Hey everyone kevin here in this video we're going to talk about four different companies that just reported earnings and what they're earning said tell us about what's going on in the market and what to potentially expect going forward, we're going to cover google starbucks, robinson and paypal. So we can try to get a little bit of a better understanding as to what's actually happening. Quick note, this video is not sponsored, but it is brought to you by well. Uh me wanting to pitch be the match.org.

There is a course member who is diagnosed with leukemia and they recommend that everybody join the registry at be the match. Dot org so check this out and uh sign up to be a potential donor of either blood or bone marrow here and support people who really need you in life all right folks, let's uh, let's get into what's going on with earnings. First, why don't we go ahead and look at paypal, given that paypal is absolutely getting crushed? What happened with paypal? Well, the earnings call gives us a lot of insights, so i'm going to give you the bare bones of it here. Let's get into it.

So, first of all, they argue that 2021 was a very difficult year for them, and part of the reason for that was because supply chain issues disproportionately impacted their cross-border volumes. This is like money coming from china or whatever transferring money to other people. They also say that inflationary pressures impacted spending within certain segments of their user base, and this becomes really important because they talk about a specific type of person, who's starting to spend less money. And this is a little bit of a red flag, not just for paypal.

But also for the economy that we want to watch for, but it could possibly be one that we could get through so uh. Let's, let's take a look at exactly what paypal is saying here now. Uh ceo here mentions that they say they're in a significantly stronger position than where they were when they entered the pandemic, which i think is useful to note, given that their stock price is basically the same as what it was when the pandemic began, which is quite Wild to think about the amazing rise and fall that paypal has had down presently 26 on the day sitting at 129, the pre-pandemic price was about 124.. Now they are calling 2022 an unpredictable macroeconomic environment.

This by the way, is one of the reasons personally. I've realized and many people have i'm just being upfront about it. That trading in this environment is incredibly difficult, especially in momentum segments, so just be careful in the momentum segments. If you see something trending, the trends just are not lasting as long as they used to, but anyway, the paypal executives talk about how they're trying to invest in things like buy now pay later and more user retention.

The reason for that is because they've seen a less successful consumer adoption, but not only that they're also losing some of the customers that they've been getting because these customers are maybe less engaged or they're running out of money, which is quite odd. They mentioned here, the more muted into the year for or that they expect 2022 to have a little bit of a more muted e-commerce growth driven by both supply chain challenges, as well as a pullback in spending by lower income consumers affected by consumer growth. So, in other words, as we're seeing prices go up and lower income individuals are able to spend less money. They also here.

They mention that their strategy for keeping people uh has has run into some challenges. Take a look at this line here. Their programs uh have been very successful in generating account creation, but overall those customers that they've been attracting have been lower. Engagement and higher churn customers they've not met paypal's required rates of return, their internal rates returned so, in other words, you've got paypal here, saying hey like a lot of our customers, which really mirror a lot of people in the united states are just not able to Spend as much money because they have less money and we're seeing less engagement amongst a lot of people that we brought onto the platform.

This is not so ideal. They talk about the priority pareto dynamics which uh remember. The pareto principle is 80 uh of the uh. Profit is generated by 20 of customers, essentially they're talking about how this is totally true over at paypal, but one of the biggest things that they're seeing here is the following.

The impact of omicron and the effect of inflationary prices, combined with a lack of stimulus, is having an impact on spending and, by extension, our business. This impact is most pronounced in our lower income cohorts and has continued into the first quarter. This is a little bit of a red flag right here. The fact that paypal is suggesting that this issue that led to this bad earnings is continuing into the next quarter.

Remember they reduced their guidance by just over 10. Now the stock is down over 26, which is wildly disproportionate, uh and seems over overblown, but it shows you how little stability some of these large phenomenal companies have paypal is a great company. It's a 200 billion dollar company i mean their market cap is essentially halved from almost 400 billion dollars, but still the fact that you could drop 26 on a day with a 200 billion dollar company. I mean this is the kind of movement that you would expect.

Either in a definite bear market or out of small caps, you know like a lawsuit coming against a spac or something right. It's quite wild. Anyway, they say quote the persistence of inflationary effects on personal consumption, labor shortages, supply chain issues and weaker consumer sentiment have led us to adopt a more cautious outlook. Now this weaker consumer sentiment argument right here has a lot of folks wondering oh okay.

Well, if consumers are or or maybe spending less money, that's potentially going to help push inflation down right. Well, that's the hope, but in the meantime the federal reserve has to respond to what's actually happening and we're seeing pricing pressures increase. Remember the new york fed survey from a couple weeks ago, where individuals are spending more money on essentials and less money on non-essentials, because they're out of freaking money, everything that is essential to them is becoming more expensive and so they're spending more money on non-essentials, uh Or rather on essentials, leaving less money for non-essentials like discretionary purchases right, they talk about how they're trying to grow their revenues at about 18 percent uh, and this is actually a phenomenal growth rate for the company and i think the valuation is is almost as attractive As netflix was at like 350 dollars, but anyway they say they plan to deliver at least 20 revenue growth in the fourth quarter. So really what they're believing is that things are going to get better by q4 2022.

Now it's important to remember that if in q4, 2022 inflation and supply chain issues trend down and consumer spending remains relatively stable, then we could be good going into 2023 with nice gdp numbers for 2022. But if we end up having a negative quarter of gdp growth in 2022, they're gon na be a lot of recessionary. Fears coming into the fourth quarter and first quarter of 2023, but anyway uh. The ceo here talks about how inflation is at a 40-year.

High and supply chain issues have never been this bad in their lifetime and they believe that, because of this, 2022 is now off to a slower start than we previously anticipated, not so ideal. Now we get into the q a and i'm just going to try to focus on the most important parts, uh that that really affect the broader economy. So i'm not reviewing everything here, but also some fun facts like, for example, a wallet user at paypal provides two times the revenue of that of somebody who just checks out using paypal. Now another thing that i thought was wild is they say in their earnings call here: only 50 of their users actually have the paypal app on their phone and something else that just personally bothers me is why don't they have, and maybe they do, but it just Hasn't been convenient for me to set up, i suppose, uh, why don't? They have like apple pay for for paypal, right uh, like i'd love, to be able to put that into my apple wallet, so i could pay with them, but anyway, maybe there's a reason for that too.

Many layers anyway, take a look at this okay. This is the uh chief financial officer, as i noted in my prepared remarks, we've seen weakness around spending in our lower income, cohorts and imagine for us the percentage or we imagine that the percentage of our user base is pretty similar to the us overall, and so It is a large percentage of our user base, and this was a cohort that certainly benefited from stimulus in the prior periods early in the year and we're seeing the effects of inflationary pricing around that where there's a more elastic demand curve. In other words, if uh, when you have an elastic demand curve, this means as price moves, some people stop buying inelastic would be like. I need my medication if the price goes up 50, i still need it.

My demand remains constant, so my demand remains constant. Now you're inelastic uh. However, if you have an elastic demand curve, then as price goes up, you're like i'm not going to buy anymore, the problem is and because initially like reactionally, this sounds good for inflation right. But the problem with this is that's just the lower income individuals who have less money to potentially buy goods and services, but take a look at this with higher income cohorts.

You've got a more inelastic demand curve and that's a lower percentage of our base. So basically they're saying: hey: look the higher income individuals they're still spending like freaking crazy, the lower income individuals they're starting to spend less, but the lower income individuals are the ones using paypal. In fact, they kind of make this joke they're, like i'm, not too sure how many people are buying a boat using venmo. They made that joke anyway.

If you take the midpoint, they say, we do have some expectation that some of the supply chain and inflationary pressures we've seen right now improve in the back half of the year. We're going to see this reiterated a few times, but i think it's interesting how they quantify this with some expectation that some of the issues are going to get better in the second half they're, not saying everything's gon na be better in the second half right kind Of interesting and the market's gon na try to start pricing this data in so i think it's really important to watch. Then we've got here, they're talking a little bit more about their app. This is where that stat is, with 50 of their users, actually use their app, which i thought was incredibly low.

I read all of this, but some of the parts were just boring, so i don't highlight them. They say that we feel supply chain issues will work their way through. This is actually impacting quite profitable revenue streams for us like cross-border transactions. I mentioned that at the earlier part of this video.

They also talk about how they're planning on introducing a high-yield savings account and they say that we've been rolling out venmo with amazon, starbucks and doordash, and i thought this was quite interesting because they're trying to get pay with venmo, going, which i do think, will eventually Turn into a competitor to a firm - and i kind of also think it's weird that maybe it's not weird - maybe it's just a good strategy for amazon, but amazon's kind of going around partnering with everybody's button, like amazon, just wants a byte out of everybody's button. They want the affirm button, they want the venmo button, they want the you know, pay with amazon button. They want the apple paper. I don't know it just seems like they.

They want everybody's button. So this is paypal. Let's now jump on over to starbucks, then we'll go to robinson and then google, so starbucks was really interesting. Take a look at some of these, so they talk about how the highly transmissible omicron variant has amplified staffing shortages in our supply chain.

This might mean, and especially covet zero in china. This might mean that we might see higher inflation at the beginning of the year and potentially less later. The problem is: is that going to spook markets? Remember bloomberg is now projecting that cpi is going to come in at seven point three percent, so if you thought seven percent in january was high. If we end up getting seven point three percent in february, it's going to be even worse.

People are going to complain that it's continuing to get worse, and this is where we could potentially get elevated talk about the federal reserve being more aggressive and potentially inflation getting worse. But we hope that this is temporary and that's what we're trying to learn from this. When are we seeing the inflection point right? Well, let's see when starbucks thinks we're going to have an inflection point. First, prior to the emergence of the omicron variant, we were experiencing some inflationary pressures and staffing issues resulting from the broader pandemic.

The omicron surge began, inflationary costs and staffing shortages well amplified them well in excess of our expectations. That's not good, so starbucks is actually saying as soon as omicron came around like the second half of december and in january, all of a sudden boom what happens inflationary? It costs and staffing shortages got amplified, so not only were costs of logistics or labor increased, but also coveted related pay is, was something that hit margin at starbucks. That's because they have to pay their employees time off for covid right. They do say, though, that customer demand remains strong, and this becomes important, because this is a little bit different from what paypal is saying where the lower income individuals are spending less money, maybe because they have less stimulus or they just put their stimulus, checking paypal and Then never came back to it after spending, which i think is a little bit more possible, but over at starbucks they're saying hey people keep buying our crap, even as we raise prices.

In fact. Listen to this, as we enter fiscal year 2022 we had estimated full year inflationary impacts around 200 basis points on margin for the balance of the year. We expect these costs to increase versus our previous estimates, so, in other words, starbucks is telling us. We expect things to actually get worse, not better.

Like most economists, we anticipate supply chain disruptions will continue for the foreseeable future. We've already taken pricing actions this year, one in october and one in january. Now. This is also critical, because this means that the january 22 price has not shown up in inflation data that we have yet like the cost of starbucks going up right, which, if starbucks is raising their prices, is probable that other coffee shops are also raising their prices And we have additional pricing actions planned throughout the balance of this year, in other words, they're already planning on raising prices more and more throughout 2022, no inflection point down yet at starbucks.

Now that could just be unique to starbucks, we'll see which play an important role to mitigate cost pressures, including inflation. As we position our business for the future, then they also said we had more partners leverage, coveted isolation benefits, in other words, more people are like i'm sick with covid and that increases cost so they're talking about that. They also talk about how they believe that this pay will moderate as we get into the second half of the year, maybe because of the summer or whatever, and we start getting sort of a relaxation of the amount of people using these these benefits. They do say that their general and administration expenses, including this i thought, was crazy, including promotional, spend and marketing, were going to be areas that they were going to tighten up their spend.

So this is really interesting because they're saying hey, we want to grow revenue by cutting advertising and instead just raising prices, like that's crazy. Think about that for a second, you want revenue to go up so you're going to raise prices and you're going to lower marketing, which, if you lower marketing expense, that means you have to raise prices even more. You know so that way you get a plus one over here and a plus one over here which offsets uh uh, the uh, the the uh. You know to actually give you some growth, otherwise you might cancel out price increase with marketing right, but just as a quick rough example, uh, that's wild.

I really didn't think that companies would actually even remotely consider reducing advertising uh. It blows my mind a little bit, but okay anyway, they do say that it's the services industry that's facing particularly particular challenges, especially with increased turnover and they're, seeing a notable battle for talent. We know, though, it's not just the services industry. We see the same thing happening at the banks and we see the same thing happening throughout most industries.

In fact, when we go over to robinson you're going to see what robin says about robinson says about employees, they're saying we're purposefully paying our employees more money, so that way they don't leave us because it costs much more money uh to continue to train more people. As starbucks here complains about exactly that, they said that uh they've got long-term growth opportunities in china, but they do expect some complexities to persist. Then they believe that they're going to have meaningful margin headwinds because of the dynamic of this environment, with inflation at its highest level in decades, coveted resurgences and industry-wide labor shortages. As a result, they believe it's prudent to revise their margin and forward eps at this time and they're also going to try to do whatever they can to retain employees more, which is just another way of saying we're going to pay people more money right.

Regarding margin, guidance, they're guiding for about 17 on uh, their operating margin, this is less than that 18 to 19, that they usually have and they're talking about how cost pressures accelerated in december - and this is not good we're seeing those intensify, as we noted in january And into q2 now their q2 is q1, so between january and march they're seeing prices go up. I hate it when companies do that, like the scc should mandate a standard for that, because it's stupid fiscal year garbage anyway uh they'll continue to invest in their business. Blah blah okay. Now this was interesting when it came to a question about how they can raise their prices.

This one person's like, oh well, we use analytics and artificial intelligence blah blah blah. This other person gave a much more simple answer. He says, as we saw inflation begin to increase in the middle of this past year. We made the decision to take pricing and we implemented pricing effective october 1..

As inflation continued to grow. We saw that we needed to take additional action and we did so effectively january 1st, so we've taken two moves in pricing to help mitigate the challenges we're seeing now. We also have some additional pricing actions that we have planned for the balance of the year. This is reiterating what we heard earlier that will additionally help offset trends in some of the cost pressures we're seeing now.

This was a big one. Okay, listen to this in terms of elasticity. We have not seen any meaningful impact to customer demand that let that sink in for a moment they raise prices twice they're expecting to keep raises raising prices and they're not seeing a meaningful impact to demand. It just tells you you're, in a messed up inflationary market with a fed.

That's not going to be your friend honestly. I lost a lot of faith in the fed uh when, when uh, when jerome powell u-turned like within nine days of biden, giving him a spanking uh, i lost a lot of respect in the impartiality of the fed. It was very dif, very sad, but anyway i didn't know this. Seventy percent of their beverage transactions are actually cold beverages.

I thought that was kind of interesting uh. You know i thought people wanted like more hot products. I like hot. Meanwhile, my hot coffee's cold, our turnover rates uh, i would say, as we track them - are elevated versus pre-covered levels, dub all right.

What do we got over here? Going into 2022 uh related to decisions, we made around wages the inflationary pressures in both freight and labor across our supply chain and across into our commodities. Uh increase basically - and this is why they have to adjust their guidance, that they're providing the lion share. Of that is really inflationary pressure related to omicron that we saw in december and we're seeing quote further into january through march now they do say we don't know exactly what will happen, but when inflationary pressures go down then they would expect their margins to actually go Up is essentially what they're saying here: okay good, so that's uh starbucks! Now, let's go on over to robinson! Oh sorry, that's their annual report. All right here we go here's robinson.

So they are a trucking and logistics company. They talk about an unprecedented level of supply disruption and how repricing has enabled them to reduce the amount of truckloads that they have with negative margins, so, in other words, they're becoming more profitable because they're able to price more. But they actually didn't give as grim of an outlook in terms of inflation, and i would expect the first place that we start seeing. Inflation to subside is actually in trucking and that's ultimately, what they end up telling us.

But let's look at exactly the details. Looking at the market, we're still seeing load to truck ratios at historic highs, driven by structural constraints and the expansion of truckload capacity, basically more demand leading to more congestion, and they expect shipping to still be a tight issue for longer. In fact, they're saying we expect stronger for longer as we look into 2022 so still seeing inflation still seeing tightness. Don't don't forget that part they're still seeing inflation, but they believe that this inflation will continue, at least through the first half and potentially through the greater portion of 2022.

So, even though things might get a little bit better, we're probably still gon na have pain for the entire year, and this is compounded by the backlog of ships waiting outside of our ports to unload car unload cargo, strong u.s import demand which is expected to persist, Especially with a workforce, bottleneck and elevated ocean shipping, now, let's see here, let's get some more fun stuff. Oh yeah cost per mile was relatively flat before rising in december, due to increases, so they saw kind of a pickup around that omicron, probably haul the daytime as well they're spending some more money on technology about nine percent, more repurchases for shares. Here we go so they say that as we entered the year this year, the markets remain tight and their north american surface transportation in january, uh has has well been tight, uh but uh in the first couple weeks they saw things getting more difficult, but in the Last two weeks, things have started moderating a bit, and so this was interesting and they say here that if we basically get this continuing moderating that will, if we get moderation, we're still going to be in a low single digit inflationary environment. So no disinflation really here yet still seeing inflation.

Well, i guess that would be disinflation see. Disinflation would be like inflation going from seven percent to let's say four percent right: low single digits, let's say, but if you went from seven percent to negative four percent, that would be deflation right, and this is ultimately what we really want to be able to drag Cpi down but they're suggesting maybe if things moderate, we'll see inflation do this in the second half of the year, but maybe not. They basically say that it's entirely possible. This tightness could remain all of the year.

So this is better news, but it's still not great uh. Let's see if there was anything else in here. Oh i highlighted this one. We believe that the health of our contractual portfolio will continue to get better as we reprice in a more moderately inflationary environment.

So one of the problems is when inflation's really high and you sign like a two-year contract for shipping. You could potentially get screwed into lower pricing and then have end up having negative margins. So they're saying hey like once: inflation stops being so freaking volatile our contracts. Won't lose us as much money all right so now the last one is google.

This is actually google mobility data which we could see for the united states, we're still kind of down here on retail, about 18 groceries, 11 parks, 15 percent and transit stations down 18 workplaces. Though, coming up look at that trend there on workplaces, much better. Obviously, people spending more time at home, but, more importantly, i want to look at the google earnings call and uh the big like bottom line for the google one is they had said literally nothing about q1. Now we expect their stock split to occur by july 15th.

For shareholders, as of july 1st - and i just want to give a little bit of a quick breakdown as to what google's talking about which isn't too much about inflation. But it's worth looking at just how incredible google is so they talk about their ai business. How great it is they talk about how youtube is exploding to where their revenue is now in excess of that of of netflix, how their pixel phone is setting a record, how they have so many different levels of cloud from ai and machine learning to multi-cloud infrastructure? Cyber security google workplace, how shopify reported 6.3 billion in global sales by 47 million customers all transacted on the google cloud shopify by the way. Don't even look at that chart man that thing went from like 1700 to whatever 900.

It is now it's it's, so it's so sad, but they they did not tell us a lot about q1, which really bothered me. I was hoping for a little bit more forecast for retail. They say that in the fourth quarter, retail was by far the largest contributor. Thanks to strong consumer activity, followed by finance, media, entertainment and travel, and they saw shoppers starting earlier and spending more throughout the quarter at the end of 2021, i do think that's going to create a really difficult setup for the end of 2022.

They also have other companies planning on expanding their investments into advertising with google. I did think this was interesting talking about this multi-year journey to bring photoshop illustrator and the other products from adobe online. So it's kind of like cloud rendering, which is kind of cool. You can now also cloud render video games with certain companies, but anyway, foreign exchange impact on revenues would be a little bit of a headwind.

We do expect to meaningfully increase capex and look at the biggest spending that they're going to spend money on right. Here. Servers servers again will be the largest increase of their capex spend for web 3. They talk about looking at blockchain and they talk about how the technology is expected to continue to evolve and innovate.

They are continuing to fight for new employees, which is going to increase more pressure on wages going up. They talk about innovating, more sales abilities and funnels with youtube. They say that cloud had impressive growth, but margins did come down, but they're, obviously working on that and they say they're in the early innings here of some of their their new innovations. They say that travel has been relatively uneven, but that's to be expected because of omicron uh talk about their share based or share repurchasing.

They do talk about broad advertising strength, but i thought this was really interesting the way he said this he said so. Overall, we did see strength as we were going through the year. As i indicated, there was a broad-based advertiser strength. There was strong consumer online activity and those were really primary drivers.

I think the one place that comments might be more relevant is really an understanding of the year to year within youtube relative last year, where there was strength uh - and i think this is. This is really interesting because he's not talking about forecast at all like this, and none of the analysts are hitting back here like everything at google is looking backwards. Now, i'm still waiting for more details on the stock split, but google didn't provide real guidance for q1 and it kind of bothers me that google wasn't giving us insight into q1. I thought this was would be a really nice opportunity, and so personally, i kind of think google is a really bad indicator for the economy right now that there could be a lot of rallying over excitement of the stock split, but a complete failure to recognize that We're actually having pain in areas like a paypal, e-commerce, shipping, starbucks, lower end consumer spending uh.

We had a massive miss on jobs today, right now. Some of these things, hopefully, will lead the the federal reserve to slow down. This is actually one of my biggest concerns is that the market or the economy starts slowing, but the fed keeps raising rates because they have to because of inflation, we'll see anyway uh. Hopefully, you found this insightful and useful if you did consider sharing the video.

Thank you so much for being here. I appreciate you remember to please check out, be the bethematch.org and do your part thanks so much bye.