TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Equity Bottom-Up

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Corrigenda: There is an error in this Insight. Please note the correction.
Correction: The first line under Results in the Detail section should read "Revenues of $6.64B (+22% YoY), a touch ahead of consensus $6.6B."
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We have been longtime fans of Netflix the product and Netflix’s management team can rightfully be described as visionary. They had the vision to have the public markets fund an experiment in business models that appears now set to breakeven on FCF in 2021. We have said for the past two quarters that Netflix is a good relative short given Deceleration in Subscriber Growth, Rising Churn, and Rising FCF burn. The key blow to our thesis is that FCF was given the all clear by management last night, while the CFO said churn was a record low.
The key question going forward…if Netflix can now generate tangible FCF into the future and this model is sustainable, don’t we then have to value Netflix on FCF? You don’t short stocks over arguments about what multiple to put on terminal values, and we aren’t advocating outright shorting Netflix, which has proven to be the #2 alltime widowmaker of short sellers (after Tesla), but we think Netflix resumes its role as the favored funding short once the dust clears from this quarter’s FCF announcement and investors focus back on the decelerating sub growth.
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Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.
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Corrigenda: There is an error in this Insight. Please note the correction.
Correction: The first line under Results in the Detail section should read "Revenues of $6.64B (+22% YoY), a touch ahead of consensus $6.6B."


We have been longtime fans of Netflix the product and Netflix’s management team can rightfully be described as visionary. They had the vision to have the public markets fund an experiment in business models that appears now set to breakeven on FCF in 2021. We have said for the past two quarters that Netflix is a good relative short given Deceleration in Subscriber Growth, Rising Churn, and Rising FCF burn. The key blow to our thesis is that FCF was given the all clear by management last night, while the CFO said churn was a record low.
The key question going forward…if Netflix can now generate tangible FCF into the future and this model is sustainable, don’t we then have to value Netflix on FCF? You don’t short stocks over arguments about what multiple to put on terminal values, and we aren’t advocating outright shorting Netflix, which has proven to be the #2 alltime widowmaker of short sellers (after Tesla), but we think Netflix resumes its role as the favored funding short once the dust clears from this quarter’s FCF announcement and investors focus back on the decelerating sub growth.

Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.


Netflix 4Q20: It’s a Free Cash Flow Machine!

Founder/CEO of ROK Advisory, ROK Advisory LLC

Ken S. Kim

Founder/CEO of ROK Advisory

ROK Advisory LLC

ROK is an independent research advisory firm. We guide you to minimize the information gap between foreign and local investors in Northeast Asia with a focus in Korea, Taiwan and Japan.

Independent Research Advisory Firm

Local press reporting that <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> has made significant improvement on their 5nm technology which is a significant improvement given <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> 's to desire to take close the gap with <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a> this is a big step.  Or was it already in the cards from a prior deal?

Local press reporting that Samsung Electronics (005930 KS) has made significant improvement on their 5nm technology which is a significant improvement given Samsung Electronics (005930 KS) 's to desire to take close the gap with TSMC (2330 TT) this is a big step.  Or was it already in the cards from a prior deal? 

Samsung Closed the Gap with TSMC Already at 5nm? Whoa!

Three things caught our eye this first week of 2021: eBay, Amazon, and the spectrum auction.<div class="content-highlight">Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</div>

Three things caught our eye this first week of 2021: eBay, Amazon, and the spectrum auction.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

TMT Weekly: 3 Things that Stood Out The Week of 1/8/2021

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

The S&amp;P DJI Global Indices team <a href="https://www.spglobal.com/spdji/en/documents/indexnews/announcements/20201211-1277389/1277389_tes15aircaivspindnkn4.pdf?force_download=true" target="_blank" rel="noopener">confirmed</a> Friday night that <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> would join the S&amp;P500 and the S&amp;P100 at the close of trading on 18 December, with <a href="https://www.smartkarma.com/entities/apartment-invt-mgmt-co-a" target="_blank" data-smartkarma-citation="entities:2193:1" rel="noopener">Apartment Invt &amp; Mgmt Co A (AIV US)</a> coming out of S&amp;P500 and its 14 December spin-out Apartment Income REIT replacing <a href="https://www.smartkarma.com/entities/dunkin-brands-group-inc" target="_blank" data-smartkarma-citation="entities:15866:1" rel="noopener">Dunkin' Brands Group (DNKN US)</a> in the S&amp;P Midcap 400, and <a href="https://www.smartkarma.com/entities/occidental-petroleum-corp" target="_blank" data-smartkarma-citation="entities:17075:1" rel="noopener">Occidental Petroleum (OXY US)</a> coming out of the S&amp;P100 but staying in the S&amp;P500. When the S&amp;P announced on the 16th of November that Tesla would be joining the S&amp;P500 in December, it said the pro-forma inclusion weight would be ~1.01% (without measuring what would come out). S&amp;P also said that it would update the pro-forma inclusion weight and trading value impact when the Deletion was announced, but they did not. My calc suggests it is 1.47% as of Friday's close. And the two-way trading value based on the S&amp;P's original US$51bn number is, as of today, ~US$152bn.Which is a lot.The arithmetic, and an explanation of why it matters, follow.

The S&amp;P DJI Global Indices team confirmed Friday night that Tesla Motors (TSLA US) would join the S&amp;P500 and the S&amp;P100 at the close of trading on 18 December, with Apartment Invt &amp; Mgmt Co A (AIV US) coming out of S&amp;P500 and its 14 December spin-out Apartment Income REIT replacing Dunkin' Brands Group (DNKN US) in the S&amp;P Midcap 400, and Occidental Petroleum (OXY US) coming out of the S&amp;P100 but staying in the S&amp;P500. When the S&amp;P announced on the 16th of November that Tesla would be joining the S&amp;P500 in December, it said the pro-forma inclusion weight would be ~1.01% (without measuring what would come out). S&amp;P also said that it would update the pro-forma inclusion weight and trading value impact when the Deletion was announced, but they did not. My calc suggests it is 1.47% as of Friday's close. And the two-way trading value based on the S&amp;P's original US$51bn number is, as of today, ~US$152bn.Which is a lot.The arithmetic, and an explanation of why it matters, follow.

Tesla Into S&P - Rebal Details, and Implications for Vol and Active Portfolio Reconstruction

IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

NY Attorney General Letitia James filed an anti-trust lawsuit against <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> which is co-sponsored by Federal Trade Commission and 46 US states. This is not dissimilar to historical legal anti-trust challenges to break up big companies such as Microsoft and AT&amp;T.  While we believe this is unlikely to be resolved soon, we believe Facebook and Big Tech have drawn bipartisan ire due to concerns about anti-competitive behaviour and the spread of disinformation. Our thoughts on the litigation as well as operational concerns are below the fold. 
Our previous research on US regulatory matters and Facebook can be found here
<a href="https://www.smartkarma.com/insights/us-congress-passes-bill-that-could-lead-to-the-delisting-of-chinese-companies-on-us-exchanges" target="_blank" data-smartkarma-citation="insights:46004" rel="noopener">US Congress Passes Bill that Could Lead to the Delisting of Chinese Companies on US Exchanges</a> 
<a href="https://www.smartkarma.com/insights/lvmh-tiffany-oh-bernie-not-like-this" target="_blank" data-smartkarma-citation="insights:43151" rel="noopener">LVMH-Tiffany: Oh Bernie, Not like This.</a> 
<a href="https://www.smartkarma.com/insights/facebook-4q-results-an-easy-beat-has-zuck-turned-the-tanker" target="_blank" data-smartkarma-citation="insights:27657" rel="noopener">Facebook 4Q Results: An Easy Beat - Has Zuck Turned the Tanker?</a> 
<a href="https://www.smartkarma.com/insights/facebook-3q-results-are-the-fangs-safe-for-now" target="_blank" data-smartkarma-citation="insights:25513" rel="noopener">Facebook 3Q Results: Are the FANGS Safe...for Now?</a>

NY Attorney General Letitia James filed an anti-trust lawsuit against Facebook Inc A (FB US) which is co-sponsored by Federal Trade Commission and 46 US states. This is not dissimilar to historical legal anti-trust challenges to break up big companies such as Microsoft and AT&amp;T.  While we believe this is unlikely to be resolved soon, we believe Facebook and Big Tech have drawn bipartisan ire due to concerns about anti-competitive behaviour and the spread of disinformation. Our thoughts on the litigation as well as operational concerns are below the fold. 
Our previous research on US regulatory matters and Facebook can be found here
US Congress Passes Bill that Could Lead to the Delisting of Chinese Companies on US Exchanges 
LVMH-Tiffany: Oh Bernie, Not like This. 
Facebook 4Q Results: An Easy Beat - Has Zuck Turned the Tanker? 
Facebook 3Q Results: Are the FANGS Safe...for Now? 

Facebook and Antitrust - The Beginning of the End for Big-Tech?

United States

AT&T Inc. is a communications holding company. The Company, through its subsidiaries and affiliates, provides local and long-distance phone service, wireless and data communications, Internet access and messaging, IP-based and satellite television, security services, telecommunications equipment, and directory advertising and publishing.

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AT&T (T US)

Netflix 4Q20: It’s a Free Cash Flow Machine!

Netflix posted an inline quarter, but the stock is up 14% on commentary about sustainability of FCF going forward. We don't advocate shorting NFLX...

Aaron Gabin

Samsung Closed the Gap with TSMC Already at 5nm? Whoa!

Samsung Electronics' desire to catch TSMC starts with how they can proceed with leading tech. Are we almost there already?

Ken S. Kim

TMT Weekly: 3 Things that Stood Out The Week of 1/8/2021

This week we highlight eBay's new tool to drive online advertising adoption, Amazon's further foray into logistics, and the $90B spent in the...

Aaron Gabin

Tesla Into S&P - Rebal Details, and Implications for Vol and Active Portfolio Reconstruction

The TSLA S&P500 inclusion involves $150bn of direct flows and perhaps another $200-300bn indirect flows. It really is a MAMMOTH trade. And index...

Travis Lundy

Facebook and Antitrust - The Beginning of the End for Big-Tech?

NY Attorney General Letitia James filed an anti-trust lawsuit against Facebook Inc A (FB US) which is co-sponsored by Federal Trade Commission and...

Rickin Thakrar

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