Chit Chat Stocks - Palantir's Big Beat; Apple Defies Gravity; Best and Worst Q4 Earnings Reports (PLTR, AAPL, SPOT)

Starting point is 00:00:00 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. 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 we're messing around with our backgrounds a bit so if you're uh if you watch these episodes feel free to uh give any advice tell us whether you like it or not if not that's all right we got plenty of fun topics to discuss

Starting point is 00:00:54 today as well. And it is the heart of earnings season. Most of big tech at this point has reported. We are going to go through sort of the three best and three worst earnings reports that we've seen so far this quarter. So we'll get to those in a bit, but I guess, Brett, welcome in. Yeah, glad to be here, Ryan. My background's in a work in progress mode, I would say. We're getting a little bit better but i think yours is pretty darn good so i don't think any improvements needed there but yeah new camera working with over here hopefully the video quality is better but i'm sure people don't really care about that we want to talk what are we talking about today spotify maybe a little google definitely palantir i have them in my earnings and potential bubble

Starting point is 00:01:45 watch oh i know the palin uh the palantirians as they call themselves won't like that little match group shake up paypal if i didn't mention them tons of stuff for the earnings that we like to follow and if we want to start in well you have the advertisement to read ryan but after that the tariff war about 20 hours worth yeah let's get to buy something huh we should say i guess pat on the back to ourselves because we survived tariff monday the treacherous day that was i think like a two hour long drawdown in the index that has since recovered um i believe if i'm not mistaken i don't really keep up with the index that much but it's amazing how we've gone from being an expert on ai infrastructure so you had to we had project stargate which meant the

Starting point is 00:02:39 world was going to we are going to grow our spending forever and then we had deep seek which meant that costs were only going to come down and deep seek monday actually led to a bit of a drawdown i think it was a 15 or something drop in nvidia's price i believe it's recovered since anyways and now we've had tariff monday which i will disclose i bought some of a mexican company that we have been talking about on the show before gave me a little bit of an opportunity to buy on a drop, although that drop has since continued to drop. So I guess I'll have to potentially add more. But with that said, before we get into things, I want to talk about our friends at Public. If you are serious about investing, you need to know about public.com.

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Starting point is 00:04:04 in five minutes or less at public.com slash chitchat stocks and get up to $10,000 when you transfer your old portfolio. That's public.com slash chitchat stocks paid for by public investing full disclosures in the podcast description. So where do we want to begin? Do we want to talk about tariff Monday? Sure. Do you have anything on that? Maybe I can talk to the summary that there was supposed to be a brief summary of the the news that was not uh and sort of the implications and why it kind of scared markets well i will say there is still news quote-unquote for china uh which i think confirms our viewpoint that a lot of these trade war things are going to be targeting towards china whether the rhetoric is towards other countries or not

Starting point is 00:04:54 because that's the one that is still there. They got rid of that de minimis restriction thing or they restricted that thing that Sheehan and Timu used to not pay taxes, I believe. But there was supposed to be 25% tariffs on Canada and Mexico, and now they're paused. For whatever reason, it seems like it's stuff that they're working through on a political level.

Starting point is 00:05:17 But I think from my viewpoint, it's very hard to see why any of these sites would be or at least while i'm thinking mexico and the united states would be incentivized to enact these because it's going to really hurt either of their economies and i think that's kind of going to lead to the status quo to continue especially if china is is getting taken off the board yeah i think i saw maybe one too many overreactions to this news and yeah i think something that a lot of people maybe overlook is the fact that trump often comes out with big bold ideas and statements like this bit as a negotiating tactic and maybe for some political leverage. So my prediction would be that not a

Starting point is 00:06:18 lot changes. There would be, to be clear, there would be some companies affected by this. If there were a 25% tariff on all goods coming in through Canada, for example, I own some home builders. We import a lot of lumber from Canada. Potential hike in prices for the lumber would get passive to consumers and potentially hurt affordability maybe volumes decline so there are companies that would be affected there's other important goods that are uh imported from canada but for the time being i think it's on delay and it seems more so than anything else like politically motivated and sort of a tactic for gaining some political leverage and maybe trying to push some of his initiatives by using this i guess weapon uh against some of the some

Starting point is 00:07:10 of our allies so anyway all that is to say oftentimes and this especially if you invest in mexico or invest in any of the companies in mexico and i will say i was interested in buying the mexican airports that brett pitched recently and this gave me an opportunity to do so with mexico and the u.s specifically you get a lot of headlines that are just that headlines and they drive major sell-offs that are typically unwarranted more often than not they result in nothing so and you saw that i mean we talked about the tariffs and then a week later or whatever a day later there was a tweet from president trump that said i had a good conversation with the president of mexico things are going great it's all fine a lot of yeah it's a lot of news and

Starting point is 00:08:04 stuff like that i mean and look the i still find that the perception among and it's probably u.s investors or maybe just ones from other countries as well the perception of the country is wildly off if i put something out on twitter regarding them they there seems to be like half of the people have this idea that the cartels run the country like it's al-qaeda i don't i don't that's not remotely uh close to the underlying reality and then they talk about the the there seems to be an idea that it's only basic manufacturing when in reality it's automotive parts, automotive assembly, medical technology, aerospace parts, and electronics. So a ton of the stuff that the United States just eats up, that the United States consumers just spend a ton of

Starting point is 00:09:03 money on. So yeah, I think there's still an opportunity there. And it's really hard to see how over the long term, the relationship between the two countries deteriorates versus gets better just because the incentives are there now can things go wrong sure things could go wrong but right now despite wild headlines things seem to be going just as you would expect the incentives to drive them yeah that's i mean there really isn't that much to talk about with the tariffs because china seems to be the only one affected and brett and i sort of have a no investments in china policy that we've both adopted so uh yeah i think it's kind of a nothing burger here i had yeah there was a bunch of people tweeting about value stocks in china what if i told you there

Starting point is 00:09:58 was i had this tweet this is a tweet that i had but what if i told you there was a country with stocks just as cheap as china that has a positive demographic pyramid which their population pyramid is an invert and has a bunch of old people has a bunch of young people and they don't have the chinese communist party and they have a relationship with the united states instead of an adversarial con you know like they're an adversary that's mexico and if you if you seem to be attracted to china because of the low pe ratios why not go to latin america instead or japan even even know that demographic pyramid's a bit worse but it is yeah the the low pes have been just the gift that keeps on destroying investors over there for probably the last decade

Starting point is 00:10:55 it seems it has seemed cheap for quite a while with a lot of these businesses and it just there are other factors that uh affect the true value of those businesses let's talk about another company that can never go down apparently yeah i'm gonna you know what let's go through some of the numbers shall we well yeah they had earnings right yes they did slow growth about the same as usual they're i think the only mag 7 well tesla too i i guess i don't even include tesla and the max 7 in my mind but if you go to meta microsoft alphabet and amazon apple is the only one that's not growing double digits uh at least on a top line yeah let me i'm gonna pull up revenue and free cash flow here so just for context and look i know the story's a little

Starting point is 00:11:55 played out honestly like everyone says the same stuff that it's not growing and it trades at a ridiculous multiple but i'm going to put some actual numbers on it so in december of let's call it 2022 basically revenue has not grown on a trailing 12-month basis for apple revenue has not grown for two and a half years it's been relatively flat you could pick a certain point in time where maybe it's gone up sort of by a little bit but adjust that for inflation too it's down and if you really look at the hardware businesses at the ipads iphones the macs the wearables revenue is definitely not growing services has been kind of the boost here because they continue to, some people would say, take more value than they deserve from that

Starting point is 00:12:50 segment. But also what I think is important here is that beyond people have been pointing at, okay, yeah, sure. They're not growing, but they generate tons of cash and it's becoming more profitable. Profits have gone nowhere. Free cashflow since March of 2022 is down 7% on a trailing 12 month basis. Now they do return a ton of cash to shareholders. In fact, let's see if I can actually pull this chart up for everyone so that I'm not just talking random numbers here and people can actually visualize it. If we look at free cashflow versus let's go repurchases of common stock and common dividends paid okay so in the last 12 months they between common stock buybacks and dividends they have returned basically 120 billion dollars to

Starting point is 00:13:51 shareholders which is a lot of money and that's in the last 12 months yeah so 15 million in dividends 105 million in buybacks well 104 free cash flow over that time 98 billion wow the capital the capital returns are not sustainable at this rate unless they're able to juice that free cash flow even further and i think i don't know if you're about to mention this 37 times earnings figure but the fact that it's trading at 37 times earnings i think these repurchases are destroying value yeah it just doesn't make sense to me that so the numbers came out i looked at them and i thought wow relative to expectations this the stock's going to get hammered the stock did not get hammered i think it went up four percent the next day this i think it's just a stock that

Starting point is 00:14:49 defies gravity honestly there's so much passive ownership in apple and so many people that probably blindly own it or might not even know that they own it that there's just no one selling and if you have owned it for a long time which i think most apple shareholders at this point are not new shareholders they've probably been around for quite a while you've got a giant tax bill if you decide if you decide to sell so i i don't know what i honestly don't know how it stays at high 30 times earnings it is the most expensive big tech company on a forward and trailing earnings basis unless you include tesla whatever it's more expensive than nvidia on a forward earnings basis. And it's the slowest growing by a mile. It makes no sense to me.

Starting point is 00:15:42 Yeah, it makes zero sense. Okay. So here's the other thing that I've seen. People say, well, this is just part of the cycle. They slow down and then they ramp back up. Do you think there's any possibility that that happens? That this is kind of like, I've seen some comparisons where people are like, well, it slowed down in 2016 and look how well that turned out. First of all, it also traded at like a single digit earnings multiple. So it reflected in the valuation. Do you think there's a new cycle coming? Where would that come from? I don't know. Vision Pro's a bust. The other wearables aren't big enough. iPad is doing fine. Yeah, it's a good business, but that's small. Is there going to be

Starting point is 00:16:27 a doubling of services revenue i doubt it and in fact there's risk that they just put in their annual report that the google payment may go away because of these lawsuits although who knows what will happen with that is iphone revenue going to soar i don't see how that it's almost impossible for them to gain more market share in the united states because at least among the younger generation they're dominating with 90 market share are people going to upgrade quicker i don't think so these ai tools are a total bust they made a major announcement among some partiful competitor that they are somehow going to have and is that going to make people upgrade quicker no because at the end of the day

Starting point is 00:17:20 what matters here is the rate of upgrades. And that has been going in the wrong direction for 10 years. And that's fine. That's how things go. You have a quality product. People aren't going to upgrade immediately. But it is a headwind of growth. And looking at Apple, if you've held it for a long time, sure, maybe there's no reason to sell. But Buffett doesn't sell his big winners his wide mode investments unless it's staring him in the face yeah and usually ever he's telling investors that he is not going to repeat the mistake of coca-cola in 1998 i think it was 1998 whenever coca-cola was trading at 50 times earnings he's saying he's not going to make that mistake because coca-cola i don't know if it's been dead money on a total

Starting point is 00:18:14 return basis, but I think it's almost been... Let me look at a chart here. This is excluding dividends. Coca-Cola was trading at $43 a share in 1998. Today, it trades at $63 a share. Now, there's a lot of dividends in there, but I could see the same thing happening to Apple. Where is their growth coming from? Where is their innovation? It's all coming from services and the innovation there is questionable to say the least. That's what just doesn't make sense to me. Honestly, what is going on here? Revenue is going nowhere.

Starting point is 00:18:55 Cash flow, profits, really pretty much going nowhere. They are getting slightly more profitable if you zoom out far enough. Sure, but that's because of services. yeah yeah the largest single shareholder is liquidating and he is not someone that just does that like what's funny is the stock's not going down think about all the think about just the the gravity defiance here yes they are returning more cash to shareholders than they can sustainably return on a forward basis we have someone here saying apple pay that's a great product it is irrelevant to a company with a three and a half trillion dollar market cap

Starting point is 00:19:34 correct and the economics really don't accrue to apple pay in that transaction for the most part it just gets people to stay with to buy an iphone yeah sure and it'll show up slap a paypal onto their valuation does it that does it make it that much better i don't think so two percent gain yeah exactly let's see we have some questions here on it uh do you think warren sold out at the end of this quarter ooh it's a good question i'm gonna say yes i would say he continued to sell i would say he has probably been blown away that he's been able to continuously sell at this price since he started selling yeah true true well there's just so much liquidity in there i read an article today that uh 51 of employees in the united states now have 401ks and or like are

Starting point is 00:20:23 offer this sort of product. And I'm almost turning into one of those Vanguard truthers where they're just this giant lobbying machine to get people to be forced to do this. There's tax breaks on these 401ks. So the employers feel obligated to do this. They match it. And guess what? They're all going into these index products. And what makes up 10% of the index fund? Apple. So there's just so much flows coming into this that it's really hard to see unless the fundamentals totally break um i don't know why someone would short apple but it feels like in a weird no man's land where why would i buy this especially over any other mag 7 company where you have amazon microsoft i know microsoft's valuations elevated but you have microsoft amazon alphabet or meta with more

Starting point is 00:21:12 reasonable valuations than apple at least at last i checked and they have the chance to grow double digit revenue for quite a long time here with much least from our view better innovation but i don't want to talk all apple the whole show ryan um i know we have some questions here on let's china with them people i think are aware that someone asked about celsius i did a tweet that said i like celsius stock here it keeps it keeps falling just as a full disclosure i have not bought yet but i may buy i think i might do a comparison to another existing holding that could be a fun video or segment on the show. I think I might wait for them to report earnings. I don't know. I got a lot of stuff I like in my portfolio right now, but Celsius is on the top of the watch

Starting point is 00:22:00 list. People want to talk Google earnings. I don't know if that's on your list, but do we want to roll right into our earnings roundup, your segment you're calling best and worst earnings reports? yeah we can really quick before we do hershey is in its biggest drawdown in 15 years are you in maybe what's the multiple honestly not sure let's pull it up i know it's down like 40 but it also traded at kind of an extreme multiple recently so not sure let's go What multiple do you want? Forward EV to EBIT? How's that?

Starting point is 00:22:44 That's fine. That's fine. Currently trades at a forward EV to EBIT of 15.6. Well, not bad. How's their capital returns? I know we looked at them like a year or two ago. If the capital returns are consistent, it could be worth it. Let's see.

Starting point is 00:23:03 Shares outstanding. the dividend yield is currently 3.8 percent yeah so mainly dividends yeah this could be a good dividend grower could be a good dividend grower for sure you have that pricing power yeah there's ozempic risk i think the mr beast risk is not that didn't materialize but there could be there could be there could be long-term headwinds from maybe a peak obesity with these weight loss drugs but perhaps that's priced in right now no seems interesting what about you what do you think yeah i'm pretty interested the glp1 stuff i that is a risk i

Starting point is 00:23:47 really haven't looked into enough um yeah obviously if people are less interested in sugar Hershey's probably going to be one company that's impacted by that. I don't really buy the Mr. Beast risk. People love Hershey products. Reese's is still the number one sold candy every single year. Now, let's hit best and worst earnings reports so far this year, or so far this quarter, I should say. You want me to kick things off?

Starting point is 00:24:21 yeah yeah you do that we had someone on here unfortunately this one kind of this one made me feel some pain because of how the stock chart looks they ask do you guys ever look at hymns it is flying at the minute we looked and uh it's on the watch list stocks up i think 400 ryan saw some people that had may had it be a big winner it's up 400 in the last year and we looked at it almost exactly a year ago i think we should get and he may or may not be listening to this episode but we've had him on the show before paul sero was a big one this has been a big winner for him maybe we get him back on and do an update on the company but yeah that'd be great i'm delaying let's get into our segment

Starting point is 00:25:07 i will say i anecdotal evidence of the week i went to hymns.com for uh a little personal here but uh just want to preserve my my hair for as long as i can the uh and i was curious like what the process was like it is a slick interface and it's in my opinion a heck of a lot better i think it would be a heck of a lot better to buy a product through that method than traditional routes it's just simpler yeah amazon's also simple too yeah can you do that with like anything that requires a prescription well yeah for the non-prescription stuff you can't yeah that's true but they do have amazon pharmacy now so who knows it's complicated industry we probably shouldn't we probably don't know enough about it but you know who does know paul sarah we should

Starting point is 00:25:59 get him back on the show all right earnings ryan what's what's your first one you want to go first you sure i thought spotify had an exceptional report the one that got away if you will because this is a stock that i sold at the absolute worst time because i thought the management team and the company was not really focused enough on profitability i guess shortly after i thought that they decided that they were um and so far the results have been absolutely exceptional this was i think they hit 671 million monthly active users which i mean they are close to 10 of the global population i believe at this point that are that are now on spotify and it also goes to show 671 million monthly active users i think that's like a triple from five years ago

Starting point is 00:26:51 anyone that thinks music streaming is a commodity they have put those concerns to rest they've been raising prices and growing subscribers while doing so. Revenue grew 16%. They had increasing ARPU because of the price increases that they've been instituting. I might have already said this, but this was the second highest quarterly subscriptions additions ever. So I think they added 35 million subscribers this quarter. And the operating leverage is really the story here and i think why people have kind of latched on total r&d expenses so i just threw sgna and r&d together here are down roughly 13 from their peak as a percentage of revenue that's down much more because revenue has jumped a lot since that time so they've seen tremendous operating leverage

Starting point is 00:27:48 free cash flow margin has gone from zero percent a year two years ago now that was kind of temporarily reduced to 15 percent over the last 12 months so they i guess they just chose to get profitable they made made the choice to and really the efficiencies have come through the expense discipline on the income statement so well gross margins are improving at a pretty good pace yeah i wouldn't say anything structurally changed with the business in terms of how they like unless i'm wrong i don't think they renegotiated some insane contract with the labels where now they have all this operating leverage it's mostly come from headcount reduction trailing no forward potentially they just signed a new deal with universal so we'll see how that shakes out but

Starting point is 00:28:51 they're always very mysterious about it so we'll see so i guess my question to you the stock's up a lot since it since it bottomed i think it's up six full maybe more so it was at 75 once so it's gonna be 10 bagger shortly well would you get back into spotify and i guess what lessons did you take away from your investment experience with spotify well the lessons are it's okay if something runs if you didn't think it was attractive when you bought it but then it keeps getting more overvalued i like the business here i would get back in at the right price but today it is officially entered the never sell zone maybe we can call it that this is not a Good buy right here.

Starting point is 00:29:41 Okay, what's their market cap? Let's pull them up quick. This is a great company. Market cap is $125 billion. It's possible they do $10 billion in annual earnings in five years. Possible. If that happens, the stock probably barely budges. This is a wildly expensive stock.

Starting point is 00:30:06 It's a great business. but i would be very hesitant to buy here and i probably wouldn't here's the thing with something like with a company like this if i had still held on to the shares and this is kind of the lesson i think we should take away from it i i still think i would be holding my shares or that's the mindset i hoped or i would hope i would have because it has such a long runway to grow but i'm not buying this thing unless it goes down a lot 50 maybe which is weird people might say well if you would hold it when you buy it and i don't think so because there's taxes and you have to look at that david this is the one lesson from david gardner everyone should take away from

Starting point is 00:30:55 when you have a winner you should be very hesitant to sell it unless it becomes extremely overvalued which speaking of which we might have one of those to talk about later today yeah it's it's a long ways away from where i would want to get back into it the one takeaway that i have here and i think i've talked about this on the show a number of times And this is probably – and maybe it's the bubble or the bull market talking or maybe it's like a valuable revelation that I've had in my investment career. But if you have a business or a product that's really idiosyncratic, it's unique, it's something that's really difficult to replicate, and I think Spotify is one of those. I mean it truly is a best-in-class product and it's going to scale. they're they can get profitable if they need to is kind of the lesson i've taken away

Starting point is 00:32:00 and usually it comes from investor pressure is kind of the experience that i've seen in this case investors were putting a lot of pressure on spotify and if you're an owner operator you're a ceo founder like daniel leck i know i'm going long here so we'll go quicker through the other ones if your stock's down 50 60 in their case i think it was like 70 or 80 percent and internally everyone at your organization is being affected by this because they've whatever their options invested all this stuff you find ways to make the stock go up and in this case it was to get more profitable and not really empire build like i i really think when they first one public is ek was kind of in the empire building stage that's perhaps yeah yeah and maybe

Starting point is 00:32:57 he didn't care he was pretty young i think he's only about 40 in his 40s now so when they first went public he was in his 30s i think maybe he was brought up in the grow revenue and users at all costs and it doesn't really matter we'll figure it out later well no they did figure it out later and it shouldn't be shocking that when your earnings explode higher go up by like 500 the stock's gonna start moving because yeah i i think that's the story here they said they could get 10 gap operating margins no one believed them they did it way quicker than i would have even thought they could do. It's there. We have a comment here that said the problem was that Eck told investors every year for a decade that they would be profitable. So the final time he

Starting point is 00:33:51 did it, no one believed him. It was kind of a boy who cried wolf situation. I mean, that's true. And I think that's why the stock was trading at such a discount. Okay. What company had a good report for you? Well, I'm going to combine this into my bubble watch. And I know it's an interesting company. It's an interesting way to say they had such a good earnings report, but perhaps this is a bubble company. And it's going to be Palantir. I thought this was one of the most impressive earnings reports I've seen so far this year. 36% year-over-year revenue growth. That was an acceleration. U.S. commercial revenue, 64% year-over-year growth.

Starting point is 00:34:43 Really, really phenomenal stuff. Ryan's pulling off the chart here. What do you got, Ryan? U.S. commercial revenue. Yeah, I mean, just look at that. It's just there's almost a step change in growth. And all the stuff they talked about with AI deployment has seemed to work out here. And what do we got?

Starting point is 00:35:01 If we combine those, yeah, look at U.S. commercial revenue, 50% growth since September 2021. U.S. government revenue continues to grow. There is a ton of opportunity for this company. The stock now, I think it jumped 25% after earnings. It's up 500% in the past 12 months. trailing 12 month price to sales ratio ryan 86 we're in snowflake land snowflake not metaphor or like the name calling but the company that traded at 100 times sales the market cap here 230 billion dollars without factoring in any shareholder dilution

Starting point is 00:35:44 i put a sarcastic comment are you in at these prices i mean no ryan's obviously not but this is i think without a doubt in the shopify 2021 snowflake 2021 maybe with shopify 2020 it's in that realm now where we have a huge market cap combined with a price to sales ratio that is not going to make sense no matter what happens. No matter what happens. Because this company is extremely popular, so I write about them on The Motley Fool quite a bit. And when I do the math for the articles, I've been doing, say, a while ago, probably 150 to 100% lower. And I would say, hey, well, they probably need like 30% revenue growth for 10 straight years and then operating margins needs to just absolutely soar.

Starting point is 00:36:49 And maybe that's happening. But now I think we probably need 50% revenue growth for 10 straight years and the expectations are just getting out of control. So what are your thoughts here? Yeah, no doubt. This was a really, really good quarter. They are showing good signs of profitability as well. So it's not like – sometimes you see companies that are almost powered by like a high stock price that can like really elevate the performance at the actual business level because you can kind of pay for growth.

Starting point is 00:37:24 You can really focus on revenue growth because that's what shareholders care about, whatever, and not really just kind of neglect profitability. That's not the case with Palantir. now you mentioned the shopify uh analogy here shopify traded in late 2021 they traded at a market cap of just under no they hit 200 billion dollars in market cap so actually got fairly comparable to palantir cheaper though only 55 times sales yeah they hit 55 times sales And if you're thinking, well, Shopify has actually done okay, relative to that high, they are down still 30%. So over the following three and a half years, it's been a negative 30% returns, and I think revenue has doubled since that time. So there comes a point when evaluation can just simply get too extreme.

Starting point is 00:38:25 I think Palantir has hit that. The performance has been really, really good. But this was the KPI that stood out to me, and we should plug FinChat here. If you go to FinChat, you can see that their commercial customers, they added more commercial customers than they ever have in a single quarter. And I guess the runway for commercial revenue, I would think, is higher without knowing the business super well. Sure, it's high. Yeah, so what? What are they going to do?

Starting point is 00:38:56 $10 billion in revenue? Great. the stock's still overvalued yeah yeah it is i mean certainly are they going to do 20 billion dollars are they going to do 20 billion dollars in revenue it's still overvalued yeah yeah it is let's uh okay good report but yeah also on the within the within the bubble watch you had this note about the enron egg this was old news ryan you always give me stuff that's about three weeks three weeks old this was i didn't realize this was so old yeah i mean it's a scam it's not real at home nuclear are you buying no i blocked all these people on twitter

Starting point is 00:39:39 i don't want them no no twitter promotional whatever those things you the money you can make from from views i don't want any of that going to go to this enron scammer if you're It's one of the, it's, it's the, the curly haircut guys are just trying to be funny. And it's, it's just like YouTube people, you know, it's like YouTube, not scammers, but pranksters that are doing this. It's great, but I don't want anything to do with it. It's a sign of a bubble though. Yeah.

Starting point is 00:40:11 I do not want to give a whole lot of attention to it, but I will say if you're interested in becoming a fraudster and like trying to i guess like you know what's your reputation worth and you're willing to sell it the this is the blueprint for it like you do a catchy name some product that is kind of outlandish marketing is just like all gimmicks and it you can attract the wrong type of attention but it is attention so i will say that famous people yeah that just want money to somehow hype your product in kind of a really fake way what's weird though we have a comment in the chat here that said i had family members who fell for the enron news yeah i guess for we're in the mix of the fin twit stuff we're maybe skeptical we're looking at this

Starting point is 00:41:05 stuff all the time we know that there's just these pranksters jokesters scammers that are constantly out there but for people that aren't in the the industry it can be kind of hard to tell And I feel bad because there is just a tidal wave of scammers out there now, isn't there? It's terrible. And I think if you have someone that's 80 years old, oh man, don't even let them have a phone anymore. Yeah, seriously. Can't go online.

Starting point is 00:41:37 Okay. Last great report that I saw for this week, there were some other ones, but I thought google had a pretty solid report but that's i don't know if there's a whole lot to touch on there to be honest mr market disagrees with you ryan yeah well the the market changes its mind on google every quarter and it makes no sense but i want to talk about meta i know this is a little boring because everyone knows meta and there's nothing like no crazy insights here but the family of apps business hits 60 percent operating margins this quarter that's its highest figure ever and well the one thing that always just blows my mind is the fact that they still have user

Starting point is 00:42:16 growth uh it's somehow they continue to grow users at like mid single digit percentage despite touching half the earth well the the emerging markets that population has grown africa and asia yeah i mean basically i assume they'll just grow with internet penetration in emerging markets and those popular those population pyramids you know i love talking population pyramids they're uh they're a little more attractive it's gonna be a lot more people in the 10 20s and 30s in those areas yeah anyway the thing i actually like potentially about meta here is yeah and we just got a comment on it there's been some kind of leaks and commentary from people in the company and i think someone basically said at reality labs if we don't get something into the mainstream

Starting point is 00:43:12 this year they're probably going to pull the plug so i guess that was i i know they should do that like if they're hemorrhaging 15 billion dollars a year on this and nothing's coming of it then yeah they should but it is nice to know that zuckerberg does not just purely see this as a forever cash incinerator where they just kind of are going to lump money into it. Now, we still got to wait and actually see. It's one

Starting point is 00:43:43 thing to just say it, but we want to see the actual proof of it. Would you have any interest in Meta here? No. I think stock is premium valuation is what I'm trying to spit out here. Yes,

Starting point is 00:44:00 it's a good business. Yes, they seem to be investing in all the right areas, but not for me at this price. Would I be holding it if I bought at the lows in 2022 and celebrating these gains like I know a lot of people did out there? Sure. Yeah. There's no reason to sell here, but there's also no reason to buy. I think it's another one similar to Spotify that is getting into no man's land, although not as an egregious of a premium valuation here. I like the Reality Labs thing. What I find interesting about those things though is that you have all of these super smart tech executives founders you have all the venture capitalists mark andreessen blah blah blah blah they're talking constantly

Starting point is 00:44:42 and they say well ar is definitely the future virtual reality goggles are definitely the future but it never is yeah i could well oh you could see it yeah i could see it this is the same thing i've been hearing since 2005 no i'd say wait and see okay with the with the glasses okay the goggles make no sense of course but having something that's like pro i mean yeah that yes looks like a bug remember those videos they pay people do to walk across the street that was a health hazard these people are gonna get blown up by a bus yeah it is yes i think the goggles are incredibly misplaced in terms of product market fit and i think that was probably one where silicon valley

Starting point is 00:45:35 was kind of in its own bubble and thought that like people would be interacting with this remember when every company had to come up with their metaverse plan uh yeah or their voice assistant plan yeah yeah they go through these waves but who knows maybe this will help their profitability if they cut down on some of those, invest in AI instead. Yeah. Let's talk about one of our friends, Blue Chippers. Blue Chippers Club was recently started by two friends of ours with the goal of building a tight-knit community of stock-focused investors. I've seen a number of listeners from the show already join. So thank you if you've done that. If you haven't, it is a community where everyone can share and break down their portfolio, pitch stocks,

Starting point is 00:46:16 receive feedback, and participate in weekly calls. I actually love this idea. It's why we're promoting it here on the show. And if you are interested, it is totally free to join. So head on over to bluechippersclub.com and hit apply. The link will be in the description. And then one more time, I want to shout out Public. If you're serious about investing, you need to know about public.com. That is where you can invest in everything, stocks, options, bonds, crypto. You can even earn some of the highest yields in the industry, like the 6% or higher yield you can lock in with a bond account public is a finra registered sipc insured platform that takes your investments as seriously as you do fund your account in five minutes or less at public.com

Starting point is 00:46:56 slash chit chat stocks and get up to ten thousand dollars when you transfer your old portfolio that's public.com slash chit chat stocks this is paid for by public investing full disclosures are in the podcast description let's talk worst reports can i start group match group i think we both chose them yeah who went last did you just do meta yeah you go for it okay well nothing surprising here they had almost the same thing as the last three years well total revenue was pretty stagnant uh three percent growth year over year six percent on a foreign exchange basis that's for the full year for yo q4 actually declined one percent was up one percent on a foreign exchange neutral basis operating margin is coming in tinder revenue is not doing great

Starting point is 00:47:51 in q4 it declined three percent year over year payers are in the moving the wrong direction hinge is the only one growing emerging and evergreen are pretty stagnant asia not doing that great if we go there's so many numbers with this company but if we look at their outlook Let's go full year 2025. They're expecting revenue to fall 3% to being up 1%. Foreign exchange can really throw a wrench into the mix. They're expecting free cash flow of about a billion, depending on, again, the foreign exchange rates. I guess the turnaround didn't happen. And you know what they did, Ryan? They fired the CEO, which seemed likely given the activist investor coming in and they brought in spencer raskoff who was just put put on the board i think

Starting point is 00:48:46 in late 2024 so maybe the writing was on the wall there he is one of the i think founders yeah co-founder and was a ceo of zillow group and i gotta say this is perhaps my least favorite pick they could make i don't know anything about this raskoff guy but i do know one thing about zillow and they are not a culture of optimizing for shareholders they're one of the best businesses in the entire world and they just wasted it for many many years this is their fourth ceo in five years now when people say that executive turnover is a red flag this is like example a of executive turnover literally the ceo uh departing i think gary swidler left too didn't he cfo probably he probably got fired he was the one that had been there for a while

Starting point is 00:49:41 honestly if it's probably good to get even if he did a good or bad job it's probably good to get a fresh faces in there but yeah every step of the way we've said oh i didn't realize how mismanaged it was good thing we got a new ceo oh good well good thing we got a new ceo it doesn't here's the thing i think this company it was pieced together by iac it's a company that did not i don't think really needed to be together or wanted to be together there are we talked about this recently, but if you are, it feels like all the reporting is segmented in a way. It feels like they've pieced together the business in a way to delight shareholders that has no benefits internally. If you work at Hinge or how about, okay, so Evergreen and Emerging, right? You've

Starting point is 00:50:38 got match.com and chispa in the same group same organization those i assume those two businesses were built on completely different tech stacks what what benefits are they gaining there like i don't know they're also probably irrelevant to the entire thing it's you know my whole point is like i don't think there's all these synergies that people want out of a serial acquirer perhaps yeah yeah you've got no like i assume if you're a great developer this isn't a place you are super eager to work the it there's been so little development and the development that has gone and gone on is completely useless to be just totally candid tinder the ai initiatives are beyond dumb and i know i'm kind of on my

Starting point is 00:51:39 soapbox here but it's just so like what are we spending money on match.com should just be run for cash there should be like five developers and that's it and tinder sorry if you're not able to reinvent it maybe you do the same thing or plow all your investment into hinge i don't know but And it's not like – there has been very little true improvement in the experience at Tinder. Yeah. I'll still argue though that these are good businesses at the end of the day. Like not the specific cases. They might be poorly run.

Starting point is 00:52:17 But the idea of these businesses, the business models are good. Yeah. But you can run, as someone said once, I don't know if it was in one of our chats or maybe it was on Twitter or some comment somewhere. They said that maybe dating app companies don't really lead to management teams that care about shareholders. Because it seems like both Bumble and Match Group have had executive teams that are not necessarily out there to, I don't know. They like good press releases and pretty corporate offices, but shareholders, maybe not so much. And they make a pretty slide deck, though.

Starting point is 00:53:03 Yeah, and they got a lot of segment stuff. It's great. Really confusing. Okay, is Match Group unownable? Sorry, I was trying to get my words out. If they had a different CEO come in, I would be happy. if they had the ceo with the right pedigree maybe but this was brought me further away yeah zillow is not the culture i want no i agree all right speaking of other bad reports you want

Starting point is 00:53:35 to talk about disney and let me let me just preface disney's report with this stat because this angers me to no end since i work at finchat and since you like having segment data for her for the company you work for? Yeah. I love consistent KPIs because it makes it very easy to monitor the progress of the business. Disney, over the last five years,

Starting point is 00:54:00 has either redefined or stopped reporting 16 different segments in KPIs, segment in KPI metrics. That's in five years. They are probably the most, they're the worst at this, actually, in terms of reporting and changing their reporting. I don't know if I've seen someone worse.

Starting point is 00:54:21 They changed something again this quarter. I didn't – honestly, I don't care. Now they don't show global paid subs. Yeah, Star India, something like that. I'm not exactly sure. Yeah, but if you want those segments, the hard workers at FinChat are helping you. Disney is probably there, the most hated company at FinChat. but they work hard to get those segments, whatever you want to get lined up and easily

Starting point is 00:54:52 chartable. And you can use our link finchat.io slash chitchat and get a 15% discount on any paid plan. Did you see Ryan, the stat I had about Nintendo versus Disney and the total return? Yes. What'd you think? Were you surprised or no? I was a little surprised. Although disney has been so bad for a decade that one didn't surprise me the 30 year did surprise me that 30 year nintendo is still positive versus them but yeah obviously not as bad you know let me try to find it uh let's see i want to get the number correct maybe it's too old oh yeah here i will say brett being better than disney

Starting point is 00:55:38 over the last 10 years is not a high bar. It's better than the S&P, too. Here's the stat, and I was surprised, too, as someone who's a Nintendo fan. Nintendo, 773% cumulative total return. It's actually much higher today. After this, the stock has still continued to run. Disney, in the last 10 years, a cumulative total return of 35%.

Starting point is 00:56:04 Nintendo is still up, I think, over the last 30 years. give or take sometimes when you go farther back i didn't put it on a precise date but disney's much closer to to those returns they just need to reclassify the reporting segments and they'll figure it out yeah exactly exactly all right here's where the disney numbers though entertainment revenue of nine percent sports revenue flat experiences revenue which as parks and cruises and other things like that in the real world. Up 3%. I don't know what people were expecting, but maybe that experience just want us a bit lower because that's been such a good business for them. Today, Ryan, the market cap is $20 billion. I know they have some debt

Starting point is 00:56:51 on there, but it's not as bad as it used to be. They're profitable now. They'll be able to deal with it. My question is, what is the thesis here? Because is there a path? And I think given the $200 billion market cap, is there a path to $20 billion in earnings? I think maybe, maybe, but it's hard. It's going to be hard. Netflix, Amazon. Why am I forgetting the other ones? youtube don't forget on the not like the sports rights stuff but on the talk shows spotify is also in there as well i think the time spent on disney platforms outside of the young kids watching disney movies is in such a hard spot right now yeah it's it's really hard to answer because disney's such a big business that it's been so messy that it's hard to really know exactly what's

Starting point is 00:57:55 going wrong but i think it's simple enough to just say the way we consume content is changing and disney's not as relevant in the modern consumption methods as they were 15 10 years ago and if that's like if theaters aren't the main mode of getting the newest movie it affects disney throughout the rest of its business too parks become not quite as appealing as maybe they were 10 years ago because people people like the ip but they don't it's not completely irreplaceable people also like other ip there's tons of kids content on youtube for anyone that doesn't know if you have if you don't have kids go to netflix go to youtube look up there's like tons of kids shows that are quite popular it's just a more competitive world

Starting point is 00:58:52 i don't think there's a clear thesis over the next 10 years that i that i would ever really entertain yeah if it works okay maybe it's a double all right fine yeah it's just a mess honestly it's a mess and the kpis are exemplary of it you know what's a name we haven't mentioned in a long time roblox that's out there too although i guess that some huge concerns with like pedophiles or something like that i don't know don't want to say they actually have that problem but there was a lot of reporting on that so that could be a concern but time spent on roblox quite high yeah i mean it's just there's competition everywhere for time spent i don't love when people just say like oh the competition for time spent no business is going to survive

Starting point is 00:59:45 like i don't like that but when disney was in like the pole position in a linear tv world that you know you're potentially gonna lose some eyeballs i think there's three horsemen netflix youtube spotify there could be a fourth but those are the three i've confirmed about a lot of time spent that's yeah for so excluding social media obviously meta's there on a different stance speaking of companies that are like major losers from the competition for time spent electronic arts this is another really bad report they've gone nowhere but billings have gone nowhere for that business for four or five years right yeah yeah it's a tough one you want to talk about them for the last we know one more earnings report there's not much there i mean it's just

Starting point is 01:00:42 they for one stagnant right it's very stagnant they pretty much have just leaned on fifa or fc now and after lapping two great years uh it's starting to slow down i think people people used to make the case that video games are just ultra competitive and ea is going to get left by the wayside and i thought they were all wrong but i think they ended up being right because well i don't know if that was the why i think it's just the publishers it's just not there's not as much money spent on these things you think there's less money spent on console gaming today than there was four or five years ago probably i mean that's the heart of the pandemic ryan i guess but i mean they haven't grown since pre-pandemic

Starting point is 01:01:38 really uh i i don't have the numbers in front of me let's pull them i think they're up from before the pandemic i mean yeah maybe the pandemic has just left such a bad comp for everyone but i just i just don't love this business at all okay no it's not it's not a high growth business yeah it's up like 10 since pre-pandemic net bookings yeah it's still not great and maybe this is something that maybe we got blind during the pandemic i just don't know if video games are high growth market i agree someone saturated yeah and the yeah maybe mobile helps like the total gross bookings overall grow just as more smartphones end up in more people's hands but console gaming pc gaming

Starting point is 01:02:43 i would bet those are pretty close to saturation maybe yeah we'll see what happens with two big things will be the switch two and grand theft out of six we'll see what happens with them those will be some big data points did you want to talk paypal i don't know if there's time i don't really have any great takes it seems to be kind of in no man's land so maybe i can form some better takes talk about it next week yeah yeah yeah the one thing i will say about them before we get out of here is why are you investing in a stock that has to fight such an uphill battle i had someone recently anecdotal evidence and everyone should definitely invest based on this

Starting point is 01:03:38 tiny little piece of evidence the one data point yeah i was buying a lawnmower from someone that's just like a local it's basically i was assuming it was going to be cash only and he said i can do cash or paypal and i i haven't heard that in so long and i just thought like why would i do that like yeah well i guess that benefits them too but like if you don't have yeah true it's the branded checkouts the way the real cash generator but it's i just yeah they are fighting so much competition and they're just like clinging on to their network i just don't see how that ends up really looking really good in like five to ten years yeah they're they're a treadmill business they're running really hard to stay in place

Starting point is 01:04:31 and it's always my favorite it's that star wars meme when they're like venmo volumes keep growing and then and you're monetizing that right you know yeah i don't think i've ever given venmo a cent of money just have the delayed transfer the i i'm sure i'm a huge loss leader for them you have to believe i think if you own paypal you have to believe that over time branded checkout will be replaced in the aggregate by all their other businesses in terms of gross profits and that's not the bet and you want to compete against adyen good luck with that good luck with that they're losing yeah all right we're going long anything else ryan before we get out of here i think that's about it missed our small cap of the week but

Starting point is 01:05:21 it's not it was peloton and people can people can guess my conclusions on that one You know, we had one that we've had quite a few recommendations from people, Frankfurt Airport. There's too many to do every week. Some of them might turn into research reports. There's one that's like a small grocery store operator, kind of a convenience store operator in Mexico. That could be one that could be for a full research report. People really seem to like that one. We had a question here about Trump's tariffs on China and the TikTok ban and any retaliation there. Honestly, no one knows because it seems like the administration changes their mind every day. So just invest in stuff that's not going to get affected by it. Easier said than done. Yeah, Peloton, small cap of the week. That would have been some nice memories.

Starting point is 01:06:06 That's another pandemic winner. But all right, let's get out of here. As a reminder, we're not financial advisors. Anything we say on the show is not formal advice or recommendation. Ryan, I, or any podcast guests may hold security disgust in this podcast, may have held them in the past, and may buy, sell, or hold them in the future. Thank you, everyone, for tuning in. We do these live every Wednesday, 1.30 p.m. Eastern Time on the Chit Chat Stocks Podcast

Starting point is 01:06:32 YouTube channel. You can watch or listen to the replays on YouTube, or you can watch or listen to the replays on Spotify, Apple Podcasts, wherever you get your podcast. We don't care. Listen or watch wherever you want. Thank you everyone for tuning in once again, and we'll see you next week.

Chit Chat Stocks - Palantir's Big Beat; Apple Defies Gravity; Best and Worst Q4 Earnings Reports (PLTR, AAPL, SPOT)

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