ICYMI: Last Week in Market News (10/26/19)

Markets Gassed Up:

The S&P 500 neared another all time high on Friday on investor hopes of a trade deal and another FED rate cut on Wednesday. Sounds like the same bull case we’ve been hearing for a year or so. A mixed earning season seemed to boost stocks even more since investors expected Q3 to go a lot worse.

Earnings Snapshot: Paypal

On Wednesday, the digital payments company had their Q3 earnings call.

Highlights:

Revenue increased by 19% over the last quarter, with EPS increasing by 5% year-over-year.

Free Cash Flow increased by 20% year-over-year.

Customer engagement had also increased heavily during the period, with a 9% yoy increase in transactions per account, a 27% yoy increase in total payment volume, and a 16% yoy increase in active accounts. Two big announcements were also made today regarding Paypal’s prospects.

First, Paypal announced that China approved Paypal’s 70% equity interest in GoPay, allowing Paypal to be the first foreign entrant into the Chinese payments market (a big market).

Second, Paypal showcased its progress on Venmo, which includes new partnerships with many large merchandisers, an increase in users, a $400 million annual revenue run rate, and a new credit card on the way. After reviewing company financial metrics during the call, Paypal made their Q4 2019 and 2020 outlook clear, that Q4 only had more growth (16% year over year) in store and 2020 had even more coming soon (mid 20% growth).

Earnings Snapshot: Amazon

Amazon stock fell 9% as they fell short of revenue and profit expectations. In particular, their operating profit came in 50% below expectations due to higher than expected costs associated with Amazon’s transition from two-day to one-day shipping.

To make matters worse, the Pentagon renewed their cloud-computing contract with Microsoft’s Azure as opposed to Amazon Web Services. Not only does a Pentagon Contract represent $10 Billion in revenue, but it’s huge for credibility in the cloud space. Which service would you rather build your app on? The one used by the Pentagon? That’s what I thought!

Earnings Snapshot: Verizon:

Verizon displayed healthy subscriber growth in Q3, but failed to increase revenue much above consensus estimates. Verizon has lagged other telecom stocks as it invests heavily in a 5G transition that could make or break the future of the business. While management is hoping to have nationwide 5G coverage by the middle of 2020, they don’t expect to see significant revenue gains from the project until 2021. The potential upside? 5G represents a huge growth opportunity in edge-computing, a valuable market for consumers and businesses alike.

Other News:

GM labor strikes officially came to a close on Friday as a final agreement was reached between UAW and GM reached a deal.

Short-sellers of Tesla stock lost over $2 billion this week as the stock soared 20% after better than expected earnings.

Ken Fisher has lost over $2.7 billion in assets under management since he made the sexist joke heard round the world. Goldman Sachs is the latest high profile client to end their relationship with Fisher Investments.

The Longhorn Investment Team Weekly Insight: ACL Edition (10/7/2019)

ACL is a lot like the stock market. It’s surrounded by fraudsters, hyped up on cocaine (or low interest rates), and cost us all a lot of money last week. Luckily, our newest class of LIT Analysts are delivering you a digestible look at last week’s top market stories to provide you with S-tier water cooler talk.

WeSuck

WeWork was a startup that was supposedly worth $67 Billion. Wow. Private investors gave them Billions in cash at enormous valuations, and WeWork planned to raise even more capital via an IPO. What could go wrong?

WeWork canceled their IPO on October 3rd because investors weren’t buying into the company or the man behind it anymore. The best analysis on the epic rise and fall of WeWork has been chronicled by multiple publications, but we’ll summarize the key problems here:

Their CEO, Adam Neumann, was outed because of his horrible management style, corrupt decisions, and high level of control over the company. Couple a bad leader with a business that loses $2 billion a year in a looming recession, and people quickly realize you’re a giant fraud. That’s how you go from 67 to 0 real quick.

For some ridiculous Adam Neumann stories, click here.

China’s out…jk.. unless?

Two Friday’s ago, news that the US might delist Chinese companies from US stock exchanges came out and the Dow, S&P 500, and Nasdaq all plummeted. The White House wanted to reduce the number of ways that Chinese companies could access American capital. This would also harm American investors because it flared trade war tensions. Once President Trump announced that the US would not actually be delisting Chinese companies, markets recovered. 

Recession Fears Mounting

Since the beginning of the fourth quarter on Tuesday, the Dow has plunged more than 800 points or 3% after new data showed manufacturing hit its lowest level in a decade. Weaker consumer confidence only adds to economic concerns. Even further, the S&P 500 has fallen below its 50-day moving average, a key technical indicator watched by analysts.

While impeachment announcements by Nancy Pelosi added some volatility to the markets, losses were driven by the economic data. History (and an MIT study) suggests that non-economic events typically don’t have a significant effect on the stock market. Meanwhile, a recession is the primary fear of investors. Barclays claims that there is a 25% – 30% chance that a recession will hit the US in the next 12 months. 

Gold pushed higher into the $1,500s/ounce as investors ticked off the hours until the key monthly U.S. employment report, which ended up coming in below expectations. In the past two months, the amount of hirings has dropped each month by a total of about 60,000.  Nevertheless, the economy still added 136,000 jobs, so the news could’ve been worse. Shares also recouped some of their losses at the end of the week due to investor bets that the FED would cut rates (yet again).

The Other Trade War

On October 3rd, the discount broker Charles Schwab slashed commission price from $4.95 to zero in order to make investing easier and more affordable for everyone (they got disrupted). Since the inception of the Silicon-Valley startup Robinhood in 2013, it was only a matter of time as to when the other major brokerages would be forced to cut down to zero to maintain their clients. Schwab’s shares took a hit, falling about 10% immediately after the announcement, which was pale in comparison to their rivals TD Ameritrade and E-Trade who fell 26% and 19% respectively.

This price war was started last week when Interactive Brokers announced they were cutting commission prices in order that they don’t lose out on business to rising zero-commission companies like Robinhood. After taking a loss after that announcement, Schwab decided to be proactive and minimize their losses in the price war by following suit. A spokesperson for the firm has said the price will result in about a 3-4% decline of total annual revenue, a loss they anticipate will be offset by the future increase in client base now that their services are more affordable. Now that the brokerage tycoons are giving up fees one by one, the stock market will move towards a true zero-commission environment. Victor Jones, CEO of Dough, said this week, “In five years, paying commission fees for trading stocks will be as obsolete as paying for a landline.” 

Profit Fell Naturally

United Natural Inc. was supposed to have amazing sales of $21.5 billion for this year, but sadly, their dreams were spoiled. As the largest supplier of natural goods, United Natural Inc. expected profits similar to those of last year ($32.8 million). Its profits were cut in half – totaling $18.9 million. As more and more companies enter the organic food sector, consumers have more and more options to explore. United Natural’s stock plummeted 25.11% on Tuesday when this news broke out. This may be indicative of the recent nationwide decrease in manufacturing. More and more companies are being forced to cut down on expenses and this may foreshadow a contraction in the near future. 

The Longhorn Investment Team Weekly Insight: The Return (8/5/2019)

Welcome back to news town, baby! Sorry for the wait – our writers fought an epic battle with FINRA and lost. Learn about that here. We’ve missed a lot since late June, so we’ll begin by catching you, the reader, up on key highlights from July and then discuss what’s happening right now.

July in Review

In large part, markets reacted to two key developments last month: earnings season and the fed rate cut.

Earnings SZN: While a majority of S&P companies beat earnings and revenue expectations last month, corporate profits grew at a slower rate for the second time in two quarters.

Additionally, a majority of the firms that gave guidance for next quarter’s earnings weren’t very optimistic. Companies like Align Technologies, AMD, and Square were among the stocks that fell despite beating earnings due to poor guidance.

Overall, earnings were good enough to sends plenty of stocks to new highs thanks to everyone’s expectation of a rate cut.

FED Cut: The market soared when chances of a rate cut seemed high. Remember: the FED cuts rates when they think the economy might need a boost from cheap capital soon. It got to the point where stocks would go down in response to positive economic data because people wanted to be certain the FED would cut rates.

So, why would investors want the FED to cut interest rates so bad if cuts could signal trouble?

The short answer: a rate cut could serve as insurance if, say, the trade war worsened, or GDP growth slowed down (foreshadowing).

The FED ended up cutting rates by .25%. Markets tanked initially on the outlook that it may be the only time the FED cuts rates for a while. Additionally, some investors wanted a bigger rate cut and were disappointed. Stocks recouped their FED announcement losses the next day only to be pummeled again by… a worsening trade war and slower GDP growth.

Dirty August: Market Panic

Vix Today: +32%

Dow Today: – 800 points

On Thursday, Donald “Decepticon” Trump issued a 10% hike on tariffs on China. Markets fell off their record highs. China retaliated by letting the Yuan tank in value to stimulate exports.

“The less your currency is worth, the more you can export. “

China was probably thinking this

The president called out Xi Jinping for currency manipulation today. The administration hasn’t ruled out devaluing the US dollar as a countermeasure. Nobody is certain about what’s next, which is why everyone is selling. One thing’s for sure: the trade war is back on everyone’s mind and could reverse the economic outlook for H2 of 2019.

Fun Fact: Another trade war is brewing between South Korea and Japan. The two nations just removed each other from their preferential trade lists, which means it will become more expensive for the two nations to do business. The dispute goes back to disagreements over reparations for Japanese colonialism and related crimes from the early 20th century. Japan claims they already owned up to all of that stuff in a treaty from a long time ago. Sounds like some deep-rooted beef. And, like they say in Japan, beef is a dish best served hot!

The Big Picture: Is a Recession Coming?

The economy, what even is it? Here’s the lowdown. For simplicity, let’s say the economy is really just a sum of 4 parts: consumer spending, investments, exports/imports, and government spending.

Consumer Spending: It’s just people buying stuff. Consumer spending has been driving most of America’s GDP growth as of late. People are buying things!

Looks Good!

Government Spending: Government spending is high as usual, and it contributes directly to GDP. While budget deficits can be scary, that’s a whole other can of worms that we’ll open later. At LIT, we can only take so many worm cans in a day before we get sick. 😦

Imports/Exports: If you export more than you import, the net exports contribute to GDP. On the surface, Trump initiated the trade war in an attempt to improve America’s export balance. Instead, that deficit has widened. This isn’t necessarily because US exports have become less competitive, but it has a lot to do with slowing economic growth abroad and a strong US dollar.

Investments: The concerning parts of GDP right now are business and residential investment. Think of business and residential investment as the money spent on new projects that drive the economy forward like a new neighborhood or a new office building (those are the most creative examples we could think of).

Business investment is the G in GDP because without it, the economy doesn’t grow in the long-run according to any classical economist. Unfortunately, investments aren’t doing so hot.

Oof

While most of the economy is consumer spending, the business cycle is primarily driven by investment, either in the business sector itself or in residential housing. Neither look good.

Bloomberg

What’s causing lower business investment? Uncertainty from the trade war has left companies unsure of what their next move should be. With supply chains this disrupted, investment is dwindling despite the lower tax rates passed in 2017.

We’ll stop here without speculating too much. Let’s face it, we can’t predict recessions and neither can you, but the GDP picture sure is looking a little consumer-dependent.

Oh yeah, we know there’s more to economics than GDP, but we wanted to give an easy breakdown for all you simpletons in the audience.

Next Week: Market updates plus some industry focused stories as we get back into full swing leading up to the new school year. Get ready for a riot!

Longhorn Investment Team Presents: What Happened?

You’ve probably been asking yourself “why didn’t I hear from Longhorn Investment Team all July?” We have answers.

Bad News: We were tragically bulldozed by an authoritarian regulatory body and their corporate cronies for four weeks.

Good News: We’re back baby!

The Long Answer: It all started on a sweltering summer day inside the “mission control room” of an air-conditioned corporate office belonging to an unnamed financial services behemoth. In that room, one of our writers was “working” as an intern in their Investor Services department. Knowing that God came first, family came second, and LIT came third, our writer attempted to ask managers, employees, and even the kitchen staff for interviews to publish in the Weekly Insight.

Big mistake, bubba. Just for mentioning the Weekly Insight in these interview requests, our writer was sent to compliance – a word that the Deutsche Bank guys still screech at the thought of. You see, affiliates of any FINRA* member organization can’t just engage in OBA’s* willy-nilly. Approval from compliance must be obtained!

FINRA* = Financial Industry Regulatory Authority

That’s right, these jabronis don’t even have a word that starts with N in their acronym, and they are the clowns who govern this business? Unforgivable. In short, FINRA regulates any company that’s part of the finance industry including the unnamed broker-dealer.

OBA* = Outside Business Activity

Outside business activities are any extracurricular hobbies that could pose a conflict of interest with your job. For example, a blog about investing could theoretically fall into this category and be subject to approval from the firm (even though this blog doesn’t represent said firm in any way).

Back to the story! The writer submitted his OBA form to compliance. Compliance messaged the intern manager, “you up?” to which the manager replied, “yeh” to which compliance responded, “yeh so this blog is ok but definitely read it bc idk if there’s gonna be any wack posts in the future”

At this point, the drama intensifies. The manager faces a decision: that person could read the blog on an ongoing basis and allow it to be posted OR that person could just say the blog is an invalid OBA and not have to read it. That person chose the latter, and the Weekly Insight was cutoff. Nobody was allowed to crank out another issue.

An uproar ensued. The writer cried and cried, but he couldn’t win any sympathy points. He wallowed on the bathroom floor (his girlfriend had also just broken up with him) as he howled a howl of pain and sorrow.

But that dark chapter in LIT history has passed! We’re back, and we have some stories to cover. So, get ready for the hottest August in years because we’ll be back with some major updates. Plus, we’d love to catch up! Feel free to tell us about your most tragic moment from the summer. Message us on Facebook or reach out on our website. You can Instagram DM us, but that is weird.

See you tomorrow!

Longhorn Investment Team Weekly Insight: Independence Week Edition

If you think you deserve a “birth-week,” you better believe America (the home of the brave) gets its week too. It’s about time we stop focusing on Texas and discuss some critical headlines – beginning with a celebration!

S&P 500: 2,964.33 (+.77% and record close)

Markets soared Monday morning on the news that no new tariffs will be threatened after the G20 summit on Saturday. No timeline is in place for a trade deal yet, but the lack of disasters over the weekend still propelled the markets higher.

Taking the camera, and zooming out with the lens, we find that the S&P had its best July since 1955! Now we’ll kick off the month with a dirty scandal below…

Aye Deutsche Bag!

Deutsche Bank is basically the Goldman Sachs of Germany only much less scandal resilient. Once a bastion of multi-national finance, Deutsche Bank quickly became a Wall Street dweeb and recipient of the Black Planet Award (given to the least ethical company in the world).

So, what happened? $17 Billion in fines over ten years, one large resulting talent outflow, and now:

“At this point, Deutsche Bank AG’s biggest problem may be how many problems it has, how long they’ve gone on and how they’ve fueled one another. Four years of sliding revenue spawned four failed turnaround plans and a steady departure of senior executives.”

Steve Arons, Bloomberg

Scandal Highlights:

  • Selling whack Mortgage-Backed Securities in 2008 (financial crisis explanation here)
  • Manipulating LIBOR – an international interest rate used as the benchmark for calculating student loans to key financial products.

“cld you do me a favour would you mind moving you 6m libor up a bit today, i have a gigantic fix.”

Actual text from Deutsche Bank employee
  • Russian money laundering and involvement on the wrong side of the Mueller Investigation
  • Violating US sanctions against Iran, Libya, Sudan, and Syria
  • Criminal cartel charges in Australia
  • Involvement in the Danske Bank $200 Billion money laundering scandal in Estonia
  • Allowing employees to wave money out their windows over protestors on the street and throw fake money down at crowds of people protesting healthcare reform
  • Bribing clients
  • Failing to control workplace harassment in investment banking division
  • Hiring detectives to spy on critics

The moral of the story: financial institutions are built on trust. It’s no wonder rock-solid compliance is such a priority for banks now.

The Hong Kong Dilemma

Today minus 22 years, Britain ceded control of Hong Kong to China because that just makes way more sense on a map. ***there’s a huge but here***

BUT Hong Kong is not officially a Chinese city. Officially, Hong Kong is a Special Administrative Region. The only other region to receive such a specially administered title is Macau.

As Special Administrative Regions, Hong Kong and Macau largely share China’s diplomatic and national defense policies but have capitalist economies and independent political systems. There’s a lot of fine print involved, but that’s the gist.

BUT things could change because the PRC is trying to pass a law that would extradite criminals from Hong Kong. This would mean that if someone not from Hong Kong committed a crime there, they could be forced through the Chinese court system. As a result, chaos ensued…

While it seems nit-picky, human rights groups see extradition as the beginning of Chinese infringement of the “one country, two systems” paradigm that has lasted for 20 years. As I’m writing this, things have turned violent and protestors are storming the Legislative Council Building. We’ll post updates as the situation develops.

Other News:

Pier One doubled their losses in Q2 year over year – not because of e-commerce disruption but instead, flat out bad products. It will be closing 57 stores as a result.

Music mogul, Scooter Braun, purchased Taylor Swift’s former record label for $300 Million.

British theme park giant, Merlin Entertainments, was purchased by Blackstone and Canadian pension fund CPPIB for $6 Billion.

Reports surfaced of a poisonous substance (sarin) being shipped to a Facebook office. Last week, employees reported that employees were pooping on the bathroom stall walls at Facebook’s Tampa office. Take this news how you want.

That’s all for now! Be sure to like and share on Facebook if you think our writers should be allowed by their employers to keep making this content. #outsidebusinessactivites

Longhorn Investment Team Weekly Insight: The Texas Two Step (Part Two)

YEEEEeeeeeeeEEEEEE! Welcome back to the LIT Texas Two Step: Part Two. In this edition, we’re taking a tour across Texas… or the relevant parts anyway.

Brent: 65.05 (+.86%)

WTI: 58.87 (+.1.80%)

No, Brent is not a Kappa Sig. Brent and WTI refer to the two most popular grades of oil, which are commonly used to quote oil prices.

So, what’s the difference? WTI (or West Texas Intermediate) refers to the price of North American oil, while Brent represents African, European, and Middle Eastern prices.

Why are the prices different? All else equal, WTI is about $2 to $4 more than Brent because of its lower sulfur content – that’s the quality spread. But the prices can also fluctuate due to political events, which is why Brent is more expensive right now. Because of rising tensions between the US and Iran, oil in the middle east is seen as less secure, and Brent prices rose relative to WTI as a result. India just promised to increase oil production to increase supply in the Middle East and stabilize Brent prices. Thanks India!

Now that you’ve met oil, we’ll introduce you to her boyfriend, Houston.

HOUSTON (Magnolia City):

Notable HQs: Phillips 66, Sysco, Haliburton, Waste Management Inc, AstroFest

Business News: Kicking things off with a tragedy, the beloved local retailer, Southern Importers, is shutting down after 104 years of selling party supplies and holiday decorations. I know what you’re thinking – what could possibly have gone wrong? To make a 104-year story short, the internet happened.

While most big box retailers have kept up with the explosion of e-commerce by becoming omnichannel, the retail apocalypse is still no joke for local businesses that don’t have the capital to adapt to such disruptions. But hey, everything is 40% there this week so take advantage!

Houston midstream player, Archrock Inc., just inked a $410 Million buyout of Elite Compression Services LLC to increase their stake in the Permian Basin. This acquisition is nothing compared to the multi-billion-dollar buyouts of Anadarko, but it is important to look at in the context of the broader liquid natural gas (LNG) market.

LNG demand is skyrocketing due to China’s transition away from coal and transitions in Eastern Europe’s natural gas grid. Take that with the ridiculous supply of natural gas in the Permian, and you see way higher demand for natural gas shipping companies – something both Archrock and Elite Compression Services specialize in.

We can’t end Houston without mentioning some cuisine related blurb so here it is: Gabe and Sam are opening five different delivery-only restaurants in Houston. Let us know in the comments what you think about such a concept (estimated food delivery CAGR=32% till 2021).

Fun Fact: More people eat out in Houston than any other city in America!

AUSTIN (Bat City):

Notable HQs: Dell, Chuys, Whole Foods, Longhorn Investment Team

Business News:

CONTROVERSY! The Austin City Council passed a law that allows homeless people to loiter in the city as long as they don’t act aggressive. In other words, homeless people can hangout wherever without the police making them go stand somewhere else. Some people say that this will be terrible for the economic community because it could reduce tourism or lower property values. Others argue that the government shouldn’t criminalize people for having nowhere to stay. Leave your hot take in the comments.

Bad News: Rents for single-family homes in Austin are hitting new highs (+3.5% yoy). As a result, many potential buyers and even tenants are being priced out of the housing market. Austin is no stranger to gentrification. I mean just look at the place.

Good News: Unemployment is at its lowest level in 20 years in the 512 thanks to the continuing influx of high-tech yuppies. Facebook and Apple’s new offices in the area are just some of the high-profile examples. Even the vape unicorn, Juul Labs, is moving its operations to ATX. Brent from Kappa Sig just got hired on as their new product tester.

Fun Fact (from someone else’s travel blog): “During football games at the stadium, UT-Austin fans display the Hook ’em Horns hand sign.”

DALLAS (Big D):

Notable HQs: AT&T, American Airlines, Southwest Airlines Exxon Mobile, McKesson

Business News:

We’ll open with highlights from new reports from the Dallas FED. They find that Texas is not immune to the prolonged trade war, as retail sales slowed in June, but unemployment is low and the service sector as a whole has performed well over the past couple months. Roughly 40% of manufacturers reported poor outlooks due to trade uncertainty.

Dallas airports just keep flying higher, as the government just invested millions into new taxiways in Love Field and the DFW airport. Alliance, the all-cargo airport in DFW is in the midst of a $260 Million renovation that will help companies like FedEx and Amazon fulfil orders quicker.

A recent study by Emory University found that the Dallas Cowboys have the best fans of any sports team ever. Case closed.

Fun Fact: Dallas is home to the first ever microchip and the frozen margarita machine.

Longhorn Investment Team Weekly Insight: The Texas Two Step (Part One)

Howdy partners! It’s a big world, and a lot of stuff is happening all over the place! Covering global markets is great and all, but this week we’re reeling it in to exclusively discuss issues closer to home. This edition of the Weekly Insight will be a two-part hoe-down consisting of the juiciest business news in Texas.

Whataburger Haws its last Yee?

Last week, PE firm, BDT Capital Partners, bought the beloved Texas burger joint/4:00 AM oasis for an undisclosed amount, and Texans were not happy. Why would Texans be mad? You know why.

Whataburger is OUR restaurant! JJ knows it, the governor knows it, and so do you! Wait a minute, Whataburger is in ten states already… and they agreed to the buyout because they wanted to raise money to expand even more…

Nevertheless, the essence of Whataburger’s brand lies in its Texas roots, which is why some see their regional distribution of restaurants as a cheeky method of creating customer loyalty. And what’s more powerful than a loyal, Texan fanbase? Maybe lightsabers, but Texans love lightsabers so that’s not even a valid comparison.

Whataburger has 800 stores that do a combined $2 Billion in annual sales, but some fear the chain will lose brand loyalty and in turn revenue by expanding. Just look at what happened to In-N-Out when they came here. The consensus seems to be that as long as Whataburger doesn’t make any rapid or drastic changes to their menu or brand, fans should remain loyal.

We also recommend BDT keeps the doors open late so Whata can remain the number one destination for parking lot fights in Keller.

The Schlitterbahn Savior

On Thursday, amusement park giant, Cedar Fair ($FUN), purchased the beloved Schlitterbahn locations in New Braunsfels and Galveston for $261 Million. Ohio based Cedar Fair is financing these acquisitions with $500 Million in unsecured debt.

Schlitterbahn New Braunsfels has achieved the “Best Waterpark in the World” award (a big deal for waterparks) 21 years in a row. The two Texas properties combined for $68 Million in 2018 revenue.

Cedar Fair also plans to invest $10 to $15 Million in those parks over the next few years, which could be a boon to both the park and summer tourism in the Comal River area.

“They are the cornerstone of our summer tourism season, without a doubt […] The rivers are our brand, but Schlitterbahn is the catalyst for the industry’s success.”

Greater New Braunfels Chamber of Commerce President and CEO, Michael Meek

The backstory: In 2016, a ten-year-old boy was killed on Schlitterbahn Kansas City’s crazy attraction, Verruckt – which is German for “crazy” and also a Call of Duty zombies map. As a result of the tragedy, the ride was demolished, and Schlitterbahn paid out over $20 Million in lawsuits.

In short, the parks were in major financial distress. Hopefully the Cedar Fair buyout will help the park pay-off its $180 Million in debt and improve the guest experience.

Changes to the Law

Governor Abbot just signed and vetoed a lot of bills. Here are some of the highlights:

  • Brass knuckles and clubs are now legal and considered a valid method of self-defense. It’s about time we clear out the overcrowded prisons that were filled with wrongfully convicted brass knuckle-heads.
  • It is now legal to take home craft beers in Texas. If you’re wondering what this actually means…well it’s just as insignificant as it reads. So yeah, you’re allowed to take home beers from a craft brewery now.
  • Red light cameras are now banned. Vroom vroom haha.

Check out the other 474 laws that were passed here.

Buckle up for the Second Step

On Thursday, we’ll complete our Texas edition with an update on some of the major companies headquartered in The Lonestar State. Be sure to check in. Yee haw!

Longhorn Investment Team Weekly Insight: It’s June! Edition (6/10/2019)

Wow is this edition gonna be a hot one or what? It’s June, the fake meat is sizzling on the grill, and Jerome Powell is an old man. That’s just finance for ya. In this episode, we have some serious content to dive into so let’s get started.

This Week in Economic Uncertainty

Friday’s Jobs Report: Non-farm payrolls added 75,000 jobs in May, coming in far below the 180,000 number everyone expected (wage growth was also stagnant). Compare this to the ridiculous run of job and wage growth over the past decade, and some are calling Friday’s DOL report “the clearest evidence yet” of a slowdown.

Bond Yields: 10-year US Treasury yields are hitting new lows for the year around 2%. Lower bond yields can be a sign of economic uncertainty because it means there’s higher investor demand for low-risk debt.

The market reacted to this news by inking its best week since November. As we’re writing this, the S&P is continuing its push toward the 2,900 range. Markets have reacted positively to the improved chance the FED will cut rates and the seemingly quick resolution to the Mexico situation.

However, President Trump just threatened that he could reimpose tariffs on Mexico if he saw fit, even after Mexico agreed to increase migration control measures. He also threatened to impose another round of tariffs on China unless Xi Jinping agrees to meet with him in Japan later this month. It seems that G20 meeting didn’t go too well after all. Click here to find out more about the causes and effects of the trade war everyone is talking about.

“Tariffs are a beautiful thing when you are the piggy bank”

Economists Everywhere

Zucc on this, Big Tech

Monopoly Man attends Google’s congressional hearing

“Antitrust law now stands at its most fluid and negotiable moment in a generation,”

Daniel Crane, law professor at The University of Michigan

Antitrust laws are designed to prevent companies from becoming too powerful. As a result, the Department of Justice has the authority to block mergers and acquisitions, or in extreme cases force divestitures to prevent monopolies, which hurt society in a number of ways:

  • Higher prices for consumers
  • Less innovation in key industries
  • Fewer small businesses
  • Outsized corporate influence on democracy

For the past 40 years, Washington has remained pretty lax in regard to antitrust enforcement and would defer the fate of large companies to the free market unless “consumer welfare” was at stake. The last so-called monopoly to be broken up was AT&T in 1982.

That paradigm has been flipped on its head, as both conservative and liberal policy makers have become weary of four tech giants: Google, Apple, Amazon, and Facebook. Last Monday, the Federal Trade Commish (FTC) and the Department of Justice (DOJ) launched a series of investigations and suits against Silicon Valley’s biggest firms, causing the four stocks mentioned above to lose a combined $130 Billion in market cap in just one session.

Because tech antitrust is a hotly debated topic (it’s even the topic at the national high school debate tournament this month) with large ramifications over the stock market and our daily lives, we’re going to go a little more in depth on this subject. Before we dive into specifics, here are a few general notes to be aware of.

First, monopolies/oligopolies are ubiquitous. The top four airlines control 75% of the market. The top four US education companies control around 90% of the market. The top four railroad companies control 90% of the market. The airplane manufacturing industry is a duopoly. 90% of US media outlets are owned by six companies. There are plenty of other examples in important industries, but you get the point: massive tech companies are bringing the debate to the table, but their level of dominance isn’t unique – it’s just more controversial.

Second, in this renewed antitrust showdown, there are three factions:

  • Team Pocahontas: This squad wants Alphabet, Amazon, Facebook, and Apple to split up into a bunch of smaller companies. It’s widely considered to be more of a catchphrase than a realistic solution, but many Democratic Party leaders take that stance.
  • Team Whatever: Free market chillers don’t call for any additional regulation and believe the current system will keep tech companies in check.
  • Team It’s Complicated: Centrist policymakers are calling for heightened regulation but oppose complete breakups of the companies in question. Some level of government intervention is garnering bipartisan support, especially when it comes to digital platforms with media influence – as both parties believe the internet is fueling voter misinformation and political polarization while eroding everyone’s personal privacy. These issues could be mitigated with forward thinking legislation.

Third, speaking of forward looking legislation, Europe has been on the antitrust wave for a while. The EU has slapped Google with three antitrust fines in three years, and they’ve also passed forward looking tech governance policies such as GDPR and a set of AI Ethics Guidelines.

With that, we’ll dive into each of the four tech companies’ legal controversies, beginning with Apple.

Apple: We’ll be quick here because Apple doesn’t hold monopoly status in any of their business units with the possible exception of their App Store. Basically, when an app developer wants to put their app on the App Store, they have to give Apple a 30% cut of the revenue, which is debatably too high and debatably squanders innovation. Even if Apple is forced to slash this commission, the App Store only makes up 5% of Apples business so it wouldn’t translate to a major loss for shareholders.

Apple’s counterargument: we should be able to charge 30% because the app store is awesome and we know developers will have to use it to reach a wide audience in a secure manner. Google has the same response when their Play Store is called into question.

Google: While Google has clear dominance in search and mobile OS, Google only accounts for 41% of the digital advertising business, and they seem to be losing ground to Facebook and Amazon (the other companies on this list). The Federal Trade Commission (FTC) investigated Google’s search platform in 2013 without imposing any penalties.

One common criticism of Google’s parent company, Alphabet, is their tendency to acquire both competitors and players in other tech-related businesses. By simply buying innovators, some argue that this practice stifles competition in important future markets. However, the biggest point of contention lies in Google’s search business, which has been accused of biasing results toward Google’s products and subsidiaries.

One issue with calling Google a monopoly that harms consumers is the fact that most of their key services are free and easy to access. In fact, there are very valid arguments that each of the companies in question have provided far more benefits to the general public than harms, and of course none of the major tech CEO’s see their firms as monopolies.

Google just acquired Looker, a data-analytics firm for $2.6 Billion to boost their cloud offerings. They didn’t have any trouble getting that approved, so perhaps antitrust concerns are overblown by the media (at least in the US).

Amazon: Bezos is far from creating a monopoly in the retail sector, but they do account for almost half of online sales. The claim here is that Amazon should not be allowed to advertise its own private label products on its marketplace because it undermines other retailers (Amazon’s private label brands account for 1% of sales).

Most regulators believe making any moves here would open a big can of worms that would harm small to mid-size retailers with private labels in the process.

Facebook: They’ve already set aside $3 Billion to pay the FTC’s fine over failing to protect user data and prevent false information in the Cambridge Analytica debacle. Antitrust is a separate issue, though.

Again, it’s hard to call Facebook a harmful monopoly when their service is free. Officials are more concerned with the ridiculous amount of data Facebook has on us. Have you ever been like “OMG I was just thinking about popcorn and then got an Instagram ad for popcorn!”? It’s horrific, isn’t it?

Well, that’s exactly why some lawmakers want Facebook to sell-off What’s App and Instagram. Zucc’s rebuttal: it’s easier to monitor and control data on all of these sites when they’re under one umbrella, and monitoring social media is necessary to prevent another Cambridge Analytica.

Other News:

Big Acquisitions: Raytheon and United Technologies announced an all-stock deal to become a massive aerospace and defense giant worth over $100 Billion. United Technologies is spinning off its Otis Elevators and Carrier AC business units in the process. Salesforce acquired data-analytics software, Tableau for $15.3 Billion in an all-stock deal, a move that could be “transformative” for the CRM leader.

Beyond Ridiculous: We’ve already discussed how overvalued Beyond Meat, the fool’s meat producer, has become since its May 2nd IPO. After their first earnings report last Thursday, they’ve soared to over $170 at the time we are writing this. That means a fake meat company has increased 580% since their IPO. We’ll update you with reasons for this historic rally as well as buy/sell recommendations in our 2019 IPO report, which we update frequently to give you the scoop on recent stock market debuts.

Other IPO News: Slack filed for a direct listing today. It will be interesting to see how they perform; they already warned investors of slowing revenue growth – indicating they might fall to the same Robinhood fate as Uber and Lyft.

How much money did you make/lose on Beyond Meat? If the answer is $0, you are smart with your money. See you next week when we blast you with more info just in time for father’s day!

Longhorn Investment Team Weekly Insight: NBA Finals Edition (6/3/2019)

We know, we’re a little late with this week’s edition, but so was the Raptor’s comeback last night so it’s fitting. The stock market hasn’t had a May this bad since 2010 – the last year Lebron James wasn’t in the finals. In this edition of the Weekly Insight, we’ll be discussing drivers of the recent slump in the markets.

DJIA: $24,815.04 (-1.41%)

S&P 500: $2,752.06 (-1.32%)

NASDAQ: $7,453.15 (-1.51%)

BITCOIN (BTC): $8,735.17 (+1.67%)

The Bitcoin Comeback

Throwback to 2017 when you were trading bitcoin and bumping Bodak Yellow all day long. What a time to be alive! Since Bitcoin’s peak at $19,783 in December of 2017, it crashed to as low as $3000 in December of 2018, and has rallied over 122% to $8,500 over the past three months. This begs the question: why did bitcoin bounce back harder than the Warriors in the 3rd quarter while the stock market has incurred 6 straight weeks of losses?

What sparked the rally?

  • An April Fool’s joke: On April 1st (the generally accepted date in April in which pranks are permitted), some jokester tweeted that BTC was approved by the Securities and Exchange Commission, which could have triggered bitcoin’s surge. I guess people are still running with the joke?
  • Bitcoin as a Haven Currency: Because bitcoin doesn’t correlate with the stock market or other foreign exchange rates, some speculate that bitcoin has rallied because the market has done so poorly. In other words, people are comparing a digital currency to a traditional “safe asset” like gold or silver. Regardless of whether or not this sort of investor sentiment is a driving force, bitcoin is not intrinsically similar to gold or silver because bitcoin has no intrinsic value and it doesn’t have significant recognition from major governments.

While some people use Bitcoin for actual transactions, merchant services only accounted for 1.3% of total bitcoin activity last year, meaning most people are just using it to trade speculatively or buy illegal stuff. Because bitcoin is so volatile, many analysts argue that bitcoin fundamentally does not serve as a reliable source of currency – it doesn’t offer a reliable store of value and it is hardly used to buy and sell things (that are legal anyway).

Why is Bitcoin so volatile?

  • Scarcity: Because there are only so many Bitcoins available, they’re very scarce, meaning higher demand can easily outpace supply. In other words, the less of something there is, the more people will pay for it – especially if they believe said “thing” has value all of a sudden.
  • Computers: Since a large percentage of bitcoin traders rely on algorithms with preset stops and limits, sometimes cascades of buy or sell algorithms are triggered at once when BTC hits a certain price, which ultimately means the market reacts faster to certain trading metrics.

As we were writing this, BTC fell over 5% in just one hour – that’s why nobody will use bitcoin for normal transactions. Imagine driving to the grocery store to buy groceries with your bitcoin, but by the time you’re checking out you can’t afford them!

Trade War Updates: Things go South

We decided to move trade war discussions to the bottom because they’re getting old, but we can’t talk about the recent downturn without mentioning worsening trade talks with China and the announcement of tariffs on Mexico. Let’s start with this whole Mexico situation, because that’s where we got the pun in our headline from.

Last Thursday, Donald DRUMPF President Trump announced a 5% tariff on all goods from Mexico. That tariff will rise by 5% every month (capping at 25%) until the country “substantially stops the illegal inflow of aliens coming through its territory.”

Big Losers

Detroit: Who else would it be? Almost every US car manufacturer depends on auto parts from Mexico, which is why if the new tariffs hit 25%, vehicles prices would increase by $1,300 on average and production could dip by as much as 18%. How inconvenient! Just as car manufacturers are trying to pivot to the next generation of electric and autonomous vehicles, they get slapped with billions in extra annual costs.

NAFTA’s replacement: Renewed border tensions came about just as congress was beginning to pass the new free trade agreement for North America: USCMA. Nothing derails a trade agreement like instigating a trade war.

Consumers: The FED Bank in New York estimates that total tariffs could cost the average American household over $800 this year.

Unsurprisingly, Mexican President, Andres Manuel Lopez Obrador, warned that if a deal isn’t reached within 10 days, they will retaliate with tariffs of their own.

China Drama Continues

Orange Man’s President Trump’s new wave of China tariffs went into effect last week, and Xi Jinping as retaliated with tariffs of his own. The Chinese government also announced that they would retaliate against the government’s Huawei shutout. The bleak picture for trade negotiations has prompted some hefty selloffs, although the S&P isn’t nearly as low as it was last Christmas.

Mark your calendars for June 8th and 9th, there won’t be any finals games, but the G-20 summit will be on like Donkey Kong (he’s a Nintendo monkey). At the G-20, Trump and Xi Jinping will meet for the first time since talks froze. A recent policy paper signaled that China would be willing to negotiate still as long as policy makers could reach “a fair deal,” so things are still up in the air.

Coming Soon:

We heard the news today; we’ll be giving our takes next week. Stay tuned for big tech’s great reckoning and whatever else happens this week.

The Longhorn Investment Team IPO Report (2019)

Welcome to the Longhorn Investment Team IPO report! We continuously update this page, so you always have the latest info on the IPO class of 2019. Strap in because we’ve got a lot of ground to cover from deadly e-bikes to total cow disruption to publicly traded pyramid schemes (and we could mean that non-ironically)!

General Trends

We’ve had a big second quarter. Q1 of 2019 was unusually quiet for IPOs, with an 44% decline by deal number year over year. This was primarily due to geopolitical uncertainties like the trade war and the government shutdown. As trade talks supposedly started to improve over Q1, we saw the lion’s share of IPOs occurring in Q2 (or right now). Now that trade talks have gone south again, it’s reasonable to expect lot fewer in H2 of 2019.

Tech companies are less likely to IPO, and the ones that do are taking longer. In 2013, a venture capital (VC) backed startup would typically IPO 6 years after its founding. Now, it takes over 10 on average. There are a few reasons for this.

Namely, tech companies are getting massive rounds of funding from VC firms at a faster and faster pace, so why rush to go public? This phenomenon is referred to as the SoftBank effect. The SoftBank Vision Fund is a massive VC fund that threw Billions at companies like Uber and WeWork (now “The We Company”), which delayed their need to IPO.

Another contributor is that fewer tech companies are going public in the first place because they get acquired by bigger tech companies (Instagram, Qualtrics, etc.)  Private Equity buyouts of VC backed tech companies are also on the rise.

The implication here is that most of the growth in these established businesses was already captured by private investors, meaning the average stock trader is missing out on lots of the capital gains. This could particularly explain why ride-hailing giants with billions in private capital have performed so poorly (Uber and Lyft both saw slowing growth rates in the year before going public).

For example: Amazon went public at a $400 Million valuation and now it is worth roughly $900 Billion. Uber IPOd at around $100 billion, meaning they’d have to hit a valuation of over $200 TRILLION for public investors to see similar upside (WSJ).

The Bright-Side: more established startups have a much lower risk of failing. That’s a big reason why this wave of IPOs is distinct from the IPOs of the dot-com bubble. Back in the early 2000’s, undeveloped tech startups were turning to public markets with very little revenue – it was all hype. While many companies IPOing today are far from profitability, at least they are established companies with attractive top lines.

Who’s Gone Public?

Slack Technologies (WORK)

DPO Date: June 20th, 2019

DPO Price: $26

Category: Software Service

Operating at a Loss? Yes

Description: Slack is like Kik for nerds. It’s a business communication app with a GUI that is really confusing to me personally. Why would this app be worth $15 Billion on $400 Million in annual revenue? Now that I’m writing this… I don’t know for sure.

10 million daily active users is a good place to start. Slack’s ubiquity in the workplace definitely added to the IPO hype, but that hype vanished when Microsoft Teams – Slack’s direct competitor – took the crown for most daily active users (13 million).

Microsoft Teams has such a high usage rate because it is bundled with Microsoft Office 365. Want Excel and Word? Looks like you also get Microsoft Teams. This makes it really easy for companies to own and adopt Slack’s competitor, and it’s not like messaging apps have super high switching costs.

Slack’s CEO, the charming Stewart Butterfield, wasn’t concerned. His argument: Microsoft can force their Teams down peoples throats all day long – if they don’t nail user experience then they ultimately won’t keep much market share. Consumers were given Bing and Google+ by bundles and look how those products turned out.

Competition will only heat up. Investors need to keep an eye on the success of Teams as well as Slack’s ability to turn more of their 500,000 users into paying clients.

CrowdStrike (CRWD)

IPO Date: June 12th, 2019

IPO Price: $34

Category: Cybersecurity

Operating at Loss? Yes

Description: Founded in 2011, CrowdStrike is a cloud-based, cybersecurity SAAS provider that offers AI and machine learning based products to identify cyberattacks with unprecedented speed. In their first day of public trading, they soared 97% (probably because of how many buzzwords their business description contains). Last year, they a net loss of $140 Million on $250 Million in revenue (+100% yoy). Trading at roughly 50 times sales, it’s safe to say CrowdStrike is overvalued given financials metrics, but investors and customers alike are willing to pay top dollar for AI based cybersecurity. In fact, Blackberry just purchased CrowdStrike’s direct competitor, Cylance, for $1.4 Billion last November.

We could write a completely separate article about the bitter rivalry between CrowdStrike and Cylance. Basically, the founder of CrowdStrike and the founder of Cylance used to be BFFs, but things went South when one of them started CrowdStrike without giving the other guy enough equity, so the other guy founded Cylance. Both of them have goatees, both of them run almost identical businesses, and both of them hate each other. It’s absolutely riveting.

CrowdStrike’s Q1 fell in line with analyst’s expectations with earnings of -.47 per share and $96 Million in revenue. Their market cap has surpassed $17 Billion despite trade war noise, indicating that investors are treating the AI cybersecurity space as a winner-take-all market.

Chewy (CHWY)

IPO Date: June 14th, 2019

IPO Price: $22

Category: Software as a Service

Operating at Loss? Yes

Description: Chewy is an online pet food delivery service that was purchase by PetSmart for $3.4 Billion in 2017. While PetSmart still owns 70% of the company, they issued shares on the public market and raised about $1 Billion on their IPO date (80% price appreciation). Several big-dog competitors exist in the pet SAAS market from Amazon to General Mills, but Chewy hopes to differentiate themselves via strong customer service and a wide product selection.

Good News: Pet care is a pretty recession proof market. If a family stopped feeding Chester the chinchilla when times got tough, that’d be pretty messed up.

Ominous News: Chewy’s business model is strikingly similar to Pets.com, the poster-child of the dot-com bubble that went bankrupt within 9 months of its IPO. Fortunately, the internet has evolved a lot over the past 20 years and Chewy’s strong revenue growth can keep it afloat.

Fiverr International (FVRR)

IPO Date: June 13th, 2019

IPO Price: $21

Category: Gig Economy

Operating at Loss? Yes

Description: Founded in 2010 straight outta Tel Aviv, Fiverr is an online marketplace with buyers and seller. Sellers offer freelance services from writing to video production to digital marketing – basically anything a businesses would want that doesn’t require in-person meetings. Buyers are businesses that want one of these services done for cheap. Fiverr gets its name from the starting fee they allow sellers to charge, which is $5. Get it?

They lost $36 Million on $75 Million in revenue last year. Fiver makes money by taking a 20% cut from each “gig” performed. User stats show 2.1 million buyers and 255,000 sellers.

One key issue with the service is the potential for low-quality submissions from sellers, who aren’t vetted by the site (even our writers are on it lmao). For instance, paying $15 for a plagiarized article isn’t adding value to the customer, and that can happen pretty frequently.

In Q2, Fiverr reported revenue of $25 Million (+14% yoy) thanks to a 14% increase in buyers and a 16% increase in spend per buyer.

Lyft (LYFT)

IPO Date: March 29th, 2019

IPO Price: $72

Category: Ride-Sharing

Operating at Loss? Big Time

Description: “Remember when Lyft went public despite losing about $911 million last year, an S-1 filing with a “Risk Factors” section the length of a novella and no clear plan to turn a profit in the foreseeable future? And then remember how people bought the stock anyway?” – Dealbreaker

April’s IPO put the L in Lyft. They’ve performed so poorly that investors nationwide recently sued Lyft for misleading shareholders in their S-1 over market share estimates. If that’s not bad enough, Lyft had to recall 3,000 of their e-bikes because “stronger-than-expected brakes” were flipping riders over the handlebars. Ouch. Oh yeah, in their Q1 of 2019 they lost $1.14 Billion on $776 Million in revenue ($894 Million in expenses were stock-based compensation and didn’t affect cash).

You may remember the awkward short-selling/lockup agreement suit from the week after Lyft’s IPO. That stuff is clarified here, but the situation is still muddier than a Future concert.

Uber (UBER)

IPO Date: May 10th, 2019

IPO Price: $45

Category: Ride-Sharing

Operating at Loss? Big Time

Description: Uber fell to the same “early-investors-ate-up-all-the-growth” trap that Lyft faced (they also had similar bike recalls to deal with). While they entered in the midst of a turbulent market, their IPO has certainly been disappointing given that they went public at a lower valuation than expected.

Uber was founded in 2009, and it has dominated the ride-hailing market since. Uber’s $11 Billion in revenue makes Lyft $2 Billion look silly! Moreover, Uber operates in more than twice the cities with three times the users (and drivers). Uber does lose more money than Lyft, but not on a margin basis.

That said, Uber has faced their share of blunders over the years from former CEO, Travis Kalanick’s slew of controversies to reports of drivers being underpaid (although Lyft is subject to the same criticism).

In Q1 of 2019, Uber reported $1.01 Billion in losses on $3.1 Billion in revenue. Skeptics have doubted whether or not Uber could ever generate positive cash flow for years now, and the fact that Uber’s ride-sharing business still has a negative contribution margin definitely casts doubt on Uber’s “grow at all costs” strategy. Despite Billions in public and private capital, Uber only has top-line growth to show for it. Make no mistake, Uber is at the center of the growth vs profitability debate – the elephant in the room for this year’s IPO class.

One key difference between Uber and Lyft lies in their long-term visions. While Lyft wants to continue to facilitate ride-sharing, Uber is ambitiously aiming to become the company that does all things transportation. This explains why Uber is expanding into other businesses like trucking and food delivery, and those are growing quicker than the core ride-sharing business. While becoming transportation’s Amazon would be great for investors, keep in mind Uber will have to throw a lot of money at such endeavors, which could prolong their route to profitability.

Beyond Meat (BYND)

IPO Date: May 2nd, 2019

IPO Price: $24

Category: Textured Vegetable Protein

Operating at Loss? Big Time

Description: Beyond Meat has been the hottest stock right out of the gate since 2000. That’s beyond crazy haha. Sorry I can hardly type right now I’m crying from laughing at my silly pun.

Anyway, Beyond Meat is going to serve you up some meat that doesn’t come from an animal because animals are a lot of work and their farts might be destroying our atmosphere.

Their CEO explains this better than I did:

“The animal serves as a bioreactor, consuming vegetation and water and using their digestive and muscular system to organize these inputs into what has traditionally been called meat,” he writes.

“At Beyond Meat, we take these constituent parts directly from plants, and together with water, organize them following the basic architecture of animal-based meat. We bypass the animal, agriculture’s greatest bottleneck.”

Beyond Meat is the first textured vegetable protein (TVP = fake meat) stock of its kind, and investors reacted by sending it to the $90 range in a matter of weeks. Reasons to be skeptical? First of all, there’s other TVP companies that exist, and they’ll probably be IPOing soon. One similarly-named firm, Impossible Foods, is among a squad of competitors who have more resources and operating margins than the crew down at Beyond. Combine that omen with Beyond’s substantial losses (that are expected to increase) and you have a pretty good case for bears.

BYND soared to over $170 before bouncing back to $130 as a reaction to JPM’s price target downgrade. That all happened in a matter of three sessions.

Despite beating EPS expectations by $0.01, it was clear the fake meat stuff was just getting out of control. The compound average growth rate for the TVP market is a disappointing 6.9% through 2021, so why did the stock shoot up so much?

What’s crazy is that so many investors shorted the stock, it actually helped to push the stock price up. 25% of the outstanding BYND shares were owned by short sellers, or people who were essentially borrowing the stock to bet on it decreasing. When BYND went up a little on good earnings, short sellers had to buy shares to cover or close out of their short positions, sending the stock even higher in an upward cycle. This is a classic example what traders call a short squeeze.

Analysts are growing weary of BYND’s competition and are reminiscing about FIZZ, the parent company of LaCroix. LaCroix was the first sparkling water to get really popular, and their stock surged 550% as a result. It didn’t take long for FIZZ to pare those gains when competitors like Topochico entered the market. Despite a significantly larger sparkling water market today, nobody buys LaCroix anymore, and FIZZ stock sucks. Similar omens are coming for BYND, as Tyson foods and Impossible foods kick it into high gear to take market share.

Yunji (YJ)

IPO Date: May 3rd, 2019

IPO Price: $13.42

Category: E-Commerce

Operating at Loss? Yes

Description: Founded in 2014, Yunji is a fast-growing social e-commerce platform in China. The company leverages the messaging app, WeChat, to allow paying members to buy and sell goods at discounts. Their direct competitor, Pinduoduo, has more than 10 times the users of Yunji, but Yunji isn’t far behind in revenue and is much closer to achieving profitability.

Are they a pyramid scheme? Xi Jinping thought so when he fined Yunji $1.4 Million and ordered them to change their marketing strategy. Yunji would essentially give members discounts for recruiting other members onto their site, which China constituted as pyramid selling. This could prevent an extra regulatory risk for investors because China’s definition of a pyramid scheme is a little wishy-washy.

In its most recent earnings, Yunji increased its transacting user base by 153% and its revenue by 53% year over year. While operating costs increased substantially across the board, the firm inked a profit a $2.5 Million (USD) for the quarter and the stock jumped 9% on the news before settling down a few days later.

Pinterest (PINS)

IPO Date: April 18th, 2019

IPO Price: $26.70

Category: Social Media

Operating at Loss? Yes

Description: Founded in 2010, Pinterest is a social media platform where you can share “pins” to show all your friends’ stuff you think is rad while Pinterest harvests those interests and turns them into advertising revenue. With over 250 million users, two-thirds of them female, Pinterest has a great audience for listening in on retail trends. Finally, signs of profitability are present, EBITDA margins improved from -35% to -19%, and revenue grew 43% yoy to $202 million in 2019 Q1.

Zoom (ZM)

IPO Date: April 18th, 2019

IPO Price: $36

Category: Software Service

Operating at Loss? Yes

Description: Zoom was founded by Eric Yuan, the former head of Cisco Webex, in 2011. Driven by ease-of-use and high interoperability, the videoconferencing company doubled sales in 2018 without losing money, which was good since investors needed a break from valuations that made no mathematical sense. This year, Zoom surpassed the milestone of hosting over 5 billion meeting minutes every month.

Zoom’s most recent earnings call reported yoy revenue growth of 103% thanks to a massive increase in customers with ten or more employees. While Zoom isn’t pulling in as many big fish clients as PagerDuty, their results were still impressive enough to send their stock price over $100. Hey, that’s pretty good!

Zoom’s earnings drop Thursday.

PagerDuty (PD)

IPO Date: April 11th, 2019

IPO Price: $24

Category: Software Service

Operating at Loss? Yes

Description: That’s right, pagers are back. Just kidding, PagerDuty is in the business of DevOp’s software, an emerging enterprise buzzword that entails improving communication between software developers and IT operators. This allows potential software crashes or bugs to be fixed before they become a serious problem. PagerDuty stock has popped off in the month following its IPO date, but they face larger competitors like Splunk and Atlassian, and their valuation is around 30 times sales. Morgan Stanley, one of PD’s lead underwriters, estimates PD an addressable market of $25 Billion, but is currently bearish on the stock.

Pagerduty is an elephant hunter. Instead of attracting a high number of small-business customers (like Zoom), PD goes after big players – think Fortune 100. This means that Pagerduty has the chance of hitting home-run contracts with tech giants, but would really suffer from customer churn – the loss of repeat clients.

PagerDuty’s first earnings report displayed a strong 49% year-over-year revenue growth (GAAP loss of $12 Million).

PD’s next earnings report drops tomorrow! In Q2, analysts are expecting the Silicon Valley Special: wider losses along with robust revenue growth.

Super League Gaming (SLGG)

IPO Date: February 26th, 2019

IPO Price: $11

Category: E-Sports

Operating at Loss? Yes

Description: Founded in 2014, Super League Gaming offers exposure to E-Sports by providing a cloud-based online community for Minecraft, LoL, Fortnite, and Clash Royale gamers. They focus on amateur e-sports and host physical tournaments as well. So far, their financials are terrible, but their market cap is currently just below $70 Million.

UPCOMING – we’ll update this page with new IPOs as well as any updates for the equities mentioned above, stay tuned! Here’s a preview of potential IPOs for 2019 H2.

Fastly

Palantir

Airbnb

Robinhood

Postmates

Casper

CloudFlare

Asana

WeWork/The We Company

Rackspace