Monday Nov.18, 2019

Year 1 of legalized cannabis was Wall Street disappointment

_"With legalized Mary Jane, I've got nothing to do"_

Hey Snackers,

We've got that deep-fry turkey recipe right here for you (pro tip: avoid canola oil at all costs).

Markets enjoyed their 4th straight weekly win thanks to more news that American consumers are spending happy. Perfect timing for big box retail chains to report their earnings this week.

Downgrade

It's official: Canada is smoking way less weed than Wall Street expected

Peer pressure from Wall Street to Canada... Last week the top 4 cannabis stocks announced how the 3rd quarter went. One year since pot's legalization up north, it's time for investors to assess how much Canada is smoking. The answer: not much. The result for the stocks was even less fun.

Cronos Group (specializes in pot and hemp brands): Shares dropped 8% after its disappointing earnings.
Aurora (mass marijuana production): Down 17% because sales were lower than expected.
Canopy Growth (expecting big things from edibles/drinkables): Earth's biggest cannabis company watched its stock plummet 14% after net revenue fell 15%.
Tilray (medicinal marijuana focus): The loner exception. It's the only one that announced higher sales than expected, but that was partly thanks to an acquisition of a big hemp company. Shares still dipped 3%.

-52%... That's the average stock price change in 2019 so far for those top 4 weed dealers. Canada legalized recreational marijuana use (leaves and oil) in October 2018 — aka "Cannabis 1.0." In October 2019, it white-marketed other ways to get the green, including edibles, vapes, and THC-infused drinks — aka "Cannabis 2.0."

Marijuana sales during the Cannabis 1.0 era have disappointed. We haven't seen any sales results yet for the Cannabis 2.0 phase.

New industries are often over-hyped... Huge cannabis oversupply in the last year dropped Canopy's average price per gram sold from about $8 to $6 last quarter. The CEO basically admitted that they overestimated how much weed Canada wanted to smoke. That's not the first time we've seen over-exuberance for brand new industries:

Augmented & virtual reality: Facebook dropped $2B to acquire Oculus in 2014. Raise your hand if you've got a VR headset (crickets).
Autonomous driving: CEOs just finished downgrading the first batch of ridiculously ambitious timelines to start self-driving cars. Get ready for more delayed ETAs.
Gambling: The supreme court allowed states to legalize gambling in 2018. That hasn't moved Wall Street much.
Crypto: "Can you venmo me a bitcoin for that avo-toast?" Said nobody.

Highs

Who's up...

It's not you, it's Nike... The swoosh broke up with Amazon after 2 years selling its gear on their site. Nike traded its CEO out for a former eBay exec last month, so it's put him to work by funnelling customers away from Amazon.com to Nike.com instead. Nike could benefit by cutting out the middleman, controlling your online sneaker-buying experience, and getting your email address to pester you with promo emails.

Toss some pixie dust on it... Disney+ officially launched, snagging over 10M new accounts in the first 24 hours (despite Day #1 glitches). But even if it gets 100M people to sign up, all those $6.99/month subscription revenues would only make up about 10% of Disney's total revenues. What Mickey really wants is hooking you on the Disney lifestyle to buy movie tickets, Disney World vacays, and Frozen lunch boxes.

Lows

...and who's down

$5.8B... That's how much we spent on the last Amazon Prime Day. Alibaba's Singles Day enjoyed sales 7-times that: $38B (fun SnackFact: Taylor Swift sang at launch concerts for both insane faux-holidays). The Chinese ecommerce firm transformed the day honoring singles into an ecommerce splurge-fest that out-sold Prime Day in its 1st hour. But Alibaba stock fell because investors expected even more. Rule of thumb: Stock price movements = expected news - actual news.

We have plenty of printers, thanks... Instead of obsessively watching their fantasy football score, the board of HP unanimously rejected Xerox's offer to acquire it for $27B. It would've been a strange deal since Xerox is 1/3 the size of HP (picture Robin inviting Batman to join his crime-fighting team) — but together, the combined company would've saved an estimated $1B annually (just 1 accounting team and 1 holiday party, instead of 2 of each).

What else we’re Snackin’

Work: Viral salary spreadsheets — how knowing what your coworkers and friends make helps you
Life: Every Matt Damon movie, ranked
Invest: Choosing between a traditional 401(K) and a Roth 401(K)
Venture: 4 reasons why being "Co-CEOs" can work
Policy: Saudi Arabia is IPO-ing the world's most profitable company — it actually might be the worst time for it

This Week

Monday: Earnings from Manchester United
Tuesday: Earnings from Urban Outfitters, Home Depot, TJX
Wednesday: 'Minutes' released from the last Fed policy meeting. Earnings from La-Z-Boy, Target, and Victoria's Secret-owner L-Brands
Thursday: Existing Home Sales report. Earnings from Gap, Macy's, Williams-Sonoma
Friday: The Consumer Sentiment poll tells us how we're all feeling

Disclosure: Authors of this Snacks own shares of Tesla, Alibaba, and Amazon.

ID: 1014345

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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?