Monday Apr.12, 2021

📦 Amazon's union "victory"

_Banks about to drop the earnings anchor_

Hey Snackers,

Stoic philosopher Marcus Aurelius once said: “Our life is what our thoughts make it.” Well, Elon Musk just taught a monkey to play Pong... with its mind.

Stocks hit all-time highs last week on recovery optimism. President Biden said all US adults should be eligible for a Covid vax by April 19. More than 1 in 5 have been fully vaxed so far.

Vote

Amazon emerges victorious from its historic labor battle against unionization

Sarah cast her ballot... and the votes are in. Fun fact: there are more Amazon employees than Americans named Sarah. Now, a massive labor showdown at America's second-largest employer is making headlines (again). Amazon workers in Alabama just voted not to unionize their warehouse. It would've been Amazon's first unionized US warehouse. Some context:

Last month, Amazon warehouse workers in Bessemer, Alabama were pushing to unionize for job security and better working conditions.
Amazon pushed back (think: anti-union bathroom flyers). It doesn't want to be legally required to bargain with the retail union over its workers' rights.
Last week, ~71% of the Alabama workers who cast ballots voted against joining the RWDSU (Retail, Wholesale and Department Store Union).

Prime outcome... While Amazon says it "didn't win" because employees made the choice, it's a victory for the 'Zon. Union rules could've limited its freedom to quickly hire (or cut) workers, and its ability to automate (think: more robot-hiring). On Friday, Amazon shares jumped 2% to their highest level in months. Why some workers voted "no"...

Unnecessary middleman: Workers who voted against the union said issues could be resolved within Amazon, without the union middleman.
Unnecessary dues: Some didn't see a benefit in paying dues to a union. Amazon says it already offers competitive benefits and wages.

The pushback isn't over... Blue-collar unions have been falling out of favor in the US: the unionization rate fell from 35% in the mid-1950s, to 11% in 2020. This vote seems to confirm that trend. But it’s not the end of the labor pushback against Amazon. Labor activists are already looking at other methods to challenge Amazon’s practices. And they could get a boost from legislators: politicians on both sides of the aisle are eager to reign in Amazon’s power, and many are advocating for better conditions for workers. Think: better hours and bathroom breaks.

Highs

Who's up...

Bringing S3XY back... Tesla shares ticked up for the week after it delivered a record ~185K cars last quarter. That's more than double its deliveries from the same quarter last year (when Covid hit), thanks to healthy demand from China. Still, competitors in the side-view mirror may be closer than they appear: it's losing market share to EV rivals.

Forgot what a waistband feels like... Levi's sales fell 13% last quarter because ripped sweatpants are the new ripped jeans. But the stock jumped 9% for the week, since Levi's boosted its sales and profit outlook for the first half of the year. Levi's thinks you'll be "revenge spending" on denim for outings, and expects sales will return to pre-pandemic levels by October.

Lows

...and who's down

Unvaxed... AstraZeneca is causing some vexation... that's preventing vaccination. Last week, European regulators said there might be a link between AstraZeneca's vax and rare (but sometimes deadly) blood clotting. Now: Australia, Italy, Spain, the UK, and others are restricting the rollout of its shot.

Wrong direction... Real estate tech firm Compass watched its stock plunge 14% since it IPO'd last Thursday. The Softbank-backed startup is the second-largest residential brokerage in the country — and the housing market is thriving thanks to ultra-low interest rates. But some investors see a basic old brokerage model behind Compass' charming techy exterior.

Zoom Out

Coming up this week...

Stories we're watching:

The corporate tax debate... The tax filing deadline was extended to May 17 (eyy). But for corporations, the headache is just starting. The Biden admin plans fund its $2.3T infrastructure proposal by raising corporate taxes. Treasury Secretary Janet Yellen says the hikes would bring home ~$2T in overseas profits. To keep the US attractive to corporations, Yellen has been pushing for a global minimum corporate tax rate. It's working: now the G-20 aims to agree on a global minimum by mid-2021.
The rise of digital currency... China became the first major economy to launch an e-currency: the digital yuan (#digi-yuan). Unlike crypto, digi-yuan is state-backed. Unlike cash, it's fully traceable. The wildest part: Beijing is testing digi-yuan expiration dates to encourage people to spend, and could use it to automatically fine people for rule-breaking. Beyond China, digi-yuan threatens the global dominance of the US dollar. Now the US is more seriously exploring its own digital currency. So are 60+ other countries.

What's dropping:

Banks kick off earnings season... Wall Street's finest, including JP Morgan Chase, Citi, and Goldman Sachs, all report this week. Banks' performance will be compared to a year ago (aka: the quarter ended April 2020). Back then, banks added billions to their reserves to prepare for pandemic loan losses (like mortgage defaults). By April, Chase had set aside $8.3B. Banks are expected to release more reserves as the economy recovers. That could lift their results.
Coinbase goes public... The largest crypto exchange in the US plans to go public on Wednesday via direct listing. It'll be the first crypto exchange to go public in the US, at a time when investors have been pouring into crypto. Coinbase thrived last quarter, estimating $1.8B in revenue from January to March — more than it made in all of 2020, and 9X more than the year-ago quarter. Coinbase's huge growth highlights the "seasonal" nature of its biz.
Delta reports earnings... Since mid-March, pandemic travel has been notching record highs, with 1M+ people taking off their watches for TSA each day. Delta's Thursday earnings will give us a window seat into how airlines fared over the last quarter — and whether people are really "revenge spending" on travel during the vax rollout.

What else we’re Snackin’

Live: Three steps to start tackling your productivity fatigue — embrace "niksen."
Read: Forbes' annual World Billionaires List (Bezos & Co. are worth $13.1T combined).
Learn: Three things to do before you start investing (it's a marathon, not a sprint).
Pause: How mindfulness alters your brain to be more rational, and less reactionary.
Walk: The ideal number of steps per day to stay healthy (spoiler: it's not 10K).
Visualize: The Gen Z unemployment rate across the world, charted.

This Week

Monday: Earnings expected from Aphria
Tuesday: Earnings expected from Fastenal
Wednesday: Coinbase goes public. Earnings expected from JPMorgan Chase, Wells Fargo, Goldman Sachs, and First Republic Bank
Thursday: Weekly jobless claims. Earnings expected from Delta, Citi, Bank of America, BlackRock, Pepsi, and United Health
Friday: Emancipation Day. Earnings expected from BNY Mellon and Morgan Stanley. China quarterly GDP data.

Authors of this Snacks own shares of: Amazon, Tesla, Delta, JPM Chase, and Bitcoin

ID: 1599090

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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?

Apple reportedly cuts Vision Pro production due to low demand

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Gonna have to rename the company... again

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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).

Net net

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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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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.