The Canadian Investor - Moderna’s Stock Soars and Will CoreWeave’s AI Bet Work?

Episode Date: August 20, 2026

In this episode of The Canadian Investor Podcast, we break down another busy week of market news and earnings. We start with Moderna, whose stock more than doubled after the company announced positive late-stage trial results for its personalized mRNA cancer therapy developed with Merck. We discuss why the news matters for Moderna, why Merck also benefited, and why biotech investing can be so volatile. We then look at Canadian Tire’s latest quarter, including the strength at SportChek and Mark’s, the stabilization in its financial services segment, and the upcoming Triangle Rewards partnership with Tim Hortons. From there, we discuss Home Depot and Lowe’s, what their results say about the housing and renovation market, and why elevated interest rates continue to weigh on big-ticket home improvement spending. We also revisit Constellation Software after its latest earnings, including organic growth concerns, record capital deployment, and why the company says AI has not materially disrupted its business so far. Finally, we cover Air Canada’s quarter, rising airline costs, CoreWeave’s explosive AI infrastructure growth and balance sheet risk, and Klarna’s latest results after a sharp post-earnings selloff. Tickers discussed: MRNA, MRK, CTC.A.TO, HD, LOW, CSU.TO, AC.TO, CRWV, KLAR, AAPL     Subscribe to Our New Youtube Channel! 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 Fiscal.ai 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.

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Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business. Just my reminder to people who own cyclicals, don't be surprised when there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time.

Welcome back to the Canadian investor podcast. I'm Simone Ben-Ajean. I'm back with Dan Kent. We have a fun episode today. So a lot of stuff that came out, even though earnings season is starting to slow down a little bit. So we had news and a massive move from Moderna. We'll go over that this morning. So fresh off the press.

We'll go over Canadian tire, the recent earnings. Home Depot also. mention a little bit about Lowe's because obviously Home Depot and Lowe's, it's kind of a yin-yang. They're pretty close to one another and we're still seeing some pretty similar things from boat here. You'll talk about consolation software that had their really, I think, pretty good quarter, what a week and a half for so ago and then we'll finish off with Air Canada, Corweave, and Klarna, assuming we have time, but we should have for a full episode here. So a fun one. And for Those wondering if we'll talk about CPI because it came out, we will talk about that on the macro show, Dan Foch and I and quite a few other things.

So that's why we don't have it today on the news and earnings. Yeah, the Moderna move, I had to refresh my page like three times. I'm like, there's no way this company is up 100% pre-market. But yeah, it did go up that much. If you look to it from COVID highs, it's pretty wild because it's still down like I think 70 plus percent from COVID. but yeah, 63% looks to be. Yeah, but yeah, 122% today.

Do you want to get into what happened? Yeah, let's do it with Moderna. Exactly what happened. So it's up, as we're recording this on around noon on August 13 Eastern Time, it's up 122%. And like you said, Moderna is still reeling from the aftermath, the COVID. The stock at reach price, I think, around $455.

It's trading around $148. right now. So definitely has come down quite a bit since COVID. So five years, yeah, we're down 60% in the last five years. So the news came out this morning that Modernus personalized MRNA cancer therapy, which was developed with Merck, so the big pharmaceutical company, reduced the risk of melanoma, recurrence, and spread in late stage trial or phase three when combined with the drug Ketruda. And I may be butchering a little bit here. I'm not the most well versed on biotech, but I did actually learn quite a bit. It took me like a good 45 minutes just to understand all of these things.

And melanoma, it's a type of cancer I had heard of, but to be honest, I didn't really fully understand what it was. So apparently it's the deadliest form of cancer and can, or one of the deadliest and can spread easily to other parts of the body. So it's a type of skin cancer. Ketruda is one of the world's top immunotherapy. cancer drugs made by Merck. And the combined treatment is called instismeran and has met both its goal of significantly reducing cancer recurrence, but also keeping the tumor from spreading to other parts of the body.

So those two things are very key. And it was much more effective than the use of Keitruda on its own. So they did not mention the reduction in percentage wise, but phase two results were 49% percent reduction of recurrence of or death and 59% in distant metastasis or death. Metastasis, I think. Methastasis, there you go. So thank you for the pronunciation right there. Appreciate it.

But the treatment still requires regulatory approval, which could take some time, but late stage trials results were exceptionally good, so good that Moderno stocks, almost, well, it's more than double at this point. So I said it almost double at the time of doing the notes, but it's up 122%. And like we said, Moderna was really reliant and had like amazing earnings and revenues during COVID with their MRNA COVID-19 vaccine. But as demand dropped off a cliff in the last couple of years, they just, they would just were very reliant on that one COVID vaccine. Whereas Merck is up also on the day, but not as much, mostly because Merck is just a much larger, diversified company. I think they're up around 7 or 8% last time I checked.

So for them, it is still beneficial. One of the thing that it helps them is they were facing some questions, some concerns regarding the Ketura specifically, and the fact that the patent is expiring at the end of the decades in a couple years. So that's definitely good news for them as well. Yeah, I think there's been a lot of talk of like artificial intelligence. moving forward with like health care and and cancer potentially treatment or whatever it may be, but we're we're kind of tapping into an older form of technology, a highly contested one.

That's actually provided some pretty significant results thus far. I mean, money aside, like financials aside, pretty good move for humanity in general to treat this easier and better so that more people can live longer. So yeah, pretty big news. Again, I had to refresh my screen a few times. Because with how beat up these stocks have been for so long, I couldn't imagine that one went up 100% pre-market, but pretty good news. So I'm not exactly surprised, especially after I read it. But yeah, that's all I got on Moderna.

Do you have anything else? No, that's it. So hopefully that made sense for someone who's not into the medical feel and obviously mispronouncing a few things with my French brain here. But that's okay. I'm sure people understood. And maybe last thing here about biotech in general. So I know some people that have made like really good money investing in biotech companies. It's very specialized though.

So it's something that I think especially if you're well versed on the subject and maybe you work in that field and you understand all the trials and everything how that works. The late stage like the earlier stages trial, the probabilities tied to that and how the regulatory process works, especially in the U.S. you can probably make some pretty good money by spreading out like bets, right? So you and that's a problem. There's a whole lot of risk behind it. It is pretty complicated. So that's a field that I've stayed away from myself. But I just wanted to mention that, that it's a good example of sometimes just leveraging

knowledge that you might have. So it may be something else for you if you work in another field and say, you know what? I know this field really well. I know the companies here. I actually have an edge. So by all means, leverage that edge when you're in. investing if you do have it whatever the field is. Yeah, because I would imagine you as well, but I had no idea this was even going on because I don't

follow the space at all. So yeah, you're definitely right there. There's probably a lot of people in this space that knew that these trials were going on. So yeah, big results from them. You want to dive into Canadian Tire. Yes. By the way, Canadian Tire, I have a puppy that's four and a half months old. And it's kind of nice.

I think all their stores allow you to bring your dogs in there. So I know, yeah, well, at least the one where I'm at. Yeah, yeah. So I've gone to a couple. It's kind of nice. You know, when you have a puppy, you want to socialize them. So I just wanted as a side note, it's kind of nice to bring the down there. Yeah.

Yeah. So it's a pretty good quarter from Canadian Tire. We've seen kind of a bit of a resurgence in the Canadian economy overall over the last bit, kind of a return to growth. And I think Canadian Tire is, is, I mean, I wouldn't call it as big of a bellwether as like the railways or the banks. but in terms of the Canadian consumer, I would call it a pretty good kind of indicator as to the health of the Canadian consumer

because there's a lot of items that are purchased at Canadian tire. Earnings were up 10% revenue, 2.4%, comparable sales up 0.7%. And for those who are kind of wondering how earnings can go up 10% while revenue is 2.4%. It's actually immediately you would think of buybacks, but it's actually a combination of things.

buybacks is obviously one of them, but they're improving efficiency. So SG&A, which would be general administrative expenses, they've actually declined and gross margins have increased. So without the buybacks, earnings are probably up mid single digits, but I don't really think you could ignore the efficiency upgrades either. It's definitely a big benefit to the business. The stock didn't do much after earnings, but I think it was priced. I think it ran up quite a bit, like 15 plus percent into earnings. So it's kind of the same situation that we talked about last quarter because this one kind of reports on the tail end of Canadian earning. So we always end up talking about it.

Marks and Sportcheck are surprisingly strong. I don't know if you can pull up a Mark's. I don't know if fiscal segments that out. Yeah, they do. So Sport checks and Mark's same store sales are, yeah, surprisingly good. If you look to, sorry, I'm kind of mixed up here, Sport check is up 8%. Marx is up 4.2%. And Canadian tire comparable sales are actually down 0.8.

So, you know, the outer brands of this company are actually what's driving the growth while Canadian tire is kind of struggling. And the 8% seems large for Sport Check, which I think it is because of World Cup. They had mentioned that the World Cup situation is going to kind of bring the results back up. But the trend is kind of more important here because this is the, the Sport Check's eighth straight quarter of positive same store sales. As you can tell by the chart here, the ones read on the chart. You can see from 2023 to pretty much December of 2024. They were negative and now we're seeing a big uptick.

So that trend is kind of reversed, which is a good sign for this company because Sport Check is more disposable purchases, I guess you could say. Sorry, not disposable. Discretionary purchases rather than, you know, people just. they're going to Sport Check to buy sports stuff clothing, you know gear for winter things like that so on the financial side of things which we usually like

just to note so they had like a stretch of what like about three years right where it was rough it was pretty much negative or low single digit growth in terms of comparable sore sales for a sport check

and then you get yeah those what like five seven six seven quarters in a row where it's like mid to high single digits but they were also had they had a while where it was pretty rough so there's probably part of the effect right now where it's a rebound from much lower sales that's kind of going on for a few more quarters and then you have the the two bump ups here like the 9.5 and the 8% I'm pretty sure the 9.5 would be that would have to be Olympic related because what was that yeah January 2026 I think the Olympic game

were late January. So actually, no, that wouldn't be Olympic related because that would be previously, unless people were kind of buying it up beforehand. Yeah, it could have been that. Yeah, yeah, season old stuff for the winter. I'm not quite sure. Yeah. Yeah. But yeah, pretty good results from kind of the exterior smaller businesses on the financial side of things, which we like to discuss. It is making up a big chunk of profits. I think high 20% in terms of percentages. Right offs are at 7.2%, which is no doubt higher than many of the big banks. I think they're half of that. But this has always been the case and it's been elevated for quite a while.

The more important thing here is they're now steady. They've held steady for quite a while. They also kept provision steady and management mentioned that the credit area is about to get better. So they see some sort of stabilization. I don't know. You kind of have, you talk about the financial side of things. Do you have any comments on that or? No, I mean, I haven't really had the chance to look at the financial side.

of things for Canadian tire, so I wouldn't be able to provide any valuable comment on it. Yeah, unfortunately. Yeah, it's just stabilization, I guess, is key because when we've covered it previously, it's always kind of ticked up and up and up. And now it's kind of steady and they say it's going to get better. Yeah, I mean, it's always been more in terms of the charge off rate. It's always been significantly higher than if you start looking at the banks. I think just on memory, it's like twice as high in terms of charge off rights.

It was always around like seven. roughly 6, 7%, where the big banks, it's more around like 3, 3 and a 5%. Yeah, exactly. Yeah, so the Tim Horton's triangle rewards is going to go live next quarter. So pretty much you order from Tim Horton, scan your card and you get Canadian tire money. I didn't know they were doing this. This is pretty low key partnership that I think could actually drive some pretty mean. To places I do shop to.

Yeah, that's what I mean. So it's more loyalty. you see so many of these companies going loyalty, loyalty rewards. Like that's pretty much what all these retailers are doing because they know it drives long-term retention. So that's a pretty good partnership for them. And just overall, this one has never really moved the needle for me as a company, but you kind of have to hand it to them. It is a very well-run company doing its absolute best to try to keep growing.

It doesn't get you excited on them now as a company? No. No. No. The new triangle rewards with Tim Orton's, that doesn't change the feeling for me. No. I think eventually you can only kind of pull so many levers to grow earnings by double digits before you need revenue to grow more than two and a half, three percent. Who knows how long they can do this for? And revenue will obviously increase a bit if the environment improves a little bit more. But yeah, I mean, they've done quite well, but it's just one I've never really been interested in buying. I will. probably never be interested in buying, but that's not to say it's a bad company. It's just, they're doing a lot of things right with what they got. They're playing the hand that they've been dealt very well. But yeah, pretty good quarter.

Okay, yeah, I don't have anything to add here. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience, too, until we switched to the new. EQ bank business account. Now, every dollar earns high interest with no monthly fees and no minimum balance. You also get free everyday transactions like EFTs, bill payments, mobile check deposits, and 50 outgoing and 100 incoming free interackey transfers. And to sign up

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next one on the list here. Home Depot. So this is a company I know that you own Home Depot. is definitely, well, you still hone it, right? Yes, probably the most patient holding in my entire portfolio. I thought you were going to say the most painful holding in your portfolio. Patient and painful. If I had hair, I would want to rip it out holding this one. But yeah. That's not enough problem you have, so that's good. So sales increase 5.7%.

Net earnings were up 4.7%. But really the story for them and lows as well is comparable store sales. and they're inching a little better. It was the best quarter for comparable store sales since, what, October 20. Yeah, October 2020. So it was 1.7 percent, but October 2020 was 4.3. So there's still a long way from what they had to achieve back then. And if you're looking at lows and lows just reporting this morning.

So for them, same kind of story, but going downwards a little bit. comparable store sells for Lowe's at 0.2%. So you can see for both retailers here, it's still a bit of a struggle. And not surprising that Lowe's is actually having a harder time than Home Depot. Any guesses as to why? Dan, I do have a pretty good engling on the reason. I'll go over it.

But just curious if I were to guess it would be contractors, like Home Depot is more exposure to contractors. Yeah. So that is. doing well, but one of the big reason is actually Canada and Mexico, believe it or not. So Canada and Mexico, so comparable sales were 1.7%, but only 1.3 for the U.S. So where is that 1.4% coming? It's coming from Canada and Mexico.

It's a much smaller part of the business. I think it's about 15% both of them combined, Canada being slightly more important than Mexico. But they did mention on the call that comp sales for both Canada and Mexico were doing quite well. So I just wanted to mention that because there is this perception that the U.S. is doing far much better than Canada. And I guess for Home Depot, they're seeing slightly different here. So it's still above what you're seeing for Lowe's at 1.3 for the U.S. Because I think Lowe's is only in the U.S. I don't think they're in Mexico, are they?

Well, I know they have like Rona. I think they bought Rona up here. Did they not? No, they sold it all. Or sold Rona off. Yeah. They had it. They switched them to lows and then they sold off and then it got, I think, rebranded by Rona, if I remember correctly.

Yeah. Yeah, I don't know what their exposure is to Mexico. I haven't went to any home builders in Mexico or building stores in Mexico recently. So, yeah, I don't really know. But I know Home Depot's got pretty good exposure in both the countries. So, yeah, that makes sense. Yeah, exactly. So, no, I just Googled it quickly.

They only have exposure in the U.S. So maybe that is part of the explanation as well. And then the pro side, like you mentioned, the average ticket was up 2.8% to 92.50. So that is encouraging. Customer transactions were down 0.8%. So that not as good. But for the first six months, free cash flow was up 33%. Sales in terms of guidance, sales are, they're staying on their guidance with sales to be between 2.5 and 4.5% for the rest of the years.

and comparable sales between flat and 2%. So still kind of struggling. You can see a little bit that they're turning a corner, but it was, I think, a better quarter than I think many had expected, but they're still facing some pretty strong macro environment headwinds here, the same thing with lows. And they specifically pointed out to larger discretionary projects during the conference called where they're seeing some pressure there.

And they are continuing to see some cost. pressures from fuel and energy, but during the quarter, the good news is those were largely offset by tariff refunds. And I think that would explain the comparable sales, you know, the change and we'll have to see in terms of profitability too. I think there's definitely some uncertainty when it comes to higher gas prices. And you're also seeing a gas diesel prices go up, which will impact the cost of transportation. So it could definitely put some pressure on margins for Home Depot and lows alike. Yeah, you need, like for these companies to do well, you need home building activity

to be good consumers or sorry, homeowners to renovate. The one thing, I still do hold this because I thought this would have happened by now. It hasn't happened at all. But then we've seen Berkshire just bought Taylor Morrison. I think that was only six or eight weeks ago. They kind of mentioned that they're seeing like pretty low housing activity that, And I mean, they didn't say this, but you can kind of read between the lines. If they're buying this company, they obviously think that there will probably be a rebound in the future.

So yeah, they need some sort of macro shift to get out of the situation they're in. There's nothing they could really do operationally. They're doing nothing wrong. It's just you need the environment to improve. Yeah, over the last five years, it's returned 20% to shareholders. So total returns, including dividends. Last three years, 14. last year it's down 13%.

It's really been kind of all over the place. These are the kind of businesses though. When the environment's not great, this when things don't look great, the environment doesn't look great, it might not be a bad time to buy these kind of businesses if you

think that things will improve down the line. But it could take some times or seeing U.S. Treasury yields a 10 year rising pretty high. It's pulled back for some reasons. Some reasons in while this morning announcement from the u.s. U.S. Treasury so we'll talk about that on the Friday or Thursday live dan fosh and I so make sure you tune in but the reason why i mentioning that is

it does affect the year mortgages in the U.S. and the interest rate so so long as the yield stay pretty elevated you you have pretty much a dampening effect on housing transaction housing prices and the ability of homeowners or probably affecting the appetite of homeowners to do those renovation projects. I just wanted to mention that. And they did mention that interest rates do impact them in terms of, without a question. Yeah, they do mention it on the call. They don't hide it. So that's it for Home Depot. Let's move on to Constellation Software. So my biggest mistake of the last two years, there you go. Yeah. Well, I mean, especially, I thought it was going to pop after this quarter as well. So it didn't

end up doing so. It actually ended up falling. And I think they, it kind of got dumped off just low organic growth. That was kind of the only thing that I could find was poor about the quarter. And yeah, I would have expected this one to be in the green. Every other number outside of organic growth was some of the best we've seen from them in a while. I think they reported last Thursday. So it hasn't quite been a week. Maybe Wednesday or Thursday. I can't remember. So. Yeah, software. I think software in general is seeing a big rebound. And I think, think they lost 7% after they reported. I think they recovered some a bit after the conference call, which I'll talk about why I think that happened. But revenue was up 17%,

free cash flow was up 57% and organic growth came in at 3% and 1% after you adjust for currency. So this was the weakest quarter of organic growth we've seen from Consolation Software in years, I think, in a very long time. So the headline number was ugly, which which caused probably a lot of the sell-off, but most of it is explainable. And because they have conference calls now, it's much easier to be explained, whereas previously you wouldn't have heard anything from the company because all they had was the annual meetings. They didn't have any calls.

So last year, and this is kind of comments from the conference call from Miller himself. So last year they had mentioned that the company had some pretty big swings in organic growth. So dark matter, which is owned by consolation, had huge organic growth at this point last year. So when they reported this year, there was an 18% decline on those tough comparables. Altera, which is a EMR company, like an electronic medical record company, I believe they bought in 2022. It was purchased with the intention that there would be some shrinking, consistent shrinking after they bought this business. This quarter was again a big hit to organic growth. And then there was another client that they lost with a business they owned in South America.

and it came out to hit organic growth, I think, 0.4%. However, they had mentioned that when they acquired the company, they knew they were losing the client. So it wasn't any sort of AI churned because obviously right now, you don't want big clients churning because that just kind of fuels the idea of hitting these companies. But they had mentioned they knew the company was churning when they bought it. So Miller said if you back these three things out,

a lot of these outliers, organic growth would have come in around 5% pretty normal. Obviously, these are not zero, they're not zero factor impacts to growth, but a lot of them are outliers. So I think it's reasonable to take, you know, some of it into consideration. I think a lot of people were criticizing the revenue growth as well, but I think this is pretty short-sighted and capital deployment would be one of the main reasons why. So they deployed, it was just shy of 900 million this quarter. So I scanned through fiscal and I think this was the second largest quarter in their history. I think back during the pandemic, they had one larger quarter that was like 913 million or

something, but they also have more than 800 million committed or closed in the first six weeks of the third quarter. So huge amounts of money being spent by Constellation. If you look at these deals, that revenue will be realized in the future. So you see a soft revenue number now, but, you know, the amount they're spending right now, I don't really think it'll stick around all that long. The company is making a lot more larger deals. And what I find interesting is when Miller was asked about whether or not taking these larger deals means accepting a lower rate of return.

He said their hurdle rate has not changed. So to me, like if this holds true, when you're buying these larger deals with the same levels of expected returns, I mean, you're eventually going to get larger growth in the future because a bare case for this company for a very long time was a law of large numbers. Like you just can't move the needle anymore when you're acquiring these smaller companies and you're worth while at one point, I think they were close to $100 billion. But now they're buying some pretty big companies and they expect that they're going to get the same returns buying these big companies as they were the tinier ones. Obviously, that's never a guarantee.

That's, they mentioned that on the call, but it, you know, it still has to come to fruition. And another thing they mentioned on the call is they're not going to give an AI target. So timeline revenue earnings nothing. They said if they issue a number, they're going to start trying to manage to that number. There's going to be expectations behind that number. So they're just, they're not going to do it.

They mentioned that AI is making their developers faster. However, you also mentioned that they can build products fast, but they cannot make people buy them. There's been no revenue impact because of AI. I mean, we're like 18 months plus into this whole software AI type situation. So,

and there's been no, they mentioned no impact to revenue. whatsoever. So if you want confirmation as to why Constellations model works so well, and they were talking about this, you can look to Altera. It's dragging on organic growth. That's that EMR company they acquired. And it's kind of taking a hit in terms of revenue. But it's intentional. They bought this as a fixer upper, like a buy a beat up company for rock bottom valuations, kind of melk it for whatever you can. So they had mentioned since the 2022 purchase, Altera has fallen from around 800 million in revenue to 646 million, but they've pulled 400 million in free cash flow from it in those four years.

And I think they only paid around 650 million for the entire company. So it's going to be completely paid off in generating significant free cash flow within five, six years and making the deal, which is massive for something like that. So, yeah, underlying quarter was very strong. I think the market didn't like the organic growth numbers. And then after he kind of clarified a lot of it on the call, I think it went from like down 8% to maybe down four and a half to five. And today, obviously, we're seeing big green. But yeah, pretty good quarter.

There's been pretty much no level of AI disruption noted in any of the results. Yeah. I mean, that is interesting, although I do am a little skeptical that there's been no AI disruption. It could be minimal. but yeah that is well that keep in mind they've never they've never really said that that's my opinion they've never they never said on the call there's been zero disruption i got caught there that now i got you i feel there's been no a i disruption okay or very little so minimum let's just say minimal a minimum disruption so no it'll be one and again i know it's a very popular company and i know

there's a lot of listeners that own it and hopefully you and brayden and all the listeners that own it do Well, for me, it's still, I don't have enough conviction in this company to really own it. And I took a little bit of a hit by doing so, but thankfully it was just not a major holding my portfolio. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience, too, until we switched to the new EQ Bank business account.

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So let's move on to Air Canada. So Air Canada, I think it's always a interesting one in terms of seeing where the Canadian, and like a bit of a bell weather stock for the economy as well, Air Canada. So passenger revenues were up 11% year over year to 5.6 billion. And cargo revenue increased 29% year over year. And that was at $325 million, which they just hit. It was actually the highest quarter since the pandemic. So Q1, 2020.

If we remember, they started cargo during the, or I think they had it before the pandemic, but it really took off during the pandemic. and then it had multiple years of lull for obvious reasons. And overall, in terms of demand and sales, it was a very good quarter for them. The biggest issue that they're facing is cost. So the cost per available seat mile. So a seat mile is just a seat for sale multiplied by the distance travel. So it's a very common metric use for airlines.

That was up. The cost was up 24% and fuel costs were up 51%. But the most concerning is not the fact that it was up 24% is that they provide an adjusted cost per SM, so cost per available seat miles, so CASM, which excludes fuel costs. And that number was up 7.6%. And now they are guiding for 5 to 6% increase this year alone. And as a refresher, Air Canada pulled their guidance back in April because of the. uncertainty with fuel costs, and that was reasonable. I don't think, I think we talked about it on the podcast. We didn't criticize them. I mean, it made sense that they would pull that because it was so

unpredictable. But before they pulled their previous guidance, they were guiding for an adjusted CSS CASM of 3.25% at the midpoint. Now, with their prior guidance, they were guiding for capacity to grow more than their costs, and now it's reversed, which means that there's likely going to be some pressure on margins here. Maybe not for sure, but definitely some downward pressure. And like we had mentioned on last week's episode, they also sold a 25% stake in their aerial plan business to pay down there. So that is a good news item.

But really the biggest story here, it's not the fact that the demand is then there. They were able to increase the cost of tickets overall. And obviously, demand was quite strong as a whole. but the cost is definitely becoming an issue here with Air Canada. Yeah, it's very hard for these companies to operate profitably now. I mean, they can only, they can also, I think they can only hedge their fuel to a, to a certain extent. Yeah. Until they've got to realize, you know, a ton of that, the, the fuel increases.

And I think people are struggling to travel and fly already with a higher cost. So when you start to pass those off, I mean, yeah, it's tough sledding to be to be an airline right now, regardless of where it is. I don't really pay attention to them a lot. I don't know if the U.S. airlines are doing much better than Air Canada. So I don't know if it's like Air Canada in isolation or. Yeah, I can have a look maybe in the company in Queens that things slowed down and maybe in the regular episode or earnings. I can compare it with some of the U.S. airlines. But overall, I'm sharing here the passenger load factor.

So it's just the amount. of the percentage of the plane that's occupied by paid passengers, and that actually improved. So there are like operationally, for the most part, in terms of demand and in terms of pricing, they did quite well, but again, it's just raining in those costs. They also concluded a four-year collective agreement with which covers 15,000 employees as machinists and aerospace workers. I guess the last note that we didn't talk about in the last couple of weeks is that Michael Russo, the current CEO's last earnings, this was the last earnings call.

You'll be retiring at the end of August 31st. He'll be replaced by the Dutch Anko van der Werf in January of 27. And before joining Air Canada, Van der Wurf was CEO of Avienka. I guess it's a major Latin American airline that I wasn't really familiar with. The executive team between that transition period will report to the board of director during the transition. So overall, I guess a pretty good quarter. The new CO does speak French because that was, I think, one of the big things with Michael Russo where there was that, was it at LaGuardia where the Air Canada hit, the plane hit a service vehicle,

a fueling or a fire truck on the track. You remember that? And he like issued a statement just in English. And I think that kind of precipitated the his departure here. Yeah. Yeah. I was looking up Air Canada. they're actually crushing the U.S. airlines this year.

They're up 50% this year. Delta is up around 20% I think. Yeah, they must be doing pretty well. I mean, they got a long ways to go before they can get back to, like even the prices today were pretty much going back to it's been flat return since 2021. But yeah, tough businesses to ever survive in long term. Yeah, one of the few businesses that the Buffett, I think he tried twice, huh? You try one and he got out quickly.

He got burned another time and then I think you said never again. So let's move on here for a, I guess an AI darling right now. Core weave is one of, I don't think we've talked about it all that much on the podcast. So why don't you go over that? Yeah, I don't think we've ever spoke about Coreweave on the channel or sorry on the podcast. But I kind of feel like I had to do a segment because it's quarter. I think it went up 22% or something after the quarter. And I mean, if I were to personally sum this company up in a single sentence, it would probably be one of the most exciting income statements you've ever seen, but one of the most terrifying balance sheets.

So in a nutshell, I'm basically flat over the last year. Yeah. Yeah. They haven't done much at all. I think they, I mean, it's been some wild swings. Yeah. Yeah. Oh, it's, you can be very happy and then, and then very, very upset with this company in the span of like a week. because it just, yeah, it's absolutely wild.

I think it IPOed, what, a few, it would be a few years ago, maybe 2024? No, 2025. Yeah, early, in the spring. Yeah, spring up 2025. Yeah. Yeah. So in a nutshell, it is spending, it's an absurd amount of spending and leverage as a result in order to build out massive infrastructure, GPUs, computing power, things like that,

because of the demand. However, you know, just running some simple. calculations, the level of growth needed here to justify profits from the spending, even when you extend out the depreciation schedules of the assets, because I think this is why the company went up 20% post earnings, is because their CEO said that the old GPUs will be able to rent it out, be rented out price-wise for longer. They think it'll last longer. So, but even if you extend that timeline out, it seems absurd. I mean, I kind of of ran a bit of math through Chad GBT, seeing how much they'd have to grow to justify the

amount of debt they're taking on. And what I took from it is about a 40% compound annual growth rate on EBITA for six years to see any sort of meaningful return on the spending. So on the quarter, revenue grew 112%. It grew 24% sequentially from last quarter. The backlog sits at $104 billion, up 246% year of a year. And this actually doesn't even include an additional $25 billion in commitments they signed in the first few weeks of Q3. So they're doing around $13 to $15 billion in revenue. I think they're guiding to like $13 billion-ish. And the backlog sits at north of $100 billion, which means years of contracted revenue.

And the thing is a lot of this revenue is take or pay non-cancellation. So they literally cannot get this stuff running fast enough. A lot of major companies are coming in, throwing money at them to get capacity online. So that is kind of the, like if you're just looking at the income statement and you're looking at the company in general, that's kind of the thing there. But the terrifying thing is the balance sheet. So this is a capital intensive asset heavy endeavor. So debt is now nearly $35 billion. The company has, I think, yeah, they're guiding to $10 billion in revenue. I think like their net profit margins like negative 25% or something. they're burning a lot of cash. So debt now sits near $35 billion with about $5 billion in cash on hand. Capital capital expenditure guidance for this year is $35 to $39 billion. Yeah, the interest expenses are absurd relative to the revenue. Cost on debt is north of $640 million in one quarter. So that's just interest expenses.

So the company is guiding to $1 billion in operating income this year. So for every $1,000,000, in operating income, they're spending 30, they've issued $35 billion in debt to generate it. So obviously the expectation here is the money they're spending now will produce operating income for, you know, five, six years. But will it improve it to the point where it will actually be profitable is the question? They're not going to generate $1 in operating income for every $35 in debt they issue indefinitely. It will go up.

But it needs to go up to the point. where there needs to be some profit. No, he sounds like he's a fortune teller the way he's talking. So I don't know. I'll get to that in a bit too because I think it's a wild statement to say. But the one thing this company loves to do is slap adjusted EBITA margins absolutely everywhere, which is not, this is not uncommon with a massive cash burning, highly leveraged company to use adjusted EBITO margins.

So it's the only thing that really looks good outside of revenue growth. So right now they're adjusted EBITA margins are around 59%. However, the important thing here, you're looking at a debt heavy, asset heavy, depreciation heavy company. EBITA pretty much, like you're talking about earnings before interest, taxes, depreciation, and amortization. So it's filtering out every single cost that is hitting this company right now. So if you look to revenue of 2.6 billion this quarter, you have 1.4 billion in depreciation,

$640 million in interest costs and $160-based comp. So 85% of their revenue is lost to depreciation, stock-based compensation, and interest expenses. So this is why you get a 60% EBITA margin and a bottom-line profit margin of negative 24, 25%. CoreWeave is not really doing anything nefarious. Nothing wrong here. they're supplying a need, one that is seeing exponential demand. However, the idea of the company actually generated profits. Who's the demand from? Is it like Open AI and Trompic or is it other customers?

Yeah, they're selling computing effectively, like people lining up for this type of stuff. It's just the idea of generating profits off that much spending, it seems far fetched for me. Is it possible? Yes. Is it likely, in my personal opinion, no. The difficult part here is the alternative situation. is absolutely ugly. So the company is mentioning that demand for older GPUs is still high. So they extended kind of the lifeline of that depreciation. He went on, what is Jim Kramer on?

I can't remember the network down. Asked money or whatever. Yeah. Yeah. So he went on there. He asked him about depreciation. And he said it's going to be extended. So pretty much they don't see any issue renting out the equipment they've spent so

much money on now down, you know, later on in the future. But the tech is. evolving so fast that this could easily not be the case. You may not be able to generate as much revenue in three years from the same chips than you are right now. People might be willing to pay for it, but they won't pay as much for it. Yeah. So he's saying he kind of mentioned that the price won't be impacted. But how do you know that?

Like in two years, you could be coming out with new GPUs, new tech where your price is collapse on the infrastructure you own now. Like, it was a pretty, businesses are becoming increasingly price sensitive when it comes to like purchasing like AI products. So tokens, like they are being more price sensitive.

And I know you are. I know as well, like more and more businesses are looking at like Chinese models, for example, because they're more cost effective. So that has a ripple effect, right? Like if you're not willing to spend as much on,

you know, the services you get from AI, those large language models, the Claude code and all of that stuff and Chad GPT, Codex, and you're just going for cheaper models, while the ones providing you with those models at some point,

they'll probably not be willing to pay as much either, right? Like, it's just pure economics because if not, their business model will implode. Yeah, it's a really bold claim to say this in like a piece of tech that is evolving faster than we've arguably ever seen in history. history. So if the company sees less demand for the infrastructure they're building now in a few

years, like you could say they probably spent 40 billion plus what, 10 to 15 billion dollars in interest costs just to build out the infrastructure. So if this, if this is a case in profitability doesn't really emerge and they say, oh man, we need to build out more. Who's going to finance round two if round one didn't work? Yeah. And in this situation, the company is in video, Yeah. Yeah. I mean, it's, yeah, it's crazy. And it's not like, this isn't just a situation of the company couldn't service its debt. I think worst case scenario, the company could not service the debt. It might be able to service it, I guess, but servicing the debt is about as low as it gets in terms of expectations right now for this company, especially like how expensive it is. If the company sees lower pricing and it has to build a new infrastructure to get up. to speed. It's going to need the cash to do so. So it seems like the economic, like you had mentioned, and I won't go over this too much because you would mention it. Like the economics of the business are moving in the opposite direction as it gets larger, I think. It kind of seems like a company that,

in my opinion, provides exponential risk to the downside, but while the upside is kind of already priced in. I mean, I do wish those who hold it the best. I have no skin in this game. I don't really care much of being right or wrong. Yeah, if the CEO did like his earnings call with a video and he had like a, you know, a tarot ball or tarot cards or, you know, something that shows he can actually see the future and he's, or a crystal ball or this, those little balls where you shake them like showing the future and he has like a video call. Then I maybe I would believe him a bit more now at least make a spectacle about it.

But no, no, I'm just kidding around. But yeah, it is just seriously before we move on to Klarna here, it is becoming to me increasingly worrying all the interminglements. Like everything seems a bit intertwined when it comes to the AI trade right now. And there's, you can't really deny it that there's a whole lot of risk. And I'm not saying go and sell all your AI related stocks, but I'm just saying like be aware of the risk. because I see a lot of people on FinTwit and just a lot of influencers online. They're just kind of all in on that. And they're showing the results and they're up like 50% or 70 or whatever it is for the year.

And that's amazing. But it's also nothing goes up in a straight line. And you're seeing all these access right now and Nvidia backing investments in companies or backing the debt of companies that then turn around and purchase its own products. Like it's just there. Yeah. I mean, there's just a whole lot of stuff where there's a bit of red flags going on. And I'm not saying, again, to sell it, I'm just saying, like, just be aware of the risk that you invest in because as great as I think the technology will end up being, this is something we tend to see.

Well, this is something we've seen in history is whenever there's, like, great technology advancements or new technology, you have, like, this build out and essentially you have investors that are just, like, throwing money at it. And it ends up destroying a whole lot of capital. doesn't mean that the technology won't end up being phenomenal 10, 15, 20 years down the line. But I think a lot of people are just kind of intermingling those two things together and not realizing that you can not, like, you can destroy a whole lot of capital while having a technology that will still change the world down the line. Yeah, and you're seeing huge revenue growth from this company. But again, a lot of these companies in the past, like the fiber build out, all that type of stuff. Like, yeah, railways are pretty notorious for that too. Yeah, the company's at the front of the line building out this new piece of tech.

Like a lot of them went broke. And then other companies picked up the scraps and ended up making money off of it, you know, over the long run. So yeah, I've seen this company all over the place. It's very popular among a lot of influencers, things like that. And I don't know if I've ever seen anybody mention the cost to service the debt, the amount of debt they're taking on. It's mostly just talking about the, you know, the 120% revenue growth, which ultimately is what will get the clicks, what will get the activity. That's why you see it in all the headlines. But yeah, there's there's risk here for sure. If they run out of financing,

they always can go to Klarna Group for Buy Now Pay Later and buy some chips. Yeah, exactly, and pay later. So Clarnet Group one, yeah, thank you. One of the big Buy Now Pay Later companies and the market reaction to the earnings release wasn't great with the stock being down more than 20%. The actual quarter was pretty good though, so revenue were up 27%. GMV, so gross merchandise volume was up 18%. But there were definitely some concerns here. On the net income side, they generated $9 million versus $53 million loss last year, so that was good. PCL, so provisions for credit losses as a percentage of GMV was down four basis point year over year.

Again, that's a pretty good sign, meaning that they're putting less money aside for bad loans. The average revenue per active consumer was up 24% to $33.70. And the revenue take rate was 2.8%. So 2.84%, which was up 20 basis point from last year, but down 16 basis points compared to Q1. And that is just simply the amount of revenue that they generate. from gross merchandise volumes. So definitely you want higher is better here, and the higher usually means they probably have some pricing power as well

in terms of the merchants. But again, on the positive side, Klarna was selected as a partner for the, or the partner for the Apple upgrade device leasing program, which is essentially a lease to homes. I don't know if you saw that a few weeks ago. Apple announced that. So I think it's a way for them to tackle higher iPhone prices.

I think in the past they had something where you could bring your old device and get a discount on the new one. I don't know if they still have that, but essentially this lease to own is like you have a smaller payment. I think over two years, for example, and then when you're at the end, you can essentially just buy it. I think for the most part, at least in Canada, I know Rogers and I think a few others actually have a similar. Yeah, Tell us does it too. So they actually do that, but I guess Apple's trying to get that directly. from themselves instead of going through a third party. So that's interesting.

The market likely also didn't like the fact that the company announced that the CFO and the CMO will be leaving the company in early 2027. So when you have two C-suite high executives that are leaving never a good look at the same time. Klarna also revised its guidance downward. So that was one of the more negative points here. So the revenue take rate that I just mentioned earlier as a percentage of GM. They lowered the guidance by six basis point for the rest of the year. And GMV guidance was reduced by 3% for fiscal year 2026. They said on the call that the revision downward was mainly due to the softness in Germany,

which is their second largest only to the U.S., so it's a pretty major market for them. They are, however, seeing strong growth in the U.S., and have some new partnership, including J.P. Morgan and Aiden, to just name a few. So overall, not a bad corridor, but I think it's a lot of the market. It's more of a result of the CFO leaving, the CMO, CFO and CMO leaving, but also the guidance being cut to big as things here. Yeah, that's a lot to take in in one quarter, guidance reduction and two people leaving. That Apple thing is kind of genius, I think. Because I would imagine that cell phone providers here, they buy the phone, then they do the lead.

I can't remember what it is, bring it back plan or whatever it is. Yeah, they probably buy the phone like right at wholesale prices. Yeah. So they probably get the phone out of the discount where Apple actually will be able to get a higher margin from it, do the program through Klarna and bypass the carriers. I'm sure the carriers weren't thrilled about it. But again, I'm sure they'll still do it too. They'll probably kind of package in with the phone plan and make it look like a good deal like they always do. But I'm sure it's going to affect people, especially for people who want to just kind of.

of bring their own phone and negotiate a better deal, right? Well, and it's kind of like, you know, people who have vehicles every other year or so or whatever, a lot of them end up leasing them because they hand them back and get a new one. So the phones, yeah, I think it's genius. I didn't know that they were doing this. I knew the carriers did it, but if this is successful with Apple, you're probably going to see it with Android, all the types of companies doing something. Yeah, because then Apple, like, I'm sure they would probably get, take the phones and then sell them,

like, refurbished or whatever. aftermarket, yeah, aftermarket, exactly. So no, I think it's a good plan for the cell phone carriers. Yeah, I think it will probably eat into their profits a little bit because when you think about it, I know what they tend to do is they'll be like, okay, yeah, you have this two-year plan, lease to own type of deal. Then you can buy it out for like three, four hundred dollars at the end, whatever it is. But you also have to get this like premium plan to be eligible, right? So if you do it now, you buy it directly or you lease it directly, through Apple, you can do basically bring your own phone, bring your own device, right, and get, negotiate a better deal. So probably not the best thing for, for carriers, especially for those who are actually willing to do the work and compare prices. Yep. Yeah, that's all I got. I guess we've ran on a while here. This is a big episode. Yeah, so yeah, no, I think it's a good point to end it. So hopefully everyone liked the episode. We'll be back with Monday, a regular episode so make sure you tune in the Monday episode as always will be available on

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