Chit Chat Stocks - IPH #96: Elon Loses $50 billion; Alphabet and Match Group Earnings; Avoiding the Macro Doom Porn

Episode Date: February 4, 2024

The Investing Power Hour is live-streamed every Thursday on YouTube. This week we discussed: - Elon's $50 billion pay package getting voided in court - Alphabet's blow-out earnings report - Match Group's hit-or-miss Q4 earnings - Avoiding the allure of macro doom porn ***************************************************** Options are not suitable for all investors and carry significant risk.  Certain complex options strategies carry additional risk. Options can be risky and are not suitable for all investors. See the Characteristics and Risks of Standardized Options to learn more. For each options transaction, Public Investing shares 50% of their order flow revenue as a rebate to help reduce your trading costs. This rebate will be displayed as a negative number in the “Additional Fees” column of your Trade Confirmation Statement and will be immediately reflected in the total dollars paid or received for the transaction. Order flow rebates are only issued for options trades and not for transactions involving other assets, including equities. For more information, refer to the Fee Schedule. All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, Inc., member FINRA & SIPC. See public.com/#disclosures-main for more information. ********************************************************************* FinChat.io is The Complete Stock Research Platform for fundamental investors. With its beautiful design and institutional-quality data, FinChat is incredibly powerful and easy to use.Use our link and get 25% off any premium plan: finchat.io/chitchat ********************************************************************* Disclosure: Chit Chat Stocks hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett Schaefer analyze businesses and riff on the world of investing. As a quick reminder, Chit Chat Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. This is the Investing Power Hour on Chit Chat Stocks, formerly Chit Chat Money, but we are officially retiring that name. My name is Brett Schaefer. I'm joined as always by Ryan Henderson. On these episodes, we talk about whatever we want in financial markets, investing, stocks, philosophy, earnings. This week, we're going to do a lot of earnings. On the docket, we got

alphabet earnings. We're going to do a little discussion on that. I believe we both read those. I know we both read Match Group, as I believe we are both shareholders. We're going to talk Musk's pay package and possibly some other fun topics if we get there. Ryan, before we get started, though, why don't you tell any of the listeners or the viewers about our good friends at Public.com? Sure. Let me hop over and hope all our listeners are doing well. hope you're liking the name change to Chit Chat Stocks. But before we get into it, let's talk

about Public. You might know public.com as the all-in-one investing platform. We've been talking about that a little bit through some of our recent ads. Now they have launched options trading and with it, they're doing something no other brokerage has done before. Public is sharing 50% of their options trading revenue directly with you, the customer. So whenever you trade on Public, you get something back. And of course, there are no commissions or per contract fees either. By sharing 50% of their options revenue, you'll know exactly how much they make from your options trades because public is literally giving you half of it. In other words, it's a more transparent approach to options with no fees and you get something back on every single trade. So go

to public.com and activate options trading by March 31st to lock in your lifetime rebate. this is paid for by public investing must activate options account by march 31st for revenue share options are not suitable for all investors and carry significant risk full disclosure in podcast description ufs members only with that said shall we get into our little earnings palooza it's been this is busy week this is like the busiest week of every three months that's right okay and more context for anyone that doesn't know when we record these this is at 12 30 p.m eastern 9 30 a.m pacific on thursdays live so we haven't gotten meta earnings we haven't gotten apple earnings or amazon earnings possibly we talk about those next week

if there's anything interesting there but just for anyone listening on sundays when these come of the podcast players yeah we haven't gotten that information yet and i did accidentally x out of everything uh that i had loaded up for my notes so i got to redo that so why don't you go first maybe talk match group yeah i know when people hear big tech match group is maybe not the first company that comes to mind but it's tech and medium-sized i'd say i would say it classifies as large cap you think mid-cap maybe not anymore i don't know what it wasn't when we first thought it was it used to be a large cap possibly mid-cap now hopefully we'll be a large cap once it once again one day but yeah we're small cap investors in the end uh no so match

Group reported this week, the results were all right. At least I thought. Let me go through some of the numbers real quick, just to give people some actual context. Revenue was up 10% year over year. It was payer declines, but revenue per payer offsetting it. So payers declined 5% compared to the same quarter last year. But keep in mind, Tinder's biggest market is North America. Tinder is the biggest app for Match Group. And they instituted some really big price increases for Tinder in North America. So the revenue per payer was up 17% versus a year ago, but the payers themselves were down. And so I thought that was all good and well. the margins were pretty strong. They're guiding for $1.1 billion in free cashflow for next year.

I thought that was a big bright spot. The concern was they gave a little bit of color around user growth for Tinder and users are still declining. So they've been investing and keep in mind, users and payers are different, right? If you institute the price increases, you're going to see a little bit of a decline in payers, but that shouldn't necessarily impact the users. Users really top of the funnel, we're seeing a little bit of declines there despite increased marketing spend at Tinder. So that was kind of the big concern, I think, from shareholders. The stock was basically flat following the earnings report. And I got to say, I did not love the conference call. I thought the report was fine, but the conference call

maybe bernard kim is a great ceo like under the hood you know i don't get to see that every day but he's not a great conference call guy because everything seems really rehearsed there's no it doesn't like if you listen to the calls they don't feel genuine at all and it's just a little frustrating as a shareholder did you have any thoughts on the quarter yeah i guess i had the big the biggest concern was that user intake number that they talk about although they get a little bit confusing which is also maybe concerning on what exactly the definition of that is because it's not overall users on the platform it's the number of users that are either downloading it or reactivating so i don't know exactly what to

think there but i don't think it's good that that number is declining and it's declining at a small rate they say mid single digit so let's say five percent i don't think that's the end of the world and it sounds like it's fixable or at least i would think it's fixable but obviously we can't have that continue i don't know on the conference call um i guess i just read the transcripts so it's probably reads a little better than if he sounds very rehearsed when he's talking but that's been people's gripes ever since he joined so i don't know if i don't know how much i put into that i i really don't care exactly as long as i have a good philosophy and are doing the things that i don't care how he sounds if he sounds like brian chesky i don't care yeah it's not gonna

But it's not that – maybe he prefers to be scripted, but it just feels sometimes when he – when it seems like he's reading off a script, it feels a little bit like he's hiding certain numbers and you're not getting transparent, like truly transparent thoughts. I know he's not going to be able to say much here, but when they asked about Elliott Management, I thought it was pretty funny. It's like, yeah, we are very happy about our potential collaboration with Elliott Management. And I was like, I know he can't say anything, but okay. Yeah, what is he going to say? But the ones that – the part that did concern me is it felt like they were kind of just – they said, we expect to get back to user growth by – I think it was payer growth – by Q3 of 2024, which is when the price increases will have rolled through. I am not sure they really have any degree of confidence in that. And if users are declining, it seems unlikely unless they institute certain product changes where it increases the incentive for people to pay.

It kind of feels like they're just kicking the can down the road and saying, oh, Q3, Q3, kind of chucking up a prayer that things get better at Tinder, which I don't know. Maybe I'd just rather them not say anything about payers at all. Yeah, or give that guidance. yeah i think i agree with you there where they don't really necessarily know and it's not necessarily important that in q3 we go from magically from minus one percent to positive one percent it's more of okay are you focusing on the right things at tinder and i think they are they got the new ceo in there who's been with the company apparently was impressed or brian or excuse me bernard kim was impressed with her and she's going to be focusing on

increasing the consistency in marketing and then focusing on improving the product features that they've been lacking over the last say five years before kim joined and then also focusing on improving the women's uh experience which as i know most of our 90 of our listeners are guys but for the small portion that are not the they understand that the women's experience on these apps can be chaotic and not as enjoyable so fixing that i think those are important things right in that will lead to monetization which is fairly easy but i think they're doing the right things but the question is will it work and not exactly sure but i think the stock is cheap here they're finally buying back shares uh consistently which i think is a good thing they changed that i think

that's positive change and they should generate about a billion dollars in free cash flow this year yes there's sbc in that so the actual number is lower around 800 million dollars if you x out the sbc if you accept the sbc yeah and part of that the math can get funky if you're buying back low and then the options you know invest at a higher price whatever but the stock's trading about 10 billion dollar market cap i think that's not the end of the world hinge is accelerating which I thought was a good thing. And what I think perhaps is underrated is the potential for margin expansion as they get these legacy brands into purposeful terminal decline. Because Tinder's margins are at 50% hinge, even though they're aggressively spending

at marketing, are 30%. And this is with them paying, I believe the number was $680 million to the app stores last year around that number it might have been 650 million but around 25 percent to 30 percent of the revenue is getting paid to apple and google that's despite that so i think margins can expand here as they get these legacy brands that you know i think it was fine it was everything was good except tinder users like everything i thought was good except that yeah but right now it's probably the most important thing to the investment over the next couple of years i mean it kind of depends how hinge develops or at what pace it grows but the other thing that i think is a little underrated is for context for

anyone that doesn't keep close tabs on match group there are like a dozen apps but they get grouped into four things. So Tinder, Hinge, Evergreen, and Emerging, which is Match.com, Plenty of Fish, as well as some of the younger ones that are more niche like BLK and Chispa. And then there's Asia. Evergreen and Emerging. Evergreen is still pretty big and it's running off quicker now, which is hurting revenue more than I think people... I think people probably don't even really look at the Evergreen brand during the quarterly report. They don't really think much about it but it's not that small like a probably similar size to hinge today um or it was bigger a little bit like as a collection it was bigger i believe last year and so that runoff is going to

not have quite as big of an effect as we move forward as they kind of just juice that thing for profits so and i was going to say yes they'll actually generate profits as they transition those users to the modern um services yeah i think the other thing that's probably a big component is component of this is that two percent user declines at tinder i could i would imagine that a lot of that just comes from hinge cannibalizing parts of it and they don't they don't want to say that but i don't think that's the end of the world because it's there's a higher propensity to pay on hinge and it's a higher value user experience so i i would imagine that's actually a net benefit in the long run but it's gonna potentially hurt them in the short run so

we've got a number of questions i'll kind of leave it there on match group i get frustrated with the conference calls but i don't plan on selling anytime soon and talk about uh we're going to talk about another frustrating conference call that i don't even read anymore which is the alphabet one just a lot of nonsense and never disclosing anything it's kind of similar in that regard yeah i'm thinking about starting a uh grass grassroots movement to just stop google's conference calls there's no point i don't they don't want to benefit shareholders yeah uh it's not like we're getting extra commentary that's useful like we're not getting real good context they're just like talking in platitudes and very vague uh or they'll give like

one tiny they'll give one piece of data that's really important every like five years and it's very frustrating uh but we've got a number of questions from tyler here in the chat do you want to pick up any of these sure let's just go through them did you guys discuss paypal's announcement that quote shocked the world was that last week lol yes very lol uh on that i have no idea what they actually announced uh except that they actually did layoffs maybe that'll shock the world but i look paypal people compare it to meta people compare it to match group i guess although i would say pay pal has a little bit more competition directly than a match group and yeah i don't like paypal i don't pay attention to them

um don't frankly care stocks cheap it might work don't have thoughts on that uh he has a question or do you have anything on them just i wasn't able we visited paypal as an idea i want to say six months ago and maybe it was a little longer and i just couldn't really get comfortable with the risks it seems like this tap to pay technology that's really going around PayPal. I mean, I know they ruled it out themselves, but Apple Pay, Google Pay, it feels like that's going to be a pretty big threat and kind of take share of the payments landscape overall, and they've got no take on that. So I had a hard time getting comfortable with that risk. And yeah, there's a lot of competition there. Note to all management

teams out there never say you're going to shock the world on a conference call that's like a week away it's you're going to get your stock to show up maybe uh especially if you're about to do layoffs right after that because he has quickly been dismissed by pretty much the entire investment community as a serious person just don't talk to the public often that's what i would say yeah with paypal too just think common sense i purposefully do never want to use paypal if someone says hey can i use paypal i go no i have these way i have 10 other options for you choose whatever you want with a tenth of the fees so just think about that and ask yourself is this a good business to be in and have they actually capitalized on venmo

Maybe they will, but let's move to another one. Do you guys have any early thoughts on booking holdings? Little teaser. We recorded a show last week, and as anyone listening to the podcast here, it'll come out on Wednesday, Ryan's stock research report on booking. I guess maybe we don't want to disclose whether Ryan's buying shares or not, but I will say- It's probably going to be in the title.

Maybe. It might be, but hey, just wait on, you know. we don't want to give away everything from the episode we want people to actually listen uh i let's see after recording i was slightly more positive on them i wouldn't say it changed my opinion that much but slightly more positive anything familiar with were you familiar with booking prior to the show a little bit a little bit i was from i was aware that they were the dominant player in european hotels yes but that's it yeah i think uh i mean just foreshadowing here i do like the business i didn't know it that well prior to researching it but it took some time

researching it and i thought it was pretty solid moat so uh yes hopefully look forward to that episode not going to give anything else away we do have some interesting comments here will says google advertising still brings in more revenue than microsoft's entire business i think it's ridiculous to sell off because it only grew 11%. Yeah, the quarter was good. We'll hit on that. We'll hit on that. That's my earnings topic. So yeah, I agree with you, though. Do we want to just hop to Google's earnings here and talk about them? Yeah, we got some questions here that'll come back up on Elon Musk. We got some stuff on mergers and acquisitions. Sorry, I don't think we're going to hit that. We've hit that a lot

recently. And then we have something on the US economy. Maybe we'll hit that if we have time. Also, Tyler says, the guy carrying the comments on his back, says the Netflix pod with Alex and Francisco was excellent. I will say that was excellent, all thanks to them. They did 90% of the work. We asked some great questions. You'll see that in your feed. It's called Netflix Stuck and the End of the Streaming Wars. All right.

Alphabet earnings. I thought it was very funny. Two things I thought were funny from the earnings release. one they said we are entering the gemini era which the wording there is funny are you how do you feel now that we're in the gemini era ryan doesn't gemini have another meaning it's one of those uh horoscope things yeah never knew i was into that yeah let's look up who's a gemini who who is the gemini in google by the way uh it is the third astrological sign may 21st through june 21st nope you're april right ryan so yeah you're not on that i guess soon to advertise a big

astrology guy did not don't see that coming the uh yeah and then the second one is when they had they changed their corporate costs to alphabet related expenses which is just your company name And some of those made sense that it was a large one because they had the layoffs, but it's another reminder that if you hire 30,000 people and then realize that you hired way too many people and have no jobs for them and then fire them all, it's not free. Okay. To the numbers. Yeah, go through some of the numbers.

Okay. Q4 revenue grew 13% year over year to $86 billion. That was an acceleration from prior quarter. 27% operating margin. Gap. up from 24% last year. Google Search, 13% growth along with everything else to $48 billion. So still about half the business or actually a little more than half the business. YouTube ad revenue, 15.5% growth, $9.2 billion. Google Cloud, 26% revenue growth, 9% operating margin as it was

unprofitable last year, I believe, and highly unprofitable two to three years ago. Overall net income, $74 billion. At the current market cap, they traded a trailing PE of 24 while still investing heavily in their moonshot research projects. Waymo burning a lot of money. Google Cloud still operating below what AWS and Microsoft, Azure's margins are, or Azure's probably is, they don't disclose that, investing in all this AI stuff and all the other, I won't call it nonsense, but other things that they could be more profitable

if they wanted to. Now, Ryan is sharing his screen here from our good friends at FinChat, his humble employer. Any thoughts, Ryan, on the quarter? surprises anything stand out i thought it was a really good quarter i was impressed by the profit margin acceleration so let me pull up ebit here real quick uh if i can total ebit jumped pretty sharply year over year uh went from about 18 billion to just under 25 billion dollars I was really impressed. I know there was a reassessment on the depreciation costs of their

servers for Google Cloud that helped with the gap earnings or the reassessment on the useful life. So that helped, but the operating margin improvement at Google Cloud has been really solid. In four years, it's gone from, I believe, negative 62% operating margins to positive nine percent while scaling from like eight billion dollars to 30 billion dollars in revenue annually so really solid improvement there youtube was also really strong so pretty strong results across the board although sometimes i just sit and think like they don't have to do anything to grow google search and they just like It's like they got sat there with this dilemma of, all right, well, we've got this insane cash generator. We should probably just start hiring people and do something or maybe start acquiring some businesses.

Some of those worked out, but now it seems like they have a lot of waste at the company that is not very efficient. And it's interesting to hear the two different CEOs talk because Google and Microsoft reported on the same day. And if I were picking purely one executive, I'm going to have to go with Satya Nadella over Sundar Pichai. He's just charismatic. Come on. i think people overrate they're all when i was ceo's charismatic but why don't you share that screen again and why don't we get through our little mid-roll with fincha why don't you toss up one of the nice kpis they have for companies like alphabet that are

i will say proprietary to the old finchad uh platformer here you share your screen because I got to talk through some of the important points to mention here. Well, I got to load up the thing, but hey, it's pretty quick, but we're running a lot of things on here. Why don't you, I'll load up first and then we can go through the ad. Yeah. Just for anyone that doesn't know FinChat, it is my employer, as Brett mentioned earlier, but it is a pretty robust stock research platform.

So if you're a fundamental investor, you manage your own money, you manage a decent sum, and you like to research stocks, this really is a pretty useful platform. So they've got all the standard financial data, so income statements going back 20 years, balance sheets, cash flow statements, free cash flow, all the valuation metrics going back 20 years. And then that's kind of the standard data. And then on top of that, they've got segments and KPIs on over 1,500 stocks. And it's 10 years of segments and KPIs. So for example, if you want to look at Amazon's AWS revenue, which is going to be coming out here in a couple hours, you can see that over the last 10 years and track it, chart it, see the growth rate, see all of that.

If you want to see match groups paying users, which we just talked about, it's all there. If you want to see how many stores, sprouts, farmers market added last quarter, it's once again, it's all there. I said last time that they had a million more KPIs. It's actually half a million. I was wrong, but it's expanding and it's growing quickly. And if you have a stock that you want segments and KPIs for, literally reach out to me.

The team there is so quick and they can have it uploaded really quickly. And where can people find it? I'm going to cut you off. Where can people find FinChat? Use our code, or sorry, not our code, our link. If you use finchat.io slash chitchat, you get 25% off any paid plan, or you can just go to finchat.io, check out the platform. And then

when you want, check out our link. Again, that's finchat.io slash chitchat. The link will be in our show notes. All right. Thank you, Ryan. I will talk my thoughts in the quarter, and then I have a few other fun questions on Alphabet. But we have a comment here from Tyler. It's amazing that it's taken Ruth nine years to figure out how operating leverage works. Now we'll see if they accidentally grew margins or intentionally grew OPEC slower than revenue. Yeah, I think if you look at Ruth Borat as the CFO actually retiring soon, if you look at the CFO department at Alphabet, you could say that's been a big hindrance to them not being valued the same as Apple and Microsoft. Second one, what stock percentage change do you think Google would get if Sundar was replaced by Satya?

I think it would go up, but I don't think it would deserve to go up. I mean, if you look at how they're executing business-wise alphabet, it's phenomenal. Google Pixel, not dominating, gaining market share rapidly. I mean, that's a huge benefit for them. YouTube, dominating. Google Search, retaining its market share, investing in all these innovative AI things under Sundar Pichai that had them ready for these threats from things like OpenAI. Now, it's still TBD on whether who will win here. But so far, I mean, it's clear that it hasn't affected them. And then Google Cloud as well. I mean, I don't think it's necessarily the problem is the CEO department, even if they just talk nonsense on the conference calls, it's the finance

department. Yeah, I think maybe I'm going to start investing in companies where I don't just get chronically frustrated by listening to the conference calls. It's just not fun. Like these are really good businesses this was a really good quarter and they just love to they just love to ruin it with the conference calls and it's yeah it is not fun you get just so frustrated listening to the calls but yeah to your i don't even read them anymore the execution has been good yeah i mean there's no value really i mean maybe they give one tidbit about something that you're really interested in like youtube premium yeah they'll mention that on occasion but it'll be so vague that you can't really do anything with the data they were like youtube premium or what was it

youtube paid subs and i was like does that include youtube tv and they're like that also includes free trials how many free trials are you know it's just you don't know what the average revenue is per paid sub and it's just frustrating but uh obviously the business is incredible and the results continue to be good i i think this is one where you don't just sit around and trade in and out of it you just hold on to it and forget about the calls and the other thing you brought this up but google end of 2022 maybe mid 2022 i think that may have been one of the fattest pitches and yes yeah it was the end of 2022 that was such a fat pitch it was trading at what low teens cash flow low teens earnings multiple and everyone was so worried about chat gpt and it just seems

like none of that has materialized yeah i mean you know that was a net income number with a lot of write-downs this year, a lot of one-time stuff from the layoffs, and they're investing an insane amount into this AI infrastructure. I think they're going to do like $40 billion in CapEx this year. I mean, that's flowing through. It's depreciation, even though they changed that definition sometimes. At a PE of 24 today, would you buy shares? I'm going to say my answer first. Sorry, repeat that? What was the multiple? 24, based on the 2023 net income. I am not buying shares, but I think investors do well for the next five years.

Yeah, I am not buying shares, but I would not be upset if I were. It's just not my top one that I'd like to buy right now. I was listening to a show with David Gardner recently, and he talked about his Rule Breakers podcast. Sometimes I just like to listen to him to convince me not to sell in and out of things. um but he he was talking about his magnificent seven score which is the number of years that you've held a magnificent seven stock so like okay you've held tesla for 10 years you've held microsoft for 10 years that's a score of 20 or whatever that's kind of he thought that was a It was just a fun little practice that he did.

And his score was like more than a hundred years. And yeah, the only one he hadn't owned was Microsoft, but I think he'd own the rest and kind of just goes to show the art of not selling. And I think I'm coming around to that more and more is just winner, loser just don't sell it because sometimes i think it's a loser and it it is ultimately a winner yeah and i think for for listeners we're we're look you might there's some people there that are totally agreeing with us and there's some people that are like well that's just the all-time

highest talking to you it's not necessarily like yeah and not it's not necessarily i'm gonna buy this with a regard to valuation it's i buy it with regard to valuation i feel like it's a decent price but i'm not going to get crazy and try to trade in and out of something if the business quality has stayed the same and that is the biggest advantage of someone like david garner that smells like ryan a viral um tweet opportunity i feel like you should you should uh go through that you know he's held it for combined 100 years i feel like because some people could And maybe there's someone out there with more, but I doubt it. So there's a question here that says, do you think David's strategy will underperform outside of his Zerp environment?

It outperformed before. Yeah, this was – this buy and hold strategy, diversified picks, where he thinks things have big upside and he thinks it provides a valuable service. These companies are, in many cases, 100 times, 1,000 times more valuable today. And I'm not talking about just the price that they're quoted. Netflix has – I mean, he was buying this when they were delivering CDs. Like, yeah, I think it's a better business today than back then. Yeah, and the question is like a 1960s to 80s period, like high inflation, kind of the economic malaise stuff, maybe less innovation. i don't know what i say forget about interest rates and just look at the business performances

of all the ones that he's bought hey if you if you okay go you go and then i'll go if you just look at the businesses and honestly i don't know if it was like a big percentage percentage of his portfolio i honestly haven't tracked all that but if you just look at the actual businesses over the time span and you don't even think about interest rates and you think about you as an owner what you would pay for each one you would pay a hell of a lot more today for a meta or a netflix or a google than you would have when he initiated his purchases i don't think it has anything to do with the interest rate environment my personal opinion i don't think it has anything to do with the interest rates hey nifty 50 if you held through outperforms

still right isn't that the stat isn't that the study they did i believe no one actually held the nifty 50 through to like the 90s but if you did hold you had your mcdonald's you had your walmart's you had your intel's you would have done quite well and yeah it's pretty wild that they actually outperformed that is pretty wild i yeah i don't have the study in front of me but i've read it before but it's been a while now before we get i think alphabet i think that's good enough there um i don't really have any other thoughts in the quarter they're doing really really well like really really well and i would not be surprised okay here's the other one that it was a tweet that didn't get much traction but i thought it was an interesting question

we got apple reporting today now they see a surprise profit jump and they're projecting growth again maybe this will age poorly but google's catching up or excuse me alphabet's catching up to apple in the net income category do they does do they pass them sometime soon i mean apples is stagnating and alphabets is just kind of mooning here in in earnings possibly a market cap well never probably not you think apple's ever going to go down because for reference apple did i was doing this for an article so that's what i thought about it apple's at 97 billion in earnings alphabets now at 74 so not not too far away yeah it's interesting i don't know the could they catch them it feels like google if they started to

catch them would be like whoa let's start hiring more okay can't grow those earnings too fast even And if it's very easy, we're going to need more people to manage all our people. So it feels like they basically just picked their earnings growth rate. And they're like, yeah, that seems reasonable. Not too fast. Allows us to grow earnings again by 15% next year. So they masquerade their profitability with costs. costs uh any other earnings that you thought were interesting this quarter that have reported so far

i saw ferraris did you look at this didn't read them yet but i saw that they shot up to all-time highs and i saw your article yeah well it praised you so i'm sure you liked it it was great very a brilliant article the uh and they also signed lewis hamilton so they got their win-win that's What is that worth in advertising? Like a billion dollars? I mean, honestly. I don't know. I mean, advertising.

Advertising doesn't matter for them, but it matters in potentially selling more cars. No, I mean, he is the advertisement. It's like LeBron with Nike, except that they make money on it. It's incredible. Right. Just the ad revenue itself

isn't huge on the income statement, but it trickles through in terms of demand. No, it's not. Excuse me. Marketing. He's the marketing. Yeah. The quarter itself, shipments were down 2.5%,

which I think it's a risk maybe a lot of people aren't talking about, is that over the last five years, shipments have really shot up. They've gone from, I think it's like 7,000 a year to 13,000. This is a management team that I don't think would be afraid to pull shipments back or the number of cars they sell. I would not be surprised if in five years, they're shipping 9,000 cars instead of 15,000. Now, who knows? But shipments this quarter were down 2.5%. Revenue was up 11%.

EBIT was up 25%. percent and it was basically all due to pricing but that doesn't just mean direct pricing power part of that is just the mix of the cars that they're selling so it just blows my mind what they're able to sell these cars for feels like price is kind of an afterthought for a lot of their customers so yeah hell of a business but i don't see myself i haven't owned it in a long time i don't see myself owning it anytime soon given the current multiple maybe i'll be kicking myself down the road for that yeah what's interesting i think people probably get decent returns five percent ten over the long term from here owning friday because i think it deserves a

premium multiple but as i wrote in that article on our newsletter it was a really fat pitch when it was at 20 times earnings and i was still getting responses to this thing saying it was an automaker at 20 times earnings like that was you're just hindsight biasing it i'm like look at look at the numbers people come on how many auto companies grew their earnings at the rate ferrari grew them and barely increased volume it's all right i i want everyone to doubt him again because then it'll be creative buying opportunity i don't need it people to agree you know uh okay i want to talk the musk pay package but one more thing uh i'm trying to convince you to research celsius for your next

stock and little you know it sounds like your uh your boss over at finchat is is is uh would agree with a braid and hand a nice tweet with a chart from your guys' platform, unsurprisingly. And it's a nice one. It shows how you can divvy things out geographically. And if we look at Celsius's North American revenue since Q4 2019, do you want to guess the revenue compound annual growth rate?

Since what year? Q4 2019 to Q3 2023. I recently looked at this, and it was not those particular periods, but it accelerated during that time. So I'm going to say 100%. 127%. Yeah, that's astounding. Now, are you going to – is this your next stock to research? I think it's going to be a listenable episode.

A lot of people want to hear this. Here's the difficulty. a business like this is kind of hard to talk about for a long period of time. Like what do you do? You basically say the product, people love it. I have the product. It feels different. I love it. Volumes have grown a lot. I think it'll keep doing it because the product's good. It doesn't like, there's no competitive advantage. There's no,

you can talk management and talk where they're stealing their market share from in the United States. You can talk what their market share is versus the big players. You can talk about the potential growth in the international market. We can talk the financial relationship with Pepsi. I mean, the management's probably very important here.

I think they're quite eccentric. So a good deep dive into that would be interesting. And then we can look at valuation and try to do some modeling. I think it's quite fun. I think it'd be good. Yeah, I could try. It's just, it is a little more difficult

because it's like, all right, international expansion. do people in europe end up liking the celsius flavor the way people in north america do probably i think tastes are similar but who knows they haven't so far yeah it's they have now see that's the big question have they talked about but yeah come on ryan don't don't you're not making any sense here the uh the it's like any good brand like how do you pitch Hershey early on? Yeah.

Well, it's not pitch. It's a research report. We research Monster. We've researched Hershey. Quite a few others that I'm forgetting. Those were good episodes. Yeah, he said, Tyler said, I'm trying to outsource my research to you. Yeah, that's true. That's the whole point of the show.

It is still expensive, just to be clear. It's quite expensive still. Doc is expensive. yeah a lot of people i see out there saying that there's this little dip here that they want to buy maybe it'll work yeah i expect 100 growth here man you like yeah that's the other difficulty is ferrari was not or not ferrari monster a lot of people want to relate it to monsters returns but it's a very different setup because early on monster was seeing really big unit growth the valuation was still pretty cheap because people were so skeptical. Now that Monster's

proven out this model can work and it can be sticky, it seems like Celsius is getting more of a premium. Yeah. I think it could be a really interesting case study because maybe today after it's already probably, what, 50 bagged over the last five to six years, yeah, the returns aren't going to be as substantial. The opportunity is not there, but I think it's a great case study to learn from for hopefully at some point there's another opportunity you can kind of pattern match find that you know diamond in the rough there yeah it's true yeah did i convince you maybe i want to we'll see we'll see i'll think about it the it is a little easier because i'm not starting from scratch there i've kind of kept up with the business a bit whereas booking

holdings i was a little bit uh a little bit further behind there we'll see i'm gonna leave it tbd so keep a little mystery here for the listeners do we want to talk about i was gonna say if you want ryan to to get convinced tell him that you would listen to the episode because you know the one thing we do agree on is that we would want more people to listen to the the podcast so book bait is good engagement is

good the or you know what people used to do this more often I don't think we've talked about it a lot if you

have a stock that you think is compelling and you want us to research it email us or DM us on Twitter

the Twitter account is now chitchat stocks the email is still chitchat money podcast at gmail.com because apparently

I'm having difficulty switching that not the most technical guy there but yeah shoot us some ideas because i always find it other people's pitches booking was one of those and it always feels more compelling when you have other people kind of as shareholders as well

with that elon musk pay package you've got some news there yeah so i guess this can go winners and losers of the week i don't know if you have a winner or loser but we should probably we'll probably get uh all this maybe we got about looks like 15 minutes left as we're going a little longer than an hour now that we have the ads in there so we get it everyone gets an hour full of the investing discussions yeah i don't know if you saw but my winner of the week is a guy named richard tornetta loser is elon musk delaware court decided to strike down his 50 billion dollar options package awarded to Musk in 2018. The landmark decision is apparently incredibly rare. This is a rare thing that happens in this court that they're saying that the board, the shareholders

were wrong to do this. And why is Richard Tornetta related to this? Well, he is an individual shareholder. I believe he only owned nine shares, but don't quote me on that exact number. he brought the lawsuit to court and he won. So he wasn't even a large shareholder. So the outcome voids this options pay package, which is worth about $50 billion today. And the reasoning from the court was this. One, Musk already owned 20% of the company at the time of the options gift, meaning every $50 billion in market cap gains equated to $10 billion in wealth creation for him. For reference, the stock today trades at about $600 billion market cap. They also said the board was, quote, beholden to Musk and lackadaisical.

And third, they said that Musk was not going anywhere according to his own statement. So the argument from Tesla's side of things was that they needed to incentivize Musk to stay. And the court said, well, we found some incentives, I think, and it makes sense. Musk responded saying he's going to incorporate Tesla in Texas instead. And I also found this in the article I thought was interesting. They just kind of threw this in there in the Wall Street Journal report. I thought it was like, this could be a headline. It said, I guess it was a headline, but they said,

In March, the Wall Street Journal reported that Musk had begun construction of his own town outside Austin. I said that weirdly. Musk began construction of his own town outside Austin. In meetings with landowners and real estate agents, Musk and employees of his companies have described his vision as a sort of Texas utopia along the Colorado River where his employees could live and work. Are you moving, Ryan, to this new town, Musk City? No, I am not. Let me just say this – I think, yeah, you're right. This is a huge win for shareholders.

I love this lady. I love this judge. If every $50 billion in market cap gained equates to $10 billion in wealth creation, how is that not an incentive of his own? It feels very egotistical to be like, listen, I know I own 20% of this company, but I'm a busy guy and I'm going to need 30% if you want me to actually commit any of my time to this company. like basically extorting the board because the board knows the stock will go down if musk is not involved which i kind of questioned some of his involvement already but the other part is like good for the shareholder if they move to texas though and i don't know if shareholders will see it this way my guess is they probably won't this is a perfect example of how it can

be valuable as a shareholder to have your company headquartered in Delaware kind of thing because shareholders won here and Elon Musk is essentially not taking more money from you. And if they relocate to Texas and he is potentially able to go through with a plan like this, you are losing out on potential capital that could be reallocated back to you. So- Yeah, yeah. I understand people's arguments that perhaps a court shouldn't be able to decide if shareholders

are correct or not. I get that argument kind of in a vacuum. But in this specific case, if you're arguing in defense of Elon Musk here, who after this is still worth, I think, over $100 billion, you are just telling me that I should not respect your opinions on any of this stuff because you just don't understand the situation. I mean, think about this. What if someone was like, well, yeah, Warren Buffett's done well with Berkshire Hathaway, but think of how much better he would have done if we gave him a 10 tranche RSU package

every 10 years and gifted him 10% of the company every decade. Think of how much value he would have created then. And he would say, what are you talking about? That's unethical. Because it is. Yeah. And it's risky. I would much rather have him just own a lot.

Like, this is the one situation that a lot of people point to where it's like that 10 tranche RSU package where they're like, this is a great program. It's like, it also makes them probably really hard to hit goals that where maybe they can manipulate stuff. Here's a question though. Here's a question. We talked about Texas. Here's a question from Tyler.

I think it's good. Do you think if Musk could do it all over again, he would take Tesla public? I think if he could get the financing, no, because then he could do his machinations that he does with SpaceX, where, for example, they gave him a billion-dollar loan to buy Twitter because he said, give me a billion-dollar loan to buy Twitter. This is, again, SpaceX, a company that's supposed to be focused on rocket building, is giving him a loan to buy Twitter, no questions asked.

So I think he would rather have him not be public because then he could do whatever he wants. All of that would not be possible if Tesla were never a public company. At the end of the day, his financing for pretty much everything has come from Tesla shareholders, right? Like you think about all the equity raises in 2021 and how they were able to finance all the production, the options that he got, and then he's like – he can use that as collateral when he gets loans from a lot of these places. So yeah, I think he has been massively advantaged by having Tesla be a public company. And I don't think a lot of private investors would have given him the benefit of the doubt to take Tesla to where it is today. So in one way, maybe that's a good thing that they've been able to kind of accelerate EV adoption because of public shareholders.

But he would not be who he is today if Tesla weren't able to be a public company or he wouldn't be worth what he is. I agree. I agree. Yeah. Any other thoughts on the topic? Starting a town from scratch is interesting. I don't know if I would really want to live there if housing was really cheap for the employees. Maybe it would make sense, but that would be difficult.

the i i like i tend to like towns where it feels like people are there for more than one reason which if you're a town only in only in a spot for to work for tesla it seems i don't know you're surrounded by it 24 7 so it would just be a little exhausting in my in my opinion but i don't you know maybe some people love it some people might really like that i think it's wild i had not heard about this before maybe i forgot about it do you have any winners and losers of the week oh wait we got this question in here i'm supposed to ask because this guy reminded me that i forgot to ask it uh for the power hour he said to investing companies like Pfizer and I'm assuming it's Bristol-Myers Squibb.

Do I need to have an opinion on each drug in the pipeline or do I need an opinion on management's ability to spend wisely on R&D and acquisitions to maintain and grow earnings? You reminded me twice to ask this question on here and I just want to say, I got nothing. Drug stuff, I'm out. I got no opinion.

I would think, I think Pfizer and Bristol-Myers Squibb are huge, right? they're both massive companies so unless they derive a huge chunk of their earnings or revenue from a single drug i think when it gets to a company of that size you are more betting on management's capital allocation skills and just their honesty and trustworthiness in general it's not i mean small biotech versus big biotech investing is two very different worlds and I think with some of these big biotechs, you can basically just bet that they're going to allocate capital properly. Yeah, like some people say that you can bet on the big, large cap biotechs as a basket.

But at that point, am I really going to get, you're just going to get sector returns? Maybe the sector- Which have been good. Maybe it continues to go faster than the broader market. But I would think like, why not just index or buy an ETF at that point? uh yeah tyler says big biotech is similar to constellation software yeah probably run worse though he's got a question on the u.s economic growth being much more than predicted and maybe we close on that it'll be fun do you guys have any thoughts about the growth of the u.s economy

being much so much more than predicted my only thought is that the macro doomers and the bears that sorry not the bears the people that are always bearish that i don't care if people are bears like on a certain stock but the people that are always bearish on the economy and on stocks they are bearish every single quarter every single quarter so you you can form an opinion on whether you think the economy is healthy or not but if you look at those people and listen to them, you will think that the next Great Depression is imminent every year since 2009 and probably before that. So that's my only takeaway is you can get biased to thinking that a recession is imminent

if you choose to listen to that enticing, sweet macro bear porn. Yeah, with a concept so broad as the economy, whether it's the US economy or the global economy it's very easy to find data that supports your view like whether it's for against the uh whether you think optimistically about the economy or not you can basically find something to support your view so i tend to just have the viewpoint of real gdp growth over the last hundred years and think that's probably going to be what drives returns over the long run from here on out, or drives economic growth from here on out. I think it'll be probably better than, not the last 100 years, but better than what some people are forecasting.

I tend to ignore a lot of the economic, global economy, macro economy stuff in general. I don't find it very interesting. Like, hey, if interest rates decline, I guess the spreads will widen for Ally. That's nice. But if a couple basis point decline or a couple percentage point decline in interest rates makes or breaks your thesis, we've said this before, it's probably not something you should own. just in that it's very possible for it to happen and you want something that could weather any sort of interest rate environment.

Yeah. You see all these arguments. They should cut in March. They shouldn't cut in March. Here's my reasoning. I don't give a damn. Here's what I thought was interesting. Since we're in the middle of Q1,

the Atlanta Fed does their kind of predictions based on the data they're already getting for the quarter. Their Q1 GDP forecast just bumped up to 4.2% for the United States. Used to be at – it was at three. That's pretty darn good. They're seeing some good data there. Economy is humming. Yeah.

I don't understand the people that hate on Powell. He's done a really good job. and he's very competent like read any read anything he writes read that book about him from i know that uh wall street journal reporter i can't pronounce his last name well he i don't know if you if even if he thought he was not smart i don't know if how negative he would be because he wants to maintain that relationship with him but i get your point he probably is being he's probably yeah he seems pretty competent to me and he seems like he probably has the best data