This has been such a crazy week. We have so much news to get
into. Of course, we have Microsoft
reporting their earnings, the stock is up huge.
This is one of my biggest Holdings.
It's a company. I'm incredibly bullish on and
we're going to be going through in detail, their earnings report
because they lay out everything that they've done everything
that they're forecasting for the future.
And we get an inside look of how this business is doing.
So I'll give you what I think. Are the biggest takeaways from
Microsoft's earnings report, but then, of course, we can't forget
about Google, this company reported earnings as well.
Well, it's up a little bit. The market is, is treating it
with a little 1.3 percent stock rise today.
But I thought there is a lot in Google's report that was
actually encouraging. So we're going to be looking at
some of my biggest concerns about Google that is the
excessive amount of employees the wasteful spending.
And then, of course, the cloud growth will be looking at all of
these different things. And I'll be highlighting why I
think this report was encouraging.
And then finally, we have met a reporting their earnings as
well. We're going to be diving into
that. Detail as well.
So huge earnings reports with Microsoft Google and meta.
But then we also have some bonus news, Microsoft's deal with
Activision. Blizzard has reached a roadblock
by the UK government. This is a frustrating piece of
news for Microsoft because they're blocking this deal out
of reasons. That don't make any sense and
I'm going to go through this report and the UK's arguments
and why they have this one wrong.
Then we also have the news at Apple.
One, the case with epics game, this is a bit forecasted but
they finally declared victory. You and then we have some some
troubling news here. There is a Reddit user who bet
over 100,000 dollars of his savings on Bed Bath & Beyond.
And he lost one hundred percent of that money because the
company went bankrupt and he's basically distraught like his
life is over. So I wanted to respond to this
post and offer my advice to this Reddit user.
Now before we get into the news, let's take a quick.
Look at my portfolio, we have the passive income portfolio,
reaching a value of four hundred and twenty six thousand dollars.
Sixty thousand, nine hundred, and gained so far.
And it's performed really well. So far this portfolio.
I've been, I've been very pleased with the performance.
It's up around 10 percent year-to-date.
It's been doing really well and I can't complain about it.
In fact, what I'm looking at buying companies and I'm
searching for ones that are in a dip.
In my portfolio, I'm struggling to find any companies in a dip
generally speaking. All of them are at least flat or
going up. We have in the financials SP
Global and Card. These companies have performed.
Okay. This year they haven't done
terrible but they also haven't reported earnings so far.
So we'll see how these ones do when they report earnings, my
guess is because Visa already reported earnings and the
earnings were good, that MasterCard is fine.
So I'm not too concerned about this one but we have SP Global I
think the earnings will be fine because Moody's has reported
earnings they did okay and then msci reported earnings and
there's were in line as well. So I think SP Mobile will do
well, but it's still some unknown.
They have other segments of their business that could be
struggling. If this one does dip, if SP,
Global goes down after its earnings report, I have cash set
aside to buy that dip. That's why I'm sitting with
12,000 dollars of cash. Just in case, one of my key
Holdings cells off big after their earnings, the other
categories that have been doing okay, but not great are the
Industrials. Canadian Pacific and Union
Pacific have not caught a bid this year.
They've been trading flat, they Haven't been going anywhere.
And that's okay with me. Not every company.
You hold is going to go up every single day and these ones are
doing fine. So we'll see what the earnings
reports are this year. I think that Canadian Pacific's
going to have a lot of positive developments, so I'm very
excited about that company. And I believe that if Union
Pacific can find a good CEO one that can really increase the
margins and operating efficiency of the business.
This could be a very, very good play for the future.
So I'm still very optimistic about both of these companies.
The restaurant category An insanely good investing category
so far Starbucks has done. Well I've earned decent gains on
that company. Buying it low and then selling
most of my steak when it went up and then we have Texas
Roadhouse. This is one that I have not sold
any of I've continued to hold it, but I'm no longer adding to
this position because it's raised up a lot over the past
three months, and it's gotten closer to what I think its
intrinsic value is. So this one is a long-term
compounder, in my opinion, I think the company will do very
well over the next 10 years. It has not reported modernity is
yet, but I think the earnings will be relatively good.
I see continued demand in the restaurant category in the
consumer category. I don't mess around here.
I invest in the companies that I think are the very top of the
very top Costco being the best physical retailer Nike being the
best apparel brand Pepsi, being the best junk food consumer,
defensive company and then Estee Lauder being the best makeup
company and their respective spheres.
These are the top companies in the world and all of them have
performed The top companies in the world so I'm very bullish on
them. Now currently I still hold a
massive steak and Costco still long this company even though it
trades at a higher valuation, I still believe that Costco has a
very long Runway of growth and it will generate continued free
cash flow in the real estate category.
I only have one company which is Vici a massive 52 thousand
dollar position and I'm a currently in the green by eleven
thousand one hundred dollars and I'm buying a more and more and
more of this company. I bought More of it this year.
And I continue to add to the position, anytime it trades
down. I don't know if you taken a trip
to Vegas recently, but if you have, it is like the party land
of planet Earth. Everybody goes there and it's
just jam-packed with people partying music, gambling shows,
casino sports events, everything you can dream of in one single
place. Vegas is the Disneyland for
adults. It has the most crazy
architecture. The biggest events it has Sports
coming to it. It has come Tensions.
It has shows. It has everything you can dream
of all in one place and the demand there is insane hotels
are being booked out every single room sold.
There's massive Investments going there.
There's massive infrastructure going there.
There's lots of developments. I think the property that Vici
owns is irreplaceable and it will be worth more and more in
the future. So, not only does it yield a lot
and pay a hefty dividend, but I think the company is going to be
worth substantially more in the future.
Now, finally, we get to the category.
I've concentrated my big investments in Tech and to two
different companies, apple and Microsoft and I've owned both of
these companies for over five years.
I first spotted to Apple and Microsoft back in 2017.
Now Microsoft I only owned a little bit back in 2017 so the
position size was very small just a few thousand but Apple I
bought into a little bit heavier.
I bought into Apple because I thought the company was
misunderstood by the market. I thought that Warren Buffett
was Correct. The company is not just a
hardware seller. It is a company that and traps
people in its massive High barrier moat and then it
monetizes them, a thousand different ways and that
monetization has led to substantial free cash flow gain
for Apple over the past. Five years when I purchased
apple back in 2017 their free cash flow per share was two
dollars and 43 cents. Since then in 2022 they've done
six dollars and 87 cents and free cash flow per share.
So they've about 3x, the amount of free cash flow per share,
that they've done through aggressive, growing of their
free cash flow and doing BuyBacks.
That combination has led to massive free cash flow per
share. So apples results didn't come
from expertly timing. This company, the results came
from buying into a company. That's very high quality has
very good economics and grew its free cash flow per share at a
very high speed. Now, that's the type of company
I'm looking for and that brings us to Microsoft Microsoft is a
company that I've been buying. Into more recently because I
consider the mo of Microsoft to be unassailable and in their
earnings reports. It shows this.
Now we have Microsoft's earnings report that they released
yesterday after market close and this caused the stock to go up
nearly 8% today. One thing that I like to do as
an investor and this is a mentality that I've had to
develop over a couple of years is to not let the the huge
changes in price after a company reports earnings dictate whether
I'm happy about the report or sad and that is difficult to do
in many cases and this is the normal human behavior.
If the company stock price goes up, investors are very happy,
they're excited. The company is doing well and
you're making money and it makes you automatically have a
positive sentiment on their earnings report.
But then if a company ever comes in below expectations or misses
its earnings and 1/4 that can cause you to be sad, and if
you're sat on a holding, you may sell it for the wrong reasons.
So rather than judging the company based off of where the
stock is, Trading. Currently, I like to dive into
the report and try to unbiasedly form my own sentiment on the
company. Whether I think the core
indicators of the company are moving in the right direction,
the core indicators being the actual Mo of the company, the
market position, the pricing power, and the core economic
drivers of intrinsic value. So having said that, let's go
ahead and jump in and to set this earnings report first thing
that we can look at right here. That gets investors.
Excited is the word AI. We have a I right there, the
first. Sentence of commentary from the
CEO of the company. He says, the world's most
advanced AI models are coming together with the world's most
universal user interface natural language to create a new era of
computing. This is Satya Nadella and he is
he's a silver tongue. He really he's really a great
speaker and he's enthusiastic and he's charming and he's
exciting when I listen to the earnings call Satya Nadella
seems he just seems more excited about what's going.
Going on with Microsoft and AI. He really seems pumped when he's
doing these earnings calls, and it's exciting to see a CEO.
That seems so enthusiastic about the things that company are
doing. This is a bit of a contrast from
from Sundar pichai. Satya Nadella seems to really be
enjoying what he's doing and this Competitive Edge.
They have with Google now, he goes on to say that across
Microsoft cloud. We are the platform of choice to
help customers get the most value out of their digital
spend. And Ation for this next
generation of AI. So, right there, the first two
sentences. He mentions a, i twice.
So, we know the CEO is excited about the company and AI there,
intermingling it with every part of the company.
But let's go ahead and take a look at the numbers.
Now, let's take a look at their revenue operating income and
earnings per share growth. These are the main metrics of
the company. We have the top line here which
is 2022. Then we have the 2023 updated
numbers, we can see the percentage change and the
revenue. They grew Revenue by 7% but then
Constant currency basis, they grew up by 10%.
If you don't know what constant currency means, that means if
you removed the impact of Foreign Exchange, Microsoft does
a lot of business outside of the US.
If you remove that impact, which is outside of their control,
they grew their overall Revenue by 10%, which I think is very
impressive in this environment. But then we have the operating
income growing, 15% on a constant currency basis, we have
net income growing 14%. We have the diluted earnings per
share. We're growing 14%.
These are wonderful numbers across the board.
This shows a very healthy fast growing company.
Now this actually beats my expectation, I thought that
since Microsoft does so much business with such big companies
and most of those companies are trying to optimize that
Microsoft may be trying to swim upstream.
They might they might have a little bit of pushback and they
might not be able to grow as much but they just proved
investors wrong time and time again, this company has such A
strong Market position that they can churn out these impressive
growth numbers year after year. After year, it is really a
spectacle to see a company this strong.
Now, if we look at this on a breakdown of the different
business lines, we can see the same growth metrics, we see the
productivity and business growth at 15%.
The intelligent Cloud at 19 percent and then personal
Computing - seven percent. That's right, this went down
right now. People are not buying as much.
And where I think what happened is during the covid, 2020. 2021,
there is massive. Pull forward in the personal
Computing category. Everyone went out and bought all
the personal Computing stuff they needed.
And now Microsoft is growing the software side of it.
So this is not concerning to me, this is a part of business.
Not every part of business is perfectly consistent every
single year some of its going to be a little bit more cyclical.
Especially when you have big things like a pandemic.
So even though As part of the company shrunk, I don't think
that this has any core issues with the company.
I don't see this as actually an intrinsic - for the company.
Now, Microsoft is a massive company that has all of these
different products and services, they offer, they do a breakdown
of all of it. And again it's just remarkable
to see how almost the entire company is growing.
The cloud Revenue, grew 25% office commercial products, 17%
365, 18% the office consumer and Cloud.
It's Services. Grew only 4%.
We have LinkedIn growing. 10% LinkedIn has been a cash cow for
Microsoft. One of their many good
Acquisitions. We have Dynamics and cloud
services growing 21%. Then we have Dynamic 365 growing
nearly 30 percent, massive growth, for that category Azure
and other cloud services, growing 31% Windows oam shrunk,
nearly 30 percent. So that's one part of the
business that's in Decline, even the Xbox content and services
eked out, growth of 5%. And keep in mind, there's a lot
of pull forward in 2024, the game category so it's impressive
to see growth in that category as well.
The search crew 13% and then devices the hardware shrunk.
26%, again, I don't think that this is a long-term concern,
they'll re-accelerate growth and Hardware over time, but
everybody has the latest device right now.
So in terms of overall, growth of the company, I see good
metrics across the board. Healthy Revenue growth healthy
operating income growth and even broken down by line item ice.
I see a very healthy business where almost every segment of it
is growing. And most importantly, all the
most important segments of it are growing the fastest.
So, Microsoft still has a very healthy growth profile.
Now, moving on, we can take a look at Microsoft's balance
sheet currently they have 104 billion dollars in cash, so they
have a lot of cash on hand. If we put that in perspective,
last quarter, they had ninety nine point five billion.
So, they increase their cash balance by around five billion.
Now, we look at their long-term debt and this is around 40.
Two billion dollars. So 42 billion and we can look at
the long-term debt over time notice the strong Trend since
2016 of almost every quarter, the long-term debt going down
the previous quarter. It was forty four billion so it
has gone down again. So, of course, in aggregate,
when you compare the cash balance to the debt of the
company, it's about as good as it gets, they are bolstering
their cash balance because they do want to by Activision
Blizzard for seventy billion dollars.
So, that's part of the reason they're holding so much cash
right now and we'll talk about that deal.
A bit later but as of right now, Microsoft has one of the top
three balance sheets in the world.
Now finally we get to the cash flow statement.
This is where I get to my favorite metric of the company
which is the free cash flow. We can do a simple calculation
of the traditional free cash flow calculation, which is the
net cash from operations, twenty four point, four billion and
then we subtract out the capex which is 6 billion, six hundred
dollars, so we have 17 billion eight hundred dollars in
traditional free cash flow for the company.
Now another thing that I like to do Which is not traditional but
it's my adjusted calculation of free.
Cash flow is to also subtract out the stock based compensation
and see what that leaves us now. The stock based compensation
came in at 2 billion, 465 million for the quarter.
If we subtract that out that leaves us with an adjusted free.
Cash flow 15 billion 369 million in adjusted.
Free cash flow for the quarter. This is free cash.
Flow - stock-based Compu. Interesting thing is the free
cash flow is actually lower this quarter than it was one year
ago. Ago, a year ago, they reach that
huge peak of 20 billion dollars in free cash flow.
So it went down to 17 billion dollars.
So that's a little bit of a negative spin on it.
The free cash flow went down a little bit, but on a positive
spin last quarter, they had a peak of 2.54 billion, in stock
based compensation. But we see hair that their stock
based compactly went down sequentially, over the past
quarter. So Microsoft is breaking their
trend of raising stock-based, compensation single quarter.
Now it's actually starting to go back down so this is overall a
good quarter. The free cash flow is more in
line with its history. And the stock-based compensation
fence is going down. It shows up, Microsoft is taking
concern over their expenses. So now that we've looked at the
earnings report of Microsoft, we've delved into the numbers,
we've seen the development of the company.
It puts a little context of why investors are so enthused about
this company. It's up 8% and the games
continue to compound, in my opinion, I still think that
Microsoft remains As in its dominant growing position with a
very long runway for growth, their Cloud business, alone is
great, their video game, business is great, their office
products are great, and the fact that Satya Nadella has really
taken the mantle of the AI. Qing from Google has been a very
positive development for this stock.
So I think investors should be very pleased with this quarter.
I think the reaction in the stock going up is warranted and
appropriate but I don't invest in companies based on quarter to
quarter reports, I invest in them based on the intrinsic
value. Your drivers and the mode when I
was buying Microsoft and this is my first by of the company.
Back in December, 20, 22, and 2017, I bought it at a share
price of $85 per share. Nothing has changed every single
quarter. I see the developments and I see
that Microsoft maintains its incredible mode.
So as of right now, I have no plans on selling any of this
company. Now, next up, we also have
Google's earnings report, unlike Microsoft, this company's only
up half a percentage today Day and Google Remains the optically
cheaper company. So even though Google trades at
a much lower PE ratio than Microsoft, it's not having quite
as good of a day, but let's go ahead and take a look at the
earnings report and see what we can find.
Now, the very top of the earnings report, we have another
one of these nice overview quotes from the CEO of the
company, which is Sundar pichai. And how much do you want to bet
he mentions AI in this quote, he says, we are pleased with our
business performance in the first quarter, was searched
performing well, and momentum and Cloud, we Reduced important
product updates, incurred in deep computer science and AI.
Our North Star is providing the most helpful answers for our
users. And we see huge opportunities
ahead continuing our long term track record of innovation
there. You have the nice overview from
the CEO. Now, let's go ahead and take a
look at the actual numbers. Now, we can first look at the
overall growth of the company. This is a big concern for big
Tech right now, they did so well after the pandemic and growth
has slowed down a lot over the past.
Year. Google grew their overall
revenue on a constant currency basis at six percent
year-over-year. So comparing that to Microsoft,
Microsoft grew up, 10%, Google grew at 6%.
That shows you the differences in the nature of the business.
Google is largely an advertising business.
Advertising is based on supply and demand, how much advertisers
want to pay Google? How much demand there is for the
ad Market. It's a little bit more volatile
than Microsoft's business. Microsoft has a lot of licenses,
they have a lot of subscribers. Chin's, most of Microsoft's
business is reoccurring Revenue, so Microsoft has better control
over their growth, then Google does a lot of people are bashing
Google for only growing at 6% constant currency or three
percent total. I don't think this is so bad.
I think this is actually good growth considering how quickly
they grew just a couple years ago.
So I don't really see this as a huge - I think six percent
growth is pretty strong considering the context here.
Another thing we can look at with Google is their earnings
per share diluted. Added EPS was down your over
here a little bit. That's another thing that's
going to hit Google and I think a part of the reason why the
company's not not having the best day today in the market.
But if we go down and dive into the segmented operations, I
think this gives the best idea of what's happening with this
company. Starting off the search business
is growing thirty nine billion to 40 billion dollars in
revenue. For the quarter then we have the
YouTube segments of the business.
This actually declined year over year so it went down ever so
slightly from six point eight, six billion 26.69.
And I think that this is one little hurdle in the long-term
growth of YouTube. If I Had A guess, ten years from
now, YouTube will be much bigger in the terms of Revenue.
It does then it does currently. So I don't consider this an
intrinsic value problem with the company or that YouTube's in
secular decline. I think the company is just
facing some minor headwinds in the advertising market.
Now, the next segment of business that I want to look at
is one that I think is the most important developing story for
the Google thesis, which is the Google Cloud growth.
If this becomes highly profitable and a growing segment
of the business, it will be a core intrinsic value driver for
this company. And it did grow substantially
over the past year from 5.8 billion to seven point four
billion in Revenue. That is a 28 percent growth
rate. So, very strong growth in Cloud,
even with a lot of companies trying to optimize their Cloud
spend. So, I'm very excited to see that
cloud growth with Google. Now, another part of this
company that I've been concerned about for over A year I was
concerned about this before it was popular to be concerned
about this, which is the number of employees that Google hires,
I think they're hiring too many employees to quickly.
Growing the company's head, count to a quickly.
And at the numbers here, it shows a lot of increase in
employees, but they have a note here.
They say that the number of employees included, all of the
employees affected by the reduction of our Workforce.
So they're basically saying that this number is not accurate
because that number the 90,000 includes all the employees that
we recently let go. So the real numbers, much lower
and we'll know that number specifically in the next
quarter. Now, moving on, we get to the
operating income or loss of these different segments.
For example, Google services, it made a lot of money.
Twenty one point seven billion, that's great.
But then we get to Google Cloud which had a surprising result
here. It went from losing seven
hundred and six million dollars last year to now having an
operating income of 191 million. It's in the green now.
My first reaction was, this is remarkable if they really made
it that profitable that quickly, that's incredible.
But when we read in the notations, they say that a lot
of this was a result of a change in amortization for the Google
Cloud. So basically, they changed
around some accounting which made it go profitable much
faster than expected. But even netting out that change
in accounting, it was still far above schedule.
But either way, I see this as a very positive development for
Google, having growth in the operating income of Google
Cloud. Year over year is going to be a
long-term intrinsic value driver for the company.
It will become a key part of it. I think that Google Cloud could
become a bigger more important part than YouTube for the
company. That's how bullish I am on this
segment. So we'll see what happens in the
following year but my guest is this number is going to continue
to grow at a rapid Pace. Other bets on the other hand, is
a money furnace. They throw money on there.
They light it on fire. I'm not bullish.
On this part of Google. I wish they would focus more on
getting an Roi. Investing in parts of the
company where the expected return is very attractive.
Now, moving on, we get to the balance sheet of Google.
The company's current cash balance right now is very high.
It's currently at 115 billion dollars.
Google has a problem and their problem is that they're to
profitable. They make too much cash and then
they sit the cash in their cash balance.
They're not doing effective things with it to earn a very
high Roi. Now, Google could do something
with all of this cash they could look.
In the market and they could try to find a very high quality
company that's selling at a very reasonable price.
A company that they know is probably undervalued and they
could try to buy that company by out more shares in that company.
Of course they could do share BuyBacks, that's what they
should be doing with their cash balance.
Google has 115 billion dollars in cash and their total debt is
minuscule. Look at the amount of long-term
debt, they have thirteen point six billion, so they Ninety
billion dollars in cash, sitting there while their company is
undervalued. And in my opinion, they should
be using this aggressively to do share BuyBacks at an accelerated
rate of what they're doing right now.
Now on that note, they did authorize another 70 billion
dollars in share BuyBacks. So that's what's authorized.
But Google should be spending all of this money.
They should spend it because I have nothing better to do with
it. There are too big and too
monopolistic of a company to reasonably have a large
acquisition. So there's really nothing.
Else they can do then buy back their own stock or pay a
dividend. Now, if we move on to the cash
flow statement, we can calculate the free cash flow hair.
And look at how the free cash flow and the stock-based
compensation is doing well, first calculate, the traditional
free cash flow. We get the net cash provided by
operating activities, which is twenty three point five billion
dollars. And then we subtract this number
right here, which is the capex of the company.
Six point two eight, nine billion dollars.
The result of that is 17 billion. 26 million dollars in
free cash flow. This is a traditional free cash
flow metric. Now, of course, on this show, we
look at another expense, which is a stock based compensation
expense because you don't really get this free cash flow if the
company is generating it by diluting you the shareholder.
So, if we adjust out the stock based compensation expense,
which is a staggering five billion 284 million.
Keep in mind, that is twice as much as Microsoft paid in stock.
Base compensation. Last quarter we get a result
that is 11 billion, nine hundred and forty-two million.
We can see that the stock based compensation really hits the
number there, the before, and after is pretty Stark.
So the stock base camp went up around 700 million dollars a
year over year. I think this is going to go back
down because they're laying off employees and they're still
having to pay Severance has and stock-based compensation
packages to them. But once that works its way out,
this number should go down which will help the free cash flow
going forward. Another thing I'll point out is
this free cash flow has helped immensely by the huge Decline
and capex year over year. Last year.
They did nine, point seven eight, six billion dollars in
capex. This year they are only doing
six point two, eight nine. So the decline in capex creates
a more efficient business. They're able to generate more
free cash flow if they can get both the stock based
compensation expense down and the capex expense down.
This free cash flow will explode.
You'll see huge numbers there and that is a great story line
for Google. The company is growing its free
cash flow substantially by getting all different expenses
down now moving on from Google, we have metas results here and
like we've been seeing big Tech is on fire with these earnings
reports that is up nine and a half percent.
After hours. Another huge Spike, like,
Microsoft's so far. Microsoft has done great.
Google's done. Well, let's go ahead and take a
look at meta platforms. Now, I'll start off with the
opening phrase and quote from the CEO of the company Mark
Zuckerberg will see if he mentions a i in it.
Quote we had a good quarter and our community.
Can use to grow now. He says, Rai work is driving
good results across our apps and businesses right there 343 we
have a, I mentioned in all the earnings reports and the opening
quotes he goes on to say, we're also becoming more efficient, so
we can build better products, faster, and put ourselves in a
stronger position to deliver on our long-term Vision.
So, there, we have two really key words that investors want to
hear. We have a i and we have
efficiency. It has been the year of
efficiency for Etta. And that's had a staggeringly
good impact on the stock price. Now let's go ahead and go over
to the financial highlights hair.
They have the revenue growth of the company, the revenue, grew,
three percent. So this is right in line with
Google's growth. I don't believe this is the
constant currency growth if I'm not mistaken.
This is not on a constant currency basis.
So we have three percent growth and then we have expenses of the
company growing by 10% that doesn't look so good.
I don't love the the expenses outgrowing the Maybe he
addresses this or Mark Zuckerberg will address that
later in the call but it's supposed to be the year of
efficiency or expenses are going down.
They're not growing at a faster rate than the revenue of the
company but here we see expenses growing faster than Revenue.
We're not off to a great start. We have the operating margins.
Actually declining a bit for the company going from 31 percent to
25 percent. Don't love seeing that.
That's not a great thing. Let's go ahead and move on to
the next line item here we have the net income.
I'm going down year over year seven point four billion to 5.7
billion. Not exactly the best numbers
here. Even the diluted earnings per
share are down year over year. So 2.72 22.2 and this is why I
want to loop back and just look at the stock price.
The stock is up huge after-hours up, almost 9%, which gives you
the impression that the company's doing amazing, and all
the numbers look good. But then we look at the numbers
and they don't seem to quite aligned with the sentiment of
the market now. So far The financial metrics
don't paint a positive picture, but when we get down to the
operational and other financial highlights, this paints a far
more positive picture where the amount of daily active users on
their various apps are increasing by 5% year over year,
five percent monthly active users, Facebook users,
increasing, Facebook, monthly, active users, increasing.
All of these core metrics are moving in the right direction
and I think that investors are saying all right maybe the
financials don't look great right now but the In terms of
its user base is still growing, which is a very positive
fundamental indicator of the company.
So Meta. Still growing as a platform, the
financial metrics, don't look great, but they're probably
better than what the investors were expecting this quarter and
then we go into some other important details here.
One thing that I want to point out is Mark Zuckerberg has
really pivoted towards this year of efficiency, focusing on
optimizing the business laying off, some employees, making it
so that the business is far more efficient and then funneling
money in Dubai. Backs.
When we look at this metric right here, amount of diluted
shares outstanding, it went from two billion, seven hundred and
forty-two million to two million five, hundred and ninety-six
million. So they bought back well over
100 million shares. That is over a five percent
reduction in the amount of shares outstanding, huge, share
reduction. So, that's a big factor in this
stock right now. Meta is a buyback machine.
Now, moving on to the cash flow statement of the company.
When I do a simple calculation of their free cash flow, I get 7
billion 156 million that is their traditional free cash flow
calculation and that puts them right around here.
So next quarter will look like this.
When it's updated on qual trim, not a bad free cash flow quarter
based off their past couple of years, but it's still below
where they were a couple years ago.
So we're not quite where we were before.
Now if we adjust the free cash flow for the stock-based
compensation, we subtract out three billion 51 million, which
gives us a total of 4 billion at one.
And five million. So that's the amount of free
cash flow - the stock based compensation overall.
Not the worst quarter in terms of free cash flow when I'm
looking at meta. However, I see some things that
I don't love to see with this company.
The capex continues to increase even year over year with their
massive spending, they've done on AI and on Oculus, on reality
Labs, all of that is adding up to huge capex expense.
Six billion 842 million is massive on a quarterly basis and
I know that they've done Layoffs, recently, but their
share based compensation was a substantial increase
year-over-year going up. Another 500 million three
billion in stock based compensation for the company.
The size of meta is quite a bit. So these two factors the capex
and the stock-based compensation really eating into their free
cash flow. So overall, I don't love the
developments in terms of the financials of meta.
It's a company that I don't currently own because I believe
there's better options but this is the game of investing which
is a game of expectations versus reality and A has surpassed
their expectations, both in the amount of Revenue and their
earnings per share and their amount of daily active users,
and monthly active users. They either met or surpassed
investors expectations which is why the stock is up big after
hours. So congratulations to met
investors. Now moving on, we have this news
that Microsoft 75 billion dollar deal with Activision Blizzard is
now hitting a roadblock, the UK has decided that they are going
to block the deal. They rejected it saying that it
would hurt competition in the video gaming industry.
Now, of course, I could go in and highlight how this isn't
true. How Microsoft buying activation
does not hurt the video game industry.
How the only company that's highly anti-competitive.
In this industry is Sony with the massive amount of exclusive
titles, they have, we could go into the details of that
argument. But before doing that, I just
want to take a step back and restate.
What's Happening Here, Microsoft a US based company is Going to
by Activision Blizzard, another us company.
So what we have is a US company trying to buy another us company
and while that's going on, the UK is saying, you can't do that.
My question is, why is Microsoft concern with what the UK thinks
about this deal? Why should they care at all?
If the UK wants to block this deal and they don't like that,
it happens, tough Microsoft should still go through and by
Activision Blizzard if the UK decides that they don't Want to
do business with Microsoft and they're going to block Microsoft
from selling products in the UK. And that's a battle, they can
fight, but the fact that a government of a smaller country,
on the other side of the ocean can come in and stop a deal from
one US company. Buying, another us company
right? At the surface level is crazy.
Microsoft should not be listening or caring about the
opinion of the UK on whether or not they should by Activision
Blizzard. That's just the first point.
And as much As you might think that this is an American
Centric, view, just reverse the roles here for a minute.
If the UK had one larger company that was trying to buy another
smaller UK company and the US government came in and said, no,
you can't do that because we don't like the deal.
You'd probably feel very frustrated in the US has
interference with that deal to UK companies trying to merge.
But that's not even really comparable because the u.s. is a
massive country. The real comparison would be if
the UK had one company. Any trying to buy another and
then something like Sweden came in and said no you can't do that
deal. Sweden doesn't like the deal so
the UK can't have one company buying another, I think it's
fine for countries like the UK to have their objections and
state their opinion. But as far as I'm concerned, I
think Microsoft should completely ignore them and
continue to go through this deal because I think the UK is
bluffing when it comes right down to it, they need Microsoft
products, more than Microsoft, needs the UK and citizens in the
K12 play Microsoft games and Activision Blizzard games more
than they're willing to go without.
So I think this is a total blood from the UK.
I think, if Microsoft press forward with this deal,
eventually, they'd go back to resuming business with
Microsoft, like they have been doing for decades now in another
piece of news, big Tech. Actually had a victory here,
Apple One. The epic games trial remember
epic games. Doing their Trojan Horse and
bypassing their payment method and then launching a giant
campaign against Apple portraying them as A huge
Monopoly. That's bad for gamers and bad
for everyone else. Well, they've had the lawsuit
battle, and Apple has emerged Victorious, quote, today's
decision, reaffirms apples resounding victory.
In this case, with nine of ten, claims having been decided in
Apple's favor for the second time.
In two years, a federal court has ruled that Apple abides by
antitrust laws at the state and federal levels.
So, as of now apples mote in the App Store, Still Remains intact.
Now finally we have the tragic story of this redditor that
posted just yesterday that they lost.
And dollars to Bed Bath and Beyond all of their life.
Savings gone to this company that has now officially declared
bankruptcy and it's been to listed from the New York Stock
Exchange. He says that he wants to ask
around if anyone's going through the same thing and how they're
dealing with it. I've been telling myself that
it's time to move on and there's no use to pouring cold water
over a dead plant but it's been just mentally draining.
You know, it's like all these years of hard work gone just
because of a stock. There's anyone going through the
same please share, how you're dealing with it.
Thank Q, I think in this state, where your this distraught by
having this massive loss, it might be good to seek help with
it. Maybe refocus your life on
things that really matter health and family and friends, and that
type of thing, and eventually just move on the money's gone.
You made a mistake time to move on, everybody makes mistakes and
investing. Although not everyone makes
mistakes this bad or this ill-advised.
And this is where I'd get into general advice.
If you've had this in your history, If you were at one
point thinking that it was a good idea to put 100,000 dollars
into Bed Bath and Beyond, maybe individual investing is not the
best route for you. Maybe just stick with ETFs
picking out. Individual stocks is not for
everyone, and if you invested in a company where the revenue line
looked like this for years, the revenue is declining.
A company where they ibadah had been declining for years.
A company where the free cash flow was in a steady decline,
For over three years. A company where the actual net
income was not only in Decline but in deep decline in the red
over the past five years. If at any point you thought it
was a good idea to invest in this company.
Then it shows that you have incredibly poor influences that
you're listening to the wrong people that you're surrounded by
the wrong. People that your judgment is
highly compromised. There's almost no point in Bed
Bath and Beyond history that it was a wise investment, but
especially over the past five years.
So, I'm not sure. What could possibly compel
someone to Oh, by this much and concentrate.
This highly into a stock where every core indicators moving in
the wrong direction. But if this happens in the past,
I think it might be best to just buy you tf's and not focus on
individual stocks. That will likely be a much
better outcome for this individual.
Now that's all for this show. I hope you enjoyed the in-depth
breakdowns. If you like this type of
content, make sure to subscribe to the channel.
I'll have more out in the following weeks that's all for.
Now, I'll see you in the next one.