🚢 Carnival sinks its own stock

Wednesday, September 16, 2020 by Robinhood Snacks | Disclosures

The one guy on Carnival's one (and only) cruise

Dow Jones
27,996 (+0.01%)
S&P 500
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Nasdaq
11,190 (+1.21%)
Bitcoin
$10,849 (+1.32%)
10-Yr US Treasury
0.676%

Hey Snackers,

The most cautionary headline of September: "Man blows up part of house while trying to swat fly." The man is okay. "It is unknown what happened to the fly."

Stocks inched up, helped by Big Tech gains. Investors were also hopeful that low interest rates will continue ahead of the Fed's policy announcement today.

Sink
1. Carnival is selling its own stock at the worst possible time (but it's desperate)

You know things are bad when... Business Insider comes out with an article titled: "You can buy a retired Carnival cruise ship and have it all to yourself." Since Carnival anchored a record $4.4B quarterly loss back in June, the tide hasn't turned much for the world's largest cruise company:

  • Carnival lost $2.9B last quarter and it literally only has 1 ship sailing right now (in Italy). Womp.
  • Yesterday, Carnival announced a $1B stock sale to raise money at the worst possible time. Carnival shares sank 11% on the news. Womp womp.

Endless shrimp cocktails never end well... Carnival's stock sale didn't either. But Carnival is desperate: it's losing $770M a month and only has $8B in cash left. US cruises aren't expected to resume until the end of October (ambitious) and virus fears are still high. Desperate times call for desperate cash-raising measures:

  • Selling at a low: Carnival stock is down ~70% this year, so it's selling stock at a major low point. Compare that to Tesla, which is capitalizing on record high stock prices by selling $5B worth of new shares.
  • Diluting: By issuing new shares, Carnival is diluting the value of its existing ones. Since more shares are being added, Carnival stockholders will own less of the overall company.
THE TAKEAWAY

Markets reacted rationally... They do that sometimes. Carnival is selling $1B worth of new stock, which represented ~7% of its market value before the announcement. The stock dropped 8% on Tuesday morning after the announcement — that's very close to the percentage Carnival got diluted by. In this case, investors' reaction made total sense.

Unveil

No crowd, no turtleneck... Apple unveiled a bunch of new hardware at its big product event yesterday. The TLDR: a new fancy iPad, a new basic iPad, and two new watches. On the software side, the iOS 14 iPhone update drops today (so we can finally understand App Clips and reply to iMessages in threads). But the announcement that really interested us might have Peloton sweating:

  • Apple Fitness+: A fitness subscription service for Apple Watch. The limit for the number of plus signs that can be added to subscription services unfortunately does not exist.
  • iPhone, iPad, or Apple TV: Where your Fitness+ workout will start. As you spin, dance, and stretch to your screen of choice, workouts sync with your watch for metrics tracking.
  • $9.99/month: How much you'll fork out for unlimited on-demand workouts, from HIIT to yoga to rowing. Each week, Apple will serve up fresh classes with new Apple trainers.

Club Apple is here... Yesterday, Apple also officially announced its "Apple One" services bundles — they'd been rumored since August. The $15/month tier bundles Apple: Music, TV+, Arcade, and iCloud storage. The $30/month tier has those, plus Apple News+ and Fitness+ (plus plus plus).

THE TAKEAWAY

Apple wants you more connected than ever... Including Fitness+ in the bundle could be key to that, since Apple TV+, News+ and Arcade aren't exactly hits. For customers, bundles cost less than subscribing to each service individually. For Apple, bundling helps score more subscribers and ensure that you're interacting with its products every waking hour. The goal is that you never leave the Apple ecosystem. Apple anchored you with iPhone and Apple Watch — now it's leveling up its lifestyle control with services.

What else we’re Snackin’
  • Stop: ViacomCBS plans to launch an expanded version of its "CBS All Access" streaming service. It'll rebrand as (wait for it)... Paramount+.
  • Fantasy: DraftKings stock hits a record high on news that its sportsbook and fantasy offerings will be linked on the ESPN website.
  • FancyZon: Amazon launches luxury stores on its app with Oscar de la Renta as the 1st partner, spelling more trouble for luxury retailers.
  • Ship: FedEx delivers expectation-crushing earnings — the pandemic shipping surge is expected to accelerate as PSL season approaches.
  • Chill: Cloud data platform Snowflake has bumped up its expected IPO price by 30% to $100-$110 per share.
  • Fast: H&M's stock soars 12% after it reported an expectation-beating COVID recovery and turned a profit.

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Snacks Daily Podcast

1) Buy home 2) Fix up home 3) Sell home (for more)

That's a day in the life of techy real estate start-up Opendoor. The house-flipping company is going public via SPAC merger at a $4.8B valuation.

Tune into our snackable 15-minute pod to hear about house-flipping and housing market crashes.

Wednesday

Disclosure: Authors of this Snacks own shares of Apple and Amazon

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