Big tech still big.

Growth tech just tech.

What does the world’s third richest man do after selling the top of $AMZN and exiting the role of CEO? He goes to Coachella and dances to bad bunny with his lover who’s managed to do incredibly well for herself when it comes to partners upgrading each step along the way from Tony Gonzales (NFL), Patrick Whitesell (Endeavor talent agency) and Jeff Bezos. Meanwhile shareholders are at the mercy of Andy Jassy who doesn’t get the same “just trust us” reaction from the market that Bezos was able to command at the helm.

We don’t exactly know what the cloud is or what it does but we’ve written about it a lot this week and will continue to do so until someone stops us. AWS is the largest player followed by Microsoft and then Google which used some accounting magic to finally become profitable this quarter.

Amazon’s thing is AWS is a growth machine that can’t be stopped and you get the retail business (loser) for free. It’s similar to the “omg did you know Costco doesn’t make money on the hot dog or toilet paper just their membership.”

But the growth machine has likely peaked.

The stock is down 3.85% compared to the S&P’s 0.60% gain and the Nasdaq is flat.

Flat is another way to describe long-term Amazon investors who have been holding through the pre-covid high, seeing a meager 1.47% return over 1,161 days.

Locking everyone down expected to bring a material shift to consumer behaviors when it comes to shopping online. Hey grandma Sue you can’t leave the house here’s how to order your groceries and Chinese nik naks from your tablet now you never need to leave the house again.

But it didn’t happen.

Cloud sales peaked. E-commerce is flat. What’s left to squeeze?

Apparently it’s the independent merchants (Amazon sellers) who are paying more money to use the warehouse space and advertising platform. It’s always been easier to sell on Amazon because they have a native audience built in. You don’t have to go from Google / FB → Website → Conversion. One click on Amazon and then one-click checkout, no shipping required let them handle the dirty work. Fulfillment is not a sexy business no matter how much robotic technology is added to make it more efficient, so we’ll have to see how much more they can increase FBA fees and advertising.

tl.dr - the market has said AWS is the only thing that matters. AWS is now showing its slowest growth ever and operating profit is down -26% YoY. there is no free cash flow. retail is a low margin people intensive business. good luck out there.

Growth Tech… Just Tech Now

Stuff that’s bad for the big boys is always much worse for the little guys. The victim here being unprofitable growth tech like rigd favorite Cloudflare.

Amazing product, bad business. We’ve been using Cloudflare since forever? and without knowing exactly what it does or how it does it, there is zero chance we’d ever switch providers.

This stock was a hypergrowth covid darling trading up to $221 in November 2021 and we printed money on $NET 90s. But at $45 now you would need a 389.28% to return to all-time highs. It’s getting crushed today due to their full-year guidance getting slashed again down to 1.28b versus prior guidance of 1.34b.

It has to be crazy being the CFO knowing that you have to make a revision that accurately reflects the business while knowing that every ten million is going to cost you hundreds in market cap.

Cloudflare isn’t alone at the party.

Here’s the 1Y performance of the growth now just tech club:

$DDOG -45.70%
$ZM -37.45%
$CRWD -39.98%
$ZI -56.32%
$ZS -56.81%
$U -61.65%

Maybe they’re undervalued or maybe they’re becoming prime acquisition targets for big tech to absorb and ruin.

Either way it’s a weird market when homebuilders like $DHI and energy giant $XOM are trading at all-time highs and growth can’t even sniff a bid.

Week summary:

We’re kicking, crying and killing ourselves for not taking a flyer on the $FRC $5p options that expired today. We saw them when we wrote about them on Monday (was over 60,000 contracts at the time), we didn’t mention them because they were down 70% on the stock mooning prior to earnings but now the stock has collapsed and the bank will be taken over by the government and the “people” who held are getting absolutely filthy rich today.

How rich?

The 4/28 FRC $5p opened Monday at .05 and now they traded up to 2.34 today. Traded perfectly it’s a 4580% return in five days. So one benjamin franklin bought you 20 contracts on Monday and you could have sold for $4,680 today.

Maybe the lesson here is that news and price action tells a story but option flow tells the truth. Someone always knows something and it shows up if you know what to look for.

That’s what we’re building at RIGD.

have a great weekend and we’ll see you on monday.

p.s. we identify as very important and would appreciate if you please mark us as such in your inbox

truthfully we messed up a setting in cloudflare when we originally started sending this newsletter out. maybe that’s why the stock is down so much.

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