June 26, 2023 | Peel #488

Silver banana goes to...

In this issue of the Peel:

• The growing demand for passenger planes, with orders for Boeing and Airbus at rarely seen altitudes. Record-breaking orders, such as IndiGo's purchase of 500 planes, demonstrate a post-C-19 travel boom.
• In the markets, Smith & Wesson and Coinbase experienced gains while Virgin Galactic and Starbucks faced losses. S&W profited from high expectations despite revenue drop, Coinbase won Supreme Court approval to halt customer lawsuits, while Virgin Galactic suffered from plans to raise additional funds, and Starbucks faced a workers' strike.
• A potential civil war scare in Russia grabbed global attention as the Wagner Group, a private military company, marched on Moscow. The situation was allegedly defused by Belarus President Lukashenko, who allegedly brokered a deal with the Group's leader, Prigozhin.

Market Snapshot

Happy Monday, apes.

Hope you enjoyed your first official weekend of summer. It was a great time to celebrate, with some of us taking it a little too far and nearly starting a Russian civil war, but we’re just glad you made it through.

Equity markets made it through (we hope) as well. Going into this morning’s open, we have equity futures slightly higher than Friday’s close for little to no apparent reason. It’s gonna be a quiet day from a planned-news side of things, but let’s see what happens.

Treasury markets face a similar story. Yields were mostly lower, if anything, on Friday as an apparent and unconfirmed switcheroo from risk-on to risk-off seemed to have a mini-return on Friday. We’ll see if that can roll on soon enough.

Let’s get into it.

Last chance to invest in the company that won over the Dragons

The pioneer in smart-doorbell technology, Ring, pitched their business on the hit show Shark Tank at a valuation of just $7mn - the sharks shut them down.

5 years later, the company sold to Amazon for more than $1 Billion, turning the 10% stake initially offered to the sharks from $700k to $100mn!

A similar story is brewing up in the Smart Shades segment of the industry, with a company called RYSE pitching on the Canadian version of Shark Tank called Dragon’s Den.

The difference? They actually received offers from two of the veteran investors and have an addressable market that could be significantly larger than that of Ring’s.

The Dragons believe that RYSE has the products, technology, and the team to become the market leader for Smart Shades, and their recent deal with Best Buy has put them miles ahead of the competition.

The opportunity to invest in RYSE is closing soon – don’t miss it.

Macro Monkey Says

Plain Ol’ Planes

While it would be a sick superpower, unfortunately, flying usually sucks, at least in the way we do it.

Leave it to mankind to develop this miracle of technology and then absolutely ruin the everyday experience of it. Idk, maybe you’re one of those psychos that like flying, but either way, we all do it because it’s all about what’s on the other side.

Vacations, business trips, you name it—we fly (mostly) because we can and want to. Passenger flight traffic can often be used as a coincidental economic indicator to help identify where we are in the business cycle.

But in a post-C-19 world where “pent-up demand” for travel was a leading force coming out of the immediate aftermath of the pandemic, this makes using travel demand as a measure of the overall business cycle somewhat anomalous.

"Nevertheless, that 'pent-up' demand for travel is bleeding over into demand for those things you travel in at record rates."

Nevertheless, that 'pent-up' demand for travel is bleeding over into demand for those things you travel in at record rates.

Orders for all kinds of aircraft from the world’s largest manufacturers of these behemoths—US-based Boeing and European-based Airbus—have been flying sky-high and holding at altitudes rarely seen in the past.

By the numbers, we know:

• Indian airline IndiGo set records with its 500-plane purchase earlier this week
• Those planes are set to be delivered in 2030
• 1,429 jets have been ordered from Airbus and Boeing in 2023 so far
• For the full-year 2019, that figure sat at 1,377

Source

"Sounds like a great problem to have, but ... they better hope that demand can last."

Who knew that, along with wearing a fanny pack across your chest, buying planes would be the hot trend of the summer? The boom-bust cycle that airlines generally live in is being put on full display.

According to Airbus CEO Guillaume Faury, his company “cannot make planes fast enough to satisfy the demand.” Sounds like a great problem to have, but given the stock’s 40% gain in the past year, they better hope that demand can last.

Either way, Airbus continues to trample Boeing since the latter manufacturer’s tragedies around the 737-MAX (which Ireland’s Ryanair just bought up to 300 of). But in this environment, a win for one has been a win for the other as the underlying demand for travel remains in full swing in the US and abroad.

What's Ripe

Smith & Wesson (SWBI) ↑ 20.20% ↑

• Firearm traders were fired up on Friday, watching Smith & Wesson shares shoot higher on the back of a high-powered earnings report.
• Gunmakers have had an unusual journey through the post-C-19 business cycle, originally seeing a demand boom that’s created inventory problems now. Both profits and revenue fell substantially compared to last year.
• That might sound like it would make shareholders want to turn the company’s products on themselves, but it was actually not as bad as feared. Moreover, high expectations for FY’24 were the key driver pushing shares far into the green.

Coinbase (COIN) ↑ 6.92% ↑

• Digital currency companies are kind of like the new kid in class in Washington. No one really knows who they are, certain people/agencies start to bully them, and they don’t really have a lot of friends.
• That said, Coinbase just made a brand new friend for the industry: the Supreme Court. While the SEC continues to steal Coinbase’s lunch money and shove its head in the toilet, the Supreme Court is having the exchange over for dinner.
• This was the smallest scale ruling possible to drive a share price move like this, but basically, SCOTUS is allowing Coinbase to halt ongoing customer lawsuits while they wait to find out if the disputes belong in court or in arbitration.
• Companies hugely prefer arbitration, as it is almost always the cheaper, faster option. The nearly 7% gain on this seemingly minor news reflects just how downbad shares have been, along with how hyped traders are to see the firm have, at the very least, a non-enemy in DC.

What's Rotten

Virgin Galactic (SPCE) ↓ 18.42% ↓

• Much like their rides to space (I’d assume), Virgin Galactic’s stock has been on a bumpy ride lately. Shares soared on the announcement of an upcoming first-ever space tourism flight, but on Friday, it was nothing but pain.
• Sometime between Tuesday and Friday, Virgin Galactic will launch members of the Italian Air Force into space to do some sciencey sh*t. In the meantime, the company is looking to raise a total of up to $700mn.
• On Friday, Richard Branson’s space company announced the need to raise $400mn on top of an already-raised $300mn through common equity sales to fund the firm’s fleet of spacecraft.
• Not only is this dilutive as all hell, but it’s also a major red flag from a business perspective as well. All in all, shareholders were spooked, and shares felt the pain.

Starbucks (SBUX) ↓ 2.49% ↓

• “Workers of the world, unite!” is on full display at Starbucks locations across the country as a 3,500+ strong strike is set to go into effect tomorrow.
• Over 150 Starbuckses (Starbuckii?) took part in the union-sponsored strike that began as a result of some allegedly un-PC activities by the traditionally progressive chain.
• That’s the most polite way I can put it, and dammit, I hope that’s good enough. Shares tumbled in response as fears for growth in the strike abound. Wonder what Dunkin’ shares would be doing right now if that was independently public.

Thought Banana

Putin On the Pressure

The biggest prank Russia has seen in at least the last quarter-century went down this weekend, causing all-time pranksters like Bart Simpson and Spencer from iCarly to watch and learn.

You might’ve heard at some point over the last 16 months or so that Russia is always down for a fight, hence the invasion of neighboring Ukraine. But, this weekend, we learned Russia is so down for a fight that if they get bored enough, they’ll just fight themselves.

On Saturday, founder and leader of the private military company the Wagner Group Yevgeny Prigozhin did the (previously) unthinkable: turn his troops towards Moscow.

"Belarus President Aleksandr Lukashenko reportedly (allegedly) brokered a deal with Prigozhin to stop what otherwise would’ve almost certainly led to a full-blown civil war."

Honestly, it sounds like something straight out of your AP Euro textbook. Unhappy with Russia’s military leadership and likely a few other reasons, too, Prigozhin spent the majority of the weekend leading his troops on a march from a Wagner-seized Russian military station in Rostov right up to the nation’s capital.

Only, it didn’t have exactly the outcome that we might’ve expected. As Wagner’s forces were ~2/3rd of the way to Moscow, Belarus President Aleksandr Lukashenko reportedly (allegedly) brokered a deal with Prigozhin to stop what otherwise would’ve almost certainly led to a full-blown civil war.

At the time of writing, that is basically the last we heard. It’s been reported that Prigozhin will be exiled to Belarus, and Russia may abide by some of the…uhhh…let’s call them “suggestions”...that originally led the Wagner founder to attack his own country’s capital.

The headlining news as of yesterday afternoon is basically two-fold, including:

• Wagner forces are no longer marching on Moscow
• No other information related to the incident has been confirmed

Lukashenko and Prigozhin’s deal terms haven’t been made public yet, and even if they did, who’s to say they’ll actually be followed?

"Regardless of the unknowable ... this event certainly signifies quite the gamechanger ..."

Regardless of the unknowable, such as what is happening or what will happen, this event certainly signifies quite the gamechanger in Russia and their war in Ukraine, such as:

• Russian political and military leadership appears to be on much less unified and solid footing.
• Putin may not wield the power, influence, and gravitas that he once did anymore.
• Wagner has made it clear that they are effectively just a personal army, fully willing to attack the home country of most of the group’s troops.
• This event created no good outcomes for any party involved.

Stay tuned because more on this is sure to drop over the coming days. A civil war prank as your country is in the midst of an actual war is a big, bold move. Gotta respect it at least a little bit, right?

The big question: What does this stunt by Prigozhin and Wagner say about the state of affairs at the highest political levels in Russia? How will this shift developments in Ukraine and beyond?

Banana Brain Teaser

Friday — Find a familiar English three-letter word using the following information:

1. RED has no common letter with it.
2. END has one common letter, but not in the correct place.
3. TIN has one common letter in the correct place.
4. TIP has one common letter, not in the correct place.
5. AIR has one common letter, not in the correct place.

PAN.

Today — The owner of Senior Pete's Pizza decided to celebrate his birthday by giving away free pizza to anyone who can solve his puzzle:

If a pizza's radius is defined as "z," and it's depth defined "a", then what is that pizza's volume?

Can you answer Pete's puzzle correctly?

Shoot us your guesses at [email protected] with the subject line “Banana Brain Teaser”.

Wise Investor Says

“The investor’s chief problem—and even his worst enemy—is likely to be himself.” — Benjamin Graham

Happy Investing,

Patrick & The Daily Peel Team

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