👻 Snap puts itself on the Map

Thursday, February 25, 2021 by Snacks
_Stop trying to make OnlyCans happen_

Stop trying to make OnlyCans happen

Yesterday’s Market Moves
Dow Jones
31,962 (+1.35%)
S&P 500
3,925 (+1.14%)
Nasdaq
13,598 (+0.99%)
Bitcoin
$48,870 (+0.88%)

Hey Snackers,

Five men who spent four years stranded at sea are finally returning home. Good luck to whoever is catching them up.

Stocks climbed yesterday, changing course after Fed Chairman Jerome Powell calmed worries over rising interest rates. The Dow notched a record high.

Ghost

1. Snap hits a record high on sales growth and ad strategy (it's growing up)

Ghosted, then unghosted... Snap can relate. Two years ago, Snap stock was languishing around $10/share. After going public in March 2017, Snap consistently failed to beat earnings estimates for nearly a year. But the little ghost has been wowing investors over the past year, and its shares have more than 4X'd. In 2020, Snap's sales growth was more than 2X Facebook's (granted: Snap is younger, smaller, and still unprofitable). This week...

  • Snap shares soared to a record high of ~$73, and its market cap crossed $100B for the first time. Market cap = the total value of a company’s shares (held by investors and insiders).
  • Driving the moves: At its investor event on Tuesday, Snap said it expects 50% annual sales growth for the next several years.
  • Wild stat: With its 265M daily users, Snap says it reaches 90% of 13- to 24-year-olds in the US. Call it Gen S.

Bring back the rainbow puke filter... Investors were also impressed with Snap's new strategy to grow ad revenue in non-messaging features (it's not all about Taco Bell face filters). A key growth opportunity: the Snap Map.

  • Yelp-ifying Snap Maps: The map where you stalk your friends' Bitmojis has the potential to bring in big bucks from small businesses. 35M businesses are already on the Map.
  • Map it out: You zoom in to the map and click on Huckleberry Cafe. Snap shows contact info, directions, reviews, and even lets you order via food delivery apps. Businesses can pay to promote their listings, Yelp-style.
THE TAKEAWAY

Snap is past its tween stage... though many of its users aren't. It's maturing into much more than just a place to send double chin pics. Over the past year, Snap has launched new features, from Mini apps to Spotlight (a TikTok copycat that has over 100M monthly users). It also plans to invest more in content, like original shows for its Discover feed. This different mix of products is key to driving more ad revenue, which Snap badly needs to become profitable.

Canny

2. The company that makes cans for White Claw is spinning off on a double trend

The most annoyed-sounding company name... Ardagh Group (pronounced: ard-ugh?) is one of the world's largest metal and glass packaging companies. Think: Heineken bottles, minus the beer. Now the publicly-traded company is spinning off its can business into another public company. The new can-only company is valued at $8.5B. Unsolicited name suggestion: OnlyCans.

  • From soda and beer: When Ardagh acquired its canning operation in 2016 for $3B, most of its sales came from big soda and beer companies.
  • To seltzer and 'bucha: Today, more than half of Ardagh's $7B in annual sales come from cans for brands like White Claw, Truly, and LaCroix.

Weird SPACaging... The new company is going public by merging with a SPAC — a company that goes public only to acquire a real company. The SPAC is betting on the continued growth of canned drinks, which are more enviro-friendly: aluminum is easier to recycle than plastic (Ardagh calls it "infinitely recyclable"). OnlyCans has two trends going for it:

  • Short-term: Canned-everything. You're not drinking glass bottled beer at the bar — you're cracking open a canned wine at home.
  • Long-term: Sustainable-everything. Just this month, Nestle announced it's selling its North American water biz for $4.3B (bye, plastic bottles).
THE TAKEAWAY

Commodity is hard to conquer... Ardagh is selling "shovels" in the seltzer gold rush. But at the end of the day, an aluminum can is an aluminum can. And Ardagh can't control the price of a commodity like aluminum. Aluminum prices have risen over the past year, partly thanks to the "canned-everything" trend. Aardagh also has to compete on price with companies like Ball Corp, which makes Coke cans. That's likely why Aardagh's profit margin is slim.

What else we’re Snackin’

  • Vax: The FDA endorsed Johnson & Johnson's single-shot Covid vaccine for emergency approval.
  • Chipper: President Biden signed an executive order to address the global chip shortage that's affecting US car companies.
  • Foxy: Foxconn, the Taiwanese electronics giant that assembles iPhones, will be building cars for luxury EV startup Fisker.
  • Payper: Australia passed its new media law that requires Facebook and Google to pay for news (they've both pledged to spend $1B on news).
  • Deposit: The Fed’s system that allows banks to transfer money to each other and settle funds went down for several hours yesterday.
  • Heli: Air taxi startup Joby is going public at a $6.6B valuation through a SPAC formed by the founders of LinkedIn and Zynga.

Thursday

  • Weekly jobless claims
  • Earnings expected from Best Buy, Domino's, Wayfair, and HP

Authors of this Snacks own shares of: Snap and Google

ID: 1539839

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