🏦 Big banks, big comeback

Thursday, April 15, 2021 by Robinhood Snacks | Disclosures
_"The last Louis Vuitton shopper in Milan"         (Alyson Aliano/Stone via Getty Images)_

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

Yesterday’s Market Moves
Dow Jones
33,731 (+0.16%)
S&P 500
4,125 (-0.41%)
Nasdaq
13,858 (-0.99%)
Bitcoin
$63,330 (-0.64%)

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

1. 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.

THE TAKEAWAY

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

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 TAKEAWAY

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.

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Snack Fact of the Day

There are only eight "centibillionaires" in the world (people worth $100B+)

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