Market Doldrums; Max Is Back; Tesla: The Next AOL?
Fly, My Pretties!
Well, Great Ones, it finally happened.
The rest of the Great Stuff team ran to the hills this week (probably galloping hard on the plains, if I had to wager). Even my winged monkeys find their way out of Oz eventually…
So, it’s just me here holding down the fort at Great Stuff headquarters. And, if it weren’t for the tiny trickle of stock-market shenanigans still kicking off before New Years’ Eve, today’s Great Stuff would’ve been nary more than Star Wars memes and Rick Astley.
You say that like it’s a bad thing!
Judging by the rest of the financial market news … everyone else is gone for the week too. If you gazed at any other headlines today, you probably saw one of two things.
Stimulus! We’re back in the throes of that give-and-take game of stimulus, what with everyone and their mother dreaming about spending all that cash that hasn’t even left the whirring, brrr-ing printers yet.
The stimulus maelstrom continues. The wheel of market sentiment keeps spinning. And I’m half-tempted to pull that stimulus cycle chart out of retirement.
Anyone not focused on the ghost of stimulus future is probably eyeing the housing market news. For October, home prices rose at their fastest rate in six years in a classic case of “max demand, no supply.”
You mean to tell me that, pandemic aside, rock-bottom mortgage rates and the dwindling number of homes up for sale make for an incredibly strong housing market? Color me surprised!
Back at the ranch … what’s going on in them market hills today? Market news? Don’t talk about — market news?! You kidding me?
It’s the end of the year — nobody’s announcing squat. Everyone’s plans, predictions and price targets for 2021 are already in the books. So, even though while most stock news out there is drier than week-old turkey, we still saved you a few kernels of Greatness from out there in that market madness.
But first, a word from our sponsors.
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Boeing’s (NYSE: BA) back, and it’s better than ever. Flying sky-high this year — it’s a 737 MAX!
The U.S.’s first post-fiasco 737 MAX flight took off today as American Airlines (Nasdaq: AAL) sends those birds back to the skies. Brazilian carrier Gol’s all-Boeing 737 fleet already beat American to the relaunching punch.
United Airlines (Nasdaq: UAL) plans to resume its MAX flights in February, while Southwest Airlines (NYSE: LUV) aims for the second quarter. With over 3,000 MAX’s on order for airlines worldwide, all eyes will be on these flights. Boeing, on the other hand, is on Great Stuff’s radar … though I can’t tease any more than that.
Out of all the retailers we’ve covered during the pandemic, Barnes & Noble Education (NYSE: BNED) has somehow eluded us thus far. The textbook and school swag companion spun off from the Barnes & Noble mothership in 2015, and things aren’t exactly festive between the stacks right now.
As many colleges and universities remain closed as the new spring semester dawns, that doesn’t exactly bode well for on-campus businesses … or those old non-electronic textbooks. (Wow, anyone remember those?)
E-book sales are far from enough to keep BNED afloat during the remote-learning period, and CFO Thomas Donohue plans to cut costs further. ‘Tis simply another angle of pandemic retail life: Barnes & Noble Education’s profits fell a nearly unbelievable 79.1% last quarter.
But it’s not all bad news in the quad today, so don’t feel like your hacky sac’s busted open, dude. BNED just signed a partnership agreement with the sports retailer Lids. You know … because nothing sells textbooks better than … hats?
BNED is up today on the cost-cutting news to add on to gains from the Lids announcement. If any of you happen to own BNED (or knew of its existence), congrats!
At the other end of the investors’ awareness spectrum … the frothiness in Chinese stocks has turned into a buy-a-thon in the wake of Alibaba’s (NYSE: BABA) ballyhoo. It’s not just the Big Tech stateside that’s under the antitrust watchdog’s careful leering gaze, you know.
China’s biggest e-commerce and fintech players have been shaking in their boots ever since Chinese officials put the kibosh on Ant Group’s would-be record-breaking IPO. And just yesterday, antitrust regulators ordered Jack Ma, founder of both Ant and Alibaba, to break up his tech empire and its “monopolistic practices.”
But it’s still up in the air as to what penalties Jack Ma will face and how exactly his businesses will carry on (or not). That seems to worry investors in BABA and other U.S.-listed Chinese tech stocks like JD.com and Tencent.
Or, at least, it was a worry, because BABA now inches its way back up from that 16% drop on December 23 as investors pile in to buy the dip. The fact remains that, for now, Ant and Alibaba got too full of themselves — you just can’t do that (for long) and operate in China.
At one point, Snap (NYSE: SNAP) was firmly entrenched in “meme stock” territory … partly thanks to a certain hype-heavy Reddit subforum. But it’s not just the internet’s gamble-happy speculators who have high hopes for the social media platform — no, sir!
Today, Snap spiked nearly 10% after Goldman Sachs adjusted its price target from $47 to $70 — the Street’s highest target for SNAP. The secret? Ads. (It’s always ads, I swear.)
Even though Snap didn’t predict revenue figures for the current quarter — you know how it goes with these pandemic expectations and low bars — Goldman believes Snap’s ad campaigns and new bid types will make the platform more attractive for advertisers.
Mark my words: All those billions of ad dollars that were spent on physical media before the pandemic? No more. Snap isn’t the first glaring pandemic example of this, but it won’t be the last either. It’s digital or nothing now, baby.
OK, I admit: This tidbit is just for the LOLs. Maybe…
Chris Harvey, the head of equity strategy over at Wells Fargo Securities, has our unofficial Quote of the Week in the bag: “AOL, similar to Tesla, had a game-changing technology, incredible performance… it goes into the index late in the year in December after an amazing run. But it was a seminal event.”
Analyst Harvey goes on to say that Tesla (Nasdaq: TSLA) might fail to keep up with the times like the dot-com bust’s casualties. Those who were around for the dot-com bubble (and haven’t merely repressed those memories) might know AOL as the poster-child for market exuberance, so it’s not like the Tesla comparison is out of left field.
Great Stuff has even gone long in the tooth trying to separate Tesla the company from TSLA the hype-wagon this year. Our conclusion? Valuation is a dead parrot. Popularity is king. And Tesla is the king of popularity (right now).
Harvey’s comparison is nice and all — *gasp* how can he be so bold and contrarian? — but let’s not kid ourselves here. Tesla and its cult of diehards are headed for their own reckoning against the wall of valuation … sooner or later.
Whether or not that inflection point turns out to be a dumpster fire like AOL— or perhaps an even bigger calamity this time around — still remains to be seen.
So, what do you think? Is Tesla the next AOL just waiting for expectations to meet reality? Or is it (dare I say) different this time? What are your memories of the dot-com crash? And does anybody out there still using AOL mail?!
Let us know at GreatStuffToday@BanyanHill.com.
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Until next time, stay Great!
Editor, Great Stuff