Monday Sep.23, 2019

Vaping has fallen — and 1 stock fell with it

"_Glad we didn't launch that e-cigar startup_"

Hey Snackers,

The 209th Oktoberfest just kicked off (it's really more of a September thing). FYI, here are some rules worth knowing.

The market's 3-week winning streak is over — now everyone's hydrating before Peloton's spin-tastic IPO on Thursday.

Smoked

Walmart bans e-cigarettes, unofficially marking them mainstream "canceled"

Aisle 6 is going cold turkey... Walmart officially shut down e-cigarette sales just before the weekend as 8 people have died in connection with using them. The situation for vaping pioneers like Juul has gone from bad to badder to worst since the FDA declared teen vaping an "epidemic" in 2018 — Here's how things accelerated in just the last 3 months:

June 25th: San Francisco bans e-cigarettes, saying they get teens hooked to nicotine.
September 4th: Michigan becomes the 1st state to ban flavored e-cigarettes because the sound more like Starbursts.
September 11th: President Trump says he plans to ban flavored e-cigs.
September 18th: China removes Juul vaping products from online stores just days after they launched across the Great Wall.
September 19th: India kicks China's moves up a notch and bans all e-cigs.
September 20th: Walmart makes its moves.

When a unicorn falls, the rider goes down with it... Juul charged vaporized tobacco into the mainstream with its iPod-looking devices, reaching a $38B private valuation late last year. But publicly traded Altria is the old school Marlboro-owning cigarette-maker that splurged $12.5B for 35% of Juul's private shares. We don't know exactly what's happened to Juul's stock (since it's private), but Altria's is down 35% since vape-lash began.

Mission statements can be completely wrong... "Improve the lives of the world's one billion adult smokers by eliminating cigarettes." That's Juul's mission statement (they write it in all-caps), which could be completely wrong in 2 big ways:

Underage kids are Juuling, too (1 in 5 US high schoolers vape).
It's not totally clear vaping is healthier than smoking.

Highs

Who's up...

Because dating wasn't already stressful... Tinder-owner Match wants to make it apocalyptic. To give you a reason to ditch Bumble and to boost engagement from people already swiping-right, Tinder launched "Swipe Night": a make-your-own-adventure interactive show. The 4-episode mini-series starts 10/6 within the Tinder app, and each episode expires after 6 hours. Your decisions determine your love destiny.

Zuck's coming over... Facebook unleashed a $149 Portal TV — a streaming device that doesn't include the Netflix app. Portal TV is all about a camera that tracks your movements for "Watch Together": Enjoy streaming that Facebook Watch show while your remote friends watch simultaneously on your screen. Privacy? A little dongle you slide to block the camera.

When you need emergency Nyquil ASAP... Google hears ya. So its drone company, Wing, just partnered up with Walgreens and a couple other brands for a 1st-of-its-kind delivery option. The team will start drone delivering pills, prescriptions, and whatever's on the shelf in Virginia starting next month. Over 75% of Americans live within 5 miles of a Walgreens, and the Department of Transportation has green-lighted this pilot.

Lows

...and who's down

Worst day in a decade... FedEx plummeted 13% one day last week after cutting its profit expectations for next year. But FedEx isn't just FedEx. Watching its global shipping network gives helpful insights on how the world's economy is doing (it's a "leading indicator"). That single earnings report was enough to worry investors.

The huge cardboard box... within a box within another bubble-wrapped box? Not sustainable. Since Amazon delivers 10B packages per year, CEO Jeff Bezos pledged to be 100% renewable by 2030 and carbon neutral by 2040 — a decade before Paris Climate Accord targets. Employees still walked out Friday to pressure Amazon to reduce its absurd carbon footprint. To start, it ordered 100K Rivian electric delivery vans (Amazon's a Rivian investor).

What else we’re Snackin’

Work: 6 emails you should send every week (like the "Appreciation Email")
Life: 10 private islands you can rent on Airbnb
Money: You know the Dow and S&P 500 stock indexes — get to know the Russell 2000
Venture: International private flights with weed. Tequila shot mass firings. A Run-DMC concert. The WSJ's inside scoop on WeWork's co-founder (who some board members want replaced right now to save the IPO)
Crypto: Now Wells Fargo is launching its own cryptocurrency (it's for the bank's internal transactions)

This Week

Monday: Our 1st look at iPhone 11 per-sales (purchases began last week)
Tuesday: Earnings from Nike, Blackberry, and Nio. The 74th UN General Assembly begins in New York
Wednesday: Earnings from KB Home, AAR Corp, and Pier 1 Imports
Thursday: Peloton's IPO @ Nasdaq. Earnings from Rite Aid, Factset, and Micron
Friday: Consumer Sentiment Report

Disclosure: Authors of this Snacks own shares of Amazon

Submission ID: 959781

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Pop Quiz!

What’s the world’s busiest airport?

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Rani Molla

Netflix is going to stop sharing subscriber numbers

After posting subscriber numbers that beat expectations today, Netflix says it’s no longer going to share those numbers starting in the first quarter of 2025. That’s a big deal since subscriber numbers have long been one of the main metrics that investors have looked at.

“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.

Another way to read this? They’ve hit market saturation and just aren’t going to be growing that much anymore, and they thought they’d end on a good note. Going forward they’re focusing on how to get more money out of the customers they do have.

They’re doing so by cracking down on password sharing and charging for extra members. They’re also pushing people to ad tiers, which are more profitable than non-ad tiers.

“Scaling ads to become a more meaningful contributor to our business in ‘25 and beyond,” Netflix said.

Netflix’s ads membership grew another 65% in Q1 over the previous one, after rising 70% the quarter before, and 40% of signups in ad markets continue to be for those ad plans.

Frozen Dead Guys

The audacious and expensive world of cryogenics

Jamie Wilde

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Meta’s not telling where it got its AI training data

Today Meta unleashed its ChatGPT competitor, Meta AI, across its apps and as a standalone. The company boasts that it is running on its latest, greatest AI model, Llama 3, which was trained on “data of the highest quality”! A dataset seven times larger than Llama2! And includes 4 times more code!

What is that training data? There the company is less loquacious.

Meta said the 15 trillion tokens on which its trained came from “publicly available sources.” Which sources? Meta told The Verge’s Alex Heath that it didn’t include Meta user data, but didn’t give much more in the way of specifics.

It did mention that it includes AI-generated data, or synthetic data: “we used Llama 2 to generate the training data for the text-quality classifiers that are powering Llama 3.” There are plenty of known issues with synthetic or AI-created data, foremost of which is that it can exacerbate existing issues with AI, because it’s liable to spit out a more concentrated version of any garbage it is ingesting.

AI companies are turning to such data because there’s not enough good, public data on the entire internet to train their increasingly greedy AI models. (Meta had reportedly floated buying a publisher like Simon & Schuster to satisfy its insatiable data needs.)

Meta, of course, isn’t the only company that’s tight-lipped about where its AI data is coming from. In a now infamous interview with WSJ’s Johanna Stern, OpenAI’s chief technology officer Mira Murati was unable to answer questions about what Sora, OpenAI’s video generating app, was trained on. YouTube? Facebook? Instagram — she said she wasn’t sure.

Meta’s battle with ChatGPT begins now

What is that training data? There the company is less loquacious.

Matt Phillips

Today’s earnings: Who’s making money edition

Here are some some notable numbers out this morning, as earnings season gathers steam. Thursday’s main event will be Netflix after the close of trading. (Keep an eye on its advertising business.) But until then...

Parts distributor Genuine Parts beat, offsetting weak sales with cost control.
Credit card company Discover jumps, as delinquencies stabilize.
Builder D.R. Horton benefitted from the fact that there’s still no houses to buy.
Credit score giant Equifax was hurt by the fact that nobody wants mortgages.
KeyCorp, Comerica latest banks bummed by depositors demanding higher rates .
Insurance Marsh & McLennan did well by investing cash at high short-term rates.
Private equity giant Blackstone’s results were meh, due, in part, to lack of exits.

7.13%

The 30-year fixed rate mortgage is back above 7%, according to weekly numbers from the Mortgage Bankers Association, the highest level in four months. High borrowing costs are creating havoc for would-be buyers, as affordability lingers at the low levels not seen consistently since the late 1980s.

Rani Molla

10h

Amazon’s spy ops on rivals: shell companies, printed docs, and a fake Japanese streetwear brand

Some companies check out rivals’ websites, stores and public filings to stay abreast of the competition. Amazon made its own fake shell company and brands, transacted hundreds of thousands of dollars per year undercover on competitors’ platforms, and kept its intel operation a secret for nearly a decade even from others at Amazon, according to a fascinating investigation by the Wall Street Journal.

Working as a seller called Big River, a secret group of Amazon employees gained access to rival platforms, including Walmart, FedEx, and Alibaba. They used Big River email addresses and went to seller conferences as Big River employees. They even stayed hidden within Amazon itself. These employees would take screenshots of competitors’ systems that they would then show others at Amazon in person to avoid an email paper trail.

Perhaps most strange of all, the company created a fake Japanese streetwear brand called “Not So Ape” (clearly a play on A Bathing Ape) and continues to sell products from the brand on a Shopify store, presumably as an attempt to learn the inner workings of the shopping platform. Of course, copying is old hat for Amazon.

In meetings where they’d use this clandestine information to inform Amazon’s own business practices, the group resorted to literal paper. “[T]he team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies."

Exclusive | Inside Amazon’s Secret Operation to Gather Intel on Rivals

April 18th

12h

What’s happening

14h

Tesla pushes for a massive Musk pay package as the EV maker rides the struggle sedan

Jamie Wilde

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Big Banks Earnings Wrap: Investment banking rebounds, but interest rates are a double-edged sword

Nia Warfield

Read

Time’s ticking

4/17/24

Big tech vs. big government

Jack Raines

More taxes, eh?

4/17/24

Capital gains taxes won’t fix Canada’s terrible housing market

Canada's proposed solution to its housing crisis may exacerbate the problem instead.

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Jack Morse

4/17/24

Worldcoin pivots to the blockchain… with a 'humans only' discount

Worldcoin, the “proof of personhood” crypto project launched by OpenAI’s Sam Altman, said it plans to launch its own ethereum layer-2 (L2) blockchain dubbed World Chain. The pitch: a blockchain where it’s both easier and cheaper for people to transact than bots.

Worldcoin has made waves for its iris-scanning metallic orb that promises a future where people can mathematically prove they’re real humans and not AI bots.

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses.

Which is what may make World Chain attractive. Crypto exchange Coinbase launched its own L2, Base, last year. Base has since seen rapid user growth — activity that’s generated the exchange millions of dollars in weekly fees.

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.

Worldcoin, Sam Altman's Crypto Project, Is Building a Layer-2 Chain

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses.

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.

Rani Molla

Ad-ing up

4/17/24

Turns out Netflix makes more money if it just acts like regular TV

Streaming companies will let you watch ad-free, but it will cost you.

Earnings

4/17/24

Companies report things

Nia Warfield

4/17/24

Smooth sailing? Not for superyachts

Sales of the luxury boats sank 17% last year. Meanwhile, Super-SUPER yachts (over 650 feet long) took the biggest sales dip, falling around 40%. Part of the problem: a pandemic-era backlog has led to a three- to four-year waitlist for new yacht orders. Meanwhile Russian oligarchs — former MVP customers — are largely out of the boat-buying business due to sanctions.