The Razor’s Edge

Earnings season this quarter comes with a special kick. It’s the first one lapping full COVID comps, which means we can start to see what the wonky pull forward or shut down year ago will do to company’s reports, and how the market will respond.

We focus today on Netflix and Twitter, two of our old standbys. On the one hand, they had opposite quarters – Netflix suffered from a post-COVID hangover in their subscriber numbers, which will likely lead revenue numbers; while Twitter posted a huge revenue beat compared to a pandemic crimped Q2 2020. Look a little closer, and there are similarities between the two companies positions and how they look going forward. We break it all down.

• 4:00 minute mark - Was COVID bad for Netflix?

• 45:15 – The strong quarter, and the one gray note in the report

The Didi Global IPO feels like a fiasco - company goes public one week, gets booted from the app store by Chinese regulators the next. With RLX Technology undergoing a similar crackdown earlier this year, and with Ant Financial still being kept off the market, and with concerns around Jack Ma's well-being in light of his criticism of the government, it's not a huge surprise most big-name Chinese stocks on the U.S. markets are trading poorly.

A lot of questions arise, but the most basic one - can you invest in these stocks? In this week's episode we talk about Didi and what the various parties' motivation might be, what might make the picture clearer, and whether you can really invest in Alibaba, as well as whether that matters.

• 3:15 minute mark – What to make of the Didi crackdown

"I'd rather short a real company than a fraud or a meme stock."

Akram's Razor made this case on a recent Twitter Space, and we unpack the point on today's episode of the Razor's Edge. In a year when many short-sellers have been run over by trains, and have the AMC and GME shaped scars to prove it, betting against a popular, universally loved name may actually be safer. We go over Akram's historic approach to shorting, how that has to adapt to the current market, what the line is between a meme stock and an ordinary dud, and Nvidia's current position, which is more precarious than the market seems to be pricing in.

• 2:30 minute mark – Akram's historic shorting approach vs. the current market

Last week's Fed meeting played to expectations - slightly tougher talk, limited changes in policy.  The market's reaction was to pile back into the Covid winners, which meant SaaS stocks among others.

So for today's episode, we follow up on our Fed discussion from last week, talking their decision and the market and media reaction. We then move over to the SaaS sector, our regular field. We break down three companies in detail – Zoom, PagerDuty, and Workday. We finish off with thoughts about the growth hangover that might plague COVID winners generally.

• 2:30 minute mark – Our Reaction to the Fed meeting

(Note: Daniel is long DBX as well as PD/THO, that disclosure was accidentally omitted from the recorded disclosure).

We've seen this movie before, but it still doesn't really make sense: a group of traders has taken up the cause of inflating the stock price of a motley bunch of stocks, including AMC as the most prominent company this time around. There are hints of financial populism as there were with GameStop in January, but this time it feels more like pure financial nihilism.

On today's episode of The Razor's Edge, we talk about the difference between round one and round two, how AMC should have something of a future even if it's more than priced in, and how given the trading volumes it would be rash to assume retail traders are truly driving this movement. We also talk about the body lurking in the background who could, if they so chose, take action to stop or slow this mania. Jerome Powell, you're our only hope? We break it down.

• 3:15 minute mark – Meme stocks part deux, and the bleeding from trading into investing

Also, check out another Shortman Studios podcast, the Big Tech Ticket, featuring conversations on the biggest issues in tech. https://podcasts.apple.com/us/podcast/the-big-tech-ticket/id1565981471

A couple weeks ago, Akram released a short thesis on Yalla, calling out an odd business model and then some major issues with the platform - duplicative accounts, low engagement, glitches with the gifting model, etc.

On this week's episode we recap that short thesis for those who haven't heard it yet, but then we also go into the aftermath. What's it like to have another short report come out in the same week? Where are the bulls? What about that buyback announcement? And where can this go? 

• 4:00 minute mark – Background on the Yala case

• Akram's Razor's presentation on Yalla - https://www.dropbox.com/s/wntrsycechmyxj9/YallaPrez.pdf?dl=0 and update - https://www.dropbox.com/s/y4wihdy3f7zjz6a/Yalla%20FollowUp.pdf?dl=0

Inflation realities and fears struck the market last week, sending indices lower and helping drive the Nasdaq's 3rd consecutive losing week. At least that's the straightforward read, but as with so much of the market, there could be other things going on. While many are talking about the CPI report, the CDC's updated mask guidance is a reminder that a post-COVID world is coming. So is that what's moving stocks, or how are investors thinking about all this?

On this edition of The Razor's Edge, we talk about the nature of this inflation and the nature of this market, how it compares to past environments, and what sorts of changes we are or are not making in our positioning.

• 3:00 minute mark - Interpreting the regime change – inflation or end of covid?

We're sharing the debut episode of a new Shortman Studios podcast, The Big Tech Ticket. The show, hosted by veteran journalist James Rogers, will cover many of the topics you hear on The Razor's Edge, but from a different angle. AI, semiconductor supply chain, antitrust, all the big issues facing tech and our society today, from the perspective of people with a front-row seat to the stories.

The initial episode features James speaking with Jason Mollica, professor of communications at American University, about Facebook’s oversight board and its awaited decision on whether or not to let Donald Trump back onto the platform. The show was recorded a few weeks ago, and with the decision expected to come out today, the discussion is timely. So, without further ado, check out this episode of the Big Tech Ticket, and sign up for the show wherever you get podcasts, including:

Apple: https://podcasts.apple.com/us/podcast/the-big-tech-ticket/id1565981471

Spotify: https://open.spotify.com/show/3Aj3Za0kZRMpAGwzgLybPw?si=3c855142bde04233

• 2:30 minute mark - The background on the Facebook Oversight Board’s pending decision

On this week’s The Razor’s Edge, we’re talking Stitch Fix. The e-commerce apparel retailer has had quite a six months – a strong earnings report in December sent shares higher, propelled perhaps by high short interest in the name. That high short interest took on rocket fuel in January amidst the Gamestop frenzy. The air came out of the shares, and then the company reported a weaker earnings in March. And then co-founder and CEO Katrina Lake announced she would step down as CEO in August. So a lot going on.

The stock has passionate bulls and bears, and we try to sort out the bull case and whether it's a keeper.

• 2:45 minute mark – Daniel’s SFIX elevator pitch

Semiconductor shortages have been one of the big economic themes emerging in 2021, in our ‘light at the end of the tunnel’ pandemic stage. We have to mention the pandemic because that’s a proximate cause of many of the shortages and supply chain issues that have beset the semiconductor industry and many others. The Auto industry has been a headliner for having to shut production due to lack of semis. And with some grumbling between China and the US over Taiwan, the key role that island plays in the supply chain also looks like a vulnerability.

On today’s episode, we attempt to navigate the economic, geopolitical, and investing implications of all this talk, while zeroing in on the supply chain and its oligopolistic, specialized nature.

• 2:30 minute mark – The shortage and Covid dynamics in semis