Monday Aug.19, 2019

Pot CEO: Profits not coming for at least 3 years

_Becoming a profitable cannabis biz takes time_
_Becoming a profitable cannabis biz takes time_

Quick reminder for interns: Send that end-of-summer, this-changed-my-life (handwritten?) thank you note to your boss.

Quick reminder for everyone: Markets suffered their 3rd straight weekly loss — blame growing worries of a global economic slowdown (this sports analogy on "the inverted yield curve" by the NYT nails it).

Highs

Who's up...

Get some oil on our backs... Southwest was a top buyer of those troubled Boeing 737 Max jetliners, and since they're grounded until at least November 2nd, Southwest is getting creative — it's adding a bunch of California-to-Hawaii flights, some for $99. There's less competition on those islands, growing tourist appreciation, and investor approval, so shares increased 3% Friday.

Feed us... While the rest of retail's bumming on tariff-boosted prices for the Made In China stuff American consumers love, Walmart is focused on food. The world's largest retailer cherished a better-than-expected $130B in revenues last quarter (FYI - that's almost double the 2nd biggest company in America). But the highlight was groceries: It now boasts 62% more online grocery shoppers than its next closest rival.

Take 3... Snap's into it. The social network's first 2 attempts at a wearable didn't work — the $150 Spectacles to record your every disappearable moment cost the company $40M in wasted frames. Now it's trying a 3rd version of its glasses for a cool $380 — it thinks the not-horrible look and 3D focused filters could move the needle.

Lows

...and who's down

Shade thrown... The guy who first reported the lies of Bernie Madoff and Enron? Now he's calling out GE. Fraud investigator Harry Markopolos claims the 127-year-old American icon is hiding $38B in losses from the books. GE believes Harry's just trying to manipulate its stock price so he can profit personally, but shares fell 10% on "the next Enron" vibes.

"Fashion miss"... Their words, not ours. Macy's dropped 18% after a series of mistakes that made an already brutal situation worse: Its new private-label athletic line got no love, it didn't sell enough warm weather goods this spring, and there aren't as many tourists in America going shopping. That all forced Macy's to put way too many clothes on sale, which dropped profits 48% from the same period last year.

This guy... Overstock's CEO. Turns out he was dating a Russian spy for 3 years. Last week he had his company issue a press release about how that got him involved in the 2016 presidential election investigation where he was interviewed by the "Men in Black." The bad look dropped the ecommerce company's stock 29% last week.

Budding

Cannabis' biggest week of the summer is a major downer for pot investors

Nice timing... Just as Woodstock festers celebrated their 50th reunion, cannabis stocks enjoyed their busiest week of the summer. Two of the biggest publicly traded pot companies revealed their earnings from the last quarter, both showing that it's hard out there for cannabis companies.

  • Tilray (-27% last week): The Candian cannabis icon sold 5.6K kilos of weed (triple what it did last year), but its loss doubled. It acquired hemp-based food creator Manitoba Harvest and more recently treated itself to a CBD candy company.
  • Canopy (-14% last week): Earth's biggest pot producer sold a hefty 9K kilos of weed (with revenues almost quadrupling), but it also gets more broke each quarter — losses more than quadrupled.

It's actually been a tough weed summer... Canopy's media-savvy CEO was just fired by its big new investor because he wasn't moving fast enough on CBD-infused drinks for the US market. CannTrust shares hit an all-time low after authorities seized some illegally-grown cannabis. And Sundial Growers recently IPO'd but was caught selling pot with mold.

Weed profits won't come for years... Canopy's CEO admitted that it could be half a decade before it's profitable. So pot companies are shifting their geographic strategy to find some wholesome profits.

  • The US opportunity is huge, but limited — Only 11 states + DC have legalized weed, so the market is mostly limited to hemp-derived CBD creams, oils, drinks, and adorable dog treats.
  • And Canada's got an oversupply problem — Even though it's legal since last fall, they're producing more up north than the people want.
  • So pot companies are looking to study abroad — Tilray is building a new growing facility in Portugal and Aurora just announced a deal with the Italian government.

What else we’re Snackin’

  • Work: 8 ways leaders perfectly delegate anything
  • Life: 5 tricks to join the Inbox Zero lifestyle
  • Money: Options, calls, and puts — what they are and how they work
  • Venture: How the Museum of Ice Cream raised $40M from venture capital firms
  • Crypto: New Zealand becomes the first country allowing salary payments in cryptocurrencies
  • Do: Check out Virgin Galactic's luxury lounge for space tourism (no shoe/electronics removal necessary)

This Week

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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.

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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.

Exclusive | China Orders Apple to Remove Popular Messaging Apps

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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.

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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.

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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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Netflix is going to stop sharing subscriber numbers

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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.

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.