Amazon (AMZN) – AI & Black Friday
Amazon debuted free-to-use AI courses to train talent. The material will include eight courses as well as certifications. It will be offered to existing and prospective employees, as well as some students.
The Amazon distribution center in Swindon (England) is as “busy as ever” as it continues to see “more and more demand” per its manager Davad Tindal. He’s seeing no weakness which is especially (and pleasantly) surprising given that economic activity in EMEA has lagged North America a bit. Sporadic strikes across some fulfillment centers do not seem to be having any impact on this titan’s execution. Still, that is something to watch closely in case they become more broad-based in nature.
Amazon’s iRobot transaction looks like it will close at $1.4 billion without antitrust pushback from the EU.
CrowdStrike (CRWD) – AWS, Channel Checks & A Tougher Setup
It’s no secret that CrowdStrike and AWS work well together. Notably, CrowdStrike recently became the first independent software vendor within cybersecurity to cross $1 billion in AWS marketplace sales. Per Synergy Research Group, among the Big 3 public cloud vendors, AWS leads with small businesses. It has the largest market share of small and medium businesses (SMBs) at 31%, followed by Azure at 26% and Google at 19%.
Channel Checks & A Tougher Setup
All of this is to say that Amazon is the perfect channel partner for firms looking to expand their client bases downstream to smaller logos. That is a key growth vector for CrowdStrike, and one that should continue to bear significant fruit. Outperforming cost & efficacy for massive clients like Walmart, Accenture and Bank of America has a way of serving as key proof of concept for the little guys. CrowdStrike delivers that proof of concept in droves. Now CrowdStrike has combined these edges into the Falcon Go Bundle to cater directly to smaller players. Partnerships and product tiers like these should keep making that pursuit highly successful.
Promising Q3 channel checks from Morgan Stanley point to better-than-expected demand for CrowdStrike. The firm raised its price target based on this research. CrowdStrike’s stock has been soaring in recent months. It’s hard to imagine that it was in the $80s just a couple of quarters ago. Heading into earnings, I’m very optimistic about the actual numbers. I’m less optimistic about what the stock does in response to those strong numbers. It’s not nearly as expensive as a firm like The Trade Desk, but its roughly 40x free cash flow multiple still commands outperformance.
There are few companies that I’m more confident in outperforming than this one. Still, don’t be surprised if the stock shrugs off stellar numbers or responds poorly if there’s any negative surprise. I have no interest in selling shares despite having this view. I’ve owned CrowdStrike since the IPO; this share taking giant is one I want to own for many more years barring worsening execution. So? Either I’m wrong and the stock keeps moving higher, or it cools off a bit and I potentially get the chance to add more. We’ll see.
Uber Technologies (UBER) – Notes Offering
Uber announced a $1.2 billion convertible senior note offering. The notes carry a 0.875% interest rate and are due (mature) in 2028. Uber will use the proceeds to pay down existing debt including about $1 billion in 7.5% convertible senior notes due in 2025. This transaction offers more evidence of Uber’s strengthening liquidity, cash flows and coinciding credit ratings (which are now investment grade). More evidence came when the $1.2 billion deal was upsized to $1.5 billion – likely due to stronger demand or more favorable credit market conditions than anticipated.
This is the luxury of running a viable business, rather than one that chases growth at all costs. Now, the chase for growth will continue to become cheaper and more profitable thanks to the stronger footing Uber finds itself on. Nobody in the space can match its cost of capital strength, and that’s an edge it will fully leverage.
I’m expecting buybacks to start some time in the next quarter or two. Leadership has hinted at it a few times. Uber is set to generate $5+ billion in expected 2024 free cash. It also has $5.2 billion in cash and another $5.1 billion in investments that it will likely be partially liquidated. That leaves it well funded to continue expanding the product suite, keep investment and keep sharpening its customer acquisition cost lead – all while returning material cash to shareholders.