Wall Street Analysts: ¯\_(ツ)_/¯
Great Ones, if you’ve kept up to date with your Great Stuff, you know that I’ve taken quite a few digs at the analyst community this earnings season.
In fact, I’m pretty sure you can read any Great Stuff article from the past two weeks and find something like: “C’mon, analysts. So much precision to still be … wrong” or “I have to ask: What are analysts actually looking at when setting expectations?”
Well … one brave analyst finally came out and said the quiet part out loud. Here’s UBS Analyst Paul Donovan:
Forecasting is hard because this is not a normal economic cycle (so normal models do not work).
Past data will be revised significantly. Seasonal adjustment probably is not working — in April, people were behaving like it was the summer. The explosion of business startups is unlikely to be properly captured in the numbers.
So basically, if Wall Street were like baseball, the entire 2020 season would be one giant asterisk.
What’s more, current economic conditions are so screwed up that Wall Street analysts have no idea how things will play out.
I think that’s plenty evident in analyst expectations for recent quarterly corporate earnings.
In short, any so-called “disappointing data” could be more a function of useless forecasting models than an under- (or over-) performing economy.
But what spawned this sudden introspection in Wall Street’s analyst community?
If you guessed Friday’s May jobs data … ding ding ding! You are correct!
The U.S. economy added 559,000 jobs in May. It was a gain over April’s tally but fell well short of an expected gain of 675,000 jobs — and nearly half the 1 million jobs that analysts originally targeted for May back in April.
What this means is that anyone — yes, even yours truly — who tells you they know for certain how this market will play out or where the U.S. economy is going is pulling stuff out of their a$$.
I know it’s cliché, but we really are in uncharted waters here. And the best thing you can do as an investor is find a ready guide (in some celestial voice) that you trust.
As always, Great Stuff will choose a path that’s clear. We will choose free will.
Editor’s Note: Paul ’s Newest Recommendation Is BIG
Last week, Paul released the full details on one of the most fascinating recommendations of his career.
It’s an emerging leader in the electric vehicle (EV) market that doesn’t make cars — instead, it makes them better! This company is single-handedly creating the car of the future, decked out with advanced voice recognition software, upgraded artificial intelligence that is aware of its surroundings and much more.
This company’s technology is in 20% of all cars already on the road. Of all the cars in the world in production, its technology is in 50% — yes, half. This is a stock Paul is confident could return gains of 300% over the next year. Over the next two to three years, gains of 1,000% may be possible.
That’s right: Tesla’s (Nasdaq: TSLA) $150,000 Model S Plaid Plus is officially no more. Kinda sucks if you’ve already paid for a preorder. TSLA shares dropped more than 2% on the news.
CEO Elon Musk tweeted out over the weekend that the Plaid Plus was “canceled” because Plaid “is just so good.” The Plus model was going to have 1,100 horsepower and go from 0 to 60 in less than two seconds.
I guess we’ll all have to settle for the regular face-ripping speed of the basic Plaid now.
Still, Plaid Plus is gone … and I haven’t been this devastated since grunge died out in the 90s. (Not really, I’m still wearing plaid flannel and Doc Martins … and you can’t stop me!)
Amazon.com (Nasdaq: AMZN) struggled to find direction today, which shouldn’t come as too big of a surprise. There was no company-specific news, and AMZN is trading near all-time highs.
I’m sure there’s some valuation concern flowing around on Wall Street, which is odd given that Amazon is simply dominating every market in which it operates … well, all except streaming.
Anywho, word on the Street is that CEO Jeff Bezos is about to fly to the angels … err, space. He’s flying to space. And he’s taking his brother with him. Bezos’ side project, Blue Origin, is launching its first passenger-carrying mission on July 20.
It will be the 16th flight for Blue Origin’s New Shepard rocket and an 11-minute suborbital trip for Bezos, his brother and one other passenger. That last seat is up for auction, with a high bid of $2.8 million. Proceeds will go to a Blue Origin foundation for math and science education.
You ever start on your homework right as the teacher starts to collect it? Yeah … that’s kinda how Lordstown Motors (Nasdaq: RIDE) feels right now. The EV maker (or prospective EV maker, let’s be honest) was hit with a Nasdaq warning after the company failed to submit an earnings report to the SEC
The official reason is that Lordstown needs to restate its earnings and how it handles warrants … but c’mon, this is Lordstown. My initial reaction is how bad are your earnings that you’d rather face the SEC and potentially delist from the Nasdaq than tell investors how much money you lost them?
As far as RIDE investors go … meh. They’ve heard worse from the company, so the shares are up 8%. Because why wouldn’t they be?
In our rare spot of non-tech news … Mondays are meant for massive materials-makers mergers. Phew. Vulcan Materials (NYSE: VMC) hit the pavement in search of a concrete counterpart — an aggregate acquisition, if you will.
The company announced it’s buying U.S. Concrete (Nasdaq: USCR) in an all-stock deal at $74 a share — a 29% premium to Friday’s close.
Vulcan makes ready-mix concrete and aggregate material to make more concrete. That makes it a perfect materials match-up for U.S. Concrete, which makes … you guessed it … concrete.
The merger would cement a true concrete leader in the U.S. materials market, letting the combined company reach more projects and clients across the country.
Can you say concrete cost-cutting synergies? Of course you can. If you own USCR, first, let me know what brought you to the exciting world of pavement. And congrats on the surprise 29% gain.
I hope you don’t have a big appetite for earnings this week, because neither does the Street.
Nevertheless, there’s still some action crackalackin’ in the earnings confessional. Take a look at what reports we’re probably going to rip apart and rant about later this week — or discuss and analyze cordially. Either way works.
Here’s the week in earnings, courtesy of Earnings Whispers on Twitter:
It’s Ryan Cohen week on Wall Street, apparently: The GameStop (NYSE: GME) train wreck is slated for Wednesday, while Cohen’s previous (and much more successful) e-commerce company Chewy (NYSE: CHWY) reports on Thursday.
My interest in GameStop, as you can presume, is sheer morbid curiosity. It’s like channel-flipping and finding a new reality show disaster to heckle, hector and tear down. Did GameStop manage to get store traffic this quarter? Or sales — how about those?
I really don’t care either way; I just want to make snappy comments and fan the flames of hype or hate — you know, the GME usual.
Chewy we’ve mentioned before — and much more optimistically, might I add. To me, this sucker’s already turning into the Amazon of pet supplies out of sheer convenience alone. Chewy should be paying us to talk up the company … but its beat-em-up reports already do a good enough job with that.
Like Chewy, motorhome-maker Thor (NYSE: THO) dropped a thunderclap of a report last time ‘round the earnings block. With everyone camped out and cramped at home … motorhomes and the road-wandering life were suddenly appealing. Who’da thought?
This quarter, though, let’s see if Thor’s earnings wheel in the sky kept on turning … and if it was able to catch up on some of that billion-dollar backlog it bragged up last report.
Also … Lovesac (Nasdaq: LOVE). I definitely need to see how the posh-and-overpriced bean bag market is doing these days. I don’t expect that hordes of people rushed out to buy Lovesacs over the locked-down pandemic, of all things, but I like to be surprised.
And now that we’re talking about it … replacing my old desk chair with a ginormous fake wombat phur bean bag sac sounds tremendous. Lovesac might be on to something here…
But what about you, Great Ones? What earnings reports are you most excited for this week? Got any trades in your sights? Wombats for the win? Any soapbox diatribes on your mind?
Whatever you feel like sharing — market-related or otherwise — drop us a line at GreatStuffToday@BanyanHill.com.
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Until next time, stay Great!
Editor, Great Stuff