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Amazon Never Dies, Tesla Royal & License To Build

Amazon Never Dies, Tesla Royal & License To Build

Live and let stream Amazon Bezos Bond MGM meme big

The Name’s Bezos, Jeff Bezos

Great Ones, are you ready for like 18 more James Bond movies? Or possibly a James Bond series?

If Daniel Craig reprises the role, I can’t say I’m too adverse to the idea.

According to reports, Amazon (Nasdaq: AMZN) is in talks to buy MGM Studios for as much as $10 billion. If the deal goes through, it will put Amazon in control of the James Bond franchise, as well as Rocky, The Silence of the Lambs, The Handmaid’s Tale, Vikings and Shark Tank.

Can you see Jeff Bezos on stage next to Mr. Wonderful and Mark Cuban? Right … like Bezos would stoop that low.

Investors appear rather indifferent to the deal, as AMZN stock gained about 1% today … but I don’t think these investors (or Wall Street) understand the full impact of what this acquisition would mean.

Right now, there are only about three minor content creators left on the market: MGM Studios, Lions Gate/Stars (NYSE: LGF.A) and AMC Networks (Nasdaq: AMC).

Can you imagine calling any of these three “minor” content creators back in like the ‘80s or ‘90s? It’s a testament to the pace of consolidation in the entertainment market during the past decade or so.

Anyway, these three studios are the last remaining scraps to be consumed and assimilated into the modern entertainment streaming market. And Amazon is on the verge of gobbling up MGM.

Now, it’s not a done deal. MGM can be a fickle mistress … just ask Apple (Nasdaq: AAPL), which tried to court the content giant back in December. Apple apparently remembered the flowers but forgot the chocolate and abandoned the chase without putting a ring on it.

One thing’s for certain: Unlike a certain other now-former streaming company, Amazon knows how to monetize content. Acquiring the rights to such storied content would further solidify Amazon Prime Video as a major player in the streaming market (even if Prime Video’s interface continues to suck).

Make no mistake: This acquisition is a big deal for Amazon and the streaming industry as a whole.

Once MGM is off the table, that leaves just Lions Gate and AMC Networks. Both have excellent content and are just begging to be snapped up by Apple, Roku, Netflix, Comcast or ViacomCBS. I’d put Disney in there too, but I highly doubt regulators would allow the Mouse to scarf down another piece of cheese that big.

On a side note, AMC Networks could already be a streaming giant with hits like The Walking Dead, Better Call Saul, Mad Men and the rest. Unfortunately, AMC waited too long to get into streaming and thereby shot themselves in the Carl. (I’ll see myself out…)

The bottom line here is that this acquisition — should it happen — is monstrous for Amazon and a wake-up call to the rest of the streaming industry.

But that’s just like, my opinion … man. Tell me what you think: Will the MGM Studios acquisition go through? Is Jeff Bezos’ Amazon mad in craft or just plain mad? And what about Lions Gate and AMC Networks?

Drop us a line at GreatStuffToday@BanyanHill.com, and we’ll talk about it more in Thursday’s Reader Feedback.

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Great Stuff New Going Going Gone

Going: Everything’s So Burry…

Burry short sellers make you feel bored stupid meme

And everyone’s so fake. And Telsa’s (Nasdaq: TSLA) rally’s empty … and Michael Burry’s so messed up.

If you’re a Tesla bull, you probably feel like you stepped in a Puddle of Mudd lately. TSLA shares are down more than 20% since the beginning of May. In fact, excluding today’s session, TSLA fell in all but two trading days this month!

As a result, Tesla bears smell blood in the water and are circling faster.

Wait … are they bears or sharks?

Does it matter? Anyway, one of the biggest bear-sharks on Wall Street, Michael Burry, just took out a massive short position on TSLA. Now, you may remember Burry from such classic hits as The Big Short, where he was among the few to bet against the housing market before the 2008 financial crisis.

This time, Burry has snapped up long put options — or bets that a stock will fall — against Tesla. According to a filing with the SEC, Burry’s bet is $534 million, or about 8,001 TSLA put contracts, as of March 31. That’s enough put options to control 800,100 TSLA shares.

There are two likely drivers for Burry’s bet:

First, sales are slumping in China as hometown competition ramps up. I’ve said it before, but Chinese consumers are fiercely loyal to national brands. Furthermore, there appears to be a concerted (and potentially government-backed) anti-Tesla media campaign.

Second, Burry believes that Tesla’s reliance on regulatory credits is a major red flag. Regulatory credits are received from government programs as a way to encourage green energy. Tesla has raked in about $1.6 billion in regulatory credits and sold those to other companies … which has helped Tesla post four consecutive profitable quarters.

Now, I’m not saying Burry’s right about Tesla … but these are serious concerns that not many Tesla bulls are taking into account, or worse — outright ignoring. And that’s bad news bear-sharks for TSLA.

Going: Shop Smart, Shop Walmart

Klaatu barada walmart? retail king earnings meme

All right, you primitive investors, listen up. You see Walmart’s (NYSE: WMT) quarterly report? That was Walmart’s boomstick!

The 2.7% revenue jump to $138.3 billion is Walmart’s top of the line. Wall Street expected $132 billion. That’s right: This sweet baby was driven by earnings of $1.69 per share, while analysts expected $1.22 per share.

It’s got a 47% spike in e-commerce sales, record Sam’s Club memberships, cobalt blue steel and a hair-trigger.

That’s right. You got that!?

Good. Now think about Walmart’s guidance. The world’s largest brick-and-mortar retailer raised its guidance and now expects earnings per share to grow in the high single digits.

It’s clear that Walmart is all fired up and ready to blow once the pandemic is in full retreat. There’s only one thing left to say: Hail to the king of retail, baby.

Gone: Housing Market of Cards

crazy what you find at Home Depot Bond meme

While it’s not quite the king of retail, Home Depot (NYSE: HD) still belongs somewhere in retail’s royal court — especially after its latest trip ‘round the earnings sun.

As it turns out, the rip-roaring housing market (we’ll get to that dumpster fire in a sec) is hog heaven for do-it-yourself suppliers like Home Depot and its blue-bannered brother.

Shocking, isn’t it?

Old homes need fixing up and repair. New homes need … new stuff. So where do you go to buy everything from drywall and microwaves to “live laugh love” signs and literally the worst cabinet handles known to man?

Home Depot, that’s right! The chain saw revenue explode 32.7% last quarter, with sales reaching $37.5 billion and creaming estimates for just $34.96 billion. Per-share earnings reached $3.86 and also blew away the Street’s expectations for $3.08 per share.

So, what’s next for Home Depot? Is this pent-up demand susceptible to any wavering in the housing market? Is this the peak for Home Depot’s pandemic prime time?

Well … probably? I’m impressed that Home Depot’s capitalizing well on the demand, but I can’t imagine the housing boom has much longer to live and keep driving that demand further.

What’s more, longtime traders know that Home Depot is typically the last to feel the pinch when the home market goes belly up. You know, because people still buy stuff for their new house … even after they’re done buying houses.

Which brings me to the next bone to pick…

Great Stuff Quote of the Week

While Home Depot is sitting pretty and flush with demand … on the other side of the supply chain tug-of-war are homebuilders, homebuyers and literally the entire housing market.

Now, I don’t like to be the bearer of bad news. But I do relish the rare chance to say “I told you so” … and here we are.

It should come as no surprise to you that the housing market is collapsing like a dying star. The latest U.S. Census data reports that, after a rampant year of rallying higher, new housing starts dropped 13% in April. It’s the sharpest decrease since the pandemic began.

What do you know? The too-good-to-not-be-a-bubble was … too good to be true. And it has everyone on the Street in a finger-pointing blame-a-thon. Here’s Peter Boockvar, chief investment officer over at Bleakley Advisory Group:

I have to blame the difficulty in procuring lumber and other products, along with labor issues for the miss, in addition to likely cancellations due to skyrocketing costs for single-family starts.

Speak of the woodworking devil — again.

I remember talking about lumber’s supply-and-demand crunch back in November when we said: “If demand outstrips supply, you’ll also see the cost of new homes rise significantly, which could temper the housing boom to an extent.”

Well, consider that boom tempered. We all knew there had to be a critical-mass point where new homebuyers simply get priced out of the homes they planned to buy.

No one knew how expensive “too expensive” would be, but new and existing home prices are already at record levels. You have homebuilders including escalation clauses into contracts so customers are on the hook for rising materials costs. A few months ago, lumber was adding on $24,000 to a new home’s cost — now that’s up to $36,000 on average.

But Wall Street’s so tied to this “housing is strong!” narrative, it wants to blame everything but the skyrocketing costs for drooping housing stats.

It’s uhhh *checks notes* a labor shortage! Yeah, that’s it!

Please. There’s no labor shortage … trust me. Frankly, there can’t be. There is demand from the workforce. Companies just aren’t offering a “product” that unemployed laborers want to “buy.”

Maybe homebuilders need to reconcile that no one wants to work on these construction projects — or at least not at the wages currently offered. And not when your more lucrative (and less back-breaking) option is staying home.

In the meantime, homebuilders are trying to squeeze out as much juice as possible from the housing market raisin. That 13% drop in new-home starts might be optimistic at best. The number of actual homes being finished is in far worse a state. From CNBC again:

Roughly 15% of builders said they are putting down concrete foundations and then holding off on framing the house. This counts officially as a ‘start’ according to the Census monthly figures, but it doesn’t create a house.

Classic homebuilders. Lumber prices, labor shortages … any excuse might help to smooth the unattractive truth, but the suburbs have no charms to soothe the restless dreams of Wall Street. (Rush out of nowhere for the win!)

Methinks the music has already stopped in this game of musical chairs. But what about you?

Is the housing market “boom” about to bust? Or is there still some fire left in the housing sector’s rally?

Drop me a line with your thoughts. GreatStuffToday@BanyanHill.com is your one-stop pitstop for ranting, raving, complaining and praising. Email us your stock market hot takes right now!

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Until next time, stay Great!

Joseph Hargett

Editor, Great Stuff

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