Friday Four Play: The “Crazy Train” Edition
Crazy, but that’s how it goes. Wall Street and Main Street, living as foes.
Maybe, it’s not too late … to learn how to invest and forget how to day trade.
Wall Street’s mental wounds are still healing, and it’s driving me insane. Want proof? Oh, you know I have proof. Not of my insanity, you get that on the daily. No, the other thing…
This morning, Oppenheimer downgraded both Home Depot Inc. (NYSE: HD) and Lowe’s Companies Inc. (NYSE: LOW) to perform from outperform. The reason? Oppenheimer is “increasingly concerned that the market is becoming too lax toward chances of a post-COVID-19 sales growth downshift.”
Fair enough. Oppenheimer finally realized that COVID-19 will impact corporate earnings and singled out home improvement companies as a potential market weak spot.
Meanwhile, Argus Research upgraded Foot Locker Inc. (NYSE: FL) from hold to buy. Its reasoning? That consumers “have returned to stores with intentions to buy merchandise.”
In other words, Argus Research believes that there won’t be a pandemic impact on Foot Locker’s bottom line. In fact, consumers are flush with cash and are ready to buy, buy, buy!
Is your head spinning yet?
Will COVID-19 impact corporate sales or not?
Maybe the message is that consumers will forgo home improvements in favor of fashionable footwear. Maybe shoes are worth risking catching COVID-19, but home improvement is not.
“I don’t want to get sick and die just to fix the toilet, but, man, those new Nikes are the bomb!” — U.S. consumers.
Or maybe consumers know that COVID-19 will bring about the zombie apocalypse, and they’re stocking up on running shoes instead of wasting money on home repairs?
Enough “maybes.” We (the consumers) all know the real reason for this insanity. Wall Street and the analyst community have no idea what’s going on with Main Street right now. They’re so doped up on Fed stimulus and vaccine dreams that they’re completely out of touch with the U.S. consumer.
And you know what that means: more market volatility. I know, I know … I’ve said this a thousand times. And I’ll keep saying it until Wall Street comes to its senses.
Heirs of a vaccine war, that’s what we’ve become. Inheriting troubles, we’re mentally numb.
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And now for something completely different … it’s time for your Friday Four Play.
No. 1: Can of Worms
Hold on to your hats, because we’re not done with the crazy. Not by a long shot…
Per order of President Trump, video-sharing app TikTok will officially be banned from U.S. app stores this Sunday. Apparently, TikTok’s “trusted technology partner” deal with Oracle Corp. (NYSE: ORCL) isn’t enough to sway Trump’s opinion on the matter. Without further action from the president, TikTok would be banned completely in the U.S. on November 12.
For some of you, this means that Oracle stock will take a hit. (Spoiler alert: It did, but not even by 1%.) Many piled into ORCL in hopes that the deal would open the doors to social media cash for Oracle. Those hopes are on thin ice right now.
For everyone else, the TikTok war could have some interesting and far-reaching consequences … not the least of which is the impact on the U.S.-China trade deal. On that front, Wedbush Analyst Dan Ives said: “this shutdown move could be a Fort Sumter moment in the U.S.-China cold tech war tensions with retaliation on the horizon.”
Awkward reference, Dan. Is China the North or the South here? But I digress…
The irony is that while a ban could escalate the U.S.-China trade war, it won’t solve anything.
Remove the app from U.S. stores? Smartphone users can easily switch to a different country’s store on their devices and Voila! There’s TikTok.
Ban the app completely in the U.S.? First, I have no idea how the U.S. would do that from a technology standpoint. Second, there are probably some pretty big laws to deal with before a ban would be legal. And third, anyone who knows how to use a VPN wouldn’t be affected anyway.
And we’d still be left with a massive and debilitating trade war with China. Your retirement ruined, all because of a video-sharing app that’s only truly popular with teens. Totally worth it.
No. 2: It’s “Tesla Levi-OH-sa” … Not “Tesla Levio-SA”
Mister Elon, what went down in your head? Oh, Mister Elon … did you talk to the dead? (OK, one last blast of Ozzy, and we’re done…)
I doubt Elon Musk talks to the dead, but analysts are very curious about his CEO compensation package and its potential effect on Tesla Inc.’s (Nasdaq: TSLA) stock price. I blame Kodak.
But, according to Piper Sandler Analyst Alexander Potter, there’s nothing to worry about. Musk’s compensation is just “poorly understood.” Potter also believes that Tesla’s energy business is also poorly understood, and that’s why he lifted his target on Tesla from $480 to $515.
“We anticipate sharply higher demand for these products,” Potter said with a swish and flick of his wand. And demand is already starting to rise. Last quarter, Tesla saw energy generation and storage revenue jump 26% to $370 million.
That’s small potatoes (potahtos?) compared with electric vehicle (EV) sales, but the market is quickly boiling, mashing and sticking to that direction. Even Musk believes that Tesla’s energy side will grow to rival its EVs.
It’s true that Wall Street completely discounts Tesla Energy in favor of the hype surrounding EVs. Tesla’s EVs are sexy and grab headlines. But energy generation and storage are about the least-sexy things you can invest in.
They’re also going to be one of the most important investments you’ll ever make. And they’re also one of the big reasons that I don’t mind TSLA being a bit overvalued right now.
If you’re already in TSLA, stay in for the long haul. If not, the stock is volatile … so you’ll eventually get a price that fits your risk tolerance.
No. 3: Where Burgers and Chips Meat
You know two-in-one shampoo? Yeah, it’s a BS term — and a Mitch Hedberg bit — but here’s a two-in-one section to continue today’s upgrade-a-thon.
First, we make like R.E.M. and look for answers from the great Beyond … Meat Inc. (Nasdaq: BYND).
JPMorgan downgraded the stock today from neutral to underweight. The logic (this time) is somewhat reasonable in a rare shot of sanity: BYNDs’ 190%-plus climb since March of this year is “above and beyond what we consider rational even for a good company like Beyond Meat” according to Analyst Ken Goldman.
The faux meatmaker will also see increased competition from “Impossible Foods taking share at grocery and restaurants hesitating to add menu complexity during the COVID-19 crisis.” Granted, Impossible was playing the menu making long game with Beyond even before the pandemic, so the competition angle here seems like a profit-taking afterthought, albeit a valid one.
Nonetheless, the meatless maniac sank 6% today because when there’s no news, even non-news is bad news. At the very least, BYND’s analyst action isn’t as much of a mental gymnastics workout as Berenberg’s coverage on semiconductor stock Ambarella Inc. (Nasdaq: AMBA).
Ambarella is an artificial intelligence (AI) market darling, with Berenberg setting a buy rating and a $67 price target. But the conviction just isn’t the same as we saw with BYND, with Berenberg’s bottom line barely fleshed out more than a gut feeling that the worst is over.
Ambarella jumped a whole 4% today. Woohoo, if you’re in it.
“COVID-19 resurgence? Nobody’s got time for that!” — Berenberg, probably.
No. 4: Three Words: Adult Ball Pit
It was the best of downgrades, it was the worst of upgrades — the least logical of rallies and the most sensible of retreats. And we haven’t even touched on Dave & Buster’s Entertainment Inc. (Nasdaq: PLAY) yet.
There’s nary a place where COVID-19 could spread faster than in Dave’s dark, dank dens of Chuck E. Cheese-like debauchery. Well … besides Carnival’s Ruby Princess ship, which is just a floating Dave & Buster’s.
Anyway, the company’s 137 restaurant-gaming-bar chimeras fully closed for just about a week back in March, and as of early this month, 52 were still shuttered.
And for the locations slowly reopening, it hasn’t been easygoing since then for the jester with a broken crown. (OK, I lied about hearing the last of Ozzy.) Revenue’s down 85% in the second quarter. What, no one’s game for some social distanced skee ball and brewskis?
It’s your usual pandemic panic: Furlough the masses of workers and shoot for rent relief or deferrals. The unusual part is when Dave & Buster’s stock crashed as much as 30% yesterday on reports of possible bankruptcy.
Then, much like bar grub after a few rounds of stand-in-place basketball, it’s all coming right back up again. Today, PLAY stumbled back to the drinking altar and rallied 14%. Why? Upgrades from both Stifel and Raymond James.
To Stifel, Dave & Buster’s income devastation, rental uncertainty and flirtation with bankruptcy are “an attractive entry point for investors with higher levels of risk tolerance.” In other words, if you’ve an Iggy Pop sized appetite for danger, go on and bite the Buster.
(Seriously though … I wouldn’t. This ain’t a “replace the ginger ales with Coke-Sprite” kind of fix, if you catch my drift.)
Great Stuff: You Think This Is a Game?
Another week is wrapping up here at Great Stuff headquarters. And by that, I mean that I’ve finally stopped delighting my wife and kids with Ozzy’s solo career and just went back to the Sabbath years. So, you have that theme to probably look forward to on Monday … which is nice.
What’s also nice is catching up on all the emails that have come pouring in after yesterday’s standout, bang-up, bat-bite-worthy edition of Reader Feedback.
Yet, I know more than a few of you have still not written to GreatStuffToday@BanyanHill.com yet. Ahem. More than a few of you. Wink wink, nod nod.
Talking to Mr. Great Stuff is the best — he’s just this guy, you know?
Until next time, stay Great!
Editor, Great Stuff