Enjoy your February 10th hand-crafted Brew!
QUOTE OF THE DAY
“Legitimate companies don’t know who the f— I am. And they don’t care. The bad guys? They know. And they don’t care” — Noted short seller Marc Cohodes, on short selling and his recent return to the markets. The full Bloomberg feature is a must-read for those of you prospective short sellers out there.
- All three major U.S. indexes broke through to new records on Thursday after President Trump promised to elaborate on his plan to cut taxes. Why’d that help? Lower taxes mean higher corporate earnings
- In a meeting with major airline CEOs, President Trump pledged to reduce regulation, fund infrastructure and lower taxes on the airline industry. Airline stocks surged—JetBlue climbed 3.53%, American Airlines was up 2.75% and Delta rose 2.56%
- The price of bitcoin plunged 9.1% after two major bitcoin exchanges gave in to Chinese pressure to temporarily halt trading of the cryptocurrency
More Bad News from Twitter
…As advertising revenue continues to fall. Twitter
(-12.34%) shares tanked after posting its slowest revenue growth to date last quarter. The social media giant (can we even keep calling it that?) has been struggling to sustain rapid growth amongst its active monthly user base, and stiff competition from true social media giants Facebook
(-0.04%) and Snapchat ain’t helping either. Despite the platform being notoriously favored by President Trump, Twitter has been plagued by stagnant user growth and an inability to attract new users. You can’t fault the company for not trying: it’s instituted a number of additions (like live streaming) and subtractions (like cutting Vine) this past year in the hopes of monetizing its user base. If the Trump Bump can’t kickstart growth here, we’re not sure what can.
Snap Starts a Five Year Streak with Amazon
…With a billion-dollar cloud deal. The news of Snap using Amazon’s cloud services came right after its IPO paperwork was made public last week. We already knew of its $2 billion deal with Alphabet’s cloud services, but Amazon’s appearance as the new side bae tells us that Snap doesn’t want to put all its cloud eggs in one basket. The rules of this deal are slightly different from Alphabet’s, however—Snap is due to pay $50 million to Amazon this year and incrementally increase its yearly payments to $350 million by 2021. However, analysts recommend breaking the deal before then, as Snap already spends almost a third to a half of its expenses on cloud services. Word is that Snap might develop its own infrastructure eventually, but for now, it’s leaning on its new friends.
Viacom Makes Moves
…Despite falling U.S. ad sales. Viacom
(+4.33%), owner of MTV and BET, plans to shake things up a bit with the release of its Q4 earnings report. The media conglomerate is turning its focus back onto its flagship brands, like BET and Comedy Central. This priority shift came with a better than expected earnings report. Even though profit fell and operating costs rose, the company still had a sizable increase in revenue. This also marks the first big move by new CEO Bob Bakish.
Next Up: Coke Falls Flat
…As soda’s popularity plummets. Coca-Cola’s
(-1.81%) earnings were pretty much in line with Wall Street predictions, but sales still suffered a drop. And it wasn’t just that: profits also ended the year on a downer. Incoming CEO James Quincey says 2017 will most likely produce results similar to 2016, which has proven to be fairly mediocre. Refreshing?
(+4.16%) posts impressive Q4 earnings on the heels of its complete refranchising. The group, which owns the Dunkin’ Donuts and Baskin-Robbins chains, sold off its final company-owned stores in Q4 and is now 100% franchised, a profit-generating strategy that’s been increasingly pursued by large food chains (learn about it here). With costs much lower now, Dunkin’ posted better-than-expected earnings. And if that’s not enough, its intelligent use of technology to foster customer loyalty and drive store traffic led the company to increase same-store sales in its U.S. Dunkin’ Donuts stores by 1.9%. A slam dunk indeed.
Happy National Pizza Day?
…Not for Pizza Hut. Yep, Yum! Brands
(+1.20%) is being dragged down by its Pizza Hut chain. The food chain group, which also owns Taco Bell and KFC, beat earnings expectations but missed revenue estimates. With same-store sales up a solid 3% at both KFC and Taco Bell, the culprit was Pizza Hut, with a 2% decline. Unfortunately, this has been a long time coming. The pizza chain’s market share in the U.S. has dropped from 25% in 1995 to 14.5% in 2015. That’s what you call a thorn in your side.
- Bob Costas steps down as NBC host of Olympics; Mike Tirico to replace him
- Mexico’s Jose Cuervo raises more than $900 million in IPO
- Zenefits is laying off 45% of its workforce
- Tesla auto factory workers reach out to form union
- Monday: Twenty-First Century Fox (+), Tyson Foods (+/-), Hasbro (+) Earnings
- Tuesday: Walt Disney (+/-), BP (-), Michael Kors (-), General Motors (+), Zillow (-), Panera (+), Buffalo Wild Wings (-) Earnings; Job Openings and Labor Turnover Survey (+)
- Wednesday: Sanofi (+), Allergan (+), Time Warner (+), Whole Foods (-), GrubHub (-) Earnings
- Thursday: Coca-Cola (+/-), Yum! Brands (+/-), Twitter (-), CVS (+/-), NVIDIA (+/-), Activision Blizzard (+), Kellogg (+), Viacom (-), Dunkin’ Brands (+), Yelp (-), Pandora (+/-), Zynga (-) Earnings; Weekly Jobless Claims (+)
- Friday: Import/Export Prices; Consumer Sentiment
The Business of Snow
A huge snowstorm hit the Northeast yesterday, shutting down roads and entire school systems. The teenager down the block can’t shovel every driveway, nor will the snow melt on its own. Cue snow removal services: the crucial industry that brought in $14.3 billion in U.S. sales last year. From liability for slip-and-falls to clearing paths and parking lots, snow removal is a must:
- Businesses pay for snow removal in two main ways. The first is to pay by the inch of snow (great for warm winters, not so great for blizzards). The safer option is to pay a flat rate for an entire winter.
- Even though there’s an obvious imperative for snow removal, the industry relies on cold weather. So most companies are landscapers in the warmer months, bringing in only $125,000 on average in revenue…
- …Unless there’s a private equity firm behind the scenes. In 2013, KKR made a $1.6 billion deal for Brickman Group, a landscaping company based in Maryland. Last year its revenue totaled $2 billion, with $342 million coming from snow removal. Now that’s a lucrative snow day.
Interview Question of the Day
Mary had a coin purse with fifty coins, totaling exactly $1.00. Unfortunately, while counting her change, she dropped one coin. What is the probability that it was a penny? (Answer)
Startup of the Day
LeSports provides live broadcasts of sporting events. By holding the media rights for more than 300 sports events worldwide, the startup has earned a valuation of $3.4 billion. Next target: eSports? They’re getting pretty big. Yesterday, the NBA announced plans to create a new eSports league centered around the popular basketball game, NBA 2K.
Food for Thought
Who says the U.S. Postal Service needs government subsidies? Holiday shipping for the post office boosted revenue growth by $701 million, or 14.7% over the prior year, largely thanks to Amazon and other online retailers. Pretty good, but not enough. Unfortunately, it still lost $200 million during the year-end holiday season and has lost money for 10 consecutive years now. Keep the subsidies comin’.