Hey Snackers,
You've got 3 days left in Shark Week — schedule here (we suggest the Return to Shark Island).
Stocks suffered their second-straight brutal drop on fresh macro news — The US/China trade war hit a freaky new level because talks in Shanghai went the wrong way (details below).
Switch hitters are rare... Square's winning a batting title with its consumer and small biz facing businesses, processing your latte purchase from the neighborhood spot. The digital payments icon announced revenues rose 44% to $1.2B (sounds pretty good). But Square spent so much on growth that it suffered a $7M loss. Here are its 3 areas of focus.
Who ordered the Caviar?... DoorDash. Square is selling Caviar to another food delivery app. Square CEO Jack Dorsey is busy building payments ecosystems (+side-hustling as Twitter's CEO) — no time to fight in food delivery wars. It's not a bad return though: Square bought Caviar in 2014 for $90M. Now it's selling to DoorDash for $410M of cash and shares.
This is a rare miss for Square... The stock had risen 40% so far in 2019, and had more than tripled in the past two years. Becoming the best money friend of businesses was already an accomplishment. Then its Cash App came out of nowhere, becoming the best friend of fantasy football league coordinators who need to track down league dues.
Arctic-functional... Fifth Avenue-fashionable. According to Canada Goose its jackets are packed with humanely-sourced goose down and lined with fur from coyotes in "overpopulated" areas (where the carnivores attack pets). So dropping $1,000 on a faux-rugged parka makes you feel ok. Canada Goose's website said so. But shares fell after the New York Post noticed that website changed.
This goes back to 2017... And it begins with the People for the Ethical Treatment of Animals:
There's market value in 'wokeness'... Definition: Being acutely aware of social injustices and acting accordingly. We're seeing corporations take stands on social issues, from Nike's Kaepernick campaign to Patagonia's climate change initiatives. But Canada Goose's un-wokeness cost shareholders a 5% drop — investors think customers judge values as much as they do style.
100% of Made In China is tarriff'd... Trade negotiators returned from chats in Shanghai this week, reporting to President Trump that China had broken too many promises — it's not buying more US crops, and it hasn't stopped selling the addictive pain reliever fentanyl. So the president started tweeting.
Tariffpalooza affects nearly everything... The S&P 500 (a helpfully broad measure of the whole stock market) dropped 2% after the announcement. Then oil prices plummeted 7% because this escalation could hit global trade. GE and Caterpillar both dipped 4% because they produce and sell there. Best Buy dropped 11% and The Gap dipped 8%.
You’re gonna notice it this time... For political reasons, the tariffs have so far targeted the kind of things that probably don't affect your life ("steel beams" part of your daily routine?). But to escalate the trade war further, Trump started taxing the toys (Barbie, Hot Wheels), clothing (check your label), and tech (likely what you're reading this on) that consumers (read: voters) buy.
FYI: Apple dropped 2% because AirPods, MacBooks, iPhones, and iAnything are China-made and will likely get more expensive because of this.
Disclosure: An author of this Snacks owns shares of Amazon.
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