(NFLX) Archives

The Corona Drag on 5G

It will be inevitable – the 5G shift in 2020 will be delayed.

Last year, 5G was available on only about 1% of phones sold in 2019 and demand has cratered this year because of exogenous variables.

Up to just recently, Apple (AAPL) was the bellwether of the success of tech with wildly appreciating shares due to the expected ramp-up to a new 5G phone later this year.

Well, things are more complicated now.

I will be the first one to say it - the new Apple 5G iPhone will be delayed until 2021 – the project has been thrown into doubt because of a demand drop off and headaches with the supply chain in China.

The phenomenon of 5G cannot blossom until consumers can upgrade to 5G devices.

Concerning all the media print of China Inc. going back to work, don’t believe a word of it.

People of the Middle Kingdom are sitting at home just like you and me by navigating around top-down government edicts.

Instead of the perilous commute in a country of 1.4 billion people, Chinese workers are fabricating attendance figures per my sources.

Overall data is grim - global smartphone shipments dropped 38% year-over-year during February from 99.2 million devices to 61.8 million - the largest fall ever in the history of the smartphone market and that is just the tip of the iceberg.

The new data point underscores the magnitude of how the coronavirus is sucking the vitality out of the tech ecosystem in China and thus the end market for global consumer electronics.

The statistic also foreshadows imminent trouble in the smartphone market as other regions have now shut down not only in China but the manufacturing hubs of South East Asia.

The outbreak squeezes both supply and demand.

Factories in Asia are unable to manufacture phones as usual because of obligatory government shutdowns and complexities securing critical components from the supply chain.

5G has been hyped up as the great leap forward for wireless technology that will usher in unprecedented new use cases supercharging global GDP — from driverless transport to robotic automation to smart football stadiums.

And coronavirus is just that Godzilla destroying 5G momentum down.

Mass quarantines, social distancing, remote work, and schooling have been instituted in American cities, meaning that the current network carriers are swamped and overloaded with a surge in data usage.

The Verizon’s (VZ) and the AT&T (T) Broadbands of America are currently focused on maintaining their current core customers, adding extra broadband to handle the increased load, and making sure the health of the network stays intact.

This is a poor climate to upsell products to beleaguered Americans who have just lost income and possibly their house because they cannot pay mortgages.

Services such as YouTube and Netflix (NFLX) have even decreased the quality of streaming on their platforms to handle the dramatic spike in extra usage in Europe with the whole continent locked down.

The Chinese consumer was the Darkhorse catalyst to ramp up the global economic expansion during the last economic crisis, picking up world spending in 2009.

On the contrary, this group of super spenders is less inclined to save the global economy this time around because they are saddled with domestic debt.

Just as unhelpful to Silicon Valley revenues, the technology relationship at the top of the governments are poised to worsen because of the health scare.

The U.S. administration has already banned the use of Chinese components in the U.S. 5G network amid suspicions the devices would be used for espionage.

Back stateside, I believe the U.S. telecoms will explicitly detail a sudden slowdown in the 5G network rollout during their next earnings report.

The telecom companies have been able to successfully handle the extra incremental load, but it has had to allocate resources to service the extra volume.

In the meantime, companies will shift to doing infrastructure and site preparation in anticipation of the re-build up to 5G, but that could be next to be put on ice if crisis management moves to the forefront.

Considering every 5G base station is being manufactured in Asia, one must be naïve in believing all is well and they will probably need to do what the 2020 Tokyo Olympics will shortly do – postpone it.

It’s not business as usual anymore.

This time it’s different.

The world just isn’t ready to digest such a shift in global business as 5G until the fallout of the coronavirus is in the rear-view mirror.

The 5G phenomenon underlying effect is to supercharge globalization into smaller networks of interconnectivity and that is not possible during a black swan event like the coronavirus which is the antithesis of globalization and interconnected business.

Just take the situation across the Atlantic Ocean in Europe, UBS Group AG, and Credit Suisse Group AG required clients to post additional collateral, and money managers in New York are preparing term sheets for ultra-rich Americans to urgently meet margin calls.

Many people are scurrying back to their doomsday’s shelter and that does not scream global business.

If you thought gold was the safe haven – wrong again – it experienced back-to-back weekly losses as margin pressures force fire sales of gold to raise cash.

Another glaring example are the assets of Eldorado Resorts Inc., controlled by the founding Carano family, which burned $28.7 million of stock in the casino entity to meet a margin call to satisfy a bank loan.

Things are that bad now!

Sure, telecom players might argue that a sudden influx of workers from home necessitates more investment in 5G, but if they have no income, all bets are off.

The capacity of 4G home broadband has proved it is good enough for today’s demands and it means the last stage of 4G will be a high data consumption longer phase before business lethargically pivots to 5G in 2021.

Verizon’s CEO Hans Vestberg said last year that half the U.S. will have access to 5G by the end of 2020, and I will say that is now impossible.

This sets up a generational buy in the Silicon Valley chip names involved in 5G after coronavirus troubles peak such as Nvdia (NVDA), Xilinx (XLNX), Qorvo (QRVO), and QUALCOMM Incorporated (QCOM).

March 4, 2020

Tech Letter

Mad Hedge Technology Letter
March 4, 2020
Fiat Lux

Featured Trade:

(THE BEST TECH STOCKS TO BUY AT THE BOTTOM)
(NFLX), (ZM), (PTON), (AMZN), (OKTA), (WORK), (ATVI), (EA), (TTWO)

The Best Tech Stocks to Buy at the Bottom

Tech Letter

Tech stocks that are begging to be picked up on the back of the coronavirus pandemic are Netflix (NFLX), Zoom Video Communications (ZM), workplace collaboration service Slack Technologies (WORK), and Peloton Interactive (PTON), the spin bike company.

Their short-term outperformance indicates that these stocks work well during mass pandemics shelving most outdoor activity and commerce.

The basket of 3 stocks has easily beat the S&P 500 since the coronavirus emerged as a threat in mid-January.

Home sitting doesn’t generate a net output of business activity unless that job is digital.

The majority of workers still commute in a physical car only to sit in an office, restaurant, or some other type of self-contained space.

That is the underlying problem that has no solution, and any rate cut by the Fed cannot ultimately solve consumers holed up in their house.

If the companies that could opt to go pure digital do take up the option, the number of remote workers would rise and digital products would be the ultimate beneficiary of this trend.

Companies that promote remote working such as Slack (WORK) and Google Hangouts are in pole position to reap the rewards.

These services include video conferencing software, logistical services, administrative services, network security services, ecommerce and any service that aids in generating digital content like Adobe and its umbrella of assets.

The trend was already transforming American culture, but the virus vigorously pulls forward a trend that was already in overdrive.

Enabling information workers to produce outside the traditional office environment is one of the lynchpins of the Silicon Valley model.

Companies will ultimately realize that spending big bucks on business travel to meet face to face for 30 minutes is probably not an optimal allocation of resources.

Business travel is getting cut with a cleaver such as Amazon.com (AMZN) who are forcing employees to avoid all nonessential travel for now, including within the U.S. Much of that travel could be replaced by video calls.

Other companies will get in on the action by directing their employees to work from home in the coming weeks.

Coronavirus mania has reached the U.S. shores with consumers stocking up on all the essentials at the local Costco.

If this gets worse, there is no solution unless a viable medical solution starts improving the health crisis.

There are still only 7 known fatalities from the coronavirus, all in the state of Washington, and limiting that number is critical to the health of the tech market.

Another company is Okta (OKTA), a leader in authentication security cloud software.

The company’s offering allows employees to use corporate applications on-site and remotely and protecting their access to their digital services is just as important as the work itself.

As consumer spurn movie theaters, concerts, and gyms, the entertainment space will give way to digital entertainment that includes Netflix (NFLX) and Roku (ROKU).

Roku is a great place to hide out in the world where Covid-19 meets daily consumers in the U.S. in a more meaningful way during 2020.

Netflix is a company that has defied gravity this year by bull-rushing its way through the competition and proving there is space for everyone.

The increase in incremental demand for digital content will only help Netflix claim a bigger part of the pie.

We can also lump the videogame industry into this cohort such as Activision Blizzard (ATVI), Electronic Arts (EA), and Take-Two Interactive Software (TTWO).

They have faced serious headwinds from gaming phenomenon Fortnite, but prolonged home sitting will even boost their shares.

The spine of digital services will receive a boost as well from the usual cast of characters such as Microsoft (MSFT), Apple (AAPL), Alphabet (GOOGL), and Facebook (FB).

As investors wait for the climax of the coronavirus and the Central Bank has indicated that they are open to more accommodative policy, we could be ripe for more volatility.

Chinese coronavirus cases have started to taper off and if the rest of the world trends in a similar fashion, this virus scare could be in the history books in 2-3 months.

However, the trajectory of the virus is still a massive unknown in the U.S. and winning the health battle is the only panacea to this dilemma.

February 20, 2020

Diary, Newsletter, Summary

Global Market Comments
February 20, 2020
Fiat Lux

SPECIAL FANG ISSUE

Featured Trade:
(FINDING A NEW FANG),
(FB), (AAPL), (NFLX), (GOOGL),
(TSLA), (BABA)

Finding a New FANG

Diary, Newsletter

We all love our FANGS.

Not only have Facebook (FB), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOGL) been at the core of our investment performance for the past decade years, we also gobble up their products and services like kids eating their candy stash the day after Halloween.

Three of the FANGs have already won the race to become the first $1 trillion in history, Apple, Amazon, and Microsoft.

In fact, the FANGs are so popular that we need more of them, a lot more. So how do we find a new FANG?

Here is where it gets complicated. None of the four have perfect business models. All excel in many things but are deficient at others.

So, there are at least four different answers as to what makes a FANG. A more accurate answer would probably be 4 squared, or four to the tenth power.

I will list the eight crucial elements that make a FANG.

1) Product Differentiation

In medieval times, location was the most important determinant of business success. If you owned Ye Olde Shoppe at the foot of London Bridge, you prospered.

Then, great distribution was crucial. This occurred during the 19^th century when the railroads ran the economy.

Products followed with the automobile boom of the 20^th century, when those who dreamed up 18-inch tailfins dominated. This strategy was applied to all consumer products.

The Financial age came next, when cheap money was used to assemble massive conglomerates that was the primary determinant of success.

The eighties and nineties spawned the era of global brands, be it Coca Cola, MacDonald’s, Lexus, or Gucci.

Today, the global economy is ruled by those who can provide the best services. Facebook offers you personal access to a network of 1.5 billion. Apple will sell you a phone that can perform a magical array of tricks.

Netflix will stream any video content imaginable with lightning speed. Alphabet will deliver you any piece of information you want as fast as you can type, but charges advertisers hundreds of billions of dollars to get in your way.

This has created what I call an “Apple” effect. It stampedes buyers to pay the highest premiums for the best products, assuring global dominance.

While Apple accounts for less than 10% of the smart phone market, it captures a stunning 92% of the net profits. Everyone else is just an “also ran.”

Instead of driving my car into a dingy dealership every few months to get ripped off for a tune up, Tesla (TSLA) does it remotely, online, while I sleep, for free.

Unlike battling for a smelly New York taxi cab in a snow storm, a smiling Uber driver will show up instantly, know where to go, automatically bill me at a discount price, and even give me restaurant recommendations in Kabul.

And you all know what Amazon can do. It beats the hell out of looking for a parking space at a mall these days, only to be told they don’t have your size (48 XLT).

2. Visionary Capital

If you have a great vision, you can get unlimited financing free from investors anywhere. That puts those who must pay for expensive external financing for growth at a huge disadvantage.

Have a great vision, and the world is your oyster.

Elon Musk figured this out early with Tesla. By promising a “carbon-free economy,” he has been able to raise tens of billions of equity capital even though his firm has never made a real profit.

Alphabet is “organizing the world’s information”, while Facebook is “connecting the world.”

Chinese Internet giant Alibaba (BABA) invented a holiday from scratch, “Singles Day,” November 11, which has quickly become the most feverish shopping day in history. In 2019, they booked an unbelievable $30.8 billion in sales in a single 24 hours period, up 27% from the previous year.

And you know the great thing about visions? Not only do venture capitalists and consumers love them, so do stock investors.

3) Global Reach

You have to go global or be gone. A company with 7 billion customers will beat one with only 330 million all day long.

Go global, and economies of scale kick in enormously. This is only possible if you digitize everything from the point of sale to the senior management. Some two-thirds of Facebook users are outside the US, although half its profits are homegrown.

By the way, the Mad Hedge Fund Trader is global, with readers in 135 countries. Our marginal cost of production is zero, and the entire firm is run off my American Express card. It’s a great business model. And boy, do I get a ton of frequent flier points! Whenever I board Virgin Atlantic’s nonstop from San Francisco to London, the entire crew stands up to salute.

4) Likeability

Who doesn’t like Mark Zuckerberg, with his ever-present hoodies, skinny jeans, and self-effacing demeanor. And who did Facebook send to Washington to testify about internet regulation but the attractive, razor-sharp, and witty Sheryl Sandberg? The senators ate out of her hand.

Bill Gates and Steve Ballmer? Not so likable. Their arrogance invited a ten-year antitrust suit against Microsoft (MSFT) from the Justice Department which half the legal profession made a living off of.

And here’s the thing. If people like you, so will consumers, regulators, and yes, even equity investors. It makes a big difference to the bottom line and your investment performance.

5) Vertical Integration

Crucial to the success of the FANGs is their complete control of the customer experience through vertical integration.

When FANGs don’t manufacture their own products, as Apple does, they source them, rebrand them, and sell them as their own, like Amazon.

The return on investment for advertising is plummeting. Just ask the National Football League. So, it has become essential for companies to keep a death grip on the customer the second they enter your site.

Some, like Amazon again, will keep chasing you long after you have left their sites with special offers and alternative products. Even if you change computers they will hunt you down.

One of my teenaged daughters used my computer to buy a swimsuit last summer, and let me tell you, booting up in the morning has been a real joy ever since.

This was the genius of the Apple store network. Buy one Apple product and they own you for life, like an indentured servant. They all integrate and talk to each other, a huge advantage for a small business owner. And they are cool.

No pimple-faced geeks wearing horn-rimmed glasses here. Get your iPhone fixed and you don’t talk to a technician, but a “genius.” It’s all about control.

Expect other strong brands to open their own store chains soon.

6) Artificial Intelligence

There is probably no more commonly known but least understood term in technology today. It’s like counting the number of people who have finished Dr. Stephen Hawking’s “A Brief History of Time” (I have).

A trillion-dollar company absolutely must be able to learn from human data input and then use algorithms to analyze it. Data has become the oxygen of the modern economy.

The company then use other algos to predict what you’re most likely buying next and then thrust it in front of your face screaming at the top of its lungs.

This has been evolving for decades.

First, there was demographic targeting. White suburban middle-class guys have all got to like Budweiser, right?

This turned into social targeting. If two friends “liked” the same brand, regardless of their demographics, they should be targeted by same advertisers.

Now we live in the age of behavioral targeting. There is no better predictor of future purchases than current activities. So, if I buy a plane ticket to Paris, offerings of Paris guidebooks, tours, French cookbooks, French dating services, and even seller of discount black berets suddenly start coming out of the woodwork.

It would be a vast understatement to say that behavioral targeting is the most successful marketing strategy ever invented. So, guess what? We’re going to get a lot more of it.

As depressing as this may sound, the number one goal of almost all new technological advancements these days is to get you to buy more stuff.

Better to use the public computer at the library to buy your copy of “50 Shades of Gray.”

7) Accelerant

If you want to throw gasoline on the growth of a company, you absolutely have to have the best people to do it. The companies with the smartest staff can suck in free capital, invent faster, develop speedier services, and always be ahead of the curve when compared to the competition.

This has led to enormous disparities in income. Companies will pay anything for winners, but virtually nothing for losers.

I’ll never forget the first day I walked on to the trading floor at Morgan Stanley (MS). I am 6’4” and am used to towering over those around me. But at Morgan, almost all the salesmen were my height or a few inches shorter.

The company specifically selected these people because they delivered better sales records. Height is intimidating, especially to short customers.

And that’s what the FANGs have, the programming equivalents of a crack all-6’4” sales team.

A few years ago, my son got a job as the head of International SEO at Google. He was rare in that he spoke fluent Japanese and carried three passports, US, British, and Japanese (born in London with a Japanese mom and American dad).

However, when he met his team, they all spoke multiple languages, were binational, and were valedictorians, National Merit Scholars, and Eagle Scouts to boot!

This is why immigration is such a hot button issue in Silicon Valley these days. If you can’t get a work visa for a graduating PhD in Computer Science from Stanford, he’ll just go back to China or India to start a local competitor that may someday eat your lunch.

By the way, if you get a FANG on your resume, even for a short period, you are set for life. Oh, and by the way, Apple gets 100,000 resumes a month!

8) Geography

It all about location, location, location. It’s no accident that Silicon Valley took root near two world class universities, the University of California at Berkeley (my alma mater), and the godless heathens at Stanford across the bay.

When the pioneers moved west in covered wagons in 1849, they came to a fork in the road. The god fearing families went right to the verdant farmland of Oregon, while young men cashing in on the latest get-rich-quick scheme chose left for the gold fields of California. Nothing has changed since.

Cal in particular was the recipient of massive government funding for the Manhattan Project that built the first atomic bomb during WWII. The tailwind lingers to this day. The world’s first cyclotron still occupies a local roundabout.

Universities provide the raw materials essential to create hot house local economies like the San Francisco Bay Area. And as much as every region in the US or country in the world would like to do this, none have been able to.

There is only one place in the world were a company can hire 1,000 engineers from scratch on short notice, and that is the Bay Area.

Also, innovation is city centered. Some two-thirds of future GDP growth will emanate from cities.

So, if you want to move your career forward, you better count on spending some serious time in Silicon Valley, New York, London, and Tokyo.

I’ve done all four and it paid handsomely.

So there you have it. Now we know what makes a FANG. I’ll be addressing who the most likely FANG candidates are in a future letter.

I want to thank my friend, Scott Galloway of New York University’s Stern School of Business for some of the concepts in this piece. His book, “The Four” is a must read for the serious tech investor.

So Where is the Next FANG?

February 14, 2020

Tech Letter

Mad Hedge Technology Letter
February 14, 2020
Fiat Lux

Featured Trade:

(DATA TELLS THE WHOLE STORY)
(FB), (GOOGL), (NFLX), (AMZN), (EBAY), (TWTR)

Data Tells the Whole Story

Tech Letter

Behavioral trends have a sizable say in which tech companies will outperform the next and a recent report from SimilarWeb offers insight into how much users navigate around the monstrosity known as the internet.

The optimal way to comprehend the trends are from a top-down method by absorbing the divergence between desktop traffic and mobile traffic.

It’s no secret that the last decade delivered consumers a massive leap in mobile phone performance in which tech companies were able to neatly package applications that acted as monetization platforms by offering software and services to the end-user.

Thus, it probably won’t shock you to find out that desktop traffic is down 3.3% since 2017 as users have migrated towards mobile and the trend has only been exaggerated by the younger generations as some have become entirely mobile-only users.

All told, the 30.6% expansion in mobile traffic has penalized tech firms who have neglected mobile-first strategies and one example would be Facebook (FB), who even though has a failing flagship product in Facebook.com, are compensated by Instagram, who is showing wild growth numbers.

The fact that mobile screens are smaller than desktop screens means that users are staying on web pages not as long as they used to – precisely 49 seconds to be exact.

This trend means that content generators are heavily incentivized to frontload content and scrunch it up at the top of the page. This also means that sellers who don’t populate on Google’s first page of search results are practically invisible.

The high stakes of internet commerce are not for the faint of heart and numerous companies have complained about algorithm changes toppling their algorithm-sensitive businesses.

Even using a brute force analysis and investing in companies that are in the top 15 of internet traffic, then the companies that scream undervalued are Twitter (TWTR) and eBay (EBAY).

Twitter is a company I have liked for quite a while and is definitely a buy on the dip candidate.

The asset is the 7^th most visited property on the internet behind the likes of Instagram, Google, Baidu, Wikipedia, Amazon, and Facebook.

This position puts them just ahead of Pornhub.com, Netflix, and Yahoo.

And if you take one step back and analyze traffic from the top 100 sites, traffic is up 8% since 2018 and 11.8% since 2017 averaging 223 billion visits per month.

Rounding out the top 15 is eBay who I believe is undervalued along with Twitter - these two are legitimate buy and holds.

Ebay was the recipient of poor management for many years and they are now addressing these sore points.

Certain content is suitable for mobile such as adult sites, gambling sites, food & drink, pets & animals, health, community & society, sports, and lifestyle.

And just over the last year or two, other categories are gaining traction in mobile that once was dominated by desktop such as news and media, vehicle sites, travel, reference, finance, and others.

Many consumers are becoming more comfortable at doing more on mobile and spending more to the point where people are making large purchases on their iPhones.

The biggest loser by far was news - they are losing traffic in droves.

Traffic at the top 100 media publications was down 5.3% year-over-year from 2018 to 2019, a loss of 4 billion visits, and down by 7% since 2017.

Personally, I believe the state of the digital news industry is in shambles, and Twitter has moved into this space becoming the de facto news source while pushing the relevancy of news sites down the rankings.

Facebook and Twitter are essentially undercutting the news by forcing news companies to insert them between the reader and the news company because they have strategized a position so close to the user’s fingertips.

The negative sentiment in news is broad based on popular news, entertainment news and local news all showing decreases of more than 25%.

Finance and women’s interest news categories are the only ones showing positive traffic growth.

The state of internet traffic growth supports my underlying thesis of the big getting bigger and the subsequent network effect stimulating further synergies that drop straight down to the bottom line.

The top 10 biggest sites racked up a total of 167.5 billion monthly visits in 2019, up 10.7% over 2018 and the remaining 90 largest sites out of the top 100 only increased 2.3%.

This has set the stage for just five gargantuan tech firms to become worth more than $5 trillion or 15.7% of the S&P 500’s market value and 19.7% of the total U.S. stock market’s value.

Now we have real data backing up my iron-clad thesis and these cornerstone beliefs underpins my trading philosophy.

Many of the biggest wield a two-headed monster like Google who has Google.com and YouTube video streaming and Facebook, who have Facebook.com and Instagram.

It doesn’t matter that Facebook has lost 8.6% of traffic over the past year because Instagram compensates for Facebook being a poor product.

And if you are searching for another Facebook growth driver under their umbrella of assets then let’s pinpoint chat app WhatsApp who experienced 74% year-over-year traffic.

Beside the news sites, other outsized losers were Yahoo’s web traffic shrinking by 33.6% and Tumblr, which banned adult sites in 2018, leading to a 33% loss in traffic.

If I can sum up the data, buy the shares of companies who are in the top 15 of internet traffic and be on the lookout for any dip in eBay or Twitter because they are relatively undervalued.

February 12, 2020

Tech Letter

Mad Hedge Technology Letter
February 12, 2020
Fiat Lux

Featured Trade:

(UBER’S DARK FUTURE)
(UBER), (LYFT), (FB), (AMZN), (NFLX), (GOOGL)

Uber's Dark Future

Tech Letter

Autonomous or bankrupt; that is the ultimate fate of Uber (UBER).

In the short-term, Uber is a master at moving the goalposts in order to breathe life in the stock.

CEO of Uber Dara Khosrowshahi can only pray that the Fed will continue to pump cheap money into the market because without artificially low-interest loans, tech firms like Uber would implode.

Is it really time to give Uber the benefit of the doubt?

No more hype, just profits? Is the calculus to profits legitimate?

That's what we call a bubble. Bubbles always burst. Here's the scary part.

Many people are counting on the continued existence of Uber and Lyft to provide "cheap transportation."

Commuters will have to get suddenly unused to it.

There are many companies today that are running the same scheme as Uber in the “gig economy.”

It’s true that management loves to use a lot of flowery language to disguise a lack of profitability.

But as the conditions are ripe for a leg up in tech, the tide rises, and even Uber’s boat rises with it.

I have yet to see even one realistic analysis of how Uber or Lyft is going to become profitable - not even basic math!

I have met a plethora of drivers for both companies, and hope they do well, but there is only so long that one can put lipstick on a pig.

So here we are, Uber in the green everyday because they moved the goalposts yet again and promise us earlier than expected profitability but still losing billions of dollars.

Lyft and Uber have apparently increased revenues somewhat by reducing promotional discounts to riders, but that does not project to even a breakeven point and the unit economics tell me no even if my heart says yes.

The only trick up their sleeve seems to be fare increases, but where is the roadmap detailing this treacherous path?

Once we get to the point in time when Uber is supposed to be profitable, I bet that management will call in another trick play and move the goal posts yet again.

It is quite laughable when so called “tech experts” want Uber to join the ranks of Facebook Inc. (FB), Amazon.com Inc. (AMZN), Netflix Inc. (NFLX), and Alphabet Inc.’s Google (GOOGL) as part of a FANGU acronym.

Reasons for this new bundle is thought to be because of the ability to take advantage of its massive scale while working toward profitability.

Uber is the global ridesharing leader and is becoming the global food delivery leader, but do they really add value?

What if the local government finally got their finger out and built a proper transport system?

They are merely taking advantage of a broken system and passing on the costs of paying drivers to the drivers themselves by designating them as hourly workers.

Are we supposed to celebrate when Uber becomes more “rational?”

Meaning that players have limited their attempts to undercut one another with the sorts of pricing and big discounts that had at one time suggested the business might be a race to the bottom.

Uber projected a lower loss than analysts were expecting for 2020, does less loss mean profits in 2020?

And I do agree that it is encouraging that the company is finally disclosing more data, but shouldn’t they be doing that in the first place?

Love it or hate it, there is a “war” going on between profitability and growth at Uber as the company manages the trade-offs.

Uber had previously talked up that it would become Ebitda profitability by the end of 2021, but Khosrowshahi now forecasts profitability for the fourth quarter of this year.

He says it is possible because Uber initiated a “belt-tightening program” in the last half of 2019, exiting unprofitable ventures and laying off about 1,000 employees.

For instance, Uber sold its food-delivery business in India to a local startup, Zomato, in return for a 9.9% stake in that company.

I do believe that they haven’t done enough to build credibility with investors and the stock’s price action is behaving as we should trust Uber’s management with whatever comes out of their mouths.

The lack of visibility and uncertainty around trends in ridesharing and Eats outside the U.S. continue to be hard to quantify.

So that sounds great! Uber is more serious than ever about becoming profitable and investors have backed them up with the stock flying to the moon.

The trend is your friend and I would suggest readers to get out of the way of this one because you could get trampled on just like the Tesla bears.

And I do support Uber in making steps in the right direction and it also can be said that stocks appreciate the fastest when they transform from a horrible company to a less horrible company.

But there is no way that I am giving Khosrowshahi a pass for Uber’s current situation and no chance I am praising him to the hills.

It is what it is, and Uber is less bad than before, and if they don’t meet their targets, I don’t think investors will believe Khosrowshahi version of a spin doctor forecast anymore.

Uber will rise in the foreseeable future and if they fail to become profitable by 4^th quarter, expect a massive drawdown.

If they succeed, expect a vigorous wave of new players to buy into Uber shares.

The stakes have never been higher for Uber and Khosrowshahi.