Wednesday Aug.14, 2019

Christmas shopping just delayed iTariffs

_Markets weren't expecting this, but kind of love it_
_Markets weren't expecting this, but kind of love it_

Hey Snackers,

Simone Biles just pulled off the 1st ever triple-double (twists on twists on twists).

Give US trade policy a gold for its own flips — fresh after planning tariffs to hit China within a few weeks, the US is now backing down hostilities. That performance was enough to jack the Dow up 373 points Tuesday.

Appear

Snap tries (again) with hardware: Spectacles 3

Forward to your 1 friend who will actually get these... For a cool $380, they too can strut around in a pair of Snap's Spectacles 3. A limited number go on sale here in November, featuring a new HD camera to create depth perception as you semi-creepily record everyone around you. We consider the design pseudo-Coachella-geek-hipster chic.

If at first you don't succeed... spend a lot of company resources to try 2 more times. Here's the social network's timeline/quest to add hardware to its app success:

  • Spectacles 1 (2017): A $130-per-pair costly mistake — Snap sold them via pop-up vending machine, but made way more glasses than the 150K that were actually sold, costing it $40M.
  • Spectacles 2 (2018): A $150 thinner mistake — Snap made the glasses narrower and waterproof, but they didn't catch on, either.
  • Spectacles 3 (Now): A $380 potential mistake obsessed with augmented reality — It definitely prices out most of Snap's teen userbase, but 3D filters make your walk to work look actually interesting.

Friction is the problem... There's nothing wrong with a tech company testing out a wearable device like Spectacles — but Snapchat still hasn't fixed problems that make them hard to use. Example: Footage taken on Spectacles doesn't automatically transfer to your Snapchat account. (Friction). That's why over half of Spectacles 1 & 2 users quit after a month.

Un-tariff

New US tariffs on China get delayed... because of holiday shopping

iTariffs... President Trump announced them just 2 weeks ago. With everything else already tariff'd, the US planned to tax the remaining $300B worth of consumer products made in China starting September 1st — including the iPhone. Yesterday, he said nevermind: waiting until December 15th for most new tariffs so American shoppers can have a Merry Christmas.

Teachers hate procrastination... Markets don't. The tariffs were essentially a 10% tax that would hurt profits for companies manufacturing in China, while raising prices by 10% for everybody. Here's who wins with Tuesday's sudden flip:

  • Apple: Shares popped 4% because iPhones and MacBooks won't get 10% more expensive until after most holiday shopping is done. Made in China AirPods, the Watch, and HomePod still get hit on September 1st, though.
  • Mattel & Best Buy: The stocks rose 5% and 6% as Made in China action figures and speakers will remain tariff-free through the holidays.
  • Nike: Sneakers were also on the exemption list, so the swoosh jumped up 2%.

This sends a message to China... If the trade war has political or stock market costs, America might cave. Credibility is important in negotiations, and Trump's credibility takes a hit with this one.

  1. Political cost: Since American buyers pay US tariffs, not Chinese exporters, this latest round would have grinched Christmas for American households.
  2. Stock market cost: If tariffs caused poor holiday sales, stock markets likely would've suffered.
Mergin'

Viacom & CBS finally agree to a huge re-merger

Distance makes the heart grow fonder... Or something like that. Take CBS and MTV/Nickelodeon-owner Viacom. The two media legends split 13 years ago — and then, like Ross and Rachel, they spent the past 3 years (slowly) flirting over whether to get back together. Now the deal has officially been reached, and these are the primetime numbers:

  • $28B: The combined revenue of the Brangelina-esque new "ViacomCBS."
  • 140K & 3.6K: The combined number of TV episodes and movies the new company will own.
  • 4.3B: The incredibly massive global reach of TV subscribers ViacomCBS claims to have.
  • 61% vs. 39%: When the deal likely closes at the end of the year, CBS shareholders get 61% of the new company, Viacom shareholders get 39%.

Family Matters... The Redstone family ran Viacom until 2006, when it made sense to split off CBS as a separate company. But now that YouTube, Netflix, and social networks are eating into both companies' profits, a re-merger seems prudent. Media heiress Shari Redstone wanted to reunite, but former CBS CEO Les Moonves was against it — now that he's been pushed out for alleged sexual assault, Shari gets her family reunion.

This all comes down to one word: streaming... CBS All Access was actually one of the 1st streaming networks, but never really took off. Consolidating Viacom and CBS' original content from Spongebob to Star Trek is respectable enough to entice cord-cutters — but Netflix and Amazon are already way bigger, and Disney just acquired Fox. Content remains king, and ViacomCBS is a smaller kingdom.

What else we’re Snackin’

  • Fresh: Domino's decides to embrace e-bike pizza delivery all by itself (no 3rd-party delivery apps) — and it's hiring
  • Chilled: Coca-Cola is releasing aluminum Dasani water bottles over the next year (but it's still making the plastic ones too)
  • Unveiled: Allbirds pioneered direct-to-consumer sneakers — now its first non-shoe product is...socks (with an entirely new material: "Trino")
  • Overheard: Spotify is kicking its podcasting fix up a notch: it officially released "Spotify for Podcasters" to give creators valuable audio data
  • Hungry: Tilray, the Canadian pot company, dropped after its earnings, but acquiring a hemp food company helped pump sales up 371%

Wednesday

Disclosure: Authors of this Snacks own shares of Luckin Coffee and Amazon

20190813-926730-2794277

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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?

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).

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Why Tesla investors are holding on to hope for a cheap car

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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