Thursday Apr.15, 2021

🏦 Big banks, big comeback

_"The last Louis Vuitton shopper in Milan" (Alyson Aliano/Stone via Getty Images)_

Hey Snackers,

Facebook is testing a standalone dating app called Sparked, for "video speed dating with kind people" — what could go wrong?

Stocks cooled down from their record highs yesterday. Meanwhile, Coinbase notched an $86B market cap after its first day of trading. ICYMI: check out our newsletter and pod on Coinbase's big numbers.

Reserve

Chase and Goldman Sachs score record quarters, thanks to the IPO-palooza

Chase Sapphire Reserve... minus the reserves. Banks kicked off earnings season with jaw-dropping earnings. JPMorgan Chase and Goldman Sachs reported first — Citi, BoA, and Morgan Stanley are up next. A year ago, banks added billions in rainy day funds to their reserves. 17M Americans were newly unemployed, so banks set aside $$$ to prep for loan losses. Think: defaults on mortgages and biz loans. But economic healing happened faster than banks expected — and big loan losses never materialized. In fact...

Chase had a record quarter. Profit ~5X'd from 2020, coming in at a record $14.3B. JPM released $5.2B in loss reserves (which turned into profit).
Goldman had a record quarter. Revenue more than doubled from 2020 to $17.7B... and profit hit an all-time high, too.

Bankers dropping bangers... Your quarterly reminder that Goldman's CEO is an EDM DJ. The IPO boom also helped banks, big time. JPM's investment banking revenue more than tripled, while Goldman's i-banking revenue soared 73%. Corporate and investment banking made up nearly half of JPM's revenue last quarter, and most of Goldman's.

Banks are selling shovels.. to the Wall Street gold rush. In the first quarter of the year, IPO companies raised a record $162B (compared to $37B in the first quarter of 2020). And SPACs have already raised more in 2021 than they did in all of 2020. Banks are the ones making IPOs and SPAC mergers happen — and they're getting paid big bucks for underwriting and advising. Banks with big Wall Street arms (like Goldman and JPM) are cashing in the most.

Luxey

Louis Vuitton-owner LVMH makes a comeback (now it's Europe's most valuable company)

Très cool... When your name is so luxurious, it's a mouthful to say: Louis Vuitton Moët Hennessy (aka: LVMH) owns 75 luxe brands, including Dior, Bulgari, and Dom Pérignon. Yesterday, LVMH posted quarterly earnings that were a major glow-up from 2020. And its shares soared to a record.

~$17B: Sales jumped 30% from last year, thanks to strong demand from China and the US, where LVMH has been opening more stores.
~$360B: LVMH's market cap makes it Europe’s most valuable company, beating out oil giants and banks. It's even worth more than Nestlé (Earth's largest food company).

Still in vogue... When the pandemic hit, big-spending Chinese and American tourists disappeared from Europe's shopping streets — problematic, since a quarter of LVMH's sales come from Europe. While Europe locked down again this year, LVMH proved it could thrive anyway: sales from Asia nearly doubled, while US sales popped 23%.

LVMH created a mass market for luxury by offering a spectrum of brands with broad pricing, for a broad customer base – not just the mega-rich.
LVMH’s edge = appealing to the aspirational rich. You can get a Marc Jacobs tote for $185... or a Louis Vuitton purse for $4K. A $35 bottle of Hennessy, or a $200 bottle of Dom — it's all in the LVMH fam.

The "double lookback" is key... Earnings are compared to the year-ago period. We're now in a period where earnings are being compared to 2020 (read: pandemic results). Unless a company was a corona-conomy thriver, its earnings likely look much better in 2021 than in 2020. LVMH sales soared from the quarter that ended around April 2020 — that's not saying much. But when we do a "double lookback" to 2019, we see that LVMH's sales were 8% higher than they were in pre-pandemic times. LVMH passed the "double lookback" test last quarter, proving the strength of its brands.

What else we’re Snackin’

Madoff: Bernie Madoff, the mastermind behind America's largest investment fraud, died at age 82 while serving a 150-year prison sentence.
Vax: A CDC panel held an emergency meeting on how to proceed with J&J's vaccine, after six women experienced a rare blood clot issue.
Hired: Gary Gensler was confirmed to lead the SEC (aka: Wall Street's top regulator). He's expected to take an active stance on Wall Street regulation.
Aerie: American Eagle's quarterly sales are on pace to top $1B thanks to jeans and dressier shirts — but leggings sales are still going strong.
Clawed: White Claw is rolling out a (harder) hard seltzer called "Surge," with 8% alcohol by volume.
Glowing: Beautycounter hit unicorn status — the "clean" makeup and skincare company reached a $1B+ valuation after a fresh investment.

Thursday

Weekly jobless claims
Earnings expected from Delta, Citi, Bank of America, BlackRock, Pepsi, and United Health

Authors of this Snacks own shares of: JPM Chase

ID: 1605445

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Tangential remarks

Nicolai Tangen, the CEO who holds the purse strings of Norway’s $1.6 trillion sovereign wealth fund, thinks that his fellow Europeans don’t quite stack up to US employees when it comes to pure hustle, telling the Financial Times in a recent interview that there is a difference in “the general level of ambition” and that “the Americans just work harder”.

Tangen has clearly been putting his money — or more specifically Norway’s — where his mouth is: the sprawling Norwegian oil fund, now one of the largest investors on the planet, has been pumping more capital into its US holdings in the past decade, while decreasing its investment into European entities.

The troublesome news for our European readers? Tangen might be onto something. According to data from the OECD, American workers are putting in almost 60 hours a year more than the weighted average for OECD nations… a benchmark that workers from countries in the European Union are already ~180 hours shy of.

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Sales of what are up 136% since 2019?

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$70B

Alphabet shares are soaring in the after-market session, with a initial jump of more than 10% implying a gain of upwards of about $200B in market value when the stock opens tomorrow morning.

Google’s parent company crushed earnings expectations, initiated a cash dividend for the first time, and authorized a fresh $70B in share repurchases for good measure. The market likes it very much.

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No, Apple hasn’t cut its Vision Pro production estimates in half

Quite a few news outlets are reporting that Apple thinks it’s only going to sell 400,000 to 450,000 Vision Pros in 2024, compared a “market consensus” of 700,000 to 800,000. They’re all citing a note from Apple analyst Ming-Chi Kuo.

Obviously there’s no question that Apple’s $3,500 face computer will have a limited audience and could be a huge flop, but this also doesn’t seem like accurate news.

The issue is that 1) this 400,000 number isn’t new. Back in July of 2023, the Financial Times reported that Apple planned to make fewer than 400,000 units in 2024, reducing its initial projections of 1M units, citing two people close to Apple and, the Chinese contract manufacturer assembling the device. 2) It's unclear who was estimating 700,000-800,000 Vision Pros in the first place, but it appears that it was Ming-Chi Kuo himself?