Friday Oct.15, 2021

🚫 John Deere in the headlights

_Head in the cloud [skynesher/E+ via Getty Images]_

Hey Snackers,

New research shows flier satisfaction jumps 5% when overhead bins are bigger. Imagine the percentage jump if you didn’t have to sleep facedown on your tray table.

Stocks closed out the day with their biggest weekly gain in months, despite rising inflation concerns. The market-tracking S&P 500 rose nearly 2% for the week, following a streak of strong earnings reports.

Bacon

John Deere strike aims to lift wages — but workers really want more spending power

Looking for traction… 10K John Deere workers went on strike yesterday to protest the tractor giant’s latest wage contract, which they said offered too slim a pay increase. With prices rising like “Squid Game” views (#inflation), Deere employees aren’t the only ones demanding bigger paychecks and better benefits.

Frosty Flake: Workers at cereal maker Kellogg and Oreo maker Mondelez went on strike recently to demand better benefits, like vacation pay. Mondelez workers succeeded in getting a pay increase and a higher company match for 401(k) contributions.
Temp check: Nurses at Kaiser Permanente voted to strike this month to protest low wages and poor working conditions.
Action: Hollywood crews plan to strike Monday if they can’t secure better benefits, hours, and workplace treatment.

Strike while the labor market is hot… It’s hard out here for employers trying to hire. Job openings soared to record highs this summer, labor-force participation is stalled at pandemic levels, and 4.3M workers quit their jobs last month. Workers know they’re hot commodities, so they’re demanding higher wages, better benefits, and stronger workplace protections. They’ve already made some progress:

+4.6%: the hourly-pay increase for US workers last quarter from a year ago. Walmart, CVS, and Costco are among those who upped minimum wages to $15/hour.
Free college tuition is now available to Target and Walmart employees. One-third of companies with 20K+ workers also plan to expand health benefits.
Bathroom breaks are now protected for Amazon warehouse workers — 74% of whom said they avoided pee breaks to hit quotas.

Spending power isn’t just about wages… It’s also about prices. Hourly pay increased 4.6% last month, but consumer prices jumped 5.4%. Wages rose but spending power didn’t, because bacon, gas, and rent all got more expensive. Since lower-income Americans are especially sensitive to spikes, they don’t just want higher wages — they also want higher spending power and more valuable benefits. Until that happens, workers may keep asking for more.

Code

GitLab goes public at an $11B valuation to support the hybrid work economy

Sounds like a scary laboratory... actually just a really big software company. Once dubbed “the Facebook of programming,” GitLab is a one-stop shop for developers to create, store, and distribute new software. Instead of sending a “per my last email: code change” to your coworker, you can see and make all changes in one place.

Shares of GitLab jumped 35% yesterday after going public on the Nasdaq. GitLab closed well above its IPO price of $77, giving it a $14B+ valuation, nearly double what it was in January.
During the pandemic, GitLab benefited from companies rushing to streamline their operations remotely. It generated $152M in revenue in 2020 — up nearly double from 2019.
Fun fact: San Francisco 49ers legend Joe Montana invested $100K in GitLab through his fund Liquid2 Ventures back in 2015, when GitLab’s valuation was just $12M.

Like a sibling rivalry… except there’s no relation. GitLab’s main rival, GitHub, has more than 65M developers and was scooped up by Microsoft in 2018 for $7.5B. GitLab has attracted new users by offering its popular DevOps software free. The hope was more nonpaying users would turn into premium paying subscribers, but it hasn’t panned out:

<1%: how many of GitLab’s 30M users converted to a $19.99 or $99.99 a month subscription. For context: Spotify had a 46% conversion rate in 2019.
$40M: GitLab's loss last quarter as a result of ramping up its marketing budget to attract big spenders.

Developers are the backbone of the hybrid work economy… but they need the tools to keep up with cloud demand. As more companies offer a flexible WFH lifestyle, it’s critical for businesses to make office apps available remotely. Companies like GitLab, whose employees are 100% remote, are gaining steam by trying to make that transition seamless. Still, it could be a while before they actually make money doing it.

What else we’re Snackin’

Scold: The White House told Moderna, which received $10B from taxpayers to fund its research, to “step up” its efforts to deliver not-for-profit Covid vaccines.
Boost: For people who got the Johnson & Johnson vaccine, research found Pfizer or Moderna boosters could produce more immunity than another J&J jab.
Disconnect: LinkedIn, the last major American social-media company still operating in China, will shut down its platform there because of increasing censorship.
Reserve: Profits at Bank of America, Wells Fargo, and Citi boomed after the banks released reserves set aside for defaults that never happened.
eStore: The Senate announced bipartisan legislation that would prevent companies like Amazon and Apple from prioritizing their own products on their platforms.
Special: Crypto exchange Coinbase asked Congress to block the SEC from regulating the crypto industry, arguing that a special regulator should do the job.

Friday

September retail sales
Earnings expected from Goldman Sachs, JB Hunt, Prologis, and PNC

Authors of this Snacks own shares of: Apple, Moderna, Amazon, Walmart, CVS, and Delta

ID: 1

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Tangential remarks

Nicolai Tangen, the CEO who holds the purse strings of Norway’s $1.6 trillion sovereign wealth fund, thinks that his fellow Europeans don’t quite stack up to US employees when it comes to pure hustle, telling the Financial Times in a recent interview that there is a difference in “the general level of ambition” and that “the Americans just work harder”.

Tangen has clearly been putting his money — or more specifically Norway’s — where his mouth is: the sprawling Norwegian oil fund, now one of the largest investors on the planet, has been pumping more capital into its US holdings in the past decade, while decreasing its investment into European entities.

The troublesome news for our European readers? Tangen might be onto something. According to data from the OECD, American workers are putting in almost 60 hours a year more than the weighted average for OECD nations… a benchmark that workers from countries in the European Union are already ~180 hours shy of.

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Alphabet shares are soaring in the after-market session, with a initial jump of more than 10% implying a gain of upwards of about $200B in market value when the stock opens tomorrow morning.

Google’s parent company crushed earnings expectations, initiated a cash dividend for the first time, and authorized a fresh $70B in share repurchases for good measure. The market likes it very much.

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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?