Embracing Disruption: An Investor s Perspective

Transcription

1 Embracing Disruption: An Investor s Perspective

2 What Is A Disruptor? A company/product/concept that changes the fundamentals of an industry and disrupts previously successful business models

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4 Industry Players

5 2016 Sales & Profits Sales: Target & Wal-Mart Amazon $554 Billion $136 Billion Profits: $16.3 Billion $2.7 Billion Source: FactSet

6 But What Are They Worth? Target & Wal-Mart Amazon $255 Billion $433 Billion Source: FactSet s of 3/19/2017

7 Race to $100 Billion in Sales 35 Years 21 Years Source:

8 96 U.S. Fulfillment Centers 1,790 U.S. Retail Stores 4,601 U.S. Retail Stores Roughly one out of every 10 Americans works in retail Source:

9 Revenue Growth Rates 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% Amazon Walmart Target 10.00% 5.00% 0.00% -5.00% Source: FactSet

10 What is Amazon s value proposition? Better value Convenience Wide Selection

11 Which industries are less likely to get Amazoned Physical experiences Leisure & Entertainment Education Convenience want or need it now Home Improvement / Auto Parts Prescription drugs / Convenience stores Pet food / supplies Distribution / logistics issues Products with low price points / perishable Personalization / Expert Advice / Installation Beauty salons / home furnishings

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13 Not Just a Retailer 2015 Revenue: $99.13 Billion % of Revenue: 92.6% % of Operating Income: 59% YoY Growth Rate: 17.5% Growth Rate (%) Revenue: $7.88 Billion % of Revenue: 7.4% % of Operating Income: 41% YoY Growth Rate: 69.7% Growth Rate (%) Source: FactSet

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15 Cloud Competitors

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17 Storing on the Cloud = Storing on the Internet

18 Average Customer Savings From Using Amazon Web Services: 64% Maybe it s not a surprise that in April 2017, IBM reported its 20 th consecutive quarter of declining revenue! Source:

19 Cloud Computing Losers Mainframe & legacy hardware companies Licensed software vs. subscription based Info tech consultants Winners Telecom / Communications Infrastructure Communications technologies Storage & security Cloud focused software & services

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21 How Airbnb Works: Visiting Go to airbnb.com to list your trip criteria. Pick from the hundreds of listing results. Welcome!

22 How Airbnb Works: Hosting Sign Up. Guests find your listing and book. Welcome guests and get paid!

23 Airbnb s Competitors

24 Number of Locations in Kansas City Sources: airbnb.com

25 What s It Worth? $12.6 Billion $16.9 Billion $22.17 Billion $30 Billion Source: FactSet NY Times

26 What s Airbnb s Value Proposition? Better value You re not visiting; you re living.

27 Ritz Carlton Hotel Listing San Francisco, California 2 Queen Beds 400 sq. ft. $519 Per Night Source:

28 Airbnb Listing San Francisco, California 2 Bedrooms, 3 Beds Laundry and parking included Approximately 1,000 sq. ft. $370 Per Night Source: airbnb.com

29 What Could Go Wrong?

30 Winners Losers Hotel Industry Hosts Travel Agencies Travelers Local Government

31 Winners Hosts Travelers

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33 Industry Competitors

34 Value Proposition No Ads Convenience Price Original Content

35 Minutes of Commercial Time Per Hour Netflix Cable Television 0% Ads Ad-Free Time 25% Ads Ad-Free Time Ad Time Cable television averages 15 minutes of advertising per hour. Source:

36 Convenience: Binge-Watching Watching multiple episodes in one sitting Netflix Users 30% 70% Binge-Watchers Non-Binge-Watchers Binge-watchers average 5 episodes per sitting Source:

37 Price Comparison Cable Average cable bill: $75-$100/month YouTube Red $9.99/month Sling Sling Orange: $20/month Sling Blue: $25/month Amazon Prime Amazon Prime: $99/year Student Prime: $49/year Hulu Limited Commercial: $7.99/month Commercial Free: $11.99/month Netflix Basic: $7.99/month Standard: $9.99/month Premium: $11.99/month Sources: money.cnn.com Hulu.com Netflix.com Youtube.com/ReD Sling.com Amazon.com/prime

38 Netflix Originals

39 HBO Originals

40 How Do They Make Money? Cable vs. Netflix Advertising Subscriptions

41 Cord-Cutting On The Rise TV Subscribers Non-TV Subscribers E2017 Source:

42 Netflix Subscriber Growth 50 U.S. Subscribers: Netflix Subscribers (millions) Year Source: FactSet

43 Losers Winners Advertisers Consumers Cable Companies Broadband Internet Content Providers

44 Winners Consumers Broadband Internet

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46 Industry Competitors Twitter LinkedIn Snapchat

47 Daily Users 1.09 Billion 11 Million 68 Million Starbucks McDonalds Facebook Sources: starbucks.com answers.com newsroom.fb.com

48 But Not Just Facebook Instagram 300 Million Daily Users WhatsApp 320 Million Daily Users Source: Oculus Rift The Leader in Virtual Reality Technology

49 How Does Facebook Advertising Work? Facebook Activity Internet Searches Personalized Ads for Each User

50 Success Stories 75% incremental reach compared to TV 11 point increase in brand awareness 2.3x increase in volume of subscription conversion 25% decrease in cost per subscription 11.7% increase in brand awareness 54% of audience (35 million people) reached in 3 days 23.6 million people reached in 3 days 30% more views than the initial target Source:

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52 Industry Players

53 Uber Statistics Over 8 million users 160,000 drivers 300 cities 1 million rides per day Source: expandedramblings.com

54 Cost: Uber Vs. Taxi A 5 mile, 10 minute trip: State Uber Taxi (+20% Tip) % Savings New York $17.75 $ % Dallas $10.30 $ % Detroit $12.30 $ % Seattle $11.70 $ % San Francisco $12.30 $ % Chicago $9.50 $ % Los Angeles $9.40 $ % *Data: Business Insider 2015 Uber Is Cheaper In Every City!

55 The Cycle of Disruption Lower Uber prices compared to Taxis More Uber drivers are available Consumers use Uber instead of Taxis Drivers switch from Taxi to Uber

56 Not Just A Car Service

57 What s It Worth? Hertz $4.7 Billion Enterprise Holdings $13.5 Billion Uber $68 Billion Source: skift.com

58 What s It Worth? Honda $45 Billion Ford $49 Billion Uber $68 Billion Toyota $165 Billion Source: Bloomberg

59 Winners Losers Taxi Companies Rental Consumers Car Companies Low-Skilled Local Transit Workers Local Government

60 Winners Consumers Low-Skilled Workers

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62 Tesla s Products Electric Cars Model S Model X Model 3 Batteries

63 Who s Buying Teslas? 84% Male 77% Income over $100,000 25% Owned a Toyota 11% Owned a Mercedes 10% Owned a BMW Majority male, younger and wealthier Source:

64 Source: U.S. Car Sales Electric Vehicles Plug-In Hybrid Electric Vehicles Total Vehicles 115, , Million

65 China has already passed the U.S. in EVs Source:

66 Top 5 Electric Vehicles Sold In ,000 50,000 40,000 30,000 20,000 10,000 0 BMW i Series BYD Qin PHEV Mitsubishi Outlander Source: Nissan Leaf Tesla Model S

67 Electric vehicle producton forecasts

68 EV battery cost forecasts

69 Goldman Sachs Forecast Seven things that may surprise you 1. Need a payback of 3 years for consumers to embrace Electric Vehicles Not likely to happen until Battery efficiency improvements should eliminate the need of subsides by EVs are not necessarily eco-friendly CO2 emission volume depends greatly on energy source used to generate the electricity 4. EVs only have 2/3 of the parts used in gasoline vehicles, but are very complex to manufacture 5. Future advances in internal combustion engines are likely to lag the massive improvements being achieved with EVs Source: Goldman Sachs: Electric Vehicle Boom: ICE-ing The Combustion Engine., September 2017

70 Goldman Sachs Forecast Seven things that may surprise you 6. Raw material costs likely to remain a significant hurdle in lowering battery costs Lithium price has almost doubled in past three years For a rare metal, lithium is quite plentiful, but a highly reactive element that poses difficulties when extracting and producing into battery grade material Lithium supply / demand likely to remain tight towards 2025 Key U.S. companies Albemarle and FMC Corp. 7. All solid-state batteries nearing viability Solid state batteries are the most promising successor to lithium ion batteries Solid state has potential to double energy density and substantially reduce recharge time and minimize degradation Toyota aims to have an EV powered by an all solid state battery by 2022 other top players incl. Sumitomo Electric, Panasonic, Nissan, Idemitsu, Ohara, LG, Philips, Namics & Sony Source: Goldman Sachs: Electric Vehicle Boom: ICE-ing The Combustion Engine., September 2017

71 Tesla Powerwall Home Battery

72 The Gigafactory Tesla s Battery Factory 5.8 Million Sq. Ft. $5 Billion to Build To Be Completed in the Next 4 Years Source:

73 Tesla and Solar City Merger Designs and Manufactures Electric Cars and Battery Components Designs and Installs Solar Power Systems

74 The Vision Sun Solar Panel Power Wall Power Home & Car 100% Renewable Energy

75 Break Even Analysis Price of Power Wall: $3,000 x 4 Units = $12,000 Installation Costs & Supplies: $4,000 Solar Panel Cost (after tax credit): $21,000 Average Annual Electric Costs: $1,391 Average Amount Spent on Gas: $1,400 Source:

76 Break Even Analysis 1 Electric Vehicle 2 Electric Vehicles 13 Years 9 Years

77 Tesla s Long Term Goal Take Us Off the Grid!

78 Winners Losers Electric Auto Utilities Industry (Short Term) Energy Natural Sector Gas Alternative Oil Energy Developing Gas Stations Nations Electric Utilities (Long Term)

79 Winners Electric Utilities (Short Term) Natural Gas Alternative Energy Developing Nations

80 Autonomous Driving

81 The Case for Autonomous Driving 90% of car crashes involve human error If only 10 percent of the cars on the road were self-driving accidents would be cut by 211,000 a year deaths would drop by 1,100 the economic savings would hit $38 billion When 90 percent of the cars are autonomous 4.2 million accidents would be avoided 21,700 lives would be spared the monetary savings would be $450 billion Source: Eno Center for Transportation

82 Industry Players

83 Potential Impacts

84 Some key developments over the past year: Uber s Otto hauls Budweiser across Colorado in self-driving truck Volvo Unveils SuperTruck at DOE, joins Stage 2 of Research Project ZF and NVIDAI Announce Artificial Intelligence Systems for Autonomous Cars, Trucks & Industrial Applications NXP s new autonomous driving products focus on safety for selfdrivin trucks Scania to Trial the First Autonomous Truck Platoon Driverless truck testing starts in Singapore / China Tesla to Unveil Semi-truck in late 2017 Michigan Enacts New Autonomous Driving Legislation Maryland Applies to Us DOT for Autonomous Vehicle Testing

85 Potential Impacts

86 Potential Impacts

87 Agricultural Markets Europe's CNH Industrial, known for its Case IH tractor brand, unveiled an autonomous concept tractor in August 2016 in Iowa at the Farm Progress Show, one of the world's largest farm shows. CNH's autonomous tractor could presumably work unmanned around the clock and uses GPS and sensor technology. The grower could remotely monitor and control the machine using a device such as a tablet.

88 Agricultural Markets CNH's autonomous tractor could come to market as early as Deere and AGCO s New Holland division, two rival farm machinery manufacturers, have similar technologies. Goldman Sachs predicts farm technologies could become a $240 billion market opportunity for ag suppliers, with smaller driverless tractors a $45 billion market on its own. Tens of billions could also be be spent on advanced tech for major farm uses such as precision fertilizer, planting, spraying and irrigation, Goldman predicts.

89 What To Watch Artificial Intelligence Minimally-Invasive Robotic Surgery Drones Cancer Treatment Industrial Automation