4 Can't-Miss Earnings Reports
I still can't believe what I'm seeing in these four earnings reports! 👀
✨ Crypto Made Simple ✨: What Gives the Bitcoin Network Value?
During the depths of a bear market, it’s easy to question the legitimacy of “risky” assets like crypto. This is thanks to journalists, who’ve declared Bitcoin “dead” 466 times and counting.
However, just because the price is down doesn’t mean the Bitcoin network and its native currency, BTC, are no longer valuable.
Today, I want to explain why the Bitcoin network is actually one of the most valuable technologies in existence. And while there’ve been entire books written on this, I’ll do my best to summarize the most important points in just a few paragraphs.
The Bitcoin Network Is Here to Stay 😎
To give some context, Bitcoin (the network) is a fully decentralized payment system that cannot censor, duplicate, or reverse transactions.
Because of its apolitical and decentralized nature, you can’t use “fiat” money like dollars, euro, or yen to transact on the Bitcoin network. Instead, value is transferred via the BTC token.
Every time a BTC (the currency) transaction is made, it’s recorded permanently on the Bitcoin network’s ledger. Anybody can download the full transaction history (in other words, the blockchain) onto their computer and participate in verifying future transactions.
This is called “running a node,” and the more nodes there are (that is, the more parties that verify transactions), the stronger the network becomes, and the less likely it is to get hacked.
The Network That’s Safer By the Day 🔒
One of the best things about the Bitcoin network is its size. Although BTC was the first mass-adopted cryptocurrency, the total size of its blockchain is only 15 GB, which is just 6% of the storage space of the average laptop.
That makes it much easier for individuals to run their own nodes, as most other blockchains are much more data intensive. This is also great for the network’s security — again, more nodes mean better security.
The network’s security is also bolstered every single time a transaction is made.
The easiest time to hack Bitcoin would have been in its early days. But every time a new transaction is posted onto the ledger, it becomes a little bit harder to create a fraudulent version of the blockchain and convince the network that it’s correct.
For the past six or seven years, there’ve been about two to four transactions per second on the Bitcoin network, strengthening it against potential hacks.
The Art of Decentralization 👺
On top of the incredible security of the network is another valuable feature: Transactions cannot be censored or manipulated. Anybody can transact with anybody without having to worry about sanctions, asset freezes, or any other types of censorship.
That’s because there’s no central power in the Bitcoin network, nor is there any way for a person or group to become a central power.
This feature is more pertinent now more than any other time since Bitcoin went online in January 2009, and I believe it’s going to be the ultimate catalyst that makes BTC a desirable asset for individuals — as well as countries around the world.
The Bitcoin network is the only technology in the world that has this level of decentralization and “uncensorability.” That, to me, provides massive value.
So, you can ignore all the “Bitcoin is dead” headlines (or laugh at them).
On Friday, we’ll go over some of the reasons that the BTC token itself is valuable.
Performance Update (Past 2 Weeks)
Disruptors Index: -6.2%
S&P 500: 0.2%
Russell 2000: -1.61%
Top 3 Performers:
Guardant Health Inc. (Nasdaq: GH) +5.91%
Enphase Energy Inc. (Nasdaq: ENPH) +4.79%
Proto Labs Inc. (NYSE: PRLB) +4.77%
Bottom 3 Performers:
Livent Corporation (NYSE: LTHM) -18.25%
Teladoc Health Inc. (NYSE: TDOC) -17.99%
Energy Fuels Inc. (NYSE: UUUU) -15.69%
The past couple weeks have continued the very fragmented period we’ve been in since mid-October, with “safe haven” stocks like consumer staples and utilities moving up, and growth stocks continuing to be flat or down.
For a quick update, watch the video below! 👇
This is obvious when you look at the S&P 500 being essentially flat for the past two weeks, while ARKK is down by more than 10% over the same period.
Our commodity-based stocks were down the most in general, with LTHM 0.00 and UUUU 0.00 in the bottom three.
This is most likely due to large commodities like oil and other energy-related things coming down, as a quick drop in the bigger commodities creates a correlation in the whole sector.
What’s interesting about that is that it’s happening at a time where the dollar has been moving down against other currencies. Typically, when the dollar weakens, it drives up the price of commodities … so I expect either commodities or the dollar to move up soon.
Even if the dollar moves higher again, I don’t see this drop lasting much longer in our commodity stocks after such a sudden move.
Another possibility is that gains are being locked in for 2022 for portfolio managers as we approach the end of the year.
Today, we’re going to take a look at four more Q3 earnings reports from our 21 Disruptors Index: LMND 0.00, PLUG 0.00, TTD 0.00, and Desktop Metal Inc. (NYSE: DM).
Other than DOCU 0.00 DocuSign Inc., which reports next week, this’ll be our last earnings update for a while. We’ll get back to a regular mix of stock and macro updates.
Lemonade Inc. (NYSE: LMND) 🍋
Year-over-year revenue growth of 107%.
Customer base grew 30% year over year to nearly 1.8 million.
Premium per customer grew 35%.
What impressed me the most about LMND 0.00’s earnings is that it held up so well despite a very weak housing market.
Clearly, people are switching from traditional insurance at a rapid pace.
LMND 0.00 is also getting into auto insurance via its acquisition of Metromile, which was completed in Q3.
The deal it got on this acquisition was incredible. For $145 million in LMND 0.00 stock, it got a company with $155 million in cash and equivalents, as well as its 100,000 customers.
In addition to home and auto, LMND 0.00 is also expanding into pet insurance via a new partnership with one of the biggest pet names out there: Chewy. Through this expansion, LMND 0.00 receives exposure to over 20 million Chewy customers.
Plug Power Inc. (NYSE: PLUG) 🔌
Revenue up 31% year over year.
$1.4 billion target for 2023 revenue.
Strong backlog growth — up 45% quarter over quarter to $931.7 million in Q3.
Operating margin positive by the end of 2023.
$2.7 billion in cash versus $547.1 million in debt and $1.64 billion in total liabilities.
PLUG 0.00’s sales went up a solid 31% in Q3, which sounds good, but was only about half of its expected growth for the quarter.
Part of the reason for this was because some of its orders got pushed back to Q4, and into Q1 of next year. Overall, its Q4 sales estimate is $341 million, which is more than it made in Q2 and Q3 combined.
PLUG 0.00 also has a major catalyst coming next year in the form of increased hydrogen fuel production.
Right now, PLUG 0.00 relies on suppliers for most of its hydrogen fuel as it only has one active fuel plant. The difference in cost between supplying its own hydrogen versus having it shipped is massive.
In fact, its CEO said that its internally produced fuel cuts its costs by about two-thirds.
The reason for this is because sourcing the hydrogen fuel externally means the cost is very correlated to natural gas, which has gone up considerably this year.
Since PLUG 0.00 only produces about 20% of its own hydrogen, the costs have been a huge blow, and it’s delayed the margin improvements that investors were anticipating this year.
However, during PLUG 0.00’s Q3 call, management said they expect two more of their production plants to come online this year.
Overall, they expect to produce about 45 to 50 tons of fuel per day by the end of the year, and by the end of 2023, that’ll shoot up to 200 tons per day.
That means costs will plummet over the next year … and we should start to see that a little bit in Q4, and probably a lot more clearly in Q1.
Another bright spot in PLUG 0.00’s earnings report was its electrolyzer business, which essentially provides large stationary power (like generators) for data centers, telecom companies, etc.
Not only is demand for PLUG 0.00’s electrolyzers going parabolic with a potential pipeline of $15 billion in future orders, but it’s actually expected to lower the company's overall margin next year.
What makes this even more impressive is the fact that its electrolyzer shipments didn’t even start until 2021!
The Trade Desk Inc. (Nasdaq: TTD) 💻
31.1% sales growth year over year.
44.4% earnings per share (EPS) growth year over year.
Especially good considering the weak advertising conversion numbers from Snapchat, Meta, etc.
$1.32 billion in cash — up from $798.6 million a year ago — versus $0 debt.
$133 million in levered free cash flow (LFCF).
Partners with over 80% of the largest U.S. retailers.
Once again, TTD 0.00 came out with an impressive earnings report in Q3, highlighted by some great financials: $1.3 billion in cash and equivalents with no debt, nearly $500 million in cash flow over the past year, and 31% year-over-year sales growth amid a relatively weak advertising sector.
While companies like Snapchat and Meta have been struggling to make money with ads, TTD 0.00 is seeing demand go through the roof for its advertisement platform.
In a nutshell, TTD 0.00 makes it possible for its customers to buy ads for its platform tailored to its individual users.
Lots of companies have been cutting costs this year, and one of the things they’re doing the most is refining their advertising campaigns to make sure they’re showing relevant ads to people most likely to buy their products.
Not only is it cheaper to run fewer and more accurate ads, but it’s also bringing in more revenue for a lot of brands. As a result, TTD 0.00 is now partnered with over 80% of the largest retailers in the U.S.
It’s also seeing huge adoption from the Connected TV, or CTV, market. The core part of the CTV market is streaming services.
As you may have heard, Netflix recently announced that it’ll be running a cheaper subscription option for customers which will include ads.
With TTD 0.00’s help, it’s quite possible that the ads will be tailored to the right viewers at a rate where Netflix may end up being able to offer its ad-included service for free.
TTD 0.00 remains one of the most interesting and unique plays in the market to me, and its Q3 report showed that its dominance in the advertising industry keeps growing.
Desktop Metal Inc. (NYSE: DM) 🖨
85.4% sales growth year over year.
Operating expenses only up 9.7% year over year — reducing expenses due to macro headwinds.
Printed casting business continues to perform well — resilience in dental and healthcare platforms.
Softness in the rest of the portfolio.
New partnership with Align Technologies digital dentistry/workflows, which will improve 2023 financials.
It was clear that the market didn’t like DM’s Q3 earnings report, as the stock moved down 12% the following day.
I’m not one to sugarcoat things, so I’m fine saying that there were some disappointments … but overall, I believe its business is still very healthy.
First, the news that drove headlines was that Q3 sales came in way below estimates.
They reported revenue of $47.09 million when the expectation was slightly above $60 million. That being said, $47.09 million still represented 85% growth over the past year, which is impressive.
DM also announced that total sales for 2022 would be around $205 million, down from the $260 million guidance from Q1 and Q2.
So, what’s causing management at DM to walk back their forecasts by such a large margin?
To give some context, the last four months of the year are typically when DM has the strongest sales. It usually begins in late Q3, but that didn’t happen this year.
This is because a lot of its customers are more conservative with spending due to macro conditions.
In its next report, we’ll see if that seasonal strength returns in Q4. Given the benefits that 3D printing has to offer, it wouldn’t surprise me one bit if its 2022 revenue ends up being a lot higher than the $205 million estimate.
DM’s inventory came in at an all-time high of $91.2 million, and I expect a lot of that will turn to sales in the next couple quarters.
So, what’s DM doing to fix this?
To me, the most impressive thing about its Q3 earnings report was its ability to control its expenses as well as it did. While its sales grew by 85% year over year, its operating expenses — things like research and development (R&D) and fixed costs — only grew by 9.7%.
As I’ve said many times, margins are very important. DM is still in the extremely early stages of growth, which means it’s normal that its costs outweigh its sales, but it’s good to see that it can keep it in check when the sales aren’t rolling in as expected.
Finally, DM entered a partnership with Align Technology to offer dentists a subscription service to order new 3D-printed supplies.
That may seem random, but dental is actually one of the most promising markets for 3D printing right now. There’s a $30 billion market for dental parts, and it’s expected that most — if not all — of that will be won by 3D-printing companies this decade.
Align is a huge leader in the dental field, so this is a great move for DM.
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