#13: Earnings, Earnings & Earnings

$FB $SNAP $TWLO $TDOC $V $SHOP $AMZN

Oct 29, 2021

A lot of us are selling.

Hell, I went on a huge selling spree last week.

And I’m going to be selling more.

But remember:

You never want to be emotionally in a position where you pull the rug out from under yourself. You don’t want to let your own fears or emotions to cause you to sell at the wrong time.

-Warren Buffett, Maybe You’ve Heard of Him

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This Week:

Facebook Goes Meta
Snap Tanks
Twilio Also Tanks
Teledoc Surprises
Is Visa On The Chopping Block?
Shopify Misses, But The Market Doesn’t Care
Short-Term Pain For Amazon?

1. Facebook Goes Meta

Facebook reported earnings on Monday. Pretty good.

Rihard Jarc @RihardJarc

$FB EARNINGS: Total Revenue $29B up 35% Other revenue up 195% (Oculus) Net Income $9.2B up 17% DAU up 6% MAU up 6% Say what you want hate it all you want but they are growing 35% on the top line at $29B. Growth monster. Super long $FB!

Duarte @FradeDuarte

Mark Zuckerberg was firing on all cylinders last night during the earnings call. This is exactly the kind of drive you wanna see in a founder-led CEO. Long $FB

But who cares about earnings, when you have a once in a generation rebrand!

In the video below, Zuck explains:

I’ve been thinking a lot about our identity as we begin this next chapter. Facebook is one of the most used products in the history of the world. It is an iconic social media brand. But increasingly, it just doesn’t encompass everything that we do: Instagram, WhatsApp, Messenger, Quest—now Horizon… and more.

Building our social media apps will always be an important focus for us. But right now, our brand is so tightly linked to one product, that it can’t possibly represent everything that we’re doing today, let alone in the future. Over time I hope that we are seen as a metaverse as company. And I want to anchor our work and our identity to what we are building towards.

I need to establish how I actually feel about Facebook—err—Meta. I have a decent position here. But it’s neither big enough, nor small enough, just noodling around in middle-of-the-pack. Doesn’t this feel like a name you have to really believe in or not.

EITHER: Zuck is generational Founder/CEO. They are synonymous with best-in-class social apps: Facebook, Instagram, WhatsApp, Messenger. And they are literally building the Metaverse.

OR: Facebook poisons our society and the Metaverse (IF any part of works), will only make that worse.

It’s very me, but I sit in the middle of this! Shouldn’t I take sides?!

Ram Parameswaran @_ram_

Know there are plenty of strong feelings, but wherever you stand, it's going to be pretty awe inspiring to see one the GOATs build again. $FB.

Tobi Lütke @tobi

Mark's fb Connect keynote is hugely inspiring. https://t.co/lRsG9HzAUF

2. Snap Tanks

Remember the Pinterest nosedive?

Well, Snap was feeling left out.

I’ve spoken very highly of Snap, writing a bullish Deep Dive last year.

Since then, there is obviously nothing to complain about.

A quick and speedy 30% drop, however, is at least something to look at. Did something break? Is the market just rerating an unbelievable run?

Ultimately, when the valuation triples in a little more than 18 months, a little rerating can’t shock anyone.

I see myself buying more.

While we’re on the topic of the Metaverse, don’t rule out Evan Spiegel and Snap.

Nick Green @crosswindcap

$SNAP is well positioned for a shift towards metaverse adoption. Filters, Memojis, friends map, visual communication, spectacles. $SNAP could be the quiet winner and their user base would welcome the transformation.

3. Twilio Also Tanks

So it’s not as bad as Snap or Pinterest, but a 17% drop is pretty steep!

What happened?

App Economy Insights @EconomyApp

$TWLO Large revenue beat in Q3 FY21. 🚀Revenue +65% Y/Y (guidance 50-52%) 🌿Organic growth +38% Y/Y 😍DBNE 131% (vs. 135% in Q2) 🧑‍🤝‍🧑Customers +20% to 250K 📈Gross Margin 49% (-2pp Y/Y) 💵Cash used in Operations $20M 🔥Q4 Guidance ~40% Y/Y growth 💬Strong focus on Twilio Engage

Doesn’t sound like 17% drop territory, right?

From what I gather, there are a few reasons for the drop:

COO George Hu resigning
Y/Y Organic growth decelerating from 50% to 38%
Lower Q4 EPS guidance

KZ Capital has a great breakdown:

KZCapital @KzCapital

1/ $TWLO Q3 2021 thoughts: George Hu resigning is a major loss, he was a real star back at $CRM & I'm not sure what could've motivated him to leave $TWLO now as they're still early in the enterprise. I think Khozema & Market are good but George was one of the best tech COOs.

So, what’s the plan?

Mark @PelotonHolder

$TWLO -15% pre market. I’m definitely buying the dip but will wait for it to settle down a couple days.

Ram Bhupatiraju @RamBhupatiraju

I asked my developer and he told me to buy more $TWLO today. So I did. (The first part is a joke btw). Both CPaaS and Customer Engagement Platforms should have plenty of tailwinds this decade and Twilio with Jeff's leadership is in a good position to capitalize on that.

Marcelo P. Lima @MarceloPLima

FWIW, I think $TWLO is a bargain here. We've been long the company since 2018 and just added on this drawdown. I think we'll see at least a 15-17% IRR from here long-term. (Not investment advice, do your own work, etc)

Bucco Capital @buccocapital

(3/3) Not worried about George leaving. Amazing COO, but COO is least impt. role in tech org. Probs getting a shot at CEO, which he deserves Long-term I'm still a believer in $TWLO + Jeff. It's sunk to a 2.6% position so I need to put up or shut up. I'll be adding strategically

In Memo #9, I said the following of Twilio (when it was trading at $352 per share):

I think if it gets to the low $300s again, I’d be a big buyer. Around these levels [~$350], I think incremental buying is prudent.

Load. Up. The. Truck.

4. Teledoc Surprises

Here’s the truth. I wasn’t supposed to be here.

I passed on Teledoc the first time I studied it. It was 2018, and I put it in the “too difficult” pile.

However, I bought a bunch of Livongo in Spring 2020.

When the Teledoc/Livongo merger took place, I didn’t know what I didn’t know. On the one hand, I liked and knew Livongo. On the other hand, I had passed on Teledoc, but that was two years earlier, and COVID clearly was changing things.

So at first, I froze. Apart from a small buy in December, I said let’s wait and see.

Here’s how Teledoc performed from the date the merger closed (October 30, 2020) through its high in February 2021.

Pretty good!

The market had spoken! So when it started dropping, I scooped up shares in late February, and then again in March as it continued to dip.

But then it kept dipping. And dipping. And dipping.

Something still feels amiss.

Rick Munarriz @Market

#Teladoc acquired the smaller #Livongo a year ago in an $18.5 billion stock deal. Over the past year Livongo has grown its user base by 45% and more than doubled ARPU. Today the market cap for ALL of $TDOC is $21.3 billion. It doesn't seem fair or right.

Earnings, however, were positive yesterday!

Here’s IQ with a bomb diggity thread.

IQ @Invesquotes

$TDOC Q32021 Earnings Digest I have already digested the Q3 Earnings and wanted to do a short thread with my thoughts. Let's get started! /THREAD/

If I’m being honest with myself, I still don’t think I belong here.

5. Is Visa On The Chopping Block?

I bought a bigger starter position than usual in Visa on February 20, 2020.

It took more than a year to climb out of its hole, then went on a decent 20% run from March through July of this year, and now is going in the wrong direction.

Wednesday’s earnings were not kind to Visa.

Feels like a pretty big haircut for what I perceive to be a slow and steady compounder that takes a slice of all economic activity? It’s supposed to be a safe bet, right?

Liberty knows what I’m talking about.

Liberty 💚🥃 @LibertyRPF

Visa down over 15% from peak. Doesn't happen that often (chart shows the past 10 years): app.koyfin.com/share/ac60b844…

Look, Visa isn’t going anywhere. But I’m beginning to wonder, given my newfound excitement in Coinbase (as discussed here in Memo #9), that if I’m betting on crypto being disruptive to financial institutions, maybe my financial exposure should be in Coinbase. Of course, owning Visa and Coinbase are not mutually exclusive. They both can win. But we’re taking bets, right? Show me a great investor that hasn’t taken calculated bets.

I think Visa will continue to win as well, but if I want to build a more concentrated portfolio, maybe it’s not necessarily a “best idea.”