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Showing posts from March, 2021

Affirm: If you buy now, you'll pay for it later

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Affirm had one of the hottest IPOs of the year. Its stock was priced at $49 in January and quickly climbed to nearly $140; that's over $40B in market cap. Since then - more precisely since reporting its first earnings report as a public company- the stock has lost over 50% of its peak value. This is despite the earnings beat. So what changed?  Back story: Affirm did forecast a wider than expected loss for 2021 which cast a dim spot over its earnings but that's not the primary reason the stock has been in a downward spiral. That's happening due to fears over increased competition and valuation going too far. Many analysts came out with what amounts to bearish ratings. Honestly, this is completely understandable considering the massive and out-of-this-world valuation for Affirm which is, after all, still a small fintech company. Also, SoFi - which has similar if not better growth prospects than Affirm - had recently signed a definitive agreement to go public via a SPAC that v
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Yum Brands is designing its stores for iPhones

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KFC-owner Yum Brands just made its biggest move in a year. It acquired Tictuk - no, it's not a typo. Tictuk is a Israeli startup that lets you order food from social media and messaging apps. You can't use it to order from TikTok yet.  Back story: Yum bought Tictuk to capitalize on “conversational commerce," which makes ordering a Chalupa Supreme as easy as sending a text (or a FB message). Yum's digital sales in 2020 hit a record of $17B, up ~45% from 2019. Now it's doubling down on tech for its futuristic makeover. Tictuk is Yum's second tech acquisition in less than a month and it help revamp Yum Brands' ordering strategy and make it more digital focused. Tictuk will enable Yum Brands to achieve a truly omnichannel presence and provide frictionless ordering for customers in just a few clicks. It's very much inline with Taco Bell's announcement earlier this week to expand its "Go Mobile" restaurant remodel nationwide. "Go Mobile&q
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Roblox: A game worth playing for the long term

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If you haven't heard of Roblox, you're probably old enough to drive and don't have kids. Roblox stock soared after it direct-listed its shares earlier this month. Since debuting on the NYSE, its shares have been strong, hovering around the $68 range. The backstory: Roblox is a free platform that allows players to create their own mini games, publish them to its marketplace (yes, monetize) and play with friends and family. It has over 8 million developers and average daily users of 37 million, according to Reuters. And most importantly, kids love it and it's been minting money: More than half of Roblox's 199 million monthly active users are under the age of 13. Roblox generated $923.9 million in revenue last year, primarily through the sale of virtual in-game currency called “Robux.” It takes a cut of the money that players spend on user-generated game upgrades. And although it has yet to turn a profit, the company expects to rake in between $1.44 billion and $1.52 b
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Everyone is winning the streaming wars!

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In a little over a year, Disney+ has accrued nearly half of the number of subscribers Netflix has accumulated over the past decade. Netflix is currently sitting at a lofty 204 million — but is growing much more slowly. Disney's performance has been so phenomenal that Netflix co-CEO Reed Hastings has named Disney his top competitor. He told Bloomberg last September, “If you’d asked us a year ago, ‘What are the odds that Disney+ is going to get to 60 million subscribers in the first year?’ I’d be like 0. I mean how can that happen? It’s been super impressive execution.” For the record, Disney+ is not second. That honor goes to Amazon Prime Video which has 150 million subscribers. However, it's hard to compare it to Disney+ because Prime is a bundle of different services. After Disney, there is Hulu which has just under 40 million, and then there's a smattering around 10-30M (HBO Max, CBS, Discovery, ESPN and Peacock). Best of the rest While Disney+ has been stealing the headl
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Disney+ is quickly catching up to Netflix but it doesn't make as much money per sub

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Disney+ has hit 100 million paid subscribers, just 16 months since its launch. That puts Disney roughly halfway to catching up to Netflix's subscriber base, which is currently sitting at a lofty 204 million — but is growing much more slowly. The pandemic has almost certainly accelerated the trajectory of Disney's growth, as we all ran out of things to watch pretty quickly, but even considering COVID the Disney+ performance has been remarkable. Disney originally expected to have between 60 and 90 million subscribers by 2024, the company now expects more like 230 million subscribers by 2024. Disney is adjusting well for the unexpected popularity of Disney+. It now firmly believes that its direct-to-consumer business is its top priority and it is going from an entertainment company with a streaming service to a streaming service that sells Mickey Mouse hats. So much so that it has restructured its media and entertainment divisions to focus on its streaming platform, and it announc
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Square paid $300M to get access to Jay Z and elite musicians

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Square acquired Tidal to build a financial platform for artists and make Bitcoin the currency of the internet. I love Square and it's one stock that I have had in my portfolio for ages. However, I don't think Bitcoin will ever be the currency of the internet. I find it hard to believe Bitcoin will replace any currencies - yes even the weak ones. The fundamental problem for Bitcoin as a currency and as a way to pay for music - or anything else for that matter - has to do with the very thing lots of people like about it. Namely, Bitcoin's supply is controlled and limited. Because the supply is limited, when demand for Bitcoin rises (because, say, people are convinced they can get rich quick by buying it), then the value of Bitcoin is going to rise as well. So, if you believe your Bitcoin is going to become more popular, then it’s foolish to spend it on music or a Tesla for that matter: you should hoard it and then sell it once its price rises. And since you can get along perf
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NIO's stock is on sale

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2020 was a big year for NIO. It went from being nearly bankrupt to cementing itself at the forefront of the Chinese EV cohort with strong delivery numbers. Last week NIO delivered its Q4 earnings. The results did not impress due to slight currency impacts to EPS and forward looking commentary on deliveries from chip shortages. NIO's management upbeat take on the earnings didn't stop the shares from dipping double-digits on Friday. Despite shedding 50% of its January high valuation, I remain bullish on NIO's long-term prospects and think that the stock was a catch at prices it was trading on last Friday and Monday. The stock is likely to continue to struggle in the next few weeks due to worries over NIO's short term performance which will be impacted by chip shortages. The shortages are expected to decrease the monthly production run rate by 25% to 7,500 units for Q2, However, these issues are expected to ease through the second half of the year, allowing capacity to ram
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Bitcoin and the 99 other coins

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So far Bitcoin is having a decent 2021. It hit a record high of more than $41.5K 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 more than $700B.  Because Bitcoin dominates much of the media's attention, it can be easy to forget just how many other cryptocurrencies there are. A quick look through the full list from coinmarketcap reveals over 100 alternative cryptocurrencies with a "market cap" of more than $100M. Each hoping that their unique take on the core blockchain technology will be enough to propel them out of obscurity, to where Bitcoin is today. With some of the names on the list you can't help but think someone is having a joke, or planning something nefarious - there is a "dogecoin", "YEP COIN", "OMG" and even "SushiSwap" (???). This time it's... different? Some of
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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 econom
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Netflix: No more burn?

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In the last article on Netflix , I discussed why Netflix's promise to premiere a movie every week is not an overly ambitious strategy for the streaming giant. It's a brilliant move that isn't risky because Netflix can keep spending at this high rate for a long time. Yesterday's earnings call confirmed this. During the call, Netflix announced that it does not intend to raise any more capital, through debt or equity, as it plans to be cash-neutral this year and cash-flow positive beyond 2021. Looks like all those price increases are flowing through to the bottom line. Of course, saying you don't need any more capital is a really great way of getting people to offer you more capital at even more attractive rates (if you ever did want it).
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