Between presidential elections, canceled IPOs, and another hectic week of earnings, you’re probably just as tired as we are!
Nov. 6, 2020
The Quick Fix
#BreatheInBreatheOut — Though we still haven’t reached a conclusion to the 2020 presidential election, it’s important for investors to remember the basics.
#SquashedAnt — After much hype and speculation, disaster has befallen Ant Group after its record $34.5 billion IPO in Shanghai and Hong Kong was suspended.
#UberLyft — Uber and Lyft stocks surged this week as Proposition 22 confirmed gig economy companies can continue to treat workers as contractors.
#MoreEarnings — The busiest week of the quarter might be over, but we still have more than enough earnings to keep our analysts up at night.
#AndFinally — Tim Cook is taking over; Apple TV launches on gaming consoles, and Spotify announces standalone streaming on the Apple Watch.
Whether it’s a pandemic or an election, the world spins on and on regardless. However, it’s easier said than done not to worry about the impact of these things on your finances.
“Will the election affect my portfolio?”
Presidential elections always feel like a game-changer for the stock market. The markets have soared this week, but there is little rationale behind it other than ‘what ifs and buts’ regarding who holds the Oval Office and the Senate. Whatever the outcome of this election ends up being, it’s important to remember the words of our recent podcast guest Morgan Housel: “Presidents tend to get too much credit/blame for market returns!” In the long-term, elections have little bearing on stock growth, so don’t react to it. Historically, whatever losses or gains that are made in the short-term after an election are typically balanced out in the long-term. There is also a causality in that when one group of stocks benefits from a certain candidate, others could suffer. In the end, timing the market based on short-term events rarely works out, unless you’re the luckiest investor alive. Granted, the whole COVID thing has tossed any historical data in the air, so who knows what to expect…
Bet you didn’t know
The ‘most successful’ president in terms of annual real total market return was Calvin Coolidge, who held office from 1923-1929. #Coolidge2024 anyone?
Trouble is brewin’ in the Far East after Ant Group’s record-setting initial public offering in Shanghai and Hong Kong was suspended.
Will Ant Group ever go public?
Although there’s likely a proverb out there somewhere about the smallest ant being capable of influencing the greatest change, I’m not sure that it would apply here. In fact, Ant Group was set to raise a jaw-dropping $34.5 billion via its IPO in Shanghai and Hong Kong on Thursday before Chinese regulators swept the rug out from under them. The move comes after Beijing implemented new rules that require internet platforms to provide at least 30% of the funding of their loans to consumers and to cap said loans at $44,843, but Ant current only funds 2% of its total loans with the rest coming from other sources such as banks. The Alibaba-backed group must now completely revise its Hong Kong IPO prospectus and this could severely impact its lending business, which drove 40% of its sales in the first half of 2020. It’s unlikely to keep them out of the public sphere forever, but according to the firm, it could be between 6 months and 2 years before it can make its public debut.
Bet you didn’t know
The Chinese e-commerce giant and unofficial MyWallSt sketchy-package-provider, Alibaba, owns a 33% stake in Ant Group. Its stock fell 7% on Tuesday after news broke about the suspended IPO.
Uber and Lyft received a much-needed win in the state of California this week after Proposition 22 results sent shares soaring
Employee gym benefits? Uber drivers don’t even Lyft…
Californians took a day off from surfing to weigh in on Proposition 22 and voted in favor of a ballot measure that exempts Uber and Lyft drivers from being classified as employees. The car-booking companies faced accusations for violating state labor laws, but it has been ruled that drivers will be considered as contractors and not as human bei… — I mean, employees. However, they are entitled to minimum earnings and vehicle insurance now, but no other employee benefits. Gig economy companies Uber, Lyft, DoorDash, Instacart, and Postmates (soon to be acquired by Uber) backed the Proposition and raised $203 million in support of it. The contractor-driven model is essential to Uber and Lyft’s business as neither has reached profitability yet, making avoiding costly employment benefits paramount to their survival. Is this a good business model or will it drive their customers away? Democratic presidential candidate Joe Biden got in on the discussion and stated that ”gig economy giants are trying to gut the law and exempt their workers.”
Bet you didn’t know
Uber has many services, but the cutest has to go to UberKITTENS, which allows users to hang out with cats and dogs across seven states in the U.S. with the aim of promoting pet adoption. **Packs bags and books flight**
Not quite as busy as our last edition of the Five On Friday, but there were still plenty of earnings for the MyWallSt analyst team to dig through during election week.
So, how did these companies do in Q3?
The Good ?
Arista Networks Q3 earnings report topped expectations with adjusted EPS of $2.42 a share on revenue of $605.4 versus $2.22 a share estimate on revenue of $580 million. The computer networking company cited an improved business environment as staff worked with clients and suppliers to navigate the pandemic to ship 40 million cloud networking ports this quarter.
Cloud is King and Cloudflare confirmed it with its Q3 earnings, reporting revenue of $114.2 million, beating Wall Street’s analyst’s consensus forecast of $103.2 million. The online travel company had a loss of $0.02 a share, versus a loss of $0.05 expected. The cloud-based networking service added ‘100 net large enterprise customers’ in Q3 bringing the company’s total customers to 3.2 million, of which 100,000 are paying users. Cloudflare forecasts revenue of $118 million for the quarter ending in December.
Down, but not out, GoPro reported that its third-quarter net income was $3.31 million or $0.02 per share, compared to a loss of $74.81 million or $0.51 per share in the prior year. Though it gave nothing away in its press release, it’s clear that a renewed focus on subscribers, which surpassed 500,000 last month, as well as strong sales in its HERO9 Black camera are helping to turn things around at the beleaguered camera-maker. Comeback anyone?
Dating might be hard, but making money off of singles on dating apps appears to be easier, after Match Group beat estimates with net income of $132.1 million, or $0.45 a share, with its Tinder brand taking in the lion’s share of subscribers at 6.6 million. Despite glaring issues with dating early into the pandemic, it looks like global adoption to life under COVID is resulting in a re-surging in dating usage, so don’t be surprised to see Q4 earnings top estimates as well.
Mercado Libre smashed its Q3 earnings expectations this week, after reporting net income of $15 million, or $0.28 per share, while revenue jumped to $1.12 billion. This growth is largely attributed to the company’s consolidation of its first-mover foothold in the previously underserved South American market, becoming the go-to service for e-commerce and payment solutions at a time COVID-19 has accelerated the need for such alternatives.
Another software winner in the time of COVID, Paycom beat the Street with Q3 earnings of $0.70 per share on revenue of $196.53 million, up 12.3% year-on-year (YoY). As a leading player in Human Capital Management needs, Paycom has cited its products’ greater value proposition versus competitors as a key driver behind growth, and with just 5% market share, there is room for a lot more.
What better time to become profitable than in the middle of an election, within a pandemic? Roku earned $0.09 a share on sales of $451.7 million despite expectations of losses as high as $0.40 per share. Thanks largely to heavy investment in international expansion, Roku now boasts 46 million user accounts. The brand-agnostic streaming service is only going to get bigger as lockdowns continue worldwide and streaming services such as Netflix and Disney vie for space.
In the same week that PayPal failed to impress investors with earnings forecasts, competitor Square boasted impressive gross profit growth of 59% YoY to $794 million. The driving force behind this growth is Square’s flagship Cash App, which saw gross profit rise 212%, and as more people opt for cashless transactions in the midst of a pandemic, the use of cashless solutions such as Square is only going to increase.
The New York-based video game publisher smashed expectations after reporting adjusted EPS of $2 on net bookings (the net amount of gaming products and services sold digitally or physically) of $957.5 million, up from $1.93 a share on net bookings of $950.5 million a year earlier. With the next generation of Sony and Microsoft’s game consoles coming out this month ahead of the holiday period, and global lockdowns ongoing, the future looks promising for game developers.
The Trade Desk
The Trade Desk (which actually deals in advertising, not stocks), came out with quarterly earnings of $1.27 per share on revenue of $216.11 million, far surpassing its year-ago performance and representing an earnings surprise of 159.18%. As usual, this growth is COVID-related, as the company cites the virus’s forcing of companies to take a more deliberate and data-driven approach to advertising after suffering so much disruption back in March and April.
The (Not So) Bad ?
The Tex Mex restaurant chain reported revenue of $2.8 million and $0.14 per share, compared to a loss of $1.8 million or $0.11 a share in the same time period last year. Chuy’s remains hopeful for the future and stated “that based on the steps we’ve taken at the onset of this pandemic, we are standing on a solid financial footing and continue to aggressively navigate this COVID environment.”
It was a mixed quarter for the healthcare software provider, with revenues up more than 20% from the year-ago period but losses widening too. CEO Seth Blackley seemed upbeat about the company’s performance, however, citing the addition of new partners in the quarter bringing the total up to eight in 2020 as reason to be cheerful.
The beleaguered smartwatch-maker isn’t setting the world alight after reporting adjusted losses per share of $0.03 on revenue of $363.9 million, though it did manage to top somewhat conservative Wall Street estimates. The company cited strong e-commerce activity, likely due to people taking up more cardio exercise amid continued gym closures. Fitbit has yet to close out its acquisition by Google, which was announced last November.
Though still impacted by the effects of COVID-19 on retail and restaurants, Monster Energy reported the highest quarterly net sales in the company’s history last night, rising 9.9% year-on-year to hit $1.25 billion. In particular, management cited growth in e-commerce, club store, mass merchandiser and grocery sales as areas of strong performance, giving the energy drink maker a strong footing with over $1 billion in cash and equivalents.
Peloton shares fell some 7% after the bell last night, despite the company reporting on yet another blow-out quarter. Management now expects to hit $1 billion in revenue and add another 300,000 connected fitness subscribers by the end of the year, yet the market seemed displeased with the warnings “supply constraints for the foreseeable future” as the company struggles to meet demand. Not the worst problem you could have.
The Ugly ?
The world’s leading online travel company reported revenue of $2.6 billion for its third quarter, a reduction of 48% year-over-year. EPS was $12.27, down 73% versus the prior year, while reported room rates were down 43% year-over-year in Q3, an improvement from the 87% decrease it experienced in Q2 this year. Booking Holdings said it is making progress in reducing its staff by up to 25%, saving the company an annual saving of up to $300 million.
With Lady Corona still at large, was Eventbrite ever going to wow us? Not in Q3 anyway, after the event management firm topped conservative estimates to report a loss of $0.21 per share, or $19.4 million. There is some light on the horizon for Eventbrite as event organizers begin adapting to the reality of COVID, with management reporting a surge in online hosted events using Eventbrite software. However, without more live events soon, it’s hard to see much upside.
Earnings might have been on the money, but PayPal’s forecast for Q4 of adjusted earnings to grow just 17% was far too conservative for investors liking. Although CEO Dan Schulman said Q3 has been ”one of the strongest” quarters in PayPal’s history, with the addition of 15.2 million accounts, growing uncertainty surrounding stimulus and lockdowns leaves the company cautious about spending growth in the lead up to the holiday season.
Unsurprisingly, Planet Fitness continues to struggle under the effects of lockdown, with revenue dropping close to 37% from the same time last year and same-store sales decreasing 5.6%. Despite the fact that 95% of Planet Fitness locations are open, CEO Chris Rondeau said that they are experiencing a glut of pent up cancellations from when most of the locations are closed, but that the company will continue to invest heavily in its digital strategy.
As you might have guessed, pandemics aren’t good for casinos, leading to Wynn Resorts’ non-GAAP loss per share of $7.04, with total revenue down 77.5% year-over-year to $370.45 million. The company is confident that it can bounce back in 2021 thanks to the easing of restrictions in places like Macau — the Las Vegas of Asia — but without anything short of a complete return to pre-COVID life, it’s difficult to see how Wynn can regain profitability in the near-term.
Bet you didn’t know
Between rising COVID cases, the election, and earnings, there were more Q3 reports to sift through this week (21) than collective hours slept by our analysts team in the past 5 days — maybe, I’m not sure. Don’t fact check us!
It’s official, Apple is trying to take over the world. Not content with dominating the mobile and wearables markets, Apple’s TV app is naturally moving into the gaming console sector too. The media player will now be available on Xbox’s Series X and Sony’s PlayStation 5, which are hitting the shelves later this month. Apple’s mission is to make the streaming platform as universal as possible; it’s already accessible on Roku and Amazon’s Fire TV. Apple won’t be the only entertainment app on the upcoming consoles — Netflix and Disney’s Disney+ and Hulu will also be competing for gamers’ attention. Apple TV is a very competitively priced subscription service, at just $4.99 a month, though it is vastly lacking in content compared to other streamers, having become the butt of the joke at times. Not phased by the competition though, Apple generously gives the video application free to customers who purchase certain hardware products, including iPads and iPhones in a bid to keep them within the Applesphere.
Out for a run? Spotify’s users can now leave their iPhone’s behind
Finished watching Apple TV on your Xbox and want to listen to the Stock Club podcast on your Apple Watch via Spotify? Tim Cook’s world domination plan has got you covered after Spotify confirmed this week that it is rolling out standalone streaming on the Apple Watch. Users can now listen to Spotify through cellular or WiFi connection by streaming directly from their wrist to Bluetooth headphones or AirPods. Long-suffering Spotify users can now forget about their most urgent of first world problems and embrace the freedom of unencumbered wrist-to-ear streaming.
Bet you didn’t know
Spotify has fun with its end-of-year campaigns by crunching users’ streaming data. Our favorite advertisement asked ‘Dear person who played ”Sorry” 42 times on Valentine’s Day, what did you do?’
The Week In Numbers
is the latest in a long line of event dates set forth by Apple, when it is expected to unveil its new Macs and Apple chips.
HQ personnel at Nike will be terminated under the company’s latest restructuring plans.
worth of Amazon shares was sold by CEO Jeff Bezos this week, bringing his total stock sales this year to $10 billion.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.