Mid-Week Update: 2/16/22
Taking a wholistic look at the markets as we overcome Hump Day.
Thank you for your patience!
Thank you so much for your continue patience regarding content this week.
I’ve been away from my desk meeting up with incredible creators like John Hu, Tejas Hullur, Zaid Admani, Daniel Iles, Julia Montgomery, Ryan Francis, Michela Allocca, and many others since Thursday. I had virtually zero access to my computer during this time.
Back in the office and ready to go! Let’s start with some notable news callouts over the past few days, then conclude with updates on Upstart (UPST) and Airbnb (ABNB).
Worthwhile News Callouts:
A few headlines that caught my eye so far this week.
The world is watching Russia’s looming invasion of Ukraine (AP News)
Here’s your friendly notice that if you haven’t been caring about the hostility of Russia against Ukraine — you really should. Russia has positioned 150K+ troops around the border of Ukraine, leaving widespread uncertainty for NATO countries as to what Putin’s next move will be.
Mass loss of life, immediate energy distribution impacts, increased cyber attacks on government / financial institutions, and more are all on the table. For the West and NATO to maintain credibility on the global stage — an aggressive move by Russia is almost certain to be met by aggressive responses. Expect market volatility as a result.
Asana (ASAN) CEO Dustin Moskovitz buys another +1.25 million shares of stock (Barron’s)
This boosts his total buying spree to be worth over $1.1 billion over the last 12 months. Ridiculous conviction.
If you missed this post, I shared a few reasons with you as to why I’m excited about Asana's future. However, I didn’t mention their CEO gobbling up millions of shares of stock. Dustin currently owns over 22 millions shares of Asana — paying over $1.1 billion in total for them.
Think about that for a moment — this guy founded Facebook, made a killing, founded Asana, and is now investing over $1 billion of his personal money into the company’s stock. He owns nearly 25% of all company stock that exists!
This is the first time a company insider has paid over $1 billion to buy shares of their stock on the open market. Right? This wasn’t gifted to him — he bought it.
Hedge funds released their 13F filings (Seeking Alpha)
This is when hedge funds are required to disclose their investment holdings. The article linked above is helpful for identifying what to look for in these filings.
The graphic above may help you realize why this is important at all — very high net worth people are generally the ones involved in hedge fund activity. If you’re a big “follow the money” believer, diving into 13F filings may be for you!
Buffett’s big bet on ATVI pays off (Reuters)
Shoutout to Warren Buffet for buying $1 billion worth of Activision Blizzard (ATVI) stock in Q4 as their stock was beaten down given the sexual harassment allegations.
He scooped these up for ~$55 / share. Assuming the Microsoft acquisition goes through, he’ll net a +40% or so profit.
Mid-Week Earnings Recap:
High-level earnings recaps of two of my long-term holds — Upstart (UPST) and Airbnb (ABNB).
Upstart Holdings (UPST)
One of my favorite financial technology stocks reported their earnings results Tuesday and they were stellar. Let’s break them down together.
For a little refresher on the company, below includes a brief analysis from last month:
Here’s a link to their release if you’d like to follow along.
Upstart reported revenue of $305 million during the fourth quarter of 2021, a year-over-year (YoY) increase of +252%. This revenue was driven higher by the outstanding volume in “bank parter originated loans” throughout the quarter — 495,205 loans representing $4.1 billion. This represents an increase of over +300% YoY.
It’s worth calling out that the conversion rate on these loans (when they’re accepted by the both the bank & consumer) increased from 17% to 24% YoY.
Income from Operations increased +487% to $60.4 million, with nearly all of that flowing down to their bottom line. Profits came in around $59.0 million, up from only $1.1 million last year.
Upstart realized a contribution margin of 52% during the quarter, an increase from 49% last year — netting them $149.5 million in contribution profit.
Notable comments from Dave Girouard, co-founder and CEO of Upstart, by category:
“With triple-digit growth and record profits, Q4 was an exceptional finish to a breakout year for Upstart. 2021 will be remembered as the year AI lending came to the forefront, kicking off the most impactful transformation of credit in decades.
But AI lending isn’t a one-category phenomenon. I’m also happy to report that, with help from an epic push by our team in the last few weeks of the year, auto loan originations on our platform are now ramping quickly and will provide growth opportunities to Upstart for years to come."
Recapping Upstart’s 2021 Metrics
“I’d like to start by reflecting on 2021, which was a remarkable years for Upstart. We grew revenue from $233 million in 2020 to $849 million in 2021, while generating net income of $137 million. And with the fourth quarter surge, we're now at more than $1 billion in revenue on an annualized basis. 2021 will be remembered as the year AI levying came to the forefront, kicking off the most impactful transformation of credit in decades.”
“We generated more cash in 2021 than we burned in our entire eight-plus years as a private company.”
Looking Toward 2022
“Right at the top of the list for 2022 was achieving meaningful scale with auto lending on our platform. We believe in our core that AI lending isn't a one-category phenomenon, but will eventually transform virtually all flavors of credit. I'm happy to tell you that just 1.5 months into the new year, we've accomplished this goal. In fact, our auto refi funnel performance is now comparable to where our personal loan funnel was in 2019 on a channel-adjusted basis.
Based on this progress, we now expect $1.5 billion in auto loan transactions on our platform in 2022. Just as importantly, we now have the confidence to invest the resources necessary to unleash the model and technology improvements in auto lending that made Upstart the category leader in personal lending.”
“But even though channel development will require significant time and effort, the good news is that we're confident we're in a class by ourselves. Upstart has a unique and proprietary auto refinance product with far less competition than we've had in personal lending.”
Looking Beyond 2022
“In the case of small dollar and small business lending, we expect to have these products in market during 2022. In the case of mortgage lending, we hope to be in market in 2023. In each case, we anticipate a year or so of development, a year of feeding and testing and then a year to begin scaling.”
Favorite Quote from the Earnings Call
“Upstart is now about the size that Google was when I joined that company in early 2004. So I've seen this movie before and hope to use what I learned there to build Upstart into the most impactful fintech in the world.”
To put that in perspective, Google has 45X’d in value since 2004 — and 7X’d in value while Dave worked there (‘04 — ‘12).
The Three Main Goals of Upstart
To transition into a multi-product distributed company that can operate in parallel instead of in serial
To break new ground in terms of quality of execution at the $1 billion-plus scale, with leaders such as Google, Amazon and Apple
To move aggressively to unlock Upstart's addressable market while simultaneously upgrading our ability to pursue it
You all know how excited I am about this company, despite it’s relentless volatility. However, it’s obvious Upstart is going to quickly become a $10 billion, $20 billion, and eventually $30 billion / year revenue company. They’re not only attacking a massive market, but also are simultaneously expanding their market by working with lenders who do not require a FICO score.
The best part? Upstart guided to $1.4 billion in annual revenue for 2022 — representing +75% YoY growth, substantially higher than Wall Street’s +45% assumption.
I’m looking forward to reading the detailed analyst reports on Upstart in the coming days — as well as the new higher price targets for the company catalyzed by this release.
Here’s a link to the company’s release if you’d like to follow along yourself.
The company reported 73.4 million nights and experiences booked on their platform, a year-over-year (YoY) increase of +59%. The gross booking value on these 73.4 million nights and experiences topped $11.3 billion during the quarter — an increase of +91% YoY.
This statistic alone makes me incredibly excited. The value of these bookings are growing faster than the cadence of the bookings themselves. Not only did Airbnb grow their bookings by +59%, but they’re also increasing revenue at an increasing rate. If you’re a science fan — you could say that Airbnb is accelerating like crazy!
Speaking of revenue, the company reported $1.5 billion for Q4 — an increase of +78% YoY. Again, this makes perfect sense from a growth perspective. Their revenue is derived from the value of the bookings conducted on their platform — which have been growing faster than the cadence of the bookings.
Adjusted EBITDA was positive and their highest ever — $333 million. Over $55 million of that flowed to the bottom line and was realized as profits. Compare these figures to -$21 million and -$3.9 billion during the same period last year, respectively.
“In 2021, we delivered $47 billion of GBV, 23% higher than the pre-pandemic year of 2019, and $6 billion in revenue, 25% higher than 2019. Meanwhile, our focus and discipline in managing the business resulted in $1.6 billion of Adjusted EBITDA, or 27% Adjusted EBITDA margin—a striking improvement from negative 5% Adjusted EBITDA margin in 2019.”
Before I share the company’s formal guidance into 2022, I wanted to call out an interesting stat surrounding longer stays. The company says they’re seeing people not just stay in Airbnbs for a short periods of time — but now living in them.
Stays with a length of 7 days or longer now represent nearly half of all bookings on the platform — insane!
Long-term stays of 28 days or more is the company’s fastest growing category by trip length and accounted for nearly 20% of all gross nights booked on the platform in Q4 — up from only 16% last year.
Another quick call out is the company’s recent launch of AirCover — a way for Airbnb hosts to feel even more safe sharing their home. It seems like Airbnb is doing everything they can to properly incentivize new Hosts to join the platform in efforts to keep up with demand.
Guidance for 2022
The company has shared three main priorities for the calendar year:
Live anywhere on Airbnb
Millions of people are now able to live and work anywhere. Airbnb wants to ensure they’re positioned correctly for this new phenomenon.
Unlock the next generation of Hosts
To unlock the next generation of Hosts on the platform, Airbnb has been taking feedback (specifically through Twitter) and plans to implement new suggestions rigorously throughout 2022.
Airbnb becomes the ultimate Host
The company believes there’s much more to unlock for guests — beyond just being a marketplace connecting travelers with Hosts. Airbnb wants to anticipate travelers’ needs in real time and provide a solution.
The best news? Airbnb is expecting to deliver positive Q1 Adjusted EBITDA for the first time in company history. I’m thrilled about this company, especially after these positive results.
I remain excited about both ABNB and UPST. More to come this week!
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.