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Anthropic's MASSIVE Funding Round + ARR Growth; Ferrari's Debacle; Salesforce Earnings Clean-Up $CRM
01:05:15
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- [00:00]
A
For the past three years, IBKR individual clients averaged 24.3% annually, beating the S&P 500's 23.1%. Lower costs and 170 plus global markets matter Interactive Brokers member SIPC visit ibkr.com performance welcome to Chit Chat Stocks, the podcast that helps you find your next great investment. I am one of your hosts, Ryan Henderson, and I am joined today as always, by the one and only Brett Schaefer. This is our week Investing Power hour episode. We do these live on Thursdays at 5pm Eastern Time. If you ever want to check them out live, head on over to YouTube. Look up chit chat stocks Thursdays at 5pm we always take questions from the audience here and it's, it's a nice way to get like instant feedback on any of your questions. But we've got plenty to discuss today. We got Salesforce earnings with a, I guess outrageous buyback program. We've got a Ferrari flop, potentially. We've got the latest fundraising round from Anthropic and a whole bunch of other earnings as well as Brett. I've already took a sneak peek at some of your topics. Bubble watch, plenty of them.
- [01:17]
B
Got some fun bubble watches this week. Yes. Welcome in, everyone. Glad he could join us. Yeah, a couple NBA players. I have a, maybe a potentially fun game we could do with these Robinhood AI accounts, but I'll let that as a tease for the rest of the episode. We're kind of in the lull of earnings season, but I think the first thing we're kinda, we're in the software part. The people that are a month off, they're a little twisted in the head. They like to have a weird fiscal year. It's fiscal year 2027 for Salesforce for some reason. But we're in 2026. Why don't we talk about this? Because that buyback figure, I think everyone was shocked at how aggressive that number was.
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A
Yeah, let's. I guess we can kick things off with Salesforce. The they reported earnings yesterday as of this recording. And as far as headline numbers go, they up, they looked fine. Beat on earnings, beat on revenue. They raised revenue guidance for the full year, but they lowered margin guidance. So nothing really too crazy as far as this quarter's results go. The standout here was that and Brett, maybe you can share this chart. They spent $27 billion on share buybacks. Keep in mind, this is a company that does, I think 6 billion or so a quarter in free cash flow. So and this is a massive jump like the previous four quarters were 2 billion. 2 billion, 4 billion, 4 billion. And then $27 billion in buybacks. So they.
- [02:55]
B
One sec. I'm bringing it up. I was sharing the YouTube live link in the substack chat. One second for everyone.
- [03:03]
A
Yeah, they levered up to do this. I believe they increased their debt load by 25 billion, if I'm not mistaken. It's a vote of confidence from management. No doubt about that. I think shares outstanding are down 10% about year over year. This is. I think if you're Salesforce and you're on the executive team, there's probably a pretty big bifurcation between the narrative and what's actually happening. I would be. I would be truly, truly shocked if they've had any customers of real size that have built the solution from the ground up. And it's one of those things where when you use it on a regular basis. For example, I use Slack every day, you realize all sort of the nitty gritty and the challenges in building an optimal solution, not just, you know, something that kind of works. I don't think any business wants to go about using a whole bunch of homegrown software that kind of works. That means just no way to operate. So, yeah, they talked a lot about Agent Force. Crossed a billion in ARR on agent force. Revenue is growing more than 10% a year.
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B
Is that the thing with the Einstein logo? Little. Yeah.
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A
They had Matthew McConaughey share a video of the numbers of.
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B
On the call.
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A
No, no, no. If you go to Mark Benioff's Twitter, he. He said our Q1. Or maybe it's their fiscal year Q3. I can't remember. We just released earnings. Here's a video from Matthew McConaughey telling you about all the progress we made. And it just. It's.
- [04:58]
B
So.
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A
I have an idea for ways to cut expenses. Let's start with this. Let's stop posting Matthew McConaughey earnings release videos, because I promise, investors don't care.
- [05:09]
B
Yeah, you should have had this loaded up. It would have been funny to play on the show. Next. Next time I want to hear the actor talk about net revenue retention rate. But okay. On a more serious note, market gap now 150 billion. Ish. They retired, what, 20, $27 billion last quarter. That's. I don't know, 17% of shares outstanding, something like that. I mean, I could pull up the calculator real quick and try to. Try to get an exact figure, but either way, it's a large number. Maybe it's 15% actually trying to do mental math here, but yeah, I mean look, that's ins. That's insanely impressive. They're not going to do it every quarter. But the fact that they were able to. Yeah, all right, exactly 18%. I still got it. But the, the. It's even. It's already even. Put into words like how aggressive this was. I was, I was truly shocked.
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A
It's. I think honestly maybe the craziest part about this. They bought back $27 billion worth of stock and the shares didn't go up. Like I'm surprised.
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B
That type of stuff is always overrated.
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A
Yeah, I'm sure the volume's way higher, but the.
- [06:27]
B
They may have done an accelerated. I'm not sure. Sorry.
- [06:31]
A
Yeah, I don't, I don't remember seeing an announcement of any sort of like tender offer or anything like that. Like sometimes you'll see that where it's like a clear cut, you know, offer of offer to buy shares at a certain price. So if they were able to do this in the open market, it's. Yeah, that is pretty staggering. The. Keep in mind they did have stock based compensation disorder. Maybe I'll pull up the actual exact numbers. Well, I guess it doesn't offset it that much.
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B
Let's correct ourselves. They had an accelerated share repurchase program executed by what's look like all the big banks. So that's how they were able to get it out the door so quickly.
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A
What exactly is that?
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B
The downside of that is you have to do it at a higher price most likely. Okay, so the banks find shareholder for you.
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A
But you would think if they had to do it at a higher price it would have I guess impacted the stock. But yeah, so it's the $27 billion in buybacks. And I know, I saw a lot of people say, well what about stock based compensation? It's less than a billion in stock based comps. So this is a sizable. Any way you slice it, this is a sizable buyback. I think this has to be just a superb sign of confidence. If you're a shareholder in Salesforce, I would feel very content where you're at right now. I think future returns or forward returns look really good from here. Honestly.
- [07:57]
B
Yes. Look at the quick numbers for the listeners here. PE20. This is GAAP, EV to EBITDA 12 and price to free cash flow officially under 10. That's not bad. We've talked about them before. They are growing revenue at a decent rate. But it's not as insane as it used to Be historically, I mean if you look at their 10 year average, it's 18.5% versus their 3 year average of only 8%. But if you get all right price to free cash flow of 10 pe of 20, you buy back a lot of stock and your revenue grows at 8% a year, you're going to do just fine.
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A
Yeah, it's always honestly a bit of a boring company to talk about because it's B2B customer relationship management software. I mean they, they sell more seats, a little bit of more seats every year and they probably raise prices a little bit as well. So you're gonna get I would think stable revenue growth. And I'm, I'm yet to see any real legitimate enterprises like publicly go out and say we're ditching Salesforce. We build a solution ourselves. So keep moving. This one's going to be really quick. Really quick topic for you here, Brett.
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B
Okay.
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A
State of the Korean markets. This isn't a full. I'm not going to go through everything, but you talked about the bonuses that some of the employees at Samsung and SK Hynix are set to receive this year. The iShares MSCI South Korea ETF is up to 233% over the last 12 months. Can you. Was the, what was the bonus figure again for the employees?
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B
So I had Gemini try to help me out with the math here because there are estimates, foreign currency translations, all that across Samsung and SK Hynix, just those two companies. Depending on how it all shakes out, the employees could get $45 billion cumulatively in bonuses this year. That would even make someone on Wall street go away. That's, that, that's, that's quite a bit. And the overall incomes in the South Korean economy, again this is according to Gemini as it says at the bottom, it can make mistakes is about 1 trillion clean USD. So that's a huge bump. That's a huge bonus of 4 or 5% of the national income growth. Just from these bonuses associated with memory chips. You can see why the stock market is going crazy. And the South Koreans love to trade is what we're picking up on.
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A
Can you guess how much or what percentage of the ISHARES MSCI South Korea ETF is accounted for by just Samsung and SK Hynix?
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B
Well, you had this in the notes so I purposely did not look it up. What is it exactly? What of the MSCI South Korean ETF?
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A
Okay, just the allocation. How much of the weightings 40, 55%.
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B
Wow.
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A
Of the ETF is just SK Hynix and Samsung.
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B
It's like Taiwan.
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A
So yeah, I mean people complain about concentration in the S&P 500. This is a whole another world. This. I mean, I guess I know what your answer is probably going to be to this. What do you think could be second order effects here. What could benefit from this? And then also does this concern you at all that so much of potential wealth is tied to two companies that are famously cyclical?
- [11:52]
B
The cyclicality of the South Korean memory chip market is not a concern to me, but it's anything that flows through to the South Korean economy. And retail spending, which again we've said it a company we like a lot. It's been a dog. It's in the South Korean index, I would hope. Although they do tout themselves as a quote unquote American business for trade relations. It's coupang because there's going to be more retail spending and especially discretionary items. Maybe there's some restaurant plays in South Korea. I'm not exactly sure Anything consumer spending related in the country is probably going to do well. But if you're looking at a five year time horizon, you have to be worried that there's a boom bust cycle because it always happens in memory trips and it might not happen this year, it might not happen next year, it might happen in 2028, but eventually it's going to happen.
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A
Yeah, let's keep moving here. What earnings did you look at this week?
- [12:53]
B
Sure, maybe we just go right in order here or actually there was a lot of people asking about this one Vera Mobility. This wasn't earnings but it's kind of earnings. We haven't talked about their earnings yet. They released it a little farther back. The Stock is down 70% this week. 80% year to date. Yeah, many people commented on it. I mean we had some show comments, we had some people in the substack chat which I should mention every show. Join the substack free substack chat and we can talk about the episodes within there they lost Avis Budget Group as a customer. They provided Avis with toll and traffic ticket management. Apparently it was a high margin business. It was around 10% of revenue or less but still a high margin business there the fear is probably that they lose hertz too. Verb yield. I don't know feet vermobility is kind of a. Well, as we called it the toll road on a toll road. It's management systems and camera hardware and software associated with toll roads with traffic cameras and I guess they moved into some new stuff with parking tickets Parking, you know, public parking garages, things like that, as well as helping out these rental fleets with that same stuff, you know, managing tolls, automatic payments, making your life more efficient. They had been a durable ish grower. They hadn't grown that much in recent quarters. It's not an explosive growth business by any means, but I wanted to take a look at the valuation again. The market cap is now down to 630 million, but they have around $1 billion in net debt. So $1.6 billion enterprise value. They are now expecting with this contract ending, their adjusted ebitda to be $380 million this year and free cash flow at 150 million, which puts them at 4 times EBITDA, EBIT and 10 times free cash flow. They're continuing to buy back stock, but they do not have unlimited capacity here, given where the balance sheet is. They don't have too much cash on the balance sheet. And the rest of the business seems durable. I guess you'd expect them to keep their contracts with the governments. I'm kind of wishy washy on it. I like it. I don't love it after this huge collapse. Uh, what about you? Any interest here?
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A
Yeah, there's essentially two, two legitimate businesses under the Vera Mobility complex, if you want to call it that. I guess you could take Parking Solutions but it's very small. The government solutions is creating physical toll and ticketing infrastructure for local governments. So that to me seems really sticky. I really like that business. The commercial services is what we're alluding to here with the Avis contract. I don't know how much of revenue that contract accounts for, but commercial services in general as a whole, and that's I assume a lot more than just Avis. I assume there's plenty of rental car companies in there. Accounts for less than half of overall revenue. So government companies, Government Solutions still accounts for the lion's share. I really like the government solutions business. It'll be a slow grower, but at the right price it seems like it would generate consistent cash flow. Should be a consistent growth as well. I assume there's some pricing power baked in there. I would be. This was already at the top of my watch list and when I looked up stocks down the most this week, trying to find topics and for mobility showed up down, I think you said 70% this week.
- [16:32]
B
That was quite a reaction. Yeah, I felt like that was a bit. I, I would have expected maybe a 30% which is still extreme, but 70, I, I've rarely seen that.
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A
I'm Curious if it is just outsized portion of earnings. I mean I do think it's more profitable than the government solutions, but I can't. If, if we just eliminated the commercial solutions in general or, or commercial services, would it fetch a price similar to what it has now?
- [17:11]
B
I'm not sure. But I know that they didn't guide down on their adjusted EBITDA that much this year. So I don't, I don't think it can't be the entirety of the profit pool. Um, clearly it was high margin. People are concerned about that. But maybe this is when you plug your nose and dig deeper. But the one thing that doesn't get me super high conviction to like this is I don't think this is a high growth business. I don't think it's the best business. Yeah, in New York City maybe it would be tough for them to rip and replace this, but it's not unheard of. And you see this right now. All right, Abe has said we don't want you anymore.
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A
Yeah, I see the numbers now actually. Commercial services is far more profitable and I bet that the government solutions side and the tolling infrastructure, that stuff, it's probably a lot more competitive than I think. So I, it might stay on the watch list for the time being because there's probably some learning I need to do before I feel comfortable owning shares on this one. Sure. Also that probably means Avis is switching
- [18:28]
B
to someone else maybe or no one because this, it was like an add on service where you had you essentially any parking tickets or camera traffic or toll road stuff, Barrel Mobility would manage that for Avis. And now Avis is, they can manage that themselves or force their customers to do that. It's probably going to degrade the customer experience. But rental car companies, I don't think they're known for caring about the customer experience.
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A
All about customer service.
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B
Yeah, exactly. Exactly. All right, listener question. Thoughts on the DRAM ETF? DRAM? Do people call it DRAM? Is it DRAM? It's the Round Hill Memory ETF. It launched Thursday, April 2, so less than two months ago. It's already up to 125% Round Hill. Always good on that timing for launching thematic ETFs. But I think the answer for both of us is a big no. We like talking about the memory stocks in South Korea, but we are ones that are kind of anti chasing what is hot at the moment. You research your investments, you analyze markets, you manage risk. But did you research your broker for the past three years, IBKR individual clients averaged an annual return of 24.3% compared to 23.1% on the S&P 500. IBKR's lower trading cost, competitive rates, efficient execution and access to more than 170 global markets helped investors keep more of what they earn and put more capital to work over time. The broker you choose matters. Interactive Brokers Member SIPC if you care about performance, find out why the best informed investors choose interactive brokers@ibkr.com performance yeah,
- [20:15]
A
I, I wasn't interested in memory chip stocks three years ago. Maybe I should have been. It was kind of hard to foresee this coming. I'm definitely not interested. Up probably a thousand percent for a lot of these companies.
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B
So yeah, don't shake something like this.
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A
It's so blatantly cyclical. Like I just, I kind of wonder like what are investors thinking?
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B
I saw, well you remember 2021 when they said that semiconductors weren't cyclical anymore? That was more the core ones. They're saying that now. They're saying the same thing. Permanent supply shortage.
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A
I read one of the recent sell side research pieces on I think Micron and Micron is expected to have a massive jump in earnings. Unsurprisingly, I think the projection they were doing a billion dollars in earnings. I think in 2024, 2025, 2027 they're expected to do more than 100 billion. So it's been a huge inflection and I can't remember the investment bank that said it but they, they, they said we're valuing it at 15 times 2027 earnings. It's like you're, you're giving a mid teens multiple on likely peak earnings. That's very aggressive.
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B
It feels like what would you give it? Four? I think four. Four sounds fine.
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A
Yeah. Especially given how like we're talking, we're not talking current earnings, we're talking about earnings 400% higher from here.
- [21:59]
B
I would expect that to be the peak over the next 10 years. Potentially. Maybe not a guarantee. Potentially, yeah.
- [22:07]
A
I mean that's like just look at their history. They are consistently cyclical and to people that are like well the AI tailwind is going to continue, it very well could that but competition will increase as well. All of these, all of these memory chip companies that are listed in this DRAM ETF are probably going to increase capacity. What happens when that capacity starts to match closer to supply? I mean the earnings are going to get wiped out.
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B
Right.
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A
At least to some degree.
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B
That's what happens every time. That's what happens every single time. And if the big three don't like, I don't know if they keep restricting supply, you'll get a crazy player like Elon Musk who will come in and do a similar tariff fab thing we have.
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A
By the way, this Roundhill strategy is such a like smart.
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B
It's smart.
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A
Kind of a funny business. Like just come up with the funniest four letter word you can to match whatever the hot theme is and just put a bunch of companies in a bucket.
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B
I mean it's smart. I don't think it's a good business model.
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A
Yeah, I can't, can't knock them but it's just, it blows my mind that other ETF providers aren't as like flexible or fast moving as as round hill.
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B
So yeah, they're good. All right, we, we have a. I want to talk the Ferrari reveal which I think will be a fun topic for us. We have a comment here that I think encapsulates the thoughts on all of the semiconductor stocks at the moment. Coworker today asked if he should sell his S&P 500 index fund and buy SanDisk. He had his brokerage pulled up on his phone and ready to do it. Not a question but a sign of the times. Yeah, I think that's the vibes we're getting here. I'm feeling that as well. And it's pretty clear like the semiconductor ETFs the memories. This DRAM one, I mean you can look at DRAM the Roundhill ETF. The ticker is D R A M. When it launched it's pretty much gone up every single day.
- [24:15]
A
This, it feels so like 2021 feels like we're back. Not in a good way like in a bubble.
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B
Different part of the market. Different. Different part of the market but definitely back. Yeah. What is it Tyler? Here in the comments section there's 19
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A
companies now that are above a trillion dollar market cap. I know that doesn't technically mean anything but that I think six, seven years ago there was one.
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B
It's 15 Eli Lilly across that they probably deserve it more than a lot of them. I read it before in another episode but it's just the mix of the global greatest market caps. If you go on there's a nice website I like to use for quick reference. Companiesmarketcap.com it's very easy to check out. There's a lot of semiconductor exposure nowadays and if you compare that versus what you could estimate their through cycle earnings over the next 10 years, it's probably inflated we have a comment here that says at least from my understanding it will take years before the supply catches up. Based on AI needs. Yes, it could take three years, but then your profits go to zero and probably negative. Just look at Micron's earnings, earnings chart. It's a sinusoid. You don't want sinusoids, you want Netflix. Well, Netflix a little bit messy, but you want the Microsofts. You want up and to the right.
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A
Yeah, and I read Asian Century stocks had kind of a good write up on this which is like China is going to increase production on some of these lower end memory chip offerings. And he said if anyone is good at increasing production, it's China and doing so at a low cost. And I've seen some comments here that's hyperscaler, won't use Chinese ram. I, I think if you were that big of a cost difference, they, they very well could. I mean where do Apple's chips come from? For the most part, China. Right?
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B
Unless I, well hey, Taiwan.
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A
I thought there was also I thought they had a big supplier in China as well.
- [26:26]
B
You could be right. But I mean TSMC is the core. Maybe not. Maybe memory is different.
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A
Who am I thinking here? I'll pull it up but I just think if there's low enough, obviously maybe you're sacrificing some quality in terms of the chips. But if you're that big of a cost difference, which from what I've heard a lot of the growth for these memory chip companies has come from basically having to increase prices. It could certainly be a headwind.
- [26:56]
B
I agree. I think in general we can talk a lot of different variables. Again, when there's a supply shortage, it eventually leads to a glut. Happens almost a hundred percent in instances. Instances. And I think it happens this time here is it 2027-2028-2029-2030, I don't know, could be a huge super cycle, but eventually it is. And that's just keeps me nervous from investing. Especially when everyone's saying come on, you have to pile into Micron. You can't miss this rally. And that's when things get dangerous. Okay, well I mentioned before, Ferrari here, stock, we like to follow. Nice luxury player Ryan. Take us through. They launched their first electric car. Kind of a momentous occasion in the company's storied history here.
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A
Yeah, people have conflicting opinions on this. I guess just real quick after a Google search, I was wrong. They are not supplying their chips. Apple's not supplying their chips from China. So just pretend I didn't say that, but Ferrari, yeah. This week they launched their first fully electric car called the Ferrari Luce. It will cost more than $600,000 USD and it seems like so far most people hate it. Pretty much all the comments I've seen were pretty negative. They brought on Jony. I've from Apple to be the lead designer on this and there's been a ton of backlash against it. I've actually seen a couple pictures that from the top the Ferrari loose kind of looks similar to an iPhone, which is a bit funny. But in an interview, there's kind of this interview that went viral with Ferrari's former chairman. His quote was, if I were to say what I really think I'd be doing Ferrari a disservice. We risk destroying a legend. And I'm truly sorry about that. I hope they at least remove the prancing horse from that car.
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B
The he sounded like he reminded me of a football or whatever soccer in European coach complaining about the refs after a game. You kind of have that Italian accent. He's just kind of moving his head shaking and he's going, well, if I said what I wanted to say, I'd get fired.
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A
Yeah, yeah.
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B
They have a different way of words than. Than the Americans. Well, hey, for any Italian listeners. And I looked this up because you know pronunciation not, not the American strong suit. You're using the Spanish pronunciation. It's Luce. What do you. What do you think of that name? That's how you say it. Luce.
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A
Ferrari Luce. I mean, I guess it sounds a little more luxurious, a little better.
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B
A little better, yeah.
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A
Italy's transport minister even criticized it, which I thought was weird at first. He criticized the price of it, which.
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B
It's not a serious country, Ryan. Come on. I mean football and Ferrari. That's what, that's what this is what matters.
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A
He simultaneously criticized how high priced it was and said this isn't the Ferrari way. Basically it's like this is exactly the Ferrari way. This is what they do.
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B
Anyways.
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A
I've seen a lot of different takes on it. Most of them would were negative. I. In looking at the car, it does not look like a traditional Ferrari. I don't know if you can pull up a picture, if it's even worth it. People might have already seen it. For all your stock.
- [30:25]
B
Yeah, just look it up. You'll. You'll find it.
- [30:27]
A
It dropped more than 8% initially on the news. The. The thing for me so the discourse online was a whole bunch of people that can't. Can't afford a Ferrari Saying, this looks stupid. And then. Which I'm not. I'm one of those people. Then there was Toby Lutke, Shopify founder. I don't think he's. Anymore. He can afford one. He said, I don't know what everyone else is thinking. I think this looks cool. And then. Which. Here's the thing. You might be trying to talk, but it looks like you're on mute.
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B
I was just saying we don't want nerds liking it. That's all.
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A
I'll say.
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B
Like, someone like me, you don't want them liking it.
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A
No, no. And the other part is, if some people were like, this is the only thing that matters. If the billionaires like it, that's all that matters. No, part of the reason you drive one is. So that is for the admiration of everyone else, honestly. Like, I would guess a lot of the. That's probably the thrill that a lot of the customers get in buying a Ferrari. So you don't just want the wealthiest liking it. You want everyone craving one or desiring one. So I think this was a flop. My gut tells me they will probably end up walking this back.
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B
Yeah, I don't think we need the 10,000 Ferraris in the world to be electric to save the planet. Like, if that's their strategy here, it's a very European mindset. And one, they have this automated, like, simulated engine noise, which is again, part of the big Ferrari thing that's, I think, very lame. The color isn't red or yellow. Maybe, maybe it can be different colors, but I kind of think they should have a ban on all colors except red or yellow. And then what are these called? Neutrals or black, white, gray, whatever you want on those. Black or white. And if it looks like something coming out of China. Like, look, it's. It's that. If you told me this is from one of the Chinese brands, I would have been, okay, yeah, it makes sense. Or a Tesla. Okay, yeah, that makes sense. You don't want Ferraris to look like that at all. It needs to be differentiated. Craftsmanship, artisanship, however you want to describe.
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A
Looked like Honda. I remember people showing that the. Some of the new Hondas that it looked like the. And you're right. I mean, look for Ferrari can't save the environment. They literally don't have enough customers. They've got. They sell like 7,000. No, I think it's like 12,000.
- [33:05]
B
Yeah.
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A
Cars a year. Okay. Tesla sells, you know, 1.5 million or whatever. So it's not. This isn't a mass market vehicle. I don't see why people are. I don't see why Ford did this to begin with.
- [33:22]
B
Yeah, I agree, I agree.
- [33:24]
A
Yeah.
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B
And you know the bitter truth about electric vehicles is I think it takes like 12 years to offset the production cost emissions. So buy used. But yeah, like we have comma Here it says $640,000 Honda. That goes fast in a straight line Electro Ferrari is a dumb idea. You want the aggressive styling, you want the combustion engine. You want no compromises. People would love it. Yeah, maybe. I mean hybrid could be potentially where you go because you could still do that kind of racing thrill stuff that the Ferrari owners like. Let's bring it back to the stock though, Ryan. The PE is down to 33 which for a luxury stock is fairly cheap. You want that durability. Where would you be interested in Ferrari or are you out completely because of this management debacle?
- [34:13]
A
I mean this, this alone is not gonna, people are still gonna seek out, they still want Ferraris. The I was pretty concerned about Ferrari I guess towards the end of last year when they, I mean deliveries had jumped like 7% a year for like four years. Like there were only so many people that can buy these. And the you if you are a Ferrari shareholder, you want the majority of revenue growth coming from pricing. You don't want it coming from deliveries because exclusivity is the selling point.
- [34:51]
B
I think you could argue a little bit in Asia there's room for more of these sent. Not sent it maybe deca millionaires to afford one. There's 4 billion people. You could maybe, you know, that's half the world. Maybe if more of those people got rich you could double that production. But you know, over maybe a couple of decades. I agree with you in general though.
- [35:09]
A
And that's what was happening, right? I think, yeah. Mainland China and rest of APAC both had grown in terms of shipments and now shipments to mainland China are down, call it 40% from 2023 peak. It's. Yeah, maybe there's a slightly more room there but still the logic still applies. You can't deliver these to everyone. This isn't the same thesis as a Tesla for example. So maybe if there's just that many more billionaires in the world, but there's no way that maybe right now billionaires are growing at 7% a year. But I don't think that's sustainable in the AI future.
- [36:01]
B
There's. We're going to be, it's going to be all abundant. What do the AI people say? Yeah, you're not going to have to work. No, I agree. I think I've said this before. PE of 20 to 25, I get interested. It's that good of a brand. And even if current management is no good as that, what if the guys say, if I had. What if I were to say what I really think I'd be doing Ferrari a disservice? Yeah, I think that's what a lot of people feel. And I have no connection to the company. But still, it's that high quality. High quality of an asset. If there's a further dip from here, it's a nice set and forget it position.
- [36:38]
A
Tyler says maybe the Koreans will buy enough Ferraris to cause unit volumes to increase.
- [36:42]
B
Yeah, that's Asia in general. I mean, South Korea is not that populous, but I was thinking more India and China. Those are very large markets. You just need 10,000 new, I don't know, millionaires to afford vehicles a year.
- [37:03]
A
Did you see this news? Anthropic, I believe, today raised their Series H round, which is just insane that they're already onto a Series H. I think they were founded like three years ago, 2021.
- [37:15]
B
I looked it up as a tribute for you after seeing this. Yeah, this was your notes. Here were my news. So it's kind of breaking news for. For everyone on this show.
- [37:25]
A
Yeah. So Anthropic raised $65 billion at a $965 billion valuation. That's about almost as much as what SpaceX is trying to raise with their IPO. They also announced that they crossed $47 billion in ARR earlier this month. So at the end of 2024, so start of 2025, they were at a billion dollars in ARR. So over the last year and a half, they've gone from a billion in ARR to 47 billion in ARR. That is unprecedented growth. Really. I can't think of any business that's grown that quickly. Do you think this means they're going to delay the ipo?
- [38:12]
B
To the question, yes. I think definitely. This gives them a pretty decent Runway to maybe even get to cash flow positive with this money. We don't have their numbers, so I'm not exactly sure. It could be worse than I'm assuming
- [38:26]
A
they claimed they were profitable last month.
- [38:29]
B
Justin, numbers. I want to see GAAP figures. I want to see audited figures. These are scientists running these companies. Like, I'm reading the AI book that I don't even know who wrote it. It's about Demis Hassabis, but it trickles down to all these Companies. What's funny is that DeepMind, which Google acquired, pretty much has the coaching tree for the entire industry, including Elon Musk. Like, he obviously didn't start there, but his ambitions are related to that. Let's. Let me give you an anecdote here that can maybe cool the flames down. There was a rumor today, I believe today or this week, that there was a consultant that leaked to the news that they had a client spending $500 million on Claude in one month. Do you want to guess what company this was?
- [39:20]
A
Sorry, just you forgot a certain word in there. Accidentally.
- [39:25]
B
Accidentally. Accidentally. Yeah. They must have not had a budget. Yeah, no. Budget constraints. Yeah. Do you want to guess who this company was? If you haven't, um.
- [39:34]
A
I haven't. I saw the headline. I didn't see who the company was. Let me guess.
- [39:39]
B
Okay. And this is from account called Singularity Research. So, okay, take. Take my. The leak here with a. A grain of salt.
- [39:48]
A
Uh, this could be bs, but I would. I would guess meta Amazon.
- [39:55]
B
Ooh, yeah. Yeah. This. I think it makes sense given their spending habits. So this is where I think it gets interesting on that ARR figure. The math here from again, the Singularity Research account makes sense. They had a $500 million increase in one month. Okay. That's 6 billion in ARR. Yeah. Of their 47 billion.
- [40:22]
A
Yeah.
- [40:24]
B
Okay. And Amazon owns Anthropic. They're spending the money and it's gonna flow back to aws. It's all the always sunny clip. That's this entire cycle. It goes in a circle. It goes in a circle. Do we have any real money? No.
- [40:41]
A
So was this accidental?
- [40:43]
B
That could be over million. Put it on that tinfoil hat, Ryan.
- [40:47]
A
Amazon pumping their books here. Who's the biggest winner from this Zoom?
- [40:55]
B
Probably honestly, they own maybe 1% of the business.
- [41:00]
A
Yeah, this might be Zoom. Honestly, maybe not anymore. Maybe the stock is. I think it's gone up a bunch because of this stake was probably the cheapest way to play Anthropic. I think there was a sell side report that came out that was like Zoom at this point is an anthropic stake with a Microsoft Teams competitor or like a. Like a web meeting business that's very
- [41:23]
B
stable only at 20% year to date. Ryan. Sean Emery came on the show, pitched it. I think it's been a significant amount since then. Maybe there's still an opportunity if you believe in that Anthropic. Plus, you know, Zoom, durable cash flow thesis. But if they're not going to ipo, they can't monetize it. Let's see.
- [41:40]
A
I did. I tried to back into some assumptions here on what the state could be worth. Granted, they've been diluted down a ton. But on a $1 trillion valuation, in theory, if it goes public and stays above a trillion dollars until Zoom can sell the stakes, potentially worth more than $10 billion. And I think the market cap today is like now 25 billion or something like that.
- [42:08]
B
Yeah, it's not the entire business, but that's nice. That's nice. Zoom's business isn't that attractive to me.
- [42:15]
A
They're Zoom's gap earnings are going to explode from the market here on this.
- [42:22]
B
So is Amazon's. Again, it's just all circular. We're marking up our gap net income we spent on all this operating expenses on one side of the business, maybe it was even at aws. And then they come back and spend the money at aws. Our customer. Tell me this is not dot com. Come on, people need to get their head on a little bit straight here. I get that these are revolutionary products, but 1,500 million dollars in one month. Study and play come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the unreal college deal. Everything you need to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 Premium and a year of Xbox game Pass ultimate with a custom color Xbox wireless controller. Learn more@windows.com studentoffer while supplies last ends June 30th terms at aka mscollegepc.
- [43:23]
A
Yeah, it's insane. The did you see Costco earnings today? Pretty uneventful. But I will say it is staggering. The comp sales growth is like it was 7% comp sales excluding the gas and foreign exchange. I think they've had My data only goes back to 2019. My quarterly data they've had positive comp sales I think above 3% for every single quarter since 2019. My guess is that probably extends to almost 2010 unless there was some blip in economic spending that I'm forgetting about.
- [44:06]
B
So positive since 2010 every quarter.
- [44:11]
A
Let me try to do the best guesswork I can. I know every single quarter since 2019 has been positive and so at least the pandemic. Yeah, annually it has been positive every year since 2012. So my assumption there is the quarter's are flowing into that pretty consistently. This is probably the the I see why this is the and it shouldn't be this because it trades at 50 times earnings or whatever. Maybe it's different now, but the. When people want a safe place to go with their money, safe place to park their cash, the durable business they turn to always seems to be Costco because it is staggeringly stable. The. The stat that stood out to me. Brett, do you know how much the average Costco warehouse generates in operating profit each year?
- [45:09]
B
Operating profit? I know. Their quarterly was at 2.8 billion. So let's round that off to 12 and then divide it by a thousand warehouses. 100 million operating profit. Or is that way off? Is that way off?
- [45:26]
A
You were almost there. You had it.
- [45:31]
B
Ten.
- [45:32]
A
Ten. Yeah.
- [45:32]
B
Okay, okay. Off by an order of magnitude.
- [45:35]
A
I think it's 11 and a half to be exact. Like around 11.5 billion in profit per warehouse. I also shout out to fiscal AI for the custom metrics here. This is always fun to do. Can you guess how many cardholders on average belong to each warehouse?
- [45:55]
B
That is a great stat. Yeah, Really? I think that's a great stat for the nerds. Dads would love this at a. At a barbecue. At least. Nerdy. I have no clue to a hundred thousand. Am I way off there?
- [46:14]
A
You're not way off.
- [46:16]
B
Okay.
- [46:17]
A
There are 160,000 card holders on average per warehouse.
- [46:24]
B
That's good. Isn't that good business?
- [46:27]
A
You can kind of feel it when you go into Costco, but it does just sound like a staggering number.
- [46:32]
B
Oh, yeah. Without a family, I'm never setting foot
- [46:34]
A
in there, but yeah, when you have
- [46:38]
B
a family, it's great.
- [46:40]
A
Anyway, the. Yeah, the quarter looked fine for Costco. I mean, there's usually never any after hours moves with a company this consistent.
- [46:49]
B
The few of mine. These were listener suggestions if you want little earnings. Celsius name we haven't talked about in a while.
- [46:57]
A
Battle Flame.
- [46:58]
B
Yeah, yeah, they're in a 50% drawdown. I guess the Aulani new acquisition is not going over well with Wall Street. I looked over the numbers briefly. Don't act like this was some deep analysis, but Celsius brand revenue, so that's Celsius, the core brand. They grew just 6% year over year. Last quarter they had 55% revenue growth internationally, but from a small base. So they're doing well, you know, trying to expand around the world. Aulani new retail sales, though, are growing 100% year over year. They have a little bit of a lower gross margin profile than Celsius for whatever reason. Maybe it's the ingredients. Maybe I doubted on that. Maybe it's the marketing spend. Wait there. Never mind. That would be below the gross margin but either way it's slightly lower margin. The price to sales ratio now is under 3 for a sector where you have Monster Beverage that has posted 30% operating margins historically which you know if you're going to grow like this, that'd be nice. However right now their EBIT EBIT Celsius is their EV to EBIT is 45 with their last 12 month operating margin or EBIT margin of just 8%. Maybe there's a nice thesis here if you think margins can expand back to 20% but it's not as cheap as it looks and the category is getting more and more competitive. Ryan, I'm not in a place that has Celsius haven't been all year is it. What is your gut saying? Getting stronger, getting weaker, still stable. What are your thoughts?
- [48:29]
A
My consumer gut feel is that this industry is just hyper competitive and has be since the rise of Celsius has become way more competitive. Like the only place where I usually am even considering buying an energy drink is at the gym and it is just rows and rows of different brands owned by or usually some sort of influencer relationship, some fitness influencer relationship and everyone kind of seems to follow the drinks of the influencer they like almost. It just feels different today than it did five years ago, the energy drink space. And somehow Monster has just avoided all of it. Maybe it's because they don't really. I don't think Monster really overlaps as much with the, the fitness lifestyle influencers.
- [49:30]
B
I think Monster and Red Bull are just above the fray. It's kind of a Pepsi, Coke, they're the standard Bears. Red Bull's always going to be available at clubs and bars and other areas. Monster maybe a little bit different but it's just core, it's always there.
- [49:46]
A
Celsius still this is all gut feel here and maybe there's market share data that I should be sharing but Celsius feels a little more elevated in terms of brand stature. Whereas I would say Aulani New feels like it's becoming increasingly irrelevant every, every time I go to the gym or every time they restock that 100% growth.
- [50:09]
B
Ryan Alani New that's what it's yeah, 100% retail growth year over year. Unless I was reading it wrong. Yeah, retail sales 100% year over year. They're gaining market share but your gut says it's not, it's not gonna, it's not gonna continue.
- [50:26]
A
No, it just doesn't feel like it. But again data, data should win over anecdotes and gut feel some sometimes though
- [50:37]
B
your gut could be telling you that the trend is topping.
- [50:43]
A
Yeah, potentially. I mean the benefit here is that Celsius has the distribution advantage with Pepsi. I think they're attached now to the Pepsi distribution network. So being able to hop on those trucks, stack a few more cases of Aulani news in those routes that's going to be way more useful than the local fitness influencer brand that but doesn't have that agreement in place.
- [51:11]
B
All right. Matech Systems, Ryan or Autodesk earnings? What do you want to talk next?
- [51:16]
A
Is Matech Systems the like photo check capture?
- [51:22]
B
That's right. Potential AI winner, wouldn't you say?
- [51:25]
A
No way. Maybe I haven't heard about this business in a long time.
- [51:30]
B
Yeah. So someone wanted us to look at them. Their stock has been doing quite well. You can maybe look at that while I'm talking here Ryan. They just reported earnings again. Digital ID and fraud protection company Listener wanted to talk about wanted us to talk about them. Quote here's from the press release. The team's execution on our unify and grow ethos resulted in record revenue and Profitability led by 18% year over year SaaS growth as customers route more transactions through Matech to counter AI driven fraud. Maybe potential AI winner if that type of stuff just keeps getting worse and worse. They are guiding for just under $200 million in revenue this year. Market cap 750 million and the stock is at 17 times EBITDA. It's a good cash flowing business I'd say good conversion. You know it's not. It's asset light somewhat fairly valued probably here. Stock is at $17 a share. Was below 10 in late 2025. So maybe there's a real opportunity there. What are your thoughts Ryan? Like it? Love it. Watch list. Want to look at it more or hard pass?
- [52:34]
A
For a business that provides well I think this is a declining part of the business. But the check capture I would have expected revenue to just decline for the last decade.
- [52:49]
B
Nice Pivot.
- [52:51]
A
Revenue since 2007. From 2007 to 2020 so before any of this these recent years revenue went from $6 million to 100 million. I would have thought it was just a declining industry. Like I'm pretty blown away by this revenue chart honestly.
- [53:13]
B
It's going to double again.
- [53:14]
A
It's become much more profitable as well. It seems margins have kind of inflected here. Yeah, I mean what did you say the market cap was? They got 27 million in operating income today.
- [53:26]
B
$750 million market cap. Yeah, it's not dirt cheap, but at the end of last year maybe it was deemed an AI loser or something like that because it looked very, very cheap on a forward basis. Yeah.
- [53:42]
A
Let's talk autodesk numbers. The.
- [53:45]
B
Oh yeah, I gotta. Let me pull these up.
- [53:47]
A
The company we both kind of have a love hate relationship with.
- [53:51]
B
You're still an owner or did you get you done?
- [53:54]
A
I am still a shareholder. That has been.
- [53:56]
B
Well, I think you'll be pleased by
- [53:57]
A
this coffee can portfolio.
- [54:00]
B
How did it react? Wow. Down 5% after hours. That could be really interesting because the numbers looked I think pretty darn good. One billings up 18%. Revenue up 18%. All their categories, geographies across the board growing I think above 15% at least most of them. And GAAP operating margin of 20, 28% free cash flow is nice. And their remaining performance obligations growing, guiding for 28% operating margin for the full year. Yeah, pretty interesting. I'd say if they can actually start getting GAAP operating margin better and then returning cash to shareholders through buybacks. I like it.
- [54:45]
A
They are buying back.
- [54:46]
B
I would like the CEO to be gone, but that's just me.
- [54:49]
A
Is it still Andrew Enagnost or is that. Am I misremembering?
- [54:55]
B
Right? Yes, yes. A good product guy, but yeah, I might be time for a new face. Stock's basically been a stable coin for the last five years.
- [55:08]
A
28% operating margin is really encouraging. I mean the operating margin chart has. It looks really solid. The buyback, I mean they are. I'm looking at it now here. Cash flow 870 million or so in free cash flow. This quarter they spent looks like almost three quarters of that on share buybacks. I. This could. Honestly, I haven't touched my autodesk position in four or five years. This might finally be the chance to. To actually add at a reasonable price.
- [55:44]
B
Yeah, it could be nice. Yeah. Nothing. Nothing else to add. All right, before we get out of here, I did tease the bubble watch. Did you see the NBA players? Maybe ex NBA players getting into tech and stock recommendations?
- [55:59]
A
I saw one NBA player second.
- [56:02]
B
Yeah, Tristan Thompson has a robotics play Cav's a legend. I don't know if I trust him on robotics.
- [56:09]
A
Well yeah, he also is famous for other reasons. If he was married to a Kardashian was like a big. Maybe he's dating some this is if we have women listening to the podcast
- [56:25]
B
which is the five.
- [56:26]
A
Frankly doubtful. They might be laughing that we don't know that but.
- [56:33]
B
Okay. Well all I want to Say is we have these NBA players talking up on stocks. I think I saw other industries, let's just say that a family friendly show talking about stock portfolios. There was a certain betting analyst that gets thrown in my face on Twitter all the time that says pour your money into the s and P500. I think Ryan knows what I'm talking about. Maybe, maybe not. I, I, I don't even want to mention it on the show, but there's a lot of people outside the industry saying to get into the stocks and let me just frame it this way for people that's, they always go, well, you think no one else can do this, Blah, blah, blah, blah, blah. If there was a somehow bubble in basketball and I was telling Tristan Thompson and Kyle Kuzma, who I'm not like, I'm not saying I'm maybe even a good high school player or a college player, but I kept trying to tell him, hey, this is how you play. I have some good ideas for how you guys can win this week. Like you would laugh.
- [57:30]
A
Yeah, I'm looking at the same thing. Some of these, some of these tweets here, I mean some of them, to be honest, don't really make much sense. But the, here's one. I'll, I'll, I'll repeat it. 10% GDP growth, 10% unemployment. I think we're going to have to depend on most tech companies for UBI and eventually uhi. More investment in tech for the government too. How else do we take care of society? I honestly, these are so confusing.
- [58:00]
B
I don't really understand what I think it's, I think it's a little AI help. I'm assuming it's also just kind of hot takes from like magazines like the Atlantic, right? I've heard these takes a hundred times.
- [58:12]
A
Yeah, this is, I don't know, I feel like generally when you start having athletes get into finance is kind of a look I shouldn't. If you're learning about finance or whatever. And that's one thing. But it's like I felt like this is happening a lot during crypto, like the crypto boom. Felt like we were seeing a lot more athletes like tied to some of these.
- [58:37]
B
Well, there might have been payments to them.
- [58:40]
A
True. Can't imagine. I think less paying Kyle Kuzma for a, for AI.
- [58:47]
B
Yeah,
- [58:50]
A
yeah. This belongs on bubble watch. But honestly, I don't know what to think of it.
- [58:54]
B
Okay, this is one I think is great because we could maybe even try out a little fun game for the show. Robinhood just announced New AI agents for stock trading and credit card spending quote Once up and running the agent can scan for the best prices, monitor availability and make purchases. Blah blah. I don't care about the credit card, I care about the AI agent. Would you trust the AI agent of Robinhood who is a stark competitor of our loved sponsor and my favorite brokerage in the world, Interactive Brokers. But I will say should I put in a hundred dollars and see if it can. It can beat our performance. I think that'd be fun.
- [59:39]
A
If you can set the parameters correctly to just say, you know I'm just
- [59:44]
B
gonna say make me money.
- [59:45]
A
Buy IBKR if it drops below a certain price or whatever I guess this takes out and it's somewhat convenient maybe. But you can also do that with just like a non expiring bid on any trading platform. So it doesn't.
- [60:05]
B
I'm just gonna tell it to make me a billion dollars.
- [60:08]
A
I do think there's maybe some potential for things to go wrong here. Honestly, I saw some pretty hilarious memes where it was con like fake conversations with Dave Ramsey about so you told your age you gave all your money to your agent and told it to buy stocks for you and now you lost all your money. Yes, that's right Dave.
- [60:31]
B
And the incentive is for Robinhood to make money by. We have a comma here. Robin, Robin Hood agent keep put. Keeps putting you in zero date options and they said also on buying Robin Hood. But regardless of that they have incentives for their partners in their. What are, what are these? The market makers, the high frequency traders that they. That pay them. I think there's misaligned incentives there to get you trading more. This is a more serious bubble. Watch topic. OpenAI's operating margin. Let the listeners think about this one. Apparently reported an adjusted figure adjusted operating income margin of a negative 122% in the first quarter. If we're going to adjust, just make it positive. Am I am, am I right?
- [61:26]
A
Yeah. If you're going to adjust you might as well go crazy with it. Honestly, there's no point in it's fake number.
- [61:31]
B
Just make it a little more fake.
- [61:33]
A
Yeah, I mean there's no stopping you. There's no rules around it. You can adjust it however you want. Honestly, this makes me feel like they have negative gross margins. If your adjusted margins are this low, I don't see how you could even have positive gross profits.
- [61:55]
B
Anthropic and SpaceX are good businesses. I think the AI we work AI wework is not the worst name for OpenAI.
- [62:03]
A
There has. I can't remember the last piece of good news I saw for OpenAI. Other than them completing their capital raise, which is questionable as to whether or not that's good news. It's probably not for the investors.
- [62:20]
B
Yeah, well, see, I can't even remember. That was a couple months ago.
- [62:25]
A
Yes, I believe Amazon was quite the large participant in that, if I'm not mistaken. So Amazon has been on the hot seat lately as far as capital allocation goes.
- [62:36]
B
Let me just say I am not 100% certain that that sourcing was correct, but it is plausible that Amazon is one of the only largest companies that could spend $500 million on Claude tokens. And either way, like there's companies spending across the board and Amazon. Yeah, it's throwing money at anything AI at the moment.
- [62:54]
A
Before we leave, you mentioned that SpaceX last. I think it was last week you mentioned that SpaceX burned $9 billion. I feel like burns, kind of an aggressive term, had a free cash outflow of around $9 billion in the first quarter. That is the second biggest free cash outflow for Q1 in all of global equities. Can you guess who number one is?
- [63:28]
B
Intel.
- [63:31]
A
Oracle.
- [63:32]
B
Oracle, yeah. That's a good choice.
- [63:35]
A
I think they had negative 11 billion in free cash flow in Q1.
- [63:41]
B
That's another just the money's going in a circle. Yeah, right. They're related. They're all related. Well, I think that's it. We had some listener questions from the substack chat. I guess we can try to answer those within the chat this time. But thank you everyone for tuning in. Ryan, anything else before we get out of here?
- [64:01]
A
No, no. Oh, I should mention, if you've stuck this far around, we are hiring at Fiscal AI. There's pretty much three open roles right now. Head of legal and two account executive roles. So if you're interested, we want people that have an interest in investing along with other skill sets as well. Obviously for those specific roles, feel free to check them out. Just look up Fiscal AI careers and if you mention that you listen to the Chit Chat stocks podcast, I think that will be a bright spot on the. On the application.
- [64:38]
B
Ryan's not the hiring department. But they do want people that like investing.
- [64:42]
A
Correct.
- [64:42]
B
It's harder that are knowledgeable. Okay. As a disclosure, we are not financial advisors. Anything we say on the show is not formal advice or recommendation. Ryan I or any podcast guests may hold securities discussed in this podcast, may have held them in the past and may buy, sell, or hold them in the future. Thank you everyone. For tuning in. And we'll see you next time,
- [65:06]
A
Sa.