Tuesday Oct.01, 2019

Amazon's cashier-less tech arriving at Terminal 2, Gate B7

_Practicing contact-less transactions at Amazon Go stores_

Hey Snackers,

California wants NCAA athletes to start getting paid post-practice, pre-class, for endorsement deals (think Peyton Manning in Papa John's commercials, but sophomore year).

Investors were busy celebrating the market's best first-3-quarters-to-start-a-year since 1997 as September wrapped itself up.

Happy 4th quarter.

Downgrade

Alphabet's self-driving car company loses 40% of its value (but is still worth over $100B)

50% lower price than Uber, 100% less driver... That's the service Waymo wants to offer in the next few years. The self-driving car unit of Alphabet leads the race to offer up futuristic, no small talk, tip-unnecessary transport of the future. But Morgan Stanley just downgraded what the bank thinks Waymo is worth: From $175B to $105B.

Discounted cash flow modeling... Young bankers learn to wield the valuation method like it's the Patronas charm. Morgan Stanley tossed Waymo's numbers into some spreadsheets to determine how much profit Alphabet will make the next couple decades. They decided Waymo's self-driving dreams could experience less revenue and more costs than previously thought for 2 reasons:

It's taking too long. Waymo missed targets to roll out a commercial robo-taxi service, currently still testing them out in Arizona (Waymo sticks its software into Chrysler minivans).
Humans are expensive. Waymo will have a backup human safety driver behind the wheel for a while before it's safe enough for those minivans to cruise sans-driver.

Don't ever forget this: Google is an ad company... but it's moving to diversify. Google actually made 87% of its revenue last quarter by infiltrating your Google search, Youtube, Google Maps, and Gmail with online ads. Saving the world wasn't a revenue source. But it's got a breed of young businesses it hopes can become healthy profit puppies someday:

Transport "Other Bets" (that's what Alphabet calls them): Waymo for humans and Wing to drone-deliver packages.
Other "Other Bets": Google Fiber (internet/phone service) and Verily (health data).

Retail

Amazon's targeting airports, baseball stadiums, and movie theaters with cashier-less "Go" tech

1 bucket of popcorn, 1 large DP, and don't miss the previews... CNBC reported that Amazon is in talks with airport convenience stores (CIBO Markets), movie theaters (Regal Theaters), and stadiums to license its Amazon Go cashier-less tech. Scan your phone when you enter, take what you want, leave — your Prime account gets charged, you don't miss the touchdown.

Amazon is the master of customer adoption... This tech is freaky (we've tried it). Cameras and sensors are all up in your space (and humans aren't). But Amazon's rolling this out to customers thoughtfully and gradually, first to those most-likely to adopt:

Early adopters: Amazon's got 16 of its own "Go" stores, visited by city-dwellers eager to brag to friends about the lack of lines.
People in a rush: If your flight already started boarding, you'll love not waiting 10 minutes in line for a pack of gum.
Mainstream: Amazon could add thousands of "No-Go" stores (that's what we're calling non-Amazon stores using Amazon Go tech), making friends out of would-be retail competitors. Amazon wants hundreds of these by 2020.

Software is way more profitable than physical stuff... Amazon's ecommerce operation ships a massive 10B products per year. But its way-smaller Amazon Web Services is the profit puppy, making over 50% of company profits through cloud services. Two tech companies in today's Snacks are following similar strategies:

Driver brains: Waymo is selling its self-driving software to carmakers (but not actually making cars itself).
Cashier brains: Amazon could sell human-less cashier and payment software to retailers (but not actually making stores itself).

Camp'd

RV legend Thor Industries surges 16% on international camping

Bold name... Thor Industries is more camping than glamping as the biggest RV-maker on Earth. It boasts a team of recreational vehicle brands that sound like desperate Eagle Scout nicknames: Bison, Jayco, Buccaneer, Keystone. Leading the fleet is Insta-worthy throwback Airstream. But here's the name that drove its overall sales up 23% last quarter: Erwin Hymer.

Thor splurged $2B on the German RV brand earlier this year.
Now Hymer's helped Thor push RV'ing across the pond deeper into Europe.

Camping is the new ironic Millennial thing... We're teased for juice cleanses, but our generation powered RV sales to record highs in 2017 getting heavy traffic to National Parks. That snagged entrepreneur attention: Outdoorsy ("Airbnb for your RV") and Hipcamp (private campsite booking site) solved camp problems totally unrelated to toilet paper. But in 2017, US RV sales peaked and Thor stock is down 65% ever since.

When US sales slow, look to emerging markets... That's what soda companies did, candy companies have done, and Thor is now doing. Thor's new German RV-maker, Hymer, happens to have a joint venture with a Chinese RV company and pursues Southeast Asia. Now Thor can reach millions of middle class Chinese who are down-to-backpack as American ex-RVers return to their cities. Emerging markets = Emerging campers

What else we’re Snackin’

Out: Forever 21 files for bankruptcy — and it could signal the end of fast fashion (fyi, 2nd-hand fashion will be bigger within a decade)
Over: WeWork officially withdrew its IPO paperwork as it begins a period of financial mindfulness and reflection
Overheard: Spotify now lets you mix podcasts in with your music playlists
Snatched: Verizon is buying up all the cool tech from a virtual reality startup
See ya: BP's CEO is reportedly retiring really soon — he oversaw the $65B the British oil company shelled out for its Gulf of Mexico mess a decade ago

Tuesday

Earnings from Stitch Fix
The 70th anniversary of the founding of the People's Republic of China

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

Correction: In Friday's newsletter, we mentioned that Match Group was getting sued by the FTC for misleading ads from Tinder, which Match owns. The ads weren't from Tinder, they were from Match.com. The corrected article is here.

ID: 967880

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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?

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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.

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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).

Net net

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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.

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French luxury fashion conglomerate Kering has seen its shares fall ~10% in the last 24 hours after reporting that sales at its flagship brand Gucci had dropped 21% in its latest quarter.

Kering’s other brands, which include Yves Saint Laurent, Bottega Veneta, and Balenciaga, fared slightly better — but the only real bright spot was the company’s eyewear division, where sales rose 24% (9% on a comparable basis).

With Gucci responsible for roughly two-thirds of the company’s profit, the ongoing struggles of the brand are weighing heavily on the bottom line: the company expects recurring operating profit to drop 40-45% in the first six months of the year.

Gucci execs will be hoping that new designer Sabato de Sarno can turn the iconic brand’s fortunes around, particularly in China where demand has dropped precipitously. His designs only started hitting stores in February.