That companies you want to invest in with Communication Services are the ones that everyone is using, netflix, zoom, you know, facebook, social Media Companies and how do you distinguish which are the better ones than the others we looked at a series of Technology Stocks this morning and broke them up into a couple different frameworks depending on whether their profitability is likely to rise throughout this covid cycle or negatively impact and recover a few we called rocket Ship Companies in there that also happened to be rocket ship stocks the stocks are following the funds. Its amazon, netflix, theres a couple Smaller Companies like wix and go daddy, all of these have had their value propositions kind of stamped on all of during this time period this covid crisis has been kind of an advertising for the benefits and the necessities of streaming at home and shopping at home and theres hard to find better winners than amazon and netflix in those categories. If those are the rocket ship winners, which have a relative perhaps under performance bias towards them given the fact that the bar is so high for Companies Like amazon and netflix and ac ka my . You have the ceo of one of them earlier today that was barry diller from the beginning the most cyclically exposed companies are the travel companies, the otas, you have booking, expedia, and trip adviser which gets advertising revenue from those those have been clocked from the beginning. There will be a recovery in those stocks, they could be great on the other side but youre going to have to wait a while. Mark, to go back to amazon and netflix, two names that despite the incredible selloff that weve seen in the market broadly in the past month and a half, alltime highs today are they still buys at these valuations i think so. Two points one is really important, netflix and amazon are at alltime highs but their multiples arent at peak forward multiples on cash flow and ebitda are closer to the median or even below the stocks can continue to run if i simplify it theres two things investors in the market will look for when it comes to these prints, netflix princes next tuesday do we believe they will have accelerating subads, will they be greater in 20 than 19 and last year they added around 27 million subs my guess is that globally theyre probably going to be able to talk about that for the first half of the year comps are easier Free Cash Flow pictures improving for netflix is a powerful combination and taking it to an alltime high and means that the stock can continue to rise from here you switch over to amazon and amazon is almost certainly seeing Revenue Growth acceleration i dont think theyve seen a demand problem like this theyre trying to struggle to catch up with it chances are you will get Revenue Growth acceleration, heavily fixed cost model that flows to the bottom line and profit acceleration and means amazon can continue to outperform again alltime highs but the multiples are not peak, theyre median and makes them still good buys. Yes some important differentiation, or nuance i should say there another name you cover, google and alphabet is slowing hiring and other investments as well. Sundar pichai at the helm, still new, only a couple months in place. How much of this is covid impact and how much is the fact that you do have new leadership and is it longer term a positive or is it a worry for this company so its we were immediately contradicted and published our report after the close and said we thought google, knowing that having a feel for the character of the Management Team and founders and the lessons they learned from the last recession no way they were going to slow down hiring and then 30minutes afterwards we saw the letter that theyre slowing down hiring. I have two sbrer pretations. Both right one theyre seeing a fall off in demand for google advertising. No choice but to slow down advertising, not cut, but slow down the number of head count ads they were planning on. Thats take one with, which is the demand that theyre seeing for their search advertising and youtube advertising has fallen off a cliff. The other one, hey be a good thing for investors, more disciplined Financial Management from this company than you would have had five or ten years ago both interpretations are reasonable mark, i mean the whole market is waiting for a day where theres some sort of breakthrough medical news that will make us feel better about leaving our homes and going to work and play. Isnt thatgoing to be a day of reckoning for some of these names, the stay at home basket yes. How much risk is embedded in that day, whenever it comes, and are you looking to a period where you do get more cautious because of that pivot . Yeah. So we would probably switch baskets. This is a real challenge for us. Weve offered to clients and investors two baskets. The more defensive you want to be, you stick with your amazons, netflix, akam, maybe chey. If you think were at a rebound phase, were going to be back to full growth by the Fourth Quarter, think about a rebound basket and that rebound basket includes uber, it includes google, includes facebook, names and even booking, names that can come back and will have a lot more alpha than that stay at home basket. The stay at home basket stocks have good fundamentals you want to be long amazon, you just happen to have a period where its going to dramatically outperform i dont think it outperformance as dramatically as the rebound basket if you get that vaccine data point and coast is clear data point i dont know if you heard diller on our air this morning talking about advertising budgets at expedia and says in a given year we spend about 5 billion. This year were unlikelyto spend 1 billion that sort of fits with the downgrades from other places say twitter at jpmorgan, how much what do you think the ad market looks like if, in fact, this bounce back to normal economy is drawn out . So i give you two things. One i think near term were going to go down 20 to 30 , internet advertising declining 20 or 30 . Were going to have googles first ever and facebooks first ever negative quarter, either Revenue Growth will decline on a year off year basis. That didnt happen during the great financial crisis its going to happen in the june quarter. When we come back, the wonderful thing about performance marketing is you can cut it off super quick, no commitments, turn it back on super quick. You will see a snapback of a v recovery for google with the one exception being that travel vertical because bookings and d expedia are major travel advertisers. Thats not going to recover really until next year so the rest of googles business can be but the travel sector wont so google will come out we think its a great rebound story but i dont think you will get back to full growth for Football Game google or facebook unti 21. Your job is to scrutinize the numbers and make projections for the coming quarters. I would like to set those aside and take a look at a big picture thought in your mind is it of your opinion that this covid19 crisis has actually shiftds consumer consum ission behavior in away that will project years into the future . Has it am i only going to be shopping online for Home Delivery and not going to malls . Am i only using food delivery and not taking certain kinds of transportation is that much of a profound impact right now from covid19 dominic, thats a 100 billion question i think the answer to the question is yes. I dont necessarily think about it in terms of an infection point. I think weve had a decade or two decade long streaming adoption, Online Retail adoption trend thats been accelerated because were going to be in our homes, you know, for i hope just two months, but it could be longer than that and i think its fundamentally changes how we think about how we purchase retail items, especially groceries a real increase in the willingness of people and necessity to purchase groceries online its safer and convenient. I think whats happened for some of these companies, this has turned out to be a Customer Acquisition event. They have a slew of new customers. They could screw it up but if they can manage the customers well and service them as best as they can with some delays and most people will accept some delays, theres chance for them, these companies if they execute well to permanently win over a new cohort of customers that arent going to go back. I think it is going to be a fundamental change in Consumer Behavior amazon is a structural winner out of this. I think netflix is probably a structural winner out of this. Theres not too many of those companies but there are a few. Yeah. Absolutely, mark the opportunity there is enormous just looking at your note, the companies that could suffer in 20 and shoot up in 21, two names we like to talk to you about, but lyft and uber. Yeah. What is your expectation not only for this year but next year why do you think that business is going to continue to recover for these names, speaking of structural changes, and what does it do to the profitability timelines . Morgan, that last one is a real unknown and one of the interesting questions thats going to come up on an uber earnings call. The ceo has laid out a goal of ebitda, break even in the Fourth Quarter of this year my guess hes going to have to walk back from that and the market expects him to walk back from that. One key point. I think this is a vshape recovery travel will take a while to come back, but were going to commute and commute to work rng were going to commute to social events and on our convenience trips. Youre going to see lift and uber spike back up pretty quickly, i think there will be people who will prefer to use uber and lift for rather than get into crowded transportation, Public Transportation venues. The advantage that uber has in all of this they have this eats business, only a small 15 part of their business, but i think thats been a structural win wither from this and that part of the business will have its profitability timeline brought forward because you have so many more drivers and restaurants on that network now. A structural winner of uber that comes out as well. We like both stocks but rebound stocks and just trying to figure out when that rebound begins all right. Mark mahaney, Rbc Capital Markets covering tech and internet, always great to have you on we appreciate it. Thank you, dominic. After the break were going to check in with shark tank host robert on the Cyber Security risks of working from home and more, stay with us the dow is down 98 points. While states and businesses continue to discuss the best strategies for reopening the economy, millions continue to work from home which were doing right now that comes with Cyber Security risks Robert Herjavec the ceo of the Herjavec Group and shark tank investor who joins us this morning. Welcome back good to see you. Good to see you guys, thank for having me again. Weve seen a lot of headlines cross about names like zoom, likts when commit to security. Are you using platforms like that with any reservations well, you know, when all of this first happened we wanted to use zoom because our customers use zoom, but i got to tell you, some of the Security Issues are really pretty bad within zoom. We switched over to teams and as you talk about its one of the reasons that the microsoft soft is doing so well the use of teams at the corporate enterprise level is really taking off. Were seeing web x usage really go up and on your show this morning, there was the acquisition of blue jean, another Video Conferencing platform yeah. Its been remarkable i guess it raises the question how much opportunity i mean if this demand is going to stay constant even at a slightly lower level theres got to be some opportunities for entrepreneurs who were thinking about getting into this space. Yeah. Very much. Ive become very optimistic about the return whenever the return is and what world will look like i think some things in the new world will change forever. Customer meetings will change forever. In the past i never thought that i could do a zoom call or a teams call with the ceo of a company im trying to sell to. In the future, i dont think my customers will want me to come and see them and so i think theres continued opportunity for remote access. Anything that allows you to connect with clients online or build a brand is going to be really valuable. I had an Instagram Live yesterday with kris jenner and, you know, shes been selling online for years now and every Business Needs to move online, especially Small Business. Weve had you on in the last few weeks to talk about what youre seeing among the companies that youre invested in and you would advise what youre seeing among Small Businesses as well one of the things we havent gotten your pulse on, though, is what you think this entire situation, more broadly is going to do to Small Business creation, to new business creation, whats going to emerge from this and how long that could potentially take i used to think that we were in a light switch moment where mir ra miraculously President Trump will get on the news and say were back on this date. What were seeing in california and new york is that were into this for the long haul and certain parts of the economy will go back quickly, but even the ones that do go back, are going to be limited. We talked about this morning restaurants. Theyll have to distance half the tables if i have more space in my restaurant, can i charge more along that line if i think its going to be challenging, but, you know, with all those challenges, theres going to be opportunities. The key for me about going back is testing and what that means and how people get tested theres a great new saliva test approved by the fda, people can do it at home and i think we just have to be able to do that at scale. Robert, its dominic here, you bring up a couple points with regard to were in it for the long haul and it does create opportunities. Im wondering from your standpoint, ive been watching a lot of the shark tank episodes on cnbc and watching all these Small Business owners come in. This is a time in christ when a lot of innovation and ingenuity happens. Is this a situation where you feel this is enough of a crisis if we are in it for the long haul we could spawn a whole new industry or group of industries based upon the idea that we are staying at home more and perhaps guarding our health a little bit more absolutely. Shark tank is a mirror to whats happening in the american economy. When we started the show 12 years ago, it was during the financial crisis and nobody could get a loan and people started a lot of businesses you didnt need capital for. We moved to online selling this will be the same thing. If ive learned anything on 12 years from shark tank, is that the human condition is about hope nobody wakes up and says, i want my life to suck. And every time somebody comes on shark tank, they are full of hope and optimism. And, you know, this is a challenging time, but entrepreneurs will figure it out. The key, though, is, youve got to have a growth plan. The stimulus plan, the protection plan, all these relief funds are simply survival funds. They are not growth funds. If you dont have a plan to grow, if you dont have a plan to gain market share, getting a stimulus today is just keeping you in business. Its not helping you to grow youve got to have a game plan for that although, robert, it actually brings me to my final question which is also about shark tank. Times has a great piece about how the Global Economy will change and one of the lines from an analyst is that companies are now thinking about resilience as well as quarter to quarter efficiency so as you evaluate pitches from here on out will you be asking them what is your plan for the next exogenous shock we might get in five or ten years well, absolutely. I want to know what peoples plans are for survival it makes me want to invest in two types of Companies Either companies with very strong Balance Sheet or Companies Like an uber or a Small Business that can scale back its costs i want to invest in a company that can quickly scale its he can pens to meet a decline in revenue or vice versa. So fluidity and the ability to adapt in a Small Business is really going to be the key i dont want to invest in a business with a large infrastructure, buildings, equipment, all that kind of stuff. That stuff is very difficult to scale down robert, finally, just to get back to the point about survivability, the ppp program hit its ceiling this morning only about 1. 6 million loans have actually been approved for all of that money. And just to put that in context weve got 30. 2 million Small Businesses when would you expect more to be extended and how do you think thats going to play out the governments got to do more and i believe im very bullish on the governments response to all this its going to take time. What i worry about is the people that probably dont need the funds right now, are probably the ones that are going to get them the smaller business most of the employment are subfive employees. Have those people applied for it are they going to get the funds . The people that really need the funds are going to struggle and i worry theres an entire element of our economy that may go away and that next wave were going to start seeing is bankruptcies for those Small Businesses because the