Tech correction

[vand]

Personally I see Zoom as much more of a direct rival to Cisco's webex platform than MS Teams.

But FWIW, Microsoft's track record in this space is not very impressive.. anyone still use Lync or MS Messenger?

Does anyone use Bing? What happened to MS Encarta? See? MS aren't exactly infallable..

I think MS would do well to just buy Zoom.

This doesn't matter in the grand scheme of things though, does it? You forgot to mention buying Nokia! Stick to the fundamentals because trying to forecast things in this way is a mugs game. The fact is all MS customers can use Teams for free and so that's a large proportion of business customers who will never switch to Zoom. Why should they if Teams works? Zoom should start paying a dividend because it's ex-growth but still highly rated. People need a reason to hold a low/no growth company at this stage. That's what the market is telling you.

Clearly you haven't even bothered looking at the numbers - Zoom is hard a low/no growth company. It only floated less than 3 years ago and revenue has gone from 150m to 4bn in that time. To suggest that it's a mature stock that should start paying out a divdend is ludicrous.

Investing is about the future not the past. Look at the EPS forecasts for the next three years - flat to down, no/low growth. It profited greatly from a unique set of circumstances that may never happen again in our lifetime. There are lots of stocks that benefitted from the pandemic that will never see that kind of growth again, especially as people return to the office this year. I think it will make a terrible investment going forwards and far too risky. Good news is it is sitting on $5Bn in cash so can maybe make an acquisition to drive future growth. Way too speculative for me. Good luck with it! I wouldn't bet your house on it

Newly floated companies aren't expected to have any positive earnings for a good few years. Google, Amazon, Facebook, etc all followed this model. None of them pay a dividend even today, and all of them had deprioritised monetising straight away in order to reinvest and grow the business. Even today we've seen Bezos prepared to run loss making ventures like eg Prime with the knowledge that the payoff is still some time away.

[simoan]

Personally I see Zoom as much more of a direct rival to Cisco's webex platform than MS Teams.

But FWIW, Microsoft's track record in this space is not very impressive.. anyone still use Lync or MS Messenger?

Does anyone use Bing? What happened to MS Encarta? See? MS aren't exactly infallable..

I think MS would do well to just buy Zoom.

This doesn't matter in the grand scheme of things though, does it? You forgot to mention buying Nokia! Stick to the fundamentals because trying to forecast things in this way is a mugs game. The fact is all MS customers can use Teams for free and so that's a large proportion of business customers who will never switch to Zoom. Why should they if Teams works? Zoom should start paying a dividend because it's ex-growth but still highly rated. People need a reason to hold a low/no growth company at this stage. That's what the market is telling you.

Clearly you haven't even bothered looking at the numbers - Zoom is hard a low/no growth company. It only floated less than 3 years ago and revenue has gone from 150m to 4bn in that time. To suggest that it's a mature stock that should start paying out a divdend is ludicrous.

Investing is about the future not the past. Look at the EPS forecasts for the next three years - flat to down, no/low growth. It profited greatly from a unique set of circumstances that may never happen again in our lifetime. There are lots of stocks that benefitted from the pandemic that will never see that kind of growth again, especially as people return to the office this year. I think it will make a terrible investment going forwards and far too risky. Good news is it is sitting on $5Bn in cash so can maybe make an acquisition to drive future growth. Way too speculative for me. Good luck with it! I wouldn't bet your house on it

Newly floated companies aren't expected to have any positive earnings for a good few years. Google, Amazon, Facebook, etc all followed this model. None of them pay a dividend even today, and all of them had deprioritised monetising straight away in order to reinvest and grow the business. Even today we've seen Bezos prepared to run loss making ventures like eg Prime with the knowledge that the payoff is still some time away.

That's pretty rich calling me a troll. I've provided a number of fundamentals about Zoom and all you're going on is that the share price has fallen a lot. Who's the idiot? And it's nonsense to suggest that all IPO's are loss making. That's factually incorrect. Many companies that get listed are already profitable.

[SteadyAim]

Anybody have any thoughts on Intel, on a p/e of about 9 ?

[simoan]

Anybody have any thoughts on Intel, on a p/e of about 9 ?

Yes, a good long term bet especially once they get their new fabs built and start up their new TSMC-like new business model. With the pandemic induced chip shortages and the South China Sea situation the US are going to want to bring home as much chip production as possible, which is good for Intel. Low/no growth for the next few years though on a PER of 12-14 but you get a 3.1% dividend while you wait...

All the best, Si

[vand]

This doesn't matter in the grand scheme of things though, does it? You forgot to mention buying Nokia! Stick to the fundamentals because trying to forecast things in this way is a mugs game. The fact is all MS customers can use Teams for free and so that's a large proportion of business customers who will never switch to Zoom. Why should they if Teams works? Zoom should start paying a dividend because it's ex-growth but still highly rated. People need a reason to hold a low/no growth company at this stage. That's what the market is telling you.

Clearly you haven't even bothered looking at the numbers - Zoom is hard a low/no growth company. It only floated less than 3 years ago and revenue has gone from 150m to 4bn in that time. To suggest that it's a mature stock that should start paying out a divdend is ludicrous.

Investing is about the future not the past. Look at the EPS forecasts for the next three years - flat to down, no/low growth. It profited greatly from a unique set of circumstances that may never happen again in our lifetime. There are lots of stocks that benefitted from the pandemic that will never see that kind of growth again, especially as people return to the office this year. I think it will make a terrible investment going forwards and far too risky. Good news is it is sitting on $5Bn in cash so can maybe make an acquisition to drive future growth. Way too speculative for me. Good luck with it! I wouldn't bet your house on it

Newly floated companies aren't expected to have any positive earnings for a good few years. Google, Amazon, Facebook, etc all followed this model. None of them pay a dividend even today, and all of them had deprioritised monetising straight away in order to reinvest and grow the business. Even today we've seen Bezos prepared to run loss making ventures like eg Prime with the knowledge that the payoff is still some time away.

That's pretty rich calling me a troll. I've provided a number of fundamentals about Zoom and all you're going on is that the share price has fallen a lot. Who's the idiot? And it's nonsense to suggest that all IPO's are loss making. That's factually incorrect. Many companies that get listed are already profitable.

I've put forward a case that at the sort of impressive rates of growth that the company has undergone, it isn't going to look expensive on many metrics before too long, if not already. A case can be made for x10 price/sales for a company that grows at such a pace.

I think most companies would love to be growing at just a fraction of the rate Zoom has managed recently.

I think it's you who is backward looking, expecting MS as the incumbent be able to easily defend from a more specialised startup. MS do a lot of things well, however they rarely do anything the best.

[TUK020]

Anybody have any thoughts on Intel, on a p/e of about 9 ?

Yes, a good long term bet especially once they get their new fabs built and start up their new TSMC-like new business model. With the pandemic induced chip shortages and the South China Sea situation the US are going to want to bring home as much chip production as possible, which is good for Intel. Low/no growth for the next few years though on a PER of 12-14 but you get a 3.1% dividend while you wait...

All the best, Si

Really not sure about them (disclosure, I worked for Intel on graduating about 40 years ago).
Intel comprise 3 elements of the chip making business (to oversimplify):
- fab manufacturing
- core processor design (x86 architecture)
- design and sale of end processors using said architecture and manufacturing process.

In Fab manufacturing they have clearly dropped behind the market leaders (TSMC). This is not just a capex bandwidth, but also a capability development model. Not sure they will ever be able to catch up.
Core processor design - at the top end this is becoming more of a free for all. Apple designing their own processors, AMD achieving higher performance (using TSMC fab processes). At the low power end, the ARM approach is conquering all.
Design & Sale of end processors - this depends on leveraging success in the above two arenas, in both of which Intel no longer represents "best of breed"

I'm a big fan of the semi industry as an investment area. I think it will be the "oil" of this century, underpinning much of economic activity. I am investing in semis via ITs. I would invest in ARM if I could. Intel, I'm not sure

[mc2fool]

Zoom is better (less faff) for informal online meetings and "stand alone" webinars, but Teams has some things that Zoom doesn't that makes it better for more formal structures, in particular the integration with Office.

So you're saying Zoom is great for people who don't want to pay for it, but Teams is worth paying for. That doesn't inspire me to buy Zoom shares.

Noooooooo ... I wasn't saying that at all, not even between the lines.

The free Zoom service is limited. To do anything serious is another matter. https://zoom.us/pricing

I've used Zoom twice this week, one for a lecture from the National Gallery, and those are run as a webinar with typically 400ish participants, and the other a talk from the Guildhall Library, which are run as a meeting with typically 200-250 participants. From what I can see that's at minimum £672pa and £600pa respectively, but I'll leave you to figure out how their pricing affects their share price. I'm just talking as a user.

[Wasron]

I'm a big fan of the semi industry as an investment area. I think it will be the "oil" of this century, underpinning much of economic activity. I am investing in semis via ITs. I would invest in ARM if I could. Intel, I'm not sure

Which ITs have you chosen for this?

I’ve looked at SMH, a physical ETF specifically targeting semiconductor manufacturers, but haven’t yet invested.

Wasron

[TUK020]

I'm a big fan of the semi industry as an investment area. I think it will be the "oil" of this century, underpinning much of economic activity. I am investing in semis via ITs. I would invest in ARM if I could. Intel, I'm not sure

Which ITs have you chosen for this?

I’ve looked at SMH, a physical ETF specifically targeting semiconductor manufacturers, but haven’t yet invested.

Wasron

Keystone Positive Changes
https://www.hl.co.uk/shares/shares-sear ... ment-trust
contains some very concentrated bets in its top 10
Moderna 11%
ASML 8% (semiconductor manufacturing process kit)
Tesla 7% (not so sure about this one)
TSMC 5% (semi foundry)

[simoan]

Anybody have any thoughts on Intel, on a p/e of about 9 ?

Yes, a good long term bet especially once they get their new fabs built and start up their new TSMC-like new business model. With the pandemic induced chip shortages and the South China Sea situation the US are going to want to bring home as much chip production as possible, which is good for Intel. Low/no growth for the next few years though on a PER of 12-14 but you get a 3.1% dividend while you wait...

All the best, Si

Really not sure about them (disclosure, I worked for Intel on graduating about 40 years ago).
Intel comprise 3 elements of the chip making business (to oversimplify):
- fab manufacturing
- core processor design (x86 architecture)
- design and sale of end processors using said architecture and manufacturing process.

In Fab manufacturing they have clearly dropped behind the market leaders (TSMC). This is not just a capex bandwidth, but also a capability development model. Not sure they will ever be able to catch up.
Core processor design - at the top end this is becoming more of a free for all. Apple designing their own processors, AMD achieving higher performance (using TSMC fab processes). At the low power end, the ARM approach is conquering all.
Design & Sale of end processors - this depends on leveraging success in the above two arenas, in both of which Intel no longer represents "best of breed"

Hi TUK020,

I should also disclose I spent 35 years of my life designing integrated circuits and intellectual property, working with various semiconductor companies in the process. Everything you say about Intel is completely true. I have no great love of the company and they were a PITA to deal with from an external point of view. I hope they were better to work for than they are to work with!

From an investment perspective they've also made several terrible investments (why on earth did they buy McAfee!?) and the management of the company, including the technical side has been awful since the direct line of original founders ended 8 or 9 years ago. Not sure, was Otellini the last? Either way, Krzanich was a disaster and they bought the wrong FPGA company in Altera (Xilinx has much better technology IMHO) and then proceeded to completely screw up the launch of the companies premium Stratix-10 line. Utterly abysmal execution of a takeover! However, I believe the new CEO is doing all the right things, at least he's saying the right things at this stage

Clearly in the near term things are not looking too rosy with purchasing of laptop CPUs pulled forward during the pandemic and they are playing catch up on the fab technology front with TSMC and Samsung. Revenue for FY22 is forecast to be flat with a large drop in EPS to $3.52 so at least the dividend (which was recently increased by 5%) is covered 2.4x. So, I would say it is safe despite all the capex required for the build out of new fabs and would expect it to keep up with inflation. There are worse places to park some money whilst you wait for the new fabs to come on-line in a few years time and I think in the longer term the new fab model could work well, especially if there are any China related issues in the Far East. I did state I saw it as a long term bet i.e. 5 years plus. If you want to make a quick buck, Intel is not the place.

I've been hearing about the dangers of AMD and ARM replacing Intel CPUs for so long now that I'm not sure it's ever going to happen tbh. Of course, there will be some erosion at the edges and it may really happen one day, but in the meantime Intel is very lowly rated, so I would say much of this is already baked into the share price, especially when you compare it against the rating of TSMC. It seems to me, that even if they never catch TSMC up technology wise they can still eat a lot of their lunch in the same way you suspect AMD and ARM will eat Intel's on the CPU side.

I'm a big fan of the semi industry as an investment area. I think it will be the "oil" of this century, underpinning much of economic activity. I am investing in semis via ITs. I would invest in ARM if I could. Intel, I'm not sure

Yes, me too, although I'm being more selective. As mentioned earlier, I really like Qualcomm currently in particular because of the 5G patent portfolio and applications outside 5G they are targeting. Again, there is the shadow of losing the Apple modem business hanging over the share price. I just feel they can grow without that. Some of the other stocks like Nvidia just look hideously overvalued by comparison. What other semi stocks do you find interesting? I sold my Microchip before last years acquisition of Microsemi (both companies I used to work with!) and that is starting to look interesting again.

All the best, Si

[simoan]

I've put forward a case that at the sort of impressive rates of growth that the company has undergone, it isn't going to look expensive on many metrics before too long, if not already. A case can be made for x10 price/sales for a company that grows at such a pace.

I think most companies would love to be growing at just a fraction of the rate Zoom has managed recently.

If you're only method of valuing something is using Price/Sales than God help you! A wiser man than me once stated "Sales are vanity, profit is sanity". In fact, by looking only at sales you are completely missing the underlying picture at Zoom. The point I am making, which you seem not to have grasped, is that the future is different from the past, and in the case of Zoom it is predicted to be very different for the next year or two. The market doesn't care about the past, only the future.

I don't deny that during a once in a lifetime set of circumstances Zoom grew at a phenomenal rate. EPS for FY 01/2022 is predicted to be $4.87 (46% YoY growth) on revenue of $4.08B (54% YoY growth). The current market cap is $40.77B so it is already on your PSR of 10. Where's the growth coming from then? Well actually, sales are forecast to grow to $4.75B for FY 2023 BUT EPS is forecast to drop 9% to $4.42. That can only mean one thing, falling margins.

I think it's you who is backward looking, expecting MS as the incumbent be able to easily defend from a more specialised startup. MS do a lot of things well, however they rarely do anything the best.

The point is, Zoom is just a gnat on the giant [expletive deleted] of Microsoft. It is much riskier because it has a single product and single revenue stream. Microsoft doesn't have to charge anything for MS Teams and has ready access as incumbent to the customers that Zoom needs to maintain its growth. Microsoft don't have to make any profit from MS Teams, in fact it wouldn't care if it lost money because it's just another part of an existing service, another bit of software code. Given the opportunity of buying Zoom or Microsoft on the same rating (which they are forecast to be) IMO only a lunatic would buy Zoom on a risk adjusted basis.

Good luck! BTW I have no interest in Zoom or continuing my part in this discussion.

[vand]

I've put forward a case that at the sort of impressive rates of growth that the company has undergone, it isn't going to look expensive on many metrics before too long, if not already. A case can be made for x10 price/sales for a company that grows at such a pace.

I think most companies would love to be growing at just a fraction of the rate Zoom has managed recently.

If you're only method of valuing something is using Price/Sales than God help you! A wiser man than me once stated "Sales are vanity, profit is sanity". In fact, by looking only at sales you are completely missing the underlying picture at Zoom. The point I am making, which you seem not to have grasped, is that the future is different from the past, and in the case of Zoom it is predicted to be very different for the next year or two. The market doesn't care about the past, only the future.

I don't deny that during a once in a lifetime set of circumstances Zoom grew at a phenomenal rate. EPS for FY 01/2022 is predicted to be $4.87 (46% YoY growth) on revenue of $4.08B (54% YoY growth). The current market cap is $40.77B so it is already on your PSR of 10. Where's the growth coming from then? Well actually, sales are forecast to grow to $4.75B for FY 2023 BUT EPS is forecast to drop 9% to $4.42. That can only mean one thing, falling margins.

I think it's you who is backward looking, expecting MS as the incumbent be able to easily defend from a more specialised startup. MS do a lot of things well, however they rarely do anything the best.

The point is, Zoom is just a gnat on the giant Pink marshmallows of Microsoft. It is much riskier because it has a single product and single revenue stream. Microsoft doesn't have to charge anything for MS Teams and has ready access as incumbent to the customers that Zoom needs to maintain its growth. Microsoft don't have to make any profit from MS Teams, in fact it wouldn't care if it lost money because it's just another part of an existing service, another bit of software code. Given the opportunity of buying Zoom or Microsoft on the same rating (which they are forecast to be) IMO only a lunatic would buy Zoom on a risk adjusted basis.

Good luck! BTW I have no interest in Zoom or continuing my part in this discussion.

All you keep going back to is that you expect them to be making money so shortly after float, and I have pointed out that's not the expected norm, and I repeat that you're just trolling if you are arguing otherwise - please give examples of companies who floated in lets say the last 3-5 years and are instantly profitable and paying out dividends shortly after floatation? They don't exist in today's world. Companies float in order to raise capital from public markets to enable continual expansion, not so that the public can instantly profit from the growth that was up to that point privately owned.

If your best investment idea in the tech space is "buy Microsoft" then God Help You.

Moderator Message:
Vand, you are again "playing the man", not "playing the ball". Stop it, or your posts will start to vanish. Moderators have better things to do with their time than moderate posters who repeatedly fail to abide by the site's guidelines. --MDW1954

[simoan]

All you keep going back to is that you expect them to be making money so shortly after float, and I have pointed out that's not the expected norm, and I repeat that you're just trolling if you are arguing otherwise - please give examples of companies who floated in lets say the last 3-5 years and are instantly profitable and paying out dividends shortly after floatation? They don't exist in today's world. Companies float in order to raise capital from public markets to enable continual expansion, not so that the public can instantly profit from the growth that was up to that point privately owned.

If your best investment idea in the tech space is "buy Microsoft" then God Help You.

I'll let others decide who is acting most like a troll because you've ignored all the points I made in my post and you have gone off at a complete tangent. I'm not going to bother responding to any of your posts in the future for that reason. You have provided no fundamental analysis or research behind this idea of investing in Zoom, just a typical novice investor "it's gone down a lot so should go back up" approach. All I have tried to do is help you and provide some fundamentals and in response all you can do is call me a troll.

With regard to IPO's, only this week I opened a position in a profitable company that IPO'ed last year called Supreme, I also have a position in Fonix Mobile which IPO'ed as a profitable company. A few years ago I took part in the AJ Bell IPO when it was profitable and ready to go. Many other examples but I just can't be bothered wasting the time to reply any further...

[vand]

All you keep going back to is that you expect them to be making money so shortly after float, and I have pointed out that's not the expected norm, and I repeat that you're just trolling if you are arguing otherwise - please give examples of companies who floated in lets say the last 3-5 years and are instantly profitable and paying out dividends shortly after floatation? They don't exist in today's world. Companies float in order to raise capital from public markets to enable continual expansion, not so that the public can instantly profit from the growth that was up to that point privately owned.

If your best investment idea in the tech space is "buy Microsoft" then God Help You.

I'll let others decide who is acting most like a troll because you've ignored all the points I made in my post and you have gone off at a complete tangent. I'm not going to bother responding to any of your posts in the future for that reason. You have provided no fundamental analysis or research behind this idea of investing in Zoom, just a typical novice investor "it's gone down a lot so should go back up" approach. All I have tried to do is help you and provide some fundamentals and in response all you can do is call me a troll.

With regard to IPO's, only this week I opened a position in a profitable company that IPO'ed last year called Supreme, I also have a position in Fonix Mobile which IPO'ed as a profitable company. A few years ago I took part in the AJ Bell IPO when it was profitable and ready to go. Many other examples but I just can't be bothered wasting the time to reply any further...

My initial analysis was that the company is priced at $40bn which puts it on a price to sales ratio which is not hugely out of line with other tech stocks, and could be considered cheap given that that it is still growing much faster than most other companies.

It doesn't have any net earnings, but nobody (except you) excepts that at moment. However, in business it's accepted that management's job is to allocate capital - the choice to either return cash to shareholders today, or reinvest it into the business for a higher return tomorrow, and Zoom management is understably foregoing returning money today in the expectation of continual growth and (eventually) higher returns in future. This is not mythical chart reading, this is how businesses plan and grow. Clearly if you want them to pay you today then its not the company for you. But as you said yourself, investing is about the future.

The company's numbers clearly shows that it was growing before covid, and continues to grow after lockdowns are being lifted.

Your fundamental analysis amounts to basically "Microsoft will eat the world"... when they aren't the #1 player in any key growth market because basically their products aren't good enough.

And fair enough, maybe some IPOs are profitable from day one, but that doesn't change the function of an IPO being to raise fresh capital for future expansion - a goal that is clearly at odds with your "jam today" requirement of a stock.

[simoan]

I'm a big fan of the semi industry as an investment area. I think it will be the "oil" of this century, underpinning much of economic activity. I am investing in semis via ITs. I would invest in ARM if I could. Intel, I'm not sure

Which ITs have you chosen for this?

I’ve looked at SMH, a physical ETF specifically targeting semiconductor manufacturers, but haven’t yet invested.

Wasron

Thanks for this Wasron. I've just taken a look at VanEck Vectors Semiconductor UCITS ETF (SMH) as I was not aware it existed. But then it's only been available for just over a year. TER of 0.35% looks OK given it gives physical exposure to 25 holdings which cover every aspect of semiconductors from front-end design and verification, photo lithography and fabrication, back end testing and the big fabless companies such, as Broadcom and Qualcomm. The weightings look about right too with TSMC and ASML accounting for 20% alone. It's really tempting to buy some to gain broad exposure without needing to do any research!

All the best, Si

[TUK020]

I'm a big fan of the semi industry as an investment area. I think it will be the "oil" of this century, underpinning much of economic activity. I am investing in semis via ITs. I would invest in ARM if I could. Intel, I'm not sure

Which ITs have you chosen for this?

I’ve looked at SMH, a physical ETF specifically targeting semiconductor manufacturers, but haven’t yet invested.

Wasron

Thanks for this Wasron. I've just taken a look at VanEck Vectors Semiconductor UCITS ETF (SMH) as I was not aware it existed. But then it's only been available for just over a year. TER of 0.35% looks OK given it gives physical exposure to 25 holdings which cover every aspect of semiconductors from front-end design and verification, photo lithography and fabrication, back end testing and the big fabless companies such, as Broadcom and Qualcomm. The weightings look about right too with TSMC and ASML accounting for 20% alone. It's really tempting to buy some to gain broad exposure without needing to do any research!

All the best, Si

Thanks Wasron, also on my list for a closer look

[vand]

This is looking - and feeling - more and more like a rerun of the dotcom crash as each week passes.

Market breadth has been steadily getting weaker for a year now
https://www.marketinout.com/chart/marke ... cline-line

- First the unprofitable speculative plays topped as far back as March 2021
- Then the tech sector was weaker and did not make a new high in Dec 2021 even as the S&P and Dow were making new highs
- The meme stocks are getting smashed all over the place. Many of them down 60%,70% or even more
- Smallcaps weak all through last year
- Tech sector now noticeably weaker than everything else. Nasdaq well into official bear market territory

[Adamski]

This is looking - and feeling - more and more like a rerun of the dotcom crash as each week passes.
...
- Tech sector now noticeably weaker than everything else. Nasdaq well into official bear market territory

I agree there could be likevthis for some time. Markets taken a dip again today.

SMT down 4.7% today, 39% ytd

Some of big tech names like Netflix down 70%

China crashed, fcss down 25% ytd, zero covid hurting exports

World VWRL down 8.3% ytd, near correction, fragile territory with ongoing war. Not looking good for investing right now..

[vand]

Basically... everything that Jeremy Grantham was warning us about at the start of the year is playing out according to script... and we are closer to the start of the process than we are the a capitulation bottom.

The one silver lining is that GBPUSD has weakened considerably in the last few months. While this is not good for our future purchasing power, it has temporarily shielded domestic investors buying global indexes from new nominal lows on their funds so far.

[barchid]

Vand
I do not disagree with your thoughts on Grantham, but remember the old market saying "it's never as good as it looks & it's never as bad as it looks".