The Razor’s Edge

Roku's dud of a quarter echoed both Snap's report from the week earlier and the start of the pandemic as the sudden advertising slowdown hit them as well. The issues with Roku go beyond the quarter, starting primarily with how much harder it is to understand the details of their business. Will this quarter force a change? And what else does the advertising slowdown mean for the market? We discuss on this week's The Razor's Edge.

• 3:30 minute mark – Breaking down Roku’s wipeout

It’s all happening: Elon Musk filed to terminate his deal to buy Twitter, Twitter sued him for specific performance, and now the trials begin. Today, not a trial actually but a hearing to see whether the trial should take place on Twitter’s requested timeline, in September, or Musk’s requested timeline, in February.

Still, the two sides are starting to show their hands. While much of this ‘negotiating’ has been done in public, the filings were still revelatory. So, as we approach the endgame of the endgame, Akram's Razor and Daniel talk about what we learned, what happens next, and who has a stronger hand; though I don’t think you’ll be surprised by our conclusions if you’ve listened to us before.

• 3:30 minute mark – Initial takeaways from the filings

1:28:30 – Last thoughts

On this week’s The Razor’s Edge, we talk about the bear market. It’s here, it’s real, so now what?

Neither Akram nor Daniel are in an apocalyptic mood, so we explain why we’re not, what green shoots there are on the supply side, what risks there are on the demand side, how this echoes 2020 (or not), how much crypto contagion worries us, and why it’s tricky picking individual names.

• 2:00 minute mark – An apocalyptic moment? Maybe not

This week's episode picks up where last week's The Razor's Edge episode left off. We talk the current whipsaw/whiplash macro environment, where a smaller, often over optimistic social media company can trigger a panic, and then news that is no worse than expected can fire up a bear market rally.

We discuss tech stocks, retail stocks, and whether it's possible to be too bearish or too bullish as the winds shift.

In part two of our recording this week, we get to Elon Musk and Twitter. Both because how can we not at this point, as the drama continues to unfurl, and also because Akram makes the case for this as a good merger arb play given the strength of contract law. We talk about whether Musk can work his way out of this and why Akram thinks he can’t, and what the next steps of the saga should be, along with a whole lot more.

• 3:00 minute mark - The logical aspects of the Twitter case

Markets are in turmoil, and we almost busted out the siren. But instead of commemorating the second bear market in the Razor's Edge's lifetime, we focused on whether, actually, growth stocks might have bottomed. In an episode recorded Sunday, May 22nd, we talk about the growth stock washout, whether sentiment or operating momentum has bottomed, whether ZoomInfo makes sense as a short and Zoom Video makes sense as a long, and the peer pressure that a lot of investors, famous or not, have faced in the past couple years.

This is the first of a two-part episode, as we'll get to the Twitter story tomorrow or Wednesday.

• 3:00 minute mark – The pending bear market, and have growth stocks already washed out?

Tech as a sector has been a theme of the Razor's Edge from the beginning. Tech as a sector to avoid has been a theme of the Razor's Edge for at least the last few months. While there have been exceptions and nuances to the sector, the market has shown little interest in nuance, as this week's earnings have made clear.

Juniper Networks, an old dot com bubble victim and survivor, has been an exception to that rule. A name Akram's Razor wrote up as a long thesis late last year, Juniper is up for the year as it has a few points in its favor: an upgrade cycle, a reasonable valuation, and operational momentum in the Wi-Lan space thanks to a winning acquisition.

We discuss the company's prospects and why it is an exception to the tech rule, and also the legacy of tech sector sentiment shifts and a lot more.

• 2:30 minute mark – The upgrade cycle driving Juniper

We planned to do another episode this week, but on a different tech stock. We did indeed record that episode, but at the same time, with all the developments around Twitter - the board's adoption of a poison pill, Elon Musk's discussion of his bid during a Ted talk, and Jack Dorsey's subtweets of the board, among other things - we decided to discuss the situation.

Akram's Razor posted a case for why Twitter's Endgame is at hand. Daniel had questions. And with this being a fast-moving situation, we are sharing it quickly. The second half of the discussion, on a different tech company, will come out later this week.

• 3:00 minute mark – How the surrounding situation has changed and the case for the Elon Musk offer

A lot has happened since we last published a Razor’s Edge episode: the outbreak of war, increased Fed hawkishness, and continued market volatility.

We pick up the thread we’ve been following for some time, though: how to understand ‘normalized’ earnings power and behavior amidst the Covid-19 pandemic, the global response, and all the knock-on effects. We focus this time on the consumer goods sector and whether the cliff facing companies like RH and Best Buy is buyable, and what it says about the current market.

We also, because how could we not, discuss Elon Musk’s investment in Twitter (though this was recorded a few hours before the news came out that he would not in the end serve as a director on Twitter’s board).

• 4:00 minute mark – Recent ups and downs

Reading List:

• Akram's Razor's Edge: Covid Cliff Comes to Consumer and Fast's WeWork Moment

Last week was a wild one. Given we’re not in a period of acute crisis, and that the market finished higher on the week, the swings from Wednesday to Thursday to Friday were especially pronounced, even before you throw in Monday’s comeback rally. The triggers to those moves? At least on the surface, big tech earnings.

To figure out what’s happening there and what these outsized moves say about the companies involved and the market as a whole, Akram’s Razor and Daniel break down Google, Amazon, and Facebook’s earnings. We talk about the market set up, whether this is as good as it is going to get for these companies, and why no one predicts a massive growth slowdown in their compounding business line.

• 2:00 minute mark – Initial reaction including the muted note with Google