Tuesday Nov.05, 2019

Uber loses $543,478 every hour

_Uber figuring out how to make money before its 2021 graduation_
_Uber figuring out how to make money before its 2021 graduation_

Hey Snackers,

New game: Match Facebook's new quasi-rainbow logo colors to the apps that it owns. Go.

Markets climbed to fresh record highs on a heavy Monday serving of earnings. The top 2 were ugly (more on that below).

Worn

Under Armour plummets after an accounting investigation (sneakers are the real issue)

Protect this house... from a federal investigation. While Under Armour was busy wicking sweat, the WSJ discovered that SEC investigators are questioning people at its Baltimore office about its accounting practices. The question is whether UA shifted around numbers to strategically make sales appear stronger than they really are.

  • 2.5: That's how many years the investigation has been going on, according to the report.
  • 0: That's how much info Under Armour has told the public about this ongoing investigation. If execs don't think it's material to the stock, they don't have to disclose it. So they didn't.

Coach always said "Talk is cheap"... Except when it reveals fundamental issues about your business. Take these 2 soundbites from Under Armour's earnings call:

  • “So now we’re focused on 2020 and beyond.”
  • “The next chapter” was mentioned multiple times.
  • If you had a 3rd quarter like Under Armour's, you'd want investors looking to the future too.

Under Armour stock plummeted 18% because its core biz is the real issue... While your wardrobe trended athleisure, Under Armour doubled-down on more "ath," less "leisure." CEO/founder Kevin Plank just gave up his role to become the brand chief, dedicated to make Under Armour even "louder." Now we're seeing how that injures UA:

  • Its home market: Sales in North America fell 4%. That was offset by 5% growth internationally, but sales for the entire company shrank over the past year by 1%.
  • The core product of sports apparel: Sneaker sales dropped 12% – and if you can’t do sneakers, can you really take on Nike?
Losses

Uber stock sinks 6% because it's on pace to lose $8B this year

Losing $543K per hour... Think about that. One time you lost nana's birthday check and you were inconsolable. Uber just told investors everything about its 3rd quarter, but it's hard to not focus on the $1.2B it lost. After losing $5B the previous quarter (that was higher because of one-time IPO costs), Uber's on pace to lose $8B this year. $8 billion.

It's Uber vs. Everybody... Investors piled into Uber for years with the hope it would become like Amazon — an unstoppable giant — but for transportation. In reality though it has enemies. Everywhere:

  • Competition: Lyft rose from the ashes of Uber’s scandals. Delivery apps are all over your phone. And self-driving car companies could unleash self-driver not-Uber fleets before Uber.
  • Politicians: California's new law could make Uber even more unprofitable by forcing it to pay drivers actual wages and benefits.
  • Restaurants: Yup, spots like Bareburger get 20% of their sales from delivery apps — but they're fed up with paying away 15% of those sales as fees to Uber Eats and its delivery rivals. The CEO calls the apps "a necessary evil" that he hopes to be rid of by next year.

Uber prefers you look at its sales growth instead... If you do, you're impressed by rides (revenues up 20%), Eats food delivery (+71%), and Freight (+81%!). Here's the problem: Uber's paying for all that growth. Competition forces it to dish out discounts and promo codes Oprah-style. So it's pledged to change things... in 2 years:

  • 2021: That's the magical year when Uber CEO Dara Khosrowshahi says it'll become profitable. Funny — that's also when Lyft said it will stop destroying money and start making it, too.

What else we’re Snackin’

  • Neighbors: Apple will drop $2.5B on housing initiatives to make its Bay Area home more affordable (Facebook and Google made similar but smaller pledges earlier this year)
  • Tap-back: SoulCycle launches "Retreats" to compete with Peloton — destination spinning you've got to travel for in order to "reconnect with the natural environment"
  • Named: Microsoft is launching a new web browser and search on January 15th and the name has Google-ish vibes: "Chromium Edge"
  • Control-Z: Twilio has to re-issue its earnings report because it got the math wrong
  • Pumped: Saudi Aramco will now IPO in Saudi Arabia, targeting a record $2T (trillion with a "T") valuation, which would officially make it the world's most valubale company
  • Carbs: Papa John's is whipping up a new garlic Parmesan-flavored crust, its first new crust in almost 40 years

Tuesday

Disclosure: Authors of this Snacks own shares of Amazon

ID: 1002945

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In its third and fourth quarter earnings report, Tesla said that its current Cybertruck production capacity was greater than 125,000 a year. Musk had previously said he expected to produce 250,000 Cybertrucks a year by 2025.

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Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

The recall is over an issue with the gas pedal pad that, the National Highway Traffic Safety Administration says when pressed, “may dislodge, which may cause the pedal to become trapped in the interior trim above the pedal.” The cause of the issue: “unapproved” soap that the manufacturer used to aid in getting the pad on the pedal.

A Cybertruck customer this week posted a TikTok about a terrifying incident in which this happened and “held the accelerator down 100%” in his 6,000+ pound vehicle. Thanks to some quick thinking where he held down the brake and put it in park, he wasn’t injured.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

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“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” its shareholders letter read. “But now we’re generating very substantial profit and free cash flow.” The company said that it will focus on revenue and operating margin as its main financial metrics, while it will look at time spent on the platform to gauge customer satisfaction.

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