ARK Innovation Has Likely Been a Disappointment for Most Investors

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#31
It all flows down to earnings or even cash flow.

Subscribers and users are not something I would value at. If you look at tech companies, they bank on the story of how many users they have attracted, however at this stage, the profit extracted from each user is negligible or even negative. Of course, the next stage is to start monetizing the users by removing the carrots.

Tencent Music is a good example of what happens next. As the product matured and freebies ended, many customers just left, MAU has decreased (this happened even before China order TME to stop being the only party to have exclusive music content due to their contracts). Now revenue is growing but profit margin has also decreased as the cost of acquiring customers or keeping them has increased. As a result, tencent music did not meet its growth story, as earnings only grew modestly. Share prices fell 70% and P/E is now at 15 -16 times (which puts it at fairly valued)

The chinese tech companies are reflective of what happens next and why I dont believe the words of users and subscribers. Because when monetization begins, all the "cheapos" will just abandon you. The same is why I don't trust the story of Netflix because when subscription fees increase or when companies such as crypto.com stops giving out free Netflix subscription to its users worldwide, people will leave. Earnings will rise no doubt but it wont be as fast as what many analysts will think. Grab and Shopee are another iffy story, many people are now leaving shopee for lazada because shopee is reducing the rewards it gives for playing its games and capping the amount of coins it gives as cashback for buying products.

So people are accumulating their coins still (at a slower pace) but in turn are spending less on Shopee platform. E.g. Previously it was easy to accumulate 1,000 shopee coins and spend on a $30 product and in the process get a $10 discount off from the shopee coins. Now users accumulate only 500 coins ($5 discount), so they wont spend on a $30 product but instead spend on a $15 product. Grab too has been introducing new fees and devaluing the Grabpoints (equivalent to cashback) and is introducing more and more exceptions in its T&C
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#32
(29-01-2022, 02:16 PM)CY09 Wrote: ..

Subscribers and users are not something I would value at. 
..

The same is why I don't trust the story of Netflix because when subscription fees increase or when companies such as crypto.com stops giving out free Netflix subscription to its users worldwide, people will leave. Earnings will rise no doubt but it wont be as fast as what many analysts will think.

..

A few points:

1. Many analysts are actually negative on Netflix, especially after recent earnings report. Most (like 9/10) downgraded it to equal-weight or underperform.

2. Seems a little contradictory, that you still expect earnings to rise "no doubt".

3. Are all subscribers/users/MAU valued the same? Is 1 Netflix subscriber = 1 Viu subscriber = 1 Youtube premium subscriber? Is 1 FB MAU = 1 Grab MAU?

Not caring about subscribers at all, or think that they are all worthless, and need "carrots" seems overly simplistic, and ignore qualitative aspect, such as intrinsic value to user/developer/seller/advertisers/content creator etc on the platform (with or without carrots), network effects, fundamental profitability (e.g. through advertisement monetization), operating leverage etc.
“If you buy a business just because it’s undervalued, then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” - Charlie Munger
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#33
I tend to agree with the author that odds are that ARK will survive but not strive. But to be intellectually honest with ourselves, we do know how hard it is to predict the future.

Lessons From the Rise and Fall of ARK

However this story ends, I can promise you that the ending will look obvious to those on one side or the other in hindsight. If ARK goes on to suffer more major losses, value guys like me will talk about how we saw it coming all along. If not, the other side will wonder how we couldn’t have seen how obvious the growth potential of ARK’s portfolio companies were.

https://blog.validea.com/lessons-from-th...ll-of-ark/
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#34
There is a time for everything under the sun. And as investors, we just have to respect the cycle (and Mr Market who is behind the cycle)

Has The Demise Of The Growthsters Been Greatly Exaggerated?

I know of a number of thoughtful, good growth investors. I am highly confident that they didn’t just get lucky. Yes, the bubble of the last few years flattered their returns and made them look even better than they are. However, when we come out on the other side I believe that their skill will result in good or in some cases great long-term track records.

The problem is that for every such investor, there are many, many people who did just get lucky. The worst part? To most people, they look and sound just like the skillful growth investors. They publicly pontificate about their clever mental models. Their special research skills. And so on. They are really just self-promoters riding the wave and taking advantage of a period of favorable sentiment for the kind stocks that they traffic in.

https://behavioralvalueinvestor.com/blog/growthsters
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