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Episode: The Antidote to Euphoria? Normal.

Author: The Motley Fool
Duration: 00:33:35

Episode Shownotes

When companies or crypto go parabolic, force yourself to think: what does normal look like? (00:13) Tim Beyers and Dylan Lewis discuss: - Bitcoin blowing past $800 and setting fresh all-time highs, and how investors should manage the expectations being built into crypto and companies like Robinhood and Coinbase. -

Axon also feeling the euphoria – up 40% post-earnings – and why the company’s recurring revenue and potential new businesses help it live up to its big valuation. (19:14) Motley Fool Analyst Sanmeet Deo joins Ricky Mulvey to check in on another 2024 highflyer – Reddit – and why the company’s data is a treasure trove of data for large language models. Companies discussed: BTC, HOOD, COIN, AXON, RDDT, META Host: Dylan Lewis Guests: Tim Beyers, RIcky Mulvey, Sanmett Deo Engineers: Dez Jones, Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

Full Transcript

00:00:05 Speaker_02
crypto showing no signs of slowing down. Motley Fool Money starts now. I'm Dylan Lewis, and I'm joined over the airwaves by Motley Fool analyst Tim Byers. Tim, has the train left the caffeination station?

00:00:21 Speaker_00
It has not. I am uncaffeinated today, Dylan, so we're going to see how this goes. Mondays and Fridays are uncaffeinated days now.

00:00:30 Speaker_02
But you know what, I sense you are still ready to go, and that's the important part.

00:00:33 Speaker_00
That's what I really need from you. Since we're talking crypto, I am always ready to go. I get a little wound up about this stuff. That's not surprising to anybody, is it?

00:00:45 Speaker_02
No, it's a controversial topic. It's one that I think almost everyone has opinions on. We're going to be talking crypto today. We're going to be talking Bitcoin.

00:00:53 Speaker_02
We're also going to be revisiting some earnings that didn't get quite enough coverage last week. I'm excited about that. Let's kick off with the crypto rally. The post-election crypto enthusiasm continues.

00:01:03 Speaker_02
Over the last couple days, Bitcoin blew past $80K, as we tape currently near all-time highs at $84,000. Also seeing a lot of interest in Ethereum, Solana.

00:01:14 Speaker_02
some of the major exchanges and brokerages that give people access to crypto, Robinhood, Coinbase.

00:01:19 Speaker_02
Tim, this feels like it is all very much on the expectation that the Trump administration will be a little bit more friendly to the crypto space when it comes to the regulatory environment, things like self-custody, all that kind of stuff.

00:01:30 Speaker_00
Yeah, I think that's right. I think that I saw a video where President-elect Trump had, I think he was speaking in front of an audience of crypto enthusiasts and talking about just getting rid of regulations.

00:01:46 Speaker_00
And I think he may have actually said he was going to fire the head of the SEC, which got a rounding, just a rousing round of applause.

00:01:56 Speaker_00
So there is a feeling, it does appear inside the industry, and I'm talking about the crypto industry, that this set of digital assets, Bitcoin in particular, needs to be unlocked.

00:02:11 Speaker_00
So okay, if we believe that's true, and we believe that this administration is going to be a bit more deregulatory as it relates to Bitcoin and all digital assets, then I can understand the rally, Dylan.

00:02:26 Speaker_00
But I have to, I mean, and I have a story about this, but I'll pause for a second here. This is the kind of moment where I really take stock. I don't look at this and say, wow, amazing.

00:02:41 Speaker_00
I don't necessarily do the opposite either, but I find moments like these to be like, okay, you know, let's maybe tap the brakes for a sec.

00:02:53 Speaker_02
I want to hear that story, Tim, because I imagine there's a dose of mindset coming our way here.

00:02:57 Speaker_00
Well, the story is this. So, Alicia Alfieri and I were working at a co-working space. We were doing some work on a recent Rule Breakers pick. It turned out, now that the pick has been made, I can reveal to listeners that this company was Warby Parker.

00:03:16 Speaker_00
And so it's a recent Rule Breakers pick. And I was doing some work, and I was sitting right next to Alicia. And I was like, I found something that I thought was really fascinating. I said, oh, no. Oh, man. This is great.

00:03:29 Speaker_00
I hadn't realized that this was going on. And so I start to get really excited. And I said, oh, no. And then I turned to Alicia, and I said, this is the moment of maximum danger. Do you understand why?

00:03:46 Speaker_00
And she gave me an answer, which wasn't a bad answer. But what I said was like, now I am convinced. And because I am convinced, that is the moment of maximum danger.

00:04:01 Speaker_00
And I feel like what we're seeing in the crypto market is a lot of people who's like, see, Great, I am convinced, this is the future. And to me, I've thought, oh boy, this is the moment of maximum danger, because you've been convinced.

00:04:19 Speaker_00
And the regulatory environment has not changed yet, Dylan. But it might. But it might, right? So when you hit that area of maximum enthusiasm, recognize that as the moment of maximum danger.

00:04:38 Speaker_00
You don't have to do that, but I think it's a good mindset practice to say like, hang on, what actually needs to happen here? What am I betting on?

00:04:49 Speaker_00
And in the case of crypto, I think there's an argument to be made that the new administration will be friendlier, there will be changes, it will make this. a bit more maybe free-flowing in the markets, a little easier to access. So fair enough, right?

00:05:08 Speaker_00
Let's say that that does happen. You could still take advantage of that, in my opinion, Dylan, and not overbet. I think the wrong move is to overbet. If you were going to try to take advantage of it, you still have other options.

00:05:24 Speaker_02
If I were to offer up a why this time is different, or slightly different, or maybe how the landscape has changed, there is the tailwind of the expectation that the Trump administration will be more crypto-friendly.

00:05:37 Speaker_02
But I would say that there's probably a second mini force at play here, in that this is one of the first times we have seen a lot of excitement around crypto. in a period where we've had widespread Bitcoin ETFs and funds.

00:05:51 Speaker_02
That is something that was not the case up until January of this year. Prior to that, it was a lot of the more industry-specific ways that you'd have access, or more traditional ways you'd have access.

00:06:03 Speaker_02
This is a period that is a little unprecedented when it comes to most investors, especially older investors or institutional investors, being able to buy into crypto relatively easily.

00:06:14 Speaker_00
Yeah, and I think lean into that. I'm probably not going to add crypto exposure so you know where I'm at, but if you're going to do it, if you are convinced,

00:06:31 Speaker_00
something alike, Bitcoin ETFs, give you that exposure without taking you way out, you know, over your skis. I would say that is important. But, you know, Hysteria knows no bounds. So if it does really get hyperbolic, be very, very careful.

00:06:53 Speaker_00
But I agree with you, if you are going to do it, ETFs are a great way to give yourself a maximum amount of exposure, while broadening your risk, you get some immediate diversification in there. which is good.

00:07:08 Speaker_00
I would prefer that for most members if they're going to go down this path with crypto.

00:07:15 Speaker_00
And then if you start to get more excited about it and you get more interested in it, you're not me, but if you're going to do that, then I would say try to build out the widest array of assets you can and keep your exposure as limited as you can.

00:07:35 Speaker_00
So I often will buy stocks, particularly on the way up, Dylan, if I'm buying stocks at premium valuations, I think the same thing applies for digital assets here.

00:07:47 Speaker_00
I'll buy just really small amounts and then buy multiple times and multiple times and multiple times because I just know that volatility is gonna come into the equation. I just know it's happening.

00:08:00 Speaker_00
So even though I'm buying on the way up, the volatility guarantees that like, you know, the thing I bought last month is probably down like 30%. So when I'm buying again, like, hey, it's a little bit better now.

00:08:16 Speaker_00
I just, I wanna create mechanisms that allow me to diversify my way in strategically. I know I sound like such an old man, like, be patient, son! But I think it's... Lewis, we need that note. At the point of exuberance, we need that note. I think we do.

00:08:34 Speaker_00
I think we do, Dylan.

00:08:36 Speaker_02
One of my questions on this is, for people that are following businesses like Coinbase or like Robinhood, who probably have seen some version of this story before, if you go back to 2021-2022 with those businesses, there's a lot of excitement

00:08:51 Speaker_02
There's a lot of activity on those platforms. We go through a period where a lot of that excitement goes away, and the business results for those companies tend to lag pretty dramatically.

00:09:00 Speaker_02
Any message for people that are following those businesses, just knowing crypto is such a large part of the activity that can be on the platform for them?

00:09:07 Speaker_00
Kretzmann Yeah. When you're studying businesses like that, I would go through If you're really interested in digging into them, what does normal look like? What do normalized earnings look like? What does normalized revenue growth look like?

00:09:27 Speaker_00
What you don't want to do is take the latest period where things happen to just have gone absolutely hyperbolic and then apply that out into the future and presume that it's just going to be that way. That's probably not right.

00:09:42 Speaker_00
So give yourself the benefit of understanding what does normal look like, and then compare that to where they are now so you know what reverting to the mean actually looks like if things don't go the way that you want it.

00:10:01 Speaker_00
Yeah, just understanding what the genuine growth looks like in a normal period, I think is just useful.

00:10:11 Speaker_00
Because these businesses, boy, they have been subjected to just so much crazy, just so many crazy periods that have pushed them back and forth and up and down and all over the place. So get a sense of what normal looks like.

00:10:29 Speaker_02
I may need you to revisit that note as we switch gears and talk about a company that reported last week that is also going through a bit of a euphoria. Axon's earnings out last week.

00:10:39 Speaker_02
We talked about it a little bit on Friday's radio show, but it was a quick discussion. And it turns out the market was not quite done reacting to those results. All told, after earnings, companies up about 40%. The earnings were good, Tim.

00:10:54 Speaker_02
I'm a shareholder, and I love to see that. But were they that good?

00:10:58 Speaker_00
Probably not. I mean, I'll tell you some things that really stood out to me from this report, Dylan. The overall, what we're looking at here is, their revenue guidance was 30%. That's impressive for Q4.

00:11:20 Speaker_00
$2.07 billion in full-year revenue, so that's 32% growth. So, they're just growing really quickly. But I'll tell you the thing that may have gotten the market more excited.

00:11:35 Speaker_00
What they said was that when you take the bookings from Q3 and then you add in what they anticipate bookings for Q4, just that half year, that's going to be more than the entirety of their bookings from 2023.

00:11:53 Speaker_00
That's the kind of statement that gets investors going It's a new world, everything is amazing, and we should all pile in right now. You know what I mean? That's an incredible statement for them to make.

00:12:13 Speaker_02
It's led to the stock being pushed up to 160X earnings, shares up 140% year-to-date. I think we may have to ask ourselves, at some point, what does normal look like for a company like Axon?

00:12:26 Speaker_02
Management's saying normal looks pretty awesome for the foreseeable future.

00:12:31 Speaker_02
Lewis I like looking at the business, and I like following the business, because it is a tech company that has unbelievably predictable revenue, and their recurring revenue is incredibly strong.

00:12:42 Speaker_02
And that, even given the nosebleed valuation, gives me some comfort as a major shareholder.

00:12:47 Speaker_00
Kretzmann Yeah, and I can back that up and say, when you look at what Axon has contracted,

00:12:56 Speaker_00
it is over three years of revenue Dylan just let that sink in for a second over three years of revenue is contracted right now so what they said was specifically this future contract revenue is approximately 7.7 billion so remember what we said like this year

00:13:19 Speaker_00
They're supposed to end at $2.07 billion. So again, over 3x. Over 3x is future and contracted, and that was up 33% year over year. So their future contracts, that backlog is growing faster than overall revenue is growing.

00:13:37 Speaker_00
So the commitment to Axon for the long term, to your point, is absolutely there.

00:13:44 Speaker_00
The question is, and they are working to answer this and we'll talk about this in a second, but the question is, will they stick with Axon and how much future growth are we going to get?

00:13:56 Speaker_00
Because, I mean, for goodness sake, Dylan, I mean, how many tasers can you sell? How many cartridges can you sell? How much evidence.com data is there? I mean, that That's a fair question, isn't it?

00:14:26 Speaker_02
license plate reading, and they talk about how for all these law enforcement departments, these are things that wind up reducing the amount of time that needs to be working on a task, winds up reducing costs.

00:14:37 Speaker_02
They also have things like drone detection in the works. It feels like they are able to tell a very clear story to the market and to shareholders about a lot of things that's in the Zeitgeist right now.

00:14:48 Speaker_00
Sure. And because in law enforcement, and particularly in investigations, like anything that you investigate, this is true in investing too, you are investigating a story. And so you're going through process lines.

00:15:03 Speaker_00
So one process at a time, I need to identify a pool of suspects, and I need to rule out that pool of suspects. And so if I can, for example, pull from camera data, and I can rule out somebody because They were in their car.

00:15:19 Speaker_00
I can identify that license plate. And they were driving on the other side of town when some crime happened. Now I've done something here. So sure, they have a compelling story here. And they want more data.

00:15:33 Speaker_00
And one of the ways they're going to get it is by employing drones. This is another fascinating thing here. This started back in May. They, you know, acquired a drone defense company called Dedrone. I don't know if I'm sure.

00:15:49 Speaker_00
or maybe it's dead drone, I don't know. I don't know how to pronounce it.

00:15:53 Speaker_02
I'll take your word for it, Tim.

00:15:54 Speaker_00
Whatever. It's one of those. And they help enable, you know, they said this in the call, there was a local police department to gain the first FAA approval waiver for drone

00:16:08 Speaker_00
as a first a drone as a first responder that's that sounds bonkers that sounds completely robocop to me uh dylan so i don't even know how to process that but what what it will do is if axon is putting

00:16:26 Speaker_00
a fleet of drones in the air and now they are adding to their database aerial data to go with what they have in body cam data you know car camera data they will have one of the largest and most important data sets in the United States, objectively.

00:16:49 Speaker_00
And so what do you do with that? I mean, that's a big question. And you might end up asking, does your valuation, 160 times earnings, account for just how big and valuable that data set can get?

00:17:04 Speaker_02
And can we really be surprised that a business like Axon has some of these other lines of business waiting there for them? Because we don't have to go too far back to remember this was not Axon several years ago, this was Taser.

00:17:17 Speaker_02
But the reality is their Axon business, their body camera and evidence.com business became so compelling and useful that they rebranded and perhaps they have another major growth over there with the drones business.

00:17:29 Speaker_00
We don't know, but it doesn't surprise me because once you start employing fleets of drones, you're going to have drones with cameras on them. And there may be a temptation to say like, how do these play out? How do they...

00:17:45 Speaker_00
supplement, you know, a, you know, law enforcement unit on the ground. I think it's simpler than that, which may sound cynical.

00:17:53 Speaker_00
It's like, you fly these things in the air, you're going to be correct, you know, just collecting mountains upon mountains upon mountains of data that you're going to, you know, try to use for your profitable benefit. And you know what?

00:18:08 Speaker_00
I mean, I would guess that the data collection that these things kick off is going to be extraordinary and it's going to be hard to really value just how important that data is going to be. So yeah, it's gone parabolic, maybe for good reason.

00:18:31 Speaker_00
Probably be cautious right now.

00:18:36 Speaker_02
Yeah, if you're buying into Axon, maybe do it in small bursts over the course of the foreseeable future.

00:18:41 Speaker_00
I would say so. Be careful.

00:18:45 Speaker_02
Tim, appreciate you hopping on with me today, and give me that reminder about what is normal. Thanks for joining me. Thanks, Dylan.

00:18:58 Speaker_02
All right, Fools, coming up on the show, Motley Fool analyst Sam Medeo joins Ricky Mulvey to double-click on Reddit, the social networking platform that owns a lot of data that large language models want to use.

00:19:14 Speaker_01
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00:20:24 Speaker_01
So Sammeet, Reddit is a fairly mature social networking platform. It's not a social media platform quite because most people are anonymous on there, but it's easily my favorite as a user in terms of time spent.

00:20:35 Speaker_01
Don't want to admit how much time I spend on Reddit. The company though, it's been around for a while. It's new to public markets. and recently reported some blowout numbers.

00:20:44 Speaker_01
So for a fairly mature social networking-ish platform, they did an increase of 50% in terms of just daily unique users year over year, increase of half. That's at about 100 million folks. So let's start with a fundamental question.

00:20:58 Speaker_01
This is basically a message board for people to gather based on similar interests.

00:21:04 Speaker_01
You can find main subreddits like news, pictures, videos, that kind of thing, all the way down to specific subreddits for local sports team, local food, hobbies, that kind of thing, television shows.

00:21:16 Speaker_01
So how does Reddit as a social message board make money?

00:21:21 Speaker_03
Well, it's pretty simple, actually. They make over 90% of their revenue from advertising.

00:21:26 Speaker_03
Revenue is recognized on cost per click, cost per thousand impressions, cost per view, or fixed fee basis, depending on the contract they have with the advertiser. So that's 90%. The remaining portion comes from data licensing and subscriptions.

00:21:42 Speaker_03
Subscriptions are very small. Data licensing is kind of like the bigger portion of that, that smaller portion there. And one of the more intriguing growth opportunities for them

00:21:52 Speaker_01
So, Bill Mann brought this up on Friday, and it was easy, or on a Friday show, I think it was a couple weeks ago, it was easy to look at Reddit as a sort of Twitter 2.0, when I'm talking about Twitter, I'm talking about ye olde Twitter, not its current private incarnation is X, but what has Reddit been able to figure out about advertising that Twitter was not able to figure out when it was a public company, and for the most part, a relative underperformer?

00:22:20 Speaker_03
Yeah, what I noticed while I was prepping for the show is that, like you said, Reddit's been around for a long time. They haven't been public for a long time, they just came public recently, but they've been around for over 20 years and just

00:22:36 Speaker_03
recently in the past maybe three years, their user base has just really started to accelerate. So, you know, it's a community-based platform. It involves real humans engaging in meaningful, long-form conversations about anything and everything.

00:22:48 Speaker_03
You know, the interactions include like upvoting popular conversations, which gets your conversation kind of moved up to the top, you know, there's replies and testimonials. It gives an advertiser a very highly targeted and high intent audience.

00:23:03 Speaker_03
You know, the platform claims it's the number one in the internet for discussing purchasing products, and with 51% of purchase-related conversations happening on Reddit. So in addition to this, you know, like I said, it's grown rapidly.

00:23:17 Speaker_03
It's user-based. Recent years, you did international expansion, improved user experience, pandemic kind of really upped their user base there.

00:23:26 Speaker_03
Things like the GameStop short squeeze saga on WallStreetBets was a big thing that drove awareness and users to the platform.

00:23:36 Speaker_03
You know, this kind of rapid user growth combined with like they have a much more cost effective ad product and more of an innovative ad product, which they've revamped

00:23:45 Speaker_03
more recently, about in 2018, 2019, has made it more of an attractive platform versus Twitter.

00:23:52 Speaker_01
So they were able to essentially get more intent to purchase up with advertisers looking to sell stuff to folks versus Twitter, which back in the day was maybe a little bit all over the place.

00:24:04 Speaker_01
And I mean, it's not just the popularity, I would recommend it as well. A while back, I was looking for a watch that wasn't stupid expensive and you go on Reddit and you're like, all right, here's my price point.

00:24:15 Speaker_01
And then a lot of the bots, I think end up being driven out because you have a high intent community of people that are willing to call like, nah, this, this, this is not actually legit. This is bad.

00:24:25 Speaker_01
Like you should not listen to this person and the cream rises to the top. You mentioned earlier that it has this business opportunity in terms of data licensing.

00:24:34 Speaker_01
And this is something that CEO Steve Huffman brought up to our colleague Dylan in their conversation when he interviewed him. Basically, Reddit has one of the largest corpuses of human information to feed these artificial intelligence training models.

00:24:47 Speaker_01
We'll think about that as a sort of stockpile of firewood that these LLMs are just... I almost said eating, but eating firewood doesn't really complete the metaphor. No, you wouldn't want to do that.

00:24:57 Speaker_01
Burning the firewood in order to do a steam engine or whatever. Horrible metaphor. We've not stuck to that. Power that AI engine. Power the AI engine coal. It is it is the coal. These conversations are coal.

00:25:11 Speaker_01
Anyway, what is what is this large corpus of information of conversation mean for Reddit's business? Is it license out data? Is it is it meaningful at this point?

00:25:20 Speaker_03
Yeah, I mean, they've already started to, you know, they already even have a couple deals. They have a license deal with Google for about 203 million over three years. partnership deal with OpenAI, which is potentially 50 million annual.

00:25:31 Speaker_03
We don't know exactly about that.

00:25:33 Speaker_03
But not only the AI training data, which these big tech companies and these AI model companies are using, but other potential customers for their data include like financial institutions, investors, social listing services.

00:25:47 Speaker_03
So it's an intriguing aspect of the company that's actually got me interested in what could be a significant high margin growth opportunity.

00:25:56 Speaker_01
It seems like this is a tough game for publishers and Reddit is not technically a publisher. They're not paying the people writing or moderating subreddits.

00:26:04 Speaker_01
But this is a case where like the New York Times is still suing at the time of this recording OpenAI to find out what articles the nonprofit OpenAI was scraping for its training data. I mean, is Reddit you think the only... Who are the winners here?

00:26:20 Speaker_01
Are any of the content publishers and providers winners in this AI training race?

00:26:27 Speaker_03
Oh, yeah. I mean, I think like the academic news publishers, book publishers, media companies, you know, they're all licensing their content to OpenAI, Microsoft, other, you know, training data, AI models and businesses.

00:26:39 Speaker_03
You know, some examples are like News Corp, John Wiley and Sons, the Associated Press, IAC. So some of these publishers are benefiting from their their content and reaping rewards from it.

00:26:52 Speaker_01
But maybe the real winner, and I'll see if you agree with this, are the real winner just the big dogs, the ones you expect, your Alphabet, your Google, which are the ones using the data.

00:27:02 Speaker_01
So right now, and it could change, Google has an agreement that if you want your articles to show up on Google Search, you are then agreeing to using that data for Google's AI training purposes.

00:27:13 Speaker_01
So if you want your article to show up on the search engine, you've also got to feed that into the AI learning machine. Is that true? You think the real winners are Google here?

00:27:22 Speaker_03
I think in the long term, they definitely could be the big winners. But keep in mind, many of these AI companies are just spending heavily on content infrastructure to really train the AI models, build AI models, huge amounts of spending.

00:27:35 Speaker_03
We've been seeing it in earnings calls. You hear Amazon, Google, OpenAI, Microsoft, all these companies. We're looking for return on that investment. We haven't seen that quite yet.

00:27:47 Speaker_03
In the short term, though, I think like we talked about, the publishers are really the initial winners because they're signing these contracts and just getting cash right away. And they're they're monetizing their content in the in the near term.

00:27:57 Speaker_03
But over the long term, I think, you know, it could and hopefully it will create a lot of return on that investment for these bigger companies.

00:28:05 Speaker_01
So I like Reddit as a user. I still have some questions about the stock. I still have some questions about the value of all of that data. And Reddit is not cheap by traditional metrics.

00:28:15 Speaker_01
It just started making a positive gap profit, the profit that is associated to accounting, like the standard accounting principles. So that price-to-earnings price tag is gonna look real high.

00:28:27 Speaker_01
So we'll use the price-to-sales, the more difficult one to use that people don't like as much. We'll use price-to-sales How much revenue has it made, and what's the market cap associated with it? Right now, that's at about 19 times.

00:28:39 Speaker_01
Investors are willing to pay 19 times Reddit's sales for its stock. This is still a mature company, and that's higher than Meta ever was, even when it was a young company.

00:28:51 Speaker_01
Revenue's grown real fast, so what needs to be true about Reddit's future for this price tag to make sense today?

00:29:00 Speaker_03
Yeah, you know, from 2018 to 2023, over those few years, you know, Reddit grew their revenues at a 52% compound clip. It's projected in the next three years, revenue could compound at almost like a 35% clip.

00:29:14 Speaker_03
So, you know, I was looking at CapIQ this morning and around like the forward total enterprise value to total revenue multiple about a couple of years out is is just under 10 and 9.8.

00:29:26 Speaker_03
So while, you know, and I like to look at forward multiples, you know, while this is still a high valuation on a sales basis in the context of that 35 percent growth that is projected, it's it's it's somewhat reasonable, you know, in order for that price tag to make sense, though, the company needs to hit those growth numbers, you know.

00:29:44 Speaker_03
And 35% is no easy task for any company, especially in a longer term basis. But even if you take a haircut off that revenue growth, say 15 to 20% in the out years, that price of sales still doesn't look too onerous.

00:30:00 Speaker_01
In one quarter, Reddit does about $3 in terms of revenue per active user.

00:30:06 Speaker_01
I estimated meta at $12, four times that of Reddit, which can make sense because you have, I would say, more engaged users on there that are sharing more data with the platform, so you're getting more targeted ads.

00:30:17 Speaker_01
But does that mean that it has a lower ceiling than a lot of these bigger social media platforms?

00:30:23 Speaker_03
I don't think it necessarily has a smaller ceiling. With Meta, their monetization is very high. You mentioned a couple things. They have a very diverse and global user base.

00:30:33 Speaker_03
And it seems like almost anyone and everyone is on one or more of Meta properties, including Facebook, Instagram, WhatsApp. You have a lot of rich user data. Like you said, a lot of people give lots of personal information on the site voluntarily.

00:30:47 Speaker_03
Reddit, most of the users are anonymous. You don't have specific personal data. You have what they talk about. there's more frequent daily engagement on these meta properties. Reddit users, maybe except you, sometimes engage less frequently.

00:31:02 Speaker_03
They might be like, hey, I find a topic that is interesting, I'm gonna go jump on Reddit, and there's a product I wanna purchase, I'll go see what the reviews or what testimonies or what people think about it, and then maybe I won't be on it for a little while.

00:31:14 Speaker_03
So not as frequent. With the social media meta platforms, people tend to be on them I don't think they ever get off. And the meta has a very mature ad platform. They've been developing it over a very long period of time.

00:31:28 Speaker_03
They have a variety of ad formats, video, text, so forth. So while I don't think Reddit has a ceiling, I don't think they can get as big as meta when it comes to this area of their business.

00:31:42 Speaker_03
But they have a lot of growth opportunities ahead of them, and they can create their own niche and purpose for the advertisers.

00:31:49 Speaker_01
Are these growth opportunities interesting enough to you as an investor? Do you think Reddit's stock is worthy of a place on our listeners' watchlists?

00:31:57 Speaker_03
Oh, yeah, absolutely. I mean, it's on my watch list. I've been, you know, I still don't know what to do if I want to buy it or not. I mean, they had a great earnings report recently. So that definitely perked me up a little bit more.

00:32:07 Speaker_03
I think the data licensing could be a rich source of future growth. And it's a unique platform with a unique business. So it's definitely worth keeping an eye out on.

00:32:20 Speaker_01
And as we close out, you got any favorite subreddits?

00:32:23 Speaker_03
You know, I just started using Reddit as I started researching it, so mostly my favorite subreddits are sports teams, some health and fitness trends like breathwork or meditation. You have any good suggestions for me?

00:32:36 Speaker_01
So, you're in New York. Yeah. And I think New York City food. So, this goes for whatever city you're in. The more hyper local interest, the better it is. So, I'm out in Denver in the Denver food subreddit. His guided a lot of my purchase decisions. Nice.

00:32:53 Speaker_01
And yeah, I really like it. Also, Whoa Dude. Sometimes you'll get some cool stuff on there.

00:32:59 Speaker_02
Very nice. It's Veterans Day, and we're grateful for all those that serve in the armed forces. We know a lot of businesses and schools in the U.S. are closed today, but the stock market is open, and so are doors are, too.

00:33:13 Speaker_02
Listeners appreciate you taking your day off to spend time with us.

00:33:17 Speaker_02
As always, people on the program may have interests in the stocks they talk about, and Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear.

00:33:25 Speaker_02
All personal finance content follows our editorial standards and is not approved by advertisers. Motley Fool only picks products that it would personally recommend to friends like you. I'm Dylan Lewis. Thanks for listening. We'll be back tomorrow.