Moby Live: NFTs Explode, IPO's, Crypto Regulation, Sofi Soars, Twillio & More!Nov 19, 2021
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Peter Starr Northrop:
Now coming to you live from our coast to coast trading desk this is Moby.co live. As always I'm your host, Peter Starr Northrop bringing you a really awesome conversation today folks. We're going to be talking a lot about the crypto dip. We're going to be getting into a couple of key earnings calls and some experiences we're having in the whole DeFi space. Really excited to see everyone file in now and now that we're seeing the audience show up, I'm also excited to be joined by Justin Kramer, our chief analyst, and co-founder here at moby.co. really hate that this podcast is basically leading off with crypto every week, but at the same time, all of the biggest and most interesting moves right now are happening in crypto.
If you're an investor, you can feel secure in your stock market investments, there's nothing too wild going on there but crypto is just pandemonium. What was it? 400 billion worth of cryptos three trillion market cap was sold off in a matter of minutes this week as new legislation has been announced in base and ratified both for infrastructure, but also for a bunch of really wild tax regulations in the crypto space. Over the last four days we have seen just a wild sell off. Justin, what are your thoughts here? Is it a by the dip or is it take your profits and get out-type situation? What are we dealing with in terms of thinking about seeing our crypto space get regulated here?
I totally agree with you in the sense that I hate to be starting off every single podcast with crypto but it's just trending right now, it's everywhere, it's hard to ignore and as investors in the stock market, in private markets, in real estate, in crypto, we're going to talk about things that people care about. That's why you guys hopefully listen to us, but outside of that exactly to your question I fully agree. Right now, we're seeing regulation in slow parts start to be introduced as part of the whole broader infrastructure bill.
Obviously a lot of people are going to be looking more at the buildings of roads and tunnels and airports and all the infrastructure we need which is amazing. I don't think many people are denying that, but there was some stuff that was snuck in there about Bitcoin and other cryptocurrencies. To your point, there's some tax implications and there's also some implications for people who are minors, people who are providing wallets, who are now getting put under this certain what we'll call broker definition.
We actually just published a piece on this, on our blog, on our paid member site. Definitely check it out if you guys haven't seen it yet. We're sending an email out on shortly. But basically the long story short is there's a bunch of politicians who feel on both sides of the fence. Some are pro-Bitcoin and pro-crypto, others are on the other side of the fence. Even the ones who are on the same side of the fence can't seem to agree with the best way to move forward. When the bill got passed on Monday there was a direct response in terms of crypto immediately selling off and it was in large part due to what was happening there.
We've seen a lot of the people blame other reasons, but this is really going to cause and effect right here with these two things. Again, this is just one of many things that'll happen and there'll be some favorable outcomes, there'll be some unfavorable outcomes, but the net takeaway from this is that we're just going to continue buying, continue adding to our position. We've been in it since about 2013, 2014 and any time we get dips, we add to it so our cost base is unfortunately moving up since then but I think gone are the days in the single digits for us to add exposure to. Again, just looking to continue to add any excess liquidity in times of weakness. This isn't really a punch at the face, if you will, by any means.
Peter Starr Northrop:
Exactly, that's one of those things where you get a sense of just the newness in crypto. A lot of times we talk about the momentum of more institutional players entering the crypto space and this is an example of what happens and perhaps more speculative folks exit the crypto space because the minute anybody talks about regulation, you see a certain class of investors just immediately bail. You can definitely sense that one of the main reasons a lot of folks who may be more advanced investors were in the crypto space was this lack of regulation, the fact that anybody can just set up a deck and do some staking has been a why hold thing to do for a while.
It's really interesting watching the deck chairs shift and there's people who actually believe in crypto are now going to be the primary investors. I personally see regulation as a good thing and hopefully will help with rug polls, it'll hopefully help with other small issues and over time stabilize the market and allow it to go up in the way that it's supposed to. But that's me speaking as a product of the public education system so maybe I've been brainwashed, you don't know.
But the major thing is I'm excited to see this. I'm also excited to see how the DeFi space specifically can push back and potentially, not necessarily rewrite, but advocate for some fairer rules and regulations when it comes to staking specifically when it comes to DOWS and such, because the fact that it's so easy to set up a taxable event and set up an IRS report is going to be very difficult for innovation moving forward, but it's honestly very exciting just seeing the door being opened. What is it, Justin? None of this goes live until 2024 anyway, right? This is all people being like, "I'm scared of something that'll happen in two years. No."
This is still years away but to a lot of people the frightening event is that this is the first step or the second step in what's to be many steps so inevitably more regulation is to come. I would be very shocked if it's the wild west, how it is today forever but again, just something that is scaring people but we're not too concerned for the time being until there's real crackdowns.
Peter Starr Northrop:
Exactly. To really narrow that down too, you've trained me well. I did jump on Solana when it went all the way down to 195 briefly, it went all the way down to 186 and I got in on it a little bit too before the actual bottom of the dip, I think you got in at 192. It's one of those things where certain trend lines might bounce back so I'm very excited for that but I'm waiting. Justin, can we get to 30K Bitcoin? Do you think we can get all the way back to July then just restart this whole bowl run later?
I wish. Obviously that would scare a lot of people and it would scare us and in theory, that'd be great, because we could add in a cheaper price but obviously saying that now versus seeing it actually happen people would be probably calling for the end near, the end is near. I don't think it'll happen but again, this is something we've reiterated all the time is anyone who's saying they know what the price is going to fall or drop to in the near future, it's impossible. All we can say is that we believe in the long run and until things fundamentally change, anytime there's extreme weakness and our conviction holds, we're going to add to it.
It's really hard to separate out logical moves from behavior based moves. But I'm sure all of you here who are listening probably have looked at things saying, "I should buy this. I know it's going to go." It goes up then you kick yourself. Just got to continue to be rule space, ignore the emotion, take it out of it. It ends up biting you in the ass a lot of the times playing into that. Honestly that fear and greed. Fear of missing out and greed of not upside that, that is probably the two biggest detriments for most people.
Peter Starr Northrop:
Precisely. It's one of those things, that's how you learn over time how some of those things are fear and greed. My main thing was learning that during 2017 when I jumped in on a bunch of just truly idiotic Alt coins thinking they were going to be the next Doge or the next, nobody had heard of Shib Inu by then but I was trying to find a Shib Inu upside potential and I got burned real bad and I realized I was being and greedy. Stick to the basics. If you find Alt coins that are small and have good upside, do those small incremental investments and hope for the best.
That's one of those things that you only really learn that by investing consistently. I think that's really a good place to think about that. It's not necessarily the main part of the dip yet, but obviously buy the dip but stick to the institutional place that you feel will have merit long-term. It's always going to be playing that long-term game. It's going to be the most boring thing I say, you're going to hear me say it five times a podcast, five times a YouTube video and if you see me in person, I'll be like, five year upside.
It's just the whole mantra right now. But getting more into more traditional investments and we still had some really strong earnings this week. It's a really boring time in the stock market considering that Thanksgiving is next week so business is ramping down before exploding on black Friday and we do that big sprint to Christmas, but I want to get into some of those earnings calls and just get your view, Justin, in terms of the services space.
I think one thing that's been really underreported is just how we're at a really good opportunity point with Twilio specifically and I'd love to get your insight here because Twilio has been dropping pretty sharply in the past month and it's just been a choppy roller coaster but you still believe really strongly in the fundamentals. Based on the report that you did earlier this week, Justin, I'd love to hear more about that. What's going on with Twilio? What's going on with these more traditional stocks? We're seeing all that volatility right now but what makes Twilio a good bet moving forward still?
It's a good question. A lot of investors including us were scared at first in terms of seeing what they announced, what the short-term guidance would be and ultimately how investors responded to that we're seeing that large sell off. That's an example, when you start seeing forward looking guidance changing, that we start then going back to a drawing board and thinking, is this something we still have conviction in? When things don't change, we don't do that. But in this case, when things did change, we had to sit there and be like, is something really going on here?
The biggest things that we saw was this dip in growth and that's what scared everyone. When we started peeling back the layers more and realizing does Twilio still have that competitive advantage? The answers were a hundred percent yes. A lot of the short-term headwinds in terms of almost not having tailwinds anymore, as it relates to COVID was what was scaring investors and that's why they were cautioning everyone. But when you look at their platform, they were in a transitional period last right now.
They've historically been an API first platform where developers can go in and leverage their infrastructure to ultimately build out these more robust skills, tools and platforms for B2B and B2C businesses. That's who they've always been historically and that's how they've grown and been successful. But right now they're in that transitional period which is leading to that wall in growth that their management team alluded to and that is as they transition to more of not just an API platform, but also a platform that people are able to start personalizing experiences and using their data on top of their technology.
They've made a bunch of acquisitions over the last several years and this is when they're starting to stand up those products in totality, start to integrate them in so naturally with investments like that there's going to be roles in efficiency and they'll take time to figure it out and that's where they are going to be over the next six to 12 months. But past that, yes, there are question marks but again, this only if anything gives us more confidence in the long run for this company so anything that's in the short run, we're just essentially going to shrug off, continue to add to our position and we have added to our position in the weakness and we actually think that now over the longer term, the upside is even higher and we think it's going to come faster than most people realize.
Long story short, this is still and always has been one of our favorite stocks. Obviously we can be wrong, but this has been a stock that's been doing very well over the last few years and we really anticipate holding the stock over the next decade until things change.
Peter Starr Northrop:
That's one of those things too, where it's really important to keep in mind the market forces that might be driving a stock like Twilio up eventually. For us, it's one of those things where it's going to be a very long trend line as the traditional advertising media complex is taking a hit from Apple's iOS 14 point whatever update wherein it's very hard for advertisers, for brands, for anyone to track conversions across the whole internet.
It's going to be a game of like finding new players in the customer engagement space. If you can't do this via Facebook, you have to rely on your own data. Companies like Twilio really empower that so it's one of those things where unless Facebook can nail this Metaverse rebrand and completely change the whole nature of the internet, they are going to start eventually gradually losing revenue, losing more users, losing more of the advertising play and that money's going to have to go somewhere so it's going to go to people trying to convert as best as possible.
That's why Twilio is an interesting play. That's why this Braze IPO this week was pretty interesting. I was very surprised to see them go up 44% after not really anticipating much from it. Very exciting to see where a lot of these second tier advertisers come in. This is where a lot of the real money is going to be made. These boring hard to understand data plays that help brands and other advertisers get as much value out of their advertising spend as possible considering that they can't really go to the one stop shop that is the Facebook ads marketplace anymore if that makes sense.
No, that totally makes sense.
Peter Starr Northrop:
But speaking of stocks that are not performing super well but doing great on the fundamental side, one other great earnings call this week was SoFi. They're down a little bit today after a solid earnings call yesterday and you're really excited about it, Justin, despite the market not really reacting well. I'm curious about the fundamentals there. It's one of, again, not quite a by the dip scenario, but one of those things where there's a lot of volatility just in the market itself and SoFi has been hurting from that in the last 24 hours specifically, but that earnings call was awesome and I want to get your thoughts there specifically,
It was really good so when they reported last week, we saw this pop up from, I think it was around the 20 mark up until 22, 23 then there's been a bit of a sell off over the last few days since roughly the 15th. Again, I think the market is just digesting the upside we've seen over the last month or two in terms of this massive run up in price. About a month or two ago when we first recommended it we were a little bit ahead fortunately of the new cycle. But now that the opportunity's been started to be digested by the market and people are understanding it, and we see this with every stock it's like there are run ups then there's pullbacks when things get over bought.
SoFi is a good example of that. Rivian's another, Licud's, another. Anything that goes up that fast inevitably has to come down. We talk about volatility all the time. In periods like this when things start to sell off a bit, I'm not too concerned about it, our analysts aren't too concerned about it. Again, another opportunity for us to start adding to our position. The biggest things we saw from the earnings report was that their lending business was driving our performance. Their accounts were growing and they started making the proper investments for the next year.
When you really think about their lending which we've talked about as the core of their business and the lending being still at a headwind given the rent moratorium or not the rent moratorium rather, there's a lot of moratoriums going on, but this is the loan moratorium, the fact that's still going on and they're still be able to grow lending above what people thought, again, just really speaks to the growth and the stability of this company and is going to be someone again, we still fundamentally believe in.
The earnings report was nothing but amazing and we think in Q1, Q2 when the moratorium ends and they start reporting what number that actually look like, again, we're going to see I think another run up next year and that's why we're increasing our price target as I think investors and the rest of the market is starting to catch onto the opportunity.
Peter Starr Northrop:
Exactly. That's one of those things where now is the time to get in and audience I want to make sure that you have a lot of opportunities here as well. As we get to the back half of this, I want to keep in mind that we try to keep these tight, we try to keep these to be 30 minutes specifically, so 2:30 Pacific, 5:30 Eastern, but I don't want that to discourage you from setting anything up here. Main thing I want you to keep in mind audience, if you have any questions at all, you can check us out over in that voice chat. There's already a great discussion there. There's this whole side talk that I'd love to jump on.
I don't think we have time though, about things going down in the video game industry specifically Actvision and how things are falling apart. But I don't want to get too deep into that because that's an entirely me thing. It's a really interesting time with relationships between Microsoft and a bunch of other publishers. I'll let you just check that out and hit us up in that voice chat. I want to go back to crypto though, because Justin you've had a really interesting experience this week.
You've done some really interesting analysis on a particular NFT project and you actually put your money where your mouth was in terms of jumping on an interesting project here. I'd love to hear more about what you're thinking about in terms of the NFT space specifically when we're thinking about all this regulation happening, but also what your experience was jumping on the non-fungible fungi, if you know what I mean.
Totally, and this is unpopular publicly, but I would say popular privately opinion in the fact that a lot of these NFTs are ultimately going to go to zero. People talk about these projects as if they're projects and they're not actually cash grabs which unfortunately is what a lot of these are. We've actually had people reach out to us because we do have a little bit of influence, we do have a little bit of reach, ask us if we can get on call, discuss their project, get to the bottom of it and see if we'd recommend it.
We've taken the calls just from a curiosity of learning and from a lot of people we've talked to, a lot of the projects we've come to realize are literally just pump-and-dumps. A lot of it is speculation on the outside but then after for us getting on the call and hearing it firsthand from projects that have already a big following, just firsthand shows me that a lot of what we and others are thinking it's very real, so having said that there are still projects that are real or they're real enough that we feel comfortable making the risk because the upside is so large.
A good example of that is a project we just recommended, excuse me, just recommended yesterday, which is this non-fungible fungi which is effectively a mushroom NFT and it feels even ridiculous saying the out loud, but after spending some time with the guys who started the project, reading more about it, seeing the traction they have, seeing the use cases, this is when we realized, "Hey, this actually is something that has real merit and potentially would warrant in an investment." We've got involved and we've been very fortunate to do well in NFT space so far but I would say out of every 100 projects we see we probably say no to 99 of them.
This is the 1% that fell within that. People who've been to the discord they've seen other NFT projects we've talked about, but again, this is something that we try and stay away from as much as possible unless the opportunity makes sense to just, it's not worth the risk/reward for us for lot of these so this mushroom one in particular they sold out of the original 100 very quickly. The floor is around five, six Ethereum today and they sold these mint passes which essentially gives you access to the next mint of the other 10,000 mushrooms.
When you look at the floor, like I said, at 5-6,000, and you look at how much it costs to buy one of these passes, which is around 0.2 0.3E the risk/reward starts to make a lot of sense. Naturally with only 100 existing NFTs, I would have to imagine the floor is going to come down, but even so it would have to come down roughly 85% for you even to break even on buying one of these passes. Again, definitely possible, but given the traction they have and the community they've built, I'd be very surprised to see that happen and that's why we got in and bought a few jars of ourselves just A, as a learning experience, B, to support it and C, to see where it goes over time. Again, there's going to be some real projects and real success that comes out of this space even though a lot of it is going to ultimately go to zero which is not the answer people want, it is the truth.
Peter Starr Northrop:
Exactly. It's one of those things we're still discovering exactly what the value in NFTs are and the thing that really makes this project very interesting is rather than jumping in on a mint itself, you jump in on that mint pass which allows you to get in on potentially minting something more valuable or less valuable in terms of its scarcity which is how NFTs derive their value. You're not literally buying a mushroom, although that would be very cool, you're buying a 3D model of a mushroom. It's silly to say, but you're staking a spot on the blockchain, if you want to think about it more literally.
It's a very interesting way of thinking about how we transfer value. I'm also excited for regulation to come in and make sure that NFTs are used for more things than money laundering. That's the major thing right now. This doesn't feel like tulip mania all over again, this feels more like a new asset class that has a lot of really interesting real world potential and real world value it's just there needs to be a lot more scale to lots of these various NFT projects. I'm excited to see it moving forward.
But the main thing you want to look at audience if you're thinking about this is how do you determine whether or not an NFT project is going to be a rug pull, pump-and-dump or whatever, check out the community. NFT projects are made out of the people that invest in them. If you're seeing an active community, people talking a lot, people engaged with it, that's how you're going to derive value over time because the community is what creates the value and much the same way that so much of a market's value is derived from sentiment, so many people believing in the stock market.
If a NFT project has a big enough community you can derive a lot of value from that and the value of these projects will go up over time. That's one of the core high level theses. Obviously there's a lot more stuff down in the technicals that make it really interesting but if you look at the high level, it's checking all the high level boxes. Is that a way good way of looking at it, Justin?
I think that's a good summation of it, honestly. I don't want to be the guy in the room saying don't, in the 80s or 90s, don't get involved in the internet, it's dumb and then the internet is obviously what it is today. I'm not saying that at all and we're not saying that NFTs are dumb, crypto is dumb. I've been an investor in it for close to a decade now.
I'm just saying that just like the.com bubble where there was a handful of companies that went in a business and there were a handful of companies that did really well, it's the same thing now. You just got to be really smart and thoughtful about the projects you get involved in and realize why you're getting involved, what your entry is, what your exit is, and just have the point. That's the summary of what we're trying to say.
Peter Starr Northrop:
The economy is never finished. Just because you feel like the internet has achieved everything it's going to achieve that just means you're not thinking in terms of what the next thing is going to be. Progress never stops. I'm very excited to see exactly how NFTs become an anchoring point in this new wild Metaverse or community-based, decentralized internet as we move forward. Either way, we're getting really close to the end here and I want to make sure that I can hit up some of the questions I've gotten in my DMS. Great conversation in voice chat.
Again, if this was a straight business podcast, I'd be talking all day about to how gangster Microsoft has been this week and how everything's falling apart at Activision but we don't have that time. Justin, I do have one just hot take, right off the top of your head. I got a DM. People are really interested in this Sweetgreen IPO. I did not expect, Salads to do so well but Sweetgreen is up 76% off its debut. A couple of fun facts here. In the fiscal year of 2020 they had a net loss of 141 million on revenue of 220.6 million. Their sales are down but things are starting to recover. Do we invest in Salads or what are your thoughts in terms of investing in physical restaurant retail at the end of 2021?
I've always been, as an investor, skeptical to invest in those types of companies. There are definitely brands within restaurant space that we have gotten involved with. Yum! Brands was a company we fortunately have done well with and they have a bunch of brands underneath them, but ultimately a lot of the reason those do successful is less so about the value add in terms of the product itself and it's more so about the brand they've built. Sweetgreen is a good example of that in terms of trying to ultimately become the McDonald's of their generation.
Which is, I think, is something their co-founders has come out and said in terms of saying, "Okay, McDonald's was all about fast food and that's what was important 10, 20, 30 years ago but healthy food is so much more important to the next generation of people. Let's become the McDonald's of healthy food." If they're able to achieve brand value and brand recognition like that, there's no reason over time that they can't achieve the same success McDonald's had. When you look at McDonald's stock over the last, even five years, it's up 100% which isn't a ton but since inception it's up 30000%.
That's obviously a good growth story. I'm not sitting here saying Sweetgreen is going to be the next McDonald's, but there, and this is what investors are seeing in the market right now, they're seeing a real opportunity for a company like them to do so and I think they're one of the first companies in the last five years that from a food perspective are in a position to do that. Sill they? I don't know yet. I think it's all too early for us to say, but definitely the path they're going down that's why the stock really popped in terms of the long-term outlook and implications for what they're bringing to market from a brand value perspective.
Peter Starr Northrop:
Exactly. It's also just like they're one of the only new physical space food companies that's really trying to iterate and innovate in the space where they can. They looked at Uber Eats coming in and saying, "Hey, I'm going to take what? 15, 30% right off the top of all of your revenue if you deliver with me." And Sweetgreen's like, "That's terrible. I'm going to build my own delivery infrastructure. I'm going to partner with every building in Los Angeles and New York city and put a Sweetgreen shelf there so we only have to send one guy at one time to every building in the entire country."
I think it's absolutely ingenious. I think they've done really well. I think they're more agile than most restaurant companies. Salad is not easier, but certainly in a lot of ways, simpler than a lot of other food place. I'm very excited to see them go moving forward but I'm not at a point where I can make a price target or anything. But either way, Justin, that is bringing us right up to the edge of time. Any final thoughts from you, man? Again, awesome conversation. Audience, thank you so much for bringing us so many interesting questions and so many interesting perspectives, but Justin, anything on your end before I go ahead and start closing this out here?
I'd say the last thing happen started in terms of crypto and we're seeing it right now bitcoin hitting the 57,000 range, 58,000. That's sub 60. In the short-term, that's definitely not good in terms of day over day, week over week. Again, as we started the conversation as we're under it, now this is something we still fundamentally believe in so if it does cross that 57, 56, 55 threshold we could see another move downwards and again, that's a good time to, in our opinion, to add exposure. We still fundamentally believe in the long-term, but in the short-term for the crypto world we might be moving into a bit of a short lived bear market. It's tough to say we're, but we're at an interesting inflection point so let's definitely watch out on that.
Peter Starr Northrop:
Exactly. The main thing to keep the mind audience is that Q4 is the moment in the economy where the most energy is in the economy. Sometimes in less insane periods of human history that has just meant that the market goes up the most in Q4 during 2020 and 2021 it means that we're just seeing a lot of volatility. Keep that in mind, whatever swings you're going to see, they're going to be massive. If you see an upswing, it's going to be a huge upswing. If you see a down trend, it's going to be a potentially larger down trend as people are trying to suss out those moments where they can get the best possible gains, there's all that focus, all that energy.
All this money's launching around the economy, demand is still mismatched in terms of where it was even a year and a half ago and we're still sorting all that out, but just ride the wave. This short-term volatility doesn't mean anything. The market is still going to go up. We're still going to build a new recovery out of this. Sure, crypto is going to have some really interesting sentiment shifts as regulations starts actually hitting, but it's going to be an upward trend no matter what. I think we're in a really strong position to ride this out, get some good gains, but I'm really excited to have your perspective here and ride it out with you guys.
Audience, thank you so much for being here. Justin Kramer, Co-Founder here at Moby.co and Chief Analyst. Thank you so much for your all your perspective. Audience, just so you know, this podcast was produced, hosted and a voiced by me, Peter Star Northrop. If you want more content from us, feel free to subscribe to us on YouTube. I'm actually desperate for you to subscribe on YouTube right now. We're very close to a thousand subscribers and that's the first real milestone before we start becoming in air quotes, real YouTube channel.
If you want to help us out there, I'd love to see that. Otherwise, if you have any other questions moving forward, we will be doing this every week still. We're going to probably not do this next Thursday because that's Thanksgiving but stay tuned from when we actually schedule it. Otherwise, audience, thank you so much for being here with us. Thank you so much for your time and as always, I'd like to leave you with peace, love and incremental gains. Everyone be well, thank you so much.