What is up Cruisers?!
Tired of reading? Just click on the play button above and you can hear COO Ethan read this week’s newsletter to you!
What is Inside?
Spotlight: Fastly $FSLY
Portfolio Update
Portfolio News
NEW! Trivia
NEW! Tweets of the Week
NEW! Sponsor
🔍SPOTLIGHT
Fastly
💵Earnings
Cruising Altitude’s portfolio pick Fastly $FSLY released their earnings a couple of weeks ago. The often shortsighted Mr. Market thought the earnings were rough as the stock has dropped 27%. The long-term Cruising Altitude minds think that they were very encouraging. First- Check out the numbers:
Q4 Revenue: $82 million (2020) vs. $58 million (2019)
A 40% increase from 2019 to 2020
Q4 Net Gain (Loss): ($46 million) (2020) vs. ($14 million) (2019)
A 228% decrease from 2019 to 2020
🔑Key Takeaway: Revenue increased significantly but profit decreased dramatically.
With a smaller growth company like $FSLY, profitability is not a priority for management. Quarterly revenue growth isn’t even the priority. The priority is the long-term trajectory of the company and whether or not they are poised for explosive growth in the long-run.
Shoot. We just realized we have not even explained what $FSLY is! Before sharing why we think this company is poised for EXPLOSIVE growth, let us share some background information!
🤚Background
Normally, living on the edge is dangerous, but for $FSLY, this is where they thrive. Fastly is a company that excels at “edge cloud computing.” Cloud computing is the process of computers sharing and retrieving data (information) from a cloud database that is accessible anywhere where you have internet access.
The “edge” refers to the process of transferring data from the cloud to the consumer’s device in a way that maximizes the speed of the user’s experience. Big companies pay big bucks for this technology. Unlike CA, tech companies expect results very quickly!
A little confused? That’s okay. We sometimes get confused too with all the tech stuff. Here is what you do need to know. Fastly has some of the best technology in the world. Just check out some of their clients:
Amazon
Shopify
Pinterest
Etsy
Buzzfeed
That’s a loaded list! These Fortune 500 companies all rely on Fastly to retrieve their data from servers and deliver it fast...really fast.
🔐Key Metrics
Check out some of these key metrics that were shared in the Q4 earnings report:
Dollar-Based Net Expansion Rate (DBNER)- This ratio measures the change in revenue from existing customers over a twelve-month period:
DBNER (Q4) = 143% (really really really good)
Enterprise Count- Number of customers with $25 million in revenue, or who are publicly traded:
Increased to 324 in Q4 from 313 in Q3
Enterprise Customer Spend- The average amount that enterprise customers spent on Fastly’s services during the quarter:
Increased to $782,000 in Q4 from $753,000 in Q3
It is truly phenomenal that Fastly was able to have such strong enterprise growth during this quarter. This past year has been a time when corporations are looking to cut costs- not take on more expensive technologies like Fastly. This cements Fastly’s ability to perform in a market consisting of the most adverse conditions.
Fastly also just appointed a Chief Revenue Officer in Brett Shirk who is coming on board to bring over 25 years of cloud-based company experience. Fastly now has their man to target additional enterprise customers which is a fantastic sign for investors.
🏀Takeover?
Remember we mentioned that Amazon $AMZN is a client of Fastly? This is fascinating because Amazon has their own edge cloud computing technology called “CloudFront.” One might think that a company the size of Amazon would use their own platform, but you’d be wrong. For their most prized possession, Amazon.com, the company uses Fastly services. The tech is just that good.
Fastly’s current market capitalization is $7.8 billion. Amazon has $84 billion in cash on their balance sheet and pockets billions of dollars a year. They could potentially buyout Fastly with relative ease.
Remember our good friends at 7Investing? Their CEO Simon Erickson shared a bold prediction that Fastly will be bought out by Amazon this year. He called this a reckless prediction but we at CA think he could be onto something.
Final Takeaway
Why is the stock market such a beautiful place? Because it gives you the opportunity to buy stakes in some of the greatest growth companies (which can also be subject to significant volatility). However, if you are able to maintain perspective, go in with the mindset expecting volatility, you can reap serious rewards.
If you are able to digest the volatility, you might find yourself jumping up and down fastly- because your brokerage account might be looking pretty good.
💸Performance
Portfolio Update
As you can see, the portfolio is now a little bit more colorful! Under the “Ticker” column we are instituting a color-coded system that allows Cruisers to see how excited the CA team is about certain stocks.
Here is the breakdown:
🟩Green= “Absolutely Ecstatic”
🟧Orange= “Just Ecstatic”
🟨Yellow= “Some Concerns”
🟥Red= “Big Concerns”
📰NEWS
Portfolio News
💵 Redemption. ViacomCBS $VIAC announced that it would redeem all of its roughly $2 billion of senior notes. Basically this means they are paying down their debt which is always good! What we don’t know is how ViacomCBS paid it down (either cash or additional debt). Regardless, CA does not see a liquidity issue.
☘️ Third Time’s the Charm. After breaking into the Michigan and Pennsylvania markets with immense success, Barstool Sportsbook will soon enter the Illinois betting market- possibly before NCAA March Madness. Barstool Sportsbook, owned by $PENN subsidiary Barstool Sports, has had incredible success with young, mobile-focused betters and will look to continue their achievements in Illinois.
🏦 Stocks and Notes. Portfolio pick Fastly $FSLY (see Spotlight piece) announced that it would issue $750 million in notes in a private offering, taking advantage of the low interest rate market. Fastly now has a little more cash on the books (which is always good) and puts them in a position to acquire another tangential company if opportunity knocks.
🖊️ Officially Official. Yesterday, $ELY shareholders officially casted their vote on whether to approve the acquisition of Topgolf. The merger is supposed to be very beneficial for $ELY. We’ve previously written about why we think this is a smart move here.
🎮GAMETIME
Trivia Night!
This week we are introducing a NEW SECTION where we ask you a trivia question about our portfolio picks! Don’t worry- no pressure to get it right! You win just for playing!
Question 1 (Easy): Which portfolio pick of Cruising Altitude provides psychotherapy by using an innovative and disruptive telemedicine technology?
Question 2 (Medium): Who is the CEO of Barstool Sports?
Question 3 (Hard): What are the two main types of genetic tests done in the Genomics industry?
Answer
Answer 1: Talkspace. The one SPAC that we have in our portfolio. We are pretty against SPACs in general as they can be risky but when opportunity knocks, we listen.
Answer 2: Erika Nardini! Be honest? Did you say Dave Portnoy. That is a good guess but he actually handed the business duties over to Erika Nardini so he could focus on doing what he does best. Being Dave.
Answer 3: Somatic and Germline. Somatic tests are tests done on cancer cells while Germline tests are done on healthy cells- so everything else! Fun fact- $NVTA recently acquired a company called ArcherDx that can track the quality of cancer treatment in between treatments using Somatic tests to help doctors and patients understand the best treatment plan in real time! Science is cool!
Thanks for playing and we hope you had some fun and learned some things in the process!
🗒️TWITTER
Tweets Of The Week
“Ya! Who does this Munger guy even think he is!”
Coincidence?
Brian Feroldi.
🤝PARTNER!
Supur!
We are very excited to have our first corporate sponsor! Today it is our good friends at Supur!
Supur is a social impact consultancy focused on helping startups & small businesses make money doing good. They develop authentic social impact programs and harness the power of purpose to elevate brand value, boost online sales & traffic, gain publicity, and engage employees.
Fastly, the star of this week’s spotlight piece, recently incorporated a social impact component to the business by joining the “Virtual Volunteering Initiative” as well as the “1% movement.” Supur could help your company find their perfect social impact initiative and improve your bottom line in the process just like with Fastly!
Interested to hear more how your company can benefit from Supur? Click here for more information!
Fastly But Slowly