Monday Jul.29, 2019

The new "Wireless Big 3" (+1 Ringo Starr)

_Wall Street's excited for the big wireless merger. Consumers are tbd._
_Wall Street's excited for the big wireless merger. Consumers are tbd._

Hey Snackers,

Alligators.

Livongo's President told us her healthcare industry is full of 'em. We interviewed her for today's 15-min Snacks Daily podcast and watched the biotech disruptor's IPO live from Nasdaq (listen on Apple, Spotify, or Google).

Wall Street wrapped up an epic week of earnings with fresh record-high stock prices. Now investors are focused on Apple's earnings Tuesday and Friday's big July jobs report.

Highs

Who's up...

New metric, who dis?... Twitter has moved to a new metric it thinks will better reflect its worth as a company. Instead of just counting the number of Twitter users, the focus is on monetizable users. If you've logged into Twitter and seen an ad, then congrats — you're a monetized user. More of those helped drive ad revenue 21% higher last quarter and Twitter shares jumped 9%.

That 4pm oat milk latte ritual... Starbucks is thoroughly enjoying it. Shares surged on word that sales at each Starbucks rose 7% on average from last year — and driving that was afternoon visits, which grew for the 1st time in 3 years. "Coffee happy hours" are now a thing.

"That'll be extra for guac"... (we know). Rising avocado prices pushed up Chipotle's costs last quarter (Mexican and Californian farmers can't keep up with American avo-hunger). But shares of the fast-casual restaurant pioneer still hit a record high. Chipotle's greatest enemy is long lines, so it's been adding drive-through windows affectionately called "Chipotlanes." Plus its app and loyalty program have nearly doubled online orders.

Lows

...and who's down

The streak is over... Amazon's 4-straight quarters of its best profits ever is officially done. Blame it on the shipping arms race — Prime delivery was upped from 2-day to 1-day delivery, jacking Amazon's shipping costs north by 36%. Expect similarly huge postage stamp bills from Target and Walmart when they report earnings in the new world of "we-demand-one-day-shipping."

Delayed — ETA TBD... Southwest had to cancel 20K flights last quarter, mostly because of Boeing's flawed 737 Max jets. Turns out Southwest was the biggest 737 Max customer with 34 in its fleet, 41 arriving this year, and hundreds more already ordered. The pain is causing it to cut all its air service out of Newark airport.

Model 3 is eating Model S... Technically, Tesla set a record for cars sold over the last three months (95K). But shares plummeted 12% for their worst day of the year after we learned that "cannibalization" is eating profits. Tesla's lower cost (and arguably sleeker) Model 3 is snagging sales away from the classic Model S and Model X, which are pricier (and profitable-ier for Tesla).

The wireless "Big 3+1" — T-Mobile & Sprint stocks spike on merger approval

It's been 15 months of lobbying... since T-Mobile and Sprint announced plans to merge. Last week the wireless companies got what they wanted: the Justice Dep't blessed the merger. The final hurdle is 13 states + DC that are suing, but magenta-loving CEO John Legere is moving forward like it's a done deal — he says rural America will get more bars and it's a win for American 5G. Here's the new "Big 3+1" in wireless:

  1. AT&T = 100M customers
  2. Verizon = 100M customers
  3. T-Mobile = 90M customers (the "Sprint" name will be retired)
  4. Dish Network (including BOOST) — If the wireless industry is The Beatles, then Dish is its Ringo Starr.

This marriage comes with 1 big condition... There must be a 4th wireless company. T-Mobile was forced to sell Boost Mobile to Dish Networks because regulators worried it would be too big after acquiring Sprint. So the new #4 is mostly low-cost prepaid plans. Here are some other mega-mergers that featured competition-salvaging conditions:

  • Big Beer: When AB InBev merged with SAB Miller for $104B, they had to sell Miller and Coors beer brands.
  • Big Entertainment: When Disney acquired Fox, Fox Sports and YES Network had to go.

3 companies will now handle 95% of American phone plans... T-Mobile used to be that pesky 4th that undercut Verizon and AT&T prices (it was great for consumers). Now with just 3 players, it's much easier for each to focus on profits by raising prices, and not worry as much about competition. The new reality: 3 is a big difference from 4.

What else we’re Snackin’

  • Work: 20 answers to 20 job interview questions at 20 top companies
  • Life: 8 questions to ask that person other than "what do you do?"
  • Money: FX. Forex. Foreign exchange. Breaking down how trading foreign currencies works
  • Venture: 21 charts highlight 13 trends shaping venture capital right now
  • Do: Check out Shake Shack's headquarters

This Week

Disclosure: Authors of this Snacks own shares of Amazon, Tesla, and Beyond Meat.

20190728-912055-2747866

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