Friday Four Play: The “Never Break the Chain” Edition
Powell rings like a bell through the night, and wouldn’t you love to love him?
Took to the sky without a rate hike, when will we get another?
All your life you’ve never seen a market taken by the wind. Would you stay if he promised you low rates? Will you ever win?
All right, in typical Friday fashion, it’s time to talk up the Fed … and Fleetwood Mac, I guess.
At yesterday’s meeting in Jackson Hole (Keep it PG, Joe…), Fed Chairman Jerome Powell decided that raising rates isn’t the right thing to do. How can he change things that he feels?
So, did he go his own way?
Kind of. The short story: Jerome and co. decided to not raise rates, with the central bank staying hands-off to let inflation run a little higher.
It’s a landslide moment, really. Powell’s been afraid of changin’, ‘cause we’ve built our recovery around unlimited stimulus. The move isn’t exactly unexpected, however — I predicted as much on Wednesday.
Still, the market rallied on the news and dreams of prolonged low-interest-rate tomfoolery. In the meantime, the Fed wants to focus on that whole “unemployment” thing. You know, the same unemployment and uncertainty that Wall Street’s told itself sweet little lies to forget about.
“The announcement of a move towards an asymmetric unemployment approach is very important and a welcome development,” said Oxford Economics’ Chief U.S. Economist Greg Daco. He continued: “The Fed will be in no hurry to raise rates. If and when the unemployment rate falls, the Fed will strive to ensure that the benefits from looser policy are as inclusive as possible.”
No hurry to raise rates? Ooh, don’t you ever look back…
The move (or lack of a move) to stoke inflation comes even though the Fed “…realizes that higher prices for essential goods such as food, gas and the cost of rent or a mortgage contribute to ‘the burdens faced by many families, especially those struggling with lost jobs and incomes.’”
Like I told you on Wednesday: This is why it pays to channel your inner pirate and hunt down golden booty. Rising inflation is bullish for gold. And it’s no coincidence that gold spiked yesterday and continued to rally today.
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And now for something completely different, it’s time for your Friday Four Play.
No. 1: But Why Though?
Not even the Oracle saw this one coming!
I too thought that we were past the last TikTok development after Oracle Corp.’s (NYSE: ORCL) surprising bid. Nope, we just had to get a M. Night Shyamalan twist.
What company would you expect to join forces with Microsoft Corp. (Nasdaq: MSFT) to buy out the massive social media platform TikTok?
Obviously, the next bidder has to be Walmart Inc. (NYSE: WMT)! You can get everything at Walmart, truly.
With the TikTok deal landing between $20 billion and $30 billion, I get how you’d need a Big Tech don and retail’s biggest employer to team up, like a mighty Voltron without a lick of social media experience.
Walmart didn’t go into detail with its reasoning, so let’s follow the breadcrumb trail of our own logic here, and you tell me if it pans out (or doesn’t).
Walmart has amped up its competition with “Emperor E-Commerce” over there, Amazon.com Inc. (Nasdaq: AMZN), correct? We talked just last week about how Walmart’s online sales surged 97% to reach record levels, even if that pace of growth isn’t maintainable.
But e-commerce is a multi-pronged marketing fork … if you can use it right and don’t shove said fork in a wall socket. And with Walmart’s new membership program set to rival Amazon Prime, TikTok could be a way to reach more eyes.
More eyes mean more money … typically.
Daniel Ives, managing director and tech analyst for Wedbush Securities, gave this mixed metaphor take: “When you think right now about going up against the 800-pound gorilla, Amazon, obviously they’ve been behind the eight ball … but Walmart could use this as a golden opportunity to partner with Microsoft and monetize the TikTok base…”
The case is as clear as mud: Walmart needs any and every advantage to stack up to Amazon. It’s the just the kind of wretched near-Lovecraftian buyout science experiment that nobody asked for.
No. 2: Big Records Need Big Lots
We’re not out of the big-box retail woods just yet — Big Lots Inc. (NYSE: BIG) reported record-breaking earnings this morning. A discount retailer excelling in a pandemic? It’s more likely than you think… Where else would I go for nearly discontinued energy drinks and almost-stale snacks?
Revenue came in at $1.64 billion, edging past expectations for $1.61. But this isn’t the low-low limbo we’ve seen so far this earnings season. That revenue figure even stacks up against its pre-pandemic results, soaring 31% year over year on the quarter!
Big Lots’ adjusted earnings were even more impressive, coming in at $2.75 to make a company record and beat analysts’ projections for $2.70. Yes, online sales were strong, but not as hefty hefty hefty as we’ve seen with other retailers, such as Walmart.
But with a lower store count keeping operating expenses under control and comparable same-store sales growing at 31% … Big Lots may be able to keep this growth going whereas Walmart’s continued success remains to be seen.
Quick, it’s not too late for a TikTok bid! The Big Lot TikTok buyout is the golden goose, I promise.
No. 3: Still the King, Baby!
Random Roku Inc. (Nasdaq: ROKU) rally on a Friday? Why not!
ROKU shot up over 9% today to reach a new all-time high. No, you didn’t miss any earnings or announcements since we last touched on the stock in early August.
It’s just your typical analyst fanfare — and I’m not complaining!
Today, Analyst Jeffrey Rand spilled the juicy deets on a streaming survey from Deutsche Bank’s Data Innovation Group. He stated: “43% of participants who had a connected TV had a Roku, while 35% had Amazon Fire TV. Apple TV sat at 27%.”
Rand also noted that, while some folks have one of each device — don’t cross the streams now! — Roku still edged out Amazon on the customer satisfaction front, with Apple way in the rear (again).
This is exactly why we recommend Roku for Great Stuff Pick back in May 2019, when you consider that Roku is the one all-access pass to stream virtually any streaming service you want, lockdown or no lockdown.
Well … almost every service is on Roku. Peacock and HBO Max are still holding the line. Streaming, much like love, isn’t always on time, you see.
Today’s analyst brouhaha joins Wednesday’s, when Citi Analyst Jason Bazinet started his Roku coverage with a buy rating and a $180 price target.
What can we say? It’s good to be king. Keep holding Roku — yes, you Great Ones who got in are up about 94% or so, but there’s more streaming service domination to come.
If you didn’t get into Roku, don’t fret for your way in on the trend. Think of the hyper-fast connection speeds that make streaming even tolerable these days. (Buffering or ads? Or worse, buffering ads!) One such technology could ignite a $12 trillion opportunity by 2035.
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No. 4: It’s Cosmetic Damage … That’ll Buff Right Out
If my family isn’t dropping dollars at Urban Outfitters in the name of “just trying out a new look, gosh” … it’s Ulta Beauty Inc. (Nasdaq: ULTA).
Ulta took off like a beautified bottle rocket after its earnings report last night, but unlike Big Lots, we’re playing the game of How Low Can Your Expectations Go?!
Adjusted for one-time items and costs, here’s how Ulta stacked up:
Revenue: $1.23 billion, versus expectations of $1.25 billion.
Earnings: $0.73 per share, versus expectations for $0.06 per share.
So a runaway beat on earnings and a slight revenue miss. Not too shabby, but how does it compete against those dreamy pre-pandemic quarters? Not great … and that’s why ULTA gave back much of today’s 13%-plus rally.
See, when we compare Ulta’s stats against last year’s backdrop, the twinkle in Ulta’s earnings eye shadow loses its shimmer, to mix metaphors. This quarter’s results are streets apart from the $2.72 per share in earnings a year ago.
And the 26% drop in sales doesn’t save Ulta any face either. While online sales more than tripled this quarter — It has to be that new Harry Potter product line, right? — Ulta CEO Mary Dillon still expects that sales “…sales will continue to be challenged for the rest of the year.”
Great Stuff: You Can’t Makeup Greatness
Thanks for tuning in to our weekly rants and diatribes this week! Oh yeah, and I hope you liked those market insights too…
Speaking of which, the whole team and I have been regaled all week by your witty emails and messages from the brink of insanity. We can’t get enough of that sweet Reader Feedback!
Whether you’ve got a market question, an investing roadblock or just some heat to get off your chest, write to us at GreatStuffToday@banyanhill.com!
We’d love to catch up with you in next week’s edition of Reader Feedback. In the meantime, you can check us out on Facebook, Instagram and Twitter … but not TikTok. No, I don’t think we’re getting that account up and running anytime soon, sorry.
You want my mug on camera doing voiceover memes and cover songs? That might not be too bad of an idea, actually…
Until next time, stay Great!
Joseph Hargett
Editor, Great Stuff