China Fires At Fintech, DOCU Drama & Ulta-mate Earnings
Friday Four Play: The “Conform Or Be Cast Out” Edition
Great Ones, I don’t usually rush to conclusions, but I have a distant early warning for anyone invested in Chinese stocks today.
And for those holding stock in Chinese financial technology companies (fintechs), this week’s developments hit a bit closer to the heart.
China is doubling down on the great communist firewall. Companies such as Tencent, Baidu, ByteDance (aka TikTok) and Didi Chuxing are being fined and reprimanded for past acquisitions and investments the government says violate antitrust laws.
You’d think China would’ve cracked down when those investments were made … but such is the fickle nature of the Chinese government.
The biggest target so far is Alibaba Group (NYSE: BABA). We all remember when former Alibaba CEO Jack Ma ducked the limelight and sped off in his Red Barchetta for parts unknown. Ma famously called Chinese banks “pawnshops” before disappearing for months. Whether the disappearance was of Ma’s own freewill remains to be seen.
What’s certain, however, is that what started as one little victory for ol’ Jack quickly turned into a Chinese takedown of the entire industry. More proof that you can’t escape the camera-eye in communist China.
Beijing quickly put Alibaba under antitrust review and expanded that investigation to the entire Chinese tech sector, with fintechs coming under intense scrutiny.
Alibaba now faces a fine that could top the $975 million Qualcomm paid in 2015 for anticompetitive practices in the country — a record fine that could seriously impact Alibaba’s vital signs.
But fines are just the tip of the iceberg for companies operating in “Red Sector A.” Chinese regulators aren’t losing it yet, but it may be just a matter of time, according to Ye Han, a partner at Chinese merger and acquisitions law firm Merits & Tree:
Wait … so Chinese companies weren’t getting government approval before making deals and acquisitions? That does not boost my confidence levels in Chinese stocks at all.
Plus, it sounds like Beijing may have brought some of these issues on itself, and now it’s dropping an iron fist to save face. “Working Men” (and women) like ourselves shouldn’t have to navigate Jacob’s ladder just to make a buck while investing.
As always, you’re free to choose freewill in your investment decisions, but I’m not putting the big money toward Chinese stocks for the time being. And if all this talk of communism and China has you itching to choose a ready guide with a celestial voice, well, wait no longer…
What’s more American than America 2.0?
Remember, if you choose not to click … you still have made a choice. And now for something completely different, here’s your Friday Four Play:
No. 1: Signs, Signs … Everywhere a Sign
Invest in this, don’t invest in that … can’t you read the signs?
Hey, all you long-haired freaky people — and those who aren’t freaky or don’t have long hair — I’ve got another potential investing deal for you!
DocuSign (Nasdaq: DOCU) is plunging today after beating earnings and revenue expectations and raising its outlook. Now that sounds like my kinda stock.
The company specializes in cloud-based digital security focused on e-signatures and document workflow. Its customers naturally include mortgage issuers, banks, notaries and sales representatives. Salesforce (NYSE: CRM) is among its largest customers.
DocuSign beat Wall Street’s fourth-quarter earnings expectations by $0.15 per share, with revenue nearly doubling year over year to top the consensus target by a cool $2 million. The company said that its business grew more than 50% in 2020, thanks in part to the pandemic.
However, DocuSign is not just a work-from-home type of company. The world shifted even more toward the digital side during the pandemic, and the ease of digital signatures and e-notaries aren’t going anywhere anytime soon.
The implications for the online mortgage business are massive all by themselves … let alone the fact that DocuSign removes the need for faxing stuff all over the place for signatures. That alone makes me want to cheer DocuSign on. I hate fax machines with a passion.
Anyway … despite blowing past Wall Street’s quarterly estimates and raising its first-quarter and full-year guidance, DOCU fell more than 7%. Given the company’s prospects in a world that needs digital signatures and online security, buying the DOCU dip seems like a no-brainer.
No. 2: Efficacy In The U.K.
I know what I want but don’t know how to get it. Cause I, wanna receive … COVID vaccine! (Sorry, Johnny Rotten … it just came out.)
So, we have yet another vaccine stock racing up the charts today.
Novavax (Nasdaq: NVAX) announced today that its COVID-19 vaccine is 96.4% effective against the original virus strain … and 86.3% effective against the U.K. variant. What’s more, the clinical phase 3 results also show that Novavax’s vaccine provides “100% protection against severe disease, including all hospitalization and death.”
And death? Well, that’s good. I’m pretty sure that’s good. But is it a 10% rally in NVAX good? I mean, the vaccine hasn’t received approval yet. It’s still in phase 3 testing, after all, and analysts don’t expect Novavax’s vaccine to get approval until May.
Honestly, we haven’t seen this kind of vaccine enthusiasm on Wall Street since the early days of vaccine development. Johnson & Johnson, Moderna and Pfizer all already have vaccines on the market now. So, what gives with NVAX?
Well … as is typical in these situations … it’s a Reddit thing. More than 20% of NVAX’s float available for public trading is sold short. This isn’t unexpected given how late Novavax is to the COVID-19 vaccine game.
However, Reddit investors view high short interest stocks as targets now. NVAX popped up several times on Reddit today, with investors talking about squeezing the shares even higher.
In short (ha … short), today’s NVAX rally was fueled in much the same way as GameStop’s (NYSE: GME) rally. Only, NVAX doesn’t have the hoard of “diamond hands” investors GameStop does. I will be surprised if NVAX holds on to today’s gains for very long.
No. 3: The Bourne ULTA-Matum
Going into the earnings confessional this week, Ulta (Nasdaq: ULTA) didn’t have too much going for it … other than low expectations. There’s a reason why it’s not been on my “pandemic-proof retailer” shortlist (which is quite a short list, I might add).
The makeup and beauty boutique has been in a pandemic-induced stranglehold for most of the year. Revenue dropped 4.6% year over year to $2.2 billion, but that still beat estimates for $2.08 billion. Per-share earnings came in at $3.41, demolishing expectations for $2.34.
The audacity — nay, the atrocity — that Ulta laid on the earnings table was a negative outlook for the year ahead. Why, I never! Ulta only expects per-share earnings to land between $8.85 and $9.30, with revenue totaling revenue between $7.2 billion and $7.3 billion.
Analysts, however, hoped for more Ulta-mate results— as if the makeup-wearing masses would suddenly don Joker-esque layers of Ulta products the second the nation reopens. Wall Street wants Ulta to bring in $9.42 per share and $7.32 billion in revenue for 2021, so Ulta’s own expectations weren’t too far off the mark.
But throw in the news of longtime CEO Mary Dillon stepping down, and the stock’s 11% nosedive makes a lil’ more sense. Dillon isn’t going far … just to Ulta’s board of directors, while President Dave Kimbell takes the CEO reigns. But apparently, this was just too much hoopla for ULTA investors.
No. 4: What’s A Funkodelic?
I figured Funko (Nasdaq: FNKO) was all but dead after it repeatedly botched earnings reports years back … and I’m half surprised the purveyor of Pop! figures is still around. But last quarter’s earnings actually gave some insight into the company’s growing foothold and potential longevity.
Sure, sales for the Pop! brand only grew 1% in the quarter … but those big-headed plastic figures aren’t Funko’s golden goose anymore. Accessories maker Loungefly, which Funko bought out back in 2017, has steadily rounded out and stabilized the company’s product offerings.
Loungefly makes purses, bags, wallets, keychains and other kitschy licensed accessories from the same media franchises that Funko uses: Star Wars, Marvel, Harry Potter, Hello Kitty and your standard Disney deluge.
Thematically, Loungefly fits perfectly within the Funko system … and it finally shows on paper this earnings season. Sales for Loungefly-branded products shot up 51% in the holiday quarter. Funko’s overall revenue rose to $226.5 million, topping estimates for $195.7 million. Per-share earnings reached $0.29 and also beat expectations for $0.18.
In my experience, fad stuff like Funko Pops doesn’t usually last this long or make too big of a comeback. I’m still not totally behind FNKO as an investment, but if it can keep that foothold Loungefly has in the licensed accessories market, Funko won’t go the way of the Beanie Baby too soon.
Though, at least Beanie Babies didn’t have the gall to call itself a “platform in which [people] engage with pop culture.” C’mon, Funko … engage? With pop culture? Engage.
Number 1, I engage you to go number 2.
I know that in my Funko-verse, I steadily eye every Funko figure every morning, head to toe, just to get my daily dose of pop culture engagement — from outside the box, mind you. I only dream of one day breaking the Funko seal, heedless of its now-shattered resale value, and truly engaging with my vinyl-molded pop culture talismans. (This is definitely sarcasm, by the way. Just in case you were wondering.)
Full disclosure: I admit, I have the John Cena Funko Pop. For the memes. He’s somewhere around here … can’t see him. Anyway, FNKO’s up 8% today on the hype.
Great Stuff: Get The Funko Out
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