The Canadian Investor - Call of Duty & is Housing Slowing Down? Earnings Roundup

Episode Date: April 28, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Canadian CPI rising to 6.7% Intuitive Surgical earnings February 2022 housing data showing a potential cooldown ASML earnings Elon Musk buying Twitter Metro earnings Activision Blizzard earnings Snap earnings Tickers of stocks discussed: ISRG, ASML, TWTR, MRU.TO, ATVI, SNAP Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital JOIN TCI:  Check out our portfolio by going to Jointci.com 🇨🇦 ❤️ Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense. Check out the Yes We are Open Podcast from sponsor Moneris Blue Jays Sign up linkSee omnystudio.com/listener for privacy information.

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My name is Brayden Dennis, as always joined by the great Simon Belanger. Simon, are you fired up? We have the TCI meetup. The date is set. Let us know ASAP if you can make it. June 18th, we are getting together for the Toronto Blue Jays hosting the Yankees at the Rogers Center. So that again, that is Saturday, June 18th. The game is at 3 p.m. If you go to our Twitter at CDN underscore investing, or if you're not on Twitter, in the show notes, there is a Google Doc link. Please fill it out ASAP if you want to be there.

We'll get some final numbers and then we'll reach out to you after with final details. So please RSVP before May 9th. Are you fired up, Simon? Yeah, I'm excited. I'm excited to see the Jays, but definitely interacting with our listeners. I think it'll be fun for those who show up. And I haven't seen you in person since September of 2019, I think. Holy, has it been that?

Oh my God. That's also when I last saw the Blue Jays. Holy, has it been that? Oh my God. That's also when I last saw the Blue Jays. Well, there you go. We only hang out when you're coming to town for the Jays. Okay, so yeah, please RSVP before May 9th. We'll get some cheap seats. Don't worry, it's not going to break the bank and it's probably the only place we can get all of us sitting together anyway.

So again, that is in the show notes or the pinned tweet on our Twitter at CDN underscore investing. One more housekeeping item and then we'll get into our episode. It's earning season palooza starting. So we got lots of lots of news. Mr. Musk providing us more news as he just breaking, just confirmed, bought Twitter. It has been confirmed. Last housekeeping note here. Simone and I just made a website called join TCI.com. Join TCI.com. Go check it out as a way for you to support the show. It kind of replaces the coffee thing, and you get lots of little goodies like access to our portfolios, our own real money portfolios, updated on a monthly basis, what we're thinking. It's not going to take away from the show. It's not going to detract from the show at all. It's not necessary to subscribe,

but I think you're going to like it. So that is join TCI.com. We're going to do this so that the first post is live right now. When you're hearing this, that is join TCI.com. All right, Simon, you want to kick us off with the CPI for Canada? Yeah. Yeah. So a lot of news, lots of earnings, definitely no shortage of items to talk about. So CPI or the consumer price index rose 6.7% in March, which was higher than analysts had predicted. They were expecting something a bit lower than that. As a refresher here for those who might be new to the show or economics in general, CPI is just an official government metric to measure inflation.

They use a basket of goods and services and they compare it for the most part year over year. They provide a bunch of other metrics as well, including month over month. This is the first full month of data after the invasion of Ukraine by Russia. So it is one that was particularly interesting for me, at least. Energy was once more the thing that rose the most with a 27.8 percent increase it actually rose quite a bit even month over month transportation was the second highest increase with 11.2 percent increase obviously not a surprise here it's very dependent on energy costs food and shelter was also extremely high at 7.7% and 6.8% respectively. Even the month-over-month figures were high, which is provided again by Stats Canada. So these are

the official figures. Total price increase month-over-month was 1.4%. So it might not sound like a lot, but keep in mind that historically, the Bank of Canada has aimed for a 2% inflation target on a full year basis. So if you're looking at 1.4% month over month, this is extremely high. 1.4% month over month is very high. Obviously, don't go doing that. But if you extrapolate that on a long horizon, you have basically runaway inflation. It's transitory though, right, Simone? Yeah, I think that term has been retired.

Yeah, it can be retired. I like the way you put that. All right, it is earnings season. It is earnings season. Intuitive Surgical just reported their first quarter with revenue of $1.5 billion for the quarter, an increase of 15%. DaVinci Surgical Systems Installed is now at $6,920, which was up 13%, which represents 311 new systems installed. Now, for those who don't know, systems installed. Now, for those who don't know, the DaVinci is just their product. So they sell a robotic assisted surgery product called DaVinci Surgical System. It is light years ahead of the competition. And so that grew at 13%. 428 million procedures performed, which was up 19%. That's one of the most important KPIs to track. So that's good. That's almost 20%. The stock has fallen quite a bit on earnings. It's now 30% off the high, like many other great businesses in the tech space so far this year. Guidance was pretty meh. And some regions, they're still talking about backed up procedures from COVID.

I think the real knock on it here is they installed 311 systems, which is pretty in line with what they did a year ago. It was up 4%. But when the stock is valued near perfection, the stock is expecting and shareholders are expecting to grow some of those key performance indicators a little faster. So fair enough. Okay. Long-term, this is a lot more attractive than before, given the valuation and the quality of the business, their innovation being so much further from competitors. Again, just a really, really cool company. Really cool company. One of those ones that are just really fun to research because, again, this is a very forward looking technology doing surgery through robotic assistants. And they are the de facto name in the space. So one to pay attention to. Yeah, that's always a fun one to look at. And I was looking at their

just a recent price drop and just their share price. Obviously, I think they're still pretty richly valued, but definitely getting more attractive for those who might be interested in this business. Yeah. And it's one that I look at that if you look at the multiples, you got to be thinking, oh, revenue is only growing like mid double digits, high double digits. And that may be true, but the runway is massive. It's not one that's going to grow double digits for a couple of years. I'm talking about like decade plus runway because it is still in such nascent stages of adoption and once it's in the hospital it's very sticky and the customers love it like this these surgeons they're not going back like they become the biggest advocates for the technology because it's safer for everyone involved.

There's a lot to like long term. Now moving on to our next segment. So there were some housing data that was released by CREA. So CREA is the Canadian Real Estate Association. And it actually prompted a lot of people to say, okay, is the housing market in Canada actually cooling down or not? It's definitely showing signs. However, it could be just a blip on the radar. So CREA reported that the average price of homes sold in Canada in March was down 2.5% to $796,000 versus February. So month over month, CREA saw a slowdown in boat activity and price growth month over month. However, keeping things in perspective is important here. Prices are still up 11% in Canada year over year with the largest increases being in the Maritimes. That was interesting. I mean, interesting, but also not surprising, given the fact that a lot of people have moved region with remote work being more and more prevalent.

And for the most part, prices in the Maritimes were much lower than urban centers across Canada. So I think there was probably some catching up to do there. On top of that, Tiff McLean, the governor of the Bank of Canada, spoke last Thursday in Washington, D.C. during a G20 and G7 economic summit, if I remember correctly. I'm just going on memory here. And he mentioned that he wasn't ruling out an interest rate increase of 50 basis points or more at the next meeting in June. So the housing story is really fascinating here for me at the very least. I think it's really interesting to keep an eye on it, especially as we're starting to see the Bank of Canada quickly raising rates. I don't know if it will have a major impact on the housing market. I guess that

remains to be seen. I think it will probably have an impact short to medium term, maybe cool the price down a little bit, maybe not necessarily a decrease, but it could also lead some people to FOMO and panic buy before rates start going up because they might be afraid that if rates go up too quickly, they may not be approved for a home that they love. Therefore, they're going to buy rapidly to try and avoid that. So it'll be interesting to keep an eye on the metrics as we see more interest rates hikes in the upcoming year. You bring up a good point there because as soon as the narrative shifts to go lock in

rates ASAP, then it is another different kind of FOMO of buying real estate assets. And I am no real estate expert or guru. So just take this with a grain of salt. But I think we are seeing a slowdown and what the Fed and the BOC is, and this is purely speculation, but what they have on their agenda, maybe even more than just housing prices, is how it just, of course, affects the overall economy because it's so important to that middle class in terms of affordability. If rates are wild, like where else are so much of our assets tied up into real estate like Canada? Like we are levered to the nines. We have some of the highest debt to income ratios.

And so it's kind of a damned if you do, damned if you don't situation with housing and Fed rates here. Yeah, no, I totally agree. And I know this is anecdotal. So I was speaking with one of my buddies who's a realtor in the Gatineau region, so the Quebec region bordering Ottawa. And he did say that for the past couple of weeks, they've seen definitely a slowdown in overall prices and interest from buyers. I don't know if it's just anecdotal. I don't know if it'll be longer term even for this region. And again, this is just a small pocket of all of Canada. It might even be different on

the Ottawa and the Ontario side of the river. But I found that interesting. I was just poking his brain and he did mention that, yeah, they saw really, really rapid rise, especially since the beginning of the year. And then for the past two weeks, it's been very slow compared to that. 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. smarttradetrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started.

But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at slash host. That is Airbnb dot C-A forward slash host. All right. Another earnings year. So after this, it's like tomorrow and the rest of this week, you're going to have to tune in next week for our earnings show as well, because big tech is about to report. We are right about to hit every day a long list of companies that you and I both talk about, important companies of the world reporting earnings. So stick around and listen to every episode over the next couple of weeks because it is right now in the thick of earnings season. We're about to start, about to kick it off.

In the thick of earnings season, we're about to start, about to kick it off. ASML, a Dutch behemoth of a business I've talked about quite a bit, reported their first quarter. By the way, all financial results here I'm going to talk about are in euros. They reported net sales of 3.5 billion, which was down 19%. Earnings per share decreased 46%. Okay, sounds not great, right? This is why it's so important to track the business KPIs. And when I say KPIs,

I mean key performance indicators to get a clear picture. I talk about this a lot, right? And it's important because you can see like, okay, earnings per share was down 46%. Did it meet or not meet analyst expectations? And it may have nothing to do with how the stock's reacting. Look at Netflix last week. If you just looked at the financials, you think, all right, not bad. Why is the stock down 37% today? And we're talking like tens and tens of billions in market cap erased. And it's because what you won't find on a financial statement is that they lost subscribers, right? And so that is that key performance indicator. If you can only know one thing about Netflix to track, it's probably net subscriber ads, right? And that's what matters.

Same thing for ASML here, right? Like those two things don't look great, but the most important KPI key performance indicator for ASML is net bookings of their EUV lithography machines. That is extreme ultraviolet lithography machines. ultraviolet lithography machines. How many 150 million ultraviolet lithography machines are in their sales backlog? So that's what the net bookings number is. Same way for intuitive surgical. I'm talking about DaVinci surgical robot systems installed and surgeries performed. Those are the numbers I really care about. So for ASML, net bookings was at 162. So literally 162 of these machines, which was up 35%. Great number to see compared to the last years. And on a trailing 12 months, they're at 699 net bookings, call it 700 orders for these

EUV machines. And that is at an all-time high. So really good to see. Think of this business more like a Boeing. We're talking about something that has huge complicated supply chains, more than a hundred thousand parts that go inside of it. They cost $150 million each to construct. And so it's important to think of them like these huge projects. Each thing they create is not just one part. We're talking about $150 million. This is why when we look at the companies we cover at Stratosphere, at the very top of the section, it'll include an outline of what the business does. And then in these nice looking graphs, it'll be key company metrics like

net bookings for ASML right at the top, because it's important to think about what's important. If you are just following the stock and you see revenue down, but the stock's up on the news, it's going to be confusing. And so that's why it's important to set out just a few key metrics for each business to follow. Yeah. No, that's always an interesting one. I mean, I know about it because of you. So, it's always interesting to hear you talk about them. And it's another one, I guess, it's technically a tech play, right? Yeah. Oh, absolutely. Yeah. That's still down quite a bit. So, we're seeing that across the board when it comes to

tech companies. Yeah. And so, for those who don't know, just taking a step back, EUV machines are critical. And you need this piece of technology to create semiconductors. So their customers are foundries for creating and manufacturing semiconductors, which is obviously a very important business.

It's one that steals every headline with supply chain issues, this and that. And ASML has a monopoly on it and is a big reason why they can't just create more capacity of foundries for semiconductors because you need these big expensive machines that take a long time to build. You can't just set up a new foundry and spin up semi-capacity in a month or two. These things take a lot of time. And this is one bottleneck and quite a monopolistic business. And it's one that I should probably own. Yeah. I like the comparison to Boeing and Airbus or Boeing, but Airbus would be in the same category, of course. They have a huge backlog and Boeing

still has a big backlog despite all of the issues they've had in the past three, four years. All of the negative publicity. Exactly. Now, moving on to what you mentioned earlier in the show and the big news, Twitter and the Musk saga continues. But we finally haven't. Well, I think so. I think we have a conclusion. But again, with an asterisk, I feel like I don't want to proclaim myself as an official conclusion here. If anything, it's going to change. So since we last did an update on it, Twitter decided to adopt a poison pill in attempt to block Musk from eventually gaining a controlling stake in Twitter. So the poison pill adopted by Twitter

meant that any shareholder trying to own more than 15% of the company's share would need board approval. If they do not, then Twitter could issue shares to existing shareholders, excluding Musk in this situation at a significant discount, which would therefore obviously dilute and make it very expensive to buy the company. Well, that was adopted, but that's not all. In a filing Thursday last week, Musk said that, given the lack of response to his offer from Twitter's board, he was exploring a tender offer to buy Twitter. board he was exploring a tender offer to buy Twitter. He had received financing commitment for $46.5 billion through several financial institutions including Morgan Stanley and Bank

of America. Then Twitter said over the weekend they were reviewing Musk's proposal and I guess they were not kidding because news came out early Monday morning that the board of Twitter might go ahead and actually approve the Musk buyout offer and then late Monday afternoon just a couple hours ago from us recording this Twitter announced that the board had approved the buyout offer of Elon Musk for an all-cash offer of $54.20 per share. If they had not approved it, a case could have been made that they were not acting in the best interests of shareholders. That's because the tender offer that I referred to meant that Musk would have gone directly to shareholder. And if the majority of shareholders would have voted yes, it would have put the board in a really tough spot.

They would have been hard pressed to say no when the majority of your shareholders are saying yes. This deal, I didn't think it would happen. Honestly, I just thought it was him trolling along and I didn't think he was serious. And although I think he took what he was saying serious, it's just like, does he really want to own Twitter? Like, I don't know. And it's actually happening. The guy is literally buying the company and taking private. And of course, his offer was $54.20 because that's how he rolls. I thought what was funny is I made a little

tweet, you know, just a little, get some engagement, get the people talking. I wrote in less than five months, Twitter CEO, their new CEO, Paraga delivered an 18% return. What a legend. Less than five months. Of course, this is off the spike of the share price shooting up on his tender of 5420. My immediate reaction, and I thought was really funny, is Twitter shareholders over the last however long have been just watching the stock do absolutely nothing for like a decade, right? Nothing, no return. I mean, it's been bumpy along the way, but it's basically at its IPO price. So it's been a dud and you haven't been paid any cash to the shareholders. So it's been a complete dud to own. And the big

knock was if only we could get a CEO that didn't have multiple jobs. If only we could get Jack out of here and have a full-time CEO. He's not distracted by the much probably better business of Square. Right? And now I'm not saying that Elon's going to become the CEO, but I wouldn't be shocked if he appoints himself as the CEO. And the shareholders are back with the big bad boss having multiple jobs. Yeah, yeah. I mean, it's going to be interesting what he does. And obviously, it's funny because you have people that are really pro this, especially those that will say it's free speech and there should not be anyone banned from Twitter

and it should be whatever you want to say, you're allowed to say. And then there are people that say, OK, free speech is fine, but, you know, there is a limit to free speech. And I mean, I won't comment on which I think is best. I think, you know, at the end of the day, I think Musk will probably realize that it's a lot harder said than done. That's just my prediction. And when you have a lot of competing forces, I mean, I don't know what to expect. I really don't know what to expect with Musk. And he can be very petty at times. It'll be interesting to see if it'll be reflected in the way he manages Twitter if he does have an active involvement in the

business, which I really think he will. I don't know if he'll be the CEO, but I don't think he bought that without wanting to be actively involved in it. For better or worse, he's become a divisive character. And I know many Twitter employees that are upset about it. Some are happy. know many Twitter employees that are upset about it. Some are happy. Of course, with every divisive character, you have extreme sides of both opinions about the guy. Whatever the opinion is or whatever you stand on this, I'm sure everyone has their own stance. I'm calling it now. I know it's not a good

thing. I know it's not great. I know it's not a good thing. I know it's not great. I know it's not a good thing. I don't wish this upon anyone's career, but I'm calling it now. There will be mass layoffs at Twitter. That is my prediction here on April 25th. I'm expecting a considerable amount of the workforce to be eliminated over the next six to eight months, which I know is drastic, but that's my prediction. My prediction is that he'll be brought in front of Congress in the US to answer questions from the American politicians. Both can be true.

Both can be correct. You know it's coming. You know 100% he's going to be summoned in front of Congress. Don't you think Mark zuckerberg's just sitting in his office going and here i am i can't even buy a gif company for a couple hundred grand you tried to buy giphy that company and they're like no anti anti-competitive sorry buddy you're not allowed to do anything and so this guy's not allowed to make a single acquisition. Then you have the richest man on earth.

Like, yeah, I'm buying Twitter. I'm taking the whole thing private. Zuckerberg's like, what is this, man? He's just so unliked by Congress. I bet you the SEC will be pulling its hair out because can you imagine the amount of like tweets aboutla that he might start doing that are like not appropriate for shareholders even though he's been slapped on before i feel like he's going to be pushing the envelope there i he already does so i don't see any reason why he wouldn't now moving on to uh some more earnings one that i thought we haven't really talked about it on this podcast before.

So Metro, the grocery stores, ticker MRU.TO, they are one of the major grocers in Canada, and they own several grocery brands, including, of course, Metro, Food Basics, and Superhase on the Quebec side. And I know it's not the most exciting business here, but I find it very interesting to see how sales and earnings from grocers are increasing compared to food related inflation and sales increase 1.9% to 4.27 billion. This is Q2 2022. I think I forgot to mention it. Earnings increase 5.4% to $198 million. Gross margins are actually remaining stable here, which is very impressive and obviously a good thing if you're a shareholder. One of the things I looked at was wages and employee benefits.

I actually went and looked at the financial statements a bit closer just to see if there was any increases there, which I expected to see. just to see if there was any increases there, which I expected to see. But surprisingly, those expenses were down 1.5% for the first half of 2022, which I did not expect to see. I thought for sure I would see an increase year over year. And I don't know, that was very surprising. What's your take on that?

Dude, I'm so confused right now. I can see what you're saying, those numbers actually like with my eyes right now. And none of them match up to your first section on CPI here. And I also, again, I don't follow grocery stores very often. If I had, you know, I was forced to own one of them i'd probably own loblaws but sales are up 190 basis points and gross margins are stable i mean it's nothing makes sense here so far yeah i mean i guess it makes sense like i don't know how they were able to reduce the cost of wages and employee benefits maybe they became more efficient and have less of a workforce i have no idea you know one thing actually i live not too far from the metro in ottawa and i did notice that their

hours overall have been reduced since the start of the pandemic so maybe and self-checkout maybe some of that's coming out on the bottom line yeah exactly so i don't know maybe the full-fledged effects of that have kind of lowered the cost over time. I don't know, but just something interesting to keep an eye on. I'll make sure to have a look when Loblaws comes out with their earnings just to see if they're seeing the same things over there. In my opinion, that's the highest quality grocer is Loblaws with my very little analyst work on grocery stores. But Loblaws, I think, is the real gem of an asset. They've been really, really good at what they do. Yeah, I don't know them well enough to say which one is better.

If I had to just go on a whim, I would probably say it's Loblaws as well. But you know what? I'll keep an eye on it. Next earnings, we can talk about it. They've done some good acquisitions, like obviously shoppers being a blockbuster one. The story of no frills is very impressive. The story of the in-house brand presence choice is very impressive. I just think that they've executed really well. 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. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm gonna spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about

hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at Airbnb.ca forward slash host. That is Airbnb.ca forward slash host. ATVI, good old Activision Blizzard. Soon to be Microsoft, yeah? Yeah, we haven't talked about them much since the Microsoft news.

If you have not been on Earth recently, Microsoft did announce that they're going to buy Activision Blizzard in the largest technology deal of all time. Now, for earnings, they reported this morning, sales were down 22% year over year from Q1 of last year. Earnings per share down 37%. Free cash flow down 24%, 627 million. Their monthly active users were 372 million. So 372 million actively playing their games, which was down 14%. That's the number I'd be tracking is those MAUs. And they do break out MAUs by segment. So let me go through that. Activision, Blizzard, and King. So sorry, Activision, Blizzard, and King. So, sorry, Activision, Blizzard, and King are their three main segments. MAUs for Blizzard went from $27 million to $22 million. That's the Warcraft, Overwatch, Diablo, Starcraft, and more.

MAUs from Activision went from $150 to $100. Now, there are other titles in Activision, but Call of Duties, they're bread and butter. That's the important one, not only for the segment, but for the company. It's the largest segment in terms of revenue. Not good seeing this engagement tumble, like 150 monthly actives to 100 playing Call of Duty. Not great. MAU is from King. That's the mobile game segment. I just think of Candy Crush because I think that's their biggest asset. That went from 258 to 250. So that's fine. That's like pretty stable. This is in line with mobile gaming being the largest segment, like the largest and growing segment in gaming. I can't imagine playing games on my phone, but it just seems like a headache.

Out of lockdowns, we can expect less video game time playing for sure. But man, this is rough. Like these numbers look pretty rough. Guess what, Simon? No one gives a shit. No one cares because the topic of the conversation around the call, the analyst questions, the stock price, all centered around Microsoft's deal of taking them private because that pegs the stock price. And you take them into the Microsoft umbrella, deal us a stock, buy out the shareholders.

However, it's now trading. I mean, it already was, but it's gone even lower. It trades well below that price now. Obviously, this is based in on the arbitrage of the deal not going through. So how do you price that risk in? Now the business is struggling a bit. Is it going to be a new bid? There's a lot of questions. For what seemed to be pretty straightforward, the arbitrage is now confusing. What is the risk baked into that price? A lot of bad PR, some questionable HR policies coming out of the company. It's not a really good story right now.

No, no, that's true. I was actually looking, I was curious to see when some of their latest releases for Call of Duty were. I'm like, oh, maybe they're just in that cycle, right? That they haven't released anything recently. But the latest one I could find was Call of Duty Vanguard, which was released in November of 2021. So that's still... Oh, that's pretty recent. Yeah, exactly. So, I mean, that's pretty recent. I don't know if it was a standalone or just an add-on or whatnot,

but it sounds like it was just part of the series. And it seems to be not as popular. I'm not 100% sure. I haven't played any of the Call of Duties recently, but that's the first thing I kind of want to look at just to make sure of those numbers because game developers traditionally have been very lumpy they tend to be really driven on the release of their main franchises so i thought that was the case here but it doesn't seem like it's the case so definitely some questions to be asked in terms of what's going on with their monthly active users.

I have the data here. This is the last five quarters of MAUs from the Activision segment, 150, 127. Again, these are all separated by a quarter. So 150, 127, 119, 107, 100. That is without missing the trend, been down every single quarter. And so you do wonder, I mean, we talked about this Call of Duty franchise just having forever staying power. This FPS game just keeps delivering. I just went on twitch.tv here live on the show. This is how I track the gaming industry is if you go on Twitch TV, you press the top. It'll always try to like loop you into whatever is live right now. But if you press the top left and press browse, it'll bring you to twitch.tv forward slash directory.

And you will see how many people are watching the games. how many people are watching the games so right now grand theft auto 5 has 332 000 active right now live viewers of streamers and then league of legends valorant fortnite and then call of duty at less than 100k still good i mean you're talking about top five for games but this is how i stay on top of what's hot go uh go take two interactive huh dude what the hell is grand theft auto like how are they so sticky people play these games for years because the cycle between them is like half a decade yeah yeah and they just keep printing cash it's incredible no it's a good one i think it's interesting to follow i mean even despite those numbers i have a feeling that microsoft has a plan to integrate activision blizzard and i i don't know i have a feeling

that they probably saw the trend already so they probably baked that in into their offer. So I would be tempted to say unless the regulators get involved and say, no, Microsoft, you're not allowed to purchase that. I have a feeling it'll go through. Yeah, the game pass and then that introduces network effects. I think they can turn this around into a less ugly story. Yeah, exactly. Now moving on to some more earnings. These were actually quite good. So I was looking at Snap. So for those who are not familiar, Snap is the company that owns Snapchat, the social media. Their daily active users increase 18% to $332 million year over year. I believe this is Q1. I didn't write which quarter it was, so my apologies for that. Whatever fiscal it is, it's the most recent one.

It's the most recent quarter. So this metric actually surprised me. I haven't been someone who's followed Snap very closely. My perception would have been that it was probably stagnant at best in terms of daily active users. And clearly I was wrong. And then I look back at their most recent full year earnings and it looked very good there as well. So revenues increased 38% year over year to $1.06 billion. Net loss increased 25% to $360 million. Free cash flow decreased by 16 to 106 million they are guiding quite well 20 to 25 percent terms of revenue growth for q2 of this year so the numbers i mentioned i have my answer

there it was for q1 and these results come on the heel of great 2021 results for Snapchat. They had increased revenues by 64% and produced more than 200 million in free cash flow for 2021. Snapchat has also been investing for quite some time now in augmented reality. For those wondering what augmented reality is, one of the best examples that I could find is those lenses offering that

allows people to change their face to like a monster, or if they smile their tongue out, they'll be like spitting rainbows. So that's what they're talking in terms of augmented reality. And this one, I'm going to keep an eye on it because it's really interesting where their earnings have gone in the recent you know year year and a half or so it seems like they are on the right monetization path and i wonder if some of the issues that's plagued meta platform so the parent company for facebook last year especially thinking about the apple privacy settings here, are helping Snap to steal some of that ad revenue. One thing is for sure, I'll keep an eye on them.

But one thing to keep an eye on if you are interested in Snap is share dilution. They've been diluting shares at about 10% per year since 2019. I am shocked at that DAU number number up 18%. That's really good. 332 million daily active users. Now, I have two anecdotes here. One is that I've seen incredible results from advertisers who are targeting the Gen Zs, right? That's who their user base is. It's the Gen Zs, these companies that that is their core customer base, or even these FinTech players that are really trying to go after the younger generation and hook them in before they're really setting up themselves financially, they've done exceptionally well. Anecdotally, number two is that I have a close friend.

She is a teacher. She teaches grade eight. So, like that right in that sweet spot right now in terms of probably their user base. She said they don't text each other. They only Snapchat each other. Really? They can't even get them to pay attention in class because they're Snapchatting each other, whether it's the conventional Snapchat of sending a selfie or like a video to each other, but even just the text. Anecdote number three, I just realized, is I was at my cottage last summer, and my buddy's younger brother was there, like he was 16 17 or something he opened up

his snapchat and had like a hundred unread from all his friends in like at high school or whatever and i was like this he's like oh yeah this is the only thing we use so call it anecdotal, whatever. The Gen Zs are all about Snapchat, bro. Yeah, that's interesting. I thought you would have – I really thought TikTok took a lot of that business away. Completely different though. Snapchat is how they communicate. They don't communicate on TikTok. Okay.

That's what they're watching and spending time on versus Instagram. Yeah, okay. It's like how Snapchat and Instagram don't replace each other. I guess I'm too old. I just don't understand how they work really well. I'm still on Instagram and, you know, not really Facebook all that much anymore. But Twitter, that's pretty much it for me. Yeah, like I'm pretty much exclusively Twitter.

But yes, dude, this is happening. And then it's coming out in the numbers. That's how they talk to each other is on Snapchat. So it's interesting. It's more engaging than a text message. So I can see why they'd like it. business from meta from facebook right especially facebook messenger because that would be i would assume a direct competitor to what you're mentioning they're doing and interacting with each other on snap yeah and they've really done a good job of monetizing they basically only monetize the explore page of snapchat we can see like what famous people are snapchatting that day or whatever the ads will be like integrated in that but there won't be an ad experience if you're just using like it to talk to to your friends and i think that's smart because if they did that they would over earn and destroy their user base so um i think man hey evan evan spiegel give the guys some credit yeah he got a lot of criticism he

he got so much hate bro when they ipo yeah their governance is a bit out of whack i remember reading that their share class is a bit funky and you really have to believe in evan spiegel if you want to invest in that company but you know what i think of my homework it will be to download snapchat and just have a look out it works a bit better yeah we can snap each other sounds good yeah i'll be like brayden help me out i don't know how this works exactly all right thanks for listening folks the tci meetup is set so just a reminder again look at the show notes of this podcast right now, or go to Twitter.

Even if you're not on Twitter, I'm sure if you just search us up on Twitter at CDN underscore investing, there's a link to a Google form. All I need you to do is put your email in there. It gives you some more details. Put your email in there and press the button that's saying I'm 100% in for this. So it will take literally five seconds to complete. And if you do that, then I'll follow up with final numbers and more details. We'll meet at a bar downtown Toronto.

And if you're from the other parts of the country, one, either book a ticket or two, we'll have to do something like we'll do other things in other cities over the next couple of years. I promise you, but Toronto Jays game seems like a good first one to go. Again, go to the show notes. Last thing here, Simone, join tci.com. We just launched it this morning of when you're listening to the show, join tci.com. Our first post is up there, listening to the show, join tci.com. Our first post is up there, a way for you to support the show and get a look in our exact portfolios and historical performance over every single month, month by month. Again, that is join tci.com. Go check it out. Simon, anything else? We got a busy couple of weeks coming up. No, no. I think we covered it all. Now I'll just have to go check the news to make sure that what we talked about for Elon

and Twitter is not outdated. Yeah, exactly. It's outdated every few minutes. No, well, luckily we recorded late enough to know that the deal actually was approved, which is interesting. Anyways, thank you so much for listening. Stratosphereinvesting.com is my company. It is the best way to find financial statements completely for free. Get those ratios,

get a historical view, whether you're a new investor, professional investor, it's a free terminal to do your investing research. So go check that out. That is stratosphereinvesting.com. See you in a few days. Take care. Peace. Bye-bye. The Canadian Investor Podcast should not be taken as investment

or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.