And Justice (Department) for All…
It’s been many a year since we had a nice juicy antitrust lawsuit in the tech world, but Alphabet Inc. (Nasdaq: GOOG) is about to break that streak.
It’s sad but true.
According to the infamous “people familiar with the matter,” the U.S. Department of Justice (DOJ) is preparing to seek and destroy Alphabet’s Google for abusing its position as the world’s largest search engine. Heck, the suit may already be filed by the time you read this.
Google currently accounts for about 90% of the U.S. internet search market. So, wherever you may roam online, Google is there. But that’s not what has the DOJ fighting fire with fire. Not exactly, anyway.
Way back in the ‘90s, Microsoft Corp. (Nasdaq: MSFT) was hit with an antitrust suit for how it handled internet browser software, and the DOJ’s memory remains. Google is now the master of puppets, using its 90% market share to strike exclusivity deals as the default search option on practically every device and browser.
From Chrome to Firefox … from Android to Apple, Google has welcomed home one and all to its sanitarium search engine. And with those search engine deals comes a near-monopoly on internet display ads and truckloads of ad revenue.
How much revenue? Google reportedly pays Apple $8 billion a year to be the iOS default search engine — that’s how you ride the lightning.
The result is creeping death for every Google competitor in the online search and ad markets. This is the real crux of the Justice Department’s complaint.
However, it’s still very early in the antitrust process. GOOG initially dipped on the news, but investors quickly realized that it’s too early to dub Google unforgiven or name the DOJ the hero of the day — or the harvester of sorrow, depending on where your investments lie.
The bottom line is that Google parent Alphabet is still a major player in the tech market. It has boatloads of cash and isn’t going anywhere anytime soon — regardless of what the DOJ does. Furthermore, assuming the lawsuit is filed soon, the earliest trial date would still fall in 2021 and could drag out for years.
I’m not a fan of Alphabet as a company — too many disposable heroes for my taste.
But as an investment? GOOG may be one of the most stable in the Big Tech market, even with the DOJ riding in like the four horsemen.
Now, if you’re longing for the payday that never comes, why not check out where the wild things are in the tech market?
No, we’re not asking you to jump in the fire all by your lonesome. And we’re not peddling some holier than thou research service either. We’re taking you through the never — fighting the struggle within — with one tiny tech company gearing up for a massive surge!
How big? I’ve heard 20,300% … but we’re testing the frayed ends of sanity with that one.
Gains are in the eye of the beholder, and you want to be one of those beholders. Click here to turn the page and act now!
Good: Back to the Front
In a move to refocus its efforts on processors, Intel has agreed to sell its flash memory business to SK Hynix for $9 billion. The deal also includes a crucial Chinese factory.
According to second-quarter revenue figures, Hynix was just ahead of Intel in the flash memory market. Flash memory is a critical component in all mobile devices and a growing factor in the PC market with solid-state drives.
The deal makes Hynix the second-largest memory maker (by revenue), behind only Samsung globally.
For Intel, the cash is a welcome reprieve, and the sale allows the company to redouble its efforts to combat AMD’s rising threat in the data-center market … and everywhere else.
That said, investors don’t appear too keen on the sale, and INTC shares fell more than 1% on the news.
Finally, Intel will report earnings after this Thursday’s close. Wall Street expects earnings of $1.10 per share on revenue of $18.21 billion. After last quarter’s failure, Intel really needs a win this week.
Better: My Friend of Misery
I don’t know about you, but I became much more of a clean freak during this pandemic. I feel like I wash, disinfect and douse my entire world in sanitizer lately, and I’m not alone.
Citing a 30% surge in “personal cleansing” products, Procter & Gamble Co. (NYSE: PG) beat second-quarter earnings and revenue expectations. Net sales rose to $19.32 billion, topping expectations for $18.38 billion.
P&G said that sales grew across the board but were especially notable in fabric and home care products like Mr. Clean (up 30%), home brands like Tide (up 14%) and health care supplies like Oral-B (up 12%).
Looking ahead, P&G lifted full-year sales growth to fall between 3% to 4%, up from its previous 1% to 3% range.
And for the icing on the cake, P&G boosted its stock buyback program to $7 billion to $9 billion for fiscal 2021. (I know you all have thoughts on stock buybacks — share with us here!)
Regular readers know that Great Stuff often talks about well-run companies worth holding through the pandemic. PG shares certainly qualify on that front — and doubly so, since consumer goods companies often perform well during times of economic hardship.
It’s time to take a serious look at PG if you don’t own it already.
Best: The Unforgiven
I don’t know if I’ll ever forgive myself for missing this investment idea, dear reader.
In the early days of the pandemic, millions prepared to work from home. That meant new laptops, new monitors, new printers … and new mice, keyboards, headsets and webcams.
Anyone who shops for mice, webcams and assorted PC accoutrements knows that Logitech is one of the biggest names on the market and the first brand you see for new computer gear on Amazon. (Bangs head on trading desk.)
So, anyway … Logitech reported that second-quarter sales skyrocketed 75% to $1.26 billion — the company’s first quarter with 10-figure revenue. Earnings spiked to $1.87 per share.
At least we weren’t alone in the missed opportunity. Wall Street expected earnings of only $1.70 per share on $1.14 billion in revenue. It doesn’t make me feel much better, but it helps.
With an eye toward the future, and the work-from-home trend extending beyond the pandemic, Logitech raised its full-year outlook for the second time this year. The company now expects sales growth of 35% to 40%. Holy cats…
LOGI shares surged more than 17% on today’s news. As always, we don’t go chasing waterfalls or post-earnings rallies.
But, you should probably keep a close eye on LOGI for a potential entry point down the road. A consolidation into the $90 area could be a nice price point if you want to get in on this purveyor of mics and webcams in the new work-from-home normal.
The scene: A soft snow befalls a silent suburban strip mall — a stark beauty soon to become a mottled, gray slushy abomination.
Your local holiday market is ready and excited for business, lights all on and strewn about, vendors like Party City and Guitar Center basking in a warm glimmer, as if all was well for the moment.
But things were not all well in retail…
You’re watching A Christmas Culling.
Yesterday, we alluded to the do-or-die situation many stocks face going into earnings season for the third quarter. But as far as the rest of the year goes, you’re not the only one already looking toward the bitter end of 2020.
For one, retailers eye the holiday shopping season with pins and needles:
Ah, normal times! Anyone remember laughter? So, retail’s holiday season will either be a saving grace for some … and for others, a light at the end of the tunnel that turns out to be a train.
To put it bluntly, it’ll be many companies’ “last effort to be relevant for the consumer and to prove their reason for existence,” according to S&P Global Retail Analyst Sarah Wyeth.
But don’t you worry now; e-commerce is alive and better than ever! It’s those brick-and-mortar sorts we have to talk about.
Your local Target is probably A-OK. Big-box budgets can pivot on a dime, move sales online, and dig into the home delivery game.
But what about the dinky little shoe store next to Target? The overpriced vitamin and protein powder store or the stuck-in-2006 pet supplies shop?
These struggling stores and even small chains can’t crank the bank enough to keep up with … well, the e-commerce trend they should’ve joined earlier in the decade. But we’ll get to that later.
The point is that most of the retail pond’s minnows and tadpoles don’t have the capital capacity to launch their businesses into pandemic-thriving mode. Optional curbside delivery can’t overcome the forces of widespread plunging consumer confidence.
And when rents get later by the day, even the holidays seem forever far away:
Will the barely clinging-on survive the Christmas Culling? Which way will retail’s sales-slicing scythe sway? We’ll keep you in the loop either way.
Great Stuff: The Call of Ktulu (and Reader Feedback)
Come one, come all, come ye who’ve never ventured to Great Stuff’s Reader Feedback free-for-all.
You have but a few days left to make this week’s installment, where we dive into the great virtual mailbag of market malaise and memey goodness. If you haven’t shared your thoughts on these crazy trading times, why not drop us a line?
GreatStuffToday@BanyanHill.com! All the cool kids on the Street are writing in to our inbox, so why not add your email in now? Spin your yarn on earnings season, stay-at-home stocks and what monopolies the DOJ should really be looking at.
Until next time, stay Great!
Editor, Great Stuff