Editors' Note: This is the transcript of the podcast we posted last week. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below, if you need any clarification. We hope you enjoy.
Sign up for Let's Talk ETFs on your favorite podcast platform:
Listen and subscribe to the Marketplace Roundtable on these podcast platforms:
Jonathan Liss: Welcome to Let's talk ETFs. I'm your host Jonathan Liss, and I've been closely tracking the ETF space for more than 13 years through a variety of roles here at seekingalpha.com. Each week, a different guest and I will take an in-depth look at a particular aspect of the rapidly evolving exchange-traded fund space with a focus on how investors can best utilize ETFs to reach their investing goals.
Before we begin a brief disclaimer, this podcast is for entertainment and educational purposes only. Nothing said here should be taken as investment advice. All opinions expressed on this show are those of the individuals expressing them alone. The full set of disclosures will be included at the end of this show. You can subscribe to Let's talk ETFs on Apple podcasts, Google podcasts, Spotify or whichever podcast platform you prefer.
A bit of housekeeping here in terms of why I'm doing this interview for Let's talk ETFs. So we're going to put it out on our Marketplace Roundtable. Also, ETF investors often forget that the funds are buying and selling and investing in longer term are made up of a bunch of different specific component stocks.
In addition to using ETFs in his portfolio, today's guest Elazar Advisors, aka Chaim Siegel is really one of the best analysts in the tech space that I have found. His estimates go into Thomson Reuters and FactSet price estimates for dozens of different stocks in the tech sector. So understanding his process to estimating earnings on specific companies like Zoom and Tesla is key to understanding where funds like QQQ and XLK that hold many of the companies that he follows or likely heading in the short-term. Anyway, hope you enjoy this conversation.
For reference purposes, this podcast is being recorded on Wednesday, October 21, 2020.
My guest today is longtime contributor to seekingalpha.com, Elazar Advisors, aka Chaim Siegel. Chaim is one of our most prolific analysts in the tech space with a deep focus on earnings within the sector.
Before setting out on his own with Elazar Advisors, Chaim was an analyst and Portfolio Manager where he worked with Steve Cohen directly at SAC Capital and before that at Morgan Stanley and JLF Asset where he was also a partner. Chaim's marketplace service here at Seeking Alpha, Nail Tech Earnings takes his analysis of the tech sector to an entirely new level, with in-depth pre and post earnings analysis for all the key stocks in the tech sector, coupled with a portfolio that includes a running list of buy, sell and neutral recommendations and entry and exit.
The service is home to an elite group of traders, portfolio managers and tech industry experts that work collaboratively to explore ideas from multiple angles. You can subscribe to Nail Tech Earnings either by going to seekingalpha.com/marketplace and looking for Nail Tech Earnings there or by typing Nail Tech Earnings or Elazar Advisors, That's E-l-a-z-a-r into the search bar at the top of the site.
Anyway enough of an intro, let's get into it. Welcome back to the podcast Chaim.
Chaim Siegel: Hi, Jonny. Thank you. Thanks for having me.
JL: Yeah, great to have you here. And I guess because of the current situation that we're in here in Jerusalem but also really just all over the world as a result of that pandemic. Last time we spoke we were of course able to do an in-person. We've probably, I don't know maybe, 20 minutes away from each other by car but we're doing it by Zoom this time which I get might explain some of your exuberance around Zoom as we'll get into later in the -- later in the call. But, anyway, it is what it is. Hopefully next time we do one of these will actually be able to do it in-person again.
CS: Let's hope.
JL: Yeah.
CS: Okay. Sounds good.
JL: Let's hope. Yeah.
CS: So, listeners should know if we cough, we're not coughing on each other. We're on different locations.
JL: Socially distance coughing, although we will try to edit those out or keeping them --
CS: This is digit digital coughing.
JL: Yeah. So, I guess let's start out here just by giving listeners your relevant background. I got into that a little bit in the intro. But, when did you first become interested in investing? How long have you been doing this for and in what capacity?
CS: Great question. I remember exactly where I was, and I think I was in high school. And I was in library. And I found out about the AT&T corporate challenge and it was about one of these -- you have a pretend portfolio and you pick stocks. And I remember the stock I think was Ford and they bought Jaguar at the time, this was a long, long time ago.
JL: You're going to say you might -- you might be dating yourself a little bit here.
CS: That's okay. I'm 100 years old, but just don't tell anybody. I sound younger, I look a little younger. But I'm 100 years old. So I've been in the business a little while. And from that, I don't know, I kind of got a bug that, I like that even though I didn't really -- my portfolio I think was up a percent over six months or a few percent, something like that, I don't remember. But I got the juices flowing and I was interested in that. I don't know how much you care to get into it. But, one summer job, I was actually in, -- I was in college, my first freshman summer, I was actually journalism major. But I ended up finding a job selling cars. And I really enjoyed business and I was like 19 years old or I don't know 20 years old, I forget how old I was. And I was actually selling cars with people there. I met a regular dealership, and I really liked the business aspect to it, I really liked it.
And then after a couple of summers doing that, I started as a broker trainee in the summers just between school -- I was still in college, but I just really wanted the experience and I had no idea what was out there. When I graduated college, I graduated with a finance degree, but I had no idea what was out there. Zero. So I started as a broker making like $10,000 a year as a back, like getting leads, because I didn't know what was out there.
And then something happened in life and I left that job. And then about six months later, I started interviewing, and I had an interview on the 72nd floor in the World Trade Center for Portfolio Manager managing $3 billion. And I knew nothing about that. I just didn't know anything about it. And I was very young. And she had these sheets of her portfolio and we started discussing the stocks in our portfolio and all the stocks in her portfolio were in my personal portfolio that my grandfather gave me some money when I was for a bar mitzvah. And I just -- I kind of left it and I had like Apple and Microsoft and Intel. And it did really well for me. I think that's what got me the job is just that she saw that I was into it. And I was excited about it. And we had all the same stocks. So that landed me my first real job. That $3 billion fund in my five years there grew to like $13 billion.
JL: And this was at Morgan Stanley, correct?
CS: That was Morgan Stanley. Yeah. And then -- and so I -- I became an assistant. I became an analyst, actually. And I was covering all the IPOs in the 90s like Amazon and things like that. And that's how the luck would have it. And then SAC kind of called me out of the blue one day. And I didn't know anything about that either, I just was kind of always in my own world. And that seemed like a great opportunity and it was. And, that's a little bit how it launched my career.
When I was at SAC, I started actually speaking to companies more regularly. And I really enjoyed that, I really enjoyed that. You can listen to what a person says. And it's pretty important what people say, how they say it, how you feel when they're speaking. I remember going to conferences, they're giving their planned pitch, and their slide deck. And you just -- I don't know, something happened to me where I would just feel excited based on what they were saying, or I was like, something's wrong here and I just couldn't place it.
And I realized that there's a lot in what people say, how they say it, the body language that they give, the exuberance that they exude, kind of what goes from there, their heart to your heart. And I realized that there's a whole different dimension of understanding. You can understand how somebody is thinking and feeling just by feeling yourself and listening to the words they use and how their words compare to other people that you speak to in the industry. Some people are saying great things, some people are not saying great things and that's very important.
So, I think my subscribers have seen and been pretty amazed that earnings season is like our prime season. And they see that I'm able to get into stocks and out of stocks when the news reports or when a company's like four minutes into their earnings call or five minutes into their earnings call, and it's Facebook or some big company. And I'm like, we got to get in, we got to get out. And then the stock moves like 5, 10 minutes later after they said some clincher in the Q&A, and then the stock starts moving.
So I just learned that, there's a lot that people say, and how they say it, and how you feel when they say it, that ends up being very important. And I think that's a core part of helping me to, maybe find things that maybe other people wouldn't see, or like on an earnings call that you get to catch things before the market, even realizes it's in front of you.
JL: So in terms of your service, Nail Tech Earnings and just to your analysis more generally, earnings are obviously very central part of that. And I know it goes beyond just listening to conference calls and that sort of thing. What else is in the approach there in terms of your earnings models and how you're projecting things outwards?
CS: Sure. Well, we're speaking to companies, we're trying to speak to our coverage we have about 40-50 companies in our coverage, all the biggest companies in tech. And I like companies with earnings, I like companies with a PE, I like big established companies, there's a lot less risk or parent a lot less risk. And I have models, I have simple income statements on each company. And I think my subscribers are always amazed on how simple my process is, but how important it is. And I learned it from you know, just -- I learned that at SAC and JLF and Morgan Stanley, that you build an earnings model, and then you see the flow of if revenues are accelerating or decelerating, if costs are accelerating, decelerating. Gross margins -- what are they doing accelerating, decelerating.
And as long as you know what happened in the past, and you can see the numbers, how they're flowing. And then you see, then you hear what the company's plans are for the future and what makes sense to you. You don't have to take -- you don't have to believe the company that they're guiding something for next quarter, you don't have to leave them. Why? Because you see things flowing based on the model, you can look at the model and see, well, this is they've gone from 10% to 15% to 20%. And now they're saying 10%. And they're saying business is great. So it doesn't make sense.
So I think 10%, 15%, 20% is going to go to 25%, not necessarily go to 10%, I think they're being conservative, and if it goes to 25%, then the earnings are going to blow out and the stock is going to go up. And so a lot of it just comes from looking at the model, listening to them, understanding what makes sense and then that gives you an earnings target, I use a year out. So whatever, we're in 2020, I'm using 2021 earnings targets. When we get into April 2021, I'll use next year.
And so that EPS number is what drives the stock. And my subscribers have seen that we'll have a -- we'll have a buy or a strong buy rating on something with 40%, 50% upside. And out of nowhere, the stock does get there because when the company reports earnings, if we're right, and when the company reports earnings, the earnings are higher than people quickly do that math and say where's the earnings going for next year? What's the stock traded at on a PE basis? And then well, that's where the stock can go. And the stock gets there or is headed there and obviously that's a nice way to make money.
JL: Definitely. And your earnings estimates, I know they were in the past, are they still used by Thomson Reuters on some of these companies your coverage universe?
CS: Yes, they're by FactSet and Reuters, so our numbers are baked into the street estimates. So when people pull up the street estimates on Yahoo or wherever they are Seeking Alpha --
JL: Seeking Alpha, yeah.
CS: That our numbers are baked into that. And also what's nice is because, we send our estimates into that. We have a wide audience that reads our research, institutional audience, the largest funds, Reuters shows us who's reading our stuff. And it's all the biggest names that you know in the -- out there in the industry. So we do have an impact on the market, when we have a buy or neutral or a numbers are way higher than the street, people pay attention. And also, it's nice because companies know that our estimates matter and our opinions matter. So Intel and Microsoft and Facebook and everybody picks up the phone when we call and so we're able to have a good understanding of what's baked into their guidance, what's not -- and then what they need to keep the trend is going or not keep the trends going. And it helps our process.
JL: Sure. Chaim Siegel of Elazar Advisors who runs Nail Tech Earnings marketplace service here at Seeking Alpha. You can sign up for Nail Tech Earnings either by going to seekingalpha.com/marketplace and looking for Nail Tech Earnings there, or by typing Nail Tech Earnings or Elazar Advisors that's E-l-a-z-a-r Advisors into the search bar at the top of your site. It is currently offering a two-week free trial on his service. So go check that out right now.
Recorded Message: Alpha Trader is a weekly investor focused podcast produced by Seeking Alpha that will dive into the most impactful market news and then set the stage for upcoming market events. We are your hosts, Aaron Task and Stephen Alpher. Episodes are available every Tuesday and will include discussions with market experts on topics that are relevant to active traders who are at Seeking Alpha. Be sure to subscribe so you never miss an episode.
JL: This show is Let's talk ETFs. We're also going to put it out on the Marketplace Roundtable. So a couple of different podcasts here. But I wanted to start out by getting into some of these broad exchange traded funds that I see just by following your work on Seeking Alpha and within your service that you're regularly putting out trade alerts on a couple of ETFs in specific the NASDAQ 100 being one of them that QQQ, the S&P 500, the Spyder version of that index fund, so SPY, and then also SMH which is the Semiconductor ETF, I think it's a VanEck fund if I'm not mistaken.
So just I guess let's go through these one at a time. The QQQ, which is a fund, I think listeners all know that I have been heavily invested in since 2008. Since I really started doing my own investing. Obviously, it's been a good call for me relative to let's say, just putting things in the S&P 500, I think I've about doubled up on the S&P 500, as a result of that conviction there and when it goes down buying more and that sort of thing. But it is really a strange index. In many ways, it's very strangely constructed index, particularly the weightings, there's sectors that are missing from the index, like financials, which I personally have viewed as a good thing since 2008. I mean, that seems okay to me, but eventually it'll lag because financials will outperform at endpoint, which is why I do own some S&P 500 also in a few other broad indexes.
So I'm just wondering, in terms of you referencing the QQQ a lot and your relationship to it with the service. Why go with that fund, and not more of a pure play tech fund, let's say something like XLK which is the Spyder Technology, which is, of course a very large liquid fund as only tech holdings inside of it, none of the other stuff you get with the NASDAQ 100?
CS: Okay, I understand great question. Part of my conservatism is that XLK I find is just, trades much more wild than then QQQs or SPYs. And I think SMH also trades more wild than QQQs or SPYs. It's smaller index. It's like the stocks in our coverage list. They're stocks that are all big cap companies. They're not -- I don't follow $10 stocks, under $10 stocks, I like stocks with volume. And so anything that could cause me risk, I like to avoid because I care very much that subscribers -- I mean, I can't predict everything, but I do want to line up as much risk aversion as possible.
So that's one main reason I use QQQs. QQQs tends to align with the stocks that I care about the big cap stocks that I care about. So I guess -- I guess that's your answer.
JL: Sure. And I mean, if you look under the hood of XLK for example, a couple of things stand out relative to the QQQs, I think so. First of all, because of what Giggs has done to reconstitute certain stocks, like Google is not being Information Technology stocks, right. So those stocks don't end up in the XLK at this point?
CS: Right. The other thing is you have Microsoft and Apple that's half the inputs.
JL: Yes, half of it's going to say -- yeah, it's incredibly top. So it's top heavy, the QQQs is. XLK and SMH are that much more top heavy? And so yeah, you're really -- I mean --
CS: And I like very much that Apple is did a split. I think that also helps, what might helps the SPYs also, it helps the QQQs I think, right? I see the Apple is 13%, Microsoft's 10%. I don't know if that helps.
JL: I think it well inside of the Dow Jones because it's price weighted, which is, I think the only major index. I know of like that it's certainly not Apple's size down. In terms of the QQQs, I think they're modified cap weighted, and I think Apple is just 13%, because of how well the stock has performed, same with Microsoft.
CS: Right. For whatever reason, I found that, if I'm hedged, let's say 35% long, 35% short and I use QQQs. I do find that my portfolio will be protected in a down market by using queues. I just find that it correlates with the stocks I'm using. So, it works.
JL: And I guess to be clear, also, you are using QQQ and SPY to go short the market on occasionally?
CS: I'm using it to hedge the portfolio. So I don't -- I hate options, I don't really like options, unless you have a good strategy, I think they're -- the time value, loses value over time and people tend to trade with too much risk. I'm just talking about hedging simply. So if I have 35% long stocks, and I want to be hedged the market because I don't know what it's going to do tomorrow, then I want to be 35% short. If I think the market is going down tomorrow, I want to be 55% short, 35% long, I'll be 20% net short. If I think the markets going up tomorrow, then I want to be 20% net long. And so that's why -- so I'm not always bearish on QQQs, you see that.
JL: Right, and I wasn't suggesting you're always bearish, I'm just saying that it's -- because of how liquid it is, if you were to actually try to borrow short. So I think SPY and QQQ are the number one in most traded securities in the world. And so that amount of liquidity when it comes to costs to borrow and things of that nature, you really can do it a lot more cheaply than even many mid or large cap stocks that you just you end up paying a few percent just to borrow the sheer short, and that adds up over time.
CS: Yes, look, I'm doing things more plain vanilla, and QQQs and SPYs are more representative of the stocks we're trading and it's safer. It's just safer to have a position overnight at SPYs and QQQs you're going to get out it's not -- if the markets down big, you're not going to have a problem getting out.
JL: Sure.
CS: So I use them because they're easy, plain vanilla, they're the largest. When I look at ETFs, I care about what's the total market cap of the ETF? I just care that I have volume and size so that I can sleep well at night that subscribers and in things that are safe and protected with their portfolio to some degree.
JL: Yeah, certainly. And what about, let's say inverse or leveraged ETFs? So, for example --
CS: I avoid them totally, because there's no need for them. But for me, unless somebody has an IRA, but then should they be shorting in their IRA? Probably not, I have no idea. But when someone people have those questions about inverse and options, I send them to our chat, because a lot of people have expertise on inverse ETFs and options. And I prefer to keep things plain vanilla.
I really feel responsibility to the subscribers, that I give them as simple as possible. And things that aren't going to trip us up in the future, because sometimes I think -- I would do worry that sometimes the performance is not one to one and sometimes you could get a big down day or a big update, and somebody is in a some derivative of something and they don't get paid on the right call.
So I want to get paid on the calls that I make. So that's why I only use the SPYs and the QQQs as hedges because that's going to be most relevant. If the market goes up tomorrow and I'm net long, my SPYs and QQQs probably aren't going to go up more than our portfolio and same on vice versa. If I think tomorrow is down.
I want to take a step, sidestep for a second and point out what I'm saying is pretty amazing, because I don't think people might -- some people might grasp what I'm saying. But when I say I'm calling the market tomorrow, that's I mean it. Last week, we called the market -- Monday we said the market would be up, ahead of Monday, meaning Sunday we said the markets going to be up tomorrow and say it's going to be. I said, we think of the market is going to be up so it was up. Then Tuesday, Wednesday, Thursday I said the market is going to be down.
So if you do the math for getting the market, right every day, you have 50% times, 50% times, 50% times. So you have a 6% chance to get the market right every day. So we had a 6% chance to get the market right every day. So we predicted that the market would be up on Friday was up most of the day, but it closed down like 0.27%. So we were 4 out of 5 last week.
And so when I have a net exposure, my subscribers realize that I'm making a call for the market tomorrow. It's not -- so I don't want to sit with losses. And if I have a stock that's down on me, I don't like that people see that I'm trading out of losses quickly. And I'm -- and when we have positions that are working for us, we're adding to positions that are working for us. And that's another reason that's helped our portfolio to just gradually build in down tapes and volatility is because we have a disciplined trading approach. And part of that is also the market itself.
So when the markets down, it helps us get a little bearish. I mean, I look at a lot of things. I have some proprietary things that I look at, that helps us a lot. And so when I say I'm calling the market tomorrow, you need to look at our net exposure, because that means I think if I'm net long, I think the markets up tomorrow, and if I'm that short, I think the markets down tomorrow.
Now, I don't expect to be right over every day, but over time, I hope to be right. And because I say tomorrow, it gives me a lot of flexibility to adjust that the days end and say, you know what, today I slow down, but tomorrow, the market had some strength today. And I think tomorrow it's up. And I do a lot of work on it, I do a lot of back testing and technicals and I've been doing this for a long time. And it helps guide the portfolio. And it also helps us stay into our strong buys.
So if we have strong buys that are going down, because it's a down market, and we have hedges that are helping us then we didn't have to let go of the position, we might cut the position so we don't get hurt on the position. But I'm really looking at it as a full portfolio approach. And so, I'm able to be it's --- I guess it's call a trader disciplined flexible to adjust to the market each and every day. And I think that's a strong component of what we're doing in the service.
JL: Yeah, it totally sounds like it. And again, I see you making these rapid fire calls throughout the day. So wondering, so you were saying that you looking at technicals somewhat also, I know that the crux of your analysis is earnings, but in terms of the shorter term movements and knowing when to cut a position partially or fully when to get back in? Are you using momentum or trend following for that component of it?
CS: I guess you would call it momentum and trend following I -- I've been doing this for a long time. And I really feel like a lot of come together in this service. I mean, as by the growth of the service. And by the success of the subscribers, they've -- I hear so much that people have been very successful, since they joined the service and they're thankful and they send me nice messages, private messages that I finally found that how to make money in the market.
And I think part of it is that through my experience that to keep it simple trading is very simple, but very hard, right? Simple, because if you like to buy stocks that go up and you'd like to buy the market when it goes up and you want to watch out, when it's going down or when it looks like it's about to start turning down.
So that's very simple. And but it's also very hard, because emotions get in the way that somebody can't stay disciplined. So yes, I would say that I do a lot of trend following I love, when stocks are working I love adding to stocks that are working. And we have something that's cal led GBON get big out of nowhere. It's an acronym GBON.
JL: Nice.
CS: And when we go GBON, everybody gets excited. It's like I could be at a 3% position. Suddenly we're at a 10% position and everybody starts getting giddy on chat. Because when I get big when I get long on the portfolio or when I get big in a stock, it doesn't mean I'm bullish on it and I hope it comes to fruition in the next quarter or the next three months. When I get big, I think the stocks moving now. Which is crazy to think, but it's working and that's -- I think our services a little underappreciated for the benefit of short-term components of making money now.
I do have some people, let's say, I expected more of a longer term approach. Our earnings work is our longer term approach. Earnings are looking out 12 months. And if you just follow that, you do good, you did really well, if you just put them away. But there's volatility in the market that you can't ignore.
So, I found that putting all this together, allows people to make money every day, or not every day, but every month, or most months, and also not to take big losses. I don't like -- I don't want to take big losses, I want to take small losses. And -- but if you if you don't have a disciplined approach, then small losses turn into big losses.
So I care very much how things are looking now are things working, are things going up or things going down? And it's simplified, but I have some more complexity behind it, things I've built in my career that have helped us to be successful in this. So yes, I agree that it's more of a momentum, less of a value for sure. I don't like tech value, I don't believe in it. Value means you have to wait 2-3 years.
Momentum means I want it to work now. So I'm expecting big things. And I expressed this to subscribers, it's pretty bold things to express the subscribers. When I get big, I needed to work now. And if it's not working now, unless I get big, I get 10% the stocks going down a 1% or 2% the next two days, I have to reduce it to a normal size position. Because when I get big, it means I expected to work now. It's a very nice feature to the service, people get excited about, people get excited when I go GBON.
JL: Especially if you have that high percentage level of hits to misses?
CS: Yes, yes. We've had many GBONs in Tesla and Roku, because it made a lot of money, and they're so excited. And our biggest one, what our biggest GBON was, I think, was Qualcomm. When Apple and Qualcomm made a truce and the stock was up 13%. We got 10% position, when we saw the stock up 13%, the stock went ended up moving another 30%, 40%, I forget. But like 30%, 40% from there in a couple of days. And people were very excited about that.
So we're in earning season now. And I tell people that look, you got to be on chat, after -- you got to be on chat in the afterhours and earnings season, especially when something that we care about reports, because that's when all the action happens. You get the news, you get to hear what they're saying, you get to see the report, and you get to see the change in trends of what the companies are doing real time.
And I believe that I'm as good as at reacting to these things as anybody out there. Early in my career, I was good at react -- I found that I was good at reacting to earnings. And so when I matched that with the technicals also when you have the fundamentals and the technicals, fundamentals look good, the technicals are just breaking out and the news just released, you can see that this stocks going to have a nice follow through for the next few days or weeks. And you know what, you have a PE time -- you have a price target that's much higher now, because the news just came out. You can sit with it, but in the short term, you're going to -- the stock -- if it's GBON, the stock is going to make money for us right now. So it's a nice feature. And if it doesn't, we can always cut the size to reduce risk.
JL: Sure. Yes, definitely. So you mentioned Tesla, and I know another stock that you've been long on recently is Zoom and you're talking about having the technicals and fundamentals align -- obviously the technicals have been terrific both of these names. I kicking myself now, because I looked at Zoom and I don't frequently buy individual stocks, but I do occasionally. And I remember looking at Zoom, I think it was at about $70 was maybe a month after the whole pandemic started thinking, Man, I don't know that just seems overpriced. It's already doubled. And of course, it's up another I don't know 700% since then, or something.
So what is it about?
CS: What 700% between for analyst?
JL: Yeah, exactly. So at least I am logging the QQQs and I've got some Zoom in there, but probably not the position size. I should have had based on just my reading of this pandemics is going to last a long time. Zoom is a leadership role in terms of how people are going to be communicating how kids are going to be going to school. Companies are going to be doing business. Everybody's going to need the paid accounts, people are not going to be able to get away with this the accounts that cut you out after 40 minutes. And we're recording on Zoom here.
So case in point really has become ubiquitous a year ago, I don't think, I use Zoom for just about anything. What is it about names like Tesla and Zoom, and we can split them up that despite I guess, on paper, at least, the fundamentals seeming overly frothy valuations that seem just really exuberant and have perfection baked into them, allows you to continue being confident on names like these. Despite, for example, Tesla having a PE of over 200 or Zoom being up 700% in change over the last year.
CS: Right. Well, as we talked about earlier, I don't care what the street saying. So if you say the valuation is 500 times, you're using a street number. And that street number can be low or can be high. And that's where my work comes in, that I want to do -- I want to run an earnings model based on what's the trends and what's realistic, can those trends continue.
So Zoom, and I look at mostly revenues. I mean, I look at the whole income statement, but revenues, obviously, is the big driver to the bottom-line. And Zoom is a special case where the revenue growth has been accelerating. And I look at the two-year run rate of revenue growth has been accelerating.
So I'm not saying it's going to accelerate forever, but it's still accelerating. I mean, if you look at Netflix, I mean, they also should be a beneficiary of the stay at home, and their revenue growth and to your revenue growth is not accelerating.
So there are potential beneficiaries that should be benefiting but are not. Zoom is one of them that are. So -- and they actually had an Analyst Day, just recently, and they had a blowout chart. They showed that usage in Q3 was up 50% from usage in Q2, 50%. So that blowout quarter that they had last quarter, their usage is 50% higher than their blowout quarter. That's the only stat they gave. They didn't give any -- they did raise their long-term guidance. And I do.
So let me answer your question, rather than getting on a sidetrack. So I've been doing this for a long time. And by working through the income statement, I have my EPS target. If somebody doesn't have their own EPS target from their own work, it's very hard to say this stocks expensive or cheap. Because then you're just basing it on the street numbers. And there's a big flaw in the market by using street numbers, and it creates a lot of opportunity for us.
The street is publishing research basing their numbers, or at least their next quarter numbers on the company's guidance. And the company doesn't like when the street goes off of their guidance very much. But -- so companies can't really net-net, they can't have their own opinion. And so they never really go out on a limb and say the numbers are going to get to here, the numbers are going to get -- so -- or that if the trend, the 10% to 15% to 20% continues. The numbers can be $10 in the street to $2.
The street doesn't do that, but we do. And that's what that's where we find opportunities. So for instance, Zoom for next year, the streets had almost $3, I think we're at $10 for next year. Just running the income statement. And if you're a member of our service, you can comb through our models, and you can see if they make sense, and you could beat me up if you think I'm way out in left field, but nobody does. They see that, Wow. I should open a Zoom model, but, Wow, 10% went to 15%. I have Zoom in front of me. Give me a second. I'll tell you exactly.
JL: Yes. Sure. Let's get the exact numbers.
CS: So I'm going to take you back. I'm looking at two year-run rate. That means I'm adding, it's amazing. By the way Netflix reported last night, they guided subscriber growth. They guided subscriber growth to, I think if I have the numbers in my head correctly, 40.5% two year run-rate. Do you know what their Q3 two year run-rate was? 40.5% or 40.4%. Companies care very much about the two year, they guide based on the two year, it's meaningful to them, and nobody in the street is talking about it.
So I think we have something so stupid, so simple and so prevalent that nobody's using it. And the sell sides not even using it, because they just follow the company's guidance. The sell side, the brokers that are posting there, they're not paid to be right, and they're not -- the brokerage firms aren't making a lot of money from their calls being right. Mostly people are paying brokerage firms to get IPOs and to get meetings with companies.
So those guys are like -- they're just a report or something to put in front of a customer. But they're not -- they're just kind of a little bit of a loss leader that those. So everybody's using street numbers, but there's not really a lot of strength behind them, which is why you have all -- many hedge funds and institutions, they have their own team inside, they're not using the street numbers, they're making up their own numbers.
When I speak to companies, we'll speak about sometimes that the buy side is higher than the sell side or the buy side is lower than the sell side. Why the buy side is running real trends and the sell side is not running real trends. So let me show you what how the trends have been.
So I'm going to take you through January of this year, they grew two year 186%, two year. The next quarter, 272, July, 451 and October, they're guided for 461. They're guiding and they're actually guiding for an acceleration.
JL: Pretty small acceleration relative to the July quarter, is that right?
CS: Right. 451 to 461. So -- but still, that's pretty impressive that the company's guiding to even an acceleration, so you have to put a little logic to it. You have to say, look, the company went from 186 to 272 to 451 and they're only guiding 10% faster. But last quarter was 170% faster. So it could be that they're being conservative. But what I did is I just kept the two year run-rate pretty similar for the next few quarters. And it gets me to huge numbers. I didn't even accelerate the two year run rate. And it gets me to $10 next year, well, the streets at almost $3.
So if the earnings are now going to be $3. Or you can just look at my model and say, where's the earnings going, if trends continue, things don't drop off a cliff? Well, you can get to $10. And so if you could say, well, this -- so $10 times, I use my max PE that I use is 65, I have a 650 price target. You can get there, but you need your own model.
Tesla has been something very similar where, we've had a model for $10 for next year. The street's been much lower than us. And there was points based on a company report, let's say last year, or a quarter, the street -- same story streets at $3. And we're at $10. I'm not $10, because I like that number. I'm at $10, because we use the 500,000 unit run-rate for this year. And the company said that they expect to be -- this is Tesla now, they expect to be at -- I think 1 million unit run-rate by Q4 2021. And we did the math and we ran through the deliveries and we assumed a price per vehicle, if it's moving up, if it's moving down based on the trends. And what's the trends for gross margins, and we got $10 for next year, you can run with Tesla is one of our longer models, but it's a spreadsheet and you can look at the math and see how we get there.
So we're using a 45 PE for Tesla. So we're at with 10.60-10:45 is 4.77 price target. And my subscribers know from being with me that these are real price targets. I mean, the stocks arrive to those price target, I'm not perfect, I'm not expecting to be 100%. But we want to line up things in our favor with the earnings and that PE and hopefully also the technicals and that every and the portfolio we call it multiple ways to win, we have several layers in the portfolio that help us make good decisions and hopefully two or three or four out of our four features are working and it drives performance.
But to look at this street number, I don't think you'll ever go out on a limb and say I got to be here, because you're never going to know it in the street numbers, the streets numbers is like the bogey that we're firing against.
So in my whole career, I think, I've learned that, you can see the trends and you don't have to listen to anybody. You don't have to believe the street as long as, you don't hear anything out there in the world that the world's changing or trends are changing. And there's no reason to think that this company's trend should change.
And if anything and Zoom's Analyst Day that they just had, it sounded like the pandemic for them is just as strong as ever, unfortunately for the world, but it's been a benefit for Zoom. And so if the pandemic is just as strong as ever, I mean, you got to expect that that usage numbers meaningful to them that up 50%. By the way, that Zoom up 50% usage number, that's versus their guide of revenues up 6%.
So if you can get 6% revenues out of that 50% usage jump sequentially, then you made the numbers, but I think they could do better than that.
JL: Yes. Particularly if you think about the fact that school just started about a month and a half ago in the Northern Hemisphere again, and that has to be a major driver of usage, I would think. All the places that kind of just wrote things out, or that didn't have to shut down until May or June. So Zoom wouldn't have been a factor. They're all on board and my guess is that, because this is only started in the last six weeks or so that those numbers are not even really appreciated by the market yet necessarily?
CS: Well, I think also some of that, you're right. I think some of that they're giving away to education, but also when it's being given away to all these kids, the parents learn about it, and people start using it. So even though they have a freemium model, a lot like Seeking Alpha has been successful with. Zoom stole the Seeking Alpha's freemium model, and has been pretty successful with it. And so that's how they've been driving revenues, too.
So -- and they did say that their experience in converting and monetizing for users, last quarter was better than expected. So if their usage is up 50%, and I hold to the fact that their monetization skills are also going to be better than expected, then I have to believe that their revenue growth is going to be better than 6% sequential.
JL: Sure, yes. It stands to recent. So before we go here, and I am mindful of your time, because Tesla is about to drop their earnings were less than an hour before the market closed here.
CS: Hopefully lift their on them.
JL: I just meant drop it as in like that.
CS: I know. Joking.
JL: Drop that the -- or something. But yes, hopefully, hopefully with them, yes. So you hear a lot of comparisons to 2000 in the tech bubble, I'm hearing them more and more frequently, I'm reading them not only on Seeking Alpha, but in other places. Also, more and more people seem to be feeling that this just it can't go on tech can keep on outperforming the rest of the market. And in this way, you obviously very closely follow the earnings of 40 or 50 of the largest companies in the space. What's your take here? Are -- is this similar to 2000, obviously, these are companies with real earnings. So that's quite different relative to 2000.
But in terms of the ability just to continue powering markets higher and outperforming everything else. Do you feel that this situation can carry on for the indefinite future?
CS: I think -- it's a great question. And do you know, in our service, we don't really talk much about the '90 bubble, because I don't think we're in a bubble. We have companies -- in the
90s, you had companies with no earnings, you had dot-com ideas with no earnings. So I would say something that's similar is -- you do have some companies like that are get -- that are specs or something with no business. And those -- I don't want to touch, right? Because there's no value behind them. That reminds me of the dot-com companies that went public which is etoys.com or whatever.
JL: That's a famous one that I think.
CS: So with the specs, I mean, there's no earnings there. So we're only doing earnings, so we're not going to get trapped in that. And -- but earnings, I think companies are delivering on earnings. The tech boom, is something very real. Even shorter term, Q3 seemed a little slower for data center purchases, which has been so core cloud company purchases, cloud CapEx, but it sounds like Q4 is picked up again.
So there's something very serious this stay at home is driving a lot of data usage. And it's something very serious for tech and people are spending. There is the enterprise side and companies that are exposed to the enterprise meaning traditional companies like Cisco has more of their customer base to traditional companies. They're getting a little slower. But then again, you have Texas Instruments that just reported a really good quarter, really good revenue acceleration Texas Instruments. But they said that overall one from going from zero in Q2 and now finally bouncing back because people are back to business.
So I think tech is legitimate, because it's based on earnings and revenues, it's not based on fluff. And the other thing is that you have the Fed that's been diligent to keep rates at zero percent. And so when you have the combination of earnings and zero percent interest rates, you have a lot of pop potential.
So I don't want to cap that. And I don't want to -- when you have the ingredients there, I don't want to compare it to a bubble, because I don't think it's a bubble, you have low rates, and you have earnings.
If you have that -- the macro is going to start slowing and I look at data, and the latest data and jobless claims, that's my biggest key. Jobless claims as my biggest key to watch data week-to-week. And that did -- jobless claims did show a weaker economy in last week, and that's important. So we're watching all this data, but the tech companies and legitimate tech companies, they're showing good earnings.
And so if the earnings starts to flow, and the revenue growth starts to slow, then yes, I agree we're in a bubble. But right now we're not seeing that this -- I do think short-term that the markets extended a little bit short-term. But that has nothing to do with where we're going to be in a month or two. I think the market has just as good ability based on interest rates and earnings to go up, but it's up a lot. So we take it day-by-day, but I don't think it's a bubble. No.
JL: Sure. No that does resonate with me as well in particular. You look at the top two names and pretty much all of the top tech indexes, so whether it's the QQQs, whether it is non-tech index, it's like the S&P 500, whether it's XLK. It's always Apple and Microsoft and to claim that these are late-90s style bubble stocks when these are companies that have raised their dividends year-after-year for -- what companies you can paid dividend.
CS: Well, let's look -- I have -- that's okay. I have QQQs opened up. Apple, last quarter Tim Cook, I was astounded how bullish he was on back to school. I don't have the valuation there, but Apple, I think sounds amaze -- he was so bullish last quarter. He's bullish. I was -- so that's something exciting and that's your biggest company. Microsoft, they've been very solid, they might be slowing a little bit, but---
JL: Maybe, I don't know they seem to every time people count Microsoft. They seem to find a new lever gear so about a month and a half into the into the lockdown my kids got an Xbox One. And so I don't really pay for Microsoft Office anymore, but they somehow find a new way to take your money.
CS: Yes. They know -- and Nvidia's next and Nvidia has been having good earnings, Adobe has been having good earnings, PayPal good earnings, Intel they've been having good earnings and they're very conservative for the back half, so one, two, three, four, five, first six companies, Cisco has been slowing a little bit. But that's your first six companies in the index, if they're legit.
JL: Yes. No question about it and then you go a little further down and you get your Tesla's and your Zoom's and they're also so it's certainly maybe they're mirroring your model portfolio.
CS: Maybe their subscribers.
JL: Yeah. Anyway, Chaim, this has been really great colorful conversation, I always enjoy talking to you about all of this stuff. Where can listeners that are interested in researching your service or you know getting to know your work a little more? Where's the best place for them to do that? Is it basically to go to Seeking Alpha look up Elazar Advisors and follow you start reading some of your free content on the site? Or are there other places people should be going also?
CS: I mean, I think you'll get a taste of what we're doing on the free site with our reports. And I would say, one thing is that check where I'm follow my comments if I'm making comments out there, because you get a taste of what I'm doing by the comments. But you also have a free trial if you try it with people that come in and check it out and works for them, doesn't work for them. But I think many more people that try and stick with us. Sometimes, it takes -- I've heard that might -- because come from the pro side, sometimes my language just a little bit pro. And so it takes, you need a dictionary for the first couple of weeks to understand what I'm talking about, like, if I go GBON on you, you might have to ask what he is talking about.
But I think you have to jump -- you could try the free articles. But I think if you come into the service, if you're looking for a guide in any market. And I don't think we need to be your only service, but I do hear subscribers are making us their only service. But if you want a guide for the market and stocks and to make sense of the Zoom's and Tesla's of the world. I think you can kick the tires with a free trial. I think you like it.
JL: Sure. And again, no risk. So if you don't like it, you decide it's not for you. And of course, none of these services are for everyone. Just you move on. Say thank you, and move about your test this.
CS: You don't need to me say thank you. You could just say click.
JL: Nice. Anyway, Chaim, I hope we can do this again soon. Best of luck out there with Tesla's earnings tonight and with just continued success with everything you're doing.
CS: Thank you very much. I really enjoyed the conversation and thanks for thinking of me to do this.
JL: Sure. For disclosures, Elazar Advisors, aka Chaim Siegel may hold many of their positions both stocks and funds that we discussed in today's show in his service Nail Tech Earnings model portfolio. I am long QQQ and POO.
If you've been enjoying Let's Talk ETFs. You can subscribe on Apple podcasts, Google podcasts, Spotify, or whichever podcast platform you prefer. And if you find this podcast useful, please consider leaving a review on one of those platforms so that other investors can discover it. You can also find this podcast on seekingalpha.com by typing Let's Talk ETFs into the search bar at the top of the site.
