Chit Chat Stocks - Nvidia's Blowout Earnings; MicroStrategy's Meltdown; Is Hims & Hers Stock a Buy? $NVDA $MSTR $HIMS

Episode Date: November 21, 2025

The Investing Power Hour is live-streamed every Thursday on the Chit Chat Stocks Podcast YouTube channel at 5:00 PM EST. This week we discussed: (00:00) Introduction (22:56) Adobe's Acquisition of Semrush (27:22) AI Winners vs. Losers: SaaS Valuation Divergence (35:10) AI and Software Development: Enhancing Creativity (38:20) Becton Dickinson: A Special Situation Investment (39:27) Wix: Analyzing Growth and Market Position (45:53) TeraVest: A Canadian Manufacturing Gem (56:14) MicroStrategy Madness (01:02:24) Hims and Hers: New Services and Market Potential ***************************************************** Subscribe to Emerging Moats Research: emergingmoats.com  ********************************************************************* Chit Chat Stocks is presented by Interactive Brokers. Get professional pricing, global access, and premier technology with the best brokerage for investors today:  https://www.interactivebrokers.com/  Interactive Brokers is a member of SIPC.  ********************************************************************* Fiscal.ai is building the future of financial data. With custom charts, AI-generated research reports, and endless analytical tools, you can get up to speed on any stock around the globe. All for a reasonable price.  Use our LINK and get 15% off any premium plan: ⁠https://fiscal.ai/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. This is our weekly Power Hour episode. I'm one of your hosts, Ryan Henderson, and I am joined, as always, by the one and only Brett Schaefer. On these episodes, we talk all things financial markets, and we have plenty of news for this week. NVIDIA reported earnings, which always captures probably the majority of headlines for the financial news for this week. But we also had Adobe making an acquisition. Jeff Bezos is getting back in the ring again as a CEO, apparently. We've got small cap of the week. We've got a number of bubble watch topics

that Brett's got, Wix earnings, and plenty more. A bunch of questions from the audience as well. But as always, if you enjoy the show, please go ahead, give us a review on Spotify or Apple Podcasts. And feel free to comment as well. We do these shows live on Thursdays at 1 p.m. Pacific time, 4 p.m. Eastern time.

So without further ado, Brett. Let's make sure you have the time right there, Ryan. I don't know what dimension you're in. Oh, sorry. 2 p.m. Pacific time, 5 p.m. Eastern time, but close. Traveling today, so I'm a little off, but where do you want to start? Let's just do NVIDIA earnings. Get it out of the way.

It may or may not be why people are panic selling this week. we're recording this on Thursday, so we don't know what's going to happen Friday. There might be a huge reversal there, but the S&P 500, I just checked and don't go selling everything yet. It's back to where it was in early September of this year. So it's given up about two months of gains in this bull market. One of the, I'd say sharpest corrections, maybe the sharpest correction we've had since the tariff tantrum in April of this year. But if you look at NVIDIA's numbers and we'll get through the positives and negatives of what their below out quarter means if you look at the numbers they're quite phenomenal so why don't you go through them ryan yeah they beat on the top

and bottom line so just headline numbers they'd be the stock jumps the initially after market yesterday when they actually released their numbers this is coming out a day later but wednesday when they reported their numbers stock jumped i think five percent after hours and it stayed up five percent hours pre-market and lost all of their gains within the span of like three hours i think during intraday trading but let's go to some of the actual numbers the top line looked really good brett maybe you can do some screen sharing with fiscal ai charts here but i'll try to come up with some creative have a little fun there most of them are just flat flat flat flat flat and then just exploding higher but i think we'll get the gist

when when looking at do you have anything specific revenue earnings earnings per share why don't we do operating income annual operating income because that's the one that blows my mind but revenue was really strong they uh blew past expectations and it looks like an insane chart when you look at the data center revenue over the last specifically like eight quarters but But Jensen Huang, CEO, came right out to start the call and said, there's been a lot of talk about an AI bubble. From our vantage point, we see something very different. He said, as a reminder, NVIDIA is unlike any other accelerator. We excel at every phase of AI from pre-training and post-training to imprints.

Now, one notable thing that happened here. So it's always funny to see the reactions because it's like confirmation bias for bulls and bears. Yeah. So real quick, operating income for NVIDIA went from $4 billion to $110 billion in about three years. So you can imagine how that chart looks for anyone that's not watching. But that is – let's take a pause here because that's an insane growth figure for any business. But to go from – think about like working at that company and feeling like, oh, I'm at a big organization when they were doing $4 billion in operating income. And then two or three years later, you are in the biggest company in the world.

So anyway, watching people's reactions to these earnings reports, I always find a little funny because bulls, it's plenty to like. Frankly, if you just look at the headline numbers and the earnings, now we can talk about cash flow discrepancies here in a second. There's – you should feel positive about it. And then for bears, they're like – like inventories jumped. So here's a quote from the CFO. He says, on our balance sheet, inventory grew 32% quarter over quarter while supply commitments increased 63% sequentially. We are preparing for significant growth ahead and feel good about our ability to execute against our opportunity set. basically inventories jumped quite a bit and they're saying it's because they see big supply commitments coming um and for bears that was also exactly what they wanted to see so it's like and i don't think that's really the bear case i think the bear case and let me address

what huang said or jensen i guess people call him uh i guess i want to be formal he said there is a lot of talk about an ai bubble from our vantage point we see something very different that's it's kind of like your crack dealer saying from our vantage point we don't see a crack epidemic there's no issue out there this is healthy usage i mean that's not the guy i want to go to when asked about whether there's a bubble no definitely not yeah well obviously he has he's more biased than anyone probably to feel uh optimistic about nvidia but there is there seems to be a misconception on like the ai bubble generally like i think when people talk about the ai bubble people are referring to a spending bubble for the most

part that's what i think of is that people are spending companies not people companies are spending more on gpus than they should because maybe they don't generate a positive return on the gpus that they're buying that's what i refer to as the bubble it's the spending bubble not but and and who benefits from a spending bubble nvidia it's going to show up in their top line so people that are saying oh no no no like look there this isn't a bubble look how much revenue nvidia is generating it's more like they're kind of proving the point in a way that there is sort of a bubble um but on the flip side obviously the quote-unquote operating earnings and it doesn't go down right yeah i mean if well if the customers generate

positive return on the gpus that they buy then is it a bubble no i guess we just have incredible economic growth for the rest of the future i i don't know but the on the flip side i see a bunch of bears calling out the inventory jump and saying like yeah that's nothing i know it's stupid they're like this is all like nvidia is just manipulative accounting that's all it is like they're just propping up earnings and it's like it feels like they're trying to cling to something to feel like i don't know this is more bearish of a report than it should be but like you there's no way that you look at nvidia in isolation and think oh inventories jump they're screwed like it's it if you were in jensen huang spot or if you were in nvidia's spot

wouldn't you boost your inventory if you were seeing huge jumps in commitments i agree and inventory is going to grow as the business gets larger that's not something especially if it's just one quarter of slightly faster growth than their quarter over quarter growth that's not something to be concerned about whatsoever but i also agree with you that the bear case has to be similar to we've talked about this plenty of times similar to the telecom bubble where NVIDIA is going to earn $100, $200 billion in earnings for, say, three to five years, and then it collapses. That is the bear case,

is that they're going to earn a ton now, but their customers are overspending, and the revenue down the line on the Open AIs, the Anthropics, the Geminis of the world don't show up. So we're still TBD, And I think the market is kind of reacting to that. Well, we're not going to shoot up NVIDIA after these earnings because we have to let them. And especially given that they're trading at, I think, still above 30 times forward earnings, something like that.

I mean, it's not an insane multiple, but they're still climbing the wall of worry for this ultra bull case. And I have no idea what's going to happen. I'd rather just sit on the sidelines. No. And there's – the thing that frustrates me is the depreciation schedule argument. This gets on my nerves because there's a whole bunch of people that are saying like – and I understand the logic. I understand the idea that, like, these valuations are propped up based on trailing earnings for these companies, for all the big tech, and that trailing earnings are inflated. I don't think the depreciation schedules are that far off. And what bothers me the most, like, maybe they are. They could be.

but it bothers me that people that are not actually working with gpus have no experience with gpus have no idea what workloads are actually running on old generations are the ones saying these should be two to three year depreciation schedules not six years six years there's no useful life for a gpu after six years that kind of thing i don't think mark zuckerberg saudi nadela sundar pichai jassy bezos basically anyone who has big ownership still in some of these big tech companies i think they would probably put their foot down somewhere along the line if these things were worthless after 12 months like there's they're not if they knew that these were no no way there wouldn't they would not that they would

rather go bankrupt before doing this one quote mark zuckerberg said that that's it and and the google founders they said we can't afford to lose in this we'd rather they literally said what that that's a quote from them we'd rather go bankrupt than lose this race so with that sentiment i think you have to have the balance there that i'm not sure who's right but there is credence to that the fact that the depreciation schedule should be a little bit faster because i don't think the accountants know so okay i understand the logic of just the ceos have fomo and they want to do what everyone else is doing because they want to be the winners in ai whatever but it just bothers me that and chanos who i have a ton of respect for it's

like do you do you actually have any insight here in terms of what workloads are running on these six-year-old gpus yeah yeah obviously not so it's just like it's like they want to be bearish and they're looking for something and the depreciation schedules of the gpus seems to be like the big boogeyman because it would have a huge impact on their earnings and i just kind of think that there isn't they probably have a better view the companies probably have a better view what the gp what older generations of the gpus are worth and what they can actually like what value they can provide for the company can you still use them i don't think they're sitting in the trash bin after three years i think they're somewhere on a rack in a data center

in the middle of nowhere serving some function probably not but what happens three years from now given how fast things are moving maybe there's a better argument that that could be different but i understand what you're saying let me add uh from an investor some quotes here from an investor that knows this space and follows it extremely closely uh much better than us i'm gonna steal some of his quotes it's gavin baker oh what's his fun name atreides atreides asset management it's the one the dune one uh he had some thoughts on ai after the gemini 3 rollout and nvidia at Blackwell Scaling. Here are some quotes. Maybe, Ryan, you can stop me if anything sounds interesting here. Quote, Gemini 3 shows that scaling laws for pre-training are intact. Okay,

that's fine. I think this second one is interesting, though. The frontier model industry increasingly looks like a four-player oligopoly. Gemini, OpenAI, Anthropic, and XAI all have much more advanced checkpoints than are publicly available that are being used to train their next model makes it difficult to catch up meta has a chance because chinese open source models are only nine months behind but only a small chance this i guess meta is benefiting a ton from ai optimizations on advertising but this is a reminder that they have i would say so far failed spectacularly to do anything within the chatbot space the customer facing chats you're talking about like customer facing applications you're meta ai right as they call it

yeah llama is llama's the model meta ai is like the consumer facing application it's confusing there's too many names yeah yeah on the one hand it seems like they're doing quite a bit on the backend with ad optimizations, but yeah, consumer facing, they have not caught any sort of momentum from at least what I can tell. All right. And here's another quote from the same piece. He says, I understand the open AI jitters, the $1 trillion of unfunded spending commitments cast unfortunate doubt on the powerful underlying reality of AI today. Open AI has lost share and is decisively behind two other companies for the first time from a model quality perspective. They've also lost most of the founding team. The internet trade survives

the demise of Yahoo, MySpace, and AOL. He also said and wanted to note that the return on invested capital for the hyperscalers, meaning Amazon Web Services, Azure, and Google Cloud, remains higher than it was before they ran their CapEx on GPUs. Let's say for the time being, I mean, when some things when supply is still way behind demand your roic is going to increase so i want to know what happens when that normalizes but his point is is fair uh as a bull there but when looking at open ai the way he puts it there they're falling behind they're losing a lot of talent and they're trying to spend a trillion dollars here maybe when altman tells the shareholders that they should sell and hope that the short sales can come in maybe the shareholders should sell at a 500 billion

dollar valuation because there is a ton of risk to this business and with how well gemini seems to be doing i would be quite concerned if i was a shareholder yeah gemini 3 looked very promising and it looked even like i will probably use it for like i don't know if you saw the image to code or like the image to application translation maybe this is more maybe this is like was introduced by older models but you can like upload an image of what you want and it'll build a website for you give you the html css and javascript um but yeah i thought it looked really really cool i'm already a gemini user and it's incredibly accessible like press tab and enter on your keyboard anytime you go to google and you're automatically on gemini

the thing i thought was interesting here the quote i liked was the fact that hopper rental prices and hopper i believe is the second newest model yeah uh the second newest model of gpus for nvidia he says the fact that hopper rental prices have increased since black walk became broadly available suggests that gpu residual values might need to be extended beyond six years so it's interesting you've got this like you've got tech wanting to extend the useful life and you've on the flip side you've got yeah yeah investors pessimistic or skeptical investors i should say saying no you gotta they're not worth as much so it it would i think yeah open ai no matter what i still think it's a very risky model and they seem to be in the worst position despite

like the most market share like i would say the most fragile position business model wise of everyone else here since it isn't just they don't have a cash printer like some of these other businesses have um but i would i feel very optimistic about google here gemini specifically which i guess the whole world does because the valuation has doubled in the span of seven months they've gone from a forward ebit multiple of 12 to 24 in literally 24 nice seven months did you know that alphabet is now outpacing nvidia's gains year to date up 52 excluding dividends nvidia only quote unquote up 30 not a bad comeback for them so much for efficient markets when you have the most profitable company in the world google up 100 in six months i it's uh

counterintuitive to or i guess it's anti-efficient markets but let's shift gears because we do want to talk other things the talk about the residual life they're saying that rental prices keep increasing again i want to know what happens when supply matches demand because and a comment here uh on the live chat reminded me of this actually they deleted maybe there's a grammar error they It talked about someone in the live chat about the EV boom in 2019, 2020, 2021 and 2022, where you saw the residual value of Tesla used cars actually rise because there is a shortage of supply versus the demand of people that wanted electric vehicles. But what happened when demand actually met or supply actually caught up with demand across the industry? while Tesla used car prices have gone down by 50%. I do not think AI is different than any other

commoditized, or excuse me, compute is different than any other commoditized industry. It's not. It's not going to be different. But I want to know what the useful life is going to be once we meet, once supply matches demand. Because is it going to be three, four, five, six years? I have no clue.

but it's a huge question that there is just so much uncertainty with yeah i guess my question would be how does supply meet demand is it just purely more production of nvidia gpus or is the implication there that someone someone else can create a leading edge gpu compatible with or comparable to nvidia's well tpus exist but there's a lot of variables out there and it makes me not want to touch any of these stocks because i don't know the answers to almost any of these questions i don't think but it doesn't really matter how supply matches demand eventually it will i mean tesla's flooded the market they had growing operating margins then then once it reversed and we heard

the we saw the opposite side of the capital cycle they went down i don't understand why this would be any different and the only way it isn't is if end ai software revenue grows at about 100 for the next decade good luck that's all i'm saying good luck like why why why would i bet on this at these prices betting on nvidia here and yeah google i guess obviously it was a lot cheaper earlier this year seems pretty fairly priced now but i think it makes a lot of sense that they're outpacing microsoft now and just surpass them in market cap before we move on we want to talk about our friends at interactive brokers interactive brokers is our favorite brokerage platform they They make it easy to buy stocks, ETFs, options, futures, currencies, bonds, and more, all from a single unified platform.

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Yeah. Yeah, they did. They are now the third largest company in the world behind NVIDIA and Apple. Let's shift gears, though, because we can do AI. We can do AI talk all day and go nowhere. I want to talk about Adobe's acquisition of SEMrush. A little bit of merger. Yeah.

Two portfolio companies here. Adobe is a larger position for me than SEMrush. It's a $1.9 billion all-cash deal. uh a semrush generates basically i think 450 million roughly in arr for those that don't know semrush is like an it's like an online visibility tool so if you work in a marketing department at let's call it a fortune 500 company you want to know how you're ranking versus competitors seo wise or even uh conversational ai ranking i forget the term they use uh i think it's geo generative engine optimization um it's it's like the new seo

whatever um sam rush is a really good tool and they have a lot of data points for you and they've put it in packaged it into a nice little software tool and adobe is acquiring them 1.9 billion dollars all cash deal i thought semrush was cheap and there's a really good opportunity to i guess upsell or cross sell here because adobe has a foot in the door with their uh experience business so for i think a lot of people think adobe creative suite they they think photoshop they think video editing all that when it comes to adobe but i want to get the exact number right but i believe it's like six billion dollars in revenue for them comes from the experience side which is like business online website management content management type stuff as well marketing

optimization it's more for the marketing department as opposed to the creative department if that makes sense even though they're kind of two in the same um anyways semrush as a shareholder i sold my shares so i mean it basically got they're buying at 12 a share the stock jumped to 11 80 i don't really care for merger arb at this point and there is a chance that it doesn't go through but given adobe's history of having deals blocked but the uh the question for me is you are buying a business at four times arr when you could be buying back your own business at 14 times cash flow like you could be buying in your own shares that two billion dollars would have gone a long way in a buyback so

i guess my thing is like was this needed now i would have wished they'd be they'd wait until they have a slightly better valuation or they wouldn't be like right now seems like a great time to buy back shares it's i guess what i'm trying to say and i know they want it makes sense Like it fits into their experience portfolio, but could you have waited two years? Like if you've got an 8%, 9% buyback yield and you're confident in your own business, I feel like you could have waited to make this acquisition. Yep, higher opportunity cost for sure. I don't really have anything to say about it. It seems like a good deal for SEMRush shareholders.

we'll see what happens with adobe but they're going to keep having to climb the wall of worry have they come out with q3 earnings i know they might be one of those offset months are they next week or did they already come out uh let me double check i'm actually not sure i should probably know that shareholder ryan come on you got to be on the ball here i know but earning season's a blur uh no they have not come out with earnings yet august is their latest okay yeah which for some reason takes me to a new takes me to another topic we got this question from the audience they asked is basically like so the question was can you take a look at the divergence between the quote-unquote ai winners

so like the snowflake data dogs palantirs cloud flares crowd strike rubric is who they called out ai infrastructure type beneficiaries versus the ai losers which are like the application software companies both still in the software bucket but he kind of groups them as ai winners ai losers like can you explain why there's been this big discrepancy in sas valuations between those two buckets and the application software you can think like adobe salesforce money.com atlassian trying to think of some others here maybe hubspot there has been a very real like divergence between the two which strikes me as a little weird and so So what I'm seeing a lot of is people like software is getting disrupted by AI because growth rates are coming down.

And they're looking at Adobe, and they're looking at ServiceNow, and they're looking at Salesforce. And you compare them against Rubrik, which is a cybersecurity company that went public last year. And part of that to me is like, okay, ServiceNow is 10 times larger. that's just a natural growth rates are going to come down when you're generating 10 times more revenue than a cybersecurity company so nominally like you can have much slower growth as a large sas company and still gain market share even if you see some tiny player growing in the triple digits so it i think it's important to not just say oh sas is slowing down because that's part of the maturity of the businesses and yes maybe they were over like

growth rates were extreme over the last five years i guess you could say but like let's take salesforce for example they pulled back a bunch of their marketing spend and got profitable they went from zero percent profit margins to 18 operating margins in i think like 12 months maybe a little longer there's there's going to be a repercussion of like growth will slow a little bit when you do that that's kind of the the give and take so and now you have everyone complaining that revenue growth is slowing for them and so i guess i'm kind of going in circles here but i don't think they really are ai losers application software companies like the ai winners i don't really have a take they seem extremely overvalued to me they they seem like

more than i would pay but they're going to grow much faster and they are probably real ai beneficiaries like when you look at cyber security companies or ai infrastructure backbone type software companies yeah they're they're going to benefit from the extra spending but the application software they're not losers because of ai like you look at monday.com they're layering on like conversational ai to features that are making the platform more usable for their customers they're improving the like feature set by layering in conversational ai so you know plan out this task for me and it'll give you whatever four bullet points of what you're supposed to do or the building blocks they can basically integrate it a little more

deeper into their actual software that does increase arpu and you see that like net revenue retention for a company like monday.com is like 117 so they are still benefiting from ai to me but maybe to not the same degree i generally think a lot of these application software companies are attractive here and i'm putting that's kind of a big bucket but adobe salesforce monday.com i think a lot of these businesses will be able to grow revenue or earnings at a double digit rate for longer than people think they can any thoughts here brett yeah it's probably a good time to buy not not a sector i really understand too well but just pulled up salesforce while you were talking seems like it's trading at 17 times free cash flow but should be noted

people should look at stock-based compensation because these are heavy spc issuers to their well both sides of the employee base research and development as well as their sales staff i see a forward uh forward pe of 19 trailing pe of 33 that might be optimistic on the next 12 months unless they can do really wild margin expansion. But in general, they're trading at seven times gross profit. So if you kind of look at the underlying unit economics there, that's, I'd say reasonable for what you might call a wide mode business. And I totally agree, AI is not going to kill these things. If it's much easier to build software tools, using generative AI and add that on to whatever service you have, the individual customer is not

going to do that because it's going to be cheaper for you to do it once and sell it to all your customers just like it was previously with general purpose software i'm not going to be building my own fiscal ai interactive brokers or port sido even if that is technically possible in the future because it's just much cheaper for a company to build it once and sell it 100 times and it's what's the return on time spent they're still going to be able to sell it to me at a reasonable price yeah i really don't understand the i don't understand the ai is gonna kill them like bare thesis maybe for actually not even for adobe because if you try like use any of these models and say you know generate me the same edge i was using mid journey for a little while and

it's good but there's still like for a static photo it can maybe work especially if it has like editing tools layered on the top of it but for video editing and anything and really like professional imagery i think you're still going to need there's workflows beyond prompting like there's manual editing involved or there's prompt editing involved so get rid of this in the corner get rid of you know you can do it that way as well but i just i don't think it's like pure ai disruption i think the biggest risk here is that ai makes it a little easier for it drops the barriers to entry for software businesses a little bit where it's now easier to get started than ever between scaling with cloud the apis that are available building on top of uh open ai's api

or gemini whatever you want to call it there's a lot of businesses being built that way but we got a comment here that says i'm a developer ai doesn't replace software it allows us to make better software faster i think that agrees with the sentiment we're trying to have we're have they're as outsiders. And it makes a lot of sense. Another one here, I'm a motion graphics artist for an ad agency, and there is not even a real competitor so far for the Adobe software that I use. That's music to Ryan's ears as a shareholder, and hopefully they spend more cash buying back stock instead of acquiring SEMrush, although that could end up being a good acquisition. Who knows? I want to talk about an investment fund that I wanted to shout out for really solid

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they're in Alphabet, Interactive Brokers, a couple other ones, but they layer on special situations. And they just highlighted one of the first ones they found in a long time in Becton Dickinson. The ticker is BD. And for reference here, the stock's at $191. As of this was, I was writing this, it might be a little different today. They are a company that sells basically diversified medical technology, syringes, thermometers, all sorts of other stuff that might be a bit more complicated. They do $21 billion in revenue, but they decided to monetize their biosciences and diagnostic solutions business which is three fifteen percent of the business i won't go through the entire structure of the spinoff but essentially

you are getting and let me get the exact number here it's it's with uh on a per share basis okay yeah so when they spin it off it's going to be valued at 18.8 billion dollars or roughly 65 per share of BDX. So $65 of $191 per share price. And the transaction is expected to close by the end of the first quarter of 2026. And after this, on a pro forma basis, the new Becton Dickinson is going to trade at less than 10 times what it will likely earn per share in fiscal 2026. And they are going to have a giant influx of cash that they're planning to repurchase stock with. seems like a really interesting opportunity they called it a good business as a whole not a great business but at times like this when the market is a trading an extreme price i think it's a

fascinating opportunity that some people should look into yeah i like it i well well i gotta look more into it but i like the sound of it and you're right i think i feel like i'm running dry on ideas lately a little bit where a lot of the companies i'm looking at it just even if i like the business it feels like an uncomfortable entry price and it's refreshing i'd relook there's some stuff down about 20 do you want to talk uh wix maybe something that you've liked before that's back below a hundred dollars a share yeah let's do it they actually had there's like a hidden gem and they're they kind of i'm going to talk about it base 44 although you were talking about the uh picture vibe coding a website with gemini that got me a little scared

for any wick shareholder but stock back below 100 five point we'll say 5.5 billion dollar market cap now i would just reference that for the rest of the notes i'm going to give here they just released earnings and they're guiding for full year 2025 two billion dollars in revenue They have 70% gross margins, and I wish I had the chart in front of me, but they're guiding for $600 million in free cash flow this year. There is a good amount of SBC underlying that, but their SBC nominally hasn't gone up for about three years now, so still at about a little over $200 million a year. So free cash flow, if Ryan remembers this as well, was about zero three years ago, and

and fluck it up to $600 million while the SBC has stayed flat at $200 million. I think that's a good way to grow shareholder value. And as Ryan mentioned, they have this acquisition of Base44 that is growing like wildfires. One of the core, quote, vibe coding website builders. It's already at $50 million in annual recurring revenue

and they're buying back stock. Shares outstanding haven't fallen that much historically because of the high SBC levels. But I think in the future that could change any interest here. It feels somewhat cheap, even if you take out that SBC from that free cash flow number. Yeah, I don't know a ton about base 44. But from what I understand is vibe coding is basically helping you prop up a website really easily with like little code required. like generative ai website building it does sound like gemini 3.0 would compete with that a bit but

gemini 2.5 or whatever probably competed with that also so maybe they've grown despite that the there is sort of a perfect world here where and i don't know if this is what's happening and i'm actually almost 100 sure it's not what's happening but you could go like build me this website on base 44 layer on wix's website editing tools and sort of marry the two however they've been pretty explicit that base 44 continues to operate as an independent company and the integrations i believe thus far pretty minimal so i it's kind of funny that they're like a venture capital firm in a way like they basically just bought out this hyper growth uh vibe coding platform which you don't really i feel like you don't see public

companies no and it was a small acquisition eventually yeah it apparently was tiny at the time and it's growing extremely quickly but i wouldn't get too hung up on that i guess i would like them to integrate that seems weird but right now they're doing so well maybe don't mess with a good thing don't let a good thing get ruined by messing with it yeah i mean they've gone from most interested in wix i have been in a long time yeah it's just soft this sort of software feels so at risk and uncertain with the ai bubble or not bubble sorry boom um i don't know it might go in the too hard pile. I'm just not sure what happens five years from now. All right, folks, before we move on, we need to tell you where we get our data.

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to check out Fiscal.ai. And if you use our link, fiscal.ai slash chitchat, you will automatically get two weeks of fiscal pro for free no card required if you want to upgrade our link will also get you 15 off again that's fiscal.ai slash chit chat the link will be in our show notes i don't know if the like core wix business is that susceptible to like like i don't know if they're a huge beneficiary of the ai boom per se but base 44 is probably the i like the core business it's very competitive so like low code no code website building is quite competitive the only issue that i've had with wix historically is that so they're based in israel and they're one of the largest tech companies there so they kind of have this like

big tech attitude without big tech resources which i think can hurt you sometimes and that you kind of see this was like a lot they spend a lot on stuff yeah they spend sort of i mean that frivolously yeah i remember like the 2022 drawdown forced them to like get religion on or at least get lean i remember they had to do i think a couple layoffs as well but you kind of see that in how they act like taking like moonshot vc bets as sort of a public company on base 44 now this worked out but they also i think they've invested they've like co invested in a lot of other companies in israel i think uh avishai abraham the founder i don't know if he's still the ceo they might have had someone else step in but he's a huge shareholder

and i think monday.com as well which is israeli based i think that's correct it could be reversed it could be the monday.com person but i think it on yeah but it's just i don't know it's probably like not a huge like they don't have the googles out there like headquartered there so it's they kind of treat themselves like they're a big tech company and spend a little too much but yeah still 600 million of free cash flow call it 400 350 and real earnings after you strip out spc i could see this doing fine from here i'm not like pounding the table on it i think that's good perspective okay do we want to talk another listener suggestion when you put some notes together for for small cap of the week taravest one that i believe your boss over

at uh fiscal ai uh likes as one of the canadian gems out there i think it must have been maybe it was a canadian person that messaged us because they also wanted us to talk about constellation software kind of wanted to talk teravest just because constellations talked about so much but it's teravest what is this company ryan and have they have they fallen from all-time highs are they in a drawdown i guess take us through take us through the story i don't know i didn't check the stock too much but i looked into the business quite a bit and first of all thank you for the recommendations while while you're talking yeah we should have good kpis there as well since uh so much of the teams from canada they love their compounders the uh yeah so teravest

constellation software and turning point brands were the recommended stocks i'll focus on teravest today give some quick thoughts on constellation and then i'm going to save turning point brands for next week constellation real quick for anyone that doesn't know constellation software i think it's mainly a household name but i'll go through it quickly they're serial acquirer of vertical market software companies so think like very niche software products the example i like to use is operational software for the bowling alley like having pre-built functions that are custom made for specific businesses these are fine companies that they're acquiring like i say fine kind of like they're okay organic growth has averaged two to three percent over the last

decade so it's not crazy growth rates but they're just really constellation is exceptional acquirers of businesses so from targeting them to having touch points with them they're constantly in contact with like every private software company seemingly in canada uh to being the first one there when they want to sell csu's or constellation has built a playbook for acquiring vertical market software companies at attractive prices that's the general thesis on constellation their founder stepped away uh due to health issues and the stock is now in its largest drawdown ever which isn't that much it's like 35 which is insane but what i find what i find interesting here is it's in its largest drawdown ever and i really don't have

that much interest in the stock they are still trading at 35 times ev to free cash flow available to shareholders so i think part of it's just people realizing the valuation was extreme What about operating cash flow? I guess you might not have that number. Well, they break out a free cash flow available to shareholders. They report that as a custom KPI. Operating cash flow would be higher. I think there's some incentive stuff, but the metric to follow is what they report there, the free cash flow available to shareholders, and there's no stock-based compensation.

So it's not misleading. the the thing that i don't love about constellation software is this might just be a theory on my part but there are not that many like great canadian like like when i say great i mean like global powerhouse canadian-based companies there's really a few great ones i'm sure there's like some energy companies that i'm not considering but like tech wise you've got shopify constellation software there's probably some others but those are kind of the two most notable and so i feel like there's a huge like concentration of canadian investors that it's almost like american investors to apple where it's like you kind of just buy and don't

think about it because it's like oh that's your american tech company or whatever i think there's some of that relationship with canadian investors as well but anyway teravest let's talk teravest because i'm going a little long here teravest often gets called the next constellation software which i find funny because they are in completely different end markets like could not be further apart they are a serial acquirer of manufacturing businesses mainly sophisticated steel products so think things like storage tanks or containers for fuel so to be more specific they are the number one manufacturer of propane and natural gas tanks and transport vehicles so picture like that big commercial truck where there's a huge pro like commercial propane tank

on the back um they're the they're the number one manufacturer of those in canada and then they're number two in the US. And this is, I think, exclusively commercial. So if you're picturing like the little tiny propane tank you pick up at the gas station or Home Depot or whatever, that's not what we're talking about. It's more of these big commercial tanks. The second largest segment for them is HVAC equipment. So these are things like heating oil tanks and furnaces. And this is really big in rural Canada, apparently, where home heating They don't have direct access to infrastructure that would enable home heating for things like the electrical grid. So they need, instead, petroleum fuels, things like heating oil, diesel, propane.

So they have to have tanks for that. In isolation, these businesses look okay. I bet it's a business that's not going to get disrupted by AI, I don't think. And there's probably not a lot of VC funding being poured into propane tank competitors, but they're small companies for the most part. There's some transformational acquisitions that they've had, but generally it's small companies that they buy at around half times revenue. Kind of medium-sized operators, not small businesses, but medium-sized, family-owned probably. Yeah. And then there's kind of the straightforward serial acquirer playbook, which is there's automatic cost synergies. So things like centralizing back office functions, admin, accounting, HR, IT, they no longer have to do that themselves. They can outsource it to TerraVest and actually I think now multiple of their portfolio companies share the same corporate office in Calgary.

One second. Sorry, I got a cough. I don't want to do it into the mic. Anyway, the other one, the big synergy here that kind of is unique is that they are able to buy steel in bulk at significantly lower cost. And all these businesses, the one commonality that they have is that they're manufacturing steel products for the most part. I think maybe there's like a few services businesses, but the biggest input cost they have is steel. So this allows them to source cheaper than competitors and either be a lower cost provider or have higher margins. it's kind of the standard cost advantage playbook but

i sometimes think when i hear business pitches like this i'm like it sounds so simple but this has worked over and over and over again serial acquirers like implementing if you're a good acquirer where you have like like true cost synergies when you integrate a company there's a reason that it works there's a reason that there's so many serial acquirers that have become like massive compounders over the years so i would put this in the mate i mean so far they've been a really good performing stock and could be worth looking into more yeah it seems okay i mean clearly the stock has worked well and they've grown well but compared to a trans dime or a heiko where you have that advantage of all right we're the only we sell

we're the only seller of this part and we have an insane amount of pricing power because of this within the aerospace supply chain versus i get a discount on steel there i feel like i need more of a competitive advantage outside of we're good at acquiring companies before i'd invest but that's just me i i don't i don't know if at their core these are great businesses no and i'm looking here ev to free cash flow and ev to oh yeah earnings yield i had it up i had it up three percent yeah yeah so nothing it's not like screaming cheap and maybe uh there might have been some temporary depression on the earnings figure there but i don't like i don't have any uh experience in this industry and it feels a little outside my circle of competence like steel propane tanks

i would be totally lying if i pretended to know what the competitive landscape looks like there especially in canada so yeah it kind of feels outside my circle of competence but the stock has done really well and i could see it continuing and the one benefit that they have is that they're a much smaller much smaller serial acquirer in a big industry as opposed to like the trans times of the world the cat's very much out of the bag so there could be a larger runway for acquisitions for teravest okay we're running up on time i got other stuff i want to talk about first and this is i guess the gavin baker stuff was also included in brett's bubble watch but micro strategy let's get an update here over a 50 percent drawdown bitcoin uh let me check

live as we're recording since it never stops trading it's down below 90 000 a coin uh 80 $38,000 per whatever Bitcoin to USD. So quite a big drawdown here. It is now down year to date. MicroStrategy, given the levered nature of the business, is down quite a bit. And I want to say, I try not to have schadenfreude, but this could not have happened to worse people. I just... I'm going to pull up that quote that you saw on Reddit.

oh yeah yeah yeah they're they're in 50 drawdown they are circling the wagons heavily they are asking why the stock is down and they're blaming there's a guy blaming the epstein files i mean it's a whole they really got their brains locked in uh on this one and did you see and maybe you'll quote but did you also see the lifeboat ai generated image yes where the ship's sinking and he's not near it so for anyone that did not see this strategy is sailing away yeah on a life raft and i i sometimes feel like i'm in there i sometimes feel like i'm too online when i talk about this stuff but uh for anyone that doesn't know michael saylor the ceo of strategy formerly micro strategy posted an ai generated image of him sailing away in a life raft while i think what

looked like the titanic was uh sinking behind him which was maybe not the message he was intending to send but here are some quotes from the shareholders in the life raft with him but yeah here are some quotes from the micro strategy reddit page uh i really try to comprehend what is triggering the sell-off and what in the world will stop it and someone said my cope is that they are pushing down so hard because they're going to pump bitcoin so hard and micro strategy will go crazy up pain before gain so okay i well i feel kind of bad because either it's like broken english or maybe this is just someone that doesn't really have any idea what they're doing is what it sounds like but yeah i love the they like oh we gotta blame them there's like there's this

you want to put someone out there like to make it feel like you're against someone but it's just your own shareholder selling stock like this isn't hot it's not some boogeyman out there that's out to get micro strategy it's a horrible strategy business model yeah strategy sorry horrible strategy uh well what's funny is that okay i looked at or go ahead go ahead it's i it is so pointlessly risky it makes no sense they they could and the thing is like they say well as the valuation comes down our bitcoin yield goes up that doesn't mean anything it doesn't mean anything that's the issue is like it's not a buyback yield it's not a dividend yield this there's no actual returns here other than hopeful price appreciation

you said it sounds incredibly risky did you know that most crypto exchanges now offer up to 50 to 100 times uh leverage on your money so you can bet one dollar put in one dollar bet a hundred dollars on something like bitcoin so if it goes down or down one two percent you're completely wiped out they're they're allowing people to do this i i know i know i've said this before but when people ask me like and i think this is a common um misconception where people are like i'm buying bitcoin because it's going to go up and they say how's that any different than stock investing stock investing you're buying well for the most part you're buying a cash flowing business where you have a claim to the earnings it's like a claim ticket

It used to be a literal ticket where you have a claim to the company's asset value and their earnings. Theoretically, if the company were to liquidate, you have a percentage of that. Or you can get a percentage of the cash flow through dividend distributions. So you have a real claim. With Bitcoin, there's nothing supporting it. So like when that business, if the stock drops, your claim to the business grows, like your dividend yield is growing, all else equal if the stock drops. Bitcoin, there's nothing supporting it. Like the only thing that was supporting it was other buyers.

So it's like – It's a pure momentum vehicle. It's a narrative vehicle. Yes. There's no such thing as value here. You're not getting more value theoretically. what's funny enough is that yeah the the micro strategy um and sorry you're buffering so i couldn't i sorry for interrupting but the uh the micro strategy people confused on why it's going

down like i look at nvidia today i was like why is it down it was a good report i looked at wix solid report why did the stock go down 20 i'm wondering what they said the micro strategy you know 100 why it's going down it's because bitcoin's going down there's no mystery here uh but i want to i want to close out with something especially because i just want to put it in the title because it's a very hot stock hims and hers new services in the stock is in a nice little draw and i'm gonna do this quick because we are running out of time they launched d2c blood draws and lab tests quote their base includes one yearly blood draw that captures 50 biomarker tests and is available for 199 a year they have a second one that captures 120 biomarker

test across 10 categories and is available for $500 a year. Our recurring guest, Travis Hoyum from Asymmetric Investing. Go check out the newsletter. Tried out the service and wrote it up on his newsletter. He said, quote, as you would expect, signing up for the labs is a straightforward process. Hims and hers is a typical modern tech company with a few clicks I had paid for and scheduled my labs. Quote, apparently through hims and hers, this cost is half the price of the quest Diagnostics if you go directly to them. And he says, quote, I see labs as a productive product that opens doors for hims and hers. When they have the lab data, creating an action plan, offering services or prescriptions is a no brainer. One thing I want to look at is Quest

Diagnostics stock because it seems like that's popping up as a big service provider for all these lab tests. But I think this product fits very well within the hims and hers ecosystem. The stock right now is in a 48% drawdown, EV to gross profits 5.2, revenue grew 49% year-over-year last quarter, company is now net income positive. Yes, there is the GLP risk, GLP-1 risk, but is the stock actually attractive here, Ryan? Any interest in looking at them again? Maybe. I had some red flags with the CEO. so the ceo seemed to get pretty caught up in the excitement of the stock it's maybe a nice way of

putting it like he felt like he was pumping it a little bit but we'd like to see him mature a little bit yeah on the one hand i see like red flags with the ceo but i also really respect travis and i do see the actual like disruption opportunity here and they do have anecdotally they have very good brand notoriety with the platform like a lot of people have heard of hims and hers well depending on which side you're on i know probably more i mean they're spending a lot of marketing yeah i see their marketing uh constantly they really want me to buy some stuff from them um youtube i'd be interested too sorry yeah i said youtube ads galore there are so many youtube ads that i get from them that is true all right we have one final question to end the show

from a commenter i'm gonna tyler joins all the time so i want to uh include it he says is sam darnold the guy uh i said i'd put him in the too hard pile yeah he's outside the circle of confidence yeah that one is a difficult question as a seahawk fan i hope he proves me wrong but all right we're going to close things out oh i was supposed to talk about the launch of the emerging moats newsletter i should just say quickly check it out we rebranded the the email newsletter we have a paid print uh stock research service on that the link is in the show notes we'll probably talk about more details on that uh when we have more time on a podcast but go check it out see if it's for you it's tailored for wealthier individuals and

professional teams and covering stuff at least once a week with comprehensive research reports every four weeks go check that out nothing's changing about the podcast but we just launched that give it a look ryan anything else before we get out of here no i think that's gonna do it i can take us out here so thank you everyone for tuning in we will be back next week uh with tons of more content what's our interview for next week or no not an interview we've got a list season it's an earning season listicle that we haven't decided yet we're either we have some ideas growing but we're going to figure that out i actually think this i have an idea that i'll try to sell you on after this brett but next wednesday should be a very exciting episode hopefully and

then we've got another power hour. Thank you again, everyone, for tuning in. Brett and I are not financial advisors. Anything we say or discuss here on Chit Chat Stocks is not formal advice or recommendation. We may buy, sell, or hold any of the securities discussed on this podcast. Thanks again, everyone, for tuning in and we will see you next time. Bye.