Facebook, Apple, Alphabet and Amazon Have Been Carrying The Nasdaq And S&P All Year

by 6 months ago

morning brew

Here’s your hand-crafted Brew for June 12th

QUOTE OF THE DAY

“In a moment of youthful indiscretion, I might even have experimented with…a Windows PC.” –– Tim Cook, going full nerd at his MIT commencement address.

Market Snapshot

  • The S&P and the Nasdaq slumped Friday, while the Dow finished slightly up.
  • Tech stocks tanked, sending the Nasdaq down 2%—its biggest loss since May 17th.
  • The dollar rose against its peers, while the pound took a beating.

Streaming Killed the Radio Star

Cue the “My Hero” Pandora station.

Amid financial turmoil, Pandora’s white knight, SiriusXM, swooped in with a $480 million injection of cash. That’s A LOT of Howard Stern money.

The cash helps shore up Pandora’s balance sheet as pressure from rising stars, Spotify and Apple Music, has contributed to Pandora’s declining revenue.

Let’s open Pandora’s box, shall we?

Real life Russ Hanneman, Tim Westergren (Pandora’s CEO), actually did put radio on the internet in 2000. And boy did people like it. Pandora still boasts 76 million active users.

But in an industry reliant on others’ IP, content and the associated legal fees can come at a steep price (especially when you’re not charging for it).

And don’t forget about the other players. Spotify users have access to a superior music catalog (30 million songs vs. Pandora’s 1 million) and iHeartRadio has a unique advantage: 800 local radio stations.

Maybe that’s why Pandora has been a rumored takeover target for much of the last year as it flirted with running out of proverbial free skips.

As recently as last week, there were rumors of a SiriusXM acquisition as well as a $150 million KKR deal on the table. Don’t feel too bad for KKR, which made off with a $22.5 million termination fee once Pandora proceeded with Sirius.

Like two transactions passing in the night

More than one intern was burning the midnight oil on Friday as Pandora also unloaded Ticketfly, which it acquired in 2015 for $450 million.

A purchase that worked out about as well as T-Swift’s boycott of Spotify (spoiler: not well). Eventbrite purchased Ticketfly on Friday for $200 million.

Pandora’s stock (+1.19%) popped on Friday’s news, but it’s TBD if investors will throw a ‘thumbs up’ to the investment vs. a complete sale.

SoftBank’s Hard Sell

SoftBank has purchased Boston Dynamics, a BigDog in robotics design, from Google (-3.40%) for an undisclosed amount. Aside from a cache of viral videos, Boston Dynamics failed to bolster Google’s robotics arm.

This marks the end of an era, in which Google has been shopping its cyborg biz since its very own “Mr. Robot,” Andy Rubin, left the company in 2014 to found Essential.

This appears to be yet another piece in a much bigger puzzle for SoftBank’s tech strategy as the brainchild of Masayoshi Son plans to raise a $100 billion technology fund (as he slowly raises his pinky to the corner of his mouth).

They Took Err Jobs!

Ford (+0.27%) is giving a whole new meaning to “flexible work arrangement.” The Michigan-based, blue-collar auto brand is offering severance packages to 15,000 white-collar workers in hopes (at least) that 1,400 employees will take the bait.

Ex-CEO Mark Fields initiated the $3 billion annual cost-saving plan right before being swapped out for the more tech-focused leader, Jim Hackett.

Now, the #2 U.S. automaker looks to meet the capital intensive demands of a rapidly changing auto industry and trim some unnecessary fat in the process.

So get down to your local Ford dealer, these silver parachutes are going fast!

Welcome to the Big Leagues

The new kids on the block: Facebook (-3.30%), Apple (-3.88%), Alphabet (-3.40%) and Amazon (-3.16%) have been carrying the Nasdaq and S&P on their backs all year.

That is until a Goldman Sachs report, released Friday, compared them to the Fab Five of tech: Cisco (-0.76%), Oracle (-0.86%), Intel (-2.11%), Lucent and… Microsoft, and quickly erased $95 billion of their $600 billion run.

The report takeaways:

  • The “new kids” have better cash flows and are financially stable.
  • But, they made up 40% of S&P 500’s gain at only 13% of the index.
  • A valuation that feels oddly similar to where the “Fab Five” stood before the tech crash of 2000…

Investors had heard enough. Commence the sell-off.

What Else Is Happening…

  • EU antitrust authorities are opening an investigation into Qualcomm’s $38 billion bid for Dutch semiconductor giant NXP.
  • Four years after Bowlmor AMF bowling narrowly avoided a corporate gutterball, private equity firm Atairos Group will buy it for more than $1 billion.
  • Japanese conglomerate Toshiba will spend $3.7 billion to finish building two nuclear reactors in Georgia.
  • Tesla just passed BMW’s $61.3 billion market cap.
  • Uber’s Chief Business Officer, Emil Michael, will resign as soon as today.

Economic Calendar

  • Friday (June 5th): Straight Path Communications Earnings
  • Monday: No events today
  • Tuesday: Producer Price Index
  • Wednesday: Fed Rate Announcement, May Retail Sales, Consumer Price Index, Crude Inventories
  • Thursday: Kroger Earnings; Industrial Production
  • Friday: Michigan Consumer Sentiment Index

Water Cooler

From the Crew

Welcome back to From the Crew. This is your chance to connect with our team, while loading up some of the very best digital diamonds in the rough.

Quick housekeeping––each member of the Crew is going to share their coolest find of the week. And guess what…they want to talk to you about it. Whether you love it, you hate it or are downright confused by it, click on the Crewmember’s name of your choosing and get the convo going!

 

From Michael: The Pet Rock

Following up on last week’s suggestion (reminder: Cat ETF), I decided to look into some other ridiculous ideas that, believe it or not, have scaled to success. In 1975, Gary Dahl invented and marketed the “Pet Rock.” It’s just like a rock…but it’s a pet. In a trend that would put the fidget spinner craze to shame, Dahl sold millions of pet rocks and became a millionaire practically overnight.

Snag your bonus walking leash!

 

From Austin: Do Things That Don’t Scale

Paul Graham, founder of Y Combinator, has invested in over 1,000 startups, including Dropbox and Airbnb. His legendary blog talks about why startups are counterintuitive—nothing more counterintuitive than doing things that don’t scale.

Do the unscalable

 

From Alex: Storytelling on Steroids

John Oliver. The man is a genius, plain and simple. I x’ed out of his 19-minute “lesson” on net neutrality, somehow learning more about the topic than ever before, while laughing to the point of exhaustion. Sneak peek: his story jumps from singing goats to gofccyourself.com to Ajit Pai’s over-sized REESE’s Peanut Butter Cup mug.

Time to laugh

 

From Will: Econ in 30 Minutes

Ray Dalio’s “How The Economic Machine Works” is a wonderful short video that succinctly explains the complexities of our economy. Breaking down terms such as “short & long term debt cycles” and “productivity growth” using simple examples, Dalio abbreviates an intrinsically convoluted concept for the layman.

You gotta watch


The Breakroom

Interview Question of the Day

If it takes 2 garage mechanics 3 hours to repair 6 cars, how many mechanics would it take to repair 22 cars in 5 hours?

(Answer)

Who Am I?

  1. I one time got into a fight with a taxi driver and jumped out while the car was moving.
  2. I was caught on video tape berating one of my own employees.
  3. The other day, an old sex memo to my employees was leaked to the public.
  4. Because of my behavior, the board of my company met yesterday to determine if I needed to take a “leave of absence.”

(Got any guesses?)

Stat of the Day

$15k

That’s how much a vintage pair of Apple sneakers (yes, sneakers) are being auctioned off for.


TAGSBusinessFinanceMorning Brew

Join The Discussion