Micron Melts on Earnings; Beyond Meat McBoosted; Unicorn Wrangling
Friday Four Play: The “Boy, Were They Wrong” Edition
It’s been quite the week for boneheadedness on Wall Street … especially among analysts.
To paraphrase Mark Twain: “But I repeat myself.”
The biggest farce of the week has been Wall Street believing that a U.S.-China trade deal is near. We saw upticks in the Dow on Monday and Wednesday as the White House indicated, once again, that a trade deal could be closer than you think.
Then again, we’ve been hearing that same mantra for months … and Wall Street’s reactions are getting increasingly smaller. So, maybe it’s learning?
Maybe not. The market is once again getting a lift on news that U.S.-China trade talks are scheduled for October 10. This optimism is coming after President Trump declared he would not accept a “bad deal,” and Chinese Foreign Minister Wang Yi compared the trade talks to Game of Thrones.
Awfully positive indicators, don’t you think?
Looking back at the week, this is just the tip of the iceberg.
So, to give you an idea of how ridiculous this week has been, today you’re getting Friday Four Play, the “Boy, Were They Wrong” Edition.
No. 1: Misplaced Micron
You have to commend Micron Technology Inc. (Nasdaq: MU) bulls. They’re consistent. I used to be one of them, I must admit. The company’s exceedingly low price-to-earnings ratio makes MU shares oh, so tempting.
But I got off this roller-coaster ride a long time ago, and I’m feeling much better now.
I can’t say the same for the brokerage community. Heading into last night’s quarterly report, Goldman Sachs, Longbow, JPMorgan Chase, KeyBank and Deutsche Bank upgraded Micron shares.
JPMorgan went as far as betting that the chipmaker would beat previous sales and profit forecasts. And both Cowen and BMO Capital Markets lifted their price targets this week.
Boy, were they wrong.
Micron’s earnings cratered 86% to $0.49 per share from year-ago results. Revenue plunged 42.3% to $4.87 billion.
The company also put current-quarter earnings guidance in the $0.35 to $0.49 per share region, well below expectations for $0.48 per share.
So much for preearnings optimism. MU shares plunged more than 7% on the open this morning. It just goes to show that sometimes it pays to be contrarian.
No. 2: Meet Your McMaker
I really hope you aren’t one of the millions shorting Beyond Meat Inc. (Nasdaq: BYND) right now. If so, you’re about to get squeezed like a McDonald’s patty.
BYND shares surged more than 11.5% yesterday after the company announced a partnership with McDonald’s Corp. (NYSE: MCD). Right now, the deal is to test Beyond Meat patties in Canada with a new PLT — plant, lettuce and tomato … cute.
But McDonald’s isn’t clowning around. If the test goes well — and similar tests this year have shown that it should — the golden arches plan to roll out the PLT to more than 38,000 restaurants worldwide.
Analysts estimate that the deal could add $50 million to $285 million to Beyond Meat’s annual sales.
But while short sellers are suffering from grill burns this week, one ratings firm stuck its head in the fryer.
On Monday, Exane BNP Paribas initiated coverage on BYND with an underperform rating and a $70 price target. That’s more than 50% below the stock’s current trading level.
BNP Paribas made some good arguments about valuation and market heavyweights Nestle and Tyson Foods moving into the plant-based market. But, to quote Banyan Hill expert Michael Carr: “You can be right, or you can make money.”
Right now, more than 41% of BYND’s shares available for public trading (aka “float”) are sold short. If these short sellers get spooked into covering their bets, BYND could quickly soar back to its July highs.
No. 3: SAFE Isn’t Secure
When it comes to cannabis, it’s all about the green.
This week, Congress is attempting to make getting that green a lot easier. The House of Representatives just passed the Secure and Fair Enforcement (SAFE) Banking Act with wide bipartisan support.
I just love these acronyms, but maybe Congress should put as much time into the contents of these bills as it does the marketing.
Anyway, SAFE is designed to provide protection for banks dealing with cannabis companies. Since pot is federally banned, banks that are federally insured refuse to do business with cannabis producers in states where it’s legal.
It’s a great idea that would generate plenty of cash flow for the industry and significantly boost development and investment in cannabis producers.
While the House is ready to party, the Senate remains a killjoy. Senate Majority Leader Mitch McConnell, R-K.Y., isn’t expected to back the bill due to divided party support, and Senate Minority Leader Chuck Schumer, D-N.Y., may try to stop the bill for political reasons as well.
And that’s IF the Senate Banking Committee even decides to review and vote on SAFE. This lazy lump of a committee hasn’t taken up a bill in roughly 500 days. It’s like they’re already too stoned to move off the couch to even bother voting on a bill.
Regardless, this is a minor setback for the cannabis industry. Congress can’t stand in the way of progress forever. Cannabis will be legalized federally eventually. For now, investors should buy these pullbacks in the pot market. So, while this week’s bullish SAFE speculators are likely wrong, you’re gonna be stoked down the road with the bargain you’re getting now.
What? You’re not investing in pot right now? I get it. The market is down and you’re afraid of bargain hunting. What you need is Great Stuff-level advice. And I’ve got just the men for the job.
Banyan Hill expert Matt Badiali and his sidekick, Anthony Planas (aka The Pot Stock Guru), can hook you up. I’m not talking stems and seeds here … I’m talking the good stuff. The real Acapulco Gold of cannabis stock investing.
No. 4: Weeeeee!
OK, I promise that this will be my last bit on WeWork for a while. (Are my fingers crossed? I’ll never tell.)
This “boy, were they wrong” is more of an ongoing thing aimed at SoftBank Group and other unicorn wranglers.
Banyan Hill expert Ted Bauman took aim at the hype surrounding WeWork’s now-defunct initial public offering (IPO) … and other overhyped IPOs this year. Among the issues Ted outlined is the “spin” profit model. Spin isn’t based on an actual business model, but rather how much hype and media manipulation you can generate before going public.
“The key thing is creating the belief that the company represents ‘the future’ — whether it does or not,” Ted noted in this week’s article: “WeWork IPO: Beware Master Unicorn Wranglers.”
Ted also took to the airwaves to discuss his take on ailing tech-wannabe unicorns. You can watch his interview on Fox Business below:
Ted makes a lot of sense, doesn’t he? I mean, he would. He’s a Banyan Hill expert, after all.
If you want more of Ted’s wisdom, click here to find out about the prospect of endless income and sign up for The Bauman Letter.
Great Stuff: Haiku Contest!
In case you missed yesterday’s Great Stuff reader feedback (shame on you!), we’re having a haiku contest this week!
So, send me your Great Stuff-inspired haiku, and I’ll publish the best of the bunch in next Thursday’s edition of reader feedback.
“Contest? Awesome! What can I win?”
Well … erm … um … the admiration of your peers for being a published poet? Not too many people can claim to have achieved that herculean feat in this day and age. (I mean, I can … I don’t know about you.)
Down the road, I hope to have more to offer than just getting published in this e-zine, but you’ll have to settle for fake internet points for now. I’ll think of something down the road.
So, send your Great Stuff haiku to GreatStuffToday@banyanhill.com.
Or just drop me a line. I can’t answer or publish everything, mind you. I get a lot of weird comments … you guys are freaks, and I love you for it. But I’ll do my best to answer/publish what I can.
Until next time, good trading!
Great Stuff Managing Editor, Banyan Hill Publishing