Tesla Model S Disappoints, Plus Yahoo Strikes A Deal With Google So That More People Search With Yahoo…WHAT?!?!

by 3 years ago

morning-brew

“I’m not going away.” — Former Virginia Senator Jim Webb, who is now also former Democratic presidential candidate Jim Webb after dropping out of the race yesterday. Webb is still considering running as an independent, but his already-fringe candidacy just got even fringe-ier.

MARKET SNAPSHOT 

Housing Saves the Day

  • Tuesday saw U.S. stocks take a dip as investors continue processing earnings reports and yesterday’s U.S. housing starts data. Somehow, even with declining global markets and a stronger dollar, housing data continues to remain strong. Coming from an industry that has been slow to heal since the recession, the data managed to offset yesterday’s negative earnings reports.
  • Oil took another L as investors now expect Iran to begin flooding the already-full oil market with…yes, more oil, as soon as economic sanctions are lifted on the country (remember, this is part of the major Iran nuclear deal that was finalized a few months back).
  • Ready to RACE? That’s what Ferrari hopes: the luxury carmaker begins trading publicly today under the appropriately-named ticker “RACE.” Demand for the IPO was overwhelming, and Ferrari is being priced at a whopping $9.8 billion valuation, at the very high end of the pre-IPO range—not bad for a company that only sells 7,000 (very nice) cars annually.
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CORPORATE PRIMER

Verizon Squeaks By

Verizon’s earnings are in, and it’s safe to say that it was a successful quarter. The communications giant narrowly surpassed Wall Street expectations with reported revenues of $33.2 billion. Despite stiff mobile competition from T-Mobile and Sprint, Verizon saw 5.4 percent revenue growth, largely due to the consistently strong performance of FiOS, its joint internet and TV service. Verizon’s shares were up nearly 2 percent, a welcomed boost for the stock, which had fallen 4.5 percent this year.

Yum Brands: A New Divide

Since 1987, good ol’ KFC has been a Chinese mainstay. Now, the fast-food conglomerate that owns KFC, Yum Brands, has decided to make major corporate changes: namely, spinning off its major Chinese business. A separate, publicly traded company will allow for a more concentrated approach towards enhancing operations in the region. Last year, revenues stagnated and profits declined 8 percent due to China’s weakening economy and increased fast-food competition. The announcement satisfied investors’ appetites, as shares jumped 4.2 percent immediately following the early morning news.

Yahoo Turns to a Friend

Yahoo reported revenues of $1.23 billion and 15 cents per share in earnings, just missing projections on both counts. Yet Yahoo’s MaVeNs initiative (for the uninitiated, that stands for Mobile, Video, Native and Social) remains promising, as third quarter revenue for the initiative increased 43 percent last quarter. Additionally, Yahoo is well aware that you don’t use Yahoo Search, and is hoping to somewhat change that: CEO Marissa Mayer announced a deal with Google that will result in some Yahoo search results and search ads being powered by Google.

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TODAY IN TECH

Tesla Model S Disappoints

For Tesla, all press is most certainly not good press. Consumer Reports has withdrawn its earlier acclaim for the Tesla Model S and replaced it with a “worse-than-average” rating, claiming the car features an “array of detailed and complicated maladies.” The news caused the stock to plummet 7 percent. It remains to be seen whether this was a market overreaction—past car companies, like Kia, have also suffered through poor ratings before turning their processes around, but the Model S has been one of Tesla’s main earnings drivers for quite some time.

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OTHER STORIES

  • China aims to lure private investors to projects
  • Hess trucks are back for the holidays
  • Subway shifting all U.S. meat supplies to no-antibiotics
  • Ahmed Mohamed (aka homemade clock kid) is moving to Qatar
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ECONOMIC CALENDAR

  • Monday: IBM, Morgan Stanley, Halliburton Earnings; China GDP
  • Tuesday: Chipotle, Verizon, Yahoo Earnings; Housing Starts
  • Wednesday: American Express, Boeing, Coca-Cola, eBay, General Motors, Las Vegas Sands, SanDisk Earnings
  • Thursday: Alphabet, Amazon, AT&T, McDonald’s, Microsoft, Under Armour Earnings; Existing Home Sales; Weekly Jobless Claims
  • Friday: Procter & Gamble Earnings

HOTEL WARS

Most hotel brands grow by building new hotels (a novel concept, we know), but a new trend has popped up called conversions. Basically, hotel brands will convince owners of other hotels to switch sides. Hilton’s DoubleTree brand has been the undisputed master of the conversion…until now.

  • In the race to upgrade to upscale branded hotels, parent companies like InterContinental Hotel Group and Marriott are converting other brands to create the upscale rating for a lower price.
  • Of course, it’s old news for DoubleTree: in the past year alone, 96 percent of DoubleTree’s new rooms were conversions from other brands, not new builds.
  • Why have they been so successful in convincing smaller brands to switch? Mainly due to the freedom and flexibility the larger chain provides, which also opens up huge cost savings opportunities. Let the games begin.

INTERVIEW QUESTION OF THE DAY

Find the odd one out: 1. FLOW 2. SNIP 3. TRAP 4. DRAW 5. BACK (Answer)

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BUSINESS TERM OF THE DAY

Macro-Hedge — An investment technique used to eliminate the risk of a portfolio of assets. In most cases, this would mean taking a position that offsets the whole portfolio. But this technique is difficult in practice because there is rarely one asset that will offset the risk of a broader portfolio, so applying a macro-hedge most likely requires taking an offsetting position in each individual asset.

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FOOD FOR THOUGHT
An actor and a bystander were shot after a mock Old West gunfight in Tombstone, Arizona, turned real. Somehow, live rounds were replaced in one of the guns.

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