The Compound and Friends
00:29:17 · Josh Brown, Michael Batnick
[00:29:17] S0: But we don't care about the first nine months. We care about this quarterly quarter and next quarter. [00:29:24] S1: Free cash flow is getting worse. [00:29:28] S0: This is by choice. They're doing this on purpose. [00:29:38] S1: He interviewed somebody at OpenAI. It's on his Substack and you can listen to the podcast. And they said that OpenAI is now doing 20% of the search that Google is. [00:29:51] S0: Yeah. [00:29:51] S1: If AI becomes... Not becomes. It is. Forget about becomes. AI is a threat to Google. I understand that they have their own product, but the search... If the search business, if there is a chink in the armor, I do not wanna own that stock. I don't care if it's down 30% from its size. [00:30:07] S0: Well, this is the thing. People like, well, they're still dominant. Yeah. But [00:30:12] S1: That's not how the stock market works. [00:30:13] S0: They had 95% market share. [00:30:16] S1: Netflix is still dominant. It doesn't work that way. [00:30:18] S0: Right. Exactly. They had 95% market share in search for ten years, and it was the most profitable advertising product in history other than whatever Meta is doing. And they will still be dominant for the next twenty years, but if it's [00:30:38] S1: Yeah. That number could fall to 20% and the stock could go down 50%.
00:30:38 · Michael Batnick, Josh Brown
[00:30:38] S1: Yeah. That number could fall to 20% and the stock could go down 50%. [00:30:42] S0: That's right. That's right. Number one. Number two, the run rate. 19 to 15 to 12. I don't know if that's a Fibonacci sequence. I don't know if we'll do... Please reverse prime numbers. If you tell me the next search print is single digits, then this ain't over. And I'm a tell you the most interesting part about this. Somebody go rewind the tape. Find us in the summer of twenty twenty five lamenting the fact that Google is is about to become the first major casualty of AI because of search moving to the LLMs. And then looking like... This is me. Looking like an idiot, I sold Google at $1.80. I do the It ran to it ran to 400. [00:31:35] S1: Yeah. That was [00:31:36] S0: Whatever it did. But here's the thing. Was I actually right in the end? [00:31:42] S1: No. Stop. [00:31:43] S0: What do you mean? [00:31:43] S1: No. No. [00:31:44] S0: Not as a traitor. Not as a traitor. But [00:31:48] S1: Well, that's what [00:31:48] S0: I worried I was worried about this like everybody else. It was short term wrong, but what if it's long term right? Do you... I'm not saying was I right to sell. It was wrong to sell. [00:32:00] S1: Alright. So so the stock gap down, whatever. [00:32:03] S0: Anecdotally, go to the last 10 things that you typed into Claude or or ChatGPT. [00:32:11] S1: I don't use Google anymore.
00:32:11 · Michael Batnick, Josh Brown
[00:32:11] S1: I don't use Google anymore. [00:32:13] S0: But it's what I'm trying to say. Just you, one person, anecdotally, the last 10 things, ask yourself, out of these 10 things, one year ago, how many of these things would have been put into a Google search box? [00:32:27] S1: All of them. [00:32:27] S0: Is it nine? [00:32:29] S1: Yeah. So, anyway, the stock gap down, fell down, and it... We're now three days removed from the earnings report. Okay? We mentioned Apple closed at the highest today. Palantir, it's... Did you miss this? Google... Hold on. Google is down three days since. There's no bounce. Why did why did YouTube miss? Maybe the same reason why Netflix is missing. Obviously, Netflix is competing with YouTube, but it's because of reels and Instagram. It's because of reels and TikTok. That's Yeah. Like, that's that's it. [00:32:57] S0: It's crazy. It's it's crazy. [00:32:59] S1: And they can't... It... They can't It's [00:33:01] S0: too much. There's just too much. [00:33:02] S1: They can't compete with the with the short term with the short term clips or the short clips. They can't compete. [00:33:08] S0: Tried to do... And they 've actually... Nobody's saying this, but I'll say it. They actually failed. YouTube's obviously unbelievable success. I don't mean the whole business failed. They tried that YouTube Red, which now they call YouTube Premium, which was gonna be elevated content, the good stuff, it didn't really work. It didn't go anywhere. They don't... Right. Well, that's the point.
00:33:08 · Josh Brown, Michael Batnick
[00:33:08] S0: Tried to do... And they 've actually... Nobody's saying this, but I'll say it. They actually failed. YouTube's obviously unbelievable success. I don't mean the whole business failed. They tried that YouTube Red, which now they call YouTube Premium, which was gonna be elevated content, the good stuff, it didn't really work. It didn't go anywhere. They don't... Right. Well, that's the point. [00:33:37] S1: Well, guess what? There's always succeed. There's a gap at Google down at two fifteen. [00:33:42] S0: Where do you wanna buy the stock? Where do wanna buy the stock? [00:33:44] S1: 23% lower. I would Where do wanna truck them? If it got to $2.13 or two fifteen. If it got to that gap from September 2025, that's 20 ish plus 22% lower. I would be very happy to buy a lot there. [00:33:58] S0: I gotta take a look at this. Hold on. Hold on. Okay. What is the significance of two fifteen? [00:34:06] S1: Is the September gap 2025. Looking G O [00:34:18] S0: O G? Yes. The stock You're going back to last September? [00:34:25] S1: Yes. [00:34:28] S0: All right. I this $2.70 area for a shorter term. [00:34:35] S1: Where it's [00:34:36] S0: going to bounce. [00:34:37] S1: That's It's [00:34:37] S0: 2.78. [00:34:38] S1: I mean, whatever.
00:34:38 · Michael Batnick, Josh Brown
[00:34:38] S1: I mean, whatever. [00:34:39] S0: 2.79. Was the... Well, hear me out for a second, okay? That was the low in March. That was the panic lows in March. And the bounce off of that level was extremely decisive. This stock traded from $2.70 in March. By May, it was 400. I wanna wanna I wanna give it one more day in the 270s, a quiet day. And then I think I would use that $2.70 as my stop. I'd risk seven points to make 50 points. [00:35:14] S1: Fine. I don't think it's going to happen because earnings was four sessions ago and it hasn't bounced even for a second. [00:35:22] S0: But I'm okay with that. I don't think it deserves to bounce. I I... Like, I don't I don't think [00:35:29] S1: not in the numbers. Doesn't deserve to bounce. [00:35:33] S0: I'm looking to see if it... I'm looking to see if it I'm looking to see if it holds the fifty two week low. That's all. [00:35:39] S1: Okay. Alright. If it doesn't I'll talk [00:35:41] S0: If it doesn't, you'll [00:35:41] S1: find that in five seconds. It'll happen Halo. Let's talk about Halo. [00:35:46] S0: Is Halo back, Michael? [00:35:48] S1: Well, Berkshire Hathaway is at an all time high, so yes.
00:35:48 · Michael Batnick, Josh Brown
[00:35:48] S1: Well, Berkshire Hathaway is at an all time high, so yes. [00:35:52] S0: Of think Mhmm. It Alright. Let me share with you. This is Tony Pasquariello writing this weekend after the tech earnings debacle week. Despite a handful of cloud businesses that are compounding huge growth rates on huge denominators, Q3 results will be remembered as a disappointment. Alongside the never ending debates on returns, capital and free cash flow, to my eye, this was the central issue for the moment anyway. At a time when hyperscaler CapEx intentions are not slowing down, a few of the big guns missed somewhere in the core of their business. Nailed it. Skipping ahead. Coming into this week [00:36:34] S1: Wait. Hang on. I'm sorry. I'm sorry. Where did Microsoft miss? Where did Amazon miss? [00:36:39] S0: I think Meta. I think you saw Meta and [00:36:42] S1: Meta and Google. [00:36:43] S0: Google. All right. So a handful, could be two. Coming into this week, my general view was the bull market should continue in 'twenty seven, but it would pack less punt. This is Tony Pasquariello's on the trading desk, Goldman Sachs. Everybody who's everybody reads his note. There's not much debate that S and P earnings have been superb. At the same time, however, it increasingly appears that earnings growth has peaked. And Adam Parker is saying the same thing. In addition, relative to the last few reporting cycles, the rate of upgrades to forward estimates has clearly slowed. This [00:37:19] S1: is That's an absolute