Three Things (11/29)

Tuesday, Nov 29th 2022

Commentary

“Happiness is not in money, but in shopping.” - Marilyn Monroe


1) Shop till you drop: While retailers are still tallying final Cyber Monday sales, yesterday's event is expected to remain the year's biggest online shopping day. Adobe Analytics estimates $11.6B in sales, up from the $11B seen last year.

Titan's Takeaway: Coupled with a record setting $9B in online sales from Black Friday, these strong Cyber Monday sales estimates demonstrate healthy consumer demand trends with positive implications for retailers and ecommerce platforms, despite rising inflation. For example, Shopify shares were up 8% on Monday morning after the cloud-based commerce platform announced strong Black Friday sales, pointing to the potential for better-than-expected fourth quarter sales this holiday season.

2) More troubles for Meta: The company has been fined ~$275M by Ireland's data privacy regulator for a data leak discovered last year in which 500 million Facebook users' details were exposed. This is the latest in a number of fines from Ireland's Data Protection Commission, bringing the total to more than $900M. The fine comes on the back of Meta's recently announced cost-cutting initiatives as the company continues to face headwinds developing its Metaverse strategy.

Titan's Takeaway: We believe most of the bad news is priced in for Meta and the likelihood of meaningful capital impairment to be low mid-term. More broadly, we are optimistic Meta will overcome structural headwinds given recent trends in Reels (i.e., increasing Annual Recurring Revenue from $1bn to $3bn Q/Q) and Measurement (i.e., bringing back 28-day attribution to a small # of advertisers). Although the company is not immune to a potential recession, we are encouraged to see the management team reduce its operating costs amid the uncertain macro environment

3) Anger in China: Protests erupted across China over the weekend on the back of reports detailing at least 10 confirmed deaths due to a fire in the western city of Urumqi. Demonstrations were seen in major cities including Beijing, Shanghai, Chengdu, Wuhan and Guangzhou as outrage spread following the release of video footage showing Covid lockdown measures delayed firefighters from reaching victims. Protesters decried the country's draconian zero-Covid policies, with some calling for Chinese leader Xi Jinping to step down.

Titan's Takeaway: The sad and unfortunate series of events demonstrate the difficult balance tasked to government officials in managing / preventing widespread Covid outbreaks while also facing growing social unrest among communities calling for more relaxed Covid policies. China continues to be a challenging investing environment amid Covid lockdowns and complex US-China relations, which has supported our decision to maintain meaningfully underweight exposure to the region for most of the year.

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