Reality Bites
Today, dear reader, I’m dropping reality bombs. So, fasten your seatbelts and put your tray tables in the upright position.
Ready? Good.
There will most likely be a second economic lockdown. I know. Everyone from the Treasury secretary to President Trump himself has said it won’t happen. It’s out of their hands now. It always was out of their hands.
I’m not talking about an official federal lockdown. I’m talking state, local and personal decisions. And there’s nothing the president can do to stop this from happening. This pseudo lockdown will happen as people take steps to protect themselves from COVID-19’s “second coming.”
Why is “second coming” in quotes? Because many doctors — Dr. Anthony Fauci among them — believe that the first wave of infections has yet to pass.
I think Wall Street is slowly starting to realize the truth of the matter. This morning, the market was headed toward its third positive close in a row. Everything was going well … until reports arrived of record increases in COVID-19 infections hit the news wires.
Arizona, Florida, Oregon, Oklahoma and Texas all reported record rises in COVID-19 infections. Texas saw hospitalizations surge 11% in just 24 hours.
This is all happening because of the reopening, and because there is no vaccine. No cure. There can be no true economic reopening or recovery until a vaccine exists. It’s that simple.
But there’s some good news, dear readers! As Federal Reserve Chairman Jerome Powell made clear this week, the Fed is there to backstop investors.
Yes, the U.S. economy will struggle to realize any real gains for quite some time. But the Fed will support the market. It’s Wall Street’s “investor of last resort,” if you will.
What does this mean for you?
It means volatility. It means that, as long as the Fed has our collective backs, we aren’t headed for a full-blown collapse. We will still see sharp market rallies and equally sharp market drops. And you need to prepare for both.
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The Good: Flying High Again
Electric vehicle (EV) upstart Nikola Corp. (Nasdaq: NKLA) is flying high again after Osborne took a shot in the dark. No, not Osbourne … we’re not biting the heads off of bats anymore in 2020. No more tears, please.
Cowen Analyst Jeffrey Osborne initiated coverage on Nikola with a buy rating and a $79 price target — about 25% above yesterday’s close. Osborne, who also maintains a sell on Tesla Inc. (Nasdaq: TSLA), may be crazy, but that’s how it goes.
In a research note, Osborne noted that Nikola is “leveraging one truck platform, two powertrain options and three business segments, with optionality in powersports, pickups and AVs.” AVs … that’s industry slang for automated vehicles. Hey, some readers may not know.
This buy rating spells big trouble for NKLA bears. Nikola is the sixth most-shorted automaker in the industry, with 5.26% of its publicly available shares sold short. (Note: Tesla is the most-shorted auto stock on the market, with 11% of its shares sold short.)
Why is this a concern for bears? Because the more bullish momentum Nikola gets, the higher NKLA rises. The higher NKLA rises, the more pressure short sellers feel to buy back their losing bets. Osborne’s buy initiation dumped more battery juice into the rally.
In short, Nikola stock could be in for a short-squeeze rally over the next several months. And that’s good news for bullish NKLA traders.
The Bad: Didn’t See That Coming
After last night’s trip to the earnings confessional, it’s clear that Oracle Corp.’s (Nasdaq: ORCL) cloud game isn’t as strong as many thought — myself included.
For the quarter, Oracle beat Wall Street’s earnings expectations by $0.05 per share. Revenue, however, fell 6% to $10.4 billion, missing analysts’ targets. So far, that’s pretty much par for the course this earnings season.
However, Oracle said that cloud revenue fell 22%. How is it that cloud revenue falls … with everyone working from home during nationwide stay-at-home orders? Practically every other company in the cloud market saw revenue soar due to increased demand.
But not Oracle. Oh no. “As the quarter progressed, we saw a drop-off in deals, especially in the industries most affected by the pandemic,” Chief Executive Officer Safra Catz said.
The cat’s out of the bag, Safra! Oracle’s cloud division clearly isn’t ready for prime time yet. And that leaves it at a severe disadvantage to its peers as we move into an era of increased remote-working options.
Unsurprisingly, ORCL shares fell more than 4% following the report.
The Ugly: Beyond Impossible
Looking to throw some meatless wonders on the grill this summer barbeque season? Beyond Meat Inc. (Nasdaq: BYND) has you covered.
The meat-alternative company will sell 10-packs of its meatless burgers in what it calls “Cookout Classic” packs. The suggested retail price for the 10-packs comes in at $15.99 — about $6.40 per pound. Anyone who’s tried to buy real meat lately knows that this price is somewhat competitive right now.
More than $6 per pound for ground beef?? Seriously, Kroger Co. (NYSE: KR)?
The effect of rising beef prices prompted a spike in meatless alternative sales, which soared 168.5% during the week of June 6, according to data from Nielsen.
So, why is this ugly, you ask? Because last week, I finally got to try a burger from Impossible Foods. Beyond Meat pales in comparison. The Impossible Burger tastes like real meat, unlike Beyond’s “salmon croquette” taste. It’s definitely a better burger, at least from my personal experience. (Take that for what you will.)
Unfortunately, Impossible Foods has no plans to go public any time soon. And to me, that’s just plain ugly.
Nikola or Trickola, Impossible meat tastes … we’re thinking about what electrifies us and mystifies all in our Poll of the Week. Gains, people. We’re speaking of super sick $gain$, son!
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Greatness in the Works
Whether you’ve scooped up a Great Stuff Pick or not, tune in tomorrow. Seriously. There’s a lot of open action in the Great Stuff Pick’s portfolio, and you won’t want to miss out on the inside scoop we’re about to dish out.
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The rest of this week looks action packed, so go get some rest now, you hear? We have a big day tomorrow, tiger. You’re gonna crush ‘em!
Until next time, stay Great.
Joseph Hargett
Editor, Great Stuff