Housekeeping:
As a reminder, if you’re a Max subscriber, you have access to the Discord room. That’s where I will field your questions and share analysis the most quickly. It’s also where a large group of bright, seasoned and friendly people converse about stocks. Come join! And please reach out if you need any help doing so.
Most of this week’s content has already been sent:
- SoFi Earnings Review.
- Microsoft Earnings Review.
- Meta & ServiceNow Earnings Reviews.
- Starbucks Earnings Review.
- Apple & Tesla Earnings Reviews.
- Netflix Earnings Review.
- Taiwan Semi Earnings Review.
- A video podcast I did this week.
- My Current Portfolio & Performance (I cut a position this week).
Next Week's Tentative Schedule:
- Palantir Earnings Review on Monday.
- PayPal and AMD Earnings Reviews on Tuesday.
- Uber & Alphabet Earnings Reviews on Wednesday.
- Amazon Earnings Review on Thursday.
Table of Contents
1. Coupang (CPNG) – Ongoing Breach Coverage
A lot more developments on the Coupang investigation front this week. First, Trump levied a series of threats against the Korean government, telling them to honor trade deals and treat their U.S.-listed companies (ie Coupang) fairly. Tariff levels were moved back from 15% to 25% to try and force desired action. I think this is actually all quite positive for Coupang. Their supply chains don’t involve exporting to the USA and 90% of the small amount of inventory they sell on behalf of U.S. merchants is duty-free.
Powerful forces are now also focusing a lot of attention and pressure on Korea’s government. In the last few weeks, we’ve seen sharp bipartisan criticism of the investigation from the House Ways and Means Committee. Both Green Oaks and Altimeter Capital have also (rightfully) accused them of unequal law enforcement and favoring Chinese-based competitors over Coupang. Beyond that, Vice President Vance met with Korean leadership and warned them about unfair treatment of the U.S.-listed companies. And now, the Trump Administration is formally making it very clear that trade deals and lower tariff levels are at least partially dependent on whether or not they believe Coupang is being treated well. Regardless of what we think of this from a political point of view, this is undeniably positive for the company. It raises the probability of eventual favorable breach punishment being more mild.
- Finally, it looks like Kevin Warsh is going to be the new Fed Chair. I do not believe he will be able to keep this Coupang board of directors position if he is appointed.
2. Zscaler (ZS) – Product News
Zscaler unveiled a slew of new AI security products this week. All of them come with the aim of making companies more comfortable in embracing AI through complete Zscaler coverage and protection. If done well, these launches enhance Zscaler’s platform-wide service with new capabilities that protect the asset classes growing most quickly. And that gives us all of the things we love about broader interoperable platforms:
- More margin-rich cross-selling.
- More customer value creation through point solution displacement.
- Higher retention and market share defensibility.
New tools include AI app inventory and permissions & dependencies to find shadow AI or malicious users. It also now features policy enforcement, data loss protection, inline inspection (directly within network connection). These capabilities ensure a customer has:
- A sense of all 1st and 3rd-party agents in their ecosystem,
- What these agents are doing.
- What the agents are allowed to do.
- When agents are doing something prohibited and/or malicious.
- Zero trust architecture to minimize breach damage and longevity.
- Support to remediate the attack.
The AI Red Teaming capabilities (intricate simulation of attacks to test AI systems) it got from SPLX M&A will be a bundled part of all of this, while it’s also added a prompt hardening product to defend against malicious data poisoning and prompt injections. Zscaler is hard at work on building a holistic Security Operations Center, a needed step for being truly end-to-end in 2026. The launch coincides with Zscaler’s 2026 AI Threat Report that makes the need for these tools more clear. AI traffic is up 91% Y/Y, while every single studied enterprise using AI had material breach vulnerabilities. These can be taken advantage of quickly, as it took Zscaler’s Red Teaming division just 90 minutes to compromise 90% of the systems in question. These introductions should help.
3. Nu (NU) – Going Global
a. USA
Nu announced conditional approval for its U.S. bank charter. This starts the clock for them to be up and running in 18 months. They have a ton of Nu customers who spend a lot of time in the United States and there are more than 10M Latin Americans in the USA who are considered underbanked. Those will be the initial focus areas, while Nu will now theoretically match the unique cost advantage SoFi enjoys over its peers. They'll have the cost of capital edge of a bank and the OpEx edge of a branchless technology company. It's an extremely competitive market, but I think they have a real shot at taking a small slice of it.
b. Argentina
Nu is opening another office in Argentina this week to be its country hub. It already has a “talent hub” there and no business. But this is different. Per the article:
They did not explicitly say they’re opening for business in that country and the article even says this is to support growth in existing markets and eventually the USA. Still… man it does feel like an Argentina launch is coming soon. The country continues to enjoy the benefits of a more relaxed regulatory environment and slower paces of inflation. Now might be a great time to jump. We shall see.
4. Amazon (AMZN) – Grocery Business & More
Amazon is shuttering the 57 Amazon Fresh locations & the 15 Amazon Go locations and is adding 100+ new Whole Foods locations “in the coming years.” It’s also doubling the Whole Foods Market Daily Shop locations (smaller stores for urban centers) from 5 to 10.
These brick & mortar shopping models are in addition to a Supercenter model that will start testing soon with a location in Illinois. This will sell inventory from across its other physical grocery businesses and its online store. It will be half retail shopping and half automated fulfillment center — with robots to help fulfill in-store orders. That way, the shopping area stays free of clutter and there’s no need for shoppers to carry things around the store. This will soon start testing and, if things go well, the concept will most directly compete with companies like Walmart & Target.
I hope these tests succeed. In-person shopping remains a massive industry and that’s not going to change. Amazon’s world-class supply chains, pricing and assortment online should give it a great chance to do the same thing offline… not just for food. And that would be a fantastic extender of its core business’s runway, while unlocking significant synergistic opportunities with its online marketplace to improve overall customer service. All of its large brick-and-mortar-first companies have built their own e-commerce sites to encroach on Amazon’s e-commerce territory… and now hopefully Amazon can do the opposite to them.
Amazon is also laying off 16,000 employees mainly at the corporate level. They’re still unwinding pandemic bloat, as headcount has grown at a 17% compounded annual pace since 2019.
5. Starbucks (SBUX) – New Financial Targets
I will get to the rest of the investor day in the coming weeks, but this weekend will be spent finalizing the Axon deep dive coming tomorrow and I have 6 earnings reviews planned for next week. I’m hoping to make time for this as well, but no promises. I’ll get to it ASAP.
The most important part of that event is the new multi-year financial model.
This includes 3% comp store sales growth on an annual basis through 2028 and 5%+ revenue growth by 2028 vs 5.9% consensus growth estimates. It also includes a 14.3% EBIT margin for 2028 at the midpoint vs. 13% expected and $3.66 EPS guidance (or $3.51 post China Joint Venture closing) at the midpoint vs. $3.38 currently expected. That led to a 2% boost to 2028 consensus EPS estimates. Considering Niccol’s track record, all of the unproductive things there are to fix at Starbucks, how well progress is going and Niccol’s track record (said twice intentionally), I am optimistic about steady upward pressure on these forecasts as we approach 2028.
6. Prediction Markets
It looks like the CFTC is going to rework prediction market rules, which gives these products more staying power. While many will think that's bad for DraftKings and Flutter, it depends on whether the last few weeks of weak New York gambling volume data is a blip or a new trend. If it's a blip, then DKNG will be able to defend most of its market share in legal states. That headwind will be smaller than the larger benefit from entering 25 new states with their own prediction market offering. And the full case will be fully on track.
If it's a trend, then I think the core business headwind will be more concerning and challenging for DKNG than the help from entering those new states. This week’s data in New York was always going to be bad with the lack of a Bills playoff game (it’s New York state data) compared to last year. At the same time, the next few weeks will be extremely important for gauging whether this is noise or a real threat to the bull case. I want to see volume growth accelerate.
7. On Holdings (ONON) – CFO
ONON named Frank Sluis as their new CFO this week. He comes from global grocery giant Ahold Delhaize where he was the CFO of their EU and Indonesia businesses. Those segments do about $30B in annual sales. He has been Unilever's VP of Finance for their EU division and a Group CFO at Hoogwegt Group (a very large dairy supply company from the Netherlands).
8. Axon (AXON) – Competition… I guess
A smaller competitor called Wrap Technologies debuted a body-worn camera that looks like it will be best-suited for federal end markets. While that’s Axon’s least important source of demand, it’s still material. Wrap is taking an open source approach, so I'm sure they'll pitch less vendor lock vs. Axon. At the same time, that also means a less interoperable platform, less vendor consolidation and less of the benefits that coincide with those things. Most customers want a full and scaled platform. Wrap does a few million a year in sales with their net-based Taser competitor and doesn’t come remotely close to matching the end-to-end ecosystem Axon provides. I’m excited to talk through the entire ecosystem in the deep dive coming tomorrow.
9. Headlines
- ServiceNow’s Bill McDermott committed $20M of his personal money to buy shares in the open market. That’s likely somewhere around 5% of his net worth and a higher percent of his liquid net worth.
- As part of the new Uber and Nvidia collaboration, Mercedes is building an L4 fleet. Ride-sharing supply will be offered through Uber’s app. There wasn’t much detail on future scaling plans.
Google: A Waymo hit a kid in California. They’re thankfully fine. Headlines like this make regulatory pushback more likely.
10. Macro
Inflation Data:
The Producer Price Index (PPI) rose by 0.5% M/M for December vs. 0.2% expected and 0.2% the month before. The Core PPI rose by 0.7% M/M vs. 0.2% expected and 0% the month before. This isn't great, but the PPI can be very volatile. And in this report, a lot of the upside was driven by especially volatile Trade Services Margins and energy. If this becomes a more stubborn theme, then it will be an issue. Until then, it's not a reason for me to change anything in my approach to portfolio management.
Output Data:
- Durable Goods Orders M/M for November rose by 5.3% vs. 3.1% expected and -3.1% last month.
Consumer & Employment Data:
- Conference Board (CB) Consumer Confidence for January was 84.5 vs. 90.6 expected and 94.2 last month.
- Initial Jobless Claims were 209K vs. 206K expected and 210K last report.