Bloomberg IntelligenceRoblox Shares Fall on Daily Active Users, Bookings Miss
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Mandeep Singh, Bloomberg Intelligence Senior Tech Industry Analyst, discusses the latest on Roblox earnings. Nancy Tengler, CEO and CIO of Laffer Tengler Investments, discusses her outlook for the markets. Shana Sissel, President and CEO at Banríon Capital Management, joins to discuss her outlook on the markets.
Hosts: Paul Sweeney and John Tucker
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One of the big movers in the marketplace today is Roadblocks. The game company stock is down eleven percent. It was down more than twenty percent early in the trading day. Bookings missed outlook a little bit softer than expected. Let's get some details on now we can do that. The man Deep singing, he's a senior technology channels for Bloomberg Intelligence. Man Deep Talk, describe what Roadblocks does, and then what's happening with the stock today.
I mean, this is a platform think fit as a Bold garden where you can play any user generated game as well as you know, the Triple A titles and all sorts of game content hosted inside Roadblocks platform where multiple users can play the game. And it's been quite popular, you know, with that demographic, the nine to seventeen eighteen year old.
It's a great way to entice somebody to do their homework. It really is.
Yeah, the use cases beyond gaming.
You spent twenty minutes doing this, you know, after you do your homework or whatever.
Yeah, and so I think again user growth of twenty percent plus and anytime you see a company missing on user growth, the reaction is pretty strong. Now, if you remember, there was a report from Hindenberg talking about how the user and engagement metrics are inflated, so pretty much the company has been you know, doing the cleanup post that report, even though they didn't really acknowledge, you know, there were a large number of users.
Were they faking those numbers. They're just so difficult too.
With online platforms, is it's so hard to figure out exactly, you know, what's bought activity and where are the user metrics inflated or engagement And there's always scope to you know, clean up and have real users being reflected on the platform. In the case of roadblocks, brand safety is a big aspect because you know, we were talking about kids using the platform. So they've really, I think done a lot since that short thesis from Hindenburg, and that's partly the reason why they missed in terms of the user and engagement metrics. But they called out Eastern Europe being weak and Turkey being weak. To me, this is really the quarter where the impact was the most obvious, and then it will gradually get better because they've cleaned up.
So it seems like at least the partial vindication for the Hindenburg research.
Well, I could make the case even for you know, a platform like snap where you may have they have shown hundred million daily active users every quarter. Now do they really have one hundred million or is it more ninety seven million because three million are just captured in their metrics. So no one has a consistent approach to.
A third party like a Nielsen for TV ratings.
There's no third party to airfact, there is no third party. It's the company that's giving you the metrics.
And I don't think there is like a consistent approach that every company uses in terms of giving out their daily active usercount.
Beyond the daily active users, what are the other important metrics.
That engagement also was like kind of a slight.
Message and radio it's time spent listening. Is that this sort of the same thing.
Yeah, So again I look at you know, what they are doing on the AI side. They are looking to develop their own foundational model. So think of it as you know what the LLLM companies are doing. It's a walled garden where they will create all of tools to enable more content. It's similar to YouTube in some sense. YouTube has got a lot of video content, Roadblocks has got a lot of gaming content and other things for that demographic. So net I mean, this seems to be justified reaction because they missed on their numbers, But has a thesis really changed because they're losing share?
I don't think so real quick.
Have the safety concerns as a parent have they been fully addressed?
That's what they're trying to address, and that's why you know they missed on these metrics. So they're using a combination of AI tools as well as just focusing more on brand safety because they want to ramp up ADS.
And the way you ramp up ADS is you.
Want to make guarantee the advertisers that it's a safe platform to advertise on.
Man Deep Seeing, thank you so much. We appreciate that. Man Deep Seeing.
Senior technology channels for Bloomberg Intelligence. Join us here on a bloomerg interactive broker studio.
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Right next, guest, nice exposure to technology. And one of my questions is is technology going to continue to lead this market?
Hire have a little bit of a hiccup so far in it.
Was the only sector to decline in the month of January exactly, and it's.
Just kind of underperforming here.
So Nancy Tangler John's She's the CEO and CIO of Laffer Tangler Investments based in Get this right now. She's calling from Scottsdale, Arizona. One of my all time favorite.
Play there is snow, snow and ice on the.
Ground, snow as Royal Palms Hotel is my go to place.
They love me there lots of good stuff to do out there, exactly. Nancy, thanks so much for joining us here. Deep Seek was a story a couple of weeks ago. We've now kind of forgotten about it, but I think that costs a lot of tech investors to kind of maybe rethink a little bit their AI trade. Here, how did you kind of view that news and did it kind of change in anyway your view of big tech.
Well, Paul and John, I'm dressed in sympathy for you this morning in a down vest because it is actually cold.
Here to find cold, Nancy, Well, not really cold yet.
I was going to whip out my violins.
Plan well, listen.
I think there was a couple of things with the Deep Seak announcement. Remember on the Friday before we had Projects Stargate where the President had Larry Ellison, Sam Maltman, and Masassan in the White House announcing a five hundred billion dollar investment in AI and whether or not it's going to be five billion dollars. We could talk about that all for quite some time, but it generated enthusiasm. And then the next Monday we had the story break that Deep Seak had developed a more efficient AI model for a five point six million I don't think that's correct, and I think there was timing involved, And then we had Ali Baba come out. What we know is that the system is not as reliable, it's censored, it crashed. And we also know that at Dagos, where this was being talked about and for months before Deep Seek that is that they allegedly have fifty thousand h one in Vidio chips, which costs forty thousand dollars each. So I think the whole thing is a bit suspect, but good for the overall AI market because what we know from Jevon's rule is that what you will see is the cheaper technology gets, the more the usage and the use case demand goes up. And we're seeing that across all sectors in earnings reports for the last nine months and also this most recent.
Quarter, Nancy, what do we learn from the earnings reports so far? I mean they're kind of backward looking, I guess more specifically the earnings calls that we've had.
Yeah, John, No, you're absolutely right. So it is backward looking when you look at earnings beats. But what we listen to is the guidance, and what we're hearing is pretty optimistic. So if I'm going to look at my notes just a little bit, because we cover a lot of companies, but we're hearing things from companies as diverse as next Era Energy, raytheon Xylum water treatment company, and pro Logis, for example. So old economy companies that are benefiting from the usage of AIRE in their well in their businesses and then the margin improvement is showing up in margins and we're getting guidance that's pretty optimistic. And so you see that in the markets. What we also see is volatility because we have Trump two point zero and we know from Trump one point oh that volatility will be with us. He's going to make bold statements, some of which will come through, many of which won't, but it'll rile the markets, and it'll rile the algos and the short term traders. As an investor, it's great news for me because we're Volatility is the friend of the long term investor.
Names.
I'm looking at your twelve Best Ideas portfolio, very very heavily weighted with the big tech names everybody knows Spotify, Amazon, Broadcom, Microsoft and the like. Talk to us about your thesis there behind that portfolio.
Yeah, So we run a growth strategy pall, and then we also run a dividend growth strategy, which is more value and we always pull from there our twelve best ideas because there was a study done decades ago that said optimal diversification is twelve names, and we have found that to be true over the years. That portfolio has done better than everything else. So we look for the companies that are generating earning's growth at a reasonable not a cheap, but a reasonable valuation. In determining that, we look at relative price to sales ratio, So what am I paying for a future unit of sales and then the price earnings to growth ratio, And these are the names that we have confidence in.
In fact, it has shown up in the performance.
So I think it's also got a heavy exposure to consumer discretionary, modest exposure to industrials via Uber, and then some one healthcare name, and I think one financial Goldman Sachs.
I learned from Paul this morning that there's high dispersion in the market. I want to answer for a detailed explanation of that. But does are we all writing the same our investors all writing the same wave.
Well to some extent, you know, and that's driven by the ETFs. John, So you know, when you see a big sell off in a stock like Apple, a lot of times that's because retail investors or financial advisors are exiting ETFs, many of which own Apple, So you have to keep that in mind. But what we're looking at is an analogy to the nineteen nineties, and I think we're in the early years of this anal Internet as a technology was super cool, but we were measuring eyeballs. I wasn't but analysts for eyeballs on a website. This technology is much more robust. And you've heard John Chambers, who was the CEO of the poster child of overvalued stocks in the nineties, say that generative AI and AI computing is more powerful than cloud computing and the Internet combined. So in some periods of time it makes sense to be part of the consensus as long as you're not buying companies with multiples of one hundred times peak earnings, which is what people were paying for Cisco in the day. And the buyers of the infrastructure are the hyperscalers who have robust balance sheets.
Many of them were.
Spending fifty sixty seventy five billion dollars this year in capex, but they're still generating fifty sixty seventy five billion dollars in pre cash flow, so these are really sustainable, strong company.
Nancy, thank you so much for joining us. Really appreciate it.
Nancy Tangler's CEO and chief investment office Laffer Tangler Investments, and oh, by the way, forecast at high for Scotts Sale, Arizona today seventy eight degrees.
So there you go.
That's tough.
Is they have a nice golf tournament there.
The PGA is there in Scotts Sale this week in Phoenix area, so they're gonna have been good weather.
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All right, let's talk to these markets here. Let's talk tech technology in these markets. This technology is still a leader for these equity markets as it has been forever.
Shana Cisel joint says. She's the president and CEO.
Of Bondrin Capital Management, joining us here. Shana, you know, a couple of weeks ago, it seems like a lifetime ago. There's this thing we all learned about deep seek, and I know you guys spend a lot of time thinking about investing in technology broadly defined. How did you guys think about this deep seek and what may mean for technology investing?
So my general rule of thumb with any kind of news is if it makes me have a very visceral response that I should step back and read, and so that was my initial response. The market, however, does not have the focus and the ability to necessarily do that, so it freaks out. As I learned more, I became less concerned about the deep seek threat and what that means for China as a competitor in the AI space. There's a number of things that stood out to me that made me think, like, Okay, this is no different than any time a Chinese company knocks off a American shoe brand or anything else. It's very similar, But there's more of a concern here. If we thought TikTok was a concern from national security perspective, this is an even greater concern with its connection to the CCP through their app. So while there's definitely some interesting aspects of the open source code that can be used by Amazon or anybody to leverage the actual app itself and the things that related to that, I'm less concerned about in terms of what it means for the US companies in the tech space.
This shouldn't be a surprise. It was always the.
Greatest risk to technology companies in the US was having somebody disrupt the market. But I think it's a bit overblown and quite frankly, I think we've been complaining about valuations forever and this solved our problem pretty quickly.
All right, let's move to treasury yields. I heard the new treasure secretary say yesterday that he's kind of focused on the tenure and bringing that down. Now, I'm kind of a student of history, and I have to go back to the early sixties and beyond right up to present day. The ten here seems to follow economic activity. And if you want to bring the ten year lower, a sure way to do it is to lessen economic growth. I'm sure it doesn't want to do that.
Yeah, that's the conundrum here, right, You want to bring rates down, but you know, at the end of the day, there is correlation there between the strength of the economy and the interst rate environment and the yield curve and how the yeld curve behaves. You know, the FED doesn't have the power things it has to control that. I mean, we've seen that in recent months with the FED cutting and yet the yield curve not behaving like rates have been cut. In fact, it's to be expected, right, because you want to get out of an inverted yield curve, which requires the longer end to go up even in a cutting cycle. But I think that the problem here and what they're trying to kind of fix, is related to mortgage rates in the housing market, and I don't know that there's an easy fix to that. But I am concerned that there's this belief that if they just cut rates enough, they can fix this problem, because I think it's not that black and white, and there's a high probability of a potential mistake being made if they go in with policy decisions thinking that it is that easy.
Chan.
I know you work with your clients talking about alternative investments. Here, where do you see the greatest opportunity in alternatives here? Private equity, private credit, hedge funds.
Where are you spending most of your time these days?
So more hedge fund like strategies, private equity, private credit are kind of sensitive to the interest rate environment and also sensitive to public market betas in the hedge fund world, especially if you believe that there's going to be increased volatility. Hedge funds and hedge fund like strategies are great diversifiers. So, for example, last week, there's a ETF PTL, the ADF us Anti Beta fund long low beta short high beta that that product did remarkably well when we had the big deep seek threat threat sell off, And that's exactly what you want and those types of products, and that's what hedge fund like strategies can do is provide you that downside protection when the market is under significant stress. Managed futures is another example, like a CTA et F. And then when you move into the hedge fund space where they can use leverage more as a tool, you can get even greater benefit as a diversifier and as a downside protector. But it's not sexy and people get forget that, like these aren't meant to outperform the market. There they serve a purpose in your portfolio.
I like to think of it as.
Like home insurance, like you hope you never have to use it, but it's you would never not have it because you need to be able to manage the risk. And that's exactly how I see those types of strategies. This year, I think is the year where these types of strategies are really going to show their worth because I think the markets are going to be quite polatile.
Shana, thank you so much for joining us. Always appreciate getting a few minutes of your time. Shana Sissel, president and CEO of a Bondrion Capital Management, joining us, you're talking about the broader market.
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