Economic Kickstart; Rocket Man IPO; Uber Eaten
Friday Four Play: The “Shout at Wall Street” Edition
When I get gains, I trade Robinhood free. Market investing is a drug for me.
My heart, my heart. Kickstart my economic heart.
But we’ve already had one kickstart this year with the CARES Act. So, what about a second kickstart?
Looks like we’ll have to wait a bit longer for Stimulus 2: COVID-19 Boogaloo.
While talks between Democrats and the White House have progressed, the two sides remain relatively far apart on several key issues — including federal unemployment benefits, reopening schools and state and local government aid during the pandemic.
And, in case you wondered if the economy really needs a second round of stimulus, the latest employment report should help clarify things a bit. The U.S. economy added just 1.76 million jobs in July, only about a third of the 4.79 million added in June.
Clearly, the pandemic’s resurgence slowed hiring considerably.
Since this whole thing started back in March, the U.S. lost 22 million jobs. The past two months saw less than half of those — about 9.3 million — return.
Now, they say we’ve got trouble, trouble in our eyes. But Wall Street’s just looking for another good time.
To that end, the Federal Reserve still has investors covered with “unlimited” stimulus, at least. They don’t call Fed Chairman Jerome Powell “Dr. Feelgood” for nothing — he’s the one that makes investors feel alright.
I’ve got one more thing you’ll understand. President Trump enacted a China ban. It’s sweeping but not easily understood, and it could cause trouble for the one they call Feelgood … erm, Jerome Powell.
When we started Great Stuff, all we needed … needed was a laugh. A year’s gone by, I’d say we’ve kicked some gains. When I’m enraged, or hittin’ the trades, gains are rushing through my veins. And I’d say we’re still kickin’ stock picks.
But not as much as rocket surgeon Michael Carr…
Volatility like today’s is exactly why Mike Carr developed his “One Trade” strategy. With the One Trade strategy, you can make one trade on one single investment every week, targeting 100% returns every time you trade it — in just two days, on average.
(Today’s poor attempt at a Mötley Crüe tribute goes out to Sgt. Christopher C. Ret. — aka Crit — who wrote in to Great Stuff yesterday. Keep rocking, you crazy metalhead! We’ll catch up more next week in Reader Feedback.)
And now for something completely different … it’s time for your Friday Four Play.
No. 1: Rocket Man
A successful initial public offering (IPO)? In this market? It’s more likely than you think.
I know what you’re thinking: “Finally, another space stock to invest in!” Wrong! And I think it won’t be a long, long time before some Robinhoodlums confuse Rocket Companies with an actual space company. Or Virgin Galactic Holdings Inc. (NYSE: SPCE) with an actual space company.
Despite its starry-eyed name, the company runs Rocket Mortgage — formerly known as Quicken Loans. Yes, Rocket Companies specializes in mortgage banking.
For better or worse (for those of us who remember the 2008 financial crisis), Rocket flipped the mortgage loan business on its head, turning the process into an assembly line of sorts.
Analysts call Rocket the “Amazon of financial services,” which I guess is a good thing. The company raised more than $1.8 billion in its IPO, making it the largest mortgage lender by market capitalization. Rocket reportedly closes more than 100,000 mortgages a month and has plans to scale up to 200,000 per month.
That’s a lot of houses — and a lot of loans. With mortgage rates at lows not seen in decades, Rocket’s IPO couldn’t have come at a better time. But the stock’s success for investors remains to be seen. Great Stuff is keeping an eye on RKT for now. Stay tuned.
No. 2: Uber Eats $1.78 Billion Loss
Some things are eternal.
Time passes. The sun rises and sets. Seasons change. Uber Technologies Inc. (NYSE: UBER) loses billions.
Once again, ride-hailing specialist Uber reported a massive loss of $1.78 billion, or $1.02 per share. The results were worse than even Wall Street expected — a loss of $1.27 billion, or $0.76 per share.
But Uber has two contributing factors this time around: the pandemic and the $2.65 billion acquisition of food delivery company Postmates. Still, investors don’t appear to cut Uber much slack. The stock fell by nearly 6% on the news.
There were a couple of bright spots, however. First, revenue rose to $2.24 billion, blowing away the consensus estimate for $1.82 billion. Second, Uber Eats now brings in more revenue than the company’s ride-hailing business.
“We are fortunate to have both a global footprint and such a natural hedge across our two core segments…” CEO Dara Khosrowshahi said in a press release.
A natural hedge? That’s one way to look at it. Rides go down, Eats goes up. I expect we’ll see the inverse occur once COVID-19 is no longer a problem.
No. 3: On the Bright Side
First Solar Inc. (Nasdaq: FSLR) is doing just fine during the pandemic, keeping its factories open to crank out those sick solar panels … and solar panel accessories. No stranger to the biz of keeping places lit, First Solar scorched the earnings confessional last night.
- Earnings per share: $0.35. Estimate: $0.23.
- Revenue: $642.41 million. Estimate: $493.34 million.
Even better than a double beat, the company also reported that a profitable second quarter income wise, compared to last year’s net and operating income losses.
Facts and figures aside, now we can get into the real meat of the matter: First Solar also took the opportunity to sell off its once-stellar operations and management (O&M) business. Essentially, the company wants to pare down its plate-spinning and focus on what it does best: making solar equipment.
See, when First Solar started out, the solar sector was still getting its feelers out, and companies entering the game had to hit clients with the all-in-one package: complete solar setup from development and manufacturing to installation and upkeep.
But now it’s time for change: First Solar is doing the rattlesnake shake and shedding its dead skin. Its O&M division, which saw margins fall from a reasonable 30% just three years ago to just 10%, came under immense competitive pressure. (More on that whole “healthy competition” issue in a sec.)
With the sale, First Solar pretty much leaves North America for the laid-back comfort of its production lines, and the market has so far cheered the streamlining. FSLR is up 15% today, and up 145% since its March lows.
The thing is, this isn’t even the hottest news in the energy market today.
The real potential for your investment dollar lies in a crucial piece of tech developed by one tiny, pioneering American company. It ain’t solar or wind, but an energy revolution that could create more millionaires than pot stocks, cryptos and Big Tech combined!
No. 4: Buzz Brewing in Big Tech
Everybody on the tech block played nice (well, as nice as usual) as they stood in the U.S. regulatory lineup last week, claiming their businesses were all fair, dandy and competitive. That’s when I set my watch for the real antitrust issues to start coming out.
You see, Apple Inc. (Nasdaq: AAPL) has built up its walled garden for, well, decades now, with its closed-in ecosystem marketed as squeaky-clean exclusivity. This time, Apple won’t let a slew of new cloud gaming apps make it to the App Store without passing the company’s increasingly strict guidelines.
Cloud gaming is Big Tech’s next big deal (to some folks), letting people play games that run entirely from remote servers and stream straight to the user’s device. Apple Arcade and Alphabet Inc.’s (Nasdaq: GOOG) Google Stadia were two first contenders, but you bet that Apple won’t let Google’s gaming service run on iOS.
Chipmaker Nvidia Corp. (Nasdaq: NVDA) was also unable to launch an iOS app. Facebook Inc. (Nasdaq: FB) actually brought its gaming app to Apple’s ecosystem but had to essentially neuter the instant-gaming part of its platform, i.e., the whole selling point of it.
But someone’s missing from the fray … where’s Microsoft Corp. (Nasdaq: MSFT)?
Still arguing with Apple about bringing the xCloud gaming service to Apple devices. A spokesperson for Microsoft stated: “…Apple stands alone as the only general purpose platform to deny consumers from cloud gaming and game subscription services like Xbox Game Pass. And it consistently treats gaming apps differently…”
Really, all this does is show how intertwined Big Tech’s competitive talons are — and how far down the “you can’t play with us” rabbit hole Apple wants to go. If Google, Nvidia, Microsoft and Facebook all turn against Apple, that’s some serious scratch that Apple stands to lose.
But Apple’s big enough to basically ignore any legal pressure the rest of Big Tech would push at it. Microsoft is the only one that truly needs this win. Facebook and Google both get enough revenue from their main gigs that gaming is an afterthought for them … and you know how long side projects (don’t) last in the Google world.
Xbox cloud gaming is the only real edge that Microsoft has in the next console season. Does it absolutely need Apple for its plans to work? Or can Microsoft afford to ignore Apple and have Xbox service users make the push for them?
And will Apple keep blocking out the haters? Probably.
Great Stuff: Friday Night, and I Need a Fight
OK, so we’re not really looking for a fight here, but I do want to order up another slice of that Reader Feedback pie, if you’ve got it!
We had an email blowout from your fellow readers this week — and we’ve got even more chitter chatter on the docket for next week.
But we can’t get to that if you don’t get to scribblin’ out a few lines to GreatStuffToday@banyanhill.com. When you’ve got your mind on the market (and the market on your mind), feel free to share your thoughts with us.
Seriously, rant away. The best rambles we get, we can’t even publish. (Thanks, Alex F!)
Until next time, stay Great!
Editor, Great Stuff