Welcome to Blue Room's Weekend Update. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.

Meta Platforms has made history again, trading down -26.4% on Thursday, February 3rd for the biggest single-day loss of market capitalization in stock market history: -$251 billion (equal to 1% of nominal GDP). The Q4 earnings results showed that, despite full year revenue exceeding $100 million for the first time in company history, various risks have started to materialize in the form of stagnant user growth and decreased engagement.

The spectacular rise of TikTok has started to eat away at time spent on Meta’s various social media platforms, inflation and supply chain problems are cutting back on advertising budgets, Apple’s iOS privacy changes still pose massive hurdles for advertisers, and Meta’s plan to build out short-form video content with Reels as well as the metaverse are years away.

Reporting the dismal outlook for 2022 and beyond, Meta’s earnings results dragged other tech companies down along with it on Wednesday. Snap Inc. fell -23.6%, Pinterest fell -10.4%, Amazon fell -7.8%, and Twitter fell -5.6%.

Dispelling investors’ fears, Snap Inc. reported Q4 earnings that sent SNAP stock soaring up +58.8% on Friday. Strategically positioning themselves after a disappointing third quarter, Snap took advantage of unique augmented reality opportunities for advertisers, worked through privacy changes and supply chain issues, reported the first quarter of positive net income in company history, and grew revenues and users faster than expected. Also reporting positive advertising trends, Pinterest’s earnings call calmed tensions, leading to a +11.1% gain on Friday.

In other market news, Amazon finished Friday, February 4th up +13.5% after reporting Q4 earnings, gaining +$191 billion in market cap — the biggest single-day gain of market capitalization in U.S. stock market history. One day after Meta’s record loss, Amazon’s cloud computing business beat analysts’ estimates and the company announced they would raise the price of Amazon Prime subscriptions to $14.99 per month and $139 per year.

Alphabet also gained +7.4% on Wednesday after beating revenue and earnings estimates, especially strong advertising revenue growth, and announcing a 20-for-1 stock split.

Spotify’s stock dropped -16.8% on Thursday after the company’s Q3 2021 earnings call. Despite meeting earnings estimates, Spotify announced they would not provide annual guidance to investors and pointed to sequentially declining revenue in Q1 2022.

In economic news for the week, the participation rate rose to 62.2% in January, the highest since the COVID-19 pandemic began — mainly attributable to reporting changes with new population estimates. This also marks an important turning point for women in the labor force. With the January results, overall participation rate growth among women ages 25-54 has now outpaced men ages 25-54 since the beginning of the pandemic.

Average hourly earnings increased 5.7% year-over-year, nonfarm payrolls jumped by 467,000 (342,000 more than expected), and initial jobless claims for the last week of January were less than expected at 238,000. These strong labor market developments bolster the Federal Reserve’s view that the economy has reached its full employment goal, and they further pressure the Fed to raise interest rates to ensure price stability.

Major indices made gains for the week despite interest rate and inflation fears. The S&P 500 closed the week at 4,500.53 (+1.55%), the Dow Jones Industrial Average closed at 35,089.74 (+1.05%), and the Nasdaq Composite closed at 14,098.01 (+2.38%).

Thank you Blue Room Analyst JARED FENLEY.

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On January 18th, 2022, atay held their Cognitive Impairment Associated with Schizophrenia webinar. Below are highlights, followed by a transcription of the event:

Although schizophrenia is known for hallucinations and delusions, lesser well-known symptoms include loss of cognitive abilities and manifest as avolition, social withdrawal, and affective flattening and account for the difficulties patients have in terms of getting a job, maintaining relationships and benefiting from rehabilitation
Discussed results of the Phase 2a Proof of Mechanism trial and the future double-blind, placebo-controlled Phase 2 trial for RL-007
Antipsychotics have existed for 70 years but the disability associated with schizophrenia has not changed; less than 15% of people with schizophrenia have a job and 20% are homeless at any time
RL-007 is a well-tolerated neuromodulator that potently enhances synaptic plasticity & elicits statistically significant & clinically-meaningful effects on learning & memory
The clinical benefit has been demonstrated in prior studies and atai is extending those observations into CIAS to demonstrated CNS activity with EEG ERP readouts
Core mechanism of action is enhancing neuroplasticity which translates into pro-cognitive effects and genetic effects and other functional recovery effects
CIAS Phase 2a results: safe and well-tolerated, dose-dependent changes across brain regions
The next study will be a double-blind placebo-controlled study to demonstrate statistically significant improvement in cognition

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On January 19, 2022, Royal Gold, represented by Jason Hynes, VP of Business Development and Strategy, participated at the 25th Annual CIBC Virtual Western Institutional Investor Conference. The virtual call was hosted by Cosmos Chiu, a Royalties Analyst at CIBC. The rest of the panel included Nolan Watson of Sandstorm Royalties (SAND), Sandeep Singh of Osisko Gold Royalties (OR), and Shaun Usmar of Triple Flag Precious Metals (TFPM). The first half involved each representative presenting high-level slides providing company updates followed by a Q&A session. Some highlights from Royal Gold:

Emphasized their interests are in mining-friendly jurisdictions
Fiscal Year 2021 was a record year, generating $407 million in operating cash flow on $616 million in revenue
They prefer to use cash and their revolving credit facility to fund growth as opposed to equity—they have 65.6 million shares outstanding, a relatively low number in an industry where dilution is commonplace
They’ve extended the mine lives of key properties—Wassa in Ghana, Penasquito in Mexico, Pueblo Viejo in the Dominican Republic, and Lardone Zone in Canada—and they highlighted production that will come online in 2022 and 2023

Additionally, some common themes highlighted by participants included:

The limited downside of the stream and royalty business model and inherent optionality provided by increasing precious metals prices
Opportunities to fund base metal projects and collect on the precious metal byproducts, which will increasingly emerge as the need and lead times associated with battery metals continue to grow

The sector has lagged but participants are of the belief that their acquisitions’ current single-digit IRRs will grow into the double-digits thanks not just to metal price appreciation but also expansion and exploration potential and resource conversion

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BR Debrief

The audio streaming service company Spotify reported earnings on Wednesday, February 2 after market close. They beat Street expectations across mostly all major metrics, including total revenues, premium revenues, advertising revenues, total premium subscribers and earnings per share, and had a slight miss on total monthly active users (406 million versus an expected 407 million). They also announced they would no longer provide annual guidance, and instead will only guide on a quarterly basis “as most of our investments are multi-year in nature, and the exact timing of any specific launch may vary within a given year.”

On the earnings call, Spotify CEO Daniel Ek was quick to highlight the measures Spotify was taking to address the Joe Rogan controversy, including making policies public, providing content advisories next to COVID-19 content and accompanying it with messaging by scientists, physicians and public organizations like the CDC and WHO.

From a business perspective, Spotify is investing on making their platform more dynamic and open, giving creators greater flexibility and the power to be more entrepreneurial. An example is the Spotify Open Access Platform, which enables creators with existing paid content businesses to activate their subscriber-base on Spotify, allowing them to retain control over their base and leveraging the reach of Spotify to grow their audience.

Their long-term goals include reaching 1 billion MAUs, 20%+ revenue CAGR, and 30%-40% gross margin. They noted no advertisers have left in protest of the JRE controversy. They see their marketplace efforts as a way to expand beyond the limitations of existing agreements with artists, thus improving gross margins. Spotify indicated they are seeing an enormous amount of demand from advertisers and are using their Spotify Audience Network to allow advertisers to reach audiences across Spotify’s ad-supported music and O&E podcast programs. They also continue to see International as being a huge growth opportunity, both from an advertising and premium subscriber perspective, although they noted it’s hard to predict which geographies bear fruit fastest—Venezuela unexpectedly proved to be a very successful market whereas Mexico proved to be more difficult than anticipated.

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CLARK
RICHERT

with Adam Lipsius
Uptown 6 Productions

Tuesday
December 8, 2020
2:30 PM
__________ __________

Clark's home
__________ __________

The Hand of the Artist

CORPORATE PROFILE : Pinterest was incorporated in Delaware in 2008 and is headquartered in San Francisco, California. Pinterest is a visual discovery engine that people around the globe use to find the inspiration to create a life they love. The company generates revenue by delivering ads on its website and mobile application.

BUSINESS DESCRIPTION ~ FROM PINTEREST
Our mission is to bring everyone the inspiration to create a life they love.
Pinterest is where 400 million people around the world go to get inspiration for their lives. They come to discover ideas for just about anything you can imagine: daily activities like cooking dinner or deciding what to wear, major commitments like remodeling a house or training for a marathon, ongoing passions like fly fishing or fashion and milestone events like planning a wedding or a dream vacation.

Most consumer internet companies are either tools (search, ecommerce) or media (newsfeeds, video, social networks). Pinterest is not a pure media channel; it is a mediarich utility.

REVENUE RECOGNITION

Pinterest recognized revenues for both brand and performance ads, with performance making up 67% of revenue for the year ended December 31, 2021. Performance revenue is billed to customers when an advertiser optimizes an ad campaign around “performance” objectives like click or conversion events. Brand revenue is billed when an advertiser optimizes an ad campaign around “brand” objectives like impressions or video views.

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REGENERON PHARMACEUTICALS, INC. Q42021 EARNINGS SUMMARY

Q4 2021 Earnings Expectations (Bloomberg)

Revenue: $4.546 billion
GAAP Net Income: $2.085 billion
GAAP Diluted EPS: $19.36

FY 2021 Earnings Expectations (Bloomberg)

Revenue: $15.584 billion
GAAP Net Income: $7.944 billion
GAAP Diluted EPS: $71.54

Q4 2021 Earnings Expectations (BLUE ROOM)

Revenue: $4.811 billion
GAAP Net Income: $2.046 billion
GAAP Diluted EPS: $19.38

FY 2021 Earnings Expectations (BLUE ROOM)

Revenue: $15.931 billion
GAAP Net Income: $7.892 billion
GAAP Diluted EPS: $70.34

Q4 2021 Actual ~ Reported Feb 4, 2022

Revenue: $4.952 billion ~ beat expectations (+104.37% YoY)
GAAP Net Income: $2.229 billion ~ beat expectations (+93.96% YoY)
GAAP Diluted EPS: $19.69 ~ beat expectations (+19.69% YoY)

FY 2021 Actual ~ Reported Feb 4, 2022

Revenue: $16.072 billion ~ beat expectations (+89.14% YoY)
GAAP Net Income: $8.075 billion ~ beat expectations (+129.86% YoY)
GAAP Diluted EPS: $71.97 ~ beat expectations (+135.8% YoY)

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Only one month into 2022, the cryptocurrency market has dropped roughly 26% in January, with Bitcoin and Ethereum reaching near 6-month lows around $33,000 and $2,100, respectively. The cryptocurrency market, while gaining more widespread adoption, has the perception as a risk asset, which has caused it to become increasingly more correlated with the stock market, and more specifically, tech stocks. As inflation concerns heighten, and the Fed signaling for multiple rate hikes this year, the stock market has shown signs of correction, bringing the cryptocurrency market down with it. However, January was also an all-time high for non-fungible tokens (NFTs) as volume and prices rose dramatically, despite a decline in cryptocurrency prices which suggest that users and creators are still flowing into blockchain and Web3 infrastructure.

NFTs and the Metaverse

Non-fungible tokens (NFTs) took off in 2021, grabbing attention from everyone - from celebrities to institutions - and even making Collins Dictionary’s “Word of the Year” for 2021. The momentum does not seem to be slowing down in 2022 as the most popular NFT platform, OpenSea, surpassed its previous all-time high for trading volume by 45%, reaching nearly $5 billion in January. In the same month, the platform also surpassed over 1 million users with at least one transaction, 28 times greater than the year prior. Additionally, Coinbase’s new NFT platform, Coinbase NFT, is expected to launch in Q1 this year, and has amassed over 3 million people on its waitlist which is sure to catapult a number of new users into the space and fuel the momentum.

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Corporate Profile: Our Mission: Give people the power to build community and bring the world closer together.

Our products empower more than 3 billion people around the world to share ideas, offer support and make a difference.

Our Culture: At Facebook, we are constantly iterating, solving problems and working together to connect people all over the world. That’s why it’s important that our workforce reflects the diversity of the people we serve. Hiring people with different backgrounds and points of view helps us make better decisions, build better products and create better experiences for everyone.

Our Principles: Our principles are what we stand for. They are beliefs we hold deeply and make tradeoffs to pursue.

Give People a Voice — People deserve to be heard and to have a voice — even when that means defending the rights of people we disagree with.
Build Connection and Community — Our services help people connect, and when they’re at their best, they bring people closer together.
Serve Everyone — We work to make technology accessible to everyone, and our business model is ads so our services can be free.
Keep People Safe and Protect Privacy — We have a responsibility to promote the best of what people can do together by keeping people safe and preventing harm.
Promote Economic Opportunity — Our tools level the playing field so businesses grow, create jobs and strengthen the economy.

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The JOLTS data for Job Openings was released on Tuesday, February 1, 2022. The total increased to 10.9 million job openings in December — far exceeding the expected fall to 10.3 million.

The number of total unemployed Americans was just 6.3 million in December.

This means there are still 4.6 million more job openings than unemployed workers.

Increasing job openings is a good signal that American businesses have not begun to scale down their operations as a result of Omicron or rising interest rates.

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Snap Inc. is a camera company.

We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate.

We contribute to human progress by empowering people to express themselves, live in the moment, learn about the world, and have fun together.

Stock Price History

January 24, 2021 $31.80

January 25, 2021 $30.66

January 26, 2021 $28.63

January 27, 2021 $28.30

January 28, 2021 $30.42

January 31, 2021 $32.54

February 1, 2021 $33.66

February 2, 2021 $32.07

February 3, 2021 $24.50 ← -23.6% day after Meta’s Q4 & FY 2021 earnings release

February 4, 2021$38.91 ← +58.8% day after Q4 2021 earnings release

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Ticker: GOOGL (Class A), GOOG (Class C)
Market Capitalization: $1.89 Trillion
Class A Shares Outstanding: 300,754,904

Class C Shares Outstanding: 315,639,479

Share Price History

January 26, 2021 $ 2,584.66

January 27, 2021 $ 2,580.10

January 28, 2021 $ 2,667.02

January 31, 2021 $ 2,706.07

February 1, 2021 $ 2,752.88

February 2, 2021 $ 2,960.00 ← +7.52% day following earnings release

February 3, 2021 $ 2,861.80

February 4, 2021 $ 2,881.13

Corporate Profile: Alphabet is a multinational conglomerate headquartered in Mountain View, California. Alphabet is the parent company of Google and several other subsidiaries. These subsidiaries include Calico, CapitalG, DeepMind, Google Fiber, GV, Intrinsic, Sidewalk Labs, X, Verily, Waymo, and Wing. Google is the main arm and driving force behind Alphabet, supported by hardware, Gmail, Cloud, YouTube, Chrome, Search, Google Maps, and Android. Google trades under the ticker symbols GOOG and GOOGL on the NASDAQ exchange.