Comparing 2022 to the Dot-Com bubble + Activist investor challenges Peloton leadership | E1368

Episode Summary

Executive Summary: The episode frames the market selloff as a repricing audit of tech and crypto assets, using Block, Zoom, Netflix, Coinbase, and Airbnb to judge which businesses remain fundamentally strong despite 35%–75% drawdowns. The hosts contrast profitable, growing companies with speculative assets like crypto and SPACs, then close on Peloton’s governance and strategy problems amid activist pressure for CEO replacement.

Main Topics: Tech-stock drawdown as a fundamentals audit (Priority: 5/5): The hosts argue the selloff is less a collapse than a reset to valuations that better reflect revenue, growth, and profitability, especially for companies that were inflated during the pandemic. Block (Square) as a founder-led, long-term hold (Priority: 5/5): Block is presented as a high-growth fintech with strong founder vision, Cash App momentum, and enough revenue growth to justify holding through volatility; Jason says he would dollar-cost average and hold for a decade. Zoom, Netflix, Airbnb: durable businesses but different valuation risks (Priority: 5/5): Zoom and Airbnb are framed as profitable or near-profitable platforms that still deserve premium multiples, while Netflix is debated because content spending and streaming competition may compress its long-term advantage. Coinbase and the crypto speculation debate (Priority: 4/5): Coinbase is treated as a higher-risk but still credible founder-led business, while Bitcoin/crypto is criticized for lacking intrinsic fundamentals and being highly correlated with the same investor base now rotating out of tech. Dot-com crash and SPAC comparison (Priority: 5/5): The discussion compares current market conditions to the dot-com bust, arguing that today’s companies generally have far more revenue and customers, while SPACs resemble the worst speculative excesses of 2000 and are especially bubble-like. Peloton governance crisis and activist pressure (Priority: 4/5): The episode ends by dissecting an activist letter calling for CEO John Foley’s removal, criticizing Peloton’s pricing, inventory, manufacturing, and leadership decisions, and exploring possible acquirers like Apple, Google, or others.

Key Arguments: Market pullbacks should be evaluated by underlying revenue, earnings, and growth rather than momentum; the hosts call this a “repricing” rather than a simple crash. Founder-led companies with strong product velocity are more resilient because founders can keep innovating and pivoting aggressively. Block’s Cash App and broader fintech platform justify long-term ownership despite a high P/E because the company is still growing quickly off a large revenue base. Zoom remains attractive because it is profitable, still growing, and could expand margins or product breadth, even as post-pandemic use normalizes. Netflix is still a strong business, but streaming competition makes its long-term library advantage less certain and may make it the most vulnerable of the large consumer subscriptions discussed. Airbnb’s valuation now looks more rational relative to its growth and profitability, showing how price corrections can restore alignment with fundamentals. Coinbase may be a viable wild-card holding because it is a credible platform for a younger financial audience, but crypto itself lacks intrinsic operating fundamentals. Crypto and SPACs are singled out as the most speculative corners of the market, with huge leverage, low transparency, and weak or absent business foundations. Peloton’s troubles are attributed to overexpansion, forecasting mistakes, poor governance optics, and tone-deaf crisis management rather than just temporary market weakness.

Data Points: Block decline from peak: 65% off its peak - Square/Block fell from $281 in August 2021 to about $102-$112 per share. Block peak share price: $281 - Referenced as Block's all-time high in August 2021. Block market cap loss: $70 billion - Approximate market-cap decline mentioned for Block. Block current market cap: $54 billion - Market cap after the selloff. Block trailing revenue: About $7 billion - Over the last year from transactions, SaaS, and hardware. Block net income: $537 million - Referenced from the same quarter discussed. Block year-over-year growth: 26% - Last quarter growth cited during the discussion. Zoom decline from peak: 75% off its high - Zoom fell from $559/share to roughly $140. Zoom peak share price: $559 - Pandemic-era all-time high. Zoom market-cap loss: $120 billion - Approximate loss in value from peak. Zoom current market cap: $44 billion - Valuation at the time of discussion. Zoom trailing revenue: $3.9 billion - Revenue cited for Zoom. Zoom year-over-year growth: 35% - Last quarter growth rate mentioned. Netflix decline from peak: 50% off its peak - Netflix fell from $691/share to about $170. Netflix peak share price: $691 - Peak in November of the prior year. Netflix market-cap loss: $150 billion - Approximate loss in market capitalization. Netflix current market cap: $170 billion - Current valuation discussed. Netflix trailing revenue: $28.6 billion - Trailing 12-month revenue cited. Netflix year-over-year growth: 16% - Last quarter growth mentioned. Netflix profit estimate: $5 billion - Back-of-the-envelope profit figure used to discuss valuation. Coinbase decline from peak: Over 50% off peak - Coinbase dropped from $357 to around $165. Coinbase peak share price: $357 - November peak mentioned. Coinbase market-cap loss: $50 billion - Approximate market-cap decline mentioned. Coinbase trailing revenue: About $6 billion - Revenue level discussed. Coinbase year-over-year growth: 5.5x - Last quarter growth rate described as five-and-a-half times year over year. Coinbase profit: About $2.9 billion - Profits cited in the discussion. Airbnb decline from peak: 35% off peak - Airbnb fell from its November high to around $136/share. Airbnb share price: $136 - Bottomed-out share price referenced. Airbnb market-cap loss: $30 billion - Approximate decline in market cap. Airbnb trailing revenue: $5 billion - Revenue level mentioned. Airbnb trailing loss: $4.5 billion - Trailing 12-month losses discussed, heavily influenced by IPO-era and stock comp expenses. Airbnb quarterly profit: $830 million - Most recent quarter profitability. Airbnb implied market cap: $92 billion - Valuation mentioned during the valuation discussion. SPAC peak share-loss context: 70% to 80% down - SPACs were described as falling dramatically from peak levels. CNN Money dot-com example: $1.7 trillion lost - Reference to the dot-com bust and total value destroyed. Internet index losses: 280 stocks; 79 down 90%; 72 down 80% - Historical dot-com crash comparison. Dot-com losers: Yahoo -$100B, AOL -$90B, Cisco -$210B - Examples used to compare the scale of losses. SPAC activity share: 81% / 63% - Chart discussed showing massive SPAC representation in U.S. IPO activity in 2022. SPACs with no pending or rumored deals: 75% - Bloomberg Law data cited for active SPACs in September 2021. Peloton market cap: $9.7 billion - Current valuation referenced while discussing a possible acquisition. Peloton stock performance: Below IPO price and down over 80% from high - Used in the activist letter critique.

Pivotal Quotes: "What you're going to see in a down market like this is everything gets repriced" — Jason: Explaining the thesis that the selloff is a fundamentals-driven reset, not just panic. "Momentum trading. Yeah, that's like some hot score." — Jason: Criticizing momentum-based investing as unreliable compared with business fundamentals. "The ride for Mr. Foley is over." — Activist letter cited in transcript: Wall Street Journal-reported letter calling for Peloton CEO John Foley’s removal.

Implications: Listeners are urged to focus on revenue, growth, and founder quality rather than hype. The episode suggests strong businesses may be buys on weakness, while crypto and SPACs remain the most fragile in a tightening, de-risking market.