Monday Aug.31, 2020

✂️ Apple and Tesla stock split day

_Prep the chopping board — it's Slice Day_
_Prep the chopping board — it's Slice Day_

Hey Snackers,

2020 has officially reached Stress Level Elephant. A Polish zoo is giving its stressed elephants CBD oil to see if it calms them. Hopefully the elephants won't have to post a sponsored Insta in exchange (#CBDumbo, #FunkInTheTrunk).

The S&P 500 and the techy Nasdaq hit fresh all-time highs last week, notching their 5th straight week of gains. The Dow finally turned positive for the year.

On the pod: Gap sold $130M in facemasks last quarter, but its Lululemon-like athleisure brand was the real star. Tune into our 15-minute pod to hear why Athleta is Gap's only hope.

Split

The Great Slicing: Tesla and Apple split their stocks into smaller slices today

Don't panic... At first glance, it might seem like your Apple holding just lost 75% of its value. Not the kind of thing we like to wake up to on a Monday. Rub the sleep out of your eyes, chug a Nespresso, and perk up: you still hold the same amount of Fruit — it just got chopped into tinier slices (so did your Tesla Model 3).

  • Apple did a 4-for-1 stock split today. If you own 1 Apple share trading at $500, you'll suddenly find yourself with 4 $125 shares. Same value, more shares.
  • Tesla did a 5-for-1 stock split today. If you own 1 Tesla share trading at $2.2K, you'll get 5 $440 shares. The value of your ownership in Elon's electric baby doesn't change.

What's wrong with a fat pizza slice?... Apple and Tesla think it's too caloric for investors to swallow. Companies with soaring stocks sometimes slice them into smaller pieces to make shares cheaper for retail investors (like us) to buy. Apple's stock price would be waaayy higher today if it hadn't done five stock splits since 1987 — Apple splits so hard, it's more like Banana.

  • Apple stock has more than 5X'd since its last split in 2014, from $90 in June 2014 to $300 in January 2020 to ~$500 today.
  • Tesla stock has soared nearly 900% in just a year, from $225 on August 30th, 2019 to $2.2K on August 30th, 2020. Today's split is Tesla's 1st ever.
  • TLDR: In July, Apple became the most valuable company on Earth while Tesla became the most valuable carmaker, all thanks to their soaring stocks.

Stock splits aren't that impactful anymore... now that fractional shares are becoming widely available at brokerages. Fractional shares take affordability much further than splits. If a stock costs $1K, you can buy 1/2, 1/10th, or even 1/300th of it — you choose the dollar amount or share amount. But splits aren't entirely useless: they suggest that a company is confident about its stock's continued growth. In July, Tesla posted its 1st full-year of profit and Apple had its strongest 2nd quarter ever.

Highs

Who's up...

Don't try to validate it... Pedialyte-maker Abbott Labs got FDA emergency use authorization for its 15-minute $5 COVID test (that looks like a parking ticket). Shortly after, the Trump admin awarded Abbott $760M to deliver 150M tests in 2020 — Abbot stock soared on the double-whammy. Doctors and school nurses can use the test to quickly deliver results via nasal swab. Abbot's also launching an app that gives COVID-free people a “digital health pass.” This quick, low-cost testing method could be key in slowing the spread.

Time to choose a ship name... Walsoft or Micromart? Walmart unexpectedly teamed up with Microsoft in the race to buy TikTok's US operations. The Chinese-owned video app will be banned in the US on September 15 unless an American company strikes a deal to acquire it. Walmart and Microsoft shares jumped — investors think the Walsoft tag-team gives them a better shot against TikTok's other biggest suitor, Oracle. But now TikTok's parent Bytedance might need the Chinese government's approval to sell, complicating the deal.

Lows

...and who's down

Game off... DraftKings stock plunged 7% after it got downgraded by a Morgan Stanley analyst on Thursday. Last month, the sport betting company's stock plunged on COVID-related MLB game cancellations. That made investors realize how fragile the live events situation is. Now there's concern that the upcoming NFL season could be canceled if players test COVID-positive. Since DraftKings' main biz revolves around live sports betting, it's in a rough spot.

All I need in this life of sin... is me and my sweatpants. Nordstrom’s sales plunged 53% last quarter since you weren't going wedding and Bar Mitzvah shopping. Stores were shut for half the quarter, and Nordie posted a $255M loss (compared to a $141M profit last year). Nordstrom was forced to heavily discount unsold racks of clothes to make them more sellable. But the stock popped on upbeat statements from execs going into the holiday season.

What else we’re Snackin’

  • Connect: Visualizing the social media universe in 2020 — the "Zuckerberg cluster" boasts over 2.6B monthly active users.
  • Wonder: Take a tour of the stellar neighborhood with this interactive 3D visualization (don't forget sunglasses).
  • Live: 6 life tips from a Japanese doctor who lived to 105 — create big arcs, not small scribbles.
  • Socialize: If you're secretly sick of virtual happy hours, suggest these 5 non-awkward activities instead.
  • Sweat: 7 simple exercises to build and maintain physical strength (with GIFs to demonstrate).
  • Explore: The best in-state road trips in the US with itineraries, just in time for Labor Day weekend (FYI: September 4-7).

🍪 Thanks for Snacking with us! Want to start getting Snacks daily? Sign up here for our daily market newsletter.

This Week

Disclosure: Authors of this Snacks own shares of Lululemon and Apple

ID: 1317453

Get Your News

Subscribe and thrive

Snacks provides fresh takes on the financial news you need to start your day. Chartr provides data visualizations on business, entertainment, and society. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Latest Stories

Markets
Net net
13h
Earnings can’t stop, won’t stop
Markets
Matt Phillips
10h

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.

Tech
Rani Molla
10h

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).

Business
Rani Molla
14h

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.

Read more
Spotify Q1

Spotify’s finally turning its user growth into serious cash flow

Tom Jones, David Crowther15h
Sponsored by
Go Deeper with Market Depth

Nasdaq TotalView powers the need-to-know data serious investors rely on.

Read more
Scuba Diving in the Wild Blue Yonder in French Polynesia
Job switchers and stayers

The FTC is banning non-compete clauses

Why that might make job switching even more lucrative

Millie Giles, David Crowther15h
Matt Phillips
15h
Hasbro pretty much entirely depends on Magic: The Gathering to make a profit

William Coulman, David Crowther
15h
Thousands of bank branches have closed across America

America has lost thousands of bank branches. The latest closure? JPMorgan’s iconic 45 Wall St. address.

Bank scene
16h

TikTok versus the United States

Casey Newton
Senate Takes Up Foreign Aid Package Passed By House

Your inbox is ready

Subscribe and thrive

Snacks provides fresh takes on the financial news you need to start your day. Chartr provides data visualizations on business, entertainment, and society. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Culture
William Coulman & David Crowther
17h

Not so Gucci

French luxury fashion conglomerate Kering has seen its shares fall ~10% in the last 24 hours after reporting that sales at its flagship brand Gucci had dropped 21% in its latest quarter.

Kering’s other brands, which include Yves Saint Laurent, Bottega Veneta, and Balenciaga, fared slightly better — but the only real bright spot was the company’s eyewear division, where sales rose 24% (9% on a comparable basis).

With Gucci responsible for roughly two-thirds of the company’s profit, the ongoing struggles of the brand are weighing heavily on the bottom line: the company expects recurring operating profit to drop 40-45% in the first six months of the year.

Gucci execs will be hoping that new designer Sabato de Sarno can turn the iconic brand’s fortunes around, particularly in China where demand has dropped precipitously. His designs only started hitting stores in February.

Gucci sales

Kering Warns Profit to Tumble Following Gucci Woes in China

Kering Warns Profit to Tumble Following Gucci Woes in China

With Gucci responsible for roughly two-thirds of the company’s profit, the ongoing struggles of the brand are weighing heavily on the bottom line: the company expects recurring operating profit to drop 40-45% in the first six months of the year.

Gucci execs will be hoping that new designer Sabato de Sarno can turn the iconic brand’s fortunes around, particularly in China where demand has dropped precipitously. His designs only started hitting stores in February.

Gucci sales
World
Good morning
22h
What’s happening
22h

Starbucks is challenging a labor watchdog’s power in a far-reaching Supreme Court case

Max Knoblauch
Read
22h

What a US TikTok ban could mean for the rest of the market

Rebecca Moretti
Read
22h

Goldman ditches its robo-advisory biz as it breaks up with consumer banking

Jamie Wilde
Read
Markets
Worse than expected
4/23/24
Ugly numbers, but Tesla shares bounce
Elon Musk
Rebecca Moretti, Rani Molla
4/23/24
Just the start

Banning
TikTok

What it means for the rest of the market

Business
Jack Raines
4/23/24

The FTC vs. Big Handbag

The Federal Trade Commission has sued to block big tech, big grocery, big vacuum, and now, big… “affordable luxury handbag.”

Yesterday, the FTC sued to block Tapestry Inc’s $8.5B acquisition of Capri holdings. The agency is worried that a merger between Tapestry, which owns the Coach and Kate Spade brands, and Capri, which owns Michael Kors, would eliminate competition in the market.

The crux of the FTC's argument lies in the scope of the "accessible luxury" handbag market, where Tapestry competes with Michael Kors, with the FTC saying the following:

Where Tapestry and Capri most vigorously compete against one another – mainly between Tapestry’s Coach and Kate Spade brands against Capri’s Michael Kors brand – is in the “accessible luxury” handbag market. Today, Coach, Kate Spade and Michael Kors continuously monitor each other’s handbag brands to determine pricing and performance, and they each use that information to make strategic decisions, including whether to raise or lower handbag prices.

The deal would eliminate fierce head-to-head competition on many important attributes including on price, discounting, and design. Tens of millions of Americans that purchase Coach, Kade Spade, and Michael Kors products could face higher prices

While Capri and Tapestry are two of the largest players in this market, winning an antitrust case won't be so straightforward, as consumers have other options at similar price points, including Marc Jacobs (owned by competitor LVMH), Tory Burch, Cuyana, and Mansur.

FTC Moves to Block Tapestry’s Acquisition of Capri

FTC Moves to Block Tapestry’s Acquisition of Capri

The crux of the FTC's argument lies in the scope of the "accessible luxury" handbag market, where Tapestry competes with Michael Kors, with the FTC saying the following:

Where Tapestry and Capri most vigorously compete against one another – mainly between Tapestry’s Coach and Kate Spade brands against Capri’s Michael Kors brand – is in the “accessible luxury” handbag market. Today, Coach, Kate Spade and Michael Kors continuously monitor each other’s handbag brands to determine pricing and performance, and they each use that information to make strategic decisions, including whether to raise or lower handbag prices.

The deal would eliminate fierce head-to-head competition on many important attributes including on price, discounting, and design. Tens of millions of Americans that purchase Coach, Kade Spade, and Michael Kors products could face higher prices

While Capri and Tapestry are two of the largest players in this market, winning an antitrust case won't be so straightforward, as consumers have other options at similar price points, including Marc Jacobs (owned by competitor LVMH), Tory Burch, Cuyana, and Mansur.

Matt Phillips
4/23/24

Tesla had a good ride, but the stock’s price destruction is historic

Few people have created as much value as Elon Musk. The iconoclastic entrepreneur took Tesla from a market capitalization of roughly $2 billion at the time of its IPO in 2010 to $1.2 trillion in early 2023. That’s a return of about 55,000%. Musk made a lot of people a lot of money.

On the other hand, Tesla shares are down nearly 60% since their all-time peak. The company has ceded ground in EVs, prompting a series of profit crushing price cuts to preserve market share. The cumulative loss in market value over that period is pushing $800 billion. Few corporate executives have presided over such a degree of value destruction.

And it could get worse, as people are bracing for an ugly update when Tesla reports after the close Tuesday.

Jack Raines
Opinion
4/23/24
Starbucks could use a CIO

Customers give Starbucks billions of dollars in prepaid credits each year. Should the coffee chain be investing it?

Starbucks American Coffee Chain Cafe In Amsterdam
Tech
Rani Molla
4/23/24

Smaller AI models are in

Tech companies that have long touted the enormity of their AI models are now saying size doesn’t always matter.

Microsoft is the latest tech company to introduce smaller AI models, as part of its Phi-3 tech family. Last week Meta released two smaller models of its AI Llama 3 and earlier this year Alphabet did the same. All are open sourcing these models to encourage wider adoption.

Microsoft says its smallest model, which can fit on a smartphone and wouldn’t need to be connected to the internet to work, is nearly as good as OpenAI’s GPT-3.5. A Microsoft exec suggested this less expensive model could be a good fit for online advertisers, if not doctors.

Microsoft Makes a New Push Into Smaller A.I. Systems

Microsoft Makes a New Push Into Smaller A.I. Systems

Microsoft says its smallest model, which can fit on a smartphone and wouldn’t need to be connected to the internet to work, is nearly as good as OpenAI’s GPT-3.5. A Microsoft exec suggested this less expensive model could be a good fit for online advertisers, if not doctors.