The top stories from the market this week include Tesla’s new $100bn status, Big Tech’s healthcare aspirations, China’s virus concerns, earnings news, and more Baby Yoda inspiration.
Jan. 16, 2020
#Tesla100
Tesla (NASDAQ: TSLA) finally reached a market cap of $100 billion this week, making it the second-most valuable car marker on the planet and setting CEO Elon Musk up for a handsome payday.
What does this mean for Musk?
I feel like Tesla’s run in the stock market over the past 3 months is matched only by its consecutive weekly appearances in the Five on Friday — this makes 3. After the company overtook Volkswagen this week with its $100 billion valuation, Elon Musk must have been dancing — we all know he loves to dance. This is because the milestone could unlock the first piece of a $2.6bn compensation package for Mr. Musk, which is contingent on the firm sustaining the $100 billion value over both a month and six-month average. The company’s strong rally is dividing Wall Street analysts, however, many of whom believe the stock to be overvalued considering it is yet to post a profitable year. The sky-high growth is also causing short sellers to capitulate and buy the stocks back, fueling the run even further. All eyes will be on the company’s reported January 29th earnings call.
Bet you didn’t know
Popular Marvel Cinematic Universe character Tony Stark, a.k.a. Iron Man, was loosely based off of Elon Musk, with actor Robert Downey Jr. reportedly modeling his mannerisms off the CEO. Personally, I could just as easily see Musk as the supervillain in a volcanic lair.
#BigTechHealthcare
As the world continues to question Big Tech’s handling of private data, two of its biggest members made their intentions to expand into healthcare very clear this week.
How invested in healthcare is Big Tech?
When thinking of our most private, personal data, many of us probably think of our health information, right? Well, good news, because Sundar Pichai, the CEO of Alphabet (NASDAQ: GOOGL) and its Google subsidiary, has stated that health care offers the biggest potential over the next 10 years to use the company’s artificial intelligence. I’m not the only one with concerns over Google handling my health data, as U.S. lawmakers have also raised questions about the company’s access to tens of millions of patient records. Only a day before this statement, Amazon (NASDAQ: AMZN) filed to trademark ‘Amazon Pharmacy’ in Canada, the U.K., and Australia, making clear its intentions to expand its prescription drug sales on a global scale, tying in with the company’s 2017 acquisition of PillPack. There’s still a long way for Amazon to go, but don’t be surprised if in 20 years we all get our pills from an Amazon vendor.
Bet you didn’t know
The health sector in the U.S. is worth nearly $4 trillion; no wonder Big Tech wants a slice.
#ChinaVirus
Growing concerns in China surrounding its coronavirus outbreak have left the country’s travel sector in a precarious position.
How is the market reacting?
China’s biggest online travel agency, Trip.com (NASDAQ: TCOM), is waiving cancellation fees for trips to the central Chinese city of Wuhan as a deadly new virus sparks fear in the region. The decision on Tuesday was one of the first signs of an industry bracing itself for tough times, with the virus killing at least 17 people and sickening hundreds more. The company’s share price dropped 8% following the news, which also saw the Chinese hotel chain Huazhu Group (NASDAQ: HTHT) drop 11% and Wynn Resorts (NASDAQ: WYNN) fall 6% amid fears that the virus will cause a decrease in bookings across the wider region. The outbreak is expected to continue slamming Chinese and other financial markets, but economists say it may ultimately have more impact on sentiment than be a lasting negative for the economy or markets.
Bet you didn’t know
Between 2002-2003, it is estimated that the SARs virus cost the U.S. economy more than $7 billion due to losses in the travel sector.
#EarningsSeasonBegins
Earnings season is well underway here at MyWallSt, with Atlassian (NASDAQ: TEAM), Ericsson (NASDAQ: ERIC), and Netflix (NASDAQ: NFLX) all reporting this week.
So how did they do?
Atlassian
The software company reported better-than-expected second-quarter earnings on Thursday which sent its stock price soaring. The enterprise software maker’s earnings rose 48% vs. a year earlier to an adjusted 37 cents a share, with revenue climbing 37% to $408.7 million. However, guidance on earnings per share fell short of estimates at just 20 cents.
Ericsson
The Swedish telecoms equipment group reported a smaller than expected rise in fourth-quarter core earnings on Friday, despite it being ‘seasonally its best’ quarter. The company claims it has been hit by a slowdown in its previously surging U.S. business and higher costs, resulting in earnings which rose to 5.7 billion Swedish crowns ($600.19 million) from 2.6 billion a year earlier but were down from 7.4 billion in the previous quarter.
Netflix
The streaming giant crushed Wall Street’s targets for new subscribers and earnings in its fourth quarter, but its guidance was well below expectations. Netflix added 8.76 million new users on top of earnings of $1.30 per share, versus expectations of 7.8 million on top of $0.53 per share. However, the company missed out on domestic growth expectations with just 440,000 new U.S. subscribers, suggesting market saturation at home for the company.
Bet you didn’t know
There are now more U.S. Netflix subscribers (61 million) than U.S. households in 1960 (53 million).
#AndFinally
The force is strong with Build-A-Bear (NYSE: BBW). The toymaker has had an entirely unexpected rally of close to 70% in the past two weeks after it announced that it would launch a ‘Baby Yoda’ toy in spring 2020. There’s no point in pretending you don’t know who ‘Baby Yoda’ is at this point, as we’ve all come to love the fan-favorite character from Disney’s (NYSE: DIS) original show ‘The Mandalorian’, based in the ‘Star Wars’ universe. Officially named ‘The Child’, the toy has become so popular that Build-A-Bear, which was down 5% year on year, has turned its fortunes around by just associating with the cute little, eh, goblin, thing? Maybe Under Armour (NYSE: UAA) should create some ‘Baby Yoda’ themed shoes, with ears and all to help save its stock? Ok, maybe that’s a bit unrealistic… Either way, I’m long on ‘Baby Yoda’!
Why can’t I have one now?
Unfortunately, the one time Disney decided to put creative integrity before profit is the one time we all just want a ‘Baby Yoda’ toy, as the company delayed manufacturing so as to avoid spoilers.
Bet you didn’t know
It is estimated that by not making ‘Baby Yoda’ toys available for the holiday period, it cost Disney an estimated $2.7 million.
The Week In Numbers
1,000
jobs are to be created by Facebook at its London office this year in order to combat toxic content on its site.
3,000
people are estimated to have attended the World Economic Forum in Davos, Switzerland this week, including President Trump and Greta Thunberg.
$1.6 billion
was reportedly spent on advertising by Microsoft in 2019, in a bid to outdo competition to its ‘Teams’ software, such as Slack.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.