Friday May.29, 2020

😴 Twitter's unfazed investors

_Live sports 2020_

Hey Snackers,

For those who think shipping delays have been bad recently: a Canadian man just received a package of hair gel he ordered 8 years ago. Happy Friday.

Stocks inched down as US-China trade tensions are escalating again — so is Twitter drama.

Order

Twitter barely budges after Trump targets social media giants with Executive Order

It started with a tweet... But the battle with social media giants has been #trending in DC for a while. On Tuesday, Twitter (for the first time) flagged two of Trump's tweets with links for additional information, as Twitter deemed the words from the President about mail-in voting "potentially misleading." Then yesterday, Trump signed an executive order targeting social giants — TLDR: he's not a fan of Section 230:

Section 230: Beautiful name — it's part of Congress' Communications Decency Act — it gives social media companies two key (and somewhat contradictory) things...
Immunity: Social media companies have broad immunity from liability for their users’ posts/actions.
Moderation: Social media companies also have broad powers to moderate/remove content on their sites (this is the more contentious one #spicy).

If Trump's order succeeds... Without immunity powers, Twitter and Facebook would have never grown into the giants they are today. If Facebook got sued every time someone posted something offensive or false, the 'Book would never have made it past Mark Zuckerberg's dorm room. Losing broad immunity would be disastrous for social media companies.

Investors didn't break a sweat... Despite being (pretty much) directly targeted with an Executive Order by the President of the United States, Twitter's stock moved only slightly downward (4% Thursday). Facebook, which is equally affected by the move, barely budged (it's near an all-time high). Why?

Threats to regulate Big Tech have been hollow for years — despite all the fanfare since 2016, nothing much has changed.
The order is likely going to be challenged in court and may get blocked for overstepping the executive power. Section 230 was passed by Congress, and likely requires congressional action to repeal.

Bet

DraftKings surges after announcing live sports streaming (despite current lack of live sports)

Tuning into Russian ping-pong... DraftKings took its fantasy sports app public juuust over a month ago. The sports betting company's stock has soared 85% since, even though live sports aren't happening right now (though ESPN did stream a spelling bee). Yesterday, DraftKings announced it'll start live-streaming sports events through its app. Despite the current state of live sports (almost none), investors are optimistic:

Unity is key: Live streaming in-app could significantly increase DraftKings' user engagement, in terms of both time and money spent in-app.
Live sports are (kinda) returning: The MLB is on pace to restart sooner than planned, and the NHL and NBA are looking to resume playoffs sometimes this summer. But...

Live sports might be very different... DraftKings' push into streaming was pretty timely. We could be remote-watching big games played in empty stadiums for a while. Sports teams and stadiums will lose out big on missed ticket revenues, but sports betting probably won't change too much.

DraftKings might be getting help from the corona-restless... Sports fans may be looking for ways to feel more engaged in games, now that the electric excitment and sound of a packed stadium is gone. Couple that with non-existent public social events, and it's not hard to see how couch-bound boredom could give DraftKings a boost. FYI, gaming peer Penn National is up 76% for the month.

What else we’re Snackin’

Dance: TikTok-owner ByteDance reportedly made $3B in profit and raked in $17B in sales for 2019.
Grub: Papa John’s sales jumped 33% in May, while Popeyes soared over 40% (drive-thru game strong. So is the chicken).
Tourism: Cyprus said it'll pay for the vacations of any tourists who catch COVID-19 while in the country.
Chill: Meditation apps are surging — Calm had 31% more downloads in April compared to January.

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Friday

Earnings expected from Big Lots

Disclosure: Authors of this Snacks own shares of Twitter and Chipotle

ID: 1200522

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Do you want to run the State Department of McDonald’s?

A couple of days ago, a tweet making fun at McDonald’s hiring a “Manager for Diplomatic Relations” went viral.

At first glance, the idea that McDonald’s, a burger franchise known for its double quarter pounders and perfectly salted fries, is expanding its diplomatic influence with policy makers in Foggy Bottom and the world at large sounds comical. But it’s actually crucial.

There are more than 40,000 McDonald’s locations spread across 115 countries around the world, and 90% of these stores are independently owned and operated franchises that pay royalties to the parent organization to operate. Tens of thousands of franchises operated by different owners with different beliefs, priorities, and values can get complicated, fast.

As we noted in Snacks in February, McDonald’s received heavy backlash from franchisees in countries including Saudi Arabia, Oman, Jordan, Kuwait, and Pakistan after McDonald’s Israel donated thousands of free meals to IDF personnel. But it wasn’t McDonald’s, as an entity, that made the donations. It was the owner of the company’s Israel franchises, who was acting under his own volition.

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Nuke stocks up on AI excitement

For most of humanity, the thought of “nuclear-powered AI” sends a shiver down the spine. But the stock market is all for it! Just check out the list of top performing S&P 500 stocks this year. Just behind established AI plays — Super Micro Computer and Nvidia, you’ll find Constellation Energy, the largest operator of nuclear plants in the U.S. NRG Energy, which also operates nuclear plants, isn’t far behind. Bloomberg reports that CEO of power distributor Exelon — which spun off Constellation in 2022 — says in the Chicago area alone, AI could drive a 900% jump in demand for energy from data centers.

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China makes Apple remove WhatsApp, Threads, Signal and Telegram from app store

In its latest move to restrict foreign tech, Beijing has ordered Apple to remove a number of popular messaging apps from its app store there, including WhatsApp, Threads, Signal and Telegram.

These apps had only been available through VPNs but were popular nonetheless, according to the Wall Street Journal.

Apple said the Chinese government asked them to remove the apps in the iPhone maker’s second biggest market over “national security concerns.” Last week, China told its state-owned telecoms to phase out the use of US chips by 2027.

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Tesla's recall reveals just how bad Cybertruck delivery numbers have been

Thanks to a recall of Tesla’s Cybertrucks, we now know how many of them have actually been delivered: 3,878 since the EV company began releasing them to customers in November.

In its third and fourth quarter earnings report, Tesla said that its current Cybertruck production capacity was greater than 125,000 a year. Musk had previously said he expected to produce 250,000 Cybertrucks a year by 2025.

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

The recall is over an issue with the gas pedal pad that, the National Highway Traffic Safety Administration says when pressed, “may dislodge, which may cause the pedal to become trapped in the interior trim above the pedal.” The cause of the issue: “unapproved” soap that the manufacturer used to aid in getting the pad on the pedal.

A Cybertruck customer this week posted a TikTok about a terrifying incident in which this happened and “held the accelerator down 100%” in his 6,000+ pound vehicle. Thanks to some quick thinking where he held down the brake and put it in park, he wasn’t injured.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

Tesla recalls the Cybertruck for faulty accelerator pedals that can get stuck

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

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Cocoa hits $11,000

Cocoa prices are breaking records on an almost daily basis — with cocoa futures closing at (another) all-time high of $11,020 per metric ton yesterday.

That’s up 158% since the start of the year, and over 4x on the typical prices seen in 2022 — as crop production continues to fall short of demand.

Major cocoa-producing nations like the Ivory Coast and Ghana, which between them grow about two-thirds of the world’s cocoa, have seen excessive tree failure due to disease, changing weather patterns, and hot, dry conditions causing devastating droughts.

As such, consumers are starting to see the effects of the largest cocoa supply deficit in over 60 years: “shrinkflation” and reduced-cocoa recipes might soon hit your favorite chocolate bars, and Hershey stock was recently downgraded. Unfortunately, the worst may still be yet to come: the International Cocoa Organization expects production to lag behind demand by 374,000 tons for the 2023-24 season.

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World out of balance: It costs the US 3¢ to make 1 penny

The cost of producing the US penny rose 13% in fiscal 2023 to 3.07 cents. Yes, that means that Uncle Sam loses more than two cents for every cent it produces. (And no, you can’t make it up on volume.)

For the record, that’s the 18th-straight year the penny’s face value has been below production costs, fueling calls for abolishing the lowest value denomination coin. Canada started to phase out the penny in 2013, joining Australia, Brazil, Finland, New Zealand, Norway, and Israel, according to Smithsonian Magazine.

3.07¢

Pop Quiz!

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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.

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