Everything you need to know this weekOct 25, 2021
We're bringing you all the news you need to know for this week. This report contains news on the most important IPO this week, the crypto world & earnings news. We've highlighted the most important topics in each section!
Bitcoin clears the $65K mark and Solana clears $200!
A large part of the hype last week was due to the Bitcoin Futures ETF ($BITO) that started trading mid-week. While this is a huge win for crypto and should help propel its reach going forward, one thing we need to call out is that this ETF is not a spot ETF but it is rather a futures ETF.
What does that mean? It basically means that the ETF buys and tracks futures contracts of Bitcoin rather than buying Bitcoin itself. Therefore the ETF isn't buying bitcoin itself, which should materially affect the actual price of Bitcoin itself.
If the ETF was however to buy Bitcoin itself, this would substantially drive the value of bitcoin up as the ETF would add huge demand to the underlying value of the security.
While there is hope for a spot ETF to come to market, this doesn't look to be on the horizon any time soon. Either way this is a big step forward, but investors need to realize the key differneces.
As for the outlook of the industry going forward, we believe this should be another catalyst needed to boost popularity of the coin. However prices have run up quite quickly and we wouldn't be surpised to see some pullback before prices push further.
Therefore, we're holding onto Bitcoin over the long term and using any pullbacks to add more to our position.
However, if you want trading advice on how to play the crypto markets, you cannot miss our discord channel where we talk about all of the daily trades we do!
If you want more crypto news and access to this free trading channel on Discord just click here -> Crypto Discord Channel
Most Important IPO This Week:
Founded in May of 2010, Udemy is an online course platform for professional adults and students. As of June of 2021, the platform has more than 44 million students, 183,000 courses, and 65,000 instructors teaching courses in 75 languages. There have been over 594 million course enrollments!
At its current $27 to $29 per-share IPO price range, Udemy would be worth $3.77 billion to $4.05 billion in its public offering.
Here are the biggest takeaways we've seen so far:
- H1 2021 revenue grew 25% from last year while YoY revenue grew at over 50%: This comes at no surprise as many people used online classes to fill up the free time during COVID. With the world returning to normal this year so far, we're not surprised to see growth slow down. The story is similar with their biggest competitor - Coursera.
- Udemy is valued half as cheap as their biggest competitor. This is because their annualized Revenue for 2021 is close to $500M. If they go public in the $4B range that would bring them towards a valuation of 8x forward looking revenue. Looking at their closest competitor Cousera, we see that Coursera had half the amount of revenue in 2020 ($293.5 million) but grew at the same rate. Assuming they grow lock step with Udemy, Coursera would be worth almost double what Udemy is going public at (16x revenue)! This is because Cousera has half the amount of sales while also having the same market cap! Therefore on a sales comparable basis, Udemy looks very cheap relative to Coursera.
- Operating Losses and EBT are still negative but are trending in the right direction. Boring words? Maybe. Extremely important? Without a doubt. Ignoring the jargon for a second, seeing that they're becoming more streamlined in such a strong period of growth, signals some positive strength going forward.
When looking across the industry too we see valuation's lining up nicely for Udemy which signals that the IPO price feels right. If you're looking for a short term trade we'd stay away, but Udemy's operating history leads us to believe that they'll be a force to reckon with for years to come!
Most Important Companies Reporting Earnings This Week:
Facebook (FB), October 25th:
This one is almost too easy. If you've been paying attention to us, you know we've been absolutely ripping Facebook recently (see our recent analysis on them: Scandals, Regulation & Outages: The Facebook Story). A target of the new Apple privacy changes, Facebook's revenue stream has been severely impacted.
Look no further than one of their biggest competitors, Snapchat. Snapchat reported earnings last week and the stock dropped over 25% due to the changes.
If you haven't been paying attention to the changes, the overview on it is that Apple is severely limiting the ability for corporations to track users across the open internet. This is a huge problem for Facebook because tracking people is literally how Facebook accumulates so much data. And without all this data, Facebook's advertising will suffer harshly.
If their advertising isn't as good as it once was, then brands and companies will start trying to find other places to spend money on digital advertising
While there aren't much better solutions than Facebook, this privacy change is going to hit their business extremely hard. Therefore, we watched the stock dropped hard last week and it should continue to fall this week. But by the time they report earnings, the worst of it may already be priced in. We aren't expecting a sharp drop post earnings but the news is going to be bad nonetheless with no end in sight. Stay far away!
Robinhood (HOOD), October 26th:
Just when you thought you read about a controversial company, we hit you with Robinhood! Does it get any more testy than this? Last we wrote about them, we actually recommended their stock (see the post: here.)
The reason was due to their shift in crypto and their product dominance.
Last quarter, Robinhood made a massive shift in getting most of their revenue from equities over to crypto - such an abrupt change that no one saw coming! They also switched market makers and brought on a massive shell company to handle their order flow that is based in the Cayman Islands (sound sketchy?...).
Either way what can't be denied is that they are beating most fin-tech apps in downloads, usage, revenue growth and other core metrics.
We're therefore using this earnings call to asses if the crypto surge was short-lived or is this going to be the future of the company going forward. This will help us decide on the future of the company and which direction they're headed.
Either way, we're buying ahead of earnings as the price has dropped. This is a LONG TERM play for us!
General Motors (GM), October 27th:
It has been awhile since we last wrote on GM but they've long been a favorite US based car company of ours. If you're a new reader, we've been investing in them since early 2020. Our reasoning has mostly been around their early investments in EV's + autonomy.
Fast forward to today and those bets have paid off as the stock is up over 220% since their lows last April.
If you want to read our most research on them, just check it out: here
During this earnings call however, we're looking to get an update on their car shortages due to due supply chain issues with their car chips.
With the stock up 15% YTD, we believe they'll beat expectations as other car stocks have performed well in Q3 thus far!