Reply To: Traders Market Weekly: Fear and Greed in Las Vegas.


It’s a tale of two tech stocks this morning. One one hand Alphabet (GOOG/L) posted some insane numbers, justifying its $2T valuation. On the other hand, PayPal (PYPL) looks like a vulnerable first mover under attack from every angle.

Google (GOOG/L) +9% knocked the cover off the ball. Not a big surprise — the numbers are staggering (much like AAPL and MSFT) while a 20:1 stock split will get more retail investors intrigued at a cheaper price in July (even though it is a purely cosmetic dynamic). Search grew 36% to $43.3B; YouTube ads grew 25% to $8.6B, making it bigger than Netflix (NFLX) in terms of revenue. That core Google ad/services business grew profit 36% to $26B at a 37% margin. The cloud business continues to grow at a healthy clip. Google was trading at only 14x EV/EBITDA yesterday. Earnings estimates for 2022 still look too low.

Match (MTCH) -1% reported adj. operating income just above estimates on lower-than-expected revenue and guided down Q1 and FY22, citing Omicron and the strong USD headwind. Tinder grew direct revenue 23% while all the other brands grew 26%. The company guided Q1 and FY22 (rev +15-20%, EBITDA margins flat) below consensus, again, citing Omicron and the strong USD headwind. Mgmt noted that new users often come from word of mouth, but in person socializing hasn’t normalized yet in many markets, especially in Asia. The valuation of ~30x EBITDA or 40x earnings is not a steal, but I do think this stock is a buy while out of favor as the clear leader in the online dating space. This is not a great environment for a stock that has disappointed, but I don’t think there is a ton of downside from here because there aren’t any existential concerns about this business longer term — the competitive position remains strong, especially as Hinge continues to take off.

PayPal (PYPL) -19% missed earnings by a penny on in-line revenue and guided down Q1 and FY21 (+16-17% vs. +18%) with new user guidance forecasted well below estimates. The outlook is likely conservative, but I have no interest in buying this stock. Mgmt had a plethora of excuses, but the real issue for PayPal is competition. I have never been a fan of the stock, probably because I don’t use it outside of Venmo, which is free. This is a hyper competitive space — Apple Pay, Google Pay, Shop Pay, BNPL, Zelle, CashApp are all coming after PayPal. Anecdotally, I use Apple Pay when possible at stores (or even online) because it’s more secure than taking out your card. To make matters worse, the company spent $3.4B in buybacks at an average price of $221/share last year. I could be wrong, but I have no interest in buying the dip here. I would prefer to short pops (a bounce to ~158 could present a fade opportunity near term).

Starbucks (SBUX) -3% missed earnings and lowered FY22 EPS guidance in the face of inflation. Sales missed estimates overseas and in China where the pandemic remains a headwind. Baristas across the country are considering forming unions. SBUX will be fine long term but this is not a stock I have any interest in buying.

AMD (AMD) +11% reported a massive beat and raise as the company continues to take share. The stock continues to grow into its valuation, which has become more reasonable at ~33x EPS.