TMTB EOD Wrap

QQQs -32bps grinded up all day to finish with a respectable showing. Spoos +16bps and IWM +19bps finished in the green. BTC -50bps after being down 4%+. Yields rose 2-3bps and market now just pricing in a single Fed cut this year. Crude +3% and dollar +25bps continued to climb. All eyes on CPI on Wednesday. Quality/GARP outperformed higher valuation/non-profitable tech today as investors continue to shift their focus to valuation.

Let’s get to the recap…

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Internet

• META -1.2% - Wells Fargo/MS raised tgts but Wells said they were cautious near-term as Q1 guide has potential to disappoint on weaker fx and mixed Q4 ad exit growth rates. Gawrelski sees Q1 Rev guide of $39-$41.5B vs street at $41.9B, implying fxn growth of 11.4% - 18.2% and decel’ing from Q4s +18.7% on a 5 ppt tougher comp. This would be a cleaner funding short if not for potential revs from TikTok, which have potential to be significantly material. To illustrate - ISI had a note out today near the close saying 3% rev accretion to META if they get 60% of Tiktok’s US revs, but MM also made a good point saying that META monetizes at 2-2.5x the rate of Tiktok so could actually drive HSD upside vs Fy25 ad revs.

  • The timeline for Tiktok is as follows: Assuming Supreme court re-affirms the ban (next scheduled opinion day is this Wednesday), the app would “go dark” in the US on 1/19, although ISI points out legal experts say that would mean TikTok still available to US users, just not available to download on an app store (in other words - download TikTok before Sunday if you want it on your phone). So it’s unclear how quickly advertisers/users will move off the platform - will it be a slow drip or quickly? As time goes on assuming no divesture, one would imagine service/monetization would degrade. I’ve read differing opinions if a divesture would be possible and what China prefers - personally, I think if Trump wants it enough, it would be easy for him to make a back-room deal with China and push through some sort of divesture.

• Going back to META, this FT article also got some play today, with key quote:

  “Multiple advertising bosses told the FT that Meta’s move to end its fact-checking programme and weaken hate speech policies could cost the platform...“the cold, hard truth is advertisers will only care if it hurts their numbers. If performance remains steady, no one’s going to lose sleep over ‘where’ or ‘how’ their ads show up”

  I think it’s a non-event imo

• GOOGL -55bps as Yip said Q4 finished inline to above but exit rates imply GOOGL needs to accelerate MSD going fwd to hit Q1 estimates bc of fx. Wells Fargo also out increasing near-term YT estimates, but lowering FY26+ search saying FY28 search could decline on AI cannibalization. Stock held in fairly well all things considered. JPM had an interesting datapt - noted that their most recent investor survey had investors preferring GOOGL over AMZN/META in 2025, expecting it to be the biggest beneficiary from GenAI. Also interesting: META was expected to be the worst performing internet stock, according to the survey.

• AMZN -22bps as MS raised Tgt to $280 and called it a top pick saying GenAI opportunities should benefit AWS and retail P&L. $280 is 35x his ‘26 EPS of $8 which is a 1.5x PEG. M-sci was also out slightly raising their AWS estimates - their now at around 19%. Reminder - Yipit is at 19.8% and street is at 19% so bogey will probably end up around 19.5%…AWS CEO was on the Decoder pod this morning - worth a listen although he didn’t say a ton incremental - talked up Cloud migration bc of increased need for cloud data for AI, competitive advantage vs AMZN bc of Trainium chip and no wall in regards to scaling laws but said more innovation required for improvements.

• ETSY +1.6% as Jefferies upgraded to hold saying they think margin pressures should alleviate, and GMS should accelerate through 2025. Yip also had a note calling out weaker net adds

• CHWY -1.2% after getting another upgrade from ISI saying they think co can grow FCF at 25% CAGR over next 3 years

• CART +60bps on Needham’s upgrade saying COVID-era customers remain stable while new post-COVID cohorts are driving sufficient volume growth. Needham projects Instacart can achieve low-teen transaction volume growth over the next two years, leading to 30% EBITDA CAGR.

• PINS -80bps catching another downgrade, this time from Jefferies saying new product launches are too early-stage to support consensus mid-teens revenue growth estimates for Q1'25 and that margin expansion is likely to moderate. Bogey here now around 10% for Q1 and bar has been significantly lowered. Typically, you want to buy PINS when sentiment and expectations are washed out with stock trading at <15x, which is right now, but it’s PINS and hard to really get good reads into the q. Still feeling it out here…

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Semis

• NVDA - 2% as more details came out on Biden’s rules and NVDA vehemently defended saying the rules saying it “threatens to squander America’s technological advantage.” The new export rules enter 120 consultation period now which will end on May 13. Trump will have plenty of time to possibly modify if necessary. Another thing to think about is NVDA could potentially see rush orders in the Apr Q and impact in July Q (h/t MS)

  • TheInformation also had an article saying MSFT, META, AMZN, GOOGL have cut some orders of GB200 because of glitchy racks, with MSFT buying older H200 chips for OpenAI to compensate.

  • Ming-chi kuo piled on later in the morning Expectations for mass shipments of GB200 NVL72 assembly in 2Q24 may still be optimistic saying the assembly mass production schedule for GB200 NVL72 has been postponed multiple times: September 2024 → December 2024 → 1Q25 → 2Q25…” Repeated delays in delivering mass shipments will lead to lower-than-expected shipments. Current estimates suggest that GB200 NVL72 shipments in 2025 could reach roughly 25,000–35,000 racks — significantly below the optimistic range of 50,000–80,000 racks from last year.”

  • Stock seems destined to be range-bound for now and hard to see stock rally significantly into earnings in late Feb with these kind of checks, but the good news is the bar is being reset lower for 1H. Time to focus on risk/reward for entry points if so inclined