Welcome back everyone. We have an exciting week ahead of us. We have some of the biggest earnings in the market happening this week. In fact, this is considered the biggest earnings week of the earnings season and front of us. Now, we have a list of the most anticipated earnings reports. Lots of big companies here. And what I've done is, I've gone through. And I've circled, the ones that I think are the most notable the ones that I want to go over and give my predictions of.
We just had Coca-Cola, they reported this morning but then tomorrow we have Verizon McDonald's Spotify. Microsoft and Google. So two big tech companies and then we have visa and chipotle. So tomorrow we get to see how Verizon's doing. I'm going to give some thoughts on Verizon and a little bit of analysis on it. We get to see how the food industry is doing with McDonald's and Chipotle. We can see what spotify's up to.
We haven't looked at that company in a while and then we have two big tech companies, which these ones really drive the market. So, tomorrow is a massive day in the market. Then on Wednesday, we have meta, another big tech company will See how Matt is doing. We have Roku and then Thursday's another, massive day Thursday, we have Amazon Intel Snapchat, MasterCard and Crocs. So another five, huge companies reporting earnings. I'm going to be going over all of these and giving my thoughts.
My predictions on what's going to happen and what investors should have in their mind. Going into these earnings. So we have a lot to get to. We're going to be reviewing all of these. I think it's going to be a very fun video. I'm going to put timestamps with all the ticker As of the different companies but I hope
you enjoyed the whole video. Okay, now let's go ahead and Jump Right In the first thing I want to mention is before we get to the specific companies, I want to share some thoughts about how I view, earnings reports.
My mind frame going into them. When I first started, investing the big thing for me that I focused on was what the news focused on and when you go into earning season, there's a couple things that the news always focus is on, they focus on whether or not the company beat its earnings per share estimates, or whether they missed it.
Whether they beat their revenue estimates or whether they missed it, every single quarter, a bunch of different analysts, come up with different analysis of what the EPS will be, and what the revenue will be, and that forms a consensus EPs, and revenue estimate. And then the company either beats that by coming in above those estimates, or they miss it by coming and Below. Like it's a pass fail, even if they're really close, but they missed by a couple pennies they
missed the company failed. It was pass fail and they miss their earnings per share estimates. So when I first started investing, I'd look at all the companies in my portfolio and I would see the news that this company missed its earnings per share estimate and I'd be so bummed because of that. I think the company is doing poorly, it's missing its revenue and its earnings per share. If a company beat its earnings per share, I'd feel so good.
Like my company is doing a great job and that is a totally wrong way to look at earnings. If you're a long-term investor, if you're a long-term investor then if the company came in a few pennies above its earnings per share. That's not really all that relevant to the long-term story of the company, the company's margins were 100 basis points above or below. That's just not that relevant instead. What long-term investors should be focused on is the overall story arc of the company.
The overall qualities of the company, the moat the earnings power, the amount of customers, it can gain the long-term Investments, the companies, making many of the things that are short-term are whether or not they beat Quarter by quarter but long term. We should look at the overall
qualities of a company. So when I'm looking at earnings season, coming up the type of questions, I'm asking, are not just if they beat their earnings per share Revenue, but I'm asking if the company still growing, if it's still maintaining a moat, if the leadership is still in acting in a way that's in the long-term benefit of the company, we can look at different metrics and different Investments That companies do in order to accomplish those goals.
So that's my thought process going in, it's more of a long-term approach. And I think that most investors should not pay so close attention to the earnings per share estimates and the revenue and base the entire company's performance on that. Now, having said that, let's go ahead and Jump Right In. We'll start off and we'll go left to right throughout this week. The first one that I want to mention is Coca-Cola. They just reported earnings this morning and the story of
Coca-Cola is all the same. It's still on track. Nothing's changed. It has a wide moat has an incredibly lucrative business. I think it's very difficult to Dislodge or disrupt Coca-Cola where it is right now. They do have some competitors with Monster Energy Celsius, Red Bull, some other companies in the energy drink category, but I think overall if you're a Coca-Cola investor like Warren Buffett, you don't feel any need to sell the company right now.
Now there's some other companies on this list. Starting off Tuesday, we have Verizon reporting their earnings. And let me bring it up here on qual trim. Quatrain, by the way, is a website that I developed. It's part of the patreon membership, you can try it out for free. Three. Let's go ahead and plug in Verizon. Here we have it up. Verizon is a company. And I've said this for over two years, straight Verizon's, a company that I believe is a value trap. I think it's just a
run-of-the-mill value trap. I don't like the investment, I was invested in it very early when I started off a dividend investing. And once I learned more about the economics of companies and what drives intrinsic value growth and compounding, I sold out of this company, the value. Trap part of it is that always trades at low multiples and High free cash flow yields. So trades at a 6.6 percent free, cash flow yield trades at a PE ratio of a 7.
So it's always decent value. And that's what a value trap is. You get lured into the good valuation metrics. And if you just focus on those and you don't look at the other economics of the company, you realize that you buy into a company that's going nowhere and gives you very, very battery turns, over long period of time. We can look at just one piece of evidence here and I won't spend too much time on this but this is the free cash flow of Verizon here is a 10 billion dollar.
Mark notice something there. The free cash flow has been the same since 2002. So they have not improved their free cash flow growth since literally 2002 over 20 years ago. No, free cash flow growth. And then we can just simply look at some other things that they have changed over time, like the amount of debt we can. Look at the long-term debt here. And even though their free cash flow has remained the same there amount of debt has gone up
substantially since then. So overall, I think the company is becoming less attractive over time, not more attractive. And personally, when I invest in companies, I'm looking for companies that can grow their free cash flow by at least 12 percent per year. I want free cash flow per share growth of around 15% per year. So Verizon my opinion is a value trap and this is one of the companies that even though earning Seasons coming up and they have earnings tomorrow.
Even if they beat their earnings and beat their revenue which they probably will, that does not make it a good investment in my opinion. I think it's very very poor investment. Next up, we have McDonald's here. Let's go ahead and bring up McDonald's on on quiet room here. I believe that the restaurant category still going to do really well. Now I have a hard time saying this because it's done so well for so long that you believe there has to be a pullback at some point or another.
But when I look at fast-food lines, when I look at McDonald's fast-food lines, we have two of them in my city and both McDonald's are constantly backed up with people in the lines. What I see is, I see a lot of demand all the time with McDonald's McDonald's has also been on top of their app. And they have a great mobile app, they're better at getting orders out. Consistently, they've improved the consistency of their food, the Management's doing a great
job. This company is in good position and I think they're going to have good earnings. I think that once again the restaurants are going to have good earnings throughout this year. So McDonald's would surprise me. It would surprise me if they came in way below expectations, or they had something go fundamentally wrong with their business. This quarter, that would be a shock because I think this company I think it's fire. On all cylinders McDonald's.
Unlike Verizon would be a company that I'd be happy to be invested in. I think the company is great. My problem with McDonald specifically is I think the company is very expensive for a restaurant. It's a pretty expensive company. 26 forward, P/E free cash flow, yield of 2.56. So investors are paying a lot for McDonald's. Right now, it has very high
expectations. I'm not willing to pay that much for McDonald's because I have other companies that I think deserve the cash a little bit more companies that are growing. A little bit faster. Now after McDonald's, we have a tech company, which is Spotify, Spotify is a great product. It's a company that I've used the product for a number of years. I'm I'm glue to it.
Whenever I try to leave Spotify, I end up coming back and that's a good sign for the company because you actually have stats on this over 70% of the people that leave the company Spotify and try to go to a competing product. They come back. So it is a very sticky product. Having said that the problem I have with Spotify is They focus on all these different kpis, like usership, growth Revenue, growth growing out there podcast platform, they're growing, but
they're not growing profitably. So even though the company is getting bigger and bigger and bigger, the economics have an improved check out this chart here that shows in Orange, the amount of free cash flow, they generate. And then in blue, the amount of stock-based compensation, they do over the past year. They've, they've done more in stock based compensation done in freak. Cash flow in, this is for a very mature company.
Spotify, has been around for a long time companies very, very old and I don't love the idea of owning a company that even though it gets bigger and bigger and bigger, it never becomes profitable. It never has any year where it has any massive profits right now, I'm staying out of that
one. Now, after Spotify, Tuesday on market closed, we have two massive earnings reports I'd even say three because visas, that's a pretty big deal but we have Microsoft, Google, and Visa three massive earnings reports coming up Tuesday after market close. Let's go ahead and start off with Microsoft hair. When I look at Microsoft, I've said this many times before I'm heavily invested in this company, I think it's the poster child of a company with great fundamentals.
Having said that Microsoft's business, relies heavily on the entire economics of the Fortune 500. So if your Fortune 500 company, you use Microsoft products, one way or another, you As Microsoft teams use Azure Cloud hosting use the suite of excel products, and that type of thing, they have so many different products. They sell business to business. And the issue for Microsoft that they're facing is that they sell to all these Fortune 500 companies.
And many of these Fortune 500 companies and even smaller. Tech companies, they're cutting back their cutting back in the amount of licenses. They need the amount of seats. Many of them are doing layoffs and of course, when they do layoffs, they say, hey Microsoft, we don't need as many licenses for Excel. We don't need as many licenses for this Nat. We don't need as much Cloud hosting. So Microsoft I believe. I'm not sure on this but I think it might show some weaknesses
quarter. That would be my guess I think it's going to be tough for them to grow their business and have a lot of growth when all of their customers and the broader S&P 500 in the Fortune 500 companies, they're all cutting back a little bit. So I think Microsoft is trying to swim upstream. They're fighting an uphill battle Why? I think it's going to be a very difficult next three quarters for them.
Now, the history, statistically speaking, Microsoft statistically beats earnings per share in Revenue all the time. They beat it, nine times out of ten out of the past 20 or earnings reports. I believe they beat it like 18 times so they're very good at beating their earnings per share in Revenue. But again I have my concerns this time with the way the economy is working and how businesses are focusing on efficiency and profitability. And Cutting back on excess. A lot of that.
Cutting back. On excess is cutting back on Microsoft. So that's my thoughts on it. I think it might be a weaker earnings report in terms of the fundamentals of the business and the continued story arc of it, I believe the moat is still in place. So even if it goes through a weaker quarter or two, I'm not concerned about this company. It is incredibly strong, it has an incredibly wide mode. The economics are incredible with this company. The profitability, the margins
of it are very consistent. They're even going over time. They've done such a good job with the company. So I think Microsoft is just as relevant today, as it was 20 years ago, I think the cloud business is still going to grow over time. I think they're sweet of Office products are still very well positioned. I think that chat GPT the technology behind that and how they got ahead of Google with that. I think was incredible, incredible pivoting by forgetting his name, not Sundar pichai.
He's of Google. What is a Microsoft Satya Nadella? I think that he did such a good job, getting ahead of Sundar pichai, so they're taking different approaches with it. But I really like what Microsoft is done. I think another weakness potential in Microsoft's business.
Might be the gaming portion. I still think people are in the mode of going out, getting out of the house having experiences and I think it's going to take a while for the pull forward of covid to work its way out of the gaming category. So it'll be interesting to see long-term ERM. I'm very bullish on Microsoft. I'm invested in the company short term. I think that they're going to have a little bit of struggle. Now, moving on, of course, we have Google the other massive big tech company.
Reporting this week. We have it pulled up here, Google trades at a lower valuation of Microsoft. So that's why a lot of companies are sorry. Investors are focused on Google is because the company trades at a lower valuation. An 18 forward, P/E ratio of four point two, three percent free cash flow yield. These are very good valuation metrics, it Paints the company's being relatively cheap. Right now and I think Google has
created down too much. I think the company is undervalued, I'm invested in the company personally. Now a couple notes on Google, Google release, their AI chatbot, which is Google barred, and investors quickly noticed. It's not as good as chat GPT. So investors got concerned that maybe Google doesn't have as much of an edge on AI as
Microsoft does. Maybe they're, they're behind Microsoft, but then Sundar pichai, just last week, went on to 60 minutes and he said in that, that Yes, we know it's not as powerful, but this isn't all we have. He said, obviously, this is not our most capable chatbot.
They have more powerful chatbots that they have not yet released and he said that he wanted to basically get people a little bit used to Bard before doing the next releases because the next releases are scary powerful, so we don't really know. But he gave a strong impression that Google has something much more powerful than Bard, much more powerful language models, And even ones that are hooked up to search and internet access, which is different than how
barred operates right now. So basically, it's a long way of saying that Google might actually still be ahead of Microsoft and AI, but they just haven't released the tech yet. We don't know. But that's one of the assumptions being made here outside of the, a ichat GPT barred debate. Google has its core products,
which are doing great. I think, out of everything that I'm going to be looking for on Google's earnings report, the Thing, I'm going to be looking for, I'll be ignoring the Google The Google course search. I'll be ignoring YouTube that stuff is going to be fine. We already know about those businesses, the thing that I'll be looking at is the cloud service Revenue. The cloud product, I want to see
that grow. And more importantly, I want to see the margins improve on that to where it can eventually become profitable hopefully profitable this year. If Google Cloud became profitable, that would be a massive Tailwind for this company. So far Google has multiple parts of their businesses that are profitable. They have, the course, search, they have Android, Dev YouTube, all generating profits. Then they have their other bets, which is a money furnace.
They burn money in the other bets, then they have Google cloud. Google cloud is the fastest growing portion of the business, it's where they've hired the most new employees where they put the most new capital in and it's not yet profitable. So once that gets profitable, that is another entire pillar of their business. It's more important than YouTube that will suddenly become profitable and be a Tailwind with growing profits year over year. So that's what I'm gonna be
looking for. When I look at Google's report, I'll be looking over the other stuff but the cloud is by far the most important story line right now with this company, I think that Google's earnings are going to be good, I think they will be, I think YouTube has been doing well. I think Google search has been doing well. I don't think that chat gbt is taking massive market share from search or anything like that but again, my Kiss when I'm looking at Google, it's going to be Google Cloud.
I'm hoping at the margins, go up and that it loses less money, this quarter than it did the previous quarter. It's not going to be profitable this quarter but I want to see the losses decrease and accelerated rate, so it gets closer and closer to profitability. So Microsoft and alphabet. Those are going to be two big
ones. The next big one is going to be Visa. Now if we think about how Visa reacts Microsoft is a weather vane for corporate spending, if corporate spending is doing well, and the business world is doing well in growing. And Microsoft's earnings are going to grow Visa is similar but with consumer spending so it's a weather vane for the overall consumer economy and how much we're spending. I think their earnings are going
to be good. I think they're going to meet their expectations or be right in line with them. I believe the company right now is a high-quality compounder that has a lot of continued. Growth ahead of it. Visa has a natural hedge against inflation. As inflation goes up, consumers, spend more money. They already hedge against that and the company right now, I think trades at a good. You're Wastin. So there's not too much baked into the price already, in my
opinion, with this company. So the earnings report for Vis, I think will be very simple. I think the earnings will be good, I think consumer spending is going to be very strong. You'll probably see even headlines up being stronger than expected, but I wouldn't bet on this. This is just my prediction. I can't see the future. Maybe I could be wrong. Let's go ahead and move on to
Chipotle hair. Now, we have Chipotle brought up here, ticker symbol CMG, and this company trades, if you can see it, there, let me zoom in a bit at Thousand eight hundred dollars per share. The stock price has really gone up and they haven't done any stock split. So it's trading at a very high valuation. The valuation right now is that a PE ratio of 35 and a free cash
flow? Yield of 1.7, which fills too expensive when you first glance at this company, it feels too expensive, but keep in mind, this PE ratio of 35 is the same as it was five years ago. So the PE Ratio hasn't changed all that much or the past five years. But the stock prices, Up hundreds and hundreds of percentages over the past five years.
This has been a wonderful investment an incredibly strong company to invest in. This is one of bill ackman's main Holdings and one of the ones that he was most notably public about. And no matter what you think of Bill Ackman, he got chipotle, right? He really nailed this investment. This shows you that again. A lot of investors are focused on the next quarter. What's going to be the earnings per share, what's going to be the revenue? What is the PE Ratio? That's East on next year's
earnings. These are all quarterly short-term viewpoints. And I did a video on this where I went into an interview that Bill Ackman had years and years and years ago. This was all the way back in 2017, 2017 to put that in perspective. During the time of this interview that I'm going to show you a Chipotle was trading as a seven billion dollar company. Now, it's a fifty billion dollar company so the interview was seven billion dollars. It's currently trading at a
fifty billion dollar. Valuation. Let's go ahead and take a look at some of this the summer. Just the parts of this interview that I think stand out well Chipotle Bill. If we could sure she has got crushed again last week on earnings. Yeah. What makes you still convinced that you can turn this thing around? So we're early. We joined the board in the last year and we're going to work hard to make it helped the company turn, but it's working this work to do for sure.
Okay, so he says that there's work to do with the company and again, this was back in 17, the stock price of Chipotle was $275 currently 1800 dollars. So, there was a lot of work to do, and it seemed to work out really well for him, but I want you to listen to part of the debate here of what the other investors are focused on the gang here. Today, Josh, you been - on AAA Steve. You've been - on AAA suggesting that there's no reason why this stock can't continue to go lower.
I love the, by the way, I love the restaurant. I just think I just think there was a You can about the company and sometimes the magic wears off and once it wears off, then people say okay, it's quick service restaurant. Why am I paying 30 times earnings for it? Why would investors pay 30 times earnings for Chipotle back in 2017? That's the problem with focusing on the short-term earnings estimates, is they only show you what's going to happen over the next couple of months.
They do not tell you how the story arc of a company's going to be over the next five years. And this is what everyone was focused on. What is the PE ratio of the company? What our next year's earnings next quarter's earnings, the current multiple of the company. None of them. Look at it, through the lens of a long-term story arc. They look at it through the lens of next quarterly. Earnings how much you paying for
that in the current multiple? I mean, it's still a skit about with the stocks done that and that doesn't really matter. What matters is one of the earnings done and what's the valuation and a 30 x, next year, giving the benefit they hit their target for once first time in three years, it's still very expensive. In a competitive space, I would, it was $275 and Very expensive, very expensive.
At that time. And notice how Bill Ackman does not focus on the current multiple he focuses on the long-term story arc, probably the opportunities in the stock market are created because most investors are focused on what our next year's earnings going to be, what's an appropriate, multiple? And first story like this, when we're company's been through what they've been through sales of gone from Two and a half to two million. The right way to look at in our view is not just about a
multiple next year. You're like, okay, what's a reasonable trajectory for a recovery and what will the earnings be two years out for years out? Years out and then discount those earnings back in time on that basis. It's a very cheap stock, if they can perform. So that's the biggest distinction there. While all of them are focused on next. Quarterly report, the next earnings Ackman is focused on the long-term storyline of the
company. So I think that's important to keep in mind, instead of focusing on just the current multiple, just the free cash flow yield. Look at the qualities of the business and how things will develop over. The next five years, it has a much bigger determining Factor. So right now the multiple is around the same for Chipotle's that was back in 2017. We look at the performance since then it's up.
Well, over 500 percent. This goes back to 2018 back in 2017 was right here at the lowest point to be buying the company, two hundred and seventy three hundred dollars per share. Now, with my expectations going forward with Chipotle, I think they're going to have good results. I think just like McDonald's, I'm expecting the food industry, the quick service restaurant industry to do really well overall. So Chipotle is one that I'm bullish on. I think it's going to do great.
I look forward to the earnings It's going to be on my watch list. If we do have a sell-off, if we have investors panic because of a slow quarter, I just might jump into that one. Now, moving on from Chipotle, we have another giant company reporting earnings, which is meta, another big tech company here. Let's go ahead and type this one in here. Mehta has always been around The Narrative of the company. That's what's been driving this company stock price performance.
Now, we have a story here. I used to own meta, I sold out of the company at a very favorable time. Right around here, I sold out of the company because Mark Zuckerberg was talking about the metaverse. That's all he was focused on here was the metaverse.
He is talking about all the Investments, they're making in the new goggles are coming out with and all the he was coming out with videos and advertisements and promos for the metaverse and talking about how he's going to sink a lot of money into this metaphors, and the ROI on this money is very unknown. So obviously investors did not like all of this discussion around. The metaverse the stock price completely plummeted over the following year. And what did Mark Zuckerberg do?
He had a choice there, he could continue to talk about the metaverse ad, nauseam and talk about how he's investing more and more money there but he made a huge pivot. Once the stock price, it an ultimate low a couple weeks later Mark Zuckerberg came out with a letter, you publish a letter saying that he was optimizing the business and the letter really did not mention the metaverse at all. This letter was a complete pivot.
A 180-degree turn from all of the talk of the metaverse now, he was focused on profitability laying off, employees of the company. Doing a different layout of the management structure to have less managers and more people working at the company doing the Hands-On stuff. He talked incessantly about cost structure and optimization after doing that. The company had a huge rally
back to $200 per share. It's not back to where it was in 2021, is things were getting out of control, but it's had a huge. Huge rally up 100 percent from its lows. So it's gone through this dramatic pivot and the stock prices run back up to where it now has a PE ratio of 15, a more average value where it's neither really undervalued or really
overvalued at this point. And it has a free casual yield of 3.4 1%. So I know a lot of met investors bought into the company when it was dipping are now taking gains. Many of them are moving on to different positions. Now, my thoughts on meta, first of all, I'm a little bit biased against meta because I don't like, so, Media companies overall all that much, I don't like the industry. I don't like Pinterest that
much. I don't like Snapchat and I don't love Instagram and Facebook that much. I just don't love the industry all that much. I think it has a lot of problems. There's always the legality issues. They're always being called in front of Congress and then they have ADD problems and there's all different things with it. So I'm a little bit biased against this industry.
I've invested in meta before I made a little bit of money on the company, but I was never a huge holding when I look at the company that Challenges. They're facing one of the biggest ones is the cost structure of the company. You can see the problem here with the growing amount of stock-based compensation, like every Big tech company meta faces this as well. And I think this is a challenge
for the company. So I think what investors should be focused on with these upcoming earnings is looking at the cost structure. Looking at the, the amount of stock-based compensation compared to the amount of free cash flow, and compared it to the amount of capex Investments, we should see stock-based compensation. Start to fall a little bit. Has he been doing these aggressive layoffs? And we should also see free cash
flow. Start to go back up as they're at least leveling out their capex. Spend in the past quarter, they've been spending nine billion dollars on capex in a single quarter which is massive. This is around 30 percent of their revenue, going to capex, massive capex. Spend that needs to level out at a minimum or at least go down for them to generate their growing free. Cash flows. So that's what I'm going to be focused on with medicine. Earnings report the cost structure of the company.
The stock based compensation, the capex spend, and the other stuff whether or not they gained a few 10 million, new users or lose 10 million users. I don't think is the biggest deal. I think the cost structure is going to be the primary focus and I think the overall they're going to have positive metrics because it sounds like Zuckerberg has been very focused on this pivot. It's not just talk. He has laid off a lot of people he has focused on optimizing costs.
Now next up of course we have a Roku Earnings Wednesday after closes. Well this is a company that I've never. I've never been behind the story of this company. I think there's too many problems and headwinds that it faces. First of all the performance of the company over the past two years has been - 84%. It got hyped up to a point that was incredible where people thought that Roku is taking over
the world. This was in line with the Kathy would Arc invest hype one of her key Holdings and then it came back down to reality that this company is not making Money right now and it faces intense competition part of their competition is apple with the Apple TV and then you have even more intense competition from Amazon with the Amazon Fire.
Amazon's practically giving away TVs on Amazon just to get people using their Fire TV. So when you buy the Amazon TV, it comes with the Fire TV built inside like many, many Roku TVs as well. They have the Roku built inside. The the reason that they want to subsidize the Where to get you using their their piece of software is just like apple wanting to get you to use an iPhone.
They want you to get into the ecosystem and they can monetize you a bunch of different ways through advertisements through different media and content that they produce. They're all different means. So this is a platform play Roku wants to become such a massive platform in Smart TVs that they can leverage that to sell advertising that they can build out their own little mini Netflix service that they can sell subscriptions and different things in shops.
They can have lots of different ways. As of monetizing it, if they become a big enough platform. So that's the story in the thesis of the company, but like many of these companies, it talk really big about their big grandiose plans. The metrics don't look too favorable. The earnings per share has been - for the past three quarters. It's expected to be - this next
quarter. We're going to have - earnings per share and then of course this is another company where their free cash flow is all over the place. Sometimes positive, sometimes negative but then there's another one where they have the high stock-based compensation. It's an expense that's going up over time. Meaning, they're deluding shareholders. I don't know if they'll beat or missed. I can't say, but I think it's just going to be tough.
That's my guess on this one. Now, next up, we have Thursday morning, we have MasterCard the duopoly with Visa reporting earnings as well. And the comments that I said around Visa, you could almost use those for MasterCard as well. I'm personally invested in, MasterCard, I'm extremely bullish on the company. The more that I read about it and research it, the more that my concerns about the of the company and competitive threats.
Those go away a little bit and I realized the fundamentals of this company and how good of a compounder it is, the revenue. Growth is remarkable it transfers, all of its Revenue into ibadah. The free cash flow is so efficient. All of their cash that they generate goes right back to the investors. So the free cash flow generation is incredible. Stock-based compensation, not a problem for this company, their free cash flow per share growth is around 17 percent.
Even when you adjust out stock-based compensation, And it's still around around sixteen and a half percent. The market average, is around eight percent. So MasterCard is growing, its free cash flow per share at a rate of around, double the speed of the market average. So even though the company trades at a 29 forward P/E, it deserves to trade that way because it's growing its intrinsic value at roughly double the annual rate of the S&P 500 citing, this company's wonderful.
I think it's high-quality compounder. I think it trades at a reasonable valuation. I'm personally bought it into the company and the story of it. I don't concern myself with the competitive threats of cryptocurrency or any of that type of stuff. I don't think that that's credible threat. I think the biggest Potential Threat to MasterCard. Maybe sometime down the road, is something like Apple pay.
I think that could potentially be a threat, but right now, it seems like apples much more inclined to work alongside Visa Mastercard than to butt heads with them. So as of right now, I think the Earth. For MasterCard and Visa both of them are going to be good. I think the companies are very high quality, I don't think there's too much baked into their price and I expect a lot from MasterCard. I have very high expectations for the company. We look at Crocs here.
This is another company that I own just a little bit of, I own a hundred dollars right now. At one point, I invested 1000 dollars into Crocs and it grew to a $1800 position. So I quickly made 80 percent gains in the company and around three months. And so this is a small by for me. I bought a thousand dollars worth of it right here. It raised up to an 18 hundred dollar position and I sold the majority of it right there to lock in the gains and I put those gains into Google that was
a trade that I did. Now it probably would have been better if I would have just kept it in Crocs and I think that's a mistake. I made, I sold the company because at the time, getting any gains from any company was incredibly tough and 2022. So when this company went up 80%, I felt like it was prudent to at least lock in some Those canes and put it into a different company. That's a little bit less volatile.
Having said that when I look over the fundamentals of Crocks and the brand value of this company, which I know it sounds funny. It's Crocs the silly shoes, you have gen Z decking out there. Croc shoes. I believe there's sustainable brand value with Crocs people, like the brand Crocs, they don't want the Chinese knock-offs, they don't want the, the second-hand pairs. They want brand-new 60 dollar pair Crocs on top of that. Crocs bought the brand. Hey dude.
Another very casual shoe, that's incredibly comfortable. Now, I've never worn a pair of Crocs shoes in my life. I haven't owned a pair ever, but I do own a number of pairs of hey, dudes. I think they're the most comfortable shoes on Earth. So Crux owns two.
Different brands that are both different enough that they give them access to a different category of consumer, but they're both incredibly comfortable and they have good brand value when I buy hey dudes, I don't want to buy knockoffs, I want to buy the real thing. So I think this company has Or sustained ability to keep its economics. Then a trendy company.
I wouldn't consider this just a trendy company, but when I look at the company, I regret selling it a little bit because I actually don't think that it's overvalued, it's still trading at a PE ratio below 9, very low expectations for the company. The only real downside of the company right now is to buy the hey, dude brand, they overpaid a little bit. They bought it during the peak hype and they paid mostly with cash. So they Took out a lot of debt for it. They're paying this down super
fast. So they went from 2.8 billion down to 2.2 billion in just a year, incredibly fast pay off of their debt, and they're also buying back shares while paying back the debt. So, Crocs is a really neat company, they've really done. Well, the management has done great, very cool company below a ten billion dollar valuation. Another thing I'd pay attention to with Crocs is we have right
here? This part on quiet room that shows you the Insider trades of the And you can see what they're doing if they're buying and if they're selling, I would pay attention to what the Insiders are doing. Because one of the biggest indicators to me that this company was undervalued was, the amount of insane buying that was happening from all of the Insiders, the executives, the board of directors. Everybody in the company was buying the company hand over fist.
When it's sold down here, they were using their own money, their own salaries, it wasn't just stock options. Just maturing This was them, buying the company like crazy when I saw that as well as the valuation, as well as the acquisition. I thought it was a good buy as well, and I think that's a big indicator.
So keep that in mind, insiders sell stocks for all different reasons, but when you see all of them buying a company, they only really do that for one reason and it's to make a lot of money. Now, moving on from Crocs, we have a slightly bigger company which is Amazon. I've talked about Amazon a lot, so I'm not going to restate the thesis hair but let me give you my predictions of this upcoming quarter.
The biggest in Music value drivers of Amazon is the AWS business, the growth of that business over time and the economics of it, the advertising business, another huge intrinsic value, driver of the company. And then you also have the prime business, which is layered upon the retail business. I believe that the retail business is going to do fine, it might come in slightly above slightly below, that doesn't really matter my opinion. I think it's going to be mostly
in line with expectations. I think the advertising business is going to do well, I believe that. Amazon is taking advertising market share from Google and meta. They have a better advertising platform because it's directly what the customers shopping for. And I believe we're Amazon is going to struggle is with AWS, Amazon's web services. I think this is going to be a big frowny face for the company. It's going to be sad.
I'm expecting that going in as an investor and I'm expecting people to blast Amazon investors saying look at this AWS has slowed down so much over the past 90 days. It's slow down. It's now down to the low, teens growth rate, like I said, with Microsoft companies in the Fortune, 500 are pulling back on their spin. They're trying to optimize their trying to cut costs and they're
doing that everywhere possible. So a lot of them are firing employees, they're finding off different divisions and they're cutting back on licenses from companies like Adobe like Microsoft. And then they're also cutting costs where they can in one of their biggest expenses which is cloud. I think we're going to see a lot of investors. Bosch Amazon for the slow growth and AWS that I'm expecting. But I don't think that's going to be too detrimental to the story.
So, if you're invested in Amazon, like I am, I think that's what you have to be ready for it. You have to be ready for the critics, talking about the big slowdown and Amazon AWS. Now, moving on, we gotta talk about until this is one of the most popular value Investments dividend-paying Investments and it's one that I've been bearish on and I've been trying to persuade investors away from for
a long period of time. I don't like this company in the Isn't said it's in the risks that it has and the operating efficiency of it, it's not that efficient of a business. It has a lot of expenses, a lot of risks and research and development and capex. The performance of it has been horrible over the past couple of years because a company has faced intense competition from new Rivals.
But I will say what makes me think that there may be some upside with this company is like I said with Crocs seeing the Insiders aggressively by the company that really changes the calculation when you see it Insiders aggressively buying the company over and over again. They could be wrong, but insiders usually know what's going on. The most with the company, I see the CEO of the company buying a lot of the company. These aren't just little
symbolic. Buys he bought 9700 shares right there, he bought another nine thousand shares back in January 31st and he continues to buy more and more shares of the company Beyond what's necessary. He really believes the company's undervalued and that you can turn the company around. So Intel's a company. Don't find attractive because of
the qualities of the company. It's not one that I'm ever going to be buying the dip of, but it is encouraging to see the CEO of the company by more and more shares of the company. Now, finally, we have the best right here. We saved the best for last, which is Snapchat. The nice thing about Snapchat in this earnings report, is normally, Snapchat is at the beginning of the week. And that's, that's meaningful. Because what Snapchat historically does is Snapchats an awful business.
If you're not aware, it's a terrible business, a terrible investment, It's been one of the worst Investments all time since the IPO I've routinely stated that this company is terrible in the way that it manages itself, it has super high expenses, it has a Founder, that's a multi-billionaire. And the investors in the company have only lost money.
So it's been an awful investment and what they typically do is they report before, all these other big companies, Snapchat has horrible, earnings, horrible reports with the advertising business, and it drops, the stock price of meta and Google as Result. Because investors believe that Snapchat similar to meta and Google, the nice thing is now they're reporting after both Google and meta. So, Snapchat can't hurt Google and meta this week, which is
nice for Google meta investors. So whether or not Snapchat beats or mrs. Is not something I'm too concerned about it can impact alphabet and meta this time and the company's one that I've never liked, I don't like the management. I don't like the way that they structure their business. I don't like the app. I don't like anything about it. So Snapchats not one.
One that I'll ever be investing in, but that is my earnings predictions and I hope this was helpful to you looking forward to the next week, a lot to dive into. And of course, after all of this happens, I'll have another video. That's a follow-up for the next week, so that's all for now. I hope you enjoyed and I'll see
you in the next one. One that I'll ever be investing in, but that is my earnings predictions and I hope this was helpful to you looking forward to the next week, a lot to dive into. And of course, after all of this happens, I'll have another video. That's a follow-up for the next week, so that's all for now. I hope you enjoyed and I'll see you in the next one.