J.D. DURKIN: Good morning, subscribers. Chris Versace and I are now back once again to answer some of your biggest questions of the week. Chris, thank you for being here as always. Before we actually get there, we did have earnings. Yes.
CHRIS VERSACE: I was just going to say, always happy to be with you on Wednesdays, always happy to tackle member questions.
J.D. DURKIN: Let's get after it. Before we get to member questions though, I do want to pick your brain a little bit about earnings. We heard from some huge names here Chris. We got Alphabet. We got Microsoft. Got those names after the close yesterday. What are your top takeaways from any of the information we got?
Well, let's take them one by one. So if we take a look at Google, if you look at the search and advertising business, YouTube, simply great numbers being put up. The shares are down today in response to what Wall Street saw, as Google Cloud, the growth really wasn't what people were looking for on a year over year basis. But what they're missing, simply missing, J.D. is when you parse the numbers and you look quarter over quarter, wow, that Google Cloud business was up like 4.7%-- not only faster than Google's overall revenue, it was actually faster than what Microsoft posted for its intelligent cloud business.
So I really think the reaction that we're seeing in the shares is overdone. We communicated that in our note to members this morning. And to be candid with you, the pullback that we're seeing I don't think is going to be long lived. If members can quickly snap up those shares, boy, would that be a great pickup. But I don't think it's going to last.
Because people are going to parse the numbers and realize exactly what we're talking about with the membership today regarding Google Cloud. Quickly shifting gears over to Microsoft, I mean look, all in all, it was a great quarter. Numbers were better than expected.
We're seeing continued growth in the cloud business, again, year over year. Also sequentially, the margins are picking up in the cloud business, so, you know check all the boxes there. The one kind of wrinkle, if you will, is the fact that the company continues to see margins in the coming year a little changed compared to what they were over the last 12 months.
Yes, they continue to invest in cloud. They continue to invest in AI. But now we're starting to see the impact of the recently closed activision deal as well. So for us, we saw enough to warrant upgrading Microsoft shares to a two from the three rating that we had. Not enough just yet to go one more step and upgrade it to a one rating.
We do need to see a catalyst to do that, likely pushing the shares past $400, $410 in terms of our price target. I think when they finally come clean and talk all about activision, how they're going to integrate it, what the cost savings will be, what the synergies will be, that could very well be the item that gets us to upgrade Microsoft shares to a one.
J.D. DURKIN: Anytime we get to include the word synergies, it's a good day as far as I'm concerned. And they're trading very differently. Class A shares of Alphabet currently down 8% on the morning. Microsoft a bit of a different story, in the green 3.5%. Thank you for the context there on both of those.
Let's kick off some member questions here, shall we, with a bit of housekeeping, if we can. Chris, lots of members are still having a bit of trouble finding where you list out panic points. We've talked a lot about panic points the last few weeks. Where can we find them, Chris, and how often can we expect updates on them?
CHRIS VERSACE: So where can we find our panic points? Very simple, they're housed in every Friday Roundup along with the company section. So if you're looking for the panic point on say Alphabet shares, it's listed right under the weekly write up, again, in the roundup for Alphabet. Eventually, we do hope to add a column to the portfolio table that you can find on the website listing out those panic points.
This will take a little bit of time, but again for now, you can always find those panic points in the Roundup. And we will, as we make changes, re cap them elsewhere in the Roundup as well as in our notes to members.
J.D. DURKIN: All right, this next one-- I'm going to be-- well, I don't know. I don't want to get ahead of the conversation. There's been so much chatter about this next point the last few weeks. I'm a little skeptical on the impact, but please correct me if you think I'm wrong. What are your latest thoughts on the potential Ozempic-- yes, it's time for the obligatory Ozempic reference-- what is the impact there on companies like PepsiCo and McDonald's?
So it's hard to measure, right? So far we haven't really seen any results. But as we know, the market tends to be a forward-looking animal.
So it's saying to itself, geez, what could this be possibly in 12, 18, 24 months? And the issue is that when we see forecasts and expectations like this, they tend to get ahead of themselves, and I think that's exactly what's happening here again.
In some of the notes that we've written to members talking about this, whether it was with McDonald's and PepsiCo or some other companies that are making comments, Walmart, for example, it's just simply too early to say, aha, this is going to destroy the particular business. If anything, some of the other forecasts that are out there, not necessarily the revenue amount for these weight loss drugs, but when you parse the forecasts and you look at how many people are expected to be on them?
How many people will be on them for certain periods of time? What the impact is on muscle loss and other factors. There's a lot of questions, I think, that cause a lot of, as you put it, correct skepticism on what the impact could be.
J.D. DURKIN: Yeah, it's-- also, by the way, you know you've got members of congress that are saying oh, this is good for the overall health and wellness of the American people. And they are quite literally out there- like congressman Schweiker, a republican in the House, saying, hey, consider this Ozempic stuff. Jorge Santos says he's on Ozempic, for whatever that's worth. I don't know what that's worth, but anyway that conversation is not dying down any time soon.
So J.D., I don't want to be a naysayer, right, because I do recognize that there are some people out there who struggle with their weight, people who have medical conditions where it's important to keep weight off. But, you know, my-- my concern here is that once again we're focused on the latest shiny new thing that just simply may not be what it's all cracked up to be.
J.D. DURKIN: No, I appreciate that. You and I have talked many times about people's impulse to kind of chase or talk about that new shiny thing. This is something getting a lot of chatter. We will absolutely cover any potential market business implications, especially, as it gets worked into more references or analyst notes or things like that. Here's another question here Chris, moving on, how does risk tolerance play into your thinking when you buy or just as importantly sell a name in the portfolio?
CHRIS VERSACE: So risk tolerance is something that you always have to consider. What's your incremental upside to be had? What's your incremental downside? And candidly, we also think about it when we ring the register, as we like to say, and take some profits off the table for a name that has run.
Members have seen me talk about this more than a few times. Company X has run significantly faster than the S&P 500 or the Nasdaq in a very short period of time. Boy, we want to book those gains. So make no mistake, whether we're buying, selling, taking profits, or just thinking about next moves for the portfolio, risk and risk management is always top of mind. And remember, that's exactly why we did something that the portfolio never had in the past, not in the last two years, not in the last 10 years, and we introduced panic points because we wanted to let members know that risk management is critical to our decision making and our decision thinking.
J.D. DURKIN: Chris, we've gotten a few members recently reaching out for advice on various energy stocks, of course, given the overall merger/acquisition environment we find ourselves in. Remind us why the club opts towards an ETF rather than, let's say, an individual company. What's your thinking there?
CHRIS VERSACE: Well, we do it for the same reason with energy that we do it with cybersecurity. The larger trend lifts-- should lift, I should say, all the boats that you're talking about. So with an ETF, we have you know a good number of companies, and we avoid any pitfalls with any individual company. We saw that last week.
Cyber shares continue to benefit from the growing concern of cyber security, but Okta who had been hacked, boy, those shares got schnockered. But did we suffer the same impact in cyber shares? No, we did not. And again, the same logic holds for why we own the XLE ETF.
J.D. DURKIN: Before we wrap up, I just need to clarify, was that word schnockered?
CHRIS VERSACE: I believe it was.
J.D. DURKIN: I'll take it.
CHRIS VERSACE: Technical term. You know how it is.
J.D. DURKIN: It's a technical term, absolutely, in the depths of trading technicals. Chris Versace, thank you as always. Fantastic conversation. I appreciate your time.
CHRIS VERSACE: Thank you, J.D.
J.D. DURKIN: Members, as always, please continue sending us all of your questions. You can do so by sending those questions on over to firstname.lastname@example.org. Thank you for taking the time. Thanks to Chris. Happy trading. We'll see you again soon.