This Piper Sandler downgrade took place after the close. I have never read a “rave” downgrade like this. Very positive. Just saying the price has gotten ahead of itself, although they raised Revenue guidance by 2-3%.
As I stated on the Destiny Solutions board, I did not sell a share on this news, as did many traders in the after-hours yesterday.
This Downgrade might even pick up the stock and turn it green because Piper Sandler is so bullish on this company’s future, just not high on the current Market Cap. (This is happening today.)
I would welcome a 20% or more downdraft in $NET and then look for another buy opp. And if we set another All-Time High today, I’m good there as I bought more $NET and added to my position this past Monday. Machts nicht.
I wish to do some spitballing on edge computing which this Downgrade never mentions in an area this analyst neglects when talking about prospects for $NET:
Where I believe mega-growth will happen (and I’ve yet to see an analyst start thinking about this) will be in the future with TaaS (or Transportation as a Service), and by “future,” I mean during the next 10-years. Think Netflix’s growth in share price when it was switching from mailers of DVDs to streaming, and streaming in the early days was janky, latency-ridden, but easier than waiting on the mailman.
I submit that $NET is building a “new” type of cloud-focused Edge Computing to propel the IoT in cars. More importantly, $NET will be mission-critical for one of the most important future markets: autonomous vehicles.
Autonomous vehicles will need three primary things for genuine Level 4 and 5 computing to happen:
- An unassailable big brain A/I software/hardware embedded in the car
- Blazing speeds from the Edge Computing
- And un-hackable security
The Big 3 cloud computing names, $GOOGL, $MSFT, and $AMZN, are already moving into this same TaaS market with edge computing, but these three are not auto “agnostic.”
$GOOGL is known for its sibling Waymo, which, if you believe scientists from MIT, Stanford, Oxford, etc., is the best “geo-fenced” offering on the planet when it comes to autonomous driving.
$AMZN bought AI autonomous driving company Zoox, and they and $F invested heavily in Rivian.
$ MSFT’s Azure Edge Computing has recently partnered with $GM and their autonomous driving AI offering, Cruze, which they hope will be as good as Waymo for future ride-sharing.
So where does this leave $NET?
$NET would be a perfect match for any Autonomous AI being released to the market by companies who don’t want their drivers, driverless cars, or A/I “owned” by one of the Big 3 data sellers. That’s one way. (There will likely be a fourth “BIG” if and when $APPL releases autonomous software and the rumored $APPL car. And we know Apple isn’t going to share its A/I OI and their own Edge Computing with the other three if and when this happens, nor would the Big 3 want to use Apple software.)
But here’s where the opportunity arrives for $NET when it comes to TaaS:
Every car manufacturer or A/I Autonomous Drive software builder bringing entertainment, gaming, concert tickets, table-bookings at restaurants, OTA software updates, web surfing, weather, traffic reports, GPS ad suggestions, and online shopping to cars in the future will need speed and security as their paramount concerns.
(Don’t suggest to me stuff like Tesla Starlink satellites or the similar sat system Amazon is constructing. If homes on Earth can’t get reception on rainy days, I can’t entertain any fanboi nonsense which doesn’t make the jump to fast-moving cars. Furthermore, there are bandwidth limitations for sat links which prevent them from being used in Edge Computing. As it stands right now, latency issues and frequent blackouts with Starlink are mentioned often on social media by first-adopters. If swaying trees block your dish antenna in a breeze, you’re not going to get uninterrupted internet, and you will either move the dish or cut down the trees.)
Latencies and hacks can crash and burn tens of thousands of cars in one fell swoop. That’s what I am focused on going forward. And if you’ve been keeping up with the news on $NET here on Saul’s board, you know these guys are building better, faster Edge computing with redundancies.
I submit $NET is lowballing the price of its R2 cloud offering to steal market share from the “BIG 3” Cloud providers. I can also make a case that $NET might keep the R2 price low and invent some revenue sharing plan on the monthly subscriptions AI firms and car manufacturers plan to use.
Many of these vehicle companies will not use Waymo, Cruze, or Zoox, where their competitors know their data.
So this is a natural fit for our “agnostic” Edge Computing leader, Cloudflare.
Topline growth might suffer for a while, maybe years, while we quickly expand into car company after car company or supply uninterrupted data from providers of online shopping, movies, weather, news, etc.
The Piper Sandler analyst with the Downgrade here thinks $NET will turn its first profit in Q1 2023, while I’m thinking, “Profits? Who cares now during the first inning of TaaS and IoT? Invest as Bezos did in the early days of $AMZN.”
Once A/I, car companies, fintech, blockchain smart-contract providers, etc., have switched to Cloudflare for a “tryout,” Cloudflare will not have any problem keeping them as customers as long as they continue to perform and upgrade their Edge Computing offerings. Many thousands of businesses will need and want top-notch, agnostic speed and security for edge applications. (Blockchain apps are springing up everywhere in real life, and that’s another subject for another time when it comes to Edge Computing. I believe $NET will be the top-choice for independents using blockchain in gambling, NFTs, music and video sales, etc.)
And by remaining “agnostic,” it also means anything $NET keeps on the edge for others can mesh with the Big 3 autonomous driving software. Meaning, “Hey, we at Cloudflare don’t want to hold you back, but speed you up.”
Get new firms using $NET offerings in TaaS, and pricing can be fungible.
I also believe $NET is thinking ahead and will win the day for outlier auto-manufacturers not attached to the Big 3 Cloud Computing firms.
I think of auto-manufacturers in EVs and Hydrogen Fuel Cells such as Lucid, Polestar, Mercedes, Nio, Toyota, Hyundai, etc. Their Autonomous Driving initiatives will never happen in America, Asia, and Europe without speed and security. In a world of driverless vehicles, you don’t buy second-tier edge computing because of price.
Here is a direct link to the Piper Sandler downgrade link without having to open that first link on Twitter. See how this analyst raves about $ NET’s prospects while giving it a Downgrade. ($NET is busy setting another All-Time High this morning, Wed, 13 NOV 21. So, I won’t be getting my 20% downdraft today.)
p.s. Talking about “agnostic” edge computing for other automakers, let’s look at Lucid’s latest news yesterday.
You probably know Peter Rawlinson, CEO/Founder of $LCID, was the designer of the very successful Tesla Model S. Three weeks ago, he allowed the press and the public to tour the first $LCID factory in Arizona. Every car magazine writer who drove one of the Lucid Dream demos raved about the precision work and performance of these cars built with painstaking manufacturing Charles Deming would have fainted over if he were alive to see it in motion. One car mag said, “The Lucid Dream is NOT the Car of the Future. It Is The Future of Cars.”
$LCID begins deliveries of their futuristic Lucid Dream cars at the end of this month, October 2021.
To give you an idea about how much compute power Lucid $LDIC needs and is offering in their soon-to-ship Lucid Dream cars as they move down highways and byways, read the following.
DreamDrive has a total of 32 on-board sensors, cameras, and radars, including the first automotive LIDAR in North America, as well as a multi-faceted driver-monitoring system and “lightning-quick on-board ethernet networking.” The backbone of the powerful computer network in the vehicle is the Ethernet Ring, a high-speed data network enabling four computer gateways—one at each corner of the car—to communicate with each other at gigabit speeds.
This hardware powers more than 30 features via a user-friendly interface, including collision avoidance, Highway Assist, Traffic Jam Assist, and Auto Park. The most advanced iteration of Lucid’s ADAS will be marketed as DreamDrive Pro. It will offer additional computing and sensor hardware in preparation for new features to be delivered via seamless over-the-air (OTA) software updates.
Okay, most of the above features are handled in the car, as you have just read. But think about the need for info on closed bridges, accidents, traffic jams, bad weather, available charging networks, sports betting during a game you are watching on a car’s big screen, lottery ticket purchases built on blockchain, etc. All of this happens as you move up a highway at 70 MPH. The information changes will need to be immediate and reliable as you speak to your intelligent AI built into your car’s hardware and software.
(I’ve seen demonstration videos from $LCID for the new DreamDrive Pro, and let me say, there’s nothing on the market from anybody right now which has the features which act with such excellence in parking, heavy traffic, etc., without geo-fencing. Please give us a Lucid Robotaxi in 10 years with no driver. Oh yes, the riders will be gaming, listening to music, watching the news, betting on a football game they are watching live, boogying to music videos and live DJ sets, PPV fights, whatever. The future of cars must deliver this stuff like sitting at your desk at home with an excellent net connection. If your power goes out at home, you lose connection. But there must be redundancy for Edge computing in a car, and $NET’s buildout is moving at a clip to make this happen.)
So, unless someone else decides to enter the cloud computing fray as $NET has done, I don’t worry about this stock growing the topline more slowly going forward while expanding rapidly into the minds of businesses needing Edge computing speed and security. I am thinking about what the TaaS requirements will be worldwide, and what the rewards will be like down the road. And that’s a huge, expanding TAM for $NET ten years from now.
Keep your radar tuned to when we begin hearing about TaaS on $NET conference calls. IoT will be massive, but TaaS will erect as big a money-printing business - possibly more significant - for vehicles.
You don’t want to be left behind when these mentions begin. Other car manufacturers are not wanting $AMZN $GOOGL $MSFT data collectors as gateways to their customers. Plus, A/I purveyors other than Zoox, Cruze, and Waymo, will naturally adopt the best of class agnostic Edge computing offerings from Cloudflare if, indeed, $NET still leads in this new area ten years from now.
With planning, or by helping purveyors of info for any commerce which makes $$$ off every click, I can see where $NET edge computing might work deals of revenue sharing for every click to keep things running smoothly and securely in future cars.
If not $NET, who else? That’s the job of this board: let us know about agnostic competitors.
If someone else develops an agnostic Edge Computing suite as $NET is now doing, what prevents us from investing in it too? TaaS will be an industry worth Trillions in revenues. (And I’m not even mentioning its use in planes, drones, and boats.)
Okay, that’s my wide-angle thinking about one of my Top 5 holdings and why I did not sell on the Piper Sandler news after the market closed yesterday.
Again, for TaaS - and IoT - we are in what I consider the first inning, and we keep running up the score.
$NET can continue to invest in expansion and show no profits in 2023 as the Piper Sandler analyst projects it will, and I don’t care.
The imperative here is to build “best of” edge computing that is agnostic and will have to mesh with everything out there with unmatched speed and security in moving vehicles of the future. The best part of all this is “cyber-security” starts - but doesn’t end - with $NET for Edge Computing. (Someone else did a bang up job on this board about $CRWD and $ZS joining forces with other cloud providers.)
What we have to insure is vehicles are un-hackable going forward. Otherwise, we will face a 9/11 on our highways at one specific time in a dystopian future.