WEBVTT - Cakmak Sees 'Paradigm Shift' for Tech Companies

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer and Bloomberg

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<v Speaker 1>Quick Takes Tim Stinovic on Bloomberg Radio. So Facebook Snap

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<v Speaker 1>just out with Meta now, Okay, Carol, I'm watching it.

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<v Speaker 1>It's actually after after climates perspective, perspective. Amazon just out.

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<v Speaker 1>We're seeing that stock rally in the after hours. Pinterest

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<v Speaker 1>is like off the charts in the after hours following

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<v Speaker 1>it all is someone we love talking with. We're talking

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<v Speaker 1>James Chock, Mock partner and technology Analystic Clockwise Capital. He

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<v Speaker 1>joins us on the phone from Miami. James, James, it's

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<v Speaker 1>great to have you with us. I want to start

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<v Speaker 1>with with Meta here because this is obviously a big

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<v Speaker 1>story with making reverberations. You've covered You covered Facebook, the

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<v Speaker 1>company formerly known as Facebook for years. Talk about this

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<v Speaker 1>inflection point that you see the company at right now. Yeah,

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<v Speaker 1>thanks for having me. I think the we can zoom

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<v Speaker 1>out just one level here and just look at the

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<v Speaker 1>broader big cap companies um in the context of Facebook

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<v Speaker 1>and realize that we're going through a paradigm shift right

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<v Speaker 1>now in determining which companies can command and control their

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<v Speaker 1>destinies in the post COVID world. You know, Google, Amazon, Microsoft,

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<v Speaker 1>they all have their first party data that they can

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<v Speaker 1>leverage in a clear path towards success. But Facebook currently

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<v Speaker 1>still relies on third party data. And at the same time,

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<v Speaker 1>which is why you saw the shortfall from the privacy

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<v Speaker 1>changes that Amazon that Apple made. But further to that,

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<v Speaker 1>they have a heavy reliance and a growing reliance on

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<v Speaker 1>third party developers to really materialize this metaverse vision that

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<v Speaker 1>they have. So they're stuck in this limbo state until

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<v Speaker 1>until they get their true bearings. And and it could

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<v Speaker 1>take some time, So James, limbo could be okay, right

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<v Speaker 1>if you get to a better place. Um and and

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<v Speaker 1>let's all remember, we wouldn't have built the railroads if

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<v Speaker 1>we didn't. You know, they took time to to build

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<v Speaker 1>way back and required a lot of money. I'm just

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<v Speaker 1>saying that it does take time to pivot for a company.

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<v Speaker 1>Do you think, though, the pivot to metaverse is the

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<v Speaker 1>future destiny for Facebook? Yeah? I don't. Facebook is not

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<v Speaker 1>going anywhere. I mean, we need to be clear about that.

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<v Speaker 1>Facebook is here to stay, and they will. Why do

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<v Speaker 1>you say that? Why do you say that because it

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<v Speaker 1>connects nearly three billion people in the world, and and

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<v Speaker 1>and has dependence on so many from people and communities

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<v Speaker 1>and businesses. Um, it's just it's still commands a ton

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<v Speaker 1>of attention. So it's not going anywhere. But in terms

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<v Speaker 1>of your question, was um, it really depends on what

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<v Speaker 1>type of timeline you have as an investor. Um. You know,

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<v Speaker 1>if you have an indefinite timeline, then then then the

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<v Speaker 1>homebuying and holding Facebook at these levels I think makes

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<v Speaker 1>a ton of sense. I mean, it's cheaper than a

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<v Speaker 1>lot of legacy companies after today's move. But you know,

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<v Speaker 1>it really comes to that trade off on which which stocks,

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<v Speaker 1>which companies can deliver the greatest alpha in the time

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<v Speaker 1>horizon that you have as an investor. What it's one quarter,

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<v Speaker 1>one year or of five plus years? So is so

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<v Speaker 1>is Amazon? And we're gonna talk. We're gonna talk Amazon.

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<v Speaker 1>And second, I want to stick on meta because we

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<v Speaker 1>have a do have a little bit of time with you,

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<v Speaker 1>which is great. James does does Facebook and meta platforms?

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<v Speaker 1>How does it start to make money in the metaverse?

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<v Speaker 1>I mean, if we're talking like a time horizon five

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<v Speaker 1>fifteen years down the line here, how does it successfully

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<v Speaker 1>make this transformation from a company that has served people

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<v Speaker 1>ads in Facebook in Instagram and Instagram Stories. How does

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<v Speaker 1>it make that transition to getting its revenue from the metaverse?

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<v Speaker 1>What does that look like? That's a great question, and

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<v Speaker 1>I don't think anybody can tell you today definitively what

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<v Speaker 1>that looks like. It's really going to be incumbent on

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<v Speaker 1>and what the developers and creators of these content and

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<v Speaker 1>experiences kind of come up with. You know, what is

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<v Speaker 1>the world going to look I mean a few years ago,

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<v Speaker 1>you know, TikTok wasn't even a thing, and now it's

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<v Speaker 1>it's blown up to where people spend in an ordinate

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<v Speaker 1>amount of time on that platform. So in terms of monetization,

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<v Speaker 1>you know, you can think of digital assets that are

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<v Speaker 1>sold advertising opportunities within the metaverse itself, but giving a

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<v Speaker 1>concrete UM kind of outlook on how exactly that will

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<v Speaker 1>look at it. Quite frankly, I don't even think Marcus

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<v Speaker 1>Zuckerberg and Facebook clearly no, I mean they for multiple quarters.

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<v Speaker 1>You know, he's been talking about UM, the reliance on

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<v Speaker 1>the creator community to to work with them. They can't

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<v Speaker 1>do it alone. So I think that path forward UM

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<v Speaker 1>is still TVD, and I think that's what's giving investors

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<v Speaker 1>ponse with the stock, it's not so much. The results

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<v Speaker 1>estimates only came down by four percent, so you're not

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<v Speaker 1>talking about a huge hit. The bigger question investors have

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<v Speaker 1>is what is your confidence level in the growth trajectory

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<v Speaker 1>and the estimates that you have for the other companies

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<v Speaker 1>that you're seeing that have reported so far from megacap

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<v Speaker 1>four of the five acts, Facebook has um has done well.

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<v Speaker 1>Because you have that visibility with Facebook, you just you

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<v Speaker 1>can't say with a high degree of confidence that this

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<v Speaker 1>will be the growth rate for this year and next.

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<v Speaker 1>So it's kind of an interesting time, right James, when

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<v Speaker 1>we're trying to figure out what is the world post

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<v Speaker 1>pandemic For a lot of companies that benefited big time

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<v Speaker 1>all on Netflix and others benefited during the pandemic, we

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<v Speaker 1>just we kind of don't know. I hate to use

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<v Speaker 1>the word normal because what the heck guy is normal anymore?

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<v Speaker 1>But I mean, like, what is you know, what is

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<v Speaker 1>it the growth rate after the pandemic, especially at a

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<v Speaker 1>time when there are some companies to trying to figure

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<v Speaker 1>out maybe what their future growth is fundamentally meeting business

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<v Speaker 1>changes like a Facebook. That's the perfect question and the

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<v Speaker 1>and then it's the question then I think investors don't

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<v Speaker 1>know um and I mean you saw so we before COVID,

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<v Speaker 1>we had a pretty good understanding of what these growth

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<v Speaker 1>curves would look like for these companies. You can you

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<v Speaker 1>can model that out pretty pretty well and with a

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<v Speaker 1>pretty good degree of competence. With COVID, that growth curve

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<v Speaker 1>steep and substantially. Um. Now we're much below that growth

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<v Speaker 1>curve because there were lapping all of those monster quarters

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<v Speaker 1>that we saw from last year. So with that lapping,

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<v Speaker 1>you know, investors are trying to discern is that new normal,

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<v Speaker 1>this new rate that we're seeing, or will we actually

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<v Speaker 1>go back to the average that it was before COVID.

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<v Speaker 1>And that's what we're trying to do as investors, and

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<v Speaker 1>we believe right now is one of the most monumental

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<v Speaker 1>buying opportunities for companies that you have confidence in that

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<v Speaker 1>will actually and tangibly uh revert back back to that

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<v Speaker 1>mean because you're buying them on fire sales prices. He's

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<v Speaker 1>Amazon one of those companies we got to talk amaz on.

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<v Speaker 1>It's up in the after hours right now. Big headline

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<v Speaker 1>here the prime membership being raised by twenty dollars a year.

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<v Speaker 1>That's going to be at one thirty nine year. Remember

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<v Speaker 1>Prime came out in two thousand five. It was seventy

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<v Speaker 1>nine dollars a year then, so seven increase since two

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<v Speaker 1>thousand five. Amazon would say, hey, we've added a lot

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<v Speaker 1>to that, but you know, talk about inflation there. Um

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<v Speaker 1>what do you make of these earnings? James, Well, first

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<v Speaker 1>of all, thank god, because it's our second biggest position

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<v Speaker 1>that's really definitely needed Amazon to work. When Amazon has

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<v Speaker 1>been the bottle of champagne versus a bottle of Scotch tonight,

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<v Speaker 1>is that what it is? Exactly? It was tequila last

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<v Speaker 1>night and probably maybe tonight. Um no, but uh jokes aside,

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<v Speaker 1>the Amazon was the company that was left behind. You

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<v Speaker 1>know within these megacap companies, you saw surges from last year.

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<v Speaker 1>You know, Amazon has been a dead stock and and

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<v Speaker 1>it's also gotten hit with the recent wave. Um we're

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<v Speaker 1>recent down, down up in the market because I think

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<v Speaker 1>people were just selling high pe names and the price

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<v Speaker 1>to sales multiples we're kind of not really an issue.

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<v Speaker 1>But um or we're not really uh incorporated into the

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<v Speaker 1>valuation analysis. And today you're with Amazon and company that

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<v Speaker 1>will actually on a pe basis trade about thirty forty

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<v Speaker 1>times next year. I mean, when have we ever been

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<v Speaker 1>able to say that it has a pe multiple of

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<v Speaker 1>UM in the double digits versus triple digits. So it's

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<v Speaker 1>on the it's a much much deeper growth curve in

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<v Speaker 1>terms of its bottom line performance and it's top line.

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<v Speaker 1>I think people will increasingly understand that as we anniversary UM,

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<v Speaker 1>the harder comps that this is indeed one of those

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<v Speaker 1>companies that will revert back to its original growth curve UM.

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<v Speaker 1>And and with that being the case, that's why it's

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<v Speaker 1>our second biggest position, because we've it and this can

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<v Speaker 1>easily be a plus stock. Yeah, and today closing at

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<v Speaker 1>seventy six, Hey help me out here, just got about

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<v Speaker 1>forty seconds, So Amazon's up almost after hours, Pinterest is up,

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<v Speaker 1>Snap is up for the invest co q q Q

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<v Speaker 1>now up about two percent here in the after hours.

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<v Speaker 1>Even Facebook is up in the after hours by about

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<v Speaker 1>one percent. What's the play tomorrow potentially and just got

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<v Speaker 1>about forty seconds tonight. Are also Pinterest and Snap also

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<v Speaker 1>our companies that are fully in control of their own destiny.

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<v Speaker 1>So I'm not surprised with expectations being so low, um

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<v Speaker 1>uh for them to move the way that they are

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<v Speaker 1>after hours. But the play for us is you have

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<v Speaker 1>confidence in the glowth grooms like an Amazon, like a

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<v Speaker 1>Spotify which sold off date today for no real reason.

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<v Speaker 1>In our opinion, Um, you know there there's there should

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<v Speaker 1>be incremental buying, and that's exactly what we're what we're doing,

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<v Speaker 1>all right, just pulling up spot if I've seen what

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<v Speaker 1>it's doing here in the after hours and it is

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<v Speaker 1>up two point six. Just a f y I. James

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<v Speaker 1>chock Mark, thank you so much. You walked us through

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<v Speaker 1>the world of technology. We so appreciate. A partner in technology.

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<v Speaker 1>Analyst at Clockwise Capital on the phone from Miami. What

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<v Speaker 1>did you say, he's going to some white cloth tonight. Yeah,

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<v Speaker 1>a little bit of white cloth tequila last night. White

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<v Speaker 1>Cloud to night, Amazon's second biggest position for Clockwise Capital,