Wednesday Aug.07, 2019

Tinder jumped. Match jumped. Then IAC jumped.

_When you hear your IAC stock is really Tinder stock_
_When you hear your IAC stock is really Tinder stock_

Hey Snackers,

Disturbing: Domino's UK is stockpiling pizza ingredients on worries that Brexit could mess with its supply chain.

Not disturbing: After their worst loss of the year, stocks rebounded hard Tuesday on hopes that China's currency trade war retaliation won't be as bad as investors thought.

Family

IAC is the venture capital-like public company powering Match

Tinder gets all the looks... And it's owned by Match, whose stock surged 19% Tuesday as the dating app's growth jumped again. But it wasn't just Match that popped — IAC shares rose 12% too. That's because IAC owns the majority of Match, along with 150 other brands that you likely used at some point today.

It's all in the name... "InterActive." That's what IAC's "I" and "A" stand for. And its legendary leader Barry Diller (aka designer Diane von Furstenberg's husband) is obsessed with that. So the company invests in innovative apps that it thinks have viral interactive potential — people-to-people platforms and shareability are its thing. Recognize this IAC portfolio candy?

  • Public companies: IAC has launched 10 of them, including Match. It's also got ANGI Home Services, the company behind Angie's List, HomeAdvisor, and Handy, to connect you with someone to build/fix/repair/clean the thing you can't.
  • Private startups: College Humor (aggressively shareable videos), Investopedia (financial info), Ask (yes, this used to be Ask Jeeves), The Daily Beast (news), and plenty more viral-ish digital media.

IAC acts like a venture capital firm... but it's a publicly-traded company. That's unique. Most VCs who got in early to Uber or Pinterest are companies that you can't invest in — only the extra-wealthy or institutions typically get access. Yet IAC has become the Berkshire Hathaway of tech, giving retail investors access to a portfolio committed to a specific theme: digital interaction.

Acquire

Disney's stock falls 5% as its acquisition spree catches up

A chain is only as strong as its weakest superhero blockbuster... Disney just announced that revenues hit a record high of $20B (up 33%), but profit dropped 51% in the 2nd quarter. Now that Disney's officially acquired Fox and most of Hulu to add to the Mouse family, you have to take the good with the bad:

  • The Good (mostly Disney): Avengers:Endgame became the best performer in movie history. And the ESPN and Discovery channels brought home big bucks.
  • The Bad (mostly Fox): We're huge Wolverine fans, but the most recent X-Men movie missed (badly). Also, a tournament-worth of cricket matches got rained out, hurting Fox's international revenues. Now Disney wants to resurrect Fox's Home Alone.

Here's what Disney actually does... Mickey lives off of 4 profit food groups:

  1. Media Networks (33% of revenue): Things at Disney's many cable TV channels (includes ESPN and ABC) were solid.
  2. Parks, Experiences, and Products (31%): Attendance fell 3% at Disney's US parks, but per-tourist spending jumped 10%. Could be the disturbingly large turkey legs.
  3. Studio Entertainment (18%): Re-butter the popcorn for Disney's hits on hits on hits. The movie studio set a record $3.8B revenue.
  4. Direct-to-consumer (18%): The home of Disney+, the much-hyped new streaming network that arrives in November.

Disney+ doesn't need to make money... (that's its secret). The new Netflix rival just needs to feed the Disney profit beast. Disney makes money everywhere, and that gives it a huge advantage over Netflix.

  • Netflix: $12.99/month, because Netflix has 1 product that needs to make all the profits.
  • Disney+: Can charge just $6.99/month because the more fans that fall in love with Coco, the more Disney can make money on theme parks, toys, and shows covered in Coco.

PS: The CEO just announced the mega package of Disney+, Hulu, and ESPN+ will cost $12.99/month.

Out

Barneys is going bankrupt — but this has a different retail lesson

Bankruptcy is the new black... Among department stores, Barneys was the fancy NYC option with just 22 locations and a cooler-than-us kind of vibe. It's a private company controlled by a hedge fund — now it's shutting 15 stores to enter Chapter 11 bankruptcy (Barneys' biggest locations will keep the doors open while a judge figures out what to do with it).

Makeover... Barneys has been here before, going through bankruptcy in the '90s. But if it re-emerges from bankruptcy (again), it will do so promising to focus on "experiences." You know, because us Millennials love experiential experiences. Barneys says it's adding more in-store restaurants and "entertainment," but we haven't heard what that includes exactly.

But do you own the real estate?... Barneys' core problem is that it didn't. Last year, the rent at Barneys' flagship Madison Ave. store jumped to $2.5M/month. Those costs can kill if you don't own the land. Meanwhile, rival Saks Fifth Ave may be suffering from the retail-pocalypse too, but it owns most of its stores (including the iconic 5th Ave. spot) — so it's benefiting from the price-pocalypse of rising real estate values.

What else we’re Snackin’

  • Splurge: American Airlines is dropping $90M for the naming rights to just the entranceway of LA's new football stadium
  • Harvest: Aurora Cannabis jumped 10% because its crops are yielding more pot than even they expected
  • New: Snap just issued $1B in convertible debt (bonds that can be turned into stock) to raise $$$ for new moves, like acquisitions
  • FTW: Bumble is going way beyond first-move dating apps — it's sponsoring an all-women Fortnite eSports team
  • Homey: Airbnb acquires Urbandoor to get into the extended-stay-corporate-client space
  • Spotlight: Tencent, the Chinese tech company, is buying 10% of Universal Music and helping lift Drake, T-Swift, and U2's presence in Asia

Wednesday

Disclosure: Authors of this Snacks own shares of Roku.

20190807-920751-2776398

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“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.

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Meta said the 15 trillion tokens on which its trained came from “publicly available sources.” Which sources? Meta told The Verge’s Alex Heath that it didn’t include Meta user data, but didn’t give much more in the way of specifics.

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Amazon’s spy ops on rivals: shell companies, printed docs, and a fake Japanese streetwear brand

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Working as a seller called Big River, a secret group of Amazon employees gained access to rival platforms, including Walmart, FedEx, and Alibaba. They used Big River email addresses and went to seller conferences as Big River employees. They even stayed hidden within Amazon itself. These employees would take screenshots of competitors’ systems that they would then show others at Amazon in person to avoid an email paper trail.

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