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Showing posts from February, 2021

Shopify, not Walmart, is the threat to Amazon's reign as king of e-commerce

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There aren't many credible threats to Amazon's reign as the king of e-commerce. Shopify, however, is a very legitimate one. Last year, it crushed earnings expectations and doubled its revenues... again. So why is its stock trending down? It's simple! In 2020, Shopify set records as the whole world shifted to eCommerce. These numbers will be hard to reach in 2021 and many investors are and will likely have a hard time accepting negative YoY growth rate and hence the stock is taking a hit in 2021. I do think at it's current pricing, Shopify is expensive and hence I will be looking for the stock to dip further to add more to my portfolio. I really think it's a strong long term investment and it will continue to gain market share. Even Amazon took note and is taking them very seriously. Last month Amazon quietly acquired Selz, an Australian tech company that "helps customers sell digital products, physical products and services all from one simple platform"......
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Shopify: The antidote to Amazon's merchant commoditization

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There aren't many credible threats to Amazon's reign as the king of e-commerce. Shopify, however, is a very legitimate one. Last year, it crushed earnings expectations and doubled its revenues again. Shopify vs. Amazon At first glance, Shopify isn’t an Amazon competitor at all: after all, there is nothing to buy on Shopify.com. And yet, there were hundreds of millions of people that bought products from Shopify without even knowing the company existed- eMarketer estimates that Shopify stores processed a little under 9% of all retail e-commerce in the US last year, second only to Amazon, which had 39% market share. I like Shopify and think its strategy is better than Walmart's. Unlike Walmart, currently weighing whether to spend more after the billions it has already spent trying to attack Amazon head-on, with a binary outcome of success or failure, Shopify is massively diversified. How so? Shopify is a platform: instead of interfacing with customers directly, over a million...
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Silvergate Capital (SI): All the exposure without the risk

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So far Bitcoin is having a decent 2021. It hit a record high of more than $52K last week, continuing the upward trajectory it has been on since April of last year, when a single Bitcoin cost less than $5K. That rise now means that the sum of all Bitcoins in existence is worth almost $1T and Bitcoin is now the 8th most valuable asset by market cap .  This time it's... different? These are some of the most dangerous words for any investor to believe wholeheartedly. Whether this latest Bitcoin rally proves more resilient than the previous highs is yet to be seen. In  a  previous article , I mentioned that t he long-term upside case for Bitcoin remains, at the very least, somewhat anarchic. While proponents of Bitcoin see limitless potential and critics see nothing but risk, I'm still on the fence. I haven't bought any Bitcoins yet but I did get indirect exposure to Bitcoin through Silvergate Capital Group (SI)- a bank in California. SI provides a lot of exposure because many...
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Buy a Tesla with Bitcoins, I don't think so

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Earlier this week, Telsa announced that it will soon accept Bitcoin as payment for cars. This along with Tesla's purchase of $1.5B of bitcoin sent the price of the cryptocurrency through the roof. But does it make sense for customers to pay for a Tesla with Bitcoins? I don't think so. Let me elaborate. In a previous article , I mentioned that if the end goal for Bitcoin is to become the currency of use for the entire planet then something probably has to go disastrously wrong with the institutions behind our current system — government backed fiat currency. That's a bold bet to make and I don't believe it will happen. I find it hard to believe Bitcoin will replace even weaker currencies.  The fundamental problem for Bitcoin as a currency and as a way to pay for a Tesla has to do with the very thing lots of people like about it—namely that the supply of Bitcoin is controlled and limited. Because the supply is limited, when demand for Bitcoin rises (because, say, people a...
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iCar: Apple’s not a first mover. It’s a second shaker

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The iCar rumors are heating up again. In December, Reuters reported that Tim Cook is building a ridiculously techy personal automobile and now we finally know who the manufacturer might be. Spoiler alert: it's not Tesla or any of the other fancy car manufacturers). Similar to the rest of Apple's products, the "Apple Car" will be designed in Cupertino but Apple isn't building/assembling it itself. That honor will reportedly go to Hyundai-Kia. Tentative ETA for production: 2024. Of course, secretive Apple didn't confirm. Why does Apple wants to make cars? Apple's first car attempt, "Project Titan" (bold name), began in 2014 and crashed in 2019. So why is Apple trying again? In short, the TAM is huge. TAM is Total addressable market. It is the the total amount of money companies could make selling a specific product/service. Morgan Stanley put out a research note stating that while the annual TAM for smartphones is $500B, the TAM for global mobility...
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Jassy is in, Bezos is out: A yawn is the greatest compliment to both

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Jeff Bezos is stepping into a more holistic role as executive chairman, meaning that Amazon is set to have a new CEO for the first time in its almost 27-year history. That person is Andy Jassy, who first joined Amazon in 1997. In the context of Amazon's business, Jassy's credentials couldn't be stronger. Back in 2006 he led the team that set up Amazon Web Services (AWS), and he has been involved in running the division under various titles ever since — most recently as CEO. Although most consumers know Amazon for its global e-commerce prowess, it is actually AWS that is still the profit center at the company. Amazon's most recent numbers revealed 2020 revenue of $386B. AWS made up only 12% of that revenue number, but its sky high profit margins mean it makes up almost 60% of Amazon's total operating profit. Under Jassy's leadership AWS has grown into a market leader, with almost one-third of the cloud computing market. With that track record Jassy was always goi...
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Bezos is out: A yawn is the greatest compliment

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Lots of news from Amazon yesterday. They did a record-smashing $125.6B in sales in the last quarter, up from $87.4B in the same quarter of 2019. That's even more than Apple (the most valuable company on Earth) did in sales last quarter. They unveiled the design for their new HQ which you can judge for yourself . And finally, the bombshell. Bezos is stepping aside (kind of).  AWS CEO Andy Jassy will be taking Bezos' place as Amazon's leader. Bezos will become exec chairman, focusing on “new products and early initiatives" — like his space baby Blue Origin and The Washington Post. So, how did market react to this bombshell?  Investors yawned at Bezos leaving, with the stock barely budging after-hours. It's a vote of confidence that the empire he built is strong enough to stand without him front-and-center. Bezos revolutionized the way we shop, made convenience a standard. He will be remembered for many things that 20 years ago, we couldn't have imagined them bein...
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Robinhood: With great popularity comes great scrutiny

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Robinhood has raised more money since Thursday ($3.4B in total) than it has in the previous eight years of its existence. Mind-blowing! It's even reportedly considering taking an additional $1B in debt in the coming days. What is Robinhood doing? It has been busy fortifying its finances for the next onslaught from Reddit traders. Robinhood wants to make sure it has enough collateral on hand to cover its obligations to 3rd partners that settle trades, which have been through the roof. So Is Robinhood in trouble? Nah. On Friday, revenue-generating trades on Robinhood were 4x greater than last summer's average, according to the FT. Despite the massive backlash across Twitter and Reddit, Robinhood is currently No. 1 on Apple's free app charts and was downloaded more than 600,000 times on Friday alone. Still, it's not all rosy for Robinhood. Its CEO Vlad Tenev is expected to testify before the House Financial Services Committee on Feb. 18 about his company's role in the...
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The business of calm

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Last week was a long one. The stress of the election coupled with the pandemic has a lot of us looking for ways to relieve anxiety and invest in wellness from the comfort of home. Increasingly, many are resorting to mental health and meditation apps. Calm, a meditation app, topped Apple's health and fitness category on Election Day — and other mindfulness apps like Headspace weren't far behind.  Why are these apps popular? The anxiety-inducing times, along with poor access to mental healthcare and high smart phone penetration are big contributing factors. However, these are not the only ones. For me, the biggest factor is that the companies making these apps have finally figured out that they are content creators and not just app makers. The features that were available through these apps 5 years ago were a lot more rudimentary compared to what we have today, and so was the content. These apps have heavily invested in improving their content. It's telling that the biggest a...
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SPAC: Why many unicorns won't hop on the SPAC wagon

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2020 has certainly been the year of blank check acquisition companies - or SPACs.  That's how Nikola- the sexy electric truck shop-, Utz - the iconic snacks company- and Virgin Galactic went public earlier in the year. Plus, it's also how electric vehicle makers Fisker, Canoo, and Lordstown Motors announced they will go public. Plus Plus, famous investor Bill Ackman recently took his SPAC (Pershing Square Tontine) public in the largest-ever blank-check IPO (it raised A whopping $4B). The objective is to buy a mature unicorn. Ackman actually said Pershing might buy a “mature unicorn” 6 times in the filing. However not all private companies are psyched about merging with SPACs to go public. Airbnb reportedly turned down an offer to merge with Bill Ackman's SPAC, saying it prefers going public via traditional. Airbnb isn't alone. Snowflake, Slack, Shopify and BigCommerce are other flashy SPACs that declined the backdoor to going public and opted for the front door through...
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Why the stock market is beating expectations

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  In the early stages of the pandemic, the S&P 500 index dropped a third of its value. Since then it has roared back, soaring more than 50 percent from its low in late March and setting an all-time high last week. This seems very implausible when set against the current state of the economy and the ongoing devastation caused by the pandemic. So why is the stock market rallying in the face of a pandemic and bad economic news? Several explanations are plausible. The stock market is not the economy: The stock market represents publicly traded companies only; it’s not the whole market. Most importantly, it’s always forward looking; i.e. it’s an indicator of the future earnings of those companies and how they would fare in the future. A rising stock market indicates that investors think these companies will do better in the future. On the other hand, a falling stock indicates that investors are pessimistic about the future earnings of companies. Continued income support for the ec...
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