The Canadian Investor - SpaceX IPO Mania, M&A Heats Up, Dollarama Rises While Dynamite and Adobe Drop

Episode Date: June 18, 2026

On today’s episode, we cover a packed week across private markets, U.S. dealmaking, and Canadian earnings. We start with SpaceX and the growing anticipation around a potential IPO. We break down why the valuation, limited public float, and upcoming share unlocks could make this one of the most closely watched public listings whenever it eventually happens. We also look at a busy start to the week for acquisitions, including Fox’s investment in Roku, Salesforce’s latest deal, and American Express making a move of its own. Then we turn to earnings, with Dollarama posting a strong rebound quarter, Groupe Dynamite selling off sharply despite impressive growth numbers, and Adobe delivering solid results on the surface while investors focused on what may be ahead. Plus, a quick preview of Monday’s episode, where we’ll be diving deeper into the recent short report on Gildan. Tickers discussed: SPACE, FOXA, ROKU, CRM, AXP, DOL.TO, GRGD.TO, ADBE, GIL.TO   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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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. company in quite some time. Welcome to the Canadian investor podcast. I'm Simo Berange and back with my co-host, Dan Kent.

We have a fun and jam-packed episode today. So we're going to start with SpaceX and its highly anticipated IPO that happened last Friday and why the valuation, the limited public float and the upcoming share unlocks are worth paying attention to. We'll also touch on a busy start to the week on the acquisition front with deals involving Fox and Roku, Salesforce, and American Express. Then we'll move over to the Canadian side of the earnings, including Dollarama's strong rebound quarter,

group dynamic post-earning drop, and Adobe, where the result looks solid on the surface, but the market clearly had other concerns. If we have time, we'll also touch on Oracle, depending how long it takes. And then just a quick note, I'm sure some of you are aware of the Gilded, short report.

We will be going over that on Monday in more details, so we won't really touch on it in this episode. Yeah, and we have kind of a segment going over, I think I probably pulled 10 or 15 years' worth of kind of high-profile Canadian short reports that have been issued, what happened, how they did afterwards, things like that. So the Monday episode will be a good one.

But let's get into SpaceX. It was a success, I would say. I would say it was a success. So SpaceX, like I mentioned, made its IPO debut, debuted as an IPO on June 12, so having trouble with that one there. And the stock is up more than 30% based on the IPO price of $135. It values the company at more than $2.6 trillion. It's placing SpaceX in the same company in terms of market cap as a Microsoft, Amazon, TSM, and, Broadcom as well actually it's within that group and then it's above actually fairly decent amount

above in terms of market cap over Broadcom, Saudi Aramco and even meta. And note how a lot of people might hear these names. Well, all of these companies are very profitable unlike SpaceX. So that's one of the big things. It's trading at a valuation and of course it's quite volatile for a company this large right now, but it's trading at around 140, 150 times sales, just based on Q1, 2026 revenues. And it's not easy to find data

if you want to start comparing of what we saw during the dot-com bubble because it was back in the 1990s. And for those that weren't born in the 1990s, the internet was definitely more in its infancy. And I did find an interesting article, literally like from back in the day where you would publish an HTML.

from David Simons in March of 1999. It was from, I can't remember the exact university, but essentially it was an article where very old school, and he just highlighted the valuations, and apparently Yahoo, which I believe was profitable at the time, was trading 130 times sales, just to give an idea. So this is definitely reminiscent of the dot-com bubble in terms of the sheer pricing in terms of sales,

and obviously the dot-com bubble also saw a lot of, companies that barely had any sales and were not profitable, just trading at pretty crazy valuation. But again, it's not that easy to find data going that back. So before I continue, any comments here on the IPO? Yahoo would have been, that would have been pre-Go, would it not? I think Google was found in maybe late 1990s, but they were, Yahoo was supposed to be like the biggest, biggest search engine you could get. They were going to be one of the larger ones.

But obviously that- was big. They were huge. I know it may be weird for younger listeners, but Google was not the go-to place to go for searches back then. I think it really started in the early 2000. I Google IPOed later. I think it might have been, I'm just going on memory like 2004 or something like that, where it would have IPOed. Yeah, so Google was founded in 1998. So yeah, this would have been the Yahoo heyday where they were going to be effectively what Google was. is now. Yeah.

And you had like, I think a bit prior to that, but you had like, I think it was like Alta Vista was one of them. You had web crawler. Anyways, all this stuff I remember when, AOL, yeah. So all this stuff I remember when I was a teenager. So I just wanted to mention that because 140, 150 times sales is not nothing. It's really expensive. And I said, I posted as a joke on X, basically said, well, I guess when you're total addressable,

market is the universe. I mean, it's not that expensive. Yeah, so. Infinite power. The other thing, I guess, the one thing I'll mention just because we went over that well, simple IPO thing, I talked to quite a few people and very few got a ton of shares. I think most orders were from SpaceX. Yeah. Most orders were filling for like maybe like two to four percent of requests. So yeah, it was there was a few Canadian IPOs as well where like the shares you actually got versus what you requested were very little. This was a no-brainer that it would be like that, though, because this IPO was oversubscribed, like mad. It was... Which one of the risk of this whole wealth simple feature is also, it could bring, and they're not the only ones, there's brokers in

other countries that are doing something similar here. It could really put retail investors as bagholders, because remember they had, like, I think that 90-day time frame where you can't sell, and that kind of ties in nicely to what I'm about to talk about with SpaceX is some people might be wondering why the stock is up 30%. It's trading 140, 150 times sales. Well, there's only 5% or actually less than 5% of total shares that are currently in the public market. So of the flow, there's only 5% that's publicly traded. And when you factor in retail investors that should be holding for 90, 120 days, it'll vary from different platforms offering this IPO deal. Well, now you're starting to lock in people to the unlocking period of insiders

potentially selling into the market. So I think there is definitely a risk where you can potentially see some of the retail investors that are in there and feel force like they have to hold the company because there's that 90 or 120 day lockup period that they may be on the hook. And the reason I'm saying is that the big test will start in August when SpaceX reports its first public earnings result. That's when the big unlock will happen where 20 to 30 percent of the shares will be unlocked. And it really depends on the price of the shares that could be as high as 30 percent. There's I think if it spends a certain amount of day above a certain price, there could be some more unlocking.

And the majority of the shares will be unlocked in the first six months following the IPO with all of them being on. unlocked, including the ones that Elon owns a year after the IPO. And you have to remember here, I think a lot of the pop that we're seeing is just, there's just an offer demand imbalance. Right now, there's just not a lot in terms of offer, in terms of flow that's available. When you have less than 5% of the shares traded, you don't need that much demand to actually drive up the price of those shares. And the question really is, once those lockup periods start opening up, they start

expiring, you have probably the IPOs of Open AI and Anthropic around the same time period. They're speculating that it could come in the fall, even as soon as September. That could put a lot of pressure on the shares of SpaceX. So I'm not overly surprised on the reaction right now. That was always what I was thinking is short term. You could definitely see a pretty significant pub, but it's where the medium term, I think, where my concerns are. Yeah, and I think for a lot of the retail investors, like they are, they're a relatively small portion of all of this. I mean, they obviously would have a chunk of that small amount of shares traded now. But the lockup period does come into play for sure. Because if you're looking to buy this with Well Simple, you can't sell for 90 days because, well, let's just say you want to flip this, but you also want a piece of the anthropic one when they go public. You can't sell your SpaceX shares.

or else Well Simple will not allow you to participate in the other ones. So it kind of creates an element of a lockup if you want to participate further. Robin Hoods is much lower. So they only go 30 days. Unless they've changed it, I'm just kind of looking online. You can go 30 days. And if you flip it, you can't buy for 60 days. But from what I take from the Well Simple one, if you flip it, you're done.

Like you can't buy anymore. So yeah, it's probably a larger buyer. That's why. So they probably have a bit more flexibility than a well. simple. They're getting a lot more shares than Well Simple for sure. Exactly. So they they probably just don't want to the like of better word piss off the you know the underwriters. By the hand that feeds yeah. Yeah exactly by the hand that feeds them but it also puts retail investors in the crossfire. So it's just something to be aware. Obviously if you're buying them now as you're listening

to this you can do what you want if you want to trade them you know have at it that's your money. I mean it's it's going to be volatile. That is one thing that's for sure. but I think you'll really start seeing the selling pressure once a lockup period start happening. Now, enough about SpaceX. 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.

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giving you even more ways to diversify. Questrade makes the whole process seamless, allow you to focus on what really matters, your investment strategy, not trying to avoid fees. Ready to invest, head over to questray.com, open and fund your account with code TCI and receive $50. Conditions apply. You know that moment when you're on the couch, shopping online, ready to checkout, and then you realize you don't have your credit card nearby, and you have no idea where it is. And then you see that purple button.

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That's Shopify.ca. Chechain. Let's move on here to quite a few acquisitions that happened on Monday. There was even a chemical one in the U.S. That was pretty significant that I won't be talking about. But the first one is Fogs buying Roku. So that values the offer at around $22 billion. And the offer was at a price of $160 per share

in a combination of cash and stock. For those looking at the stock here, I was doing my notes earlier this morning, and we are on June 17th here. Roku shares are trading at around $138, so people might say, oh, the market doesn't think that it will go through. Well, actually, it's pretty close to the offer value because it's a combination of cash and stock. It's dependent on Fox stock, right?

So it's always that ratio of cash in stock. And it's actually quite closed. The 160 is more like the kind of headline number. It's not necessarily like the value that will be attributed to the actual closing of the transaction. And for those not familiar with Roku, it's one of the biggest connected TV platforms in the U.S. And I think worldwide as well, it gives more controlled to Fox over how viewers access streaming content. And by buying Roku, Fox gets a platform that has more than. 100 million users worldwide, and I think it's around 80 in the U.S.

And it will enable them to leverage that platform along with their existing assets like a Fox News, Fox Sports, 2B, which I was not familiar with. I started looking at it. It's an ad-supported streaming service. And the strategic logic is that in media owning content is no longer enough. You want also to have a platform where people discover and watch that content. You're able to feed them ads. And the concern from investors is definitely the price here, considering that Roku has very low margins.

And it's also been the stock has definitely been in the gutter a little bit since the pandemic. I think it peaked around $450, $500 a share. Yeah, it was $4.70 something was peak. And then it's down considerably from there. That would have been like peak pandemic lockdown times. Yeah. Yeah. People were watching TV because what else could you do?

Trade stocks. That was another thing they could do. That's it. But yeah, so I think really interesting acquisition there. We'll see if it goes through. But from what I saw, I think it's likely to go through, especially when you start thinking of other behemots in the streaming space. I don't think it should be much of an issue from a competition perspective. When you think about Netflix, Disney and all the big platforms, even now, Prime Video is probably a decent player in the space, Apple TV. So there's quite a few out there. The next one, here, Salesforce is buying Finn for around $3.6 billion. I couldn't find whether it's all cash, cash in stock. But this one is definitely smaller, but very relevant to the AI theme that we talked a little bit about SpaceX. And Finn is an AI customer service agent platform across every channel includes live chat, email, WhatsApp, SMS, and Slack. Salesforce is buying AI capability inside customer service workflow. And they already have a massive base of enterprise customers. I don't think that's news to anyone.

And they are seeing it as a way to build on their existing agent force, which is Salesforce AI agent platform. And the opportunity here is to plug AI agents directly into existing customer service and customer relationship management system. And if AI agents change how the company handled customer support, then of course, self-force wants to own that layer rather than be disrupted by it. So whether it works out or not, we'll have to see. And I think a lot of it depends on whether Cell Force does a smooth integration into it or not. But I don't know whether it's more of a

panic move, trying to just get into there or whatnot, or if it's really strategic, we'll have to see. Yeah, I'm not quite sure on this one. Yeah, I don't really know this stock very well. I know the space, like live agents or whatever it may be. I know there's a lot of companies that, offer this type of service. I've never really seen it on WhatsApp. I'm not sure what company runs their customer service through WhatsApp. That seem a bit odd. Yeah, yeah, you can get enterprise, um, enterprise stuff on WhatsApp for sure. Oh, interesting. Yeah, I don't, I don't know the company too well, so I don't have much to comment on here. Okay. And then the last one here, definitely on the smaller side. So American Express buying the fork, I was not familiar with this

company from TripAdvisor. I am familiar with TripAdvisor for $700 million. It's an all-cash deal. The Fork is a restaurant booking platform. It's really mainly focused in Europe. It's a smaller deal, of course, but it does make a lot of sense of where American Express is going. They are doubling down on their experience and rewards offerings, which this deal will provide more access to sought after restaurants in Europe. And for TripAdvisor, the same. helps simplify the business, I guess, and focus more on experiences and bring in some cash to the business that has definitely been struggling for some time. I really, I don't see a bright future for a trip advisor. I really can't, I don't understand. Like, I used to go

there for reviews for trips and resorts and stuff. But aside from that, and again, I think you can get a whole lot of that from AI nowadays, can't you, right? So, yeah, probably a lot faster, too, I would imagine. So this would be like the European open table. I guess so. Pretty much. Yeah. So they probably just charge, they probably make money by charging the restaurants probably for booked reservations. I don't know how those companies make money at all, but I would imagine that. Something like that. I mean, maybe American Express doesn't even need to make a whole lot of money on it. It's just to add to their offering. Yeah. Yeah. Yeah, I mean, for 700 million, it's a very, well, I guess it's a small deal in the grand scheme of the,

things, but that's it. And so now let's move on. We'll get with the Canadian earnings. So, yeah, big rebound quarter from Dollarama. You want to go over that? Yeah. So we had talked about it last quarter because Dollar Ram is one we always talk about it because it kind of reports like off the path. It's kind of outside of earning season. So it's always one that pops up on here. But last quarter they mentioned that weather held people back from going to the stores. And we were both kind of. I remember I made fun of them. Yeah. We were both kind of hesitant. to believe that, but it does seem to have been true. Like, they didn't come right out and say, oh, see, the weather was the issue, but you can tell by the rebound and results that, you know,

they were, they were probably telling the truth. Revenue increased 21.4% ahead of consensus. Earnings grew by 13.3% again ahead of consensus. Margins took a hit across the board, but it isn't really anything operationally. All this is is Dollarama kind of merging in the reject shop acquisition in Australia. And I do believe the, the Mexico pilot project as well. So these stores have lower margin profiles, the ones in Australia. So it will drag on the company margins until they can integrate them and build out more of that dollarama, dollarama model in that country.

Canadian segment is doing outstanding. 5.6% same store sales, 3.5% increase in transactions, 2% in basket size. So the average somebody is spending when they go in there is going up and traffic is picking up. And I mean, a lot of Canadians just kind of right now at this point just refuse to pay higher prices for necessities. That's just kind of the reality. It's been the reality for the dollar amas, the loblows of the world for the last three, four years here. Same store sales in Canada are now tracking well ahead of guidance for for the last five quarters, you know, that, that weather impact quarter. So we have that weather impacted quarter that happened last quarter. That was the first time

same store sales have been below 4.9% I think over the last few years here and two of the last three quarters have been over five and a half percent. So the company is guiding to same store sales growth of three to four percent this year. And I would imagine that's just because the other segments are probably going to drag because the Canadian end is is kind of well above this. Dollar City, which is their Latin American exposure. They own majority stake in this. I think they bought it six or seven years ago. that's growing like crazy too so earnings are up 27.1% revenue 30.30.4% store counts 752 versus 644 a year ago and then as I'd mentioned Mexico is kind of the company's next bet they've been launching pilot stores there for the last

while it'll be interesting to see if they can integrate there it's kind of a big loser financially for the company right now but again it's it's very early it has a lot of potential untab market and on the Australia front, very early innings, but what they're saying, they've only turned around, they've only turned around, like turned around 28 stores to the dollarama layout versus I think they have over 400 total. So the results from this segment are probably going to look pretty ugly over the short term. They're going to be overhauling store layouts, renovating them, overhauling inventories, all that type of stuff. So it's going to cost them a lot of money to do this. but eventually when they get that model turned over, it should have some pretty big potential.

And if you're an owner of this company, you're looking to own it, I wouldn't expect any, like nothing more than losses from those two segments right now, but also kind of understand the company is definitely playing the long game here. So there is risk to large integrations like this, but it does, if it pays off and is executed well,

there's a lot of tailwinds in those areas. Guidance remains unchanged, 3 to 4% same store sales growth, 60 to 70 new stuff. stores gross margins of 45% in Canada, capital expenditures 420 to 470. And that's guidance for the rest of the year, right? Yeah, yeah. For while they did, this was their Q4, I believe.

Yeah. So this would be, this would be their fiscal 2027, I believe. So that would be the guidance for 2027. Few comments on the call. I don't know how like they're kind of, they, they expect the Middle East conflict to be over soon. And for oil to stabilize. I'm not really sure how. Dollarama management has a good grasp on that, but they were pretty confident in it.

So they said cost will not be an issue. And then they mentioned that there is some pressure on product sourcing from China and that the Australia rollout is taking some time in terms of completed stores because they never roll out a re-bannering of a store until it fits the identical dollarama model. So it's going to, you know, they're being renovated. Once they're renovated, the layout is good. The product assortment is good. then they'll finally turn that banner over.

But yeah, big rebound. It got down to, I believe, the 165 range after they reported. And now it's back to 190-ish. So, yeah, it's a very good quarter. Yeah, hey, I'll eat my words. I guess the weather does impact that business at Dolorama. So, no, a very solid quarter. I think that comparable sale or store sales is always the one.

To me, it's, is the one I keep an eye on. But yeah, nothing more to add there. Let's move on to Grub Dinamit. The shares took a massive hit after the earnings release, dropping more than 35% on the day that happened yesterday. And at first glance, it's really easy to wonder why the company was down so much. I mean, revenues grew by 37% comparable store sales were up a whopping 23%. They also mentioned on the call they have substantial pricing power with their retail. The retail unit was up 15%.

So every unit sold retail on average was up 15% in terms of pricing. This helped boost both their gross margins and adjusted EBITA margins. They opened their first UK store under their garage brand. And they believe that it shows that their brand can be successful internationally, which is kind of funny. That part is it was a little bit of a head scratcher. I know they're trying to sell the business, but it's not because you open one store. that it went well, that you're going to be successful on the international stage.

But I digress. I just thought it was hilarious that management was like just, yeah, it's not really a sample size. Like it's, I mean, one to me is not a sample size. Get to like 15 or 20 with some good results and then we can start talking. But they also have, to be fair, stores across 41 U.S. states. And despite the amazing court, it's really, I think, the 2026 guidance that rate some question marks from investors.

And to be fair as well, it is up about, I think, 7% today, roughly that I'm seeing right now. Yeah, it rebounded quite a bit. Yeah, I mean, yeah. I mean, it's down a lot more rebounding. It needs a lot more, but. Exactly. But it's still rebounded a little bit today. So comparable store sales in terms of guidance and revenue growth remain unchanged for

2026. They lowered the guidance of the amount of net use. stores they anticipate to open in 2026. I think that cost investors a little bit off guard. And they slightly increased their EBITA margin guidance for 2026, but the increase was very small and was essentially just tightening the range. And I think it really comes down to this and tell me if you agree or not. But it really raises the question about the quarter being a one-off because as amazing as this quarter was, you're still looking at comparable sales in their guidance to only increase between 11 and 14% for the years.

So that remained unchanged. So you could, it's hard to not think this was just a one off quarter. If the company itself is not adjusting it guidance, if it's a sign of things to come, then you would think that they would have increased that comparable sales guidance. And their overall guidance would be much higher. Yeah, I couldn't really, like I looked into this and I could not find a reason for it to fall 36%. because I think this guidance... Well, it was also trading at a premium.

Yeah, it was trading very high premium for at least a clothing company. Yeah, because it had such strong results. And I think like the 11 to 14% same sort of sales growth, I think, was known to people before. So it's just the only thing I could find that caused it to fall that much was the store counts, how they expected the store counts to be like too lower than they are. And as an Eritzia shareholder, this kind of terrifies me because, I mean, something that small to cause the stock to fall 36%. Like a lot of these companies have ran up so much over the last while.

Like as an Eritzia shareholder, like, what if Eritzia comes out with a quarter that's like, you know, the market expects 22% same store sales and they post 21. Is it falling 20%? Like it's, yeah, it's wild. I don't really, like 36% is a huge dip. And a lot of people can't really find a reasoning for their stock to shed one third of its value. It was, it's pretty wild. I mean, I don't know them well enough.

Yeah, that's my best. Yeah, that's my best estimate. I mean, I couldn't see, like, that's my best guess, whether it fell off that much. And for joint TCI subscribers, I'm just showing the revenue growth percentage. And it's been an amazing story since essentially now like February 20, 25 when it grew 13% that quarter, I mean, it's been above 20% since. But if you look at it too, it was 25% revenue growth last quarter, 40 the quarter prior, 36 before that. So there's also could be some indication that things are slowing. But I mean, who would expect sales to grow that quickly for that long of the period?

at some point, you know, things revert back a little bit. But that would be my best guess as to why it was just a valuation thing. It's a fashion company. And I guess the market just expects a whole lot. If it's going to put a premium on a fashion retailer in terms of, yeah. You'd better. Evaluation. They better just blow you out of the water.

So that's kind of the overview 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 switch to the new EQBank 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, quick and fully

online, no branch visits because, let's be honest, no business owner has time for that. We use it for our own business and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at eQbank.ca slash business. There is an old saying in investing, it's not about timing the market, but time in the market. The most successful investors aren't usually the ones trying to catch every top and bottom. They're the ones who spend the most time in the market. I've been a quest trade user for over five years, and the reason I stick with them is that they remove the friction of regular investing. With no commissions on stock and ETF trades, you don't have to wait until you have thousands of dollars saved up to make a move.

You can contribute small amounts regularly and keep your portfolio growing consistently, removing the stress of trying to time the market. And they keep making it easier to build a well-rounded portfolio. Soon, you'll be able to trade precious metals through Questrade, giving you even more ways to diversify. Questrade makes the whole process seamless, allow you to focus on what really matters your investment strategy, not trying to avoid fees.

Ready to invest, head over to Questray.com, open and fund your account with code TCI and receive $50. Conditions apply. You know that moment when you're on the couch, shopping online, ready to checkout, and then you realize you don't have your credit card nearby, and you have no idea where it is. And then you see that purple button. That's shop pay from Shopify. It completely changes the experience. One tap, and you're done. no forms, no hassle.

Honestly, it's happened to me plenty of times where I just abandoned the purchase because of that extra friction. From a business perspective, that really matters. Less friction means fewer abandoned carts and higher conversion. But Shopify isn't just about checkout. You can build your store with customizable templates, manage inventory and payments all in one place, and even use built-in AI tools to speed up product uploads and content creation. Plus, you can run marketing campaigns directly through the platform to reach customers where they already are.

See fewer carts abandon and more sales go, Cheching, with Shopify. Sign up for your $1 per month trial today at Shopify.ca. Go to Shopify.ca. That's Shopify.ca. Cheching. Let's move on to a company that's very divisive on FinTwit or XTwit. I don't know what to call it anymore, but Adobe. So there's a lot of bulls, there's a lot of bears, and I think there's no one in the middle, it seems like.

No. I mean, I was kind of in the middle, but I got criticized. Yeah, I think I'll try to be in the middle. I think it's, but you go over. I mean, I kind of knew, yeah, you go over and I'll chime in as well. Yeah, so they beat on revenue. and earnings estimates raised guidance and the stock kind of tanked. I think it fell like seven or eight percent after reported. And that's kind of been the story for this one over the last few years.

I think it's down 70 percent from highs a few years ago. Revenue increased 11 percent in constant currency, adjusted earnings by 18 percent. I think a lot of that earnings growth because they're buying back a ton of shares. I'd be curious to know how earnings were growing actually without share buybacks. But operating margins were, flat, ARR increased by 12.5%, and RPO's by 13%. And in my opinion, too many Adobe bulls are focusing kind of on the disruption level bear case and kind of applying it to the, I don't know why this stock is going down. This thing, this company is not getting disrupted.

But I think really with me trying to take the most objective look at it possible, like the company is not growing as fast as it was. it is definitely a deceleration of growth. Like I think revenue growth rates are, you know, I'm just kind of guessing, but I think they're pretty close to half of what they were, maybe four or five years ago. Like they used to grow 20% anyway.

Yeah, you can pop up a chart while I, well, like, yeah, net income, like, was barely higher on that pure net income basis. Just, yeah, as you were saying, like, so last year net income, yeah, I was just shy of $1.7 billion. Now it now it was just slightly above $1.7. So you can make the case.

it was essentially flat. Yeah. So I think you're not only getting, you're just getting a revaluation. You know, the multiple is coming down, which has happened across all software companies, but this is also a software company

that is just not growing as fast as it was. It's putting in a lot of efforts, and I'll talk about it in a bit, with the freemium model, things like that, to kind of shape up for the future to get that growth back again. But it's just not growing as fast as it was.

So if you exclude the CEMRA, acquisition which is like a SEO based company I used to use it yeah and just to answer your so yeah revenue growth I mean it was much higher if you go back to the pandemic pre-pendemic you were looking at revenue growth like in the 20s and then now since I would say 20 to late 2022 you're looking at like high single digits low double digits in terms of growth if you look at this chart right here you can see a clear deceleration of growth, which is obviously going to come with a smaller,

with a smaller multiple. But on that ARR front with the with the Semrush acquisition, that's kind of an SEO based platform where they help websites kind of increase their Google reach, probably their chat, GBT, all that geo type stuff. ARR shrinks to around 10% if you exclude that acquisition, which you realistically should.

So bear case right now is slowing growth. so acquisition impacts really shouldn't be factored in until they're fully integrated. AI first ARR looks to be just over 500 million is tripling on a year-over-year basis. So there's definitely a ton of momentum there, but when you look to the company's total ARR, like, it's kind of a drop in the bucket. If it continues to grow at this pace, it definitely won't be in a few years. But it looks like their creative freemium situation is picking up a lot more monthly active users across pretty much every area of the business. business. Many will look to the AI segment being the fastest growing as a bull case, which again, if it can continue, it certainly is. But the contrarian look is to probably say, hey, it's like,

what, 2% of their total ARR right now. Talk to me when it hits, you know, double digits. Then you have a real growth vector for them. Creative and marketing subscriptions grew around 11%, which is where the deceleration is kind of occurring. However, by the looks of it, it is partly strategic. The company is deferring pricing increases, pouring a lot of effort into that freemium model. They're looking to defer a bit of growth now for long-term gain. And the bet here is substantial user growth, convert them to paid members. And I will say if they can execute this, like the company is trading at like 8x forward earnings.

It is cheap. There is absolutely no question that it's cheap. But if you go to this freemium model, you never really convert a lot of these users, the bear case is ultimately right. Because I used to run a freemium model on our platform. It was terrible. It was a complete disaster. I mean, there were so many people who just signed up

and never had any intentions to pay at all. So you get a lot of these with these freemium models, and we'll just kind of have to see how this one turns out. So the company raised guidance. They now expect revenue of around 26.5 billion, earnings of 2440, and ARR growth of 10.2%. So you're looking at very cheap. valuations. But there's also another issue, which I actually think is what caused the stock to

drop. The CFO is leaving and obviously the CEO is transitioning to the chair of the board. So you're in like this big shift in company strategy, kind of, you know, the AI build out, the freemium model and you're losing, like both of these people have been with the company. CFO was 20 plus years, I think, in the CEO, I think was 17 years. So it's not really a good sign in the midst of, you know, trying to do, you know, some sort of operational turnaround. And there is also the added element that platforms like Claude Code are making disruption levels higher in this area. I mean, we, I made a tweet over, over the weekend. I pretty much got bored on the weekend and I wanted to create my own video editor so I didn't need to use Premiere Pro anymore. And I did. I created

an editor that, you know, pretty much did everything that I utilized in Premier Pro and then some. and I ended up, I was able to actually cancel my Premier Pro subscription and I made a tweet about this and I got a lot of, a lot of Adobe bowls riled up suggesting that I was like going to conquer Adobe on a global scale or something like that. I got called a clickbait Dilwad. That was one of the, uh, okay. That's a pretty good title. You should, uh, you know, get a picture frame that. But there, there is the potential there and a lot of people look at the enterprise level, which is like, that's their bread and butter is like these large companies, but I don't really think you want to just completely ignore the abundance of creators that they have that are probably more nimble, very easy for them to kind of churn out of a platform like this and get a solution that's a little bit easier. I think a lot of people are going to get more comfortable with these platforms as we go on.

Like a lot of people are probably not utilizing a platform like codex, Claudecode, whatever it may be. But that is not to say they won't be in the future because, it is a lot easier to do this than you think. So I think that's another element of it. But it seemed like a pretty good quarter. But I think the management swaps are probably what caused it to fall. I think it was 5 or 7%. Yeah. And I mean, at the end of the day, there's just also more options. Even if people are not as driven as you and creating their own editing platform, there's still more competition, whether it's the script, whether it's Canva on the photo editing side. And obviously, you start

coming in with AI. I mean, Chad GPT images is really good. Yeah, it's real, really good. It actually listens to you when you ask it to make some modifications. It doesn't get it always right the first time, but just things like that. There's just tools that are available that compete directly with Adobe. And I think, you know, the fear might be a bit overdone for Adobe. maybe it is trading too cheaply and of course that won't get rid of all their customer base.

There's going to be enterprise customers that will just, you know, not want to switch and that's fine. But there's going to be individual creators that will be happy to switch to whether it's other platforms or using AI on their own Codex or Cloud Code to be able to build something that works from them. I'm sure, it may not have all the options that you have in Premiere Pro, for example, but for their use, it fulfills everything they need, and it's cheaper. So I think it just, the risk for Adobe is just over time, lower margins, slower customer growth. You also get potentially lower pricing power because you have those other tools that available to people or AI. I think those are the big risk. And sure, it looks good.

I think they even didn't, I think they update your guidance too for 2026, did they? Yeah. They raised it. So sure, it looks pretty good this year. Might even look pretty good for 2027. But beyond that, can anyone say with certainty that Adobe is going to be in an amazing place in 28, 29, 2030, 2031, much more clarity when it comes to that. And you can make a real case that they'll start eroding slowly on the edges. and then, you know, it starts eroding faster and faster.

Or it could remain in the freemium approach that they're taking. It could actually, you know, be a real a tailwind for them in terms of growth. So I think you can make a case for both, but I think saying that one or the other is absurd, I think is just people getting a little bit into eco-chamber and just anchoring on their own thesis for Adobe. Yeah, and it's like I had mentioned, it's pretty wild because I'm not. really an Adobe bear. I mean, you would have to be crazy, in my opinion, to believe that this bear case is not a possibility. I'm not saying it's going to happen, but it is a possibility.

Like, I don't really think the market has sold the stock off 70% on this bear case and there's realistically, you know, to a lot of, you know, very aggressive Adobe bowls. Of course, it's a possibility. Anyone who says it isn't, like, whatever option, whatever outcome for like the best company in the world, there's always a, no matter how small, there's always going to be a disaster possibility for a company. Yeah. You pick your most love company, the best company in the world, to say that there's like a zero possibility of something happening is just you're lying to yourself.

Like it's nothing in zero risk. Yeah. That's just the reality. Yeah. And obviously I think for Adobe it's higher. But I think people who say like you're out for lunch. it's just they're completely dismissing the risk. And I think that's a dangerous place to be in investing,

especially if you start sizing your position too high because you have so much conviction in something. Yeah. Yeah. And I mean, there was a lot of bulls a year and a half ago when the stock was what, 40, 40 some percent higher, you know, and now it's lower. So is the risk lower at 8X expected earnings?

I would say yes. But is this one going to go back to like a high valuation software? company multiple, probably not. I don't think any of those software companies ever will go back to those pre-LLM valuation multiples, but I think Adobe is you're just not seeing the growth you used to. And it's probably going to be a long-term trajectory here to see if this new model pays off. And now they kind of have new management coming in during this transition phase. So that always makes it a bit more difficult as well. But do you want me to tackle Adobe? I think we, or Oracle, sorry, I think we have time.

Sure. I thought my puppy had to go pee outside, but I think he's good. He's good. So if you don't take too long, I think we'll be able to make it work. Yeah, I'll be quicker here because I mostly want to focus on like the cash situation for them. So depending on which way you looked at it, it was a great quarter or an ugly one from Oracle. If you're focused on the RPO's and the backlog, you probably thought it was great. If you're someone who is focusing on kind of the total cost to satisfy that backlog, you probably thought it.

was fairly ugly. So revenue grew 21% earnings were up 22%, but gross margins took a 5% hit. I'm fairly certain this is one of the, if not the largest backlogs in software history. So it increased 363%. I think it's at $638 billion now. And I think there's a big difference between something like Alphabet's massive backlog and Oracles though. And I do believe that Alphabet said that most of its backlog, not the majority of its backlog will be realized in two years. So over 50%. I can't remember the exact numbers. So for Oracle,

they said only around 13% of it over the next year and only around 34% of it over the next three years. So this is more long-dated and the longer you span it out, the higher the uncertainty gets. So they are one of the biggest cash-burning companies on the planet right now. They might be the biggest cash-burning company.

So over the last 12 months, they have negative free cash flow of around $24 billion. And the guidance next year doesn't make the situation any better. They expect 2027 free cash flow to be $40 billion in the whole. And they are issuing $20 billion in equity. And they already added over $40 billion in debt to the balance sheet last year. Capital expenditures will come in at $70 billion in 2027. They were just shy of $50 billion, I think, last year. Margins have pretty consistently declined.

them what I would imagine from this is it's just a shift from the company. So this is a company that now has to add, you know, depreciation heavy data centers, whatever it may be to the mix, which will probably hit margins because, you know, Oracle used to be, they were like a data management software company, I believe. Anyway, I'm not exactly sure what they did, but they, yeah, they have, like, I was familiar with people soft, so they're HR management database. So they're basically, they were, I mean, And the use I'm familiar with, it's just database management. Yeah. Yeah.

So you're looking at a high margin software company transitioning to this big asset heavy, you know, business like this. So margins are going to take a hit. Will they recover down the line? It's probably difficult to say, probably never to the scale they were before. But revenue guidance is for 34% growth, earnings 18%. I believe this was next year. And they do mention that through 2030, they should be able to.

to see 31% compound annual growth rates on revenue and 28% on earnings. So really, growth is not the question. You could, you know, with the amount they're spending, I would hope that they could turn out that much higher growth through the next four years. I mean, they'd better. But. Yeah, but can you really grow to 18% if on negative earnings? Yeah.

Like under earnings negative? I would imagine. Well, they might not be negative now. It's difficult to say. You'd see their earnings for sure. I'm just looking because I'm like, how does that work at growth on a negative number? So, no, actually, they're still positive somehow. I mean, it's just mostly all the KPEX burn.

But eventually, you know, they're expecting probably a lot of depreciation to hit the income statement. They're still expecting to grow at that pace. The growth is not the question. It's the cost of the growth is the question. So when Oracle had that big pop after the massive backlog increase, it was kind of a situation where people were saying, look at the demand. And I think now the demand is blatantly obvious, but the cost of satisfying that demand is absurd.

Because this... Exactly. And they're having trouble doing it too. So I think what I'm showing here for Joint TCI is the backlog that's going to be realized in the next year, right? And it's dropped from being in the mid-30s, high 40s, even in the 40s, prior to their big backlog jump last year to low double digits, 10, 12%. So what, I think there's some risk of, okay, some of those backlogs, maybe some of the

customers say like, okay, this is taking too long, we're just going to shift that somewhere else. I don't know how ironclad these contracts are or not, so that is one of the risk. And I mean, can they really execute? We've been, you know, hearing more and more about bottlenecks, not in my back. backyards, the NIMBs in terms of data centers being built, you know, the electricity that's required for that? Like, will the percentage that they can fulfill in the next year, is that going to go up or is it going to trend down because of those bottlenecks?

Like, there's real questions on their ability to fulfill that. Yeah. If you can imagine the more long-dated your backlog is, the more opportunity there is for that backlog to not be satisfied. And then when you build out all the infrastructure to satisfy that and it's not getting used, Like you have a disastrous situation. They used to be a company that pretty routinely bought back shares. So they took share counts from $4.3 billion shares outstanding in 2016 to around $2.77 billion in

2023. But now the script is flipped. They've stopped buybacks. They're issuing equity. They're taking on debt. They're issuing preferred shares. It's a complete reversal. It used to be a very cash flow positive company, very shareholder friendly.

And now they're just kind of. of tapping the well, like consistently now. And again, as I had mentioned, like it used to be a software company, but it's kind of looking like a infrastructure utility play. And I just don't think the market will pay that much for it as they would when they were a software company. And the thing is, like you're still paying 22x EV EBTA, like enterprise value to EBTA, to effectively fund the company's just cash burn build out in hopes that those RPO's materialize. very long-dated RPO's. For this, like, if somebody were to say, would I buy this one?

I would not touch this company. There's just way too much riskier for me. The RPO's look flashy on the surface, but that's where the key difference is with something like Alphabet, who I believe has like 50 some percent of their backlog to be realized over the next couple of years, whereas Oracle is like, well, 10% over the next 12 months. And you could probably say 20, maybe 20, 25. 30% over the next two years.

A lot of that is way out in the future. Well, yeah, exactly. And what we're seeing is these companies now have, like you mentioned, they have to issue equity. They're issuing debt to fulfill that. And I'm just showing here it's pretty, it's pretty amazing looking at this chart where you looked at the annual free cash flow compared to the capex spend. And they had been free cash flow positive for decades. I mean, I'm going back here.

Yeah, this is a company in like, in 20, they spent two billion dollars right prior to 2025 they had been cash flow positive since at least 2007 yeah for cash flow positive which is crazy and now you just see the capex just going through the roof in the last last two years it's obviously going to continue and then you factor in the amount of equity they'll probably have to issue debt to be able to pay for that and it kind of just circles back to SpaceX IPOing, issuing equity.

It circles back to Open AI, to Anthropic. When you have more and more companies that are issuing equities and issuing debt,

and you also have meta-talking potentially issuing equity to fund its aspirations too. There's a lot of big companies that are tapping the markets.

And I'm not saying it's a big issue like for some of those, but are they, is a company like Oracle really going to get that like favorable terms compared to Google and a meta, probably not. And our investor is going to be navigating towards more entropic, open AI, SpaceX because of the hype around it, probably.

So there's probably not just going to be the crumbs left for an Oracle. Maybe I'm wrong, but that's how I'm reading it. Yeah, the, like again, this is a situation where it all depends on the risk you want to take. Because, you know, if it does realize all those RBOs, there's a lot of potential here after they build out that infrastructure, but with them being as long-dated as they are, there's a lot of risk that it doesn't materialize. And I guess the other thing you say about all the equity issuance is like good management teams tap the equity market when prices are high. So that should kind of tell you something, all these hypers like tapping, you know, issuing new equity. They're not doing it because they need to.

I mean, they get access debt easily. Google still, they have, Google has a lot of debt, but it's also. They're being opportunistic. Yeah. So that kind of shows you what they think about the prices right now because Google could just, they could issue more debt. They find the equity element of it more attractive right now, probably because prices are, prices are very high. Yeah, no, exactly. Well put. I think that's a great point to end it. So this was a fun episode. I feel like even when earning season is down, we're getting material every week. So it's always fun for our news and earnings. Thank you so much for listening. And we will be back for our regular episode. Don't miss it on Monday.

We'll go back at a history of short reports in Canada. I also have a stock on my radar that's pretty interesting play, especially if you want some AI plays that are not too expensive. Make sure you tune in. Thanks for listening. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or.

consult with a financial professional before making any financial or investment decisions.