Friday Four Play: The “Ain’t That the Dickens?” Edition
It is the best of economies. It is the worst of economies. It is a season of much-anticipated growth. It is a season of much-feared loss…
Great Ones, if it sounds like we’re stuck in Charles Dickens novel, it’s because — maybe we are. Wall Street faces both the potential for emerging from the COVID-19 nightmare and the possibility that a full recovery could still take months longer than expected.
This uncertainty is largely factored into the broader market, but for many companies, the proof is in the pudding … or porridge, as Dickens would say.
Case in point, just look at the two most-hyped Millennial companies to go public in the past year: Airbnb (Nasdaq: ABNB) and DoorDash (NYSE: DASH). Both topped Wall Street’s fourth-quarter earnings and revenue expectations.
DoorDash banked a whopping 226% surge in revenue to $970 million, with orders vaulting 233% to 273 million. It’s not DiGiorno; it’s delivery.
Meanwhile, Airbnb reported a quarterly loss as revenue dropped 22% to $859 million and bookings fell 39%.
Both reports clearly reflect the times. COVID-19 lockdowns are ballooning DoorDash and crushing Airbnb. What’s more, guidance looked very similar between the two.
DoorDash put 2021 guidance well below the Street’s expectations. The company noted that its “forecast assumes increasing consumer churn, reduced order frequency at the cohort level, and slightly smaller average order values beginning in Q2.”
Meanwhile, Airbnb didn’t provide guidance at all: “We continue to have limited visibility for growth trends in 2021 given the difficulty in determining the pace of vaccine rollouts and the related impact on willingness to travel. We are not providing an outlook for the rest of 2021 at this time.”
Yet, following these reports, DASH plunged more than 5% while ABNB rose more than 5%.
The different reactions clearly don’t come from Airbnb or DoorDash’s quarterly reports. If they did, ABNB would be down and DASH would be up.
The real difference lies in Wall Street’s expectations. In a post-pandemic world, investors expect consumers to rush right out their front doors to travel, explore and do all the things the lockdown prevented us from enjoying. I can’t say I disagree with that outlook. I’ve been dying to go somewhere … anywhere … for months.
This situation clearly benefits Airbnb over DoorDash.
In fact, with DoorDash facing reopening pressures, rising Dasher wage pressure and pushback from restaurants that don’t feel like they’re getting enough value … DASH may have already peaked.
On the other hand, Airbnb has yet to fully hit its stride. Once the lockdowns and travel restrictions start fading away, ABNB is poised to go on one heck of a trip.
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And now for something completely different, here’s your Friday Four Play:
No. 1: AT&Teetotaler
After what can only be described as a drunken, decade-long merger and acquisition binge, AT&T (NYSE: T) finally sobered up and came to terms with the mess it created. I mean, how else do you rack up $151 billion in debt unless you’ve been drinking heavily?
Dude … let’s buy that satellite TV company. And then get some cartoons from TimeWarner to watch on it. That’d be awesome… Also, what’s the internet?
The latest development in AT&T’s road to sobriety revolves around its 2015 purchase of DirecTV for $67 billion. The idea was apparently to create a premium video experience by combining satellite and cable TV.
But, much like Bill Gates and Microsoft back in the mid-90s, AT&T greatly underestimated the power of the internet.
This week, AT&T announced it will spin off its DirecTV unit — which includes DirecTV, AT&T TV and U-Verse — to TPG Capital. The deal is more like step one toward sobriety, however, as AT&T will still own 70% of the new company, leaving TPG with 30%.
The real kick in the pants here, however, is the value of the newly spun-off collection of dying video business: “The transaction to separate AT&T’s US video business into New DirecTV implies an enterprise value for the new company of $16.25 billion,” the company said in a call with analysts.
And then, in an admission that had to hurt nearly as much as admitting you have a drinking problem in the first place, CEO John Stankey said: “We certainly didn’t expect this outcome when we closed the DirecTV acquisition in 2015.”
Didn’t expect that you’d lose $50.75 billion on DirecTV? I hope not. Though, if you’d paid attention to the early days of online streaming, I think you could’ve had some inclination as to how this all had to end.
The real shame of this entire AT&T saga is that it took an activist investor — a sponsor if you will — to help Stankey and AT&T finally see the light.
With the company now focused completely on the mobile and streaming content markets, AT&T might finally be on the road to recovery.
No. 2: Yes Canary?
I never thought I’d see the day Twitter (NYSE: TWTR) was the most talked-about the social media company. But, here we are…
After it posted blowout earnings (“No Canary”) driven by resurging ad revenue, TWTR marched steadily higher to hit a fresh all-time high. The stock received a boost today after Goldman Sachs lifted its price target from $78 to $112 and reiterated its buy rating.
Goldman cited Twitter’s investor day presentation, in which the company proclaimed that it would double its annual revenue by 2023 with 315 million daily active users.
But not everyone’s twitterpated with Twitter.
Matt Maley, chief market strategist at Miller Tabak, told CNBC that “on a technical basis, it’s also getting incredibly overbought.” In fact, Matt notes that the last time Twitter’s relative strength index (RSI) was this high, TWTR dropped 40% in less than six months.
It’s not a bad point, per se, and I share this concern. In fact, if you’re looking to buy in to TWTR, you might want to wait for a pullback so you get a better price.
However, if Matt is so concerned about TWTR’s RSI, I wonder what his take on the S&P 500 Index’s lofty RSI would be? I mean, if you’re concerned about TWTR being overvalued and heading for a correction, you have to share the same concerns about the overall market, right?
I know this isn’t an apples-to-apples comparison, and I’m probably ranting or whatever, but I think we all know the deal at this point: Twitter is faring better than most of its social media competitors, but if you’re looking to add TWTR to your holdings, wait for it to digest recent gains.
No. 3: Lemme Get Uhhh … Synthetic Chalupa?
Onetime Great Stuff Pick Beyond Meat (Nasdaq: BYND) reported earnings last night that left a bitter plant-based taste on Wall Street’s tongue.
The meatless wonder reported a per-share loss of $0.34, missing estimates for a loss of just $0.14. Revenue edged up slightly to $101.9 million but missed expectations for $103.6 million.
As always, earnings were just a sideshow to the real news beyond. The nonmeat of the matter was Beyond announcing supply partnerships with fast food’s who’s who: McDonald’s (NYSE: MCD) and Yum Brands (NYSE: YUM), parent of KFC, Taco Bell and Pizza the Hutt.
This semi-clears up the “he said she said” went down with the McPlant news that we covered a while back. You remember, where everyone thought McDonald’s ditched BYND because it wasn’t named in the release?
It’s only “semi-cleared up” because many investors glossed over a key piece of the supply deal. Beyond will be what MCD is calling a “preferred supplier,” which means some of Macca’s global markets (China, Latin America, etc.) already have plant-based supply deals in place with other sources.
The BYND deal will be just for the U.S., along with the Australian, U.K. and Canadian markets should they decide to launch McPlants as well. This ain’t the end of the world, but it’s a mere salve if Beyond was looking for exclusivity…
Anyway, with the partnerships, Beyond is looking to add plant-based chicken, pork and egg to its current faux-beef lineup. BYND spiked 8% on the announcement but then lost it all as the news slowly digested.
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No. 4: A Handmade Tale
From double miss back to double beat, Etsy’s (Nasdaq: ETSY) earnings were a well-crafted treat.
For the DIY e-commerce company, per-share earnings reached $1.08 and destroyed estimates for just $0.59. Revenue also took off like a shot on the quarter, hitting $617.4 million versus the $516 million forecast.
Analysts were surprised, but you shouldn’t be. Just think: Whom does ETSY cater to most?
Hobbyists looking for side-hustles (or a full-time crafting gig, to be fair), people looking to decorate their boring-beyond-beige home workspaces … and stimmied-up folks looking to blow cash on anything online that makes the feel-good chemicals come out.
What Etsy calls “habitual buyers” are flocking to the platform, up an insane 160% last quarter.
But unlike DoorDash and Airbnb, it’s still unclear how the pandemic’s waning chapters will affect Etsy, though CEO Josh Silverman expects growth to “decelerate off of last year’s high levels along with the rest of e-commerce.”
For the time being, Etsy gave current-quarter guidance that slew expectations — $513 million to $536 million, compared to forecasts for $383 million. Though, understandably, the company was still cagey about giving any full-year revenue estimates.
Great Stuff: Bring It on Home
Welcome to the weekend, Great Ones! Don’t think that our romp ends here, however.
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Editor, Great Stuff