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Daniel Snyder: Welcome everybody. Welcome, welcome, welcome to Stock Market Live. You’re joining and hanging out with Daniel Snyder and Austin Hankwitz. We have a special guest, Bertrand Seguin joining us today from the App Economy Portfolio.

We’ve got a lot to talk about, right? Earnings season, it’s coming to a close. What is going on with crypto? Holy cow! If you’re watching any of that news, it’s pretty interesting if you ask me. Obviously, let’s go and get some shoutouts, man. I love all the people that show up right on time. Look at this. This list is growing week over week, week over week.

Austin Hankwitz: I love it.

Daniel Snyder: Obviously, everyone thanks for joining us and hanging out with us for this hour. Obviously, it has to be said, join the conversation in the chat, right? Like, let us know what you’re thinking, point things out about metrics or whatever else that you might be watching yourself when it comes to these companies that we talk about. And if you have any questions for our guest, leave them in the chat, and we’ll have him answer as we’re discussing all of this right now during the hour, but I have something I want to ask you, real quick, Austin. At the top of this show.

Austin Hankwitz: Yeah. Let’s do it.

Daniel Snyder: So, I just saw this come across my feed the other day. Credit card debt in the United States has hit an all-time high of $930 billion for the Federal Reserve. Are we kind of getting pushed into the corner of the wall? Like, this can’t be a good sign, right?

Austin Hankwitz: No way. It’s not a good sign at all. And actually, I don’t know if you saw this in my post that I had shared on my Seeking Alpha Cash Flow Freaks. We do this weekend review every Sunday. And we had quoted, I think it was like the retail foundation, it’s these experts that are telling you where people are spending their money, right? And they were guiding to what the holiday shopping was going to look like.

And weirdly enough, if you compare what Amazon’s (AMZN) tone is, PayPal’s (PYPL) tone, MasterCard’s (MA) tone on spending habits and projections against this sort of foundations projections, they are very different, right? Amazon is over here saying that we’re only expecting an extra 17 billion during the holiday season for Q4. PayPal is saying, you know, it’s maybe mid-single digits at best, but this retail foundation is saying, high-single digits, low-double digits for e-commerce, but they’re saying a lot of that spending is going to be supplemented and catalyzed by tapping into your savings account and swiping that credit card, right?

So, it’s just really alarming. It’s just really alarming to me to think that, you know, our savings rate is at a multi-decade low, but our credit card debt is at a multi-decade high. Something’s got to give here, and I’m worried to see what that outcome might be.

Daniel Snyder: Yeah. I have the exact same thought — not the exact same thoughts, but pretty similar thoughts of, like thinking about, well, okay, sure we’re hitting all-time highs. People are putting a lot more on credit. When your savings are coming down, we know interest rates are going up, which is where I’m kind of like thinking forward of like, are people going to get a horrible wake-up call when they start to see those interest payments continue to climb and continue to eat away and eventually be like, “don’t know what to do, can’t pay you anymore.

You know, you gave me the credit line, it’s on you now.” Something that I’m keeping in mind, but also the inflation aspect of it is like, things do cost more. And if people are just so used to buying after these last two years of free money, they’ve obviously gotten into a habit. And it’s like, we got to break that habit. And I think that’s what we’re trying to see. It’s like, is this going to be a hard landing or a soft landing? And I think this is going to …

Austin Hankwitz: 100%. I think it’s really, really tough too to think, like, that’s actually pretty funny. My girlfriend’s mom had to, you know, put something on a credit card. I think it was surgery for a pet or something, and it was going to be a couple thousand dollars. And she’s like, okay, swipe the card. All good, paid off in a couple months, you know. That’s what credit cards are for a lot of people. And then she goes, but then I realized I don’t think I want to do it anymore because the last time I checked my APY and the credit card was, like, you know, 22%, but I just looked at it just to confirm this go around, and it’s 36%.

What’s going on here, right? And that’s the Federal Reserve raising those interest rates. So, it’s getting to the point where, you know, I’m not the person to argue one way or another, but some people might say it could be even predatory feeling and others are just kind of really confused. So, to your point, right, it’s like, there’s going to be a wake-up call. And unfortunately, people won’t wake up until it’s too late, right?

Daniel Snyder: Yeah. I mean, it’s the same thing with — where you go back and look at the GFC, right? Global financial crisis. It was a rude wake-up call, and it’s like, are we going to see that within the credit side of things coming down the line. Hopefully not, but obviously, we’re going to switch things up in the format of the show a little bit this week. We have a great guest that we have to get to. He’s been on before, but we had to bring him back because he’s been doubling down with his service.

He’s been putting down these great data visualizations that I think are really going to be impactful for all of you here today watching and hanging out with us. I mean and it’s the tech earnings, right? It’s your Apples (AAPL), it’s your Amazons, it’s your Metas (META), it’s your Googles (GOOG, GOOGL). It’s — the companies that people are still keeping an eye on even though interest rates are climbing, markets are pulling back, we’re in a bear market.

Obviously, we’re seeing how interest rates – we’re seeing layoffs happen through the tech industry. So, it’s something we definitely want to touch on as well as we’re going to touch on Disney (DIS), right? Because I still personally love the company a ton. I think we might get a generational buying opportunity here in the future if this thing continues to pull. I mean it’s — we’re going to get into it. But before we do that, let’s go ahead and kick things off with initial thoughts, bullish or bearish. Austin, go ahead and kick us off this week. What have we got?

Austin Hankwitz: Okay. So, here’s the deal everyone. I had — I didn’t think about this whenever I was creating my three thoughts, but after the second one and the first one was so similar, I realized that the third one, I can just — I’ll find it and I did find it. So, the theme for this week’s initial thoughts is CEO transitions, right? Companies having a CEO and now maybe they have a different CEO. And you mentioned the Crypto stuff.

So, I do want to get your thoughts on what was going on there, right? So, Binance acquired FTX yesterday after some intense drama causing Bitcoin to spiral down to $17,000. FTX’s coin, FTT lost 80% of its value. Are you bullish or bearish on Binance, and now the fact that Binance — is this a larger conglomerate that assuming the deal goes through, right, it’s non-binding, but assuming the deal goes through, it is going to be a massive, massive exchange.

Daniel Snyder: Alright. So, this is fun for me because I’ve been bearish on crypto for a long time. I mean, that’s just me personally just to put that out there. So, if everybody’s like, oh, you’re wrong, just so I’ve never bought into it. Funny you bring that up though. So, an hour ago, so for those of you that don’t know, obviously, within Seeking Alpha, we have a lot of people that are passionate about the markets. We have people that care about forex, we have people that care about the bond yields and what happens in the bond market, we have people that care about cryptocurrencies.

So, we actually have a cryptocurrency Slack channel where a couple of the people here — we all interact and we talk about what’s going on. And actually, just about an hour ago, I don’t know if you saw this, probably not with how you were talking about it, but Bitcoin Magazine, referencing CoinDesk, says breaking news, Binance is strongly considering dropping out of the FTX deal after looking at the financials because they had non-binding letter of intent.

Non-binding letter of intent is, I mean, they’re talking about, like, taking crowns and putting on a [nappy], right? Like, it doesn’t mean anything. It’s not binding. Like, you’re just doing it to try to probably salvage some of your token prices for the near run. Like, I don’t know. I am bearish on it. I have so many thoughts about how this guy got drunk on his own power.

Austin Hankwitz: Yeah. Yeah.

Daniel Snyder: Just printing his own tokens as if he was a central bank, which he’s not. This ruins the trust of everything going on in the crypto world. Actually, take a quick moment. I’m going to go ahead and plug this. I mentioned it last week. Guys, next week, we are having a Crypto Webinar. Ash, Josh, go ahead and throw a link in the chat if you wouldn’t mind. This was with Omid Malukan. Sorry. He’s the adjunct professor over at Columbia Business School.

He used to work at Citi Ventures, worked at Citibank, guy knows his stuff. If you want to join us and get your questions answered about what’s happening in crypto right now, he’s the guy to do it. So, join us next Tuesday. That’s November 15th, and I think that’s at 2 PM Eastern if I remember right. Go ahead and join us for that hour. But yeah, overall, I mean, I think FTX is just going to become another one of those names that get lost in history in all honesty.

Austin Hankwitz: I got that. No, I think you’re – I think you’re on the money, right? It’s kind of funny because, you know, we’re opposites in the fact that I got exposed to cryptocurrency when I was in high school, right? And I’m 26 now. And I was, you know, buying the Bitcoin. I was buying the Chainlink, and the XRPs and whatever the heck, you know, people want to think of.

But I remember to the point of Binance, like, when I first started using it, Binance was like this Chinese exchange that was really kind of like what’s going on kind of scary, but what I really respected was the transparency of their CEO, something that I don’t think Sam Bankman-Fried was able to lean into enough. Their – Binance’s CEO CZ, the two letter CZ is what he goes by. He was always very transparent with the books. 99.9 % of all the money that — I mean, it was very proof of reserves, very proof to show that we’re not doing anything crazy with your money.

And to your point, you know, getting drunk, you know, getting high on your own supply, I feel like that’s what Sam Bankman-Fried — we saw that happen with, what was it Three Arrows Capital, Celsius. I mean, all these people just get greedy.

Daniel Snyder: As the [voyager], yes…

Austin Hankwitz: …They get greedy and it’s just — it’s rare to see a guy be so transparent from day one. And so…

Daniel Snyder: And this is the modern version of a run on a bank, if you think about it.

Austin Hankwitz: Oh, absolutely it is.

Daniel Snyder: All of this has happened in history before, but it was with actual fiat money. And so you’re just like, you tell me crypto is so different. Why are we seeing history repeat itself?

Austin Hankwitz: Absolutely. Okay. Next one I got for you here. So, sticking on to this theme of CEOs, right? Kohl’s (KSS) CEO is resigning to join Levi Strauss (LEVI) in January. I think she’s smart. I think she’s a visionary. She built Starbucks (SBUX) over the last seventeen years. She did marketing for Procter & Gamble (PG). And when she took the reins at Kohl’s, she, you know, quickly spread up this awesome partnership with Amazon.

So, you can come into the Kohl’s department store, return to Amazon, you know, good — get a little bit of Kohl’s cash. You’re walking through the store. You might buy something. She got Sephora to leave JCPenney to come to Kohl’s, right? So, she’s very smart. Bullish or bearish now that Kohl’s has — the CEO of Kohl’s has left to go somewhere else. I want to get your thoughts and I’ll tell you what the market’s thinking, because the market is probably going to disagree with you, but let’s hear what you’ve got to say Daniel?

Daniel Snyder: Bearish on Kohl’s, a CEO moving over to Levi though. I mean, where’s — management makes a lot, right? Management is definitely a huge part when it comes to evaluating companies. How — but — so she’s been the one going through this whole Kohl’s ordeal, and she’s been the one battling against all the investors, wanting them to sell off pretty much all of their real estate assets. So, she’s dealing with all of this, and now Levi wants her. I’m going to say bearish. Bearish, yes. It doesn’t sound appealing to me.

Austin Hankwitz: So, what’s interesting is, when I was looking at all this, apparently, the markets, the — I don’t know the specific name of the hedge fund, right? But these activist investors very much don’t like Kohl’s current CEO. I forget her name, but they very much don’t like her. They don’t like her management style. They don’t like the way that she handled this buyout from the company that owns Vitamin Shoppe for, I think it was going to be $8 billion, right?

They very much don’t like what she’s doing, and Kohl’s stock price moved up, I think, it was 5% or 6% after the news of her leaving. So, it’s just really interesting to see that despite someone coming in with so much experience and having some really cool, you know, partnership and strategic ideas with Amazon and Sephora, how the activist investors can just say, hey you know what, we get it, but get out of here. We don’t want you, right? Who’s next?

Daniel Snyder: Yeah. That’s a great point.

Austin Hankwitz: Alright. So, the last one I have for you. Another CEO hop and ship moving around, Adidas (OTCQX:ADDYY), right? Adidas just hired Bjorn Gulden as their new CEO. He used to be the CEO of Puma (PUMA:CA) to take the reins after they lost a lot of market share in China plus help them navigate this, like, Yeezy brand kind of thing going on that they’ve got to figure out. The market loved the idea, right? As Gulden turned around Puma, deep understanding of the market with fashion and shoes is a great network. Are we now bullish or bearish on Adidas after this new CEO change?

Daniel Snyder: Well, you know, from the other week, I’m already bullish still on Adidas.

Austin Hankwitz: Adidas.

Daniel Snyder: Let’s say it right. Adidas. I’m already bullish on Adidas. I think this is a great move for them. I think for them to get the — that management to come over to Adidas, I mean, I think you’re going to see what did Puma do right? Puma has crushed it within the football world, right? Like, they have that whole sports complex, there’s still a lot of fans, a lot of revenue, everything’s brought out of that. Adidas has kind of gone up and down in waves over the years. I think this move right here will continue to help Adidas in the future and continue the bullish momentum behind them.

Austin Hankwitz: I love it, man. I agree with you entirely, and I still can’t get past the fact that you call it Adidas. I’ve seen it a couple of months.

Daniel Snyder: The name of thecompany, man, yeah, it’s Adidas. It’s Adidas. Alright. So, let’s dive into it. Also, before I give you the three for this week, I want to ask everybody that’s here hanging out with us. Do any of you going back to the crypto thing, because actually I was going to ask you about this as well, and I’ll just kind of switch it up a little bit, but do any of you here with us today own any crypto? Have you ever owned crypto? Do you still own it? Will you buy it here? Do you have tokens? What do you think about it? Let us know in the chat, we want to get some opinions from you guys while you’re here as well.

Austin Hankwitz: And beyond that too, I think something we talked about Daniel with the whole crypto theme of that was a couple weeks ago. I think there was a survey that, like, 40% or 50% of people wanted this in their 401((k))’s in their retirement. If you’re one of those people too in the chat, I would love to hear if you agree with that. Do you want crypto to be a part of your retirement plan?

Daniel Snyder: Yeah. Let us know. So, alright, first up on deck. Obviously, Breaking News, breaking headline news this morning, Meta, you know where I’m going with this, laying off 13% of its workforce, that’s 11,000 employees. Is this bullish? So, we just saw what the stock has done today. I mean, the stocks have been rising. Is this bullish or bearish? What do you think?

Austin Hankwitz: I think it’s bullish, right? So, I kind of have some prepared notes for what we’re going to talk about later with Meta, and we’re going to get into that. I’m actually kind of excited to share because I don’t think enough people are talking about the point I’m going to share later. But so, this is what I’m thinking, right? Whenever I looked at Google’s recent earnings, you know, they report their headcount, and Google’s headcount went from, I think, it was 150,000 to 100,000, like, 90,000.

And I’m just, like, how do you go from so much, be like, where does this bloat? What’s going on here? Like, why are we hiring so many people, your revenue is certainly not following this. And so, I think it takes a lot of just self-awareness, reflection to say, hey, I might have over hired as a company, right? And I think that’s what Mark Zuckerberg has done. He’s realized, like, if we want to be able to check these boxes, if we want to be able to spend $100 billion in 2023 on CapEx, on AI, on servers, on you know, Metaverse, whatever it is, we need to get rid of some people because just it’s bloat, right?

So, I’m bullish on Meta after them, you know, unfortunately, letting go 11,000 people, as weird as that sounds. But I do think that my rationale will be more — better explained here as we talk more with our guest about them, but bullish on Meta.

Daniel Snyder: Cool. Cool. Alright. Up next, starting next month, Airbnb (ABNB) is going to show the final price to users upfront when they search for places to say, I know. Dude, that’s like the exact reaction I had. I’m like, why is not everybody doing this already, guys? We’re about to enter 2023. Why are we still hiding prices with cleaning fees and taxes and all this stuff? Just show me the price upfront. Bullish or bearish?

Austin Hankwitz: So, bullish. So, so bullish. I don’t know how many times I’ve hopped on Airbnb and I’m like, I want to stay in this cabin or do this cute little thing. And I’m like, $280 in a cleaning fee. What’s going on here, I thought this was this, this or that. And I would argue that a lot of the backlash that they’ve received on Twitter (TWTR), on Instagram, on TikTok, has been people saying, hey, why are we hiding the cleaning fees? What are these cleaning fees?

I understand, like, you have to clean your place, but why are we charging hundreds and hundreds and hundreds of dollars? Why can’t you tell me that upfront, right? So, I think that I’m not saying the sentiment of Airbnb has flipped negative over the coming, you know, last quarter or two, but I will say that this has kind of moved towards transparency as well as I think, you know, they’re doing stuff with the Wi-Fi speeds, being able to test those ahead of time, right? Just a move toward transparency is certainly great. I think it’s going to help them in the long run, so bullish on that idea.

Daniel Snyder: Awesome. Awesome. Alright. Last up, I just pulled this one since we did the crypto. So, we’re going to dive into Disney here in a little bit on the episode. But I’m wondering your thoughts on this because everybody’s trying to think about how is Disney going to innovate in the future with everything about augmented reality and virtual reality, and their CEO Bob Capek says that virtual parks won’t replace in-person experiences.

So, being the entertainment and creative company they are, obviously, they’re going to have to design something really awesome for that space. Do you think potentially that it might pull people away from the parks that they have a different experience within virtual reality and augmented reality? Would you be bullish or bearish on that?

Austin Hankwitz: I don’t think it would pull people away from the parks. So, I haven’t been to Disney. I’ve did a Disney Cruise when I was, like in third grade, right? But I haven’t, like, been to any Disney Parks. But it did go to Universal Studios in September, October, right? It was about two months ago. And it was cool, man. It was the first time I’d been to a theme park, and it was really cool. I rode those rides. I smelled the smells. I ate the foods. I saw the people. I high-five the you know, it was cool.

And despite, you know, putting on a headset or whatever’s going on for the VR/AR, all that fun stuff, that’s cool. You can do it at your own house. Maybe it’s something you really love. You’re a big you know, true fan of Disney. That’s something you want to double down on and spend the money. And I’d even argue that you know, some of the, like, you know, the movies they make is kind of like virtual reality, you know, vibes.

But long story short is I don’t think that if you’re wearing a headset and offering VR/AR type solutions to your customers that that’s at all going to pull away from the let’s go to the park itself feeling. I think that’s a deep-rooted feeling a lot of people get when they go to these parks. Disney has done a really good job of branding themselves and with the smell specifically, right, when we smell something, it reminds us of something cool, and they’ve done a really good job of that. So, bullish on Disney’s ability to do both at the same time.

Daniel Snyder: Alright. There you go. Great take. There you go. Bullish/Bearish. Alright, so let’s go and dive — I want to dive into some of this chat. We’re about to get Bertrand here in a second, but going back to the cryptos, we have Dan that says he’s never touched cryptos, Stephanie says that she’s owned a few cryptos and she started investing in Bitcoin when it was at 7000. Stephanie, do you still own that? Just kind of curious. Let us know. Cole says, yes, back when it was about 9000, but I only use funds that I can use — that I can lose a 100% of.

Austin Hankwitz: My man Cole.

Daniel Snyder: I would approach it…

Austin Hankwitz: Yep. Smart man.

Daniel Snyder: ifI lost [crypto], but I don’t. Obviously, you know my point on that. Bridget says he doesn’t own any crypto. Craig says no retirement involvement, doubled investment years ago, too volatile for me. Definitely. I mean, yeah. It’s like volatility of crypto is, like, hundreds and hundreds of percent compared to some of the stocks in the market. I mean, it’s crazy. Lindy says, yes. All cash position now on local exchange, considering withdrawing the bank account until the storm settles down? Landy, when do you think the storm will settle down is the question, right?

Let’s see who else we hear. We’ve got Mohammed says less than five percent of my portfolio is crypto, mainly Ethereum purchased around $200. Don’t plan on having any more exposure than this, unless it grows organic.

Austin Hankwitz: I think that’s – see that’s what I’m always telling people, man. If I get these questions on Austin crypto, yes, no, what do I do? I’ll say, listen man, 5% to 15% of your total investment portfolio, I think is a really fair kind of like carve out depending on your risk, right? If you’re really young, you’re risky, maybe, you know, ten, fifteen, I get it. But you know, if you’re kind of risk averse, 5% and I’m talking the equity in your house. I’m talking about, you know, everything that that’s kind of your net worth, right? 5%, 15%, in that range I think is perfect.

So, shoutout to Mohammed here for playing it safe.

Daniel Snyder: Little play, money on the side. Theodore says I own Ethereum and 1inch, never heard of that one before because all prices just dropped about 16%. Colt I is a millennial, switched to hotel travel and rarely do Airbnb’s now. It used to be exclusively Airbnb when traveling, that that’s interesting to me because that was a big thing. It’s like, was Airbnb going to be the hotel killer? Remember that conversation a few years back?

Like, I was living in Los Angeles at that time. And Los Angeles as a city was like, hey, we need to take care of this because Airbnb’s are popping up all over the place. And so if you didn’t get permitted by the city, you couldn’t operate an Airbnb, and then you could only operate it so many days, do you remember when all of this was happening?

Austin Hankwitz: Yeah. Yeah. I definitely do.

Daniel Snyder: Then they were protecting the hotels. Christian says, I agree that Disney theme parks and VR metaverse-type Disney experiences are complimentary. Yeah, I think — I think you’re right. Like, I think theme parks still have that certain element whether you’re going for the characters, or you’re going for the specific types of food, right? You can’t taste food in metaverse. They have the Dole Whip at Magic Kingdom down in Orlando, and I think Disneyland has it as well in California.

I mean, there’s a lot of experience that you can’t really feel that true roller coaster, you know, G force, adrenaline rush. I don’t think that you could get it in metaverse. I think it’s just going to be different types of experiences. This is going to be pretty interesting. Actually, I don’t know if you saw this. Disney on their platform already kind of did — they did a short film recently. I forget what it was called. I would have to find it, so I can tell you guys.

But it’s like, during the short film on the movie that you’re watching on Disney Plus, you take your phone and you hold it up to the screen and like a waterfall comes out. Like it’s like an AR kind of scenario. So, they’re working on stuff like that, which I think is going to be more immersive as you’re watching movies. But I agree about the theme park stuff.

So, alright. Well, we’re taking way too long. Let’s go ahead and bring Bertrand Seguin into the conversation. This guy, guys, he’s a real deal. Like, he’s – he quit his job just to do this. I mean, his data, the way he breaks everything down, the way he’s diving – he’s diving not only in the tech, but he’s doing other things outside of tech. But obviously, ex-Silicon Valley, Bertrand thanks for being back with us. Obviously, the people love you. I mean, you can hear them right there. They love you. Thanks for coming back on the show.

Bertrand Seguin: Thanks Daniel, Austin, as well. Good to see you guys, really happy to be here.

Daniel Snyder: Yeah. Thanks for taking the time. So, obviously, just want to remind everybody as we’re having a conversation right here. If you have any questions that pop up in your head, if you have any questions for Bertrand, we can obviously ask him right here. So, make sure you do that. And I’m — we’re going to dive right in, right? So, Josh, let’s go ahead and throw up the first slide we have here today with us. And you have this whole thing on how they make money, right?

You do these beautiful, kind of graphs and it breaks down, like, where the revenue comes from? What’s the operating expenses? What’s the profit or do they have profit? And I think first, I want to dive into Disney before we get into all the tech names. So, Josh, going in to go to the next slide. We’re just going to take a quick look at the Disney updated rating summary. These are from today even after the earnings call yesterday, so keep that in mind.

The Quant has a strong buy. Wall Street Analysts and Seeking Alpha authors both still have buys on the stock at this time. And let’s go ahead and look in the factor grades real quick.

Josh, next slide. So the valuation is a D, growth is still an A, profitability is still an A, momentum is still B+, revisions are still a B-, but this next slide is what I want to make sure everybody really takes a moment to look at. Go ahead and switch over to this next slide and maybe Bertrand, why don’t you just kind of like break down where the idea of creating these graphs and what should people kind of focus on while they’re looking at this? Give us a rundown.

Bertrand Seguin: Yeah. You know, I think it was a year ago or something, I came across a Disney chart, actually. I think it was from Charter (CHTR) that was using the Sankey diagrams that you see here. They were breaking down the revenue side, and I realized that the time maybe there is something more we can do here where we not only break the revenue inflows, but also the outflows, right? Where does the money go? How much is left at the end of the quarter, right?

So, as a finance guy, there are things I look for like the revenue growth year-over-year or the margin uptick or downtick all those things I figured I could implement them in one-single view. You know, it takes a long time to review earnings. We all look at them. So, this is a way really to get straight to the point and to digest in seconds what would normally take several hours to really get into the details. So, Disney is a great example for that because they have so many different segments, right, so many business units that it really helps digest the entire operations.

The way to look at Disney is so interesting because this is something I wrote about previously on Seeking Alpha. There is this concept from Schumpeter, which is a – the late economist from Austria who said – who talked about creative destruction, right? And creative destruction is when you have an innovation that takes over the previous one, and renders it obsolete, right?

And so, in the case of Disney, this is exactly what’s going on, the concept of creative destruction because there is the headline about direct-to-consumer which is all the apps we know and love that we can subscribe to directly, Disney Plus, Hulu, or ESPN Plus.

Those are the new growth engines potentially for Disney. But of course, what they do in the process is that they are not just the catalyst, they are also eating away at other segments, namely linear networks or cable TV, of course, going down and to the left for the foreseeable future this is going to be down to zero eventually, right, if we really project ourselves far in the future, but also content sales and licensing. So, those are the theatrical releases that make money.

You know, people go less to the theater because they have access to all this great content at home. So, really direct to consumer is — there is this cannibalistic shift, right where you can see the line direct to consumer eating away at linear networks and eating away at content sales and licensing. And so, that is the top part you see here that’s called media and entertainment, think of it like all digital businesses, right? Yeah.

So, overall, media and entertainment are actually going down year over year despite direct to consumers’ growth because other segments are suffering in the process. And so, if you invest in Disney thinking, oh, Disney Plus is going to crush everybody, remember that there are legacy businesses that are suffering in the process within the same company, right? So, this is important to keep in mind. At the bottom, I show a different shade of blue, the other businesses, which are more the physical realm.

So, the parks you were — you guys were just talking about. But also, consumer products, those are the toys, figurines, collectibles, you name it. And so parks, it looked good this quarter because it was – we had favorable comps, right? Last year with COVID, the parks were actually not doing so great. So, a way to look at it, I was just checking, Parks and experiences were $6 billion of revenue this quarter. If you compare it to 2019, so pre-COVID it’s actually down 9%.

So they are not back yet to where they were pre-COVID. So, there’s nothing to really celebrate here. Historically, Disney is kind of a no-growth company, right? This has been a low-single-digit growth, but the margins were pretty great around 20%-plus operating margin. And so, what’s going on here, you can see that from the revenue, black bar in the middle, the cost and expenses that I pack together, they are cost of revenue, but also operating expenses, what is left at the end is only 2% operating margin right now.

Very, very thin margin. And so just to have fun and to try to break it down, that is on a non-GAAP basis. So, if you reincorporate costs that are not really allocated to either segments, you can get back to the adjusted margins which allows us to see, okay, what businesses exactly bring in the money, right? And so that’s how you know that Parks are still doing good at 20% adjusted margin. Meanwhile, the Media segment is basically operating at a just breakeven adjusted margin, which is really a loss on a GAAP basis.

And why is that? It’s because while linear TV continues to be a profitable business, the entire profitability is destroyed by the investments that Disney makes in direct-to-consumer and in the studios. So we cannot just jump to conclusions just looking at one segment. You know, this is something Peter Lynch talked about very often about if you like a piece of a business or product, maybe they do, you have to zoom out and look at the entire business to understand what moves in and out.

And so, I’m going to pause here maybe for a second, but just this is really how a good way to zoom out and look at the entire income statement.

Daniel Snyder: Yeah. I love that. I also think it’s worth pointing out, you know, obviously, you mentioned the thing about the parks, right, comparing it back to 2019. But if they’re doing 6 billion right now and they’re still dealing with the COVID stuff and the lockdowns in the Shanghai parks and so, like, they’re not fully reopened, so that’s pretty promising. Austin, I’ve got to ask you because I know you were diving into their earnings and looking everything over, what’s your thoughts about what’s going on with Disney right now?

Austin Hankwitz: Yeah. So, I got a couple of notes here. So, there — how I saw it, right, is the Q3 earnings were kind of disappointing, right? Revenue and operating income were both below expectations from Wall Street. However, Disney plus added 12.1 million new users right now was a beat on expectations. The guidance they provided though on both revenue and operating income for next year came in below, but I think a lot of that had to do with this weird choppy advertiser, you know, kind of market we’re going to be seeing as a recession potentially looms.

But you know, I think a lot of the headlines were painting a pretty grim picture, and I don’t think it’s as bad as people might be painting it out to look. Underlying theme park demand remains healthy, their operating miss wasn’t due to moderating demand, but this one-off item, right, the cruise ship unless everything goes right for Disney though in 2023, which it’s kind of hard to think everything’s going to go right assuming, you know, the macro.

Daniel Snyder: Yes, if there is a recession, then you’re obviously going to get hit.

Austin Hankwitz: Yeah, I think there’s a lot of good reasons to be excited, but I do think that, you know, their stock price is definitely going to see some volatility.

Daniel Snyder: Yeah. I agree with you. And that’s what I said at the top of the show, I think this is going to be a generational opportunity for those of you that are watching Disney in this moment, right? Stock might not bottom until next year, especially if we get hit by a recession. But I think the thing that they do have going for them just to point out, CFO. Shoot, what’s her name? Christine McCarthy, was talking about on the earnings call about how operating losses are going to improve by 200 million next quarter on the streaming arm.

And then even if people go into this ad tier, right? We talked a lot back when I worked there. It’s like the CPM cost that they get a charge as a company with the quality brand and the audience reach they have, if people are going to that ad tier, D2C could potentially become profitable a lot faster than 2024 in my opinion because their CPM levels are so high, so something to keep in mind there that could be a great positive for them or potentially help balance out the destruction they might see in parks and cruises and everything else if we have a recession.

Austin Hankwitz: I agree.

Bertrand Seguin: That’s a great point, Daniel. And you know I mean, I’m not an investor in Disney, but I’m an investor in The Trade Desk (TTD). It’s actually my largest position, and they are really the ad tech that powers the D2C arm of Disney, and I think it’s extremely promising on the connected TV side. So, it’s a great point, and you know, Chapek mentioned that D2C would be profitable theoretically by 2024.

So, two years from now, we revisit, you know, and maybe even though we have a creative destruction, there is creative in that concept, so they are generating value eventually on this segment for the entire media operations.

Daniel Snyder: Yeah. For sure. I’m just going to take a quick moment before we move on to Meta, just to pull up the chart real quick that we’re looking at just to see where those moving averages are. Obviously, huge gap down today with the earnings that we got last night, you hate to see it. You really do with a company that’s been around for so long and is loved by so many. Obviously, and a significant downtrend has been for a while but it also hit — remember when it hit this high of $203 a share when everybody was freaking out about how fast D2C was growing last year.

So, I mean, look, new CEO, new management, right Austin? Like, we’re talking about that, Bob Iger and the Bob Chapek shift recently happened, management, new business practices, or new department arms, as you’re talking about Bertrand, about how, you know, they’re cannibalizing their legacy platforms as they’re going into this D2C shift. So, it’s kind of the state of Disney right now. Let’s go ahead and move over to Meta if we can.

Josh, let’s go ahead and throw up the ratings summary real quick and we’ll just push right through this so that we can get to the chart and check out what Bertrand brought us. So, ratings summary obviously for Meta, Seeking Alpha Authors, Wall Street analysts are both a buy on the stock. The Quant holding system has a hold right now. Let’s look at the factor grades. Obviously, valuation is a where am I? Sorry B-, growth is an F, profitability A+, momentum is a D-, and revisions are a C-.

And let’s go ahead and go to the next slide. Alright. So, here we go. Looking at another chart. I mean, it just looks so pretty. I’m so sorry.

Austin Hankwitz: I love this. This is exciting.

Daniel Snyder: Color coding…

Bertrand Seguin: Thank you.

Daniel Snyder: Green for profit, the red for just stop losing money. I love how you did the four family of apps right there on the left side as well.

Austin Hankwitz: Let’s keep this up too, because I definitely want to talk toward this. But yeah. Go ahead Bertrand.

Daniel Snyder: What are we looking at here?

Bertrand Seguin: Sure. So, it’s, you know, we talked about the metaverse a lot, with Meta, with the name change and everything. So, this chart was very useful for me to realize how small reality lab is, you know, in a visual format. So, you will have two main segments, right, that people need to keep in mind when looking at Meta. One is called family of apps. So, those are the four apps you see on the left of the screen.

And the other segment is Reality Labs, which is the hardware and software related to the metaverse. So, Meta Quest, it is also a portal if you ever used that, I haven’t. But the software related to that would be Horizon which is the place where people can hang out on Meta Quest. So, very much so 98% of the revenue of the company is still family of apps, still advertising. So, this is very, very early days even if Reality Labs eventually succeeds, it will take years for it to be accretive to the business as a whole.

Facebook historically is an extremely profitable business. So, even though you have huge margin compressions right now with FX headwinds, right, and the fact that growth has stalled quite a bit on the advertising side this year, the margin remains healthy. They remain healthier at 20% way down from a year ago, but still healthy. And so, the key aspect to look at on the top right of the chart is to see where does the profit come from?

So, 9.3 billion coming from family of apps, FOA, and a loss of $3.7 billion coming from Reality Labs. So, right now, there is this anxiety among shareholders that basically is a curve of maybe burning the cash due to shareholders eventually by investing so aggressively in Reality Labs. And so, of course, there are two takes here, [indiscernible] well he should be seeking a second act, right? Because those apps are not going to remain popular forever and they need to invest in the future, so that makes perfect sense.

But at the same time, this is such a cash-generating business that you don’t want to put it to waste, right, and to destroy shareholder value with all these investments if there is a sense that this Reality Labs thing is not going anywhere, right? So, that’s where people are going to disagree. But overall, the thing I will point out is there are a lot of moving pieces. That’s the key is that it’s not just a single app that moves the needle here.

The ones I have, really, my eyes on are WhatsApp and Messenger mostly because of two, two ways. Those apps can really monetize more. One is through ads, obviously, but also something that was announced during the Salesforce (CRM) Dreamforce event, which was a partnership for paid messaging, so allowing businesses to reach out directly to their customers. So, something is kind of similar to Twilio (TWLO) Engage as well.

There are, again, lots of potential here. The run rate on Messenger and WhatsApp is already at 9 billion annually for these initiatives. So, this is going to be really meaningful over time. So, Facebook, tricky in terms of maintaining the same relevancy. But the other apps can take over. And, you know, users are still here. They are not shifting to the metaverse just yet. There is barely anybody less than half a million people on Horizon, but users, you know, three point well, is it 3.7 billion across all apps?

That’s pretty much the entire planet. They are still here, still growing very slowly, but still there. And so the question is, will they remain around and will they shift to other segments eventually, right?

Austin Hankwitz: So, Daniel, Bertrand, and even the chat, I’ve got a hunch and I really want to share it with you all. And I came to this like epiphany yesterday when I was looking into this. And I want to know if I’m crazy, or if, like, we are seeing some crazy opportunity presented to us. So, I’m going to run through it and I really want your feedback. The stock price of Meta is down 75% from the recent all-time high in late 2021. You know, currently trading at levels we haven’t really seen since 2015. And in 2015, the company was doing $18 billion in revenue, $3.7 billion in profits, and EPS was $1.30.

In 2023, right forward-looking stock market, the company is going to do $123 billion in revenue, $21 billion in profits, and $7.82 in EPS, generally speaking. So, we’re seeing like a seven 7x, right, on their top and bottom lines. But despite this, right, their stock is still trading at the same price. So, this means one of two things. It could mean Meta is massively undervalued today or it means Meta was massively overvalued in 2015.

And the two things I want to really call out is, you know, Meta is currently a $240 billion market cap company, but they’re also sitting on $40 billion in cash and cash equivalents. So, if we kind of strip that cash out, we think of the business of Meta is really worth $200 billion, we’re about 9.5x forward earnings on that 21 billion in 2023 profits, right?

But this $21 billion in 2023 profits include a $13.5 billion headwind of operating losses that go straight to Reality Labs, right, which means that their family of apps is paying for that Reality Labs business as you’ve very well, you know, illustrated here for us in that top corner to operate at a loss. And so, we can kind of back into the idea that the family of apps, if you take that $21 billion, you add the $13.5 billion is going to do some $35 billion in operating profit, right, in 2023, which means you’re only paying today 6x family of apps earnings at this $200 billion market cap assuming all that cash, right?

So, Facebook introduced Reality Labs to shareholders in August 2020, and I promise I’m coming to a point. This is just the buildup, right? Facebook introduced Reality Labs to shareholders in August 2020, which theoretically means that the company’s earnings in 2019 were 100% family of apps earnings, right? So, at their bottom in 2018, this Fed-induced rate hike sell off, they were trading at 16x earnings. Average IPO EPS – -I’m sorry. Average, you know, since IPO in — I think it was 2013 rather, you know, they traded 35x earnings.

So, like, I just want to be clear, like, Meta’s stock price today is assuming just 6x forward family of apps earnings, something that the market has historically priced at 35x, but has never been below 16x in history. Is this the new norm? Am I missing something? Is Reality Labs just like PP — It’s just a dumpster that we’re just burning our cash into, like I just — if someone came up to me and said, Austin, do you want to invest in Instagram at 6x profit, I’m like, yeah, yeah, sure. Why not, right? Six times, like that sounds like a no-brainer, like, what am I missing here, Bertrand? I feel like this is, like, just such — I don’t know.

Bertrand Seguin: I think your foots are the ones of so many investors right now in Wall Street, and it’s a polarizing stock, right? So, you have, like, definitely about half of investors who would 100% agree with you right away here. The key – the part that’s really hard for me, I haven’t bought any phase. I own Meta in my portfolio, but I haven’t bought it for the past six years.

The key is there is a double whammy on Facebook and eventually on Instagram, which is fewer impressions if users don’t grow anymore and engage less because they spend more time on a more engaging app, that is TikTok and less revenue per impression because of the end of the ideas, of course an app tracking transparency from Apple. So, more challenges to monetize and less impressions overall if users come less, right? And so the biggest challenge for this is the so-called value trough, right?

Are we looking at something that looks really impressive if you look at backward-looking metrics, but at the same time five years from now, if Facebook is starting dwindling, like, 5% users per year that go away because there are other shiny objects out there, then you will really put it into question whatever we thought we were looking at in 2022 looking at the numbers backwards, so — and that’s why this is such an interesting company to look at, right?

And that’s why I think, you know, there is a very strong case to be made that investing at today’s valuation is going to deliver pretty great returns, but you could say that of a lot of stocks right now on the market, maybe that have a higher valuation, but growing like bunkers and are going to rebound very, very well once we are in a different part of the cycle. So, the real question is the missed opportunity, right? Meta is great right now, but other stocks are also 60%, 70%, down from the [indiscernible] high and more attractive than they’ve ever been.

So, that’s really — that’s why I wouldn’t look at Meta in a vacuum even though the opportunity is compelling. I totally see your points.

Daniel Snyder: Bertrand, I couldn’t agree with all of that, right? Like, the whole thing that came to mind, Austin, when you were kind of laying out your cases. And actually, I was just talking to this — our Head of Quantitative, Stephen Crest, here at Seeking Alpha yesterday, about this company specifically, and we kind of came to the conclusion that this is almost like a value trap stock. Why is that? Well, because, I mean, all of the growth is getting hit right now.

This stock doesn’t pay a dividend. It’s trying to figure out where it’s going next with its lifespan as a company, right? If we already have 3 something billion people using these apps to Bertrand’s, like, if people start leaving and impressions start falling and they haven’t found a way to gather all of that data so that they can target ads at a higher cost, that’s where you’re going to — that’s I think what Wall Street is kind of freaking out a little bit. It is like, okay, you haven’t really proven where we’re going next.

And therefore, why am I going to give you any valuation if I cannot even know that, you know, who’s to say that the four family of apps don’t get crushed by 60% in the next four years. You know, there’s always new apps being created, and we talked about YouTube Shorts too, right? If people are leaving for YouTube shorts instead of watching reels, I think that’s all the things that we got to consider when it comes to this company.

Austin Hankwitz: Yeah. I think I appreciate that. I agree, right? I mean, at the end of the day, it’s like this company was doing this, and now it’s doing this, and then now it’s also spending all this money. It’s like, okay, what’s going on, right? And to your point Bertrand, like it is you’re right. We can’t value this company in a vacuum. And at the end of the day, like, you know, the stock market is forward-looking. And it’s really hard to think about a world though without this family of apps inside of it.

And I think to your point Daniel, with the YouTube Shorts, I think Mark shared with us that there was a 50% year-over-year or quarter over quarter – I think it is probably a year-over-year increase in reels, 140 billion reels are shared every day on, you know, Facebook and Instagram. So, I think that’s, you know, interesting as well. I’m not over here pounding the table on Meta. I want to make that very clear. I’m just super interested in this valuation, like, what’s really going on?

And you know, why aren’t people talking about this? So, I appreciate the perspective from both you guys and the chat. I really appreciate it.

Daniel Snyder: Yeah. Also, I want to jump in here real quick before we move on. So, Stephanie sent us a little private question here. It says, how often is the Quant being updated? Is it daily, monthly? It has not changed with the price? So, the Quant system actually updates every single morning before the market opens. I believe the algorithmic computer starts running at, like, 4 AM or something like that. So, some days, it’s done before the markets open. That’s the big point.

And all those factor grades, all the Quant rating systems, the Seeking Alpha author ratings, all of those are updated every single day, not on a monthly basis. I wanted to make sure that we clarify that and that’s why we look at them. And that’s why I pull them on the day of the show so that they’re always up to date for when we’re here. Cole asked us, in recession economies, what is a fair multiple of revenue on a company like Facebook aka Meta. Is 9x, 10x revenue still relevant with the upcoming headwinds?

Maybe a 5x or 6x of revenue is at par now? Do you guys have any thoughts on that? I think it all depends on the margins’ goal. Good point.

Austin Hankwitz: Yeah. I think right, it’s like, you know, at the end of the day, you know, you’re like, oh, yeah, 10x revenue. Like, that’s, like, you know, what your company is from a [indiscernible]. It’s, like, 10x revenue if you only like, what if you only have though, you know, 10% gross profit margins. That’s obviously not going to be the case, right? Yeah. I think it all just depends on the margins, but for Facebook, gosh. I don’t know. I mean, you know, I personally think this isn’t really revenue.

This is more earnings per share focus, but like the S&P during bear markets has kind of averaged around this like 12x to 13x, 14x range. So, that and again, that’s earnings and not revenue. So, you go to kind of back into that. But certainly, less than what it’s been in bull markets. I mean, that’s all the answer I really have.

Daniel Snyder: Bertrand, do you have a thought on that?

Bertrand Seguin: Yeah. I mean, you know, interest rates are kind of dictating what is fair to pay at any point in time, and they move fast and they are cyclical. So, what is true today will not be true six months or a year from now. So, I would never look at valuation in the vacuum again, and I would say it’s more about, oh, what can you buy today at the same price or if you pay more what do you get in return, right? So, it’s — I care less about valuation standalone or even compared to where the company was at and more about, okay, what do I get today if I put that out to work, that would be my focus.

Daniel Snyder: Yeah. Great point. I’m going to go ahead and hijack the screen real quick. I want to point this out as well. If you do have access to Seeking Alpha Premium, you can go here to the Factor Grades, and underneath the Meta Growth tab, you can actually see I just want to point this out, you’re asking about revenue. You know, forward revenue is currently around 12%. Historically, it’s 5% right now. And the five-year average was 32 and 26 respectively.

So, obviously, that’s what we’re considering, right? There’s obviously been an overall crush in revenue, and all of this is broken out. Metrics are compared to this sector against other Meta — companies in the communications sector, I should say. Real quick, we’re going to do a quick look at the chart just to make sure we squeeze that in here, where am I? There we go. Alright.

Obviously, huge downtrend. We have re-entered the gap as of this morning with the news about the layoffs. obviously cutting down your expenses, always makes shareholders happy, but unfortunate that it has to happen especially at a time like this with a possible recession incoming, so, keep an eye on that.

So, let’s go ahead and keep the show moving. Let’s go on to the next stock, which we have on deck, which is what’s up next, Josh? Why don’t you go and throw it up for us? I believe it’s Apple. Go ahead and throw up that slide. Let’s go through the ratings summary real quick. Seeking Alpha authors have a hold. Wall Street Analysts are a buy, Quant system is a hold. Factor grades. Next slide, please. Valuation is an F, growth is a D-, profitability A+, momentum B-, Revisions are a C-.

And next slide, so we can go ahead and look at this beautiful income statement. Bertrand, what should we really notice about this chart that you have here?

Bertrand Seguin: The part that I focus on, because you know, my background is in the digital economy. So, I’m very narrowly focused on services, because they have a higher profit margin, right? So, if you look at the cost of revenue on the bottom center, you can see that products, which are the hardware that we know and love, this is a 35% gross margin profile. Meanwhile, services, they do twice as well, right, 70% gross margin profile.

So, with half of the revenue, you can get as much gross profit, right? Simple. And so even though service is only about 20% of Apple’s revenue in the full year, FY22, it was 33% of gross profit. So, it is already a third of it. So, again, the story around Apple Services being the [bulk case] is not new, but it’s really materializing right now and people might miss it on a quarter-to-quarter basis, or it missed expectations or what have you, but really the trend is here and here to stay.

So, for me, the way I think about it is hardware is the gateway, right, to the ecosystem of services, of course. And so, what will be key is to keep fueling that ecosystem, so one thing that Tim Cook mentioned I think was very noteworthy was you refer to Switchers. So, Switchers is someone who would switch, for example, from a Pixel, Google Pixel to an Apple iPhone, and when you think about Apple’s market share, it’s about 15% to 20% of the smartphone market depending on the quarter.

And so, the real untapped market is not people upgrading, it’s people switching. That’s really when the magic can happen for services. And so, what they mentioned was a double-digit growth in Switchers, and I think that’s very bullish for the company. They mentioned that, you know, people really desire their product, iPhone 14 Pros. They are supply constrained by constrained meeting, people cannot buy at any vendor they want to, so similar to companies like Tesla (TSLA), right?

And we have 900 million paid subscription across the Apple universe. So, that was almost a double in three years. So, very bullish as well to see that people are embracing those services. Another aspect that cut my attention was the overall health of the Apple business compared to their direct competitors. If you look at the current Mac Pro, it’s actually pretty bad for smartphone makers, everybody was down year-over-year into the calendar Q3, so that’s the fiscal Q4 for Apple.

Meanwhile, Apple actually increased its shipments by 6%. So, not a huge growth, but the only positive one that I could find in the top 10 manufacturers, so very bullish as well to see just that the quality pays off and that people are switching to Apple. The last point I would make on this chart is that underneath the services, there is an item that Apple doesn’t break down, which is advertising. And so in a way, there is that juicy payment from Google to be the by-default search engine on Apple devices.

This is probably close to 5 billion, 3 billion to 5 billion per quarter at this point. So, this is a big chunk, but there are other advertising revenues that Apple may be able to make down the line that includes placement on its App Store. For example, they have added a few things on the Today page or things you might like, right? And next year, they are supposed — this is a rumor, but they are supposed to launch more ads in Apple Maps.

So, we all know how Google Maps is a huge business, and if Apple can take a page of Google’s book and even just the way Amazon has been able, and we’re going to talk about this maybe in a minute, but the way these companies have been able to play the advertising game, if Apple can embrace it, the services revenue I think can be really uncapped, so that’s really the way I think about it. People think hardware first, but underneath it, there is really like a long [test] developing.

Austin Hankwitz: I’m right there with you, man, right? They had a wonderful quarterly print, record performance driven by iPhone and Mac, and despite this tougher macroenvironment in these FX headwinds, the company maintained their profit margins and revenue growth in these emerging markets. And to your point, these leading indicators, right, active installed base, paid subscribers, new users, those switchers, right, they’re all looking healthy.

I think it’s going to result in market share gain in the coming quarters and coming years, but I don’t think it’s important to note though that Apple is not immune from challenging macro environments. They have a superior product and, you know, the value of that product and the user experience and pricing power, though despite a challenging environment will allow them to have strong pricing power, stable margins, and share gain likely in the medium term. So, we’re definitely on the same page.

Daniel Snyder: I would love to ask the opinion of both of you as well as everybody listening that, you know, jumping in the chat let me know what you think. But I continue to think, we talk about the devices, right? We get — you get the devices. Once it’s in your hand, you’re locked in, right? But I think there might be a silent killer for them.

And by killer, I mean, in a good way, right? Like, I think a huge opportunity for them, which they talked about in the past that hasn’t been adopted as much as they had like is Apple Pay. Do you guys think that that specific service could eventually translate over into a huge revenue driver for this company?

Bertrand Seguin: It already does. It is part of services. So, you know, in my graph, you have a little logo at the bottom left that’s the Apple Wallet logo and that’s basically that includes Apple Pay. So, to your point, unfortunately, they don’t break it down. So, there is no way for us to know if Apple Pay is already really huge or not. If I had to bet, it is already huge, right? Because –

Daniel Snyder: You would agree — I remember a little while ago, Tim Cook said it’s not as big as they like. I mean, obviously, they want it to be the biggest thing. But I mean, with — they’re turning iPhones into payment terminals, right?

There can — they’re definitely — we talked about this with the PayPal Square. You know, there’s new payment providers coming up trying to take away these legacy systems that we’re aware of, and if they can do it and charge a little bit less service fee to the business, I mean, there could be a huge adoption, and I think if you already have the device in your hand, what is it, you press the button twice and Apple Pay pops up and you bop, and you’re gone, like I think that’s going to be huge.

Austin Hankwitz: I agree. I find myself using Apple Pay more and more. I’ve got all of my debit cards, credit cards, all that stuff logged into my Apple Wallet, right? I mean, when they first launched, I was like, what the heck is this, I’m not going to use this. But now every time I buy anything online, I double click, it’s like Apple Pay, share email, it’s so simple right there with you. I think it’s going to be bigger.

Daniel Snyder: I think it’s a lurking killer. Alright. Let’s go ahead and go on to the next slide, Josh. Let’s keep this thing going since we’re coming up on the hour. I want to make sure we get through all of these. So, we still got Alphabet and we still got Amazon. So, Alphabet, the ratings summary breaks down like this. Seeking Alpha authors are a buy, Wall Street analysts are a strong buy, and the Quant holding system is a strong buy currently as of today.

Factor grade is breaking it down. Valuation is a little bit high. Growth is a C, profitability A+, momentum C, revisions C-. Let’s go ahead and check out this beautiful visual. What should we be pointing out right now about Google?

Bertrand Seguin: Similar to Apple, there is a specific segment that’s catches my attention. And for me, it’s Google Cloud, fastest growing segment, 38% growth year-over-year. This is in yellow at the bottom. So, Google Cloud did well this quarter because Microsoft (MSFT) Azure, they don’t break in tandem necessarily the same way, but Azure was growing 35% year-over-year and AWS grew 28% percent year-over-year.

So Google Cloud app was actually the only top three cloud infrastructure platform to gain market share. They gained 1 point quarter to quarter. So, doing well, they improved also their margin profile for that segment. They’re still losing money on that segment, but they improved by several points. So, they are doing well. They are mixing it with Google Workspace. So, it’s, again, not perfect comparisons, right? But we take what we have.

Overall, you know, they face the same advertising headwinds as Meta and other platforms that rely on ads. But really, what I focus on is how they use AI to power their ecosystem and improve engagement and improve the kind of results you get because this is what’s going to retain people in their ecosystem, you know, they mentioned something like, I think it was 8 billion requests on Google Lens. I don’t know if you guys have used Google Lens before.

This is amazing. You just take a picture of something. They will give you a result and show you what it is or what to find — where to find online equivalent of the photo you just took. So, I love how AI is really powering the entire ecosystem, namely well, you’re all familiar I think with DALL E, DALL E2 generative AI. So, Imagine is the name of it for Google. It’s very impressive. It generates tremendous results.

You can only imagine how — if they can start creating images out of just things you like, maybe your color, maybe your sports team, you name it, and it can serve an ad to you that is actually completely tailored to you and your taste, the monetization potential is really high. So, I like how just the investments they put in AI is often compared to the shift to mobile, that was one of the references of management during the call where AI is going to be really leading the way for them.

And so highly profitable business, really just a big machine here. I love it. It’s one of my biggest positions. And even though there are headwinds for the foreseeable future, right, I think underneath it, there is, like, a huge potential long term in AI — hard to replicate for competitors. And, of course, Google Cloud gaining market share is a nice to see.

Daniel Snyder: I think they pulled it off. What do you think Austin?

Austin Hankwitz: Oh, yeah. They pulled it off. It’s you know, I’m going to save all my remarks here because I don’t know we are running up on time. But my conclusion is, you know, trends are pointing down in the near term, but with that being said, I’m buying the weakness. it’s Google, right? I mean, they — we know where Google’s going, we know what they’ve done, we know what they can accomplish, we know where things are headed. I’m buying weakness on Google every day of the week.

Bertrand Seguin: Nice.

Daniel Snyder: I mean, I agree with you. I think this company is continuing to innovate. It has made a great acquisition with YouTube, of course, advertising spend is being pulled back, YouTube’s getting hit with that. Mathias here in the chat says can Apple restrict Google in any way the same way they did with Facebook? I think you’ve got to remember Mathias, I mean, obviously, Apple’s anti-tracking went across everyone. But also, Apple and Google already had their partnership where Google pays — isn’t it Google pays Apple every year to be the primary search engine for Phones. Is that right?

Bertrand Seguin: That’s right. So, 10 — 15 billion to 20 billion if I have to guess is paid by Google to Apple, and that could be — that could be a challenge if Apple ever decided, you know what, I’m going to do Search Now or we can talk about — we can have a show when that happens.

Daniel Snyder: Yeah. For sure. I mean, that would be, like, huge news though, so we would obviously have to. So, you guys are asking where can you find all these charts? App Economy Insights, guys. Obviously, Bertrand, he started this not too long ago and it is blowing up. You guys got to go look this up. And I’m like these are only a few of the charts that he’s done. Like, you put out literally, like, what is Airbnb, Warner Discovery, you’ve been crushing it.

Like, I can’t even keep up with all of it. But let’s go ahead like I said, we’re getting to the end of the time. Let’s go ahead and get into this last one of Amazon. It’s going to go to the next slide, please, Josh. Ratings summary, Seeking Alpha authors have a buy on the stock. Wall Street analysts have a strong buy, but the Quant system is a hold at this moment in time. Factor grades breakdown has a valuation D-, growth B-, profitability A+, momentum D+, and the revisions are C+ at this time.

Let’s go ahead and look at the last beautiful Economy App chart of the day. So, obviously, Amazon’s diversified like, crazy. Like all these other companies we’ve been talking about, all the different arms, what should we be pointing out here Bertrand?

Bertrand Seguin: Alright. I know we are short on time, and we could do an entire show about Amazon. This is very hard for me, but I will point out to three things that are driving Amazon’s future. And for me, that’s AWS, of course. It could justify the entire evaluation of the company arguably. [Indiscernible] growing segment slower than it used to be, and people have been spooked a little bit by the slower growth.

I think in particular, next quarter is expected to be only 20% growth for AWS based on the run rate in September, so that spooked a lot of investors. Now you have to consider that the way Amazon works is they want to focus on the customer. This is the absolute must for them. And so what are they doing right now? They are helping their business customers in the cloud segment to spend less. They are actively helping and this is important.

They are helping their customers spending less on their platform so that they can retain them long term. Everybody is trying to save money right now, and so they want to help their customers do that because they know that it will pay off down the line. So, very lovely to see, I think they are making the right call here, and we have to look beyond the cycle that we’re facing right now. In two, three years, AWS is going to maintain a healthy growth rate.

They have not lost market share, right? Google gained but Apple did not lose market share this quarter in the cloud infrastructure market. So, very lovely to see. The second one is advertising, of course. Second fastest growing 25%, very high margin. This could really turn everything around Amazon.com into a powerhouse in terms of margins. They continue really implementing new things. And so, I think it will continue.

And, of course, subscriptions in general, I think it was — there was a study recently. It’s on my Twitter page that referred to the least likely subscription services that people would come back on due to inflation is Amazon Prime. That’s least likely to be cut because why would you do that, right? It saves you money. It’s very important and it gives you all these other services that are optional, but people are not going to cut back on Amazon Prime.

This is really part of our lives, still large and that market in Europe. So, I think the potential is here. And so what you have to do though is to kind of like ignore or accept that margins are going to be razor thin for foreseeable possible future free cash flow is going to look ugly because they are doing all these CapEx, right, investing in growth. So, I wrote an article that’s free about Amazon on my website where I cover in detail why the free cash flow in question is not a concern because they could stop investing.

The only reason why they have those razor-thin margins and struggle with the cash flow is because they chose to invest aggressively into their future. And it may not work out, but if you look at the past twenty years, it’s been doing pretty well for them when they follow that strategy, right?

Daniel Snyder: Yeah. No kidding. I mean, it’s always day one at Amazon, right? Isn’t that what they say? Awesome. What are your thoughts on Amazon right now? I mean, there’s so much we could pack. And like you mentioned, this could be an entire episode, but just off the top of your head, what are you thinking?

Austin Hankwitz: Yeah. I mean, I agree with everything Bertrand is saying, right? AWS saw a growth of 27%. It was less than the 30% that people expected, but this likely isn’t much, you know, a theme, right? We’re not going to see, like, oh, it’s all slowing down, right? That’s not the case here. You know, they’re certainly going to survive just fine and it makes a lot of sense to your point Bertrand about people saving money, right?

This is a downcycle. People aren’t going to be dumping millions and millions and millions of dollars into this cloud infrastructure. So, let’s just retain these customers as we can. And then finally, right, the good news here is Amazon has slowed their shipping costs per unit. CapEx spend seems to stay flattish. They’re poised for wonderful margin expansion when macroenvironment improves. It’s a playbook. They’re following the playbook. We’re in a bear market. We’re in, you know, this macro uncertainty. They know they’ve done this two, three times before. They know exactly what they’re doing. I’m here for it.

Daniel Snyder: It’s a good day. Great point. Alright, guys. Let’s go ahead and say thank you to Bertrand for spending so much time, breaking us down through Disney, Facebook, Meta, sorry I still call it Facebook. Apple, Amazon, Google. We appreciate you so much. I mean, the guy, go check him out on App Economy Insights if you haven’t already. Obviously, there’s so many other companies. These charts just help you visualize it.

If you’re anything like me, I just love looking at the visuals. Obviously, you get it broken down by departments. revenue growth. You put it right there in the parentheses, so we know when they’re losing money and making money. Can’t thank you enough. So, thank you, thank you, thank you for hanging out, and everybody in the chat is popping off right here. Thank you, thank you, thank you. I hope you see that as well because this is just so valuable. This is so valuable. So, thank you Bertrand. We hope you have a great rest of the week. Anything else you want to say before we hop out of here?

Bertrand Seguin: No, that was great. I really enjoyed chatting with you, Austin, Daniel. It was lovely, and, you know, you can follow me on the Economy App at Twitter — on Twitter just if you want to see more of these beautiful charts. And, yeah, that was fun.

Daniel Snyder: Awesome. Well, we’re going to go ahead and get on out of here. Everybody have a great rest of the day, have a great rest of the week, careful with what are we at? Like, 5% of earnings left? Luckily, it’s over for almost the quarter. Disney heard, not going to lie. It was really bad to see that one. But everybody have a great rest of the week. Remember the crypto webinar next week. And besides that, we’ll see you on Stock Market Live next Wednesday, same time, still me and Austin, our beautiful faces and we get to hang out with you.

So, take care everybody. Have a great day. Josh, get us all out of here.