Speedwell Research's Weekly Recap
Squid Game Island Deliveries, New YouTube Channel, Etsy still Trying to Reinvigorate Growth (Still,) A Product that Survives Client Bankruptcy, Meta Ads Runway Extended
Welcome to Speedwell Research’s Newsletter. We write about business and investing. Our paid research product can be found at SpeedwellResearch.com. You can learn more about us here.
This is a weekly recap, where we summarize recent content you may have missed.
Table of Contents:
Speedwell Releases & Upcoming
Spotlight
Coverage Updates
Sharing Links
Speedwell Research’s Drew Cohen Launched a YouTube Channel that will cover basic investing and business concepts.
We have a lot of undergrad and MBA students reach out to us with investing questions and so this channel was started to cover more general business and investing topics. Overtime though we will get into more complex topics, so feel free to drop in any questions you have in the YouTube comments!
1. Speedwell Releases & Upcoming.
Research.
This week, we released an article on CoStar’s founding and early history.
We have released eight 4Q24 business updates so far this earnings season. We have released business updates on Coupang, Evolution, Airbnb, CoStar Group, Floor & Decor, Permiter Solutions, Copart, and Dream Finders Homes.
The Synopsis Podcast.
We dropped Two Podcast Episodes this week!
The first was a dialogue episode where we provided a business update on Perimeter Solutions and Coupang. We talk about the impact of the LA Fires on Perimeter’s fire retardant business and a their first acquistion as a public company. With Coupang we talked about how they continue to execute on their ecommerce opportunity, while expanding to Taiwan.
Our second episode was an article episode on CoStar’s business history, where we read our CoStar Business History memo. This is a long excerpt from the history section of our CoStar Research Report.
Upcoming.
Podcast
A Company podcast episode on Axon will be released this week!
As a reminder, these are our super in-depth episodes that focus on a single company we wrote a research report on. You can find our Axon Research Report here.
Research
We will release our report on APi Global (stock ticker NYSE: APG) this week!
Coverage
API Group will be at the J.P. Morgan Indsutrials Conference on Wednesday.
Become a Speedwell Member today to get access to all of our research updates and our in-depth research reports!
2. Spotlight.
Below are select quotes from our various writings and podcast.
Coupang 4Q24 Update.
Growing Cohort Spend: “CFO Gaurav Anand noted on the call that the oldest cohort of customers grew more than +20%, with their newest customers at a fraction of the spend of their oldest customers. This means that as customers simply shop more on Coupang, they will end up buying more on the site overtime. This sort of growth is much less risky than growth that assumes success with a new offering or opening up a new market… Coupang simply adding more selection and increasing the adoption of their fulfillment service has helped drive higher customer spend.”
Coupang Out Amazoned Amazon: “They also have started adding installation services to “thousands of items from large appliances, furniture, electronics to even tires for automobiles. A customer who realizes that she needs new tires on her car can purchase them online from home and have them delivered and installed the very next day.” Such a service not only increases the number of items that Coupang can sell, but directly attacks many specialty stores that historically could help differentiate on service.”
Squid Games Island Now Gets Rocket Delivery: “Bringing Dawn and Fresh Delivery to more remote areas in the market, including Jeju Island.”
Read the Coupang update here.
CoStar Business History.
What a “Can’t Live Without” Product Means: “If those brokers are at Company A or Company B, they still use our products. And if their income goes down 30%, they still use our products. And when they're making no money, they still use our products. When they're in bankruptcy, they still use our products.”
Usage Focus: “CoStar wasn’t just concerned with paying users though, but the actual usage of that product. Whereas competitors would incentivize their salesforce on product signups, CoStar created a commission structure where salespeople couldn’t earn their full commission unless the people they signed up actually used the product.”
Resilience Through The Housing Crisis: “There were fears that CoStar, as a provider to the industry hit hardest by the financial crisis, would prove to be a very cyclical business, and one that was potentially unduly benefiting from the early 2000s real estate boom. Instead of exposing weakness though, the financial crisis proved CoStar’s resilience.”
Increasing Consumer Surplus: While competitors and most of the industry focused on cutting costs, Andy was focused on providing customers a more detailed and encompassing scope of information. As he noted in 4Q08, “keeping an eye on costs and minimizing spending are the watchwords of this recession, but even more important, I believe, is keeping the focus on our customers and ensuring that CoStar continues to provide the type and quality of information they expect”.
Read the CoStar Group Business History Memo here.
3. Coverage Updates.
Dream Finders Homes
Completed acquisition of Cherry Creek Mortgage. This acquisition will help Jet HomeLoans (DFH subsidiary) expand their orgination operations. It is important to remember that they are not a balance sheet lender and thus do not retain the risk of this mortgages.
President of JetHomesLoans was quoted in the press release explaining the acquisition rationale: “This partnership leverages Jet HomeLoans’ existing retail production strength with Cherry Creek’s robust expertise in servicing along with all necessary industry approvals. The result is a stronger, more diversified company that will deliver a superior experience for our growing customer base. Most importantly, these complementary capabilities will allow Jet HomeLoans to maximize affordability for our Dream Finders homebuyers”
Constellation Software
Constellation Software reported 4Q24 earnings on Friday. Revenues grew +16% y/y with organic growth of 1% (or 2% fx adjusted).
Announced a total of $620 million in acquisitions. This puts the total acquistions for the year at $1.35bn, down from $1.6bn last year.
They generated $1.65bn in free cash flow for full year 2024 if you back out the IRGA liability. Check out our Constellation Research Report for an explanation on why that adjustment is important.
This implies Constellation is currently valued at ~44x fcf.
We will publish a 4Q24 Constellation Software update by mid-march. In the mean time, check out our 3Q update here.
Meta CPO Chris Cox at Morgan Stanley TMT Conference
CPO Chris Cox had a high-level discussion on Meta’s AI strategy, product innovations, and infrastructure investments. Some highlights below:
Targeting: "If you think about digital advertising, it was about better targeting. Now, if we actually have ads that are more personalized, conversion rates should go up."
Meta Ray-Ban Retention: "Four months after purchase, people are still using them daily, which shows strong product retention."
WhatsApp International Dominance: "You go to the Delhi train station and the guy selling chai is using WhatsApp to tell people when he's open."
Etsy Ceo Josh Silverman at Morgan Stanley TMT Conference
Etsy CEO Josh Silverman and newly appointed CPO Lanny Baker discussed Etsy’s business strategy, macro headwinds, AI integration, product innovation, and growth plans for 2025. As a reminder, core ETSY GMS has been in contraction and they have had trouble reigniting growth. Some highlights below:
App-Centric: "Let's really invest a lot more time and effort driving people to the app. We know we're under-penetrated in the app. And we know that when people adopt the app, their lifetime value goes up… We think that the discovery experience on Etsy could be so much better than it is. We've really optimized the Etsy experience for search... But let’s free up screen real estate and create really exciting browse experiences."
Tariff Impact: "Less than 5% of GMS on Etsy is US buyers buying from Canada, Mexico, and China combined. And of that less than 5%, the vast majority of that is products that are less than $800, which is below the de minimis. So for the tariffs that have been enacted so far, we think there's effectively no impact to Etsy.”
Consumer Pressured: "Consumers continue to feel really stressed, that they just feel like groceries still cost a lot, rent costs a lot, gas costs a lot, and they don't have extra money to spend on discretionary goods. And Etsy is at the discretionary end of discretionary."
4. Sharing Links.
Speedwell’s Drew Cohen launched a YouTube Channel this week and you can find his first videos below!
A Letter A Day: Marc Andreessen (1997) (Link)
Drew Cohen on What Investing Really isAbout (Link)
Drew Cohen on Building a Confidence as an Investor (Link)
Howard Marks latest memo, Gimme Credit (Link)
Best Anchor Stocks research on Judges Scientific (link)
Todd Combs interviews Charlie Munger (2022) (Link)
And a special thank you to Matthew Harbaugh for helping put this weekly recap together!
The Synopsis Podcast.
Follow our Podcast below. We have four episode formats: “company” episodes that breakdown in-depth each business we write a report on, “dialogue” episodes that cover various business and investing topics, “article” episodes where we read our weekly memos, and “interviews”.
Speedwell Research Reports.
Become a Speedwell Research Member to receive all of our in-depth research reports, shorter exploratory reports, updates, and Members Plus also receive Excels.
(Many members have gotten their memberships expensed. If you need us to talk with your compliance department to become an approved vendor, please reach out at info@speedwellresearch.com).
