Discussions Around Platform Businesses and Earnings Trends

Global Chief Investment Officer
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We released two separate Behind the Markets podcasts last week, touching on two important issues for the market:

  1. Developments in content platforms like Twitter, given the recent political discourse.
  2. The latest readings on earnings from New Constructs, our data provider on core earnings, who also has released some expanded features into the credit markets. Here, we also touched on how much success is priced into Tesla, banks and other major themes for valuations

Platform Business Model Performance in 2020 

Alex Moazed believes the latest censorship from Twitter was a big strategic misstep and could enable more startup competition that impales their leadership. Twitter has “only” 30 million active daily users, and Moazed will be watching their earnings closely, as he anticipates a big drop in engagement metrics. 

Many platform IPOs came out recently in the $20 to $50 billion range, and these mid-sized platforms have a lot of upside potential, in Moazed’s view. 

The conversation also touched on gaming platform growth. Roblox is doing a direct listing after seeing their prices quadruple their expected IPO price just four months ago—this is another area of platforms that will be interesting to watch in the future.

Moazed’s thesis is that platforms are the most robust business model and 2020 was another year that emphasized their dominance.

New Constructs’ Earnings Reading

One hot topic is Tesla. Tesla recently reported profits from non-recurring regulatory tax credits they purchased from companies unable to complete production goals, but these companies—like BMW, Daimler, Volkswagen and others—are ramping up production in big way. 

David Trainer’s reverse discounted cash flow model implies Tesla will have a car production rate of 45 million cars sold by 2030, when the total electrical vehicle (EV) market size is projected to only be about 30 million cars. Today, they only produce 500,000 cars per year, and he admits that his model’s lofty forecast is not realistic.

We discussed whether it makes sense to remove intangibles or R&D spend from the calculation of earnings, but Trainer thinks that presents additional challenges. 

Lastly, we discussed Trainer’s valuation work and the reason he founded New Constructs. It backs out what type of earnings growth is factored into current prices using reverse discounted cash flow models.

WisdomTree discussed valuations across large-cap and small-cap indexes in one of our recent blog posts. 

Please listen to these two great discussions below.

Behind The Markets Podcast: Applico CEO Alex Moazed
Behind the Markets Podcast: CEO of New Constructs David Trainer
For more investing insights, check out our Economic & Market Outlook


About the Contributor
Global Chief Investment Officer
Follow Jeremy Schwartz

Jeremy Schwartz has served as our Global Chief Investment Officer since November 2021 and leads WisdomTree’s investment strategy team in the construction of WisdomTree’s equity Indexes, quantitative active strategies and multi-asset Model Portfolios. Jeremy joined WisdomTree in May 2005 as a Senior Analyst, adding Deputy Director of Research to his responsibilities in February 2007. He served as Director of Research from October 2008 to October 2018 and as Global Head of Research from November 2018 to November 2021. Before joining WisdomTree, he was a head research assistant for Professor Jeremy Siegel and, in 2022, became his co-author on the sixth edition of the book Stocks for the Long Run. Jeremy is also co-author of the Financial Analysts Journal paper “What Happened to the Original Stocks in the S&P 500?” He received his B.S. in economics from The Wharton School of the University of Pennsylvania and hosts the Wharton Business Radio program Behind the Markets on SiriusXM 132. Jeremy is a member of the CFA Society of Philadelphia.