Week 30 Report - Matthew Hughes
Happy Friday! We had a busy earnings week this week. Join me this morning as we look back and digest it all!
Notable Earnings This Week:
Monday: Tesla, Lockheed Martin, Hasbro
Tuesday: Apple, Alphabet, Microsoft, AMD, Starbucks, Visa, UPS, General Electric
Wednesday: Shopify, Facebook, Ford, PayPal, Spotify, McDonald’s, Ford, Boeing, Pfizer, ServiceNow
Thursday: Amazon, Fortinet, Anheuser-Busch InBev, Pinterest, Twilio, Upwork
Friday: Exxon Mobil, Procter & Gamble, AbbVie, Caterpillar
- Although the markets are near all-time highs, it’s also jittery because of the drama coming out of China, where the CCP is cracking down on its own Big Tech firms and where China/US relations are heated.
Monday Global News:
Economies are built on growing populations. America’s demographics, exacerbated by Covid-19, are going in the wrong direction. https://t.co/YTB29O7zaI
— Real Time Economics (@WSJecon) July 25, 2021
- In half of all states last year, more people died than were born (up from 5 states in 2019).
- Early estimates show the total U.S. population grew 0.35% for the year ended July 1, 2020 (the lowest ever documented).
- Years of strong immigration could help offset fewer births.
China confirms its intention to restrain the booming tutoring industry, slamming education stocks https://t.co/JpVpilDRZg
— The Wall Street Journal (@WSJ) July 26, 2021
- The Chinese state media published rules that would force tutoring services to be run as not-for-profit operations.
- New Oriental Education & Technology Group (EDU) down ~54%.
- TAL Education Group (TAL) down ~70%
- The Chinese government is trying to manage spiraling educational costs that have helped deter many families from having more children.
Crypto News:
The crypto markets were up aggressively over the weekend, with bitcoin (+12%) around $38,250 and Ether (+9%) at $2,300.
Business & Investment Banking News:
TSMC's CEO says it's in the early stages of considering a chipmaking plant in Germany to help address global chip shortages https://t.co/Zfgw6Ts71G
— Bloomberg (@business) July 26, 2021
- TSMC (TSM) is considering a new plant in Germany.
- The world’s biggest chipmaker is also continuing its due diligence around building a semiconductor facility in Japan.
- TSMC plans to spend $100 billion over three years ramping up its capabilities.
- TSMC is trading for 12.5x forward EBITDA, but 50x forward EV/(EBITDA-Capex), making it fully valued in my view, so I'm not overly excited by this investment.
Language learning platform Duolingo raises range to $95 to $100 ahead of $498 million IPO $DUOL $IPO #IPO https://t.co/ixoyu46TP7
— Renaissance Capital (@IPOtweet) July 26, 2021
- Duolingo just filed a S-1. High growth, high GP margins – 73%, doubled revenues in 2020, last valued at $2.4B. I have used and like the app, but seems like a bad return-from-home play looking forward and people return to being more busy and phone use drops.
Expected IPOs for grill sellers Weber and Traeger and a nearly $1 billion SPAC deal for BBQGuys highlight excitement for the “stay-at-home” trend https://t.co/Cz8VXO7nVI
— The Wall Street Journal (@WSJ) July 24, 2021
Matthew Hughes:
A quick look at Traeger ($COOK) shows that they’re growing at a 100% annual pace (with help from Joe Rogan, I’m sure). A contemplated $2.2B valuation would value the company at somewhere around 2x 2021 Revenues and possibly 8-10x 2021 EBITDA. This actually looks really interesting, despite the risk of the return-from-home…
Tuesday Global News:
Inflation expectations, an important signal of future inflation, have begun to ease in the past month, a development that should reassure the Fed in its prediction that the recent inflation surge will prove temporary
-WSJ
- Inflation expectations are what businesses, consumers, workers, and investors expect inflation to be over the next one to 10 years.
- Because such expectations can be self-fulfilling, economists consider this a key to where inflation is going.
- Expectations for inflation 5 to 10 years from now came in at 2.9% which is close to the average of 2.8% in surveys from 2000 – 2019.
Business & Investment Banking News:
Tesla reported no new sales or purchases of digital assets, according to its Q2 earnings presentation Monday, despite @elonmusk's concerns about bitcoin’s environmental impact. $TSLA
- Tesla reported a $23 million impairment on its bitcoin holdings.
- This is because bitcoin is considered an inventory asset, which means under GAAP, its value is recorded at the lowest price hit in the quarter.
- Record sales and expanding margins carried Tesla (TSLA) to its first $1 billion quarter of net income in its 18-year history.
- Profit more than tripled to $1.45 a share (beating the $0.97 estimate).
- The company widened its margins from core auto operations to 25.8%, from 22% in the prior quarter and 18.7% a year earlier.
- At $657.62 a share, TSLA trades at 10.8x forward sales and 57x forward EBITDA.
Matthew Hughes:
By all accounts, this was a big beat by Tesla, but the stock is up less than 2% in pre-market trading. Remember. the stock is so highly valued, that investors need to believe in a lot of value in self-driving, energy storage, and trucking too, not just near-term automobile sale profits.
Lucid Motors kicks off market debut with EV factory expansion plans.
- Lucid Group (LCID) completed its reverse-merger with Churchill Capital Corp. IV on Monday.
- CEO Pete Rawlinson said Lucid will be expanding its Arizona factory by 2.7 million square feet.
- Shares closed 11% higher at $26.83.
Wednesday Business & IB News:
Apple posted a record spring-quarter profit, as customers embrace new iPhones and investors look for signs its pandemic-induced success will continue.
-WSJ
- Apple (AAPL) earned $21.7 billion in profit for the period ended in June.
- Revenue rose 36% YoY to $81.4 billion, beating expectations.
- Its on pace for its best fiscal year ever with a projected profit of $86 billion for the 12-month period ending in September. That would be about 51% better than last year’s record.
- AAPL is trading at 21x forward EBITDA.
Microsoft reported sales and profit that exceeded analysts’ estimates for a 10th straight quarter, though investor optimism was tempered by concern about slowing growth in the software giant’s Azure cloud-computing business.
- Q4 sales climbed 21% to $46.2 billion (beating estimate of $44.3 billion).
- Azure revenue had gained 50% from a year earlier for the two prior quarters. Azure posted a 46% sales gain in this quarter.
- At $286.54 per share, MSFT is trading ~23x forward EBITDA.
Alphabet reported quarterly sales that topped Wall Street estimates, driven by robust digital ad spending
- Total revenue in the period was $51 billion (10.6% beat).
- Profit was $27.26 per share (estimate was $19.35 / share).
- YouTube sales jump 84% to $7 billion.
- Cloud unit revenue gains 54% while narrowing operating loss.
- Trading at ~17x forward EBITDA.
Thursday Global News:
U.S. GDP grew at a 6.5% annual rate in the second quarter, up slightly from earlier in the year. The economy’s size now exceeds its pre-pandemic level.
-WSJ
The Fed Reserve modestly upgraded its assessment of the economy in a policy statement released Wednesday. “The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered,”
-WSJ
- The Fed cut its benchmark interest rate to near zero back in March 2020 and has been purchasing at least $120 billion a month in Treasurys and mortgage bonds to stimulate the economy.
- Officials said the purchases would continue until they see “substantial further progress” toward their goals of low unemployment and stable inflation.
- “The economy has made progress toward these goals” hinting that the progress would be assessed in coming meetings.
- The central bank’s next meetings are Sept. 21-22 and Nov. 2-3.
Business & Investment Banking News:
Robinhood priced its IPO at $38 share, people familiar with the matter say, a lower-than-expected price for its highly-anticipated public debut.
-WSJ
Shopify's Q2 results beat estimates as e-commerce shines.
- Shopify (SHOP) reported Q2 revenues of $1.12 billion, up 57% YoY. Analyst expectations were $1.05 billion.
- Shopify also posted an adjusted net income of $284.6 million, more than double from last year’s Q2 result.
- After reporting, SHOP shares are flat.
- SHOP is trading ~65x forward gross profit
PayPal slumped in New York trading after reporting second-quarter revenue that fell short of analysts’ estimates.
- $6.24 billion in Q2 revenue fell short of the $6.27 billion analyst estimates.
- PayPal (PYPL) is battling the loss of EBay Inc, which has rolled out a new payments system after the two ended their longtime partnership.
- PYPL shares dropped >5% after-hours.
