Monday Apr.01, 2019

It's Official: Best Quarter Since '09

"Lyft, you finally made it"
"Lyft, you finally made it"

Hey Snackers,

March Madness. Cherry blossoms. Marshmallow Peeps. IPO-palooza. All just kicked off.

And driven by Friday's Lyft-off, markets rose all last week — That makes 2019's 1st quarter the best one since '98.

Highs

Who's up...

The Uber for drivers... Now with 39% of the ride-hail market (doubled from 2016), Lyft jumped 9% on its first-day trading Friday, raising its valuation to $27B. The co-founders (FYI, they own 5% of the shares, but 49% of the voting rights) rang the bell from a former car dealership in LA — Not NYC's Nasdaq stock exchange. It's a vehicular metaphor for its un-Uber strategy: Happy drivers = Happy riders. That lot will become a "Driver Center" for car repairs and tax support.

Man-leisurewear... First, it made yoga pants brunch-ready. Now, it's conquering the work wardrobe. For guys. Lululemon revealed 2018 was one of its strongest years, yet. Then shares soared 14% last week on the CEO's goal for gender parity in its sales (starting with stretch-khakis).

5G drama... America's worried that China's government can spy through Huawei's smartphones. Suspicion hasn't stopped it though — The Chinese telecom's profits jumped 25% last year to nearly $9B. Countries that aren't the US just want their 5G network future to come fast and at a low-cost, and Huawei's answering their calls.

Sleep in a box... Physical goods startups don't usually earn invites to the unicorn ranch. But Casper Sleep just joined all the $1B-valued apps with its latest fundraise, and we learned its sales are growing 60% per year. It even thinks 2019 will be its 1st year of profitability (and it's interviewing investment bankers to run its future IPO).

Lows

...And who's down

Pump the house music... Spotify dipped before the weekend on analyst concerns about Mom and Dad's music taste — American families want family plans ($14.99/month), not a bunch of individual ones ($9.99). That trend simply sounds less profitable for the music streamer.

Chaise, you've been demoted to chair... Restoration Hardware (AKA "RH") fell 22% because December's tough stock market psychologically affected its high-end furniture buyers. The CEO is confident though that his lavish plan to aggressively renovate and upgrade their mansion-sized stores (its NYC "Gallery" cost $50M to build) will fix "retail's lost decade." We dived into his unique strategy on our pod.

A really, really big poke... Facebook banned white "nationalist" and white "separatist" content last week (it's already been removing white "supremacy" content from the world's walls). But then the US government sued it for allegedly discriminatory housing ads. Now Zuck's asking Congress to write "new rules for the internet" so the social network doesn't have to.

Bundle my bundles... Apple splashed into gaming, premium news, and TV subscriptions for its biggest non-iPhone unveil yet. But shares ended the week down since it was so light on the how-much-will-this-cost-us-a-month details.

Evolution

BlackBerry surges 13% on big pivot milestone

BBM is dead. Long live BlackBerry... The iPhone victim quit making its own smartphones in 2016. And on Friday, shares jumped after BlackBerry beat expectations with 9% quarterly sales growth. But it was words from the CEO that made the stock win: "We're done rebuilding. We're looking to invest."

The Batman of tech... Under new CEO John Chen, BlackBerry pivoted to become a "security company" — A watchful guardian for big business and government. It's designed cybersecurity services to stealthily protect your digital life:

  • Your connected car: Blackberry's QNX software is there so that the tech-y features of your car are safe, secure, and actually work.
  • Your money: It just dropped $1.4B for Cylance, a buzzword-packed, AI-powered, predictive analytics cybersecurity firm protecting financial institutions from hackers (ATMs = the front lines).
  • Your connected home appliances: Later this year, BlackBerry's unveiling Spark, its major move into the internet-of-things. Its software connects household-anything with your phone's app-everything.

Services are the new black... Selling electronic gadgets includes expensive manufacturing and fickle consumer tastes. The software business model can be less costly and more scalable, with recurring monthly money coming in. And Apple's pulling the same move — With iPhone sales down, it's nudging you to Apple Music/TV+/News+ (AKA, monthly subscriptions).

Rising

The best 3 months for stocks in a decade

Living its best life... The S&P 500, a wide-ranging index of publicly traded companies, jumped 13.1% over the last 3 months — Cue the Best Quarter Since '09 and Best 1st Quarter Since '98 trophies. The thing is, markets still haven't climbed out of the brutal hole from the end of last year.

  • Let's back up to the holidays: From October to December, the S&P 500 fell 20%. And it bottomed out on Christmas Eve on concerns of rising interest rates.
  • It's been all up since: From December 26th through this past Friday, the S&P 500 has risen 20.5% (and the tech-packed Nasdaq's up a shocking 25%).
  • Plus, fossil fuel's getting into it: Oil prices rose up 32% last quarter as the international oil-controlling cartel OPEC cut supply a tad, and sanctions hit Venezuela and Iran's production.

There are so many people I need to thank... Politics — including January's government shutdown, the US/China Trade War, and Brexit — isn't on the list. Neither is the US economy, which has been slowing down (America's 2018 GDP was just retouched downward). It was all markets:

  1. Profits: They're the underlying driver of stock values, and they were still growing faster than the economy last quarter (Q1 earnings season starts soon, so we'll see if that continues).
  2. The Fed: The central bank's December decision to raise interest rates bothered investors. But to encourage investors and businesses, the Fed hasn't changed them since. Markets applaud it.

It's perfect weather for an IPO... There are a bunch of companies eager to go public in 2019, especially now that investors are feeling good again. Lyft squeezed itself in on the last day of the quarter, and its Silicon Valley tech buddies are lined up ready to go too. We'll see how the dump of fresh stocks onto Wall Street affects the market as a whole.

What else we’re Snackin’

  • Work: 5 ways to get out of meetings you know will waste your time
  • Life: How to make pizza without an oven
  • Money: The simple calculator that does your taxes in 30 seconds
  • Venture: Drake invests in eSports betting startup The Players' Lounge
  • Crypto: A cryptocurrency gift card provider will now let you book Airbnbs with Bitcoin

This Week

  • Monday: February's Retail Sales Report
  • Tuesday: Earnings from Dave & Buster's
  • Wednesday: US/China trade talks head to DC
  • Thursday: Earnings from Corona-brewer Constellation Brands
  • Friday: March's big Jobs Report

Disclosure: The author of this Snacks owns Lululemon shares.

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Business

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?

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?

 Max Holloway and Mark Zuckerberg

Meta exhaustingly tries to merge the metaverse and AI

Gonna have to rename the company... again

Rani Molla4/25/24
Markets

Chipotle continues to go on a tear, hitting a sales record

Hey it might not be the kind of AI stock investors are all hot and bothered over, but don’t sleep on the burrito business.

Chipotle posted much better-than-expected results on Wednesday, with sales rising 14% to a record $2.70B in the first quarter, which is like a billion additions of guac.

Profits jumped 23% to $359M.

Chipotle has quietly cruised higher over the last year. It’s up 63%, compared to the 24.5% gain for the S&P 500 over the 12 months through Wednesday’s close. Not bad for a rice-and-beans based business model.

Tech
Rani Molla
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Facebook had great earnings, the market hates it

Facebook reported impressive earnings. Record first-quarter revenue thanks to AI! Profit up 117% compared to a year earlier! But at the same time, its capital expenditures are going up and it’s expecting second quarter revenue potentially lower than analyst estimates. So in other words, the future doesn’t look as bright as the present.

All in all the stock is down more than 10%. (Basically the opposite of what happened with Tesla yesterday).

Business
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Why Tesla investors are holding on to hope for a cheap car

Despite terrible earnings numbers last night — declining vehicle sales, disappointing revenue and profit, enormous spending — Tesla stock is up more than 10% as of midday. That’s a welcome move for the car company, that’s been among the worst performers this year in the S&P 500.

Why the about face?

While Reuters reported earlier this month that Tesla is no longer making its long-awaited $25,000 mass-market car — news sent the stock, already suffering from headwinds across the EV industry, down even further— Tesla reported during its earnings that it’s going to make cheaper cars than it currently has.

Before the second half of next year, Tesla said it will release “more affordable models” that “will utilize aspects of the next generation platform as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle line-up.”

So rather than release the $25,000 Model 2, Tesla is incorporating some of that technology into its existing models. UBS called it the Franken-3Y2.