James Clear first:
If you know where you want to go in life, people tend to help or get out of the way.
Both of those are useful
Starting Lineup Performance and Valuation
We’ve got a lot to cover - let’s jump into it.
The Starting Lineup is hurting and so is everyone else. Zooming out this has been a historically bad (3rd worst in history) start to the year.
The Starting Lineup is underperforming the market at -23%. This is mainly due to it’s overweight tilt towards high-growth quality companies and the absolute pounding of $TDOC. More on that later.
Just a reminder, this is a fictitious experiment. I’ve chosen ~10 companies that I am interested in and created a focused-fake portfolio. The experiment started with equally weighting each of the 10 companies, and then seeing how everything played out.
FOCUS is the goal here. I am forcing myself to focus on ONLY these 10 companies, and to ignore everything else. Although this is a fictitious experiment, I am long some of these companies in my own personal accounts: $COIN $SHOP $DDOG (disclosure).
$TDOC had the worst quarter I’ve ever seen and thus, I’ve ‘cut’ $TDOC from the Starting Line Up Portfolio.
Under normal circumstances, I’m happy to hold for the long term and to wade through bad quarterly reports, but $TDOC’s last report was devastating.
A few major callouts:
On an EPS basis, $TDOC lost $41.58 in the last quarter. As of right now, $TDOC is only worth $38.32 per share. Let that sink in. This shouldn’t be possible.
$TDOC’s management lied to investors in Q4’21 about the growth status of BetterHelp, and how much Marketing would be needed to achieve the targeted growth rates
$TDOC’s stock has fallen over 86% from All-Time Highs and yet there was STILL a $60MM payout in Stock-Based Compensation. This immediately signals a misalignment with shareholders interest.
$TDOC’s reported a goodwill impairment of $6.6 billion for it’s outrageously EXPENSIVE acquisition of Livongo (good thread on this)... Just to put this in perspective, $TDOC bought Livongo for ~$18B, and now $TDOC as a whole has a MARKET CAP of $6.2B. Talk about burning cash.
Increased pointed competition. $TDOC is losing to more pointed competition and $TDOC is losing market share.
They are trying to spend their way into market share. Just look at their Q2’22 Advertising and Marketing spend (below and source). That’s nearly 100% growth in nearly 12 months, and revenue has marginally increased.
So what does this all mean?
In short, $TDOC has failed to successfully merge Livongo into their platform. They have failed to out innovate competition, and now they are needing to out spend to increase revenue.
And lastly, $TDOC’s management team has shown their inability to execute over the long run, and lost my trust.
Brian Feroldi and Brian Stoffel have a great video breakdown on $TDOCs horrific earnings report.
With $TDOC out of the way, how is everything else going this week - THURSDAY is going to be crazy good or crazy bad $FUBO $SQ $NET $MELO $DASH $SHOP $DDOG…
Focusing only on the Starting Line Up Companies:
$TEAM reported on April 28th and they were rock-solid as normal
Rev $741m +30%
Gross Profit $621m +28% at a Gross Margin 84%
FCF $312m -13% (want to keep an eye on FCF and have it moving in the positive direction or at least, steady state)
And they continue to grow customers even in this supply chain choked, war ladened, and inflation riddled economy.
We ended Q3 with a total of 234,575 customers, a net increase of 8,054 from Q2. During the quarter, our overall customer count was reduced by approximately 1,800 due to Russia-based customers dropping out of our total. Some were suspended and others are unable to pay us, owing to sanctions levied on their payment networks.
Consensus Guru had a great chart summarizing $TEAM’s report - woof, that is execution.
My Take: Another strong quarter from $TEAM in a crazy economic environment no less. They are THE top dawg and showing it. The FCF volatility is something to monitor, but I’m not too bothered as long as growth rates continue.
Upcoming Earnings:
Unity - May 10th
ZScaler - May 24, 2022
Shopify - May 05, 2022
Costco - May 26, 2022
Coinbase - May 10, 2022
Home Depot - May 17, 2022
Confluent - May 05, 2022
Datadog - May 05, 2022
Disney - May 11, 2022
This is not investing or financial advice. This is purely for entertainment and really my own education.