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Freddie Strike Male ID: 71284404
American Stock researcher
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    $Zoom Video Communications(ZM.US)$ shares are dropping 3.5% to $203.94 as $Microsoft(MSFT.US)$ unveiled a standalone version of Teams for small businesses.
    Microsoft Team Essentials will cost $4 per user per month and get access to core features of Teams, without having to also subscribe to Office, The Verge notes.
    In comparison, Zoom has a small business plan that costs $19.99 per month per license. Zoom Pro, which the company says is "great for small teams," costs $14.99 per month per license.
    Small businesses previously had to pick a Microsoft 365 Business Basic plan, which cost $5 per month per user, or other platforms, such as Slack - owned by $Salesforce(CRM.US)$, Google Workspace $Alphabet-A(GOOGL.US)$, Workplace from $Meta Platforms(FB.US)$ or others.
    The standalone version of Microsoft Teams Essentials has a simpler chat interface and focuses on meetings and video calls, Jared Spataro, head of Microsoft 365, told the news outlet.
    Microsoft Teams Essentials has 10GB of OneDrive storage, whereas Business Basic has 1TB worth of storage. Essentials also does not have the ability to record meetings, provide transcripts, translation, separate rooms or channels and other functions that the more expensive plan has.
    Last month, Zoom's shares plunged after the company reported fiscal third-quarter results that disappointed Wall Street and acknowledged that it would face headwinds in 2022 as more employees return to offices around the globe.
    Zoom drops 3% as Microsoft unveils cheap standalone version of Teams
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    $Grab Holdings(GRAB.US)$ When it comes to food delivery, I wonder if any comparisons to China are entirely valid. So much of SEA's food tends to be home-cooked, often with gravies, which is a likely natural competitor to 'drier' foods preferred by Chinese customers, from fast food chains to their own cuisines.
    Going forward, isn't increased fuel costs a major headwind for Grab?
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    $Grab Holdings(GRAB.US)$ Grab is giving big discounts for their food service right now in Indonesia. Gojek is giving less, and shopee is the least.
    $Grab Holdings(GRAB.US)$ I expected Grab's mobility segment to recover to figures between Q1 and Q2, given that COVID19 cases are stabilizing in SEA. However, this minor recovery isn't enough to justify its current $52bn valuation, where its valuation implies an expectation of 35% CAGR on top of a fully recovered pre-pandemic mobility segment over the five years. On top of that, the removal of the $10 NAV floor post-merger and the high inflationary and high risk of tapering/rate hikes economic environment adds to investors' downside risk. Therefore, we chose the conservative alternative to take profits at this price level and only leave profits on the table to capture potential spike on announcements related to its merger.
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    SPAC$Altimeter Growth Corp(AGC.US)$rose 3% in after hours trading after holders approved the deal to take Southeast Asian ride-sharing company Grab public.
    Shareholder redemptions were almost 0%, at 0.02%, according to a statement. The transaction is expected to close tomorrow and Grab is expected to begin trading on the Nasdaq under the ticker symbol "GRAB" Thusday.
    Grab is Southeast Asia's most valuable startup and is set to undergo a merger with Altimeter at a valuation of $40B.
    The deal is expected to be one of the largest-ever U.S. equity offering by a Southeast Asian company. A public debut from Grab will offer investors access to a regional consumer market of more than 655M people across countries including Indonesia, Thailand and Vietnam.
    Earlier this month, Brad Gerstner's SPAC Altimeter Growth announced that that the SEC declared effective the Form F-4 registration statement of Grab Holdings and set the shareholder vote for today.
    SPAC Altimeter Growth gains after holders approve deal to take Grab public
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    $Grab Holdings(GRAB.US)$$Altimeter Growth Corp(AGC.US)$ Grab's Q3 adjusted net sales stand at $429mn, 22% decline QoQ. Grab's Q3 revenue also declined 13% QoQ. This implies incentives to consumers declined 27% QoQ. It is a comfort to see that revenue is less sensitive to consumer incentives. A more worrying sign would be increasing adjusted net sales (or incentives) and declining revenue. Since incentives to consumers declined more than revenue, there isn't evidence suggesting an anomaly or discrepancy. Rather, the decline is more likely to stern from the business environment, which is what Grab has reminded investors about in Q2.
    In Q2, Grab warned investors about potential severe COVID19-related mobility restrictions in Southeast Asia. During the period, Grab's full-year 2021 projection has considered the potential of partial and total lockdowns in various countries where the company operates as a consequence of COVID19's continued expansion. Grab's fear came true as COVID cases in SEA countries reached a new all-time high in Q3 due to the Delta variant. The Philippines reimposed lockdowns on Sept. 9, a day after announcing the lifting of stay-at-home orders for more than 13mn people. In August, Vietnam has also imposed a strict stay-at-home order in Ho Chi Minh City's southern suburbs and dispatched the army to assist quarantined citizens.
    Therefore, it is no surprise that Grab attributed the decline in overall revenue to the lockdown, especially in Vietnam. This claim is accurate. By referring to Table 1, we can see that the decrease in revenue is mainly derived from its mobility segment. If we expand our analysis time period, we can observe that Grab's underperformance (drop in revenue) in 2021 is caused mainly by its mobility segment. Grab's Q2 mobility segment revenue, and total revenue dropped $27mn and $35mn QoQ, respectively. Grab's Q3 mobility segment revenue and total dropped $30mn and $23mn QoQ, respectively. The decline in the mobility segment coincides with increases in COVID19 cases across SEA (Figure 4). Therefore, Grab's claim that its decline in revenue is contributed by the lockdowns and travel restrictions across SEA.
    Despite the drop in revenue, activities (GMV) on the company's platform actually increased 5% during the period. This may not seem like a big deal, but this statistic actually invalidated one of our previous hypotheses (maturing market). In Q2, Grab's GMV only increased 6.5% in spite of a 27% increase in incentives. This suggested that Grab's market is reaching maturity. However, Grab's GMV increased 4.1% (QoQ) in spite of a 27% (QoQ) decline in Q3. This means that Grab's GMV growth isn't fueled by incentives as much as initially thought.
    Following Grab's narrative, monthly transacting users (MTU) also declined due to lockdowns. This is also expected. However, what was unexpected is GMV per MTU actually increased. This further proves that Grab indeed has a network effect where activities (GMV) of existing users increase. This is crucial to Grab's overall growth for several reasons:
    It is unlikely for Grab to expand beyond SEA. This is because Grab, Uber, and DiDi (NYSE:DIDI) share equity with one another. Therefore, it is unlikely for them to compete with one another.
    Due to the limited geographical expansion, it is clear that Grab has to upsell and cross-sell new products to the existing userbase to increase the revenue stream.
    For these very reasons, Grab's increase in GMV and GMV per MTU is a positive takeaway. With UBER as comps, Grab has to grow at 35% CAGR on top of a fully recovered pre-pandemic mobility segment over the next five years. This feat is very challenging. Firstly, the majority of Grab's revenue is derived from its mobility segment. Based on the relationship between COVID19 cases and Grab's mobility segment (Figure 4 and Table 1), we expect Grab's Q4 mobility segment to be in between Q1's and Q2's, somewhere around $135mn. This figure only represents around 6.75% of the pre-pandemic level (approximately $2bn). Hence, there is still a very long way to go. Secondly, we don't expect food delivery to grow materially from here as we expect the need for food delivery to decrease when the economy reopens. Hence, food delivery is not expected to contribute to Grab's overall growth. Thirdly, financial service and enterprise & new initiatives' overall contribution to revenue is only marginal. Hence, it is difficult to justify Grab at its current $52bn valuation.
    Moreover, investors will lose the $10 NAV safety net once the Grab-AGC merger is completed. This adds to investors' downside risks. In addition, the overall macroeconomy conditions add to the difficulty in investing in high-growth companies. High inflation erodes the value of future earnings, while any form of tapering or rate hikes will devalue Grab's intrinsic value.
    Grab IPO: Q3 Performance Breakdown
    Grab IPO: Q3 Performance Breakdown
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    $Altimeter Growth Corp(AGC.US)$$Grab Holdings(GRAB.US)$ Grab's earnings report puts a lot of emphasis on Adjusted Net Sales where Adjusted Net Sales = Revenue + consumer incentives and excess driver/merchant incentives. This will mislead investors and exaggerate the company's actual performance. Firstly, incentives-fueled growth is not sustainable due to cash burns and reliance on subsidies from external parties. Secondly, according to Grab:
    Grab presents Adjusted Net Sales as a metric to compare, and to enable investors to compare, its aggregate operating results in the absence of excess incentives, which are intended to be temporary drivers of growth, and which Grab plans to reduce in the future. Grab’s management believes Adjusted Net Sales captures significant trends in its business over time.
    Therefore, incentives should be removed from any form of Grab's performance analysis. Unfortunately, Grab's performance after removing incentives doesn't look optimistic. Grab's revenue decreased by 16% quarter over quarter, despite an increase in adjusted net sales of 8%. This suggests that incentives fueled the bulk of its expansion. According to the numbers, Grab upped its incentives by 27% quarter over quarter. However, the 27 percent increase in incentives resulted in just a 3.78 percent rise in monthly transacting users (MTU) and a 2.6 percent increase in GMV per MTU. This has several consequences. To begin, the considerable increase of incentives but just a modest increase in growth indicates an aging market.
    On the other hand, with Uber as comps, Grab's valuation of $60bn implies a (revised) CAGR of 35% + a full recovery of its ride-hailing business to pre-pandemic levels. This causes a discrepancy between its valuation and growth expectations. A bear-case scenario will see Grab's share price mirror $Zoom Video Communications(ZM.US)$ decline after reporting slowing growth.
    Let's examine whether Q3 performance can turn things around for Grab.
    Figure 1: Grab's 2021Q1 Quarterly Performance
    Figure 2: Grab's 2021Q2 Quarterly Performance
    A Short Recap on Grab's Q2 Performance
    A Short Recap on Grab's Q2 Performance
    Widely followed hedge fund manager Dan Niles predicted Wednesday that the $S&P 500 Index(.SPX.US)$ will decline in 2022, as the Federal Reserve is forced to raise interest rates and stock valuations come further off of all-time highs.
    "My favorite investment idea right now is cash," the founder and portfolio manager at Satori Fund told CNBC.
    In terms of individual stock picks, Niles pointed to Google's parent company $Alphabet-C(GOOG.US)$$Alphabet-A(GOOGL.US)$ and Facebook's parent $Meta Platforms(FB.US)$, which he says provide growth at a reasonable price.
    "Those are great names. The names you want to be scared about are the ones that have no earnings and are valued off of revenues," he said. "Those are the stocks that are going to have huge troubles as rates continue to ratchet up."
    Niles argued that signs of weakness have been popping up in the equity markets for the past several weeks, with indexes like the Russel 2000 falling dramatically over that span.
    "Underneath the surface, there's a lot of damage being done and people are just continuing to crowd into some of the biggest names," he said.
    Detailing his prediction for 2022, Niles projected that the Fed will be forced to raise rates to counteract inflationary pressures. This, in turn, will push stocks off of lofty valuation levels, which reached a peak above figures seen during the dot-com bubble of the late 1990s and early 2000s.
    Meanwhile, for the end of the year, Niles contended that most fund managers are "either window dressing or tax-loss selling," which means that value stocks will have trouble finding support during December.
    Niles has long supported FB and GOOGL. See what tech giant he previously labeled "the most overpriced tech stock."
    Satori's Dan Niles: S&P 500 will fall in 2022, likes Google, Facebook and cash
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    $Apple(AAPL.US)$ Why has Apple been a net outflow for so long, whether the stock goes up or down?
    $Tesla(TSLA.US)$ It doesn't make sense if this thing hits a new high! There's nothing like it!