Three Things (11/10)

Thursday, Nov 10th 2022

Commentary

"I believe we are deeply underestimated as a company today. Billions of people use our services to connect, and our communities keep growing." - Mark Zuckerberg


1) Meta lays off over 11,000 employees: After a disappointing earrings print, Mark Zuckerberg's company is laying off over 11,000 employees, or roughly 13% of its global workforce, in an effort to control costs. The company's considerable investment in the Metaverse has concerned Wall Street investors, while growth in its flagship product Facebook has stalled as TikTok takes market share.

Titan's Takeaway: Patience is wearing thin for Zuckerberg and his Metaverse. A name change is one thing, but pouring billions of dollars into a void as the cost of capital increases won't make Wall Street tap the like button.

2) Disney Disappoints: Disney reported mixed results in its latest earnings report showing mounting streaming losses and sending its stock spiraling down. While Disney+ added 12.1 million net new accounts, losses in the overall streaming unit ballooned to $1.47 billion. Despite the bearish streaming numbers, its theme park business reported a 36% increase in revenue.

Titan's Takeaway: Disney is caught in the crosshairs of the streaming slowdown, but it appears we are closer to an earnings inflection point with material direct-to-consumer profitability improvements. If Disney can illustrate signs of reaching its FY24 goals, the scales could tip, and positive sentiment may follow suit.

3) Redfin lays off 13% of employees: The real estate company slashed its workforce by 13% and shutters its home-flipping unit as rising rates continue to batter a new cohort of real-estate tech upstarts. Redfin's home-flipping business amounted to 34% of the company's revenue. Redfin's furlough follows Opendoor Technologies posting record losses last week.

Titan's Takeaway: The housing market has slowed significantly this year as higher interest rates are making buying a home more expensive for would-be homeowners. Home-flipping is particularly sensitive to the rising rate environment as the investments tend to be of shorter duration and more speculative in nature. While home prices will eventually stabilize, capital costs will likely remain elevated for some time.


Ask Titan Anything

What a whirlwind! We published an update in our app today and would encourage you to read it. It was announced Tuesday that Binance plans to acquire FTX, the second-largest crypto exchange behind only Binance. FTX found themselves in a liquidity crunch to the point that they paused customer withdrawals, which led to famed FTX CEO Sam Bankman-Fried reaching out to Binance in search of help. There are a ton of moving pieces that led to this acquisition and then Binance's decision to walk away. But we've seen this story before -- balance sheets of crypto companies that are overly concentrated in illiquid holdings with little to no intrinsic value leading to a liquidity crunch for the crypto company as soon as the price of the illiquid holdings begins to drop. It's a lot of financial engineering, and this is yet another example of why we continue to believe that more regulation in the crypto markets will lead to more stability and institutional adoption over time.

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Ask Titan Anything is intended to be informational in nature and does not take into account the specific objectives, financial situation, or particular needs of any specific person. Nothing in this answer should be construed as investment advice, or a recommendation to buy or sell securities.

As of this writing, DIS, META were a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.

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