up a lot over the past 93 00:04:19,600 --> 00:04:21,700 three months, and it's gotten closer to what I think its 94 00:04:21,700 --> 00:04:24,400 intrinsic value is. So this one is a long-term 95 00:04:24,400 --> 00:04:27,400 compounder, in my opinion, I think the company will do very 96 00:04:27,400 --> 00:04:30,500 well over the next 10 years. It has not reported modernity is 97 00:04:30,500 --> 00:04:33,500 yet, but I think the earnings will be relatively good. 98 00:04:33,600 --> 00:04:37,400 I see continued demand in the restaurant category in the 99 00:04:37,400 --> 00:04:40,100 consumer category. I don't mess around here. 100 00:04:40,100 --> 00:04:42,700 I invest in the companies that I think are the very top of the 101 00:04:42,700 --> 00:04:47,000 very top Costco being the best physical retailer Nike being the 102 00:04:47,000 --> 00:04:49,900 best apparel brand Pepsi, being the best junk food consumer, 103 00:04:49,900 --> 00:04:52,900 defensive company and then Estee Lauder being the best makeup 104 00:04:52,900 --> 00:04:55,300 company and their respective spheres. 105 00:04:55,300 --> 00:04:58,900 These are the top companies in the world and all of them have 106 00:04:58,900 --> 00:05:03,100 performed The top companies in the world so I'm very bullish on 107 00:05:03,100 --> 00:05:04,900 them. Now currently I still hold a 108 00:05:04,900 --> 00:05:08,600 massive steak and Costco still long this company even though it 109 00:05:08,608 --> 00:05:12,000 trades at a higher valuation, I still believe that Costco has a 110 00:05:12,000 --> 00:05:14,900 very long Runway of growth and it will generate continued free 111 00:05:14,900 --> 00:05:17,100 cash flow in the real estate category. 112 00:05:17,100 --> 00:05:21,100 I only have one company which is Vici a massive 52 thousand 113 00:05:21,100 --> 00:05:24,400 dollar position and I'm a currently in the green by eleven 114 00:05:24,400 --> 00:05:28,100 thousand one hundred dollars and I'm buying a more and more and 115 00:05:28,100 --> 00:05:30,800 more of this company. I bought More of it this year. 116 00:05:30,800 --> 00:05:33,800 And I continue to add to the position, anytime it trades 117 00:05:33,800 --> 00:05:35,900 down. I don't know if you taken a trip 118 00:05:35,900 --> 00:05:40,300 to Vegas recently, but if you have, it is like the party land 119 00:05:40,300 --> 00:05:43,300 of planet Earth. Everybody goes there and it's 120 00:05:43,300 --> 00:05:47,400 just jam-packed with people partying music, gambling shows, 121 00:05:47,400 --> 00:05:51,600 casino sports events, everything you can dream of in one single 122 00:05:51,600 --> 00:05:53,900 place. Vegas is the Disneyland for 123 00:05:53,900 --> 00:05:55,400 adults. It has the most crazy 124 00:05:55,400 --> 00:05:58,500 architecture. The biggest events it has Sports 125 00:05:58,500 --> 00:06:00,400 coming to it. It has come Tensions. 126 00:06:00,400 --> 00:06:02,800 It has shows. It has everything you can dream 127 00:06:02,800 --> 00:06:07,600 of all in one place and the demand there is insane hotels 128 00:06:07,600 --> 00:06:11,000 are being booked out every single room sold. 129 00:06:11,100 --> 00:06:12,700 There's massive Investments going there. 130 00:06:12,700 --> 00:06:14,600 There's massive infrastructure going there. 131 00:06:14,800 --> 00:06:18,000 There's lots of developments. I think the property that Vici 132 00:06:18,000 --> 00:06:21,900 owns is irreplaceable and it will be worth more and more in 133 00:06:21,900 --> 00:06:24,000 the future. So, not only does it yield a lot 134 00:06:24,000 --> 00:06:26,700 and pay a hefty dividend, but I think the company is going to be 135 00:06:26,700 --> 00:06:28,500 worth substantially more in the future. 136 00:06:28,500 --> 00:06:30,600 Now, finally, we get to the category. 137 00:06:30,600 --> 00:06:33,900 I've concentrated my big investments in Tech and to two 138 00:06:33,900 --> 00:06:37,500 different companies, apple and Microsoft and I've owned both of 139 00:06:37,500 --> 00:06:39,900 these companies for over five years. 140 00:06:40,100 --> 00:06:43,800 I first spotted to Apple and Microsoft back in 2017. 141 00:06:44,300 --> 00:06:48,700 Now Microsoft I only owned a little bit back in 2017 so the 142 00:06:48,700 --> 00:06:52,000 position size was very small just a few thousand but Apple I 143 00:06:52,000 --> 00:06:53,800 bought into a little bit heavier. 144 00:06:54,100 --> 00:06:56,400 I bought into Apple because I thought the company was 145 00:06:56,400 --> 00:06:59,400 misunderstood by the market. I thought that Warren Buffett 146 00:06:59,500 --> 00:07:01,900 was Correct. The company is not just a 147 00:07:01,900 --> 00:07:04,700 hardware seller. It is a company that and traps 148 00:07:04,700 --> 00:07:08,200 people in its massive High barrier moat and then it 149 00:07:08,200 --> 00:07:11,200 monetizes them, a thousand different ways and that 150 00:07:11,200 --> 00:07:14,600 monetization has led to substantial free cash flow gain 151 00:07:14,700 --> 00:07:17,000 for Apple over the past. Five years when I purchased 152 00:07:17,000 --> 00:07:21,700 apple back in 2017 their free cash flow per share was two 153 00:07:21,700 --> 00:07:26,000 dollars and 43 cents. Since then in 2022 they've done 154 00:07:26,200 --> 00:07:29,600 six dollars and 87 cents and free cash flow per share. 155 00:07:30,000 --> 00:07:32,800 So they've about 3x, the amount of free cash flow per share, 156 00:07:32,800 --> 00:07:35,600 that they've done through aggressive, growing of their 157 00:07:35,600 --> 00:07:37,800 free cash flow and doing BuyBacks. 158 00:07:38,100 --> 00:07:41,300 That combination has led to massive free cash flow per 159 00:07:41,300 --> 00:07:43,200 share. So apples results didn't come 160 00:07:43,200 --> 00:07:46,100 from expertly timing. This company, the results came 161 00:07:46,100 --> 00:07:48,800 from buying into a company. That's very high quality has 162 00:07:48,800 --> 00:07:52,200 very good economics and grew its free cash flow per share at a 163 00:07:52,207 --> 00:07:54,900 very high speed. Now, that's the type of company 164 00:07:54,900 --> 00:07:58,900 I'm looking for and that brings us to Microsoft Microsoft is a 165 00:07:58,900 --> 00:08:01,200 company that I've been buying. Into more recently because I 166 00:08:01,200 --> 00:08:04,300 consider the mo of Microsoft to be unassailable and in their 167 00:08:04,300 --> 00:08:06,200 earnings reports. It shows this. 168 00:08:06,300 --> 00:08:08,700 Now we have Microsoft's earnings report that they released 169 00:08:08,700 --> 00:08:12,200 yesterday after market close and this caused the stock to go up 170 00:08:12,200 --> 00:08:16,000 nearly 8% today. One thing that I like to do as 171 00:08:16,000 --> 00:08:18,200 an investor and this is a mentality that I've had to 172 00:08:18,200 --> 00:08:23,000 develop over a couple of years is to not let the the huge 173 00:08:23,000 --> 00:08:27,100 changes in price after a company reports earnings dictate whether 174 00:08:27,100 --> 00:08:31,400 I'm happy about the report or sad and that is difficult to do 175 00:08:31,600 --> 00:08:34,799 in many cases and this is the normal human behavior. 176 00:08:35,000 --> 00:08:38,299 If the company stock price goes up, investors are very happy, 177 00:08:38,600 --> 00:08:41,100 they're excited. The company is doing well and 178 00:08:41,100 --> 00:08:43,900 you're making money and it makes you automatically have a 179 00:08:43,900 --> 00:08:46,000 positive sentiment on their earnings report. 180 00:08:46,500 --> 00:08:50,000 But then if a company ever comes in below expectations or misses 181 00:08:50,000 --> 00:08:53,600 its earnings and 1/4 that can cause you to be sad, and if 182 00:08:53,600 --> 00:08:56,300 you're sat on a holding, you may sell it for the wrong reasons. 183 00:08:56,600 --> 00:08:59,300 So rather than judging the company based off of where the 184 00:08:59,308 --> 00:09:02,000 stock is, Trading. Currently, I like to dive into 185 00:09:02,000 --> 00:09:06,200 the report and try to unbiasedly form my own sentiment on the 186 00:09:06,200 --> 00:09:08,200 company. Whether I think the core 187 00:09:08,200 --> 00:09:10,600 indicators of the company are moving in the right direction, 188 00:09:10,900 --> 00:09:14,400 the core indicators being the actual Mo of the company, the 189 00:09:14,400 --> 00:09:17,800 market position, the pricing power, and the core economic 190 00:09:17,800 --> 00:09:20,300 drivers of intrinsic value. So having said that, let's go 191 00:09:20,300 --> 00:09:22,700 ahead and jump in and to set this earnings report first thing 192 00:09:22,700 --> 00:09:25,000 that we can look at right here. That gets investors. 193 00:09:25,000 --> 00:09:28,900 Excited is the word AI. We have a I right there, the 194 00:09:28,900 --> 00:09:31,700 first. Sentence of commentary from the 195 00:09:31,700 --> 00:09:34,100 CEO of the company. He says, the world's most 196 00:09:34,100 --> 00:09:37,100 advanced AI models are coming together with the world's most 197 00:09:37,100 --> 00:09:41,800 universal user interface natural language to create a new era of 198 00:09:41,800 --> 00:09:45,800 computing. This is Satya Nadella and he is 199 00:09:46,100 --> 00:09:49,900 he's a silver tongue. He really he's really a great 200 00:09:49,900 --> 00:09:53,100 speaker and he's enthusiastic and he's charming and he's 201 00:09:53,100 --> 00:09:56,800 exciting when I listen to the earnings call Satya Nadella 202 00:09:56,800 --> 00:09:59,700 seems he just seems more excited about what's going. 203 00:09:59,800 --> 00:10:03,800 Going on with Microsoft and AI. He really seems pumped when he's 204 00:10:03,800 --> 00:10:07,000 doing these earnings calls, and it's exciting to see a CEO. 205 00:10:07,300 --> 00:10:10,600 That seems so enthusiastic about the things that company are 206 00:10:10,600 --> 00:10:13,600 doing. This is a bit of a contrast from 207 00:10:13,800 --> 00:10:17,400 from Sundar pichai. Satya Nadella seems to really be 208 00:10:17,400 --> 00:10:19,900 enjoying what he's doing and this Competitive Edge. 209 00:10:19,900 --> 00:10:23,300 They have with Google now, he goes on to say that across 210 00:10:23,300 --> 00:10:26,100 Microsoft cloud. We are the platform of choice to 211 00:10:26,100 --> 00:10:28,900 help customers get the most value out of their digital 212 00:10:28,900 --> 00:10:30,600 spend. And Ation for this next 213 00:10:30,600 --> 00:10:33,600 generation of AI. So, right there, the first two 214 00:10:33,600 --> 00:10:35,700 sentences. He mentions a, i twice. 215 00:10:35,700 --> 00:10:38,600 So, we know the CEO is excited about the company and AI there, 216 00:10:38,600 --> 00:10:40,600 intermingling it with every part of the company. 217 00:10:40,900 --> 00:10:42,500 But let's go ahead and take a look at the numbers. 218 00:10:42,600 --> 00:10:45,200 Now, let's take a look at their revenue operating income and 219 00:10:45,200 --> 00:10:47,600 earnings per share growth. These are the main metrics of 220 00:10:47,600 --> 00:10:50,000 the company. We have the top line here which 221 00:10:50,000 --> 00:10:53,400 is 2022. Then we have the 2023 updated 222 00:10:53,400 --> 00:10:56,500 numbers, we can see the percentage change and the 223 00:10:56,500 --> 00:10:59,600 revenue. They grew Revenue by 7% but then 224 00:10:59,900 --> 00:11:02,700 Constant currency basis, they grew up by 10%. 225 00:11:03,000 --> 00:11:05,600 If you don't know what constant currency means, that means if 226 00:11:05,600 --> 00:11:09,400 you removed the impact of Foreign Exchange, Microsoft does 227 00:11:09,400 --> 00:11:11,400 a lot of business outside of the US. 228 00:11:11,700 --> 00:11:14,700 If you remove that impact, which is outside of their control, 229 00:11:14,900 --> 00:11:19,100 they grew their overall Revenue by 10%, which I think is very 230 00:11:19,100 --> 00:11:22,400 impressive in this environment. But then we have the operating 231 00:11:22,400 --> 00:11:26,300 income growing, 15% on a constant currency basis, we have 232 00:11:26,300 --> 00:11:29,600 net income growing 14%. We have the diluted earnings per 233 00:11:29,600 --> 00:11:31,300 share. We're growing 14%. 234 00:11:31,500 --> 00:11:34,100 These are wonderful numbers across the board. 235 00:11:34,300 --> 00:11:37,100 This shows a very healthy fast growing company. 236 00:11:37,600 --> 00:11:40,800 Now this actually beats my expectation, I thought that 237 00:11:40,900 --> 00:11:44,300 since Microsoft does so much business with such big companies 238 00:11:44,300 --> 00:11:46,700 and most of those companies are trying to optimize that 239 00:11:46,700 --> 00:11:50,300 Microsoft may be trying to swim upstream. 240 00:11:50,500 --> 00:11:52,800 They might they might have a little bit of pushback and they 241 00:11:52,800 --> 00:11:56,000 might not be able to grow as much but they just proved 242 00:11:56,000 --> 00:11:59,900 investors wrong time and time again, this company has such A 243 00:11:59,900 --> 00:12:03,600 strong Market position that they can churn out these impressive 244 00:12:03,600 --> 00:12:07,600 growth numbers year after year. After year, it is really a 245 00:12:07,600 --> 00:12:10,200 spectacle to see a company this strong. 246 00:12:10,200 --> 00:12:12,800 Now, if we look at this on a breakdown of the different 247 00:12:12,800 --> 00:12:16,100 business lines, we can see the same growth metrics, we see the 248 00:12:16,100 --> 00:12:19,200 productivity and business growth at 15%. 249 00:12:19,400 --> 00:12:23,100 The intelligent Cloud at 19 percent and then personal 250 00:12:23,100 --> 00:12:27,600 Computing - seven percent. That's right, this went down 251 00:12:27,600 --> 00:12:29,600 right now. People are not buying as much. 252 00:12:29,700 --> 00:12:34,600 And where I think what happened is during the covid, 2020. 2021, 253 00:12:35,000 --> 00:12:38,200 there is massive. Pull forward in the personal 254 00:12:38,200 --> 00:12:40,900 Computing category. Everyone went out and bought all 255 00:12:40,900 --> 00:12:42,600 the personal Computing stuff they needed. 256 00:12:42,600 --> 00:12:46,000 And now Microsoft is growing the software side of it. 257 00:12:46,000 --> 00:12:49,700 So this is not concerning to me, this is a part of business. 258 00:12:49,700 --> 00:12:53,300 Not every part of business is perfectly consistent every 259 00:12:53,300 --> 00:12:55,800 single year some of its going to be a little bit more cyclical. 260 00:12:55,800 --> 00:12:58,200 Especially when you have big things like a pandemic. 261 00:12:58,700 --> 00:13:02,200 So even though As part of the company shrunk, I don't think 262 00:13:02,200 --> 00:13:04,700 that this has any core issues with the company. 263 00:13:04,700 --> 00:13:08,200 I don't see this as actually an intrinsic - for the company. 264 00:13:08,400 --> 00:13:11,200 Now, Microsoft is a massive company that has all of these 265 00:13:11,200 --> 00:13:14,500 different products and services, they offer, they do a breakdown 266 00:13:14,500 --> 00:13:17,300 of all of it. And again it's just remarkable 267 00:13:17,300 --> 00:13:20,900 to see how almost the entire company is growing. 268 00:13:20,900 --> 00:13:25,100 The cloud Revenue, grew 25% office commercial products, 17% 269 00:13:25,400 --> 00:13:29,400 365, 18% the office consumer and Cloud. 270 00:13:29,700 --> 00:13:31,800 It's Services. Grew only 4%. 271 00:13:31,800 --> 00:13:36,000 We have LinkedIn growing. 10% LinkedIn has been a cash cow for 272 00:13:36,000 --> 00:13:37,900 Microsoft. One of their many good 273 00:13:37,900 --> 00:13:40,400 Acquisitions. We have Dynamics and cloud 274 00:13:40,400 --> 00:13:44,700 services growing 21%. Then we have Dynamic 365 growing 275 00:13:44,700 --> 00:13:48,500 nearly 30 percent, massive growth, for that category Azure 276 00:13:48,500 --> 00:13:52,500 and other cloud services, growing 31% Windows oam shrunk, 277 00:13:52,500 --> 00:13:54,700 nearly 30 percent. So that's one part of the 278 00:13:54,708 --> 00:13:58,300 business that's in Decline, even the Xbox content and services 279 00:13:58,300 --> 00:14:01,400 eked out, growth of 5%. And keep in mind, there's a lot 280 00:14:01,400 --> 00:14:05,200 of pull forward in 2024, the game category so it's impressive 281 00:14:05,200 --> 00:14:07,000 to see growth in that category as well. 282 00:14:07,400 --> 00:14:11,300 The search crew 13% and then devices the hardware shrunk. 283 00:14:11,300 --> 00:14:15,600 26%, again, I don't think that this is a long-term concern, 284 00:14:15,800 --> 00:14:18,600 they'll re-accelerate growth and Hardware over time, but 285 00:14:18,600 --> 00:14:20,600 everybody has the latest device right now. 286 00:14:20,700 --> 00:14:23,500 So in terms of overall, growth of the company, I see good 287 00:14:23,500 --> 00:14:26,400 metrics across the board. Healthy Revenue growth healthy 288 00:14:26,400 --> 00:14:29,600 operating income growth and even broken down by line item ice. 289 00:14:29,700 --> 00:14:32,600 I see a very healthy business where almost every segment of it 290 00:14:32,600 --> 00:14:35,200 is growing. And most importantly, all the 291 00:14:35,200 --> 00:14:38,300 most important segments of it are growing the fastest. 292 00:14:38,400 --> 00:14:41,400 So, Microsoft still has a very healthy growth profile. 293 00:14:41,600 --> 00:14:43,800 Now, moving on, we can take a look at Microsoft's balance 294 00:14:43,800 --> 00:14:47,600 sheet currently they have 104 billion dollars in cash, so they 295 00:14:47,600 --> 00:14:50,600 have a lot of cash on hand. If we put that in perspective, 296 00:14:50,600 --> 00:14:53,500 last quarter, they had ninety nine point five billion. 297 00:14:53,800 --> 00:14:56,800 So, they increase their cash balance by around five billion. 298 00:14:56,900 --> 00:14:59,600 Now, we look at their long-term debt and this is around 40. 299 00:14:59,700 --> 00:15:02,500 Two billion dollars. So 42 billion and we can look at 300 00:15:02,500 --> 00:15:05,500 the long-term debt over time notice the strong Trend since 301 00:15:05,500 --> 00:15:10,200 2016 of almost every quarter, the long-term debt going down 302 00:15:10,200 --> 00:15:12,600 the previous quarter. It was forty four billion so it 303 00:15:12,600 --> 00:15:15,400 has gone down again. So, of course, in aggregate, 304 00:15:15,400 --> 00:15:17,500 when you compare the cash balance to the debt of the 305 00:15:17,500 --> 00:15:20,700 company, it's about as good as it gets, they are bolstering 306 00:15:20,700 --> 00:15:23,100 their cash balance because they do want to by Activision 307 00:15:23,100 --> 00:15:25,000 Blizzard for seventy billion dollars. 308 00:15:25,300 --> 00:15:27,300 So, that's part of the reason they're holding so much cash 309 00:15:27,300 --> 00:15:29,400 right now and we'll talk about that deal. 310 00:15:29,700 --> 00:15:32,800 A bit later but as of right now, Microsoft has one of the top 311 00:15:32,800 --> 00:15:34,200 three balance sheets in the world. 312 00:15:34,300 --> 00:15:35,900 Now finally we get to the cash flow statement. 313 00:15:35,900 --> 00:15:38,000 This is where I get to my favorite metric of the company 314 00:15:38,000 --> 00:15:41,100 which is the free cash flow. We can do a simple calculation 315 00:15:41,100 --> 00:15:44,600 of the traditional free cash flow calculation, which is the 316 00:15:44,600 --> 00:15:48,200 net cash from operations, twenty four point, four billion and 317 00:15:48,200 --> 00:15:52,000 then we subtract out the capex which is 6 billion, six hundred 318 00:15:52,000 --> 00:15:55,100 dollars, so we have 17 billion eight hundred dollars in 319 00:15:55,200 --> 00:15:57,200 traditional free cash flow for the company. 320 00:15:57,600 --> 00:16:01,200 Now another thing that I like to do Which is not traditional but 321 00:16:01,200 --> 00:16:03,000 it's my adjusted calculation of free. 322 00:16:03,000 --> 00:16:06,000 Cash flow is to also subtract out the stock based compensation 323 00:16:06,000 --> 00:16:08,900 and see what that leaves us now. The stock based compensation 324 00:16:08,900 --> 00:16:12,400 came in at 2 billion, 465 million for the quarter. 325 00:16:12,400 --> 00:16:16,400 If we subtract that out that leaves us with an adjusted free. 326 00:16:16,400 --> 00:16:20,100 Cash flow 15 billion 369 million in adjusted. 327 00:16:20,100 --> 00:16:23,200 Free cash flow for the quarter. This is free cash. 328 00:16:23,200 --> 00:16:26,200 Flow - stock-based Compu. Interesting thing is the free 329 00:16:26,200 --> 00:16:29,500 cash flow is actually lower this quarter than it was one year 330 00:16:29,500 --> 00:16:31,600 ago. Ago, a year ago, they reach that 331 00:16:31,600 --> 00:16:34,700 huge peak of 20 billion dollars in free cash flow. 332 00:16:35,000 --> 00:16:37,200 So it went down to 17 billion dollars. 333 00:16:37,500 --> 00:16:40,100 So that's a little bit of a negative spin on it. 334 00:16:40,100 --> 00:16:43,000 The free cash flow went down a little bit, but on a positive 335 00:16:43,000 --> 00:16:48,500 spin last quarter, they had a peak of 2.54 billion, in stock 336 00:16:48,500 --> 00:16:50,900 based compensation. But we see hair that their stock 337 00:16:50,900 --> 00:16:54,100 based compactly went down sequentially, over the past 338 00:16:54,100 --> 00:16:56,200 quarter. So Microsoft is breaking their 339 00:16:56,200 --> 00:16:59,300 trend of raising stock-based, compensation single quarter. 340 00:16:59,700 --> 00:17:03,600 Now it's actually starting to go back down so this is overall a 341 00:17:03,600 --> 00:17:05,599 good quarter. The free cash flow is more in 342 00:17:05,599 --> 00:17:08,200 line with its history. And the stock-based compensation 343 00:17:08,200 --> 00:17:11,200 fence is going down. It shows up, Microsoft is taking 344 00:17:11,200 --> 00:17:14,099 concern over their expenses. So now that we've looked at the 345 00:17:14,099 --> 00:17:16,599 earnings report of Microsoft, we've delved into the numbers, 346 00:17:16,599 --> 00:17:18,300 we've seen the development of the company. 347 00:17:18,599 --> 00:17:22,099 It puts a little context of why investors are so enthused about 348 00:17:22,099 --> 00:17:24,700 this company. It's up 8% and the games 349 00:17:24,700 --> 00:17:28,099 continue to compound, in my opinion, I still think that 350 00:17:28,099 --> 00:17:31,700 Microsoft remains As in its dominant growing position with a 351 00:17:31,708 --> 00:17:35,500 very long runway for growth, their Cloud business, alone is 352 00:17:35,500 --> 00:17:38,100 great, their video game, business is great, their office 353 00:17:38,100 --> 00:17:40,800 products are great, and the fact that Satya Nadella has really 354 00:17:40,800 --> 00:17:44,800 taken the mantle of the AI. Qing from Google has been a very 355 00:17:44,800 --> 00:17:46,600 positive development for this stock. 356 00:17:46,600 --> 00:17:49,500 So I think investors should be very pleased with this quarter. 357 00:17:49,500 --> 00:17:52,500 I think the reaction in the stock going up is warranted and 358 00:17:52,500 --> 00:17:56,300 appropriate but I don't invest in companies based on quarter to 359 00:17:56,300 --> 00:17:59,500 quarter reports, I invest in them based on the intrinsic 360 00:17:59,500 --> 00:18:01,500 value. Your drivers and the mode when I 361 00:18:01,500 --> 00:18:05,000 was buying Microsoft and this is my first by of the company. 362 00:18:05,400 --> 00:18:09,800 Back in December, 20, 22, and 2017, I bought it at a share 363 00:18:09,800 --> 00:18:14,100 price of $85 per share. Nothing has changed every single 364 00:18:14,100 --> 00:18:16,300 quarter. I see the developments and I see 365 00:18:16,300 --> 00:18:18,900 that Microsoft maintains its incredible mode. 366 00:18:19,200 --> 00:18:22,800 So as of right now, I have no plans on selling any of this 367 00:18:22,800 --> 00:18:24,700 company. Now, next up, we also have 368 00:18:24,700 --> 00:18:28,100 Google's earnings report, unlike Microsoft, this company's only 369 00:18:28,100 --> 00:18:32,100 up half a percentage today Day and Google Remains the optically 370 00:18:32,100 --> 00:18:34,900 cheaper company. So even though Google trades at 371 00:18:34,900 --> 00:18:38,300 a much lower PE ratio than Microsoft, it's not having quite 372 00:18:38,300 --> 00:18:40,500 as good of a day, but let's go ahead and take a look at the 373 00:18:40,500 --> 00:18:42,200 earnings report and see what we can find. 374 00:18:42,300 --> 00:18:44,400 Now, the very top of the earnings report, we have another 375 00:18:44,400 --> 00:18:47,400 one of these nice overview quotes from the CEO of the 376 00:18:47,400 --> 00:18:50,600 company, which is Sundar pichai. And how much do you want to bet 377 00:18:50,600 --> 00:18:54,600 he mentions AI in this quote, he says, we are pleased with our 378 00:18:54,600 --> 00:18:57,000 business performance in the first quarter, was searched 379 00:18:57,000 --> 00:19:00,900 performing well, and momentum and Cloud, we Reduced important 380 00:19:00,900 --> 00:19:04,800 product updates, incurred in deep computer science and AI. 381 00:19:05,200 --> 00:19:08,500 Our North Star is providing the most helpful answers for our 382 00:19:08,500 --> 00:19:10,800 users. And we see huge opportunities 383 00:19:10,800 --> 00:19:14,500 ahead continuing our long term track record of innovation 384 00:19:14,600 --> 00:19:16,200 there. You have the nice overview from 385 00:19:16,200 --> 00:19:17,900 the CEO. Now, let's go ahead and take a 386 00:19:17,900 --> 00:19:20,300 look at the actual numbers. Now, we can first look at the 387 00:19:20,300 --> 00:19:23,300 overall growth of the company. This is a big concern for big 388 00:19:23,300 --> 00:19:26,900 Tech right now, they did so well after the pandemic and growth 389 00:19:26,900 --> 00:19:29,500 has slowed down a lot over the past. 390 00:19:29,600 --> 00:19:31,100 Year. Google grew their overall 391 00:19:31,100 --> 00:19:34,300 revenue on a constant currency basis at six percent 392 00:19:34,300 --> 00:19:36,800 year-over-year. So comparing that to Microsoft, 393 00:19:36,800 --> 00:19:40,100 Microsoft grew up, 10%, Google grew at 6%. 394 00:19:40,200 --> 00:19:43,000 That shows you the differences in the nature of the business. 395 00:19:43,400 --> 00:19:46,200 Google is largely an advertising business. 396 00:19:46,400 --> 00:19:50,300 Advertising is based on supply and demand, how much advertisers 397 00:19:50,300 --> 00:19:52,600 want to pay Google? How much demand there is for the 398 00:19:52,600 --> 00:19:55,100 ad Market. It's a little bit more volatile 399 00:19:55,100 --> 00:19:58,400 than Microsoft's business. Microsoft has a lot of licenses, 400 00:19:58,600 --> 00:20:01,100 they have a lot of subscribers. Chin's, most of Microsoft's 401 00:20:01,100 --> 00:20:05,300 business is reoccurring Revenue, so Microsoft has better control 402 00:20:05,300 --> 00:20:08,700 over their growth, then Google does a lot of people are bashing 403 00:20:08,700 --> 00:20:12,200 Google for only growing at 6% constant currency or three 404 00:20:12,200 --> 00:20:14,900 percent total. I don't think this is so bad. 405 00:20:15,000 --> 00:20:17,700 I think this is actually good growth considering how quickly 406 00:20:17,700 --> 00:20:19,500 they grew just a couple years ago. 407 00:20:20,000 --> 00:20:23,100 So I don't really see this as a huge - I think six percent 408 00:20:23,100 --> 00:20:26,000 growth is pretty strong considering the context here. 409 00:20:26,300 --> 00:20:28,400 Another thing we can look at with Google is their earnings 410 00:20:28,400 --> 00:20:31,200 per share diluted. Added EPS was down your over 411 00:20:31,200 --> 00:20:33,300 here a little bit. That's another thing that's 412 00:20:33,300 --> 00:20:35,800 going to hit Google and I think a part of the reason why the 413 00:20:35,800 --> 00:20:38,800 company's not not having the best day today in the market. 414 00:20:38,900 --> 00:20:41,800 But if we go down and dive into the segmented operations, I 415 00:20:41,800 --> 00:20:44,200 think this gives the best idea of what's happening with this 416 00:20:44,200 --> 00:20:46,400 company. Starting off the search business 417 00:20:46,400 --> 00:20:49,700 is growing thirty nine billion to 40 billion dollars in 418 00:20:49,700 --> 00:20:51,400 revenue. For the quarter then we have the 419 00:20:51,400 --> 00:20:52,700 YouTube segments of the business. 420 00:20:53,000 --> 00:20:56,300 This actually declined year over year so it went down ever so 421 00:20:56,300 --> 00:20:59,400 slightly from six point eight, six billion 26.69. 422 00:20:59,600 --> 00:21:04,000 And I think that this is one little hurdle in the long-term 423 00:21:04,000 --> 00:21:06,900 growth of YouTube. If I Had A guess, ten years from 424 00:21:06,900 --> 00:21:09,100 now, YouTube will be much bigger in the terms of Revenue. 425 00:21:09,100 --> 00:21:12,200 It does then it does currently. So I don't consider this an 426 00:21:12,200 --> 00:21:15,900 intrinsic value problem with the company or that YouTube's in 427 00:21:15,900 --> 00:21:18,200 secular decline. I think the company is just 428 00:21:18,200 --> 00:21:21,000 facing some minor headwinds in the advertising market. 429 00:21:21,000 --> 00:21:23,100 Now, the next segment of business that I want to look at 430 00:21:23,100 --> 00:21:26,100 is one that I think is the most important developing story for 431 00:21:26,100 --> 00:21:29,200 the Google thesis, which is the Google Cloud growth. 432 00:21:29,800 --> 00:21:33,000 If this becomes highly profitable and a growing segment 433 00:21:33,000 --> 00:21:36,900 of the business, it will be a core intrinsic value driver for 434 00:21:36,900 --> 00:21:39,500 this company. And it did grow substantially 435 00:21:39,500 --> 00:21:43,000 over the past year from 5.8 billion to seven point four 436 00:21:43,000 --> 00:21:46,200 billion in Revenue. That is a 28 percent growth 437 00:21:46,200 --> 00:21:49,200 rate. So, very strong growth in Cloud, 438 00:21:49,400 --> 00:21:52,300 even with a lot of companies trying to optimize their Cloud 439 00:21:52,300 --> 00:21:54,000 spend. So, I'm very excited to see that 440 00:21:54,000 --> 00:21:56,700 cloud growth with Google. Now, another part of this 441 00:21:56,700 --> 00:22:00,400 company that I've been concerned about for over A year I was 442 00:22:00,400 --> 00:22:03,200 concerned about this before it was popular to be concerned 443 00:22:03,200 --> 00:22:06,300 about this, which is the number of employees that Google hires, 444 00:22:06,500 --> 00:22:08,800 I think they're hiring too many employees to quickly. 445 00:22:08,800 --> 00:22:11,400 Growing the company's head, count to a quickly. 446 00:22:11,800 --> 00:22:15,200 And at the numbers here, it shows a lot of increase in 447 00:22:15,200 --> 00:22:17,400 employees, but they have a note here. 448 00:22:17,700 --> 00:22:21,300 They say that the number of employees included, all of the 449 00:22:21,300 --> 00:22:24,200 employees affected by the reduction of our Workforce. 450 00:22:24,600 --> 00:22:27,900 So they're basically saying that this number is not accurate 451 00:22:28,000 --> 00:22:32,100 because that number the 90,000 includes all the employees that 452 00:22:32,100 --> 00:22:35,000 we recently let go. So the real numbers, much lower 453 00:22:35,000 --> 00:22:37,500 and we'll know that number specifically in the next 454 00:22:37,500 --> 00:22:38,900 quarter. Now, moving on, we get to the 455 00:22:38,900 --> 00:22:41,000 operating income or loss of these different segments. 456 00:22:41,300 --> 00:22:44,000 For example, Google services, it made a lot of money. 457 00:22:44,000 --> 00:22:46,200 Twenty one point seven billion, that's great. 458 00:22:46,400 --> 00:22:49,500 But then we get to Google Cloud which had a surprising result 459 00:22:49,500 --> 00:22:51,500 here. It went from losing seven 460 00:22:51,500 --> 00:22:55,100 hundred and six million dollars last year to now having an 461 00:22:55,100 --> 00:22:59,100 operating income of 191 million. It's in the green now. 462 00:22:59,600 --> 00:23:02,800 My first reaction was, this is remarkable if they really made 463 00:23:02,800 --> 00:23:05,400 it that profitable that quickly, that's incredible. 464 00:23:05,500 --> 00:23:08,200 But when we read in the notations, they say that a lot 465 00:23:08,200 --> 00:23:11,600 of this was a result of a change in amortization for the Google 466 00:23:11,600 --> 00:23:13,700 Cloud. So basically, they changed 467 00:23:13,700 --> 00:23:16,900 around some accounting which made it go profitable much 468 00:23:16,900 --> 00:23:20,100 faster than expected. But even netting out that change 469 00:23:20,100 --> 00:23:22,900 in accounting, it was still far above schedule. 470 00:23:22,900 --> 00:23:25,300 But either way, I see this as a very positive development for 471 00:23:25,300 --> 00:23:29,100 Google, having growth in the operating income of Google 472 00:23:29,100 --> 00:23:31,700 Cloud. Year over year is going to be a 473 00:23:31,700 --> 00:23:34,700 long-term intrinsic value driver for the company. 474 00:23:34,900 --> 00:23:38,400 It will become a key part of it. I think that Google Cloud could 475 00:23:38,400 --> 00:23:41,700 become a bigger more important part than YouTube for the 476 00:23:41,700 --> 00:23:44,000 company. That's how bullish I am on this 477 00:23:44,000 --> 00:23:46,100 segment. So we'll see what happens in the 478 00:23:46,100 --> 00:23:49,300 following year but my guest is this number is going to continue 479 00:23:49,300 --> 00:23:52,300 to grow at a rapid Pace. Other bets on the other hand, is 480 00:23:52,300 --> 00:23:54,200 a money furnace. They throw money on there. 481 00:23:54,200 --> 00:23:56,300 They light it on fire. I'm not bullish. 482 00:23:56,300 --> 00:23:58,400 On this part of Google. I wish they would focus more on 483 00:23:58,400 --> 00:24:00,600 getting an Roi. Investing in parts of the 484 00:24:00,600 --> 00:24:03,500 company where the expected return is very attractive. 485 00:24:03,600 --> 00:24:05,300 Now, moving on, we get to the balance sheet of Google. 486 00:24:05,300 --> 00:24:09,000 The company's current cash balance right now is very high. 487 00:24:09,100 --> 00:24:12,500 It's currently at 115 billion dollars. 488 00:24:12,900 --> 00:24:16,200 Google has a problem and their problem is that they're to 489 00:24:16,200 --> 00:24:19,100 profitable. They make too much cash and then 490 00:24:19,100 --> 00:24:21,700 they sit the cash in their cash balance. 491 00:24:21,900 --> 00:24:24,700 They're not doing effective things with it to earn a very 492 00:24:24,700 --> 00:24:27,700 high Roi. Now, Google could do something 493 00:24:27,700 --> 00:24:29,400 with all of this cash they could look. 494 00:24:29,500 --> 00:24:32,100 In the market and they could try to find a very high quality 495 00:24:32,100 --> 00:24:35,200 company that's selling at a very reasonable price. 496 00:24:35,500 --> 00:24:38,800 A company that they know is probably undervalued and they 497 00:24:38,800 --> 00:24:42,800 could try to buy that company by out more shares in that company. 498 00:24:43,400 --> 00:24:46,000 Of course they could do share BuyBacks, that's what they 499 00:24:46,000 --> 00:24:48,000 should be doing with their cash balance. 500 00:24:48,300 --> 00:24:53,700 Google has 115 billion dollars in cash and their total debt is 501 00:24:53,700 --> 00:24:55,800 minuscule. Look at the amount of long-term 502 00:24:55,800 --> 00:25:00,200 debt, they have thirteen point six billion, so they Ninety 503 00:25:00,200 --> 00:25:04,200 billion dollars in cash, sitting there while their company is 504 00:25:04,200 --> 00:25:06,600 undervalued. And in my opinion, they should 505 00:25:06,600 --> 00:25:10,500 be using this aggressively to do share BuyBacks at an accelerated 506 00:25:10,500 --> 00:25:12,200 rate of what they're doing right now. 507 00:25:12,300 --> 00:25:15,000 Now on that note, they did authorize another 70 billion 508 00:25:15,000 --> 00:25:17,400 dollars in share BuyBacks. So that's what's authorized. 509 00:25:17,400 --> 00:25:19,800 But Google should be spending all of this money. 510 00:25:20,000 --> 00:25:22,400 They should spend it because I have nothing better to do with 511 00:25:22,400 --> 00:25:24,100 it. There are too big and too 512 00:25:24,100 --> 00:25:27,300 monopolistic of a company to reasonably have a large 513 00:25:27,300 --> 00:25:29,300 acquisition. So there's really nothing. 514 00:25:29,500 --> 00:25:32,000 Else they can do then buy back their own stock or pay a 515 00:25:32,000 --> 00:25:33,700 dividend. Now, if we move on to the cash 516 00:25:33,700 --> 00:25:36,500 flow statement, we can calculate the free cash flow hair. 517 00:25:36,700 --> 00:25:38,700 And look at how the free cash flow and the stock-based 518 00:25:38,700 --> 00:25:42,800 compensation is doing well, first calculate, the traditional 519 00:25:42,800 --> 00:25:45,800 free cash flow. We get the net cash provided by 520 00:25:45,800 --> 00:25:49,500 operating activities, which is twenty three point five billion 521 00:25:49,500 --> 00:25:52,200 dollars. And then we subtract this number 522 00:25:52,200 --> 00:25:54,400 right here, which is the capex of the company. 523 00:25:54,600 --> 00:25:56,600 Six point two eight, nine billion dollars. 524 00:25:56,800 --> 00:26:01,400 The result of that is 17 billion. 26 million dollars in 525 00:26:01,400 --> 00:26:04,100 free cash flow. This is a traditional free cash 526 00:26:04,100 --> 00:26:06,900 flow metric. Now, of course, on this show, we 527 00:26:06,900 --> 00:26:09,800 look at another expense, which is a stock based compensation 528 00:26:09,800 --> 00:26:13,600 expense because you don't really get this free cash flow if the 529 00:26:13,600 --> 00:26:16,600 company is generating it by diluting you the shareholder. 530 00:26:17,000 --> 00:26:20,200 So, if we adjust out the stock based compensation expense, 531 00:26:20,600 --> 00:26:25,300 which is a staggering five billion 284 million. 532 00:26:25,700 --> 00:26:29,300 Keep in mind, that is twice as much as Microsoft paid in stock. 533 00:26:29,400 --> 00:26:32,200 Base compensation. Last quarter we get a result 534 00:26:32,200 --> 00:26:35,400 that is 11 billion, nine hundred and forty-two million. 535 00:26:35,500 --> 00:26:38,100 We can see that the stock based compensation really hits the 536 00:26:38,100 --> 00:26:40,800 number there, the before, and after is pretty Stark. 537 00:26:41,100 --> 00:26:44,600 So the stock base camp went up around 700 million dollars a 538 00:26:44,608 --> 00:26:47,200 year over year. I think this is going to go back 539 00:26:47,200 --> 00:26:49,300 down because they're laying off employees and they're still 540 00:26:49,300 --> 00:26:52,300 having to pay Severance has and stock-based compensation 541 00:26:52,300 --> 00:26:55,200 packages to them. But once that works its way out, 542 00:26:55,300 --> 00:26:58,400 this number should go down which will help the free cash flow 543 00:26:58,400 --> 00:27:00,800 going forward. Another thing I'll point out is 544 00:27:00,800 --> 00:27:04,000 this free cash flow has helped immensely by the huge Decline 545 00:27:04,200 --> 00:27:06,300 and capex year over year. Last year. 546 00:27:06,300 --> 00:27:09,000 They did nine, point seven eight, six billion dollars in 547 00:27:09,000 --> 00:27:11,100 capex. This year they are only doing 548 00:27:11,200 --> 00:27:14,600 six point two, eight nine. So the decline in capex creates 549 00:27:14,600 --> 00:27:16,900 a more efficient business. They're able to generate more 550 00:27:16,900 --> 00:27:19,700 free cash flow if they can get both the stock based 551 00:27:19,700 --> 00:27:23,000 compensation expense down and the capex expense down. 552 00:27:23,300 --> 00:27:25,900 This free cash flow will explode. 553 00:27:26,000 --> 00:27:28,700 You'll see huge numbers there and that is a great story line 554 00:27:28,700 --> 00:27:30,600 for Google. The company is growing its free 555 00:27:30,600 --> 00:27:33,600 cash flow substantially by getting all different expenses 556 00:27:33,600 --> 00:27:36,900 down now moving on from Google, we have metas results here and 557 00:27:36,900 --> 00:27:40,400 like we've been seeing big Tech is on fire with these earnings 558 00:27:40,400 --> 00:27:42,600 reports that is up nine and a half percent. 559 00:27:42,600 --> 00:27:44,800 After hours. Another huge Spike, like, 560 00:27:44,800 --> 00:27:47,700 Microsoft's so far. Microsoft has done great. 561 00:27:47,700 --> 00:27:49,700 Google's done. Well, let's go ahead and take a 562 00:27:49,700 --> 00:27:52,000 look at meta platforms. Now, I'll start off with the 563 00:27:52,000 --> 00:27:55,000 opening phrase and quote from the CEO of the company Mark 564 00:27:55,000 --> 00:27:57,400 Zuckerberg will see if he mentions a i in it. 565 00:27:57,500 --> 00:27:59,300 Quote we had a good quarter and our community. 566 00:27:59,500 --> 00:28:03,200 Can use to grow now. He says, Rai work is driving 567 00:28:03,200 --> 00:28:07,900 good results across our apps and businesses right there 343 we 568 00:28:07,900 --> 00:28:10,900 have a, I mentioned in all the earnings reports and the opening 569 00:28:10,900 --> 00:28:14,200 quotes he goes on to say, we're also becoming more efficient, so 570 00:28:14,200 --> 00:28:17,200 we can build better products, faster, and put ourselves in a 571 00:28:17,200 --> 00:28:20,300 stronger position to deliver on our long-term Vision. 572 00:28:20,700 --> 00:28:24,000 So, there, we have two really key words that investors want to 573 00:28:24,000 --> 00:28:26,000 hear. We have a i and we have 574 00:28:26,000 --> 00:28:28,100 efficiency. It has been the year of 575 00:28:28,100 --> 00:28:31,100 efficiency for Etta. And that's had a staggeringly 576 00:28:31,100 --> 00:28:34,500 good impact on the stock price. Now let's go ahead and go over 577 00:28:34,500 --> 00:28:35,700 to the financial highlights hair. 578 00:28:35,700 --> 00:28:37,900 They have the revenue growth of the company, the revenue, grew, 579 00:28:37,900 --> 00:28:40,300 three percent. So this is right in line with 580 00:28:40,300 --> 00:28:42,600 Google's growth. I don't believe this is the 581 00:28:42,600 --> 00:28:45,000 constant currency growth if I'm not mistaken. 582 00:28:45,200 --> 00:28:47,200 This is not on a constant currency basis. 583 00:28:47,300 --> 00:28:50,400 So we have three percent growth and then we have expenses of the 584 00:28:50,400 --> 00:28:55,300 company growing by 10% that doesn't look so good. 585 00:28:55,600 --> 00:29:00,400 I don't love the the expenses outgrowing the Maybe he 586 00:29:00,400 --> 00:29:02,900 addresses this or Mark Zuckerberg will address that 587 00:29:02,900 --> 00:29:05,300 later in the call but it's supposed to be the year of 588 00:29:05,300 --> 00:29:07,300 efficiency or expenses are going down. 589 00:29:07,500 --> 00:29:10,400 They're not growing at a faster rate than the revenue of the 590 00:29:10,400 --> 00:29:13,900 company but here we see expenses growing faster than Revenue. 591 00:29:13,900 --> 00:29:16,900 We're not off to a great start. We have the operating margins. 592 00:29:17,400 --> 00:29:21,300 Actually declining a bit for the company going from 31 percent to 593 00:29:21,300 --> 00:29:24,400 25 percent. Don't love seeing that. 594 00:29:24,400 --> 00:29:27,100 That's not a great thing. Let's go ahead and move on to 595 00:29:27,100 --> 00:29:29,600 the next line item here we have the net income. 596 00:29:29,700 --> 00:29:34,800 I'm going down year over year seven point four billion to 5.7 597 00:29:34,800 --> 00:29:37,400 billion. Not exactly the best numbers 598 00:29:37,400 --> 00:29:39,100 here. Even the diluted earnings per 599 00:29:39,100 --> 00:29:44,900 share are down year over year. So 2.72 22.2 and this is why I 600 00:29:44,908 --> 00:29:47,200 want to loop back and just look at the stock price. 601 00:29:47,200 --> 00:29:51,800 The stock is up huge after-hours up, almost 9%, which gives you 602 00:29:51,808 --> 00:29:54,300 the impression that the company's doing amazing, and all 603 00:29:54,300 --> 00:29:56,500 the numbers look good. But then we look at the numbers 604 00:29:56,500 --> 00:29:58,600 and they don't seem to quite aligned with the sentiment of 605 00:29:58,600 --> 00:30:00,700 the market now. So far The financial metrics 606 00:30:00,700 --> 00:30:03,600 don't paint a positive picture, but when we get down to the 607 00:30:03,600 --> 00:30:07,500 operational and other financial highlights, this paints a far 608 00:30:07,500 --> 00:30:11,100 more positive picture where the amount of daily active users on 609 00:30:11,100 --> 00:30:14,300 their various apps are increasing by 5% year over year, 610 00:30:14,600 --> 00:30:17,400 five percent monthly active users, Facebook users, 611 00:30:17,400 --> 00:30:20,300 increasing, Facebook, monthly, active users, increasing. 612 00:30:20,600 --> 00:30:23,700 All of these core metrics are moving in the right direction 613 00:30:24,100 --> 00:30:27,200 and I think that investors are saying all right maybe the 614 00:30:27,200 --> 00:30:30,300 financials don't look great right now but the In terms of 615 00:30:30,300 --> 00:30:33,400 its user base is still growing, which is a very positive 616 00:30:33,400 --> 00:30:35,100 fundamental indicator of the company. 617 00:30:35,100 --> 00:30:37,500 So Meta. Still growing as a platform, the 618 00:30:37,500 --> 00:30:39,700 financial metrics, don't look great, but they're probably 619 00:30:39,700 --> 00:30:42,500 better than what the investors were expecting this quarter and 620 00:30:42,500 --> 00:30:45,200 then we go into some other important details here. 621 00:30:45,500 --> 00:30:48,400 One thing that I want to point out is Mark Zuckerberg has 622 00:30:48,400 --> 00:30:52,100 really pivoted towards this year of efficiency, focusing on 623 00:30:52,100 --> 00:30:55,500 optimizing the business laying off, some employees, making it 624 00:30:55,500 --> 00:30:58,400 so that the business is far more efficient and then funneling 625 00:30:58,400 --> 00:31:00,100 money in Dubai. Backs. 626 00:31:00,400 --> 00:31:03,600 When we look at this metric right here, amount of diluted 627 00:31:03,600 --> 00:31:06,600 shares outstanding, it went from two billion, seven hundred and 628 00:31:06,600 --> 00:31:09,600 forty-two million to two million five, hundred and ninety-six 629 00:31:09,600 --> 00:31:12,000 million. So they bought back well over 630 00:31:12,000 --> 00:31:15,600 100 million shares. That is over a five percent 631 00:31:15,600 --> 00:31:19,200 reduction in the amount of shares outstanding, huge, share 632 00:31:19,200 --> 00:31:21,600 reduction. So, that's a big factor in this 633 00:31:21,600 --> 00:31:24,700 stock right now. Meta is a buyback machine. 634 00:31:24,700 --> 00:31:27,000 Now, moving on to the cash flow statement of the company. 635 00:31:27,000 --> 00:31:30,800 When I do a simple calculation of their free cash flow, I get 7 636 00:31:30,800 --> 00:31:34,800 billion 156 million that is their traditional free cash flow 637 00:31:34,800 --> 00:31:38,100 calculation and that puts them right around here. 638 00:31:38,100 --> 00:31:39,800 So next quarter will look like this. 639 00:31:39,800 --> 00:31:43,800 When it's updated on qual trim, not a bad free cash flow quarter 640 00:31:43,800 --> 00:31:47,000 based off their past couple of years, but it's still below 641 00:31:47,000 --> 00:31:49,000 where they were a couple years ago. 642 00:31:49,300 --> 00:31:51,100 So we're not quite where we were before. 643 00:31:51,200 --> 00:31:53,600 Now if we adjust the free cash flow for the stock-based 644 00:31:53,600 --> 00:31:57,800 compensation, we subtract out three billion 51 million, which 645 00:31:57,800 --> 00:31:59,500 gives us a total of 4 billion at one. 646 00:31:59,800 --> 00:32:01,300 And five million. So that's the amount of free 647 00:32:01,300 --> 00:32:03,900 cash flow - the stock based compensation overall. 648 00:32:03,900 --> 00:32:06,800 Not the worst quarter in terms of free cash flow when I'm 649 00:32:06,800 --> 00:32:09,600 looking at meta. However, I see some things that 650 00:32:09,600 --> 00:32:11,900 I don't love to see with this company. 651 00:32:12,200 --> 00:32:16,500 The capex continues to increase even year over year with their 652 00:32:16,500 --> 00:32:20,200 massive spending, they've done on AI and on Oculus, on reality 653 00:32:20,200 --> 00:32:24,000 Labs, all of that is adding up to huge capex expense. 654 00:32:24,200 --> 00:32:28,800 Six billion 842 million is massive on a quarterly basis and 655 00:32:28,800 --> 00:32:31,300 I know that they've done Layoffs, recently, but their 656 00:32:31,300 --> 00:32:34,400 share based compensation was a substantial increase 657 00:32:34,400 --> 00:32:37,200 year-over-year going up. Another 500 million three 658 00:32:37,200 --> 00:32:39,300 billion in stock based compensation for the company. 659 00:32:39,300 --> 00:32:43,100 The size of meta is quite a bit. So these two factors the capex 660 00:32:43,100 --> 00:32:46,100 and the stock-based compensation really eating into their free 661 00:32:46,100 --> 00:32:48,400 cash flow. So overall, I don't love the 662 00:32:48,400 --> 00:32:50,900 developments in terms of the financials of meta. 663 00:32:50,900 --> 00:32:53,200 It's a company that I don't currently own because I believe 664 00:32:53,200 --> 00:32:56,500 there's better options but this is the game of investing which 665 00:32:56,500 --> 00:33:01,000 is a game of expectations versus reality and A has surpassed 666 00:33:01,000 --> 00:33:04,100 their expectations, both in the amount of Revenue and their 667 00:33:04,100 --> 00:33:07,200 earnings per share and their amount of daily active users, 668 00:33:07,200 --> 00:33:10,500 and monthly active users. They either met or surpassed 669 00:33:10,500 --> 00:33:14,000 investors expectations which is why the stock is up big after 670 00:33:14,000 --> 00:33:15,800 hours. So congratulations to met 671 00:33:15,800 --> 00:33:17,900 investors. Now moving on, we have this news 672 00:33:17,900 --> 00:33:21,900 that Microsoft 75 billion dollar deal with Activision Blizzard is 673 00:33:21,900 --> 00:33:26,800 now hitting a roadblock, the UK has decided that they are going 674 00:33:26,800 --> 00:33:29,300 to block the deal. They rejected it saying that it 675 00:33:29,300 --> 00:33:32,300 would hurt competition in the video gaming industry. 676 00:33:33,300 --> 00:33:37,000 Now, of course, I could go in and highlight how this isn't 677 00:33:37,000 --> 00:33:39,100 true. How Microsoft buying activation 678 00:33:39,100 --> 00:33:40,800 does not hurt the video game industry. 679 00:33:41,100 --> 00:33:43,700 How the only company that's highly anti-competitive. 680 00:33:43,700 --> 00:33:47,100 In this industry is Sony with the massive amount of exclusive 681 00:33:47,100 --> 00:33:49,700 titles, they have, we could go into the details of that 682 00:33:49,700 --> 00:33:52,500 argument. But before doing that, I just 683 00:33:52,500 --> 00:33:55,200 want to take a step back and restate. 684 00:33:55,200 --> 00:34:00,000 What's Happening Here, Microsoft a US based company is Going to 685 00:34:00,000 --> 00:34:03,200 by Activision Blizzard, another us company. 686 00:34:03,600 --> 00:34:07,700 So what we have is a US company trying to buy another us company 687 00:34:08,199 --> 00:34:11,900 and while that's going on, the UK is saying, you can't do that. 688 00:34:12,300 --> 00:34:15,400 My question is, why is Microsoft concern with what the UK thinks 689 00:34:15,400 --> 00:34:18,400 about this deal? Why should they care at all? 690 00:34:18,699 --> 00:34:21,900 If the UK wants to block this deal and they don't like that, 691 00:34:21,900 --> 00:34:25,800 it happens, tough Microsoft should still go through and by 692 00:34:25,800 --> 00:34:29,800 Activision Blizzard if the UK decides that they don't Want to 693 00:34:29,808 --> 00:34:33,400 do business with Microsoft and they're going to block Microsoft 694 00:34:33,400 --> 00:34:36,699 from selling products in the UK. And that's a battle, they can 695 00:34:36,699 --> 00:34:40,900 fight, but the fact that a government of a smaller country, 696 00:34:41,000 --> 00:34:45,199 on the other side of the ocean can come in and stop a deal from 697 00:34:45,199 --> 00:34:47,800 one US company. Buying, another us company 698 00:34:48,000 --> 00:34:50,400 right? At the surface level is crazy. 699 00:34:50,500 --> 00:34:53,699 Microsoft should not be listening or caring about the 700 00:34:53,699 --> 00:34:57,100 opinion of the UK on whether or not they should by Activision 701 00:34:57,100 --> 00:34:59,100 Blizzard. That's just the first point. 702 00:34:59,300 --> 00:35:01,500 And as much As you might think that this is an American 703 00:35:01,500 --> 00:35:04,500 Centric, view, just reverse the roles here for a minute. 704 00:35:04,700 --> 00:35:09,000 If the UK had one larger company that was trying to buy another 705 00:35:09,200 --> 00:35:12,800 smaller UK company and the US government came in and said, no, 706 00:35:12,800 --> 00:35:15,800 you can't do that because we don't like the deal. 707 00:35:16,200 --> 00:35:18,700 You'd probably feel very frustrated in the US has 708 00:35:18,700 --> 00:35:23,000 interference with that deal to UK companies trying to merge. 709 00:35:23,000 --> 00:35:25,300 But that's not even really comparable because the u.s. is a 710 00:35:25,300 --> 00:35:28,200 massive country. The real comparison would be if 711 00:35:28,200 --> 00:35:31,500 the UK had one company. Any trying to buy another and 712 00:35:31,500 --> 00:35:35,700 then something like Sweden came in and said no you can't do that 713 00:35:35,700 --> 00:35:37,800 deal. Sweden doesn't like the deal so 714 00:35:37,800 --> 00:35:41,400 the UK can't have one company buying another, I think it's 715 00:35:41,400 --> 00:35:44,400 fine for countries like the UK to have their objections and 716 00:35:44,400 --> 00:35:47,400 state their opinion. But as far as I'm concerned, I 717 00:35:47,400 --> 00:35:49,600 think Microsoft should completely ignore them and 718 00:35:49,600 --> 00:35:52,300 continue to go through this deal because I think the UK is 719 00:35:52,300 --> 00:35:55,700 bluffing when it comes right down to it, they need Microsoft 720 00:35:55,700 --> 00:35:59,500 products, more than Microsoft, needs the UK and citizens in the 721 00:35:59,700 --> 00:36:03,200 K12 play Microsoft games and Activision Blizzard games more 722 00:36:03,200 --> 00:36:04,800 than they're willing to go without. 723 00:36:04,900 --> 00:36:07,100 So I think this is a total blood from the UK. 724 00:36:07,100 --> 00:36:09,300 I think, if Microsoft press forward with this deal, 725 00:36:09,600 --> 00:36:11,800 eventually, they'd go back to resuming business with 726 00:36:11,800 --> 00:36:15,600 Microsoft, like they have been doing for decades now in another 727 00:36:15,600 --> 00:36:18,100 piece of news, big Tech. Actually had a victory here, 728 00:36:18,200 --> 00:36:21,300 Apple One. The epic games trial remember 729 00:36:21,300 --> 00:36:23,800 epic games. Doing their Trojan Horse and 730 00:36:23,800 --> 00:36:26,900 bypassing their payment method and then launching a giant 731 00:36:26,900 --> 00:36:29,900 campaign against Apple portraying them as A huge 732 00:36:29,900 --> 00:36:31,800 Monopoly. That's bad for gamers and bad 733 00:36:31,800 --> 00:36:33,600 for everyone else. Well, they've had the lawsuit 734 00:36:33,600 --> 00:36:36,600 battle, and Apple has emerged Victorious, quote, today's 735 00:36:36,600 --> 00:36:38,800 decision, reaffirms apples resounding victory. 736 00:36:38,800 --> 00:36:42,800 In this case, with nine of ten, claims having been decided in 737 00:36:42,800 --> 00:36:44,400 Apple's favor for the second time. 738 00:36:44,400 --> 00:36:47,000 In two years, a federal court has ruled that Apple abides by 739 00:36:47,000 --> 00:36:49,900 antitrust laws at the state and federal levels. 740 00:36:50,100 --> 00:36:53,100 So, as of now apples mote in the App Store, Still Remains intact. 741 00:36:53,200 --> 00:36:56,800 Now finally we have the tragic story of this redditor that 742 00:36:56,800 --> 00:36:58,900 posted just yesterday that they lost. 743 00:36:59,700 --> 00:37:02,300 And dollars to Bed Bath and Beyond all of their life. 744 00:37:02,300 --> 00:37:05,800 Savings gone to this company that has now officially declared 745 00:37:05,800 --> 00:37:08,000 bankruptcy and it's been to listed from the New York Stock 746 00:37:08,000 --> 00:37:09,900 Exchange. He says that he wants to ask 747 00:37:09,900 --> 00:37:12,000 around if anyone's going through the same thing and how they're 748 00:37:12,000 --> 00:37:14,100 dealing with it. I've been telling myself that 749 00:37:14,100 --> 00:37:17,800 it's time to move on and there's no use to pouring cold water 750 00:37:17,800 --> 00:37:21,000 over a dead plant but it's been just mentally draining. 751 00:37:21,000 --> 00:37:24,000 You know, it's like all these years of hard work gone just 752 00:37:24,000 --> 00:37:26,600 because of a stock. There's anyone going through the 753 00:37:26,600 --> 00:37:29,200 same please share, how you're dealing with it. 754 00:37:29,300 --> 00:37:33,900 Thank Q, I think in this state, where your this distraught by 755 00:37:33,900 --> 00:37:38,200 having this massive loss, it might be good to seek help with 756 00:37:38,200 --> 00:37:40,400 it. Maybe refocus your life on 757 00:37:40,400 --> 00:37:43,400 things that really matter health and family and friends, and that 758 00:37:43,400 --> 00:37:46,800 type of thing, and eventually just move on the money's gone. 759 00:37:46,800 --> 00:37:50,200 You made a mistake time to move on, everybody makes mistakes and 760 00:37:50,200 --> 00:37:52,600 investing. Although not everyone makes 761 00:37:52,600 --> 00:37:55,400 mistakes this bad or this ill-advised. 762 00:37:55,700 --> 00:37:57,900 And this is where I'd get into general advice. 763 00:37:57,900 --> 00:38:01,300 If you've had this in your history, If you were at one 764 00:38:01,300 --> 00:38:06,000 point thinking that it was a good idea to put 100,000 dollars 765 00:38:06,000 --> 00:38:10,200 into Bed Bath and Beyond, maybe individual investing is not the 766 00:38:10,200 --> 00:38:13,400 best route for you. Maybe just stick with ETFs 767 00:38:13,600 --> 00:38:15,600 picking out. Individual stocks is not for 768 00:38:15,600 --> 00:38:19,600 everyone, and if you invested in a company where the revenue line 769 00:38:19,600 --> 00:38:23,200 looked like this for years, the revenue is declining. 770 00:38:23,200 --> 00:38:26,700 A company where they ibadah had been declining for years. 771 00:38:26,800 --> 00:38:29,400 A company where the free cash flow was in a steady decline, 772 00:38:29,600 --> 00:38:32,300 For over three years. A company where the actual net 773 00:38:32,300 --> 00:38:36,200 income was not only in Decline but in deep decline in the red 774 00:38:36,200 --> 00:38:39,000 over the past five years. If at any point you thought it 775 00:38:39,000 --> 00:38:41,400 was a good idea to invest in this company. 776 00:38:41,800 --> 00:38:45,200 Then it shows that you have incredibly poor influences that 777 00:38:45,200 --> 00:38:47,900 you're listening to the wrong people that you're surrounded by 778 00:38:47,900 --> 00:38:49,800 the wrong. People that your judgment is 779 00:38:49,800 --> 00:38:52,800 highly compromised. There's almost no point in Bed 780 00:38:52,800 --> 00:38:55,400 Bath and Beyond history that it was a wise investment, but 781 00:38:55,400 --> 00:38:57,200 especially over the past five years. 782 00:38:57,300 --> 00:38:59,100 So, I'm not sure. What could possibly compel 783 00:38:59,100 --> 00:39:01,300 someone to Oh, by this much and concentrate. 784 00:39:01,300 --> 00:39:04,600 This highly into a stock where every core indicators moving in 785 00:39:04,600 --> 00:39:07,700 the wrong direction. But if this happens in the past, 786 00:39:07,800 --> 00:39:11,300 I think it might be best to just buy you tf's and not focus on 787 00:39:11,300 --> 00:39:13,200 individual stocks. That will likely be a much 788 00:39:13,200 --> 00:39:15,100 better outcome for this individual. 789 00:39:15,600 --> 00:39:17,900 Now that's all for this show. I hope you enjoyed the in-depth 790 00:39:17,900 --> 00:39:19,200 breakdowns. If you like this type of 791 00:39:19,207 --> 00:39:21,100 content, make sure to subscribe to the channel. 792 00:39:21,300 --> 00:39:24,100 I'll have more out in the following weeks that's all for. 793 00:39:24,100 --> 00:39:25,400 Now, I'll see you in the next one.