Lending’s Big Upstart, Microsoft’s Discord Deal & Peloton’s Purchase Power
Lending Is Trending
There’s a lending trend growing on Wall Street lately, Great Ones. Have you noticed?
In the past month, Rocket (NYSE: RKT), Affirm (Nasdaq: AFRM) and Upstart (Nasdaq: UPST) have all gained considerable investor attention. If you’re like me, you might wonder why companies that specialize in loans are rallying when most of Wall Street is eating itself over inflationary fears.
Yeah … sure, Mr. Great Stuff. We all sit around pondering lending rates and inflation in our spare time. It’s the bee’s knees!
Fair enough. Here’s the deal: One of the big reasons Wall Street is afraid of inflation is that it brings higher borrowing costs, thus making it harder for companies to borrow money and expand.
So, why would lending companies like Rocket, Upstart and Affirm get investors’ attention? I mean, rising inflation should force borrowing rates down and eat into these companies’ growth, right?
Great Ones who read the March 3 Great Stuff issue on Rocket might argue that short interest and the Reddit crowd are responsible for this disconnect.
Upstart saw a similar situation yesterday when it skyrocketed more than 30% after Barclays boosted its price target from $58 to $110. UPST is also a heavily shorted stock, and those short sellers were likely squeezed by yesterday’s news.
But RKT’s short squeeze didn’t occur in a vacuum. It came after the company posted a rather stellar quarterly earnings report. It was the same with Upstart, as Barclays noted in its research note to clients.
Here’s what I think is going on: Wall Street is overreacting to the growing inflation narrative because it thinks the economy is just hunky-dory. But the economy is not hunky-dory. People are going back to work, yes, but 10 million Americans are still unemployed.
Furthermore, those going back to work still need to pay bills and buy things. However, many people have been without a solid source of income for so long that they still need loans to make up the difference.
Companies such as Rocket, Upstart and Affirm disrupt the regular markets for those loans and now benefit from a need-rich environment.
That’s why Rocket and Upstart are seeing strong earnings and revenue growth. And while Rocket may slow down sooner due to rising mortgage rates and soaring home prices, Upstart will see demand grow for some time. After all, it specializes in auto loans and the like.
Don’t get me wrong here. The rebuilding of the American economy is still rolling forward, just at a slower pace than all the interest rate fearmongers believe it is. As such, I’m keeping lending companies on my radar — especially disruptive ones such as Rocket, Upstart and Affirm.
In fact, after Upstart settles down from all this short-squeeze insanity, it might be a solid investment pick for anyone looking to make bank from the U.S. economic rebound. But for something closer to the heart of American industry…
The Good: When In Doubt — Buy, Buy, Buy
Its elusive e-bikes were backordered out the wazoo, and those locked-up supply chains needed some grease.
Peloton went out and bought fitness gear-maker Precor to boost its own manufacturing might at the end of last year.
But Peloton’s lil’ front basket wasn’t full just then … and onward it shopped.
The company also bought up Atlas Wearables and matmaker Otari before the year’s close. Peloton went back to the fitness tech market for seconds last month and bought up Aquido, which built an AI-powered digital assistant tool.
Yesterday, all of those buyouts officially closed, and Peloton should be a fully armed and operational fitness behemoth. Should be. I just can’t get over the idea that Peloton’s latest buying spree is an attempt to remain relevant after the pandemic home-fitness trend ends.
Just watch … Peloton’s finally going to be able to meet demand right as its relevancy wanes. Why else would it snatch up every buzzworthy tech in sight?
You want AI? Smartwatches? Interactive workout mats with screens on ‘em? Say no more! If Peloton can incorporate its fresh buys into its workout gear (and actually manufacture said workout gear), maybe its shopping spree won’t look so desperate after all. But that’s a big “if.”
Better: Welp, Discord’s Done For
On the other end of the desperation spectrum … Microsoft (Nasdaq: MSFT) might munch up yet another tech upstart — if you believe the infamous “people familiar with the matter.”
Communication platform Discord has reached out to a number of interested buying parties, including Microsoft.
Discord (as opposed to Datcord) is a chat platform geared toward gamers in that its wide array of sleek features actually work well. It’s like Slack but smoother … and like 20% cooler.
But why does stuffy ol’ Microsoft need Discord anyway? Does it have an extra $10 billion just burning a hole in its coffers?
Obviously, Skype was not enough for Microsoft’s monstrous appetite back in 2011. Some say that every decade, the Gates-spawned beast must feast upon a new chat platform, like a Sarlacc Pit for software.
Maybe Skype didn’t quite scratch Microsoft’s itch for more gaming exposure, and Discord would flesh out its ability to capitalize on (read: advertise to) its Xbox gamers … and our data.
Before you start emailing me about how Microsoft ruins everything it touches — and trust me, my ear’s open for your rants — this deal might not go through. Discord still wants to keep its options open to go public, which might be more likely than a sale at this point.
Such is the nature of big tech buys these days (PTON doesn’t count, by the way). It’s all hush-hush hype until it’s loud-loud hype that subsides back to silence. Just ask Microsoft how its $30 billion bid for TikTok went down last year…
Best: Falcon Punched
Disney’s (NYSE: DIS) big bets on streaming make it today’s “best” by a long shot. The company just teased viewership figures for its series premiere of Falcon and the Winter Soldier on Disney+ this weekend.
Disney says that Falcon’s premiere is already the biggest opening weekend yet on its platform.
Sure, Disney+ is still “new-ish” … but the competition that Falcon beat out was WandaVision and both season premieres for The Mandalorian.
Of course, Disney was cagey with the numbers and declined to give any real data behind the viewership.
But according to TV Time, Falcon and the Winter Soldier made up 23% of all streaming video in its opening weekend — everywhere. Nearly a quarter of last weekend’s streams — on any platform — were for Falcon.
I’m shocked, and this is a Marvel series I’m not even that into (just as shocking, I know). Disney plans to keep its streaming wheels a-spinnin’ all spring and summer, with more Marvel series releases slated over the next few months.
Disney+ is quickly becoming the Mouse’s House’s cash cow, and the company plans to dish more content. More draw to the platform. More, more, more — it’s the Disney way!
It’s also the way to continued greatness for any of you in this Great Stuff Pick … eventually. Disney shares ended down today in the general market froth.
Yesterday, Great Ones, Fed Chairman Jerome Powell said something during a webinar on cryptocurrencies that has me concerned for his mental well-being.
He then added to that statement with:
Bitcoin is volatile. True. Water is also wet, and the sun rises in the east. And yet, bitcoin is nowhere near as volatile as it once was due to continued adoption by investors and businesses.
But that’s not what concerns me. Let’s break this down, shall we?
Powell says that bitcoin isn’t backed by anything, and therefore it’s not a useful store of value. But he goes on to say that bitcoin is “essentially a substitute for gold.”
Does that mean that gold, which also isn’t technically backed by anything, isn’t a good store of value? We all know that isn’t true. Has Powell lost his marbles?
I mean, if we’re dragging investments for not being backed by anything, the U.S. dollar is a prime candidate. After all, the dollar is backed only by feel-good faith in the U.S. economy and the U.S. government’s ability to pay its debts.
Powell came so close to getting the point of cryptocurrencies … and then just turned away from it.
The bottom line is that the Fed will never be on board with crypto. After all, it has an agenda tied to the U.S. dollar, and bitcoin isn’t tied to any currency.
While Powell and the Fed won’t admit it, the truth is that bitcoin is backed by bitcoin … just like gold is backed by gold. For all intents and purposes, bitcoin is digital gold. It’s the modern-day store of value.
Now, Great Ones already know that if you want the most bang for your buck from bitcoin and crypto research, Ian King’s Next Wave Crypto Fortunes is the way to go. (Seriously, how long are you going to wait before jumping on the crypto train! Click here now!)
But I get it. Cryptos and bitcoin aren’t for everyone, just like investing in gold isn’t for everyone. Unlike gold, however, you can invest in the technology behind bitcoin and still benefit from the rise of cryptocurrencies — without all the “volatility” that Powell is so afraid of.
That technology? Blockchain! Your way in? Right here — click me to learn about blockchain.
And after you get the juicy deets on blockchain, let me know what you think about cryptos, gold, Pelotons and Discord marathons … basically anything that inspires you to drop us a line.
GreatStuffToday@BanyanHill.com. Write us anytime!
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Editor, Great Stuff