Status Update!
Here’s the weekly rundown
Weekly Summary:
“Everybody needs money. That’s why they call it money” — Danny DeVito
When it comes to the stock market, you don’t get a much more “action-packed” week than this one. Why’s that? Big money 💵 and big announcements 📣.
More than 30% of the companies that comprise the S&P 500 announced their earnings, including the big league Facebook, Microsoft, Apple, Google, and Amazon …how’d that go??
Overall, it couldn’t get too much better. Companies have been killing their earnings numbers, some 80% of companies have beaten earnings this quarter and average earnings growth is up over 30% vs last year.
The big league though was a mixed bag of wins and losses. Microsoft, a winner, chalked up annual revenue growth of 22% (crazy) driven in part by companies looking to rely on Microsoft’s products in the face of shortages and higher costs.
Amazon and Apple, both taking L’s, clearly felt the full force of inflation and supply chain shortages. Apple couldn’t source enough chips even though they have demand for their products and Amazon is watching margins dissolve as they pay more and more for labor. Investors shrugged off these snags by week’s end.
The biggest announcement of the week, Facebook is changing its name to “Meta”. Yep, kind of an odd name but Mark Zuckerberg is sold on the metaverse and that’s what he’s betting Facebook on. This is apparently the next phase of the internet, a virtual reality that people work, shop, travel, and take part in. Facebook intends to invest $10 billion per year into developing the metaverse.
All in, the market took a W for the week.
The Major Headlines:
💔 PayPal Dumps Pinterest
Friendzone.. about as fast as PayPal shows interest in Pinterest, shareholders of PayPal put an end to any acquisition ideas. The reason, it could’ve been that PayPal shares fell 12% when word got out about the deal but more likely, it was unclear how PayPal would monetize the 454 million users of Pinterest.
PayPal has been looking to add digital commerce to its arsenal but most of Pinterest’s revenue comes from ads not selling things. Add on PayPal’s 2013 purchase of Venmo which they have yet to make a profit from and that’s the end of a PayPal Pinterest duo. –See Article
️⚰️ Hertz Rises from the Dead
First on the list of things to do after bankruptcy… buy a Tesla.
Hertz, the car rental company, announced Monday it has placed a huge order for 100,000 Tesla’s — a $4 billion investment. What’s a bit surprising is the timing of the deal, as the company emerged from bankruptcy just four months ago after succumbing to years of losing money and covid.
The order represents 20% of Hertz’s 500,000 global vehicle fleet and will consume around 10% of Tesla’s annual production capacity.
Who do you rent 100k Teslas to? Uber drivers. After Monday’s announcement, Hertz signed an exclusive deal with Uber to supply electric vehicles to their drivers. –See Hertz Article –See Exclusive Deal Article
Tesla shares were us +20% this week | Hertz shares were up +10% this week
~Tesla joined the $1 T club this week~
🛩 Spanx CEO Gives Employees $10K & 2 Plane Tickets to Anywhere in the World
Make it, sell it, build awareness — Spanx original business plan
From an apartment bedroom Sara Blakely started womenswear company Spanx with the audacious goal… one day the company would be worth $20 million. Twenty-one years later (last week), Sara Blakely sold a majority stake in her business to investment behemoth Blackstone valuing the business at $1.2 Billion.
How do you celebrate building a company 60x more valuable than you intended? If you’re Sara Blakely, you give all your employees 2 tickets to anywhere in the world and $10,000 so they can actually enjoy where they go. –See Article
👢No Money IPOs — Rent the Runway Goes Public
Where can you lose $150 million/year and still be worth over $1 billion?? Apparently public markets -well, kind of.
Wednesday designer outfit rental service Rent the Runway went public with an IPO price of $21/share (a valuation of $1.7 billion). That’s a pretty hefty price tag for a company that lost over half of its userbase during the pandemic and has recorded $85 million of losses in the six months ended July 31. Add in 2019 losses of $150 million and there’s a lot of money-losing going on here..
How do you get a $1.7 billion valuation from this?? GROWTH or at least the hope of future growth turning into big earnings. The used clothing industry is a $40 billion market growing at 15% annually.. if Rent the Runway can capture this market they might be worth a lot. If not, well they’re worth $0.
🤷♂️ Abandon the Vote: New Spending Bill Pleases Nobody
New plan… again
For Joe Biden, his Build Back Better plan has been anything but easy to get passed. After finally getting more conservative Democrats Manchin and Sinema to sign on, progressives are holding out.
This has sent The White House back to the drawing board yet again rolling out a new plan just hours before President Biden left for Europe Thursday.
Originally a $6 trillion plan, then a $3.5 trillion plan, and now a $1.85 trillion plan the Build Back Better Act aims to pump unprecedented amounts of cash into social welfare programs, climate change, and education.
In the new plan:
- Universal pre-k for 6 million 3-and-4-year-olds
- Climate tax credits $12,500 credit for U.S. made, union madeEVs (Tesla is nonunion)
- Tax hikes 1% tax on stock buybacks, 50% minimum tax on foreign profits of U.S. companies
*1% tax on stock buybacks is actually an indirect tax on most retirements plans that invest in stock, and a double tax on stock investments.
Out of the new plan:
- Paid leave 12 weeks of paid family and medical leave for every US worker
- Free community college
- Billionaire’s tax a tax on unrealized gains of billionaires, targeted just 700 of America’s richest citizens
A Few Earnings From This Week
Earnings Beat $3.22 vs $3.18. est
Facebooks shorter-term goal is to expand its Reels feature citing Tik Tok as the most effective competitor its ever faced. With this, refocus its platforms towards the 18–29 year old demographic instead of its current wider scope. Longer-term Facebook plans to spend at least $10 billion/year on metaverse development sacrificing some of its operating profit. This will open up additional ways for them to drive commerce within their apps.
*Later, CEO Mark Zuckerberg revealed that the company will change its name to Meta Platforms Inc.
Alphabet
Earnings Beat $27.99 vs $23.24 est
Alphabet’s long-term goal of being an AI first company a clear undertone of everything they are doing. Search (Google) still the main driver of revenue (ad revenue up 43% YoY to $53.13 B) plans to improve Google Lens to allow people to search via images, bring a more visual approach to shopping on Search, and eco-friendly routing in Google Maps. YouTube, the second biggest search engine in the world, reported ad revenue of $7.2 B.
Microsoft
Earnings Beat $2.27 vs $2.08 est
“Work from home” and “back to work” movements made Microsoft’s growth look like a startup, not an established $2 Trillion company. MSFT Blew away revenue expectations with 22% revenue growth. Cloud grew by 36% YoY revenue surpassing $20 B. Confirmed hires on Linkedin increased 160% YoY
“Digital technology is a deflationary force in an inflationary economy” Satya Nadella (MSFT CEO) Tuesday’s earnings call
Amazon
Earnings Miss $6.12 vs $8.92 est
Labor shortages, higher employee costs, global supply chain constraints, and increased shipping costs ate in BIG to Amazon’s earnings. Plans are to hire 275,000 seasonal and permanent workers offering $3,000 sign-on bonuses –in total labor inflation will cost Amazon $4 billion.
Revenue growth slowed significantly to 15% vs 37% as people shopped at physical stores. Revenue from Amazon services topped revenue from retail sales for the first time ever.
Apple
Earnings In Line $1.24 vs $1.24 est
“Larger than expected supply constraints” -Tim Cook (AAPL CEO). iPhones sales were up 47% YoY but below estimates, this is the biggest revenue-driving category for Apple. Tim Cook went on to say manufacturing disruptions have improved greatly but that chip shortages are lingering around.
Want this in your inbox? Get it for free
Originally published at https://speckandcompany.com on October 29, 2021.
