☕ Let’s review, big tech is NOT warning about losses

Happy Halloween! 👋

It’s that time here in the US and a big deal for the little goblins who will be out in force tonight. The costumes get more interesting and wonderful every year – we can’t wait to see ’em!

Meanwhile, the markets are down in early going on the heels of yesterday’s earnings calls.

Not that I’m surprised.

Big traders are maximizing profits having played the IV Crush I wrote to you about on Tuesday perfectly.

The nervous money is getting shellacked, but the smart money is getting busy.

Know who YOU are and, odds are, you’ll be just fine.

Here’s my playbook.

1 – Big tech is NOT warning about losses

Let’s be clear.

They’re warning about the level of investment required to win the race.

AI is the highest stakes game in history.

Listen to the calls.

Listen to the execs who actually work there.

Listen to the engineers who built the products.

Not the analysts and clickbait artists pontificating from their ivory towers who have never worked in tech and who couldn’t write a line of code if their lives depended on it.

“Nuff said.

• If you’re an investor and you’re not buying into the sell off, you need to have a very serious chat with the person looking back at you in the mirror about what you hope to accomplish in the markets.
• If you’re a trader, that’s different (and, frankly, you ought to be making money hand over fist from the rise in volatility). Otherwise, same instructions apply with regard to the mirror!

2 – Meta: “Great, but wait”

People have been quick to jump my case over the years for staying away from Meta but then disappear into the wind on days like today.

The numbers were great… other than that pesky growth thing and warning about the level of AI spending it’ll need to be competitive. But what’s a few billion between friends, right??!! 🤦(Read)

• Sales +19% YoY
• Net income +35% YoY – but this was Meta’s lowest YoY growth since Q2 2023
• Advertising revenue +18.7% YoY

I’ll pass.

Advertising is 98% of total revenue and Reality Labs lost -$4.4B which takes some talent.

Team Zucko is still too much of a one-trick pony for my taste.

3 – Microsoft shows why it’s the Maestro

Team Nadella posted stellar earnings: (Read)

• Revenue of $65.59B, +16% YoY
• Productivity and Business Processes was $28.3B up 12%
• Intelligent Cloud was $24.1, +20% YoY (Azure +33% YoY)
• Personal Computing was $13.2B, +17% YoY
• Operating income was $30.6B, +14% YoY

Microsoft returned $9B+ to shareholders in the form of dividends and share repurchases during Q1 2025. Perhaps more importantly, the company also said that its AI business will surpass a $10B annual run rate next quarter.

In contrast to Meta, this is NOT a company hunting for success because it might develop super cool goggles or shift its business model.

It’s already well on the way.

Keith’s Investing Tip: Nervous money almost never makes money, especially in situations like this. Stay focused on the execs, not the nonsense. And whatever happens, do NOT fall for the clickbait and shoddy journalist masquerading as financial research. There’s a ton of it out there in Internet land this morning.

Btw, history shows that there are likely 10-15 new Microsofts, Palantirs and Nvidia out there right now in various stages of maturity. If you've got a handle on what they are and know what to buy, awesome! If not and you'd like some help, I'll be here if you need me.

4 – Peloton’s Hail Mary reminds me of GoPro’s last gasp 

Shares are +25% as I type this morning on news that the company has appointed Peter Stern, a Ford executive and former Apple-ite to be the next CEO and president, effective Jan 1st 2025. (Read)

It’s an $8 stock, folks.

Ergo the 25% everybody’s so riled up about is just a $1.56 move.🤷

The official story is that Peloton’s choice to bring on Stern highlights its strong focus on growing high-margin, recurring subscription revenue and building up its community of connected fitness and app subscribers.

In my best Dr. Evil voice, “rrrriiiiiiiigggghhhhhtttt.”

The company raised guidance but in the same breath warned about a soft holiday quarter.

The situation reminds me of GoPro’s last gasp.

Every quarter was supposedly a miraculous turnaround or a big move that would fix everything. Nothing ever was.

GoPro traded at ~$86 in 2014 but now trades for … wait for it… $1.34 per share, a -96.25% loss.

5 – Starbucks needs 200k sharpies

CEO Brian Niccol wants to return the chain to glory after 3 consecutive quarters of declining sales. His goal… delivering a customized drink to the customer in under four minutes. (Read)

Call me crazy, but I’d rather by stock in Newell Brands, the company that makes the ~200,000 Sharpies he’ll reportedly need. Newell, btw, also owns Rubbermaid, Yankee Candle and Paper Mate.

Hmmm.

Meanwhile, pass me a Grande, half-caff, extra-hot, soy milk, sugar-free vanilla, one pump of hazelnut, one pump of caramel, no whip, with a dash of cinnamon, shaken not stirred, for exactly 30 seconds – which I actually heard someone order recently. Sigh.

Seriously, I’ll take a large black coffee.

Yes, just the coffee.

Bottom Line

People ask me about hot stocks frequently.

That’s the wrong question.

Ask yourself which stocks will be there when you need ‘em and work backwards.

It’s a very short list.

As always, MAKE it a great day.

YOU got this - I promise.

Keith 😊