The Canadian Investor - 3 Stocks at Risk from Trump’s New Aluminum & Steel Tariffs

Episode Date: February 17, 2025

In this episode, Braden shares his first impressions of the cruise industry, how Royal Caribbean built a dominant brand, and whether it’s worth a deeper investment look. We then break down the latest tariff announcements from Trump and their impact on Canadian aluminum and steel exports, including key players like Alcoa, Rio Tinto, and Algoma Steel. Next, we discuss Uber’s record-breaking earnings, its role in the future of autonomous vehicles, and whether it can remain the dominant ride-sharing platform. Finally, we dive into Lightspeed’s questionable capital allocation decisions and what investors should watch for going forward. Tickets of stocks/ETFs discussed: LSPD.TO, UBER, RCL Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

So not so long ago, self-directed investors caught wind of the power of low cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians. And we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor.

And here we are with this iconic Canadian brand in the asset management world. Well, folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO all equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business.

And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank, is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. This is The Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets.

Hosted by Brayden Dennis and Simon Bélanger. The Canadian Invest investor podcast. Welcome into the show. My name is Brayden Dennis, as always joined by the remarkable Mr. Simon Belanger. Dude, can I start with a stock idea? Yeah, go for it. I had a quick look of what you wanna talk about

and I never thought you'd talk about this. I don't think I ever would, no. But you know, I reserve the right to change my mind. No, but today should be a good episode. I'm gonna talk about this and then you're gonna talk about more news on tariffs. I'm gonna talk about autonomous vehicles in the future of Uber, RoboTaxi and all that stuff.

And then you're gonna talk about a Canadian company on how to not do share buybacks 101. I think this is actually a fun segment too. Yeah, I'm going to be dunking on a Canadian company, unfortunately. But I think the stock you chose is pretty good, though. It's the opposite of a pandemic, darling, I would say. Correct. Yes. So not advice. Nothing in this show is advice. Always do your own research. I do not own shares in this stock. Yada, yada, yada. Don't bore my conviction. It's a bad way to invest. Okay. Ticker. RCL. Royal Caribbean Cruises. 70 billion in market cap company. By the way,

are you a cruise guy? You've been on a cruise vacation before? I haven't, but I would like to try at some time, at some point, probably like a Disney cruise. So my daughter, I think it's very much geared towards kids, but also the parents having a good time while the kids are there from what I've heard. So maybe one of those Disney cruises

or something like that, yeah. You'd be right in the demographic. Yeah. Absolutely. With the young kids. Now, I have zero idea what they're like. I went on one when I was like a really young kid. I don't really remember.

I know that they're giant buffets on the ocean. That's what they are. They're giant buffets. you stuff your face with food while floating on the ocean with a water slide. Honestly, sounds kind of unreal. So I'm in Fort Lauderdale right now, as you know, and this is where a lot of the ships leave from. It's like cruise capital.

And I'm like to Ashley, I'm like, should we go on a three day cruise or something? Like, should we figure out if this is for us? Like are we those people? So I'm a big YouTube guy, so I check out videos on YouTube, like which boat should we go on. I kind of want to just see videos of what they look like too. Should we go on Royal Caribbean, Celebrity, which are higher end, the Carnival, that's the low cost option.

I wanna see some reviews, but then also what they look like. I'm like, ah, Carnival, that, now that looks kinda on the low end. And Disney Cruise, you know, just given where I am, don't have kids. Eh, I'd rather swim than go on to Disney Cruise today with me and my fiance. If you want a good reason to not have kids,

go on to Disney Cruise today with me and my fiance. If you want a good reason to not have kids, go on the Disney Cruise without kids. Fair, I mean, teach their own, you know, everyone's got their thing. For us, that kind of leaves Royal Caribbean and celebrity the two options, okay? And all the YouTube videos, I'm basically like, oh, we are loyal, we're loyal to royal. I'm like, what the hell is this?

Like, loyal to royal. I'm watching more the hell is this? Loyal to royal. I'm watching more videos. I'm watching more videos. And there's this entire cruise cult of they review every single boat. They've been on all of them. Oh wow. Okay. Yeah. And all these videos are really aimed at the other cruise goers. I could not, I could not find any videos that like for me that were like, hey here's the basics. They were really like about the the cruise goers, the very like loyal fan bases. And I'm like what is this loyalty program? They're all talking about how they rack up these loyalty programs and oh no it's it's Royal Caribbean or bus type of thing.

And I'm like, okay, this is kind of interesting. There's something to this loyalty program. This is interesting. Where do I go? I go pull up Finchrad. I'm like, I just want to see Royal Caribbean stock. This is the kind of just person I am. Here I am, so I'm thinking celebrities, their most fierce competitor.

I realized Royal Caribbean owns them. Okay. That's their sister brand. I'm looking around, post pandemic, these two brands have really gobbled up a lot of market share. Disney's Disney, the parks and the cruises, the people who are going to go on Disney are going to go on Disney, but they've really gobbled up market share on the margin. So I pull up their financials. I see the huge market share grains. This is a growth business, Simone. Passenger ticket revenue and onboard revenue has been, you know, kind of up and to the right. You have 2020 and 2021,

where the business just collapses, basically goes to zero. It looks like they were still generating revenue, but they only had a few ships going. The business lost a ton, a ton of money in those two years. It was really catastrophic. Even 2022 was not back up to the even 2017 levels.

But since then, the business is back and more and sure it's probably catching up on some, you know, some pent up demand. That is the risk though, is that Simone, they basically went from eight billion in debt to 20 billion in debt on the balance sheet during those years. It trades at 18 times next year's earnings.

They are getting the balance sheet in order. The total debt load's gone down from 2022. And it's producing a fair bit of cash again. They're losing basically $6 billion in cash in 2020, another $4 billion in 2021, and a $2.2 billion in 2022. But since then, they're generating a few billion in cash every year. And I expect this to continue to go up because that kind of onboard revenue makes up a lot of the money. So I don't typically like these types of investments, but I wanted to turn over the stone when I saw this loyal to royal cult online. Like there's something, there is something here.

Yeah. Yeah. I mean, I know, I know a lot of people that love cruises, and I do wonder those that were stuck on the boats. Remember when the pandemic hit, there were like literally boats that were quarantined. I feel like if you were part of that group, you're probably have PTSD going back on the cruise. But obviously that was a small portion of people. But yeah, it's surprising how well they've done. But I'm not surprised. We've seen pent up demand happen

for a whole slew of different services, especially experiences where people can do them during the pandemic. So I'm not surprised to see that they've rebounded that well. And in the last two years, we've seen that happen time and time again although we're seeing it slow down a little bit when you start looking I'm thinking about Airbnb I haven't looked at them in the last couple months but I know they were seeing slowing demand as well a little bit seeing that people are pulling back a little bit on span which makes sense I'm I'm surprised that it seems, at least with the data you're showing and you're talking about, they're not seeing that.

It seems to be continuing for them. I guess I just didn't expect to see, and that's why I love a platform like this where you can just kind of pull up the two business segments quickly. I was not expecting to see this be such a growth business and such a steady growth business over time. I think that that base cohort of customers that really like to do these types of holidays around the world just keep

coming back for more and I think that they've made really interesting investments in their own private islands. Have you know, I don't know if you know anything about this. No, I didn't know. No, tell me about it. So out in like the Bahamas, Royal, Disney even, they've basically taken old islands and reno'd them into a stop that you partake in on some of these typical routes

that leave South Florida, for example, which is very, you know, kind of the most common cruise routes that for North Americans, at least. And they've built their own islands that you go to for the day. Okay. Yeah. And it's like a fun, Royal Caribbean calls it like the perfect day. It's like what the island, something, Coco Cay or the perfect day day whatever some jingle they got going there but it's basically like utopia for a kid showing up to a beach island essentially it's like the way to picture it but there's food for the adults there's drinks there's the drink package

you got to pay for but that has been reaping rewards, that investment that they've built out in these islands that they've put out, and basically restored from nothing. They're reaping the benefit from those investments as well too. So anyways, just a name for the watch list. I'm not rushing to buy the idea, but I like turning over these stones.

I like bringing them to the pod and yeah. Yeah, I was looking just to see if you would have bottom ticked it during the pandemic. I mean, you've really done well. I'm not sure. Probably similar to the S&P 500, maybe a bit ahead if you bought it during the big crash in March of 2020. Because I'm just doing the five year here and the total returns five year, which is just before the pandemic started.

It's about one hundred and one percent. So quite good for five years. You could have done worse in terms of investment. It's probably one hundred and twenty, one hundred thirty. If you're looking at March twenty, twenty, a bottom tick of much 20 is more than a 10 bagger for Royal Caribbean. Oh wow, okay, nevermind, yeah.

Yeah, so it's, I mean, again, this is me cherry picking, it's trading at $22 in March of 2020, but I mean, if you're compared to the S&P, you can bottom tick that day too, yeah. It has more than 10 bagged. Yeah, I guess I was underestimating the drop that happened. So yeah, I'm just choosing here, yeah, March 23, 2020 and 647% in terms of total return.

So it's not bad, not bad at all. Could have done a lot worse. Well, you can see the price is at 22 bucks in March, right? And it's 256 today, right? So that's more than 10 bags just on the share price. Mm-hmm, no, that's right. I don't know. Finchad's giving me 642, but I guess the total change,

okay, yeah, 813, so I wasn't looking at the right thing. But yeah, it's been quite the investment, all that. Stupid FinChat product, damn. No, I was looking at different areas, so that's my bad, it's a user error. Yeah, so that's it for Real Caribbean. Welcome back into the show. This is the Canadian investor podcast made possible

by our friends and show sponsor EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April or November year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be

able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQBank GICs are a great option. The best thing about EQBank is that it is so easy to use. You can open an account and buy a GIC online in minutes.

Take advantage of some of the best rates on the market today at EQBank.ca forward slash gic again EQBank.ca forward slash gic. This next week for business Toronto Monday New York Tuesday Wednesday meetings down south Thursday Friday Miami Tuesday back to Toronto Wednesday, when vacation or work, I prefer staying somewhere that feels like home and that's why I book on Airbnb. Recently while planning on going south for the winter, it hit me, my place could be an Airbnb too while I'm away.

Imagine making extra money while you're out enjoying life. Since your place is sitting empty, hosting an Airbnb is a practical way to earn a little extra income for your next adventure. And now it's easier than ever. If you've ever felt overwhelmed by the idea of hosting on Airbnb, try Airbnb's new Co-host Network. You can hire a local experienced and vetted co-host to take care of your home and guests. Your co-host can create your listing, manage reservations, and offer on-site support.

Find a co-host at airbnb.ca forward slash host. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free, so that you can choose the ETFs that you want. And they charge no annual RSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service.

Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Okay, you're gonna talk about more tariffs, the buzzword of 2025.

More tariffs, yeah. I mean, I think we're gonna have to talk about tariffs every other week, it seems like. And like Trump said, it's his favorite word in the American dictionary. I think that was one of his quotes at some point. Well, on Monday, he announced that there'd be tariffs of 25% on aluminum and steel exports going to the US. The tariffs will be applied universally and with no exception or exemptions. In other words, it will apply to all countries, including Canada. And Canada is not singled out specifically here, but the reality is that indirectly it

is because Canada is the largest exporter for both steel and aluminum and by a mile. Like Canada is definitely the largest exporter to the US for both, even more so for aluminum than steel, but even steel is pretty significant. So if Canada exports seven billion worth of steel every year to the US, and obviously depending where you're getting the data, so you may have seen six seven around that range

There's different areas to get that data whether it's coming from the US or internationally But regardless Canada is well in front of second and third place when it comes to exports of steel Which is Mexico and Brazil at around three billion each and it's even more pronounced Like I said for aluminum Canada is by far the number one exporter to the US with around 10 billion in exports that's 10 times higher than the next country so it's that's why you're seeing a lot of people concerned with these and for both metals the US represents around 90% of exports for Canadian products. And I think it's important for people to remember. Remember last week when we I talked about tariffs and said, look,

if you're building a bike that has an aluminum frame, and you're just bringing the aluminum for the frame, that will be tariff. So in this case would be tariff 25%. However, it doesn't mean the rest of the bike will be tariff if the rest of the bike is all made in the US. So I think we have to keep that in mind where it's hard to say to what extent there is going to be a negative impact for these industries. But I think it's fair to say that there will be some kind of negative impact. But I think it's a bit too early to say that it's going to be necessarily a massive impact. And of course you have Ontario and Quebec, that would be the two most impacted provinces. Ontario more for the steel production and Quebec because of the cheap hydroelectricity. It would be more for the aluminum production.

And the tariffs are supposed to go in effect. I thought I'd put that down my notes but early March I think it was March 3 or 4th if I remember correctly. So there is still some times for these producer a couple weeks, two three weeks for them to try to react to that. At the end of the day I think it's going to be most likely the US consumer that will be on the hook for increased prices And there's probably gonna be some impact to Canada We'll have to see and what I wanted to do is just look at Three companies that may see some impact a lot of them that have been cited So Alcoa would be the first one

I pulled some charts here and it's hard to say again to what extent just because the companies don't always break down their business lines. And I'm sure you know that with KPIs, right? So sometimes you'd want them to break it down a certain way and they don't always do. But Alcoa here, to get a good idea, the United States, the US revenue is a bit more a bit less than half of

their total revenues and they're looking at five billions for coming from US and around 10.5 billion for their total revenue so a bit less than half and aluminum production is about 60% of their revenues so if you're doing some quick math assuming that it's probably a same ratio for the US, so you're looking about at around 3 billion in sales that could potentially be impacted. Again, it won't go to zero. I think that's safe to say there's probably part of that production that is directly already happening in the US.

So we don't know exactly what portion is going out and being exported to the u.s. But alcoa is Probably one of the companies that will be the most impacted by this and of course Quebec There's some major plants me major aluminum Foundries or smelters. I don't know what they're called, but there's some major ones in Quebec So alcoa is the first one that it'll be interesting to have a look. And for all the three companies I'll be mentioning here, there's two more.

Make sure that if you own them or you're looking to start a position, don't make any quick rash reactions, anything like that. I think my recommendation for any of these is wait until they come out with their next earnings call and listen to what the leadership team and management has to say regarding those tariffs. Maybe they'll have a special update before then and if they do make sure you listen to it carefully and then you make a judgment because again you see those headlines,

mainstream media is really good at you know posting stuff that sells making it carefully and then you make a judgment because again you see those headlines mainstream media is really good at you know posting stuff that sells making people panic a lot of fearmongering we've seen that ever since Trump has been elected and I think on this podcast we've been saying pretty consistently let's just wait and see let's not make any conclusion Donald Trump for lack of better words says a lot of shit out loud. And yeah, kind of take it with a grain of salt at times and in my view, not make any adverse reaction. Anything you want to say

before I move on to the two other companies? I just want to double click on the example you had with the bicycle, which has raw material for the frame, for example, and then other parts that may come in and assembled in the US. The effects downstream for the US consumer, of course, this is inflationary, but it's diluted the further you go down from raw material

to processing, to actually making something, to assembly, which has dilution from other products, which may not have tariffs, to end customer. Yeah, exactly. So it's like, as you go up closer to raw material businesses, these are the ones that have their unit economics impacted the most by far. So it affects everything downstream.

But if you're wondering like, why do I see that magnified so much in price action or in news or reaction from the markets about certain companies, it's just like how close to the sun are they in terms of like this this impacting their unit economic So that'd be the only thing I'd click on. Yeah, and I think I forgot to mention So the ticker for alcoa is AA and it's listed in the US

So just for people wanting that may not have been familiar with the company I always like to stay to say the ticker is there and that's a great point because it's clear that the US is trying to encourage the aluminum to be made in the US, the steel to be made in the US, because one interesting thing is it tariffs aluminum and it tariffs steel, but it does not tariff iron ore, for example, for steel. So what they're trying to do is they're trying to encourage companies to bring it to the US,

not tariff the base material or the minerals, and then actually making in the US. I think it's important just a little nuance if people have not caught on to that that I wanted to mention. Now the- It's like, yeah, like we should have all our processing, refining, smelting be done here, right?

Like, I mean, yeah, because if you go on the raw material and they own that material, and they don't own that material, then it just makes absolutely no sense to tariff it. Exactly. And keep in mind, too, other ways that it can dilute, like we mentioned last week, a weaker Canadian dollar, if we're talking about Canada will soften the impact of that 25% tariff on aluminum. Quebec sells a lot of cheap electricity to Alcoa and at the end of the day it's Hydro-Quebec, it's government controlled, they have a lot of cheap electricity. Maybe they try to reduce those rates to make it more attractive and more profitable for them to actually produce that and keep jobs in Quebec. Whether the US would not in turn react to that, that's another question.

But there's a whole lot of different ways that these could potentially be mitigated as well. And the next one here is Algoma Steel. So if you're from northern Ontario, from Sault Ste. Marie, and I say it in French, I know in anglophones we'll say Sault Ste. Marie, or whatever, but I say in French, they have their primary smelter over there. I think it's the only one that they have. I'm assuming it's massive for Sault Ste. Marie's economy. And they don't provide really a breakdown of sales in terms of geography, but again,

I think it's safe to say that a big portion of that is going to the US. So that is another company, again, publicly traded. I tried to look at publicly traded companies. The ticker is ASTL for those who are interested at looking at the company. That's another one that could be impacted. There are other ones just to be clear a lot of them are private and the last one that is not really likely to get impacted is

Rio Tinto and Rio Tinto I think a lot of people will know that they produce a lot of aluminum but they're it's interesting looking and FinChat has a lot of great information on that in terms of the KPIs and the segment and what I'm showing for for a joint TCI is a couple of different things. So you have the aluminum revenue that is 12 billion roughly a year. You have USA revenue that is 7.5 billion and then you have their total revenues that are 54 billion. So clearly here, they're not as dependent on aluminum. They produce a lot of iron ore as well.

So that is something that they produce and two thirds of their sales actually go to China. So they're a company that is actually probably quite okay with this. They are very dependent on China, but that's another one because there's probably only part of their US sales that would be tariff, mainly because I was talking about earlier iron ore,

for example, and that's a big part of what they produce, would not be tariff to the US. It would only be more kind of finished, not in air code, but more complete product like actual steel and aluminum. So that is another one I wanted to talk about because a lot of people know the name. It's a big player, but global aluminum sales were only 23% of their sales, 60% of the revenues are iron ore, and 60% of the revenues goes to China. So it's hard to say what impact it would have, but clearly they would not have as big of an impact

as an alcohol, for example. Makes sense. And I believe for Rio, like there's a fair bit of their operations in South America, Latin America, Chile, Argentina, Brazil, Australia. So it might never even go through the US if that much of the revenues, that's a good chunk of the revenue is actually going to China.

So I know they have fairly large mines in Australia, for example. Yeah. So it would make sense. Yeah, it's definitely, yeah, it's in Australia, for example. Yeah. So that would make sense from there. It's definitely, yeah, it's one that, you know, there may be an overreaction. I'm not sure in the coming months

because people falsely think they'll be very impacted by tariffs. So something to keep in mind, like I said, there's a lot of moving parts. I mean, maybe in two weeks we'll know that those tariffs are paused because who knows why. Trump decided to pause them for ABC, different reason, maybe he's getting industry pressure from various industry groups in the US or business groups. Who knows, but that's the status of what we're seeing right now is that

they will be going into effect in early March. One thing to keep in mind, it took me a long time as an investor to learn this, you know, kind of unfortunately the long painful way which is sitting on companies that do absolutely nothing for a long time thinking why doesn't the market care about what I think it should care about which is basically an idea which has a lot of merit which is which of these high quality companies are, you know, being thrown out with the bathwater and are getting a discount. But then at the same time, if the market is so silly

to throw them out, it's also so silly to not quickly then correct and give it a higher multiple than it had before. It's like, oh, the market doesn't like steel. So even though Rio is not going to get affected, steel is just going to trade at depressed multiples for a while, even if the fundamentals are intact. So it took me a long time to realize that those short-term opportunities don't unfortunately always lead to

the market rerating itself in the next six to twelve months. Unfortunately, I wish if only it was if only it was so rational, you know, but the same way it interacts irrationally in the long term sometimes it can for multiple years. Yeah, I mean if the market was rational I don't think Apple would be trading at the valuation it is right now. So that's the one I always come back to. Shots fired. Yeah, and I love Apple products.

You know I do, but yeah. Welcome back into the show. This is the Canadian investor podcast made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market.

I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed. And I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use.

You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at EQBank.ca forward slash GIC. Again, EQBank.ca forward slash GIC. This next week for business, Toronto Monday, New York Tuesday, Wednesday, meetings down south, Thursday, Friday, Miami Tuesday, back to Toronto Wednesday,

when vacation or work, I prefer staying somewhere that feels like home, and that's why I book on Airbnb. Recently while planning on Going south for the winter it hit me. My place could be an Airbnb too while I'm away Imagine making extra money while you're out enjoying life Since your place is sitting empty hosting an Airbnb is a practical way to earn a little extra income for your next adventure And now it's easier than ever. If you've ever felt overwhelmed by the idea of hosting on Airbnb, try

Airbnb's new co-host network. You can hire a local experienced and vetted co-host to take care of your home and guess. Your co-host can create your listing, manage reservations, and offer on-site support. Find a co-host at airbnb.ca forward slash host. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker

by MoneySense, and with them you can buy all North American ETFs, not just a few select ones, all commission free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly.

Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com for details. That is questrade.com. Let's talk about Uber and the future of autonomous vehicles. So first things first, Uber, man, full year results, 162 billion in gross bookings. Unbelievable scale moving through the platform. Nearly $7 billion of free cash flows, you know. This is a profitable, profitable company.

Who would have thought, not me, though, for sure. Who would have thought, not me, either? I am a shareholder once I realized I was wrong. I corrected that mistake, and I'm glad I did correct that mistake because, well, I don't know if it was a mistake, but there was fundamentally different unit economics happening here. They were in a war with Lyft, which they won. And so there was many factors at play,

but this is a profitable, profitable business since Dara has taken over. So a quote from Dara, the CEO on the earnings call, which is, quote, our very early experience in Phoenix suggests Uber's network is able to drive significantly higher utilization versus any other first party network could because of our scale. So he's talking about their partnership with Waymo. For those who do not know, Waymo is an Uber company.

Sorry, sorry, sorry, it is a Google owned company, Waymo is, and it is autonomous robo taxis. Put it in the app, say where you wanna go, a car picks you up without anyone driving, the autonomous vehicle drops you off at your location, off you go, they're operating in San Francisco, Phoenix, and LA.

So he's talking about this partnership. The other pattern, quote, we see is, customers love the product. The opt-in rate for customers the second time that they're offered an autonomous vehicle is significantly higher than the opt-in rate the first time. So it's a great product, and you see that in terms of pricing.

So he's hinting as well, like people are paying extra money on the Uber app to pay for a Waymo to come pick them up rather than a human driver to come pick them up. So they're actually charging significantly more. I mean, they're nice cars too. Like the it's a partnership they have with. Is it Jaguar? What is it they? I don't know. You know more about this than I do.

Waymo cars. What are they? Let me use the Google machine. Yeah, is it Jaguar? Am I making that up? It's the Jaguar I-PACE. Yeah, it's that SUV. Oh yeah, yeah, yeah, yeah. It's, Jaguar I-PACE. Yeah, it's that SUV. Oh yeah, yeah, yeah, yeah.

It's, there you go. Yeah, they're pretty nice. So they're like luxury vehicles and it's got the big, you know, Google car thing on the top that has all the sensors. It's got sensors everywhere. Yeah, you're showing it on the screen here, their little video.

Yeah, it also, if you don't want to talk to the driver, then you're guaranteed you don't have to talk to the driver. Soon it's going to be like chat GPT that like starts talking to you. Yeah, so that's the Waymo partnership. So I have a few thoughts here in no particular order because I'm not sure if this is bullish or bearish for Uber because you know, you could just hype, you could just circumvent them right it's

obviously regardless it's bullish for Waymo they're leading this by far so I'll start there I got five thoughts number one Waymo which is owned by Google is incredible they're completing over a hundred and fifty thousand paid rides per week and growing extremely fast in their three cities, San Francisco, Phoenix and LA They're now deploying to other warm climates Austin Miami, you know those types of things I think Austin and uber rolling that partnership out right now as we speak Pick you up. Strap you off. No humans higher safety rating Better product I think across the board the board than someone picking you up.

Number two, Waymo and Uber are partnering up together for that Austin, Texas rollout, which means, of course, just like they have for Phoenix, if you're on the Uber app, that is an option the same way that there's a call for a Uber black versus a regular one versus a Excel. Right. Yeah. And it costs more. Number three question is if it's Waymo or if it's Tesla Robo taxi, whenever that comes

out, whoever has the technology at scale, it's no longer a question. So if the technology will reach scale because it is, it's no longer a question, is if the technology will reach scale because it is reaching scale. I mean, especially in these warm climates where they have this ability to run this AV, EV infrastructure across the board. They've mapped out the cities, they've proven, they've gotten their regulator to say yes, they've proven safety rating as they kind of go geography by geography, it's proven out. The question is, is Uber going to be needed as the distribution partner?

Or do they skip over them right directly? You go to the Tesla app, you go to the Waymo app. I think most people are just going right to the Waymo app in San Francisco and LA in their like kind of home region versus going towards Uber. So that's bearish for Uber. I think you can kind of circumvent them. Number four, human drivers are going to be around for a really, really long time still. Like you got to go each geography, regulators, this. And it part lays into my fifth thought.

Internal combustion engine cars are going to be around for a really long time as well and autonomous vehicles and electric vehicles are synonymous This won't be coming to inclement weather for a while like for this really to ramp up you basically need to have Autonomous vehicle ice or autonomous vehicle hybrid. Yeah. Yeah, yeah because I mean you hear stories constantly of people saying that they don't have much as much battery life with their EVs in colder climates in Canada obviously Toronto is probably on the warmer side I would say but if you're starting to look at even Ottawa, Montreal, Edmonton, Winnipeg, all those cities. Yeah.

It doesn't make, in my view- Go drive your Tesla in January in Winnipeg. Yeah. Your battery life's like 40%. Exactly. And you still don't have the infrastructure. That's been one of my biggest pet peeves against CVs is the infrastructure is still not there.

And even for us, my wife and I talked about it. Our next car will probably be a plug-in hybrid. Because then- Love plug-in hybrids. Yeah. They're fantastic. Gives you the best of both worlds. You can use the EV when you're more doing kind of stuff in town, not going very far.

The combustion engine doesn't kick in. And then if you're doing longer trips, you don't have to go and rent a combustion engine car like I've I know a lot of people that have had to rent cars because they have Teslas because they're afraid that if they drive it they they basically have battery anxiety or they tried it once and had a Crappy experience and they're like never again I'm just gonna rent a car which makes no sense at all to me if you're gonna have a Brand new car or pay for a car you should be able to use it on trips without fearing that it runs out of power

I'll push back on that a little bit though because so I used to be in this world And I was at the auto show and we were showing off the kind of like the new charging infrastructure that that Ontario was putting in and all the different, like the network map, even Tesla's network map for charging is fantastic, it's super impressive. People would be like, like majority of the people, don't get me wrong, people go on trips, they go on road trips, don't get me wrong.

People would come and be like, ah, but it's just, I can't do it because if I want to drive to Montreal, it's just gonna I can't do it because if I want to drive to Montreal, it's just going to be too much of a problem. And I would just say, when's the last time you drove to Montreal? Yeah, it depends, for sure it depends on the frequency. Yeah. It's more, it's like, look at me like, ah, like our, I guess like my honeymoon, like

45 years ago. It's like exactly. This is not normal. Like you could rent the car for those situations. Yeah, that's a fair point. I mean, obviously it depends on the use of you. Every three years you go do a longer than, let's say 150 kilometer, 200 kilometer trip every two, three years, then it's not as much of a concern.

But if- By the way, that's nothing. You can do three times that on a lot of questions. No, no, but I'm saying like, I'm just saying longer trip. I'm just trying to encapsule like all the, you know, plus. I was like 150 kilometers, but yes. No, I think what there are five, six- You haven't even made it to Barry yet.

Yeah, there's what, five, 600 kilometers now in terms of range for the most part. But even then, I think what there are five haven't even made it to bury it Yeah, there's what five six hundred kilometers now in terms of range for the most part but even then I think one of the issues I've heard people is they'll get to a charging station and There's supposed to be five working chargers or ten there and half of them are not working Are can currently out of order which is a lot less common for gas stations, right? Once in a while, you'll have a gas pump that's not working, but most of the time they're always functioning. So I think for me, it's still, the infrastructure needs to be improved.

And in the meantime, I'm gonna, next car plug-in hybrid, to me it's just the best. Plug-in hybrid's great. Best of both worlds. Plug-in, I think mobility, I have two thoughts. One, plug in hybrids are amazing. Two, people should ride more electric pedal assisted bikes. So it's like the most efficient way to move a human ever.

They're amazing. Of course. I can't do it, sorry. You run into the weather issue. Out of principle. Yeah, you're a bike stop, dude. You've ripped one before? No, my parents have one but I haven't they each have one

I mean they they really like it and when I'm older there are these like mountain bikes that are electric mountain bikes I only got the fat wheels Yeah, but no actual like heavy-duty mountain bikes like real mountain bikes that are levy and those things like they cost as much as a car almost not quite my dad got one yeah it's it's pretty expensive but I I've I know a few people that have them on like the mountain bike variety and they they actually like him the biggest downside is they're heavier so So when you're mountain biking, that extra weight when you go downhill, it just reduces the mobility

or how agile you can be with the bike. That is one of the biggest downsides. Yeah, but climbing up, it's great. Oh yeah. Going uphill, it's amazing. I kind of want one, but it's okay. So all that to say, we are in alignment. Internal combustion engines and hybrid,

plug-in hybrid, whatever format you want, are gonna be around for a long, long time. And autonomous vehicles and electric vehicles have been kind of attached at the hip, for this to really get legs beyond some of those kind of really coastal, warm climates, you're gonna need it to not just be AV and EV attached at the hip. You're gonna need AV and ICE and AV and hybrid

attached at the hip too. So all this to say, I have a lot of thoughts around this industry is going to change a lot and I think Uber is going to be an amazing, amazing business, but the distribution moat that they have could be at risk if something like Waymo or Tesla RoboTaxi has direct access to the consumer and doesn't need to rely on a partnership with Uber to be the main distribution moat.

Because if Uber can have the distribution moat, think of how an amazing business that is. It's all of a sudden, you don't have to have human driver cash out costs. Like your take rate can be way, way better. So Uber is going to be an incredible business for a long time here. The future of its distribution mode,

I think is up in the air. If it goes the way that is favorable to Uber, then it is going to be an unbelievable business. It's already an amazing business. It's going to make shareholders very, very wealthy. So if you think Uber fits into this next chapter, I think the stock is very, very cheap here. I think it trades at like 19 times next year's free cash. I'm a shareholder right now. It's a fantastic business, very profitable. I guess one other thing that could happen is they just partner or there's a merger with

one of those leading AV companies. I know a lot of them are owned by Big Tech but maybe they end up spinning those off or creating a some kind of structure where it merges some way with uber so that would be another potential outcome probably not anytime soon but in the next five ten years imagine if Google Google's Waymo and uber were owned by the same entity yeah there's no way regulators would allow that they'd have to ask like Google to spin it off to be able to do that. That's sure. Sure.

But just could, could you imagine like there would just be no barriers to this stock ripping at that point? Because the thesis is clear for Uber right today. It's like, oh, you have a monopoly on 25% take rate on the cab business globally. Like that's pretty freaking good. Yeah. I mean, regulators would be the only barrier and I'll give an example before we give. And you probably won't believe this, but so obviously I live in Ottawa and I believe to this day last year.

At the beginning of the year was still like that. I still think it's like that now, but Gatineau, which is on the Quebec side, still does not allow Uber pickups. So you can be dropped off from Ottawa if you're going to the casino, for example, on the Quebec side, but you have to get a taxi to come back to Ottawa. So it's just an example as you can really get regulator. This one is on the municipal level because I know in Montreal you can get an Uber so it's really on the municipal level but you can see certain regulators trying to step in to protect an industry or protect Uber drivers because they don't want those jobs to go away type of deal. Yeah, makes sense. I mean, even a lot of airports will have that. Like they have to have special permissioning

for pickups at airports. And some of the airports would be like, they don't want to like shoot the cab driver business in the foot by allowing Uber. So they just say, no, it's gotta be from this, these licensed cab companies to do pickups and drop-offs at the airport. You can't get an Uber from there.

I've been to many airports that aren't like that in the last few years. So you're right, it is a bunch of geographical issues. But no, I mean, if the AV technology was owned by the distribution company like Uber, oh man, that would be wild. Yeah. All right, let's move on to the last topic of the day.

Last topic. So a Canadian company like you alluded, and I'll say the name of the company leading the way at showing how not to do buybacks. And the company I'm talking about here is Lightspeed. So lspt.to. Company that I've been very critical of, I'll be very honest, over the last few years.

Been very critical, especially of Dax de Silva the CEO He's been on and off. So he was CEO and then left and then came back I think it was still on the board if I remember correctly But one of the reason I've been critical is he's made some really stupid statements. I'm very blunt I know shots fired here, but more specifically and I will add the link in the show note There's a video that's still on YouTube from BNN Bloomberg so towards the end it was loaded in May of 2021 so kind of close to the market peak when euphoria was getting towards the top where he said towards the end of the video and

you can watch a video they would like to become a mega mega cap company Well fast forward to today the stock is now down 78 percent since that video has been posted And that isn't even the peak either. So since the peak it's down close to 90 percent It had a market cap of 13.7 billion at the time of the video being posted and now has a cap of 2.9 billion. Now to be fair from 2021 to last year, revenues have more than quadruple for Lightspeed. So clearly they have grown very quickly. The problem is they are not making money.

So they are losing money. They were freecast positive for the first time on a quarterly basis for 1.8 million and that was the last quarter but they still had a net loss of 26 million. They still have a they were still 58 million freecast negative for the last 12 months and have lost 124 million in the last 12 months as well. Since 2021 total shares outstanding have grown 19%. I will give them that, they issued a lot of shares

around the market peak, so that definitely gave them a little bit more of a runway. They've reduced stock-based compensation, but it was still 55 million in the last 12 months, and that's still a big issue for Lightspeed. Their cash on hand went from $94 million in March of 2022 to $61 million in their most recent quarter. So they are, it's not a crazy rate, but it's still a company that's burning a lot of cash. And that's what I'm showing here, their cash

on hand, so cash and cash equivalent. So pe peaked around 1 billion and it's been dwindling ever since because when your free cash flow negative I mean cash is gonna be going out the door and it's not gonna be increasing because you're still burning some cash. When you look here and I'm sharing another tab here for a joint TCI so you have in blue stock base compensation like I said it's still a pretty significant problem if you ask me. I know it's typical for tech businesses, but again, not something I'd like to see. And then you also have the total shares outstanding that are up 19% since that time. So you see where I'm probably getting at, I'm sure you know where I'm getting at here, is that they just announced that they authorize up to 400 million worth of share buybacks. So really, like, I'm just

asking the question, is this really the best use of capital right now for Lightspeed? Authorizing 400 million worth of share buybacks. And if I were the shareholders, I'd hope that they actually do not go ahead. Yeah, you'd hope it's just posturing. Just posturing. And one of the tweets that I got from Dax de Silva, so he announced the results. I tweeted that he's not very active on Twitter,

so probably just post this in terms of getting some awareness for the financial results So you have here saying they've authorized up to 400 million. It's probably a reaction because They mentioned and I'm quoting here is tweet as you recall We initiated a comprehensive strategic review of our business and operation The goal to define our best path forward so we can maximize shareholder value and help Lightspeed realize its full potential. We received strong engagement from multiple participants over several months but ultimately concluded that continuing to execute on our transformation plan as a public company

puts us on the best path forward. So I will translate that for you. So what it means is that there was no interest in private equity because if there was any interest, we've seen tons of Canadian companies go private. So clearly they were not interested in the business and I think they're just. I mean, someone was probably interested at some price that DAX was not gonna buy on.

But again, that to me is just saying that there might've been interest, but it was not very good. It was not a good offer. There's no legs. No, exactly. And he's been trying to hand out that for a while. And now the issue is I think they're doing

a knee jerk reaction is the stock got propped up a little bit recently because I think investors were hoping that it would be taken private and get a nice premium on the share price and I think they're panicking and they're trying to show that they're shareholder friendly by announcing this buyback authorization. That's my interpretation of all of that. Maybe I'm wrong, but I don't have a lot of faith in this management team if it wasn't obvious already. How things have changed so much. I mean, they were like a pandemic growth stock,

darling, the stock ripped. It's down 90% since then. That's on a 90% drawdown. 89.7% since then. Dude, they were doing a bunch of weird acquisitions at the time too. I just look at the income statement, just at the top, and it's like, look at the growth rate, you know, very consistent,

25%, you know, they're chugging along in the 30s, doubled in 2022 with all those acquisitions, Distant 25%, you know, they're chugging along in the 30s, doubled in 2022 with all those acquisitions. You could probably, you know, organically, it's probably in like 40, 50% range, which is fantastic for a software company. Really nice kind of end-to-end product, vertical software for retail, nice omni-channel,

and nice business. Now reaching a billion of run rate scale on the top line, it's like how are you... How are you not profitable? It's just like these companies built in that era, you just need to drain the swamp. The companies in that era, it's just like they need a department of company efficiency in there.

It's just like, how are you not making shareholders boatloads of money on this growth trajectory? You know what I mean? It's just such financial mismanagement. Yeah. Yeah. And share buybacks are just not the answer. I understand you may want wanna transform the business, but wouldn't you wanna hold on to that cash

while you're transferring the business? Like that's what baffles my mind. That is, to me, a company should not be doing buybacks when they're losing money. That's just as simple. Like you need the cash. Like why are you spending it on it? What if things get worse and you start burning more cash are you gonna have to now go turn around issue more shares get in some

debt when you had the you had the gas to begin with and you decided to do the bonehead move and actually buy back stock but i think so i posted a graph in the doc there for for you to look at so the red line is total shares outstanding you You're showing some version of this, which is, you know, the share count's basically flat at 153 million shares. And they actually in the June quarter of last year spent $40 million on a buyback. That's it.

That blue line is share repurchase. So you saw that the share count went down slightly and next quarter because of, you know, dilution it's back up to that 153 number. So it's just like, they're trying to offset dilution. Yeah. It's just 40. What's, what's 40 million here? What's 40 million there? And in the grand scheme of things, it's not a significant amount of money. It's just like all these things just add up to very shareholder,

unfriendly company. It's, it really these things just add up to very shareholder unfriendly company. It really is just as a shame as I mentioned. Yeah. That I have to be critical of this entrepreneur who's built this amazing billion dollar runway business, but it's just been runs like you're public. So that means you have to run it for shareholders, employees and customers.

It's not just employees and customers anymore. It's employees, customers, and shareholders on that three-legged stool. And it's just unfortunate that some of these companies in that era have been run with no accountability of the three-legged stool. And then you just run it, and then you end up in a really shitty situation

for the rest of the legs of the stool where you know there's business risk because you're so so unprofitable for your customers that leads to business risk and the employees who are getting their stock options are way way underwater so you haven't created value for them either. It's just it's unfortunate it really is because this should be such a success story for all three stakeholders. Yeah and we're what like four years out now since the peak since let's say 2022 that was a pretty rough year for a lot of these businesses though so let's say three years out. At some point I mean sure take a year or two, but I feel like it should have been figured out by now

That's that's I they're trending to less losses I will give them that but again it what if something happens that puts a wrench into their plan and You just that cushion you had now you're probably not gonna have it or anymore or just a smaller one So just that's where I have a lot of issue. But I think we've talked enough about light speed. Anything else you wanna add before we wrap this up? No, maybe just a comment on this to a broader point that I've seen around companies that were funded

both privately in the venture world, as well as kind of those go public, grow at any cost companies, where you just had to show mega 50% year over year, 15% quarter over quarter sequential, or you fall from grace, that those few years at the beginning of the 2020s, the ones that have really course corrected are,

are reaping the benefits and the ones that have dragged their heels to course correct, I have just been continued to get smoked, like to get smoked. And I think that that's probably a sobering thought for a lot of these founding CEOs who are running those companies because they were force fed a interest free, zero interest rate phenomenon, capital down your throat from private markets and then into the public markets where they were unfortunately learning the wrong lessons. And it's unfortunate because these people are brilliant. They're like the best entrepreneurs in the world. They're the best entrepreneurs in the entire world

and they deserve all their flowers and they're incredible at product, incredible at go to market, incredible at marketing and enterprise sales. You gotta check all of those rings to have the Thanos and Vinny Stone to make these billion dollar businesses. But it was just the timing of them.

They learned the wrong lesson at the wrong time. Yeah, they got the growth aspect correct. They just did not get the efficiency aspect correct. And they got high on cheap capital. I think it's easy. High on cheap capital. That's what it is. You didn't have to get anything else right. You just had to grow. Yeah, exactly.

But now they're showing like it's not as easy to grow when you don't have that cheap capital and you're trying to be profitable at the same time. I think they're realizing that yeah, that's a complete different animal than just trying to grow at all costs and The best ones are able to make the shift and the ones that are not as good that only were successful in that mode I think they will Slowly fade away. It may not be quickly but at the end of the day you have to be able to run a profitable business and when the environment changes you need to Adapt and clearly some of them have not been able to adapt. It's like I'm on my fundraising tour right now,

which has been actually really great. And investors always say the same thing to me. They're like, you've done all of this and you've only raised a million and a half to date. And I'm like, yes, like why would I need 15, 20 for this? Right? Like. Well, you were also raising, when you started raising, it was a more difficult environment.

Like I think you started raising around the time that the tides were kind of turning, right? Your very initial round. So I think you didn't also, I think it was probably a good thing for you where you had to make it work this way. You just couldn't get drunk on that. Exactly.

Capital. And then when you figure it out under that environment, I mean, you can pretty much only get better. You know, and so. Yeah, you create a cohort of companies that didn't have that luxury almost for their benefit, right? For their long-term benefit maybe. At the risk of maybe reaching hyper growth

in the first few years, but it's hard to say, only the paranoid survive at this point. Thanks for listening to the podcast, folks. We really appreciate you. We are here Mondays and Thursdays. And Simone on Mondays, Dan and Simone on Thursdays, the real estate podcast is also available on Tuesdays and Fridays, that's the Canadian real estate investor podcast.

So if you are a homeowner, landlord, or flirting with the idea of buying your first home or buying your first investment property, there's two better guys to go to. That is the Canadian real estate investor podcast on your podcast player. You can support us by going and going on to the podcast players and pressing follows as well as going to our Patreon at join TCI.com and or getting 15% off finchat with code TCI. We'll see in a few days. Take care. Bye bye.

The Canadian investor podcast should not be construed as investment or financial advice. TCI. We'll see you in a few days. Take care. Bye bye.